Insolvency and Bankruptcy Board of India (IBBI) proposes extending the response time for default confirmation from 9 to 21 Days to enhance the insolvency resolution process.
In a significant move aimed at expediting the corporate insolvency resolution process (CIRP), the Insolvency and Bankruptcy Board of India (IBBI) has put forth a discussion paper to refine the efficacy and acceptance of default records issued by information utilities (IUs). This initiative underscores the pivotal role of IUs in facilitating the resolution of corporate insolvencies under the Insolvency and Bankruptcy Code (IBC).
The proposed amendments seek to fortify the issuance process of default records by IUs, chiefly by extending the timeline for corporate debtors to respond to default information provided by creditors. Currently, this window stands at around nine days, but the IBBI suggests elongating it to 21 days. This extension aims to ensure that the default information submitted by creditors is duly authenticated by corporate debtors, thus averting potential challenges during insolvency proceedings that could impede the process.
IUs, serving as repositories of financial data pertaining to corporate debtors, are integral to the IBC framework. Without the seamless functioning of IUs, adhering to the prescribed timelines within the code becomes a formidable task for adjudicating authorities and insolvency professionals, as highlighted in the discussion paper.
The primary role of IUs lies in furnishing high-quality authenticated information regarding debt and default. Consequently, the record of default issued by IUs assumes paramount importance in insolvency proceedings, serving as crucial evidence before adjudicating authorities to establish defaults.
While regulations governing IUs have been in place since 2017, the discussion paper acknowledges that IUs have yet to realize their full potential in optimizing time efficacy throughout the CIRP. The time-bound nature of the IBC mandates strict adherence to timelines, compelling adjudicating authorities to either admit or reject CIRP initiation applications within 14 days of receipt.
The paper further proposes several measures to bolster the reliability and efficiency of default records issued by IUs. These include the requirement for the use of authenticated email addresses for correspondence with debtors, mandating creditors to submit necessary proofs for debt or default, and compelling debtors to upload proof of dispute existence.
Commenting on the proposed changes, legal experts emphasize the significance of robust due diligence by IUs and stakeholders alike to bolster the credibility of default records. They applaud novel ideas such as self-declarations by creditors and issuance of default certificates for undisputed amounts, which aim to enhance the conclusiveness and reliability of default records.
In conclusion, the IBBI's proposal signifies a concerted effort to streamline the insolvency resolution process by addressing deficiencies in the current framework surrounding default records issued by IUs. If implemented effectively, these reforms hold the potential to expedite corporate insolvency proceedings, ensuring the flow of undisputed and comprehensive information while minimizing frivolous disputes before adjudicating authorities.
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