Streamlined grievance redressal, better availability of information: The latest amendments to the IBBI Regulations

The Insolvency and Bankruptcy Board of India (IBBI) on Tuesday announced amendments to regulations governing the IBC regime in India, with a view to facilitating a more streamlined system of complaint redressal and improving the availability of information in such cases..The IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022, IBBI (Grievance and Complaint Handling Procedure) (Amendment) Regulations, 2022, IBBI (Information Utilities) (Amendment) Regulations, 2022 and the IBBI (Inspection and Investigation) (Amendment) Regulations, 2022 were introduced to this end, amending the respective existing regulations..Here's a brief look at the amendments introduced to each of the Regulations..The IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2022.One of the main reasons for delay in the Corporate Insolvency Resolution Process (CIRP) is, as highlighted previously, admission of cases. This is in turn is caused by inadequate information/documents provided by operational creditors (OCs) to establish the transaction and the default at the time of filing applications under Section 9 of the Code.The amendment to the 2016 Regulations places a duty on operational creditors to furnish copies of GSTR-1 and GSTR-3B returns filed by them along with an e-way bill as additional documentary evidence. GSTR-1 contains detailed information of all the outward goods and services of a business. It includes details of invoices, debit notes, credit notes etc, and is required to be filed by the supplier of goods/services every month or quarter.GSTR-3B is filed by a registered GST dealer. It is a monthly self-declaration which is used to declare summary GST liabilities for a tax period. This return contains information relating to outward supplies of goods/services, amount of taxes paid etc.Rule 138 of the CGST Rules, 2017 provides for the e-way bill mechanism. In the context of CIRP, this mechanism holds importance as it provides for furnishing of information prior to the commencement of the transaction and is issued in relation to supply or for reasons other than supply.Thus, GSTR-1 and GSTR-3B filed by the OC along with e-way bill, wherever applicable, can serve as proof to establish that the supply of goods/services to the corporate debtor has actually happened ,and thus, can be used as evidence in establishing default..A newly inserted Regulation 2C requires financial and operational creditors to produce details of their Permanent Account Number and email id while filing applications under Section 7 or 9 of the Code.In addition, the amendment also places responsibilities on corporate debtors. Added to Regulation 4 is the following sub-clause:“The personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor shall provide the information within such time and in such format as sought by the interim resolution professional or the resolution professional, as the case may be.".The Code already provides for information disclosure by promoters. However, by way of the amendment, the Code would also bind any other person associated with the management of the corporate debtor and the creditors as well. “The creditor shall provide to the interim resolution professional or resolution professional, as the case may be, the information in respect of assets and liabilities of the corporate debtor from the last valuation report, stock statement, receivables statement, inspection reports of properties, audit report, stock audit report, title search report, technical officers report, bank account statement and such other information which shall assist the interim resolution professional or the resolution professional in preparing the information memorandum, getting valuation determined and in conducting the corporate insolvency resolution process”, will be added to Regulation 4(1)..Further, the amendment to Regulation 35 states that “if the two estimates of a value in an asset class are significantly different, or on receipt of a proposal to appoint a third registered valuer from the committee of creditors, the resolution professional may appoint a third registered valuer for an asset class for submitting an estimate of the value computed in the manner provided in clause (a)”. Valuation plays an important role in decision making by the Committee of Creditors (CoC). The exercise of valuation is, by nature, subjective. Given that there are no notified standards in India and that registered valuers tend to use different standards, it could lead to differences in approach and methodologies adopted for valuation. The possibility of having a third registered valuer can potentially break the deadlock..The amendment also addresses the issue of treatment of avoidance applications filed after the closure of the CIRP. It provides that the resolution plan shall provide for the manner in which such applications will be pursued and the manner in which the proceeds, if any, from such proceedings shall be distributed..IBBI (Grievance and Complaint Handling Procedure) (Amendment) Regulations, 2022.As per a press release issued by the IBBI, through this amendment,"The mechanism of complaint/grievance redressal and subsequent enforcement action has been amended to have expeditious redressal and also to avoid placing undue burden on the service providers."The new Regulation 3(5) provides that a grievance or a complaint shall be filed with the Board on its dedicated portal www.ibbi.gov.in.The amended Regulation 6 puts responsibility on the Board to dispose of grievances within 7 days. The earlier time frame was 15 days. Under Regulation 6A, the Board may forward a grievance against an insolvency professional for disposal by the insolvency professional agency of which he is a professional member. The agency shall dispose of the grievance within thirty days of receipt of the same.The amendment also provides for revisions in various timelines related to the enforcement process as provided in the 2017 Regulations..IBBI (Information Utilities) (Amendment) Regulations, 2022.This amendment aims to create repository of information on default. As per amendment to Regulation 20 the creditor, before initiation of CIRP, will be obligated to file the information of default with the information utility, which shall process the same for the purpose of issuing record of default in accordance with Regulation 21. The amendment to Regulation 21 aims to substitute, “information of default” with “authentication of default” as its title. In addition, in Regulation 21(c)(ii), the following subsection shall be added It also provides for a colour-coded categorization for authentication of information in the following manner:.IBBI (Inspection and Investigation) (Amendment) Regulations, 2022.The biggest change introduced by this amendment is the insertion of Regulation 10B, which empowers the Board to refer a violation of the provisions of the Code or the rules or regulations by a service provider to the Disciplinary Committee, which may pass an interim order on the issue. Such an interim order shall lapse on the expiry of ninety days.A newly inserted sub-clause (7) of Regulation 13 reads,"In case where the service provider is an insolvency professional, the Board shall intimate the order to all the members of committee of creditors of the insolvency resolution processes in which he is acting as an interim resolution professional or resolution professional, as the case may be, and to the Adjudicating Authority.”.[Read the amendments]