Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016 amended by IBBI

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2020 on 6 January 2020.

According to the amendment, a person, who is not eligible under the Code to submit a resolution plan for insolvency resolution of the corporate debtor, shall not be a party in any manner to such compromise or arrangement of the corporate debtor under section 230 of the Companies Act, 2013.

Further, the amendment states that where a secured creditor proceeds to realize its security interest, it shall pay as much towards the amount payable as it would have shared in case it had relinquished the security interest, to the liquidator within 90 days from the liquidation commencement date; and the excess of the realized value of the asset, which is subject to security interest, over the amount of his claims admitted, to the liquidator within 180 days from the liquidation commencement date.

The amendment provides that a secured creditor, who proceeds to realize its security interest, shall contribute its share of the insolvency resolution process cost, liquidation process cost and workmen’s dues, within 90 days of the liquidation commencement date. Where a secured creditor fails to comply, the asset which is subject to security interest, shall become part of the liquidation estate.

The amendment also provides that a liquidator will deposit the amount of unclaimed dividends and undistributed proceeds in a liquidation process along with any income earned into the corporate liquidation account before he submits an application for dissolution of the corporate debtor.

The law makers have also provided for a process for a stakeholder to seek withdrawal from the Corporate Liquidation Account.

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