Throwing its weight behind ‘electronic’ process, insolvency regulator IBBI has mandated that any class of creditors looking for a representation in the Committee of Creditors (CoC) should choose their ‘authorised representative’ only through an electronic process.
This would mean that home buyers, who were recently categorised as financial creditors, would have to use an electronic process to choose an insolvency professional (authorised representative) from among the three IPs offered for choice by an interim resolution professional.
After categorising ‘home buyers’ as ‘financial creditors’, the Insolvency and Bankruptcy Board of India (IBBI) had recently specified the mechanism, albeit indirectly, through which their voice would be heard in the ‘committee of creditors’.
Now, in a new circular, IBBI has specified that where the approval of resolution plan is at least 15 days away, the resolution professional should “expeditiously” obtain, by electronic means, the choice of the insolvency professional from creditors in a class to act as their ‘authorised representative’ of the class.
Experts’ take
Aseem Chawla, Managing Partner, ASC Legal, a law firm, said the use of electronic means to choose an IP was a good beginning. However, the implementation should happen in spirit following an inclusive approach where procedure does not come in the way of the representation and intent of such class of financial creditors, Chawla added.
Saurav Kumar, Partner, Induslaw, a law firm, said the IBBI circular should benefit home-buyers who have only recently been recognised as financial creditors. The simplified mechanism should clear some doubts on the manner of representation of such home-buyers.
The onus is now on the Resolution Professional to ensure that the choice of authorised representatives is obtained expeditiously for all insolvency resolution processes for which the final approval of the resolution plan by the CoC is at least 15 days away.
“In my view, the intent of circular is to allow for maximum participation for approval of the resolution plan and that needs to be respected at all times. The resolution professionals are obligated to take the consent of the creditors via electronic means to enable this process to be completed quickly. The enabling process should not supercede the intent and the resolution professional must be duty-bound to ensure maximum participation, in any other expeditious manner,” Kumar said.
Pankaj Mahajan, Head-Restructuring & Insolvency, Mazars Advisory LLP, said the circular has been issued to ensure the inclusion of other classes of creditors in the existing resolution processes which are nearing completion.
“The keyword with regard to selection by electronic means is ‘expeditiously’, conveying the intent of IBBI to take the intended class of creditors on board with immediate effect,” said Mahajan.
The onus has been
put on the Resolution Professional to ensure that the choice of authorised representatives is obtained expeditiously
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