The Instruction No. 1083/04/2022-CX9 dated 23.05.2022 is a welcome step to the extent it came at least though it came late. This instruction and annexed Standard Operating Procedures (SOP) for the NCLT cases regarding filing claims by authorities under CBIC required to be filed under the Insolvency and Bankruptcy Code (IBC) took almost six years.
The Insolvency and Bankruptcy jurisprudence and environment are still in a nascent stage. This instruction is a minor step to remove one of the main hurdles. Insolvency Professionals feel duty-bound to inform the Government Authorities about the Tribunal order for insolvency resolution and their appointment, moratorium, invitation of claims and public announcement. The information of insolvency was usually taken as lightly as a waste paper by authorities armed with the power to attach any property and assets of assesses and accused.
These Government Authorities faced several legal and ego issues:
- How could Government Authorities, a legal and sovereign superpower, fall in the category of operational creditors? NOIDA is still facing the same dilemma and running post to pillar to satisfy its legal soul and ego. After losing on judicial fronts, they are pleading to Parliament for an amendment to the Code.
- How could a private person, the Insolvency Professional, ask a government authority to file the claim before himself? How could such a person claim the status of a court officer or legal jurisdiction over government authority?
- How could a government authority with the power to issue notice, summon someone, and assess tax liabilities suddenly run to the office of a private person, the Insolvency Professional, for approval of their claims? It hurts when an Insolvency Professional declines to receive claim paper (post ninety days), accepts claims, seeks bulky clarification or counters the claim based on his own wisdom.
This particular instruction dated 23.05.2022 is not without discrepancies and practical difficulties. The instruction correctly claims:
“3. One of the reasons for such delay in filing the claims is that concerned zonal offices have not received information regarding initiation of the process in a timely manner. Accordingly, it has not been proposed that IBBI would share the details of the public announcement on a regular basis to an identified office/office or a centralised system and hence it has been requested that such office/officer/system I CBIC need to be identified and intimated to the IBBI for implementing the system for sharing of information.”
This assertion indicates a pathetic situation.
Government Authorities and other persons may receive first-hand information on the insolvency or liquidation or bankruptcy orders directly from National Company Law Tribunal. Theses Instructions rely upon communication from the IBBI. The IBBI itself got this information with a 3-5 days delay.
There is a little time gap in IBBI Communication, which is required to be plugged.
In a practical scenario, within three days of appointment as an Interim Resolution Professional or Liquidator, the Insolvency Professionals issue public notices in newspapers and then send a copy to upload on the IBBI website. In addition, all insolvency professionals send information about the commencement of the insolvency resolution process by email and, if possible, by speed post to all potential claimants, including government authorities, tax authorities, suppliers, and bankers, subject to information received from the corporate debtor or gathered from secondary sources.
There may be a centralised nodal email address of authorities under CBIC. Insolvency Professionals could send an email about the commencement of the insolvency resolution process. Such email may have a standard subject line like <CIRP/Liquidation> <Company Name> <Company CIN> <Company PAN> <State> <Last date of filing Claim> for easy understanding and communication.
These Instructions issued by CBIC do not facilitate Insolvency professionals to communicate with powerful tax authorities directly. If CBIC does not enable Insolvency Professionals, it does not help CBIC authorities to file claims timely.
IBBI has a proper mechanism of email communication of daily development on the public announcement, invitation of claims, invitation of resolution plans and auction notices. Anyone can subscribe to the same. Point No. iv of SOPs annexed with this instruction must have mentioned it more clearly.
However, there is a little time gap in such IBBI Communication, which is required to be plugged. The copy of the public notice does not upload automatically on the IBBI website without their internal approval. Therefore, public notices may display on the IBBI website and communicate with a delay. IBBI may permit such public notices to be uploaded automatically with a copy of the NCLT order as soon as the concerned IRP/Liquidator drafts and upload the same on the IBBI website. This way, it may appear on the website and in newspapers on the same day.
Concerned officials of Government authority and Insolvency Professionals lack clarity on the filing of government claims. Such as; which officer has the authority to sign the claims, make declarations and affidavits, what supporting documents are required in claims by tax authorities and correspondence addresses like email and postal address, the release of properties and assets attached by tax authorities, and vacation of lien on bank accounts and other assets. All these issues and challenges lead to delays in the claim verification and the insolvency resolution process. Therefore, I suggest the next set of instructions and Standard Operating Procedures should have appropriate advisories on these matters. This will certainly assist in reducing litigation.
I have an additional suggestion for CBIC, which affects the microeconomic environment and MSMEs in particular. Unless the management of the corporate debtor under insolvency resolution is cooperating, Insolvency Professionals have no mechanism to have details of suppliers and service providers. All these suppliers and service providers are fellow operational creditors of these tax authorities under Insolvency and Bankruptcy Jurisprudence. CBIC has nation wise data of these suppliers and service providers, including their official email and postal addresses. In case of authorities under CBIC may, please provide such data of the last three years concerning the corporate debtor to concern insolvency professional; it may help better invitation of claims and verification thereof. Authorities under CBIC may also flash a message of public notice to these fellow operational creditors in an automated system.
Aishwarya Mohan Gahrana