Amendment in Corporate Insolvency Regulations


Recent case of Jaypee Infratech, question arises where should home-buyers be classified? Are home-buyers financial creditors or operational creditors? In case, home-buyers they classify themselves as operational creditors, will they forego their claim on interest or assured return on their advances? In case, home-buyers they classify themselves as financial creditors, will they forego their claim over homes? This was a game of dice, will company be able to resolve insolvency or face liquidation?

These amendments try to solve these issues.

Regulator, the Insolvency and Bankruptcy Board of India amended two regulations with identical amendments. The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 was amended by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2017 and the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2017 respectively.

Claim by other creditors

Both amendments insert Regulation 9A dealing with claims by other creditors.

Sub – regulation (1) prescribes, a person claiming to be a creditor, other than those covered under regulations 7, 8, or 9, shall submit proof of its claim to the interim resolution professional or resolution professional in person, by post or by electronic means in Form F of the Schedule.

Regulation 7, 8 and 9 respectively deals with operational creditors, financial creditors and workmen and employees respectively. Now, these amendments tried to help customers of a corporate debtor facing insolvency.

Sub – regulation (2) prescribes, the existence of the claim of the creditor referred to in sub-section (1) may be proved on the basis of —

(a) the records available in an information utility, if any, or

(b) other relevant documents sufficient to establish the claim, including any or all of the following:—

(i) documentary evidence demanding satisfaction of the claim;

(ii) bank statements of the creditor showing non-satisfaction of claim;

(iii) an order of court or tribunal that has adjudicated upon non-satisfaction of claim, if any.

Mode of claim

These amendment regulations also amended a paragraph related to mode of submitting claims in Form A of public announcement. This is just a minor claims to enable other creditors to file a claim.

Now amendment paragraph reads as under –

“The financial creditors shall submit their proof of claims by electronic means only. All other creditors may submit the proof of claims in person, by post or by electronic means.”

Details of security/property

According to particular 8 of the Form F, other creditors require to provide details of:

  1. any security held, the value of security and its date, or
  2. retention title arrangement in respect of goods or properties to which the claim refers.

Post Strip –

Time available to file claims

According to insolvency resolution law as summarized in Public Announcement Form A, the creditors of [name of the corporate debtor], are hereby called upon to submit a proof of their claims on or before [insert the date falling fourteen days from the appointment of the interim resolution professional] to the interim resolution professional at the address mentioned against item 8.

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