To ensure fairness in bankruptcy cases, the Insolvency and Bankruptcy Board of India (IBBI) has issued a circular instructing resolution professionals (RPs) to share copies of their reports with both creditors and debtors involved in insolvency cases. The circular highlights instances where RPs failed to provide equal access to information to both parties, leading to a disparity in understanding.
The circular read, "It has been observed that in certain cases, the RPs have not shared a copy of the report with both debtor and creditor, leading to a lack of equal information access among them." Adding, "Therefore, it is hereby advised that the RP shall provide a copy of the report to both debtor and creditor in all cases."
The Insolvency and Bankruptcy Code (IBC) rules state that RPs are required to submit reports to the adjudicating authority after receiving applications from either creditors or debtors. These reports contain evaluations and recommendations for the approval or rejection of the application. By sharing these reports with both debtors and creditors, the IBBI aims to ensure "transparency and informed decision-making".
According to a report by the Financial Express, experts believe that this initiative will empower debtors with a better understanding of the evaluation process followed by RPs, enabling them to present their cases effectively before the National Company Law Tribunal (NCLT). Access to more information will also allow debtors to initiate negotiations or devise repayment plans before formal proceedings begin, potentially reducing the overall resolution time.
This comes as a part of the IBBI ongoing efforts to make the process involved in insolvency cases more efficient and seamless. IBBI data indicates that a significant number of resolutions have been pending for over 270 days, well beyond the stipulated period of 180 days from the date of admission of the application. This highlights the need for measures to expedite the resolution process and enhance efficiency.
Earlier this month, the IBBI also lifted restrictions to allow the same insolvency professional to handle the resolution process for both a company and its personal guarantor, aiming for better coordination and harmonisation between the two processes. Additionally, amendments have been made regarding the mandatory nature of Committee of Creditors meetings in insolvency cases involving personal guarantors, further enhancing regulatory oversight and procedural clarity.