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Insolvency and Bankruptcy Board of India (“IBBI”) vide notification dated March 15, 20211 amended IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations 2016”) by introducing IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2021 (“Amendment CIRP Regulations 2021”).

The Insolvency and Bankruptcy Code of 2016 (the “Code”) along with CIRP Regulations 2016 details a timeline for the steps to be taken by various participants in the Corporate Insolvency Resolution Process (“CIRP”). It also details the mechanism of submission of the claims to Resolution Professionals (“RP”). The Code provides for the definition of the claim and the CIRP Regulations 2016 provides for mechanism, verification and mode of submission of claim to the RP.

The definition of claim in Section 3(6) of the Code consists of two parts:
  1. Right to payment;
  2. Right to remedy for breach of contract if such breach of contract gives rise to a right of payment.

“Claim”, under the Code means a right of payment by the debtor, whether arising from a debt, a contract or type of legal obligation, whether liquidated or unliquidated, matured or unmatured, disputed or undisputed, secured or unsecured, fixed or contingent. Claim can be submitted by the participants or stakeholders only upon making of the public announcement of the initiation of CIRP by the RP and call for submission of claims, as is provided under Section 13 and Section 15 of the Code read with Regulation 6(1) of CIRP Regulations 2016, upon initiation of insolvency commencement date. Insolvency commencement date means the date on which an application whether under Section 7, 9 or 10 is accepted by Adjudicatory Authority by initiating CIRP.

  1. Position prior to and position after the Amendment

    Amendment Regulations 2021 has inserted Regulation 12A to the CIRP Regulations 2016. Regulation 12 of CIRP Regulations 2016 provides for submission of proof of claims. A creditor, who failed to submit proof of claim within the time stipulated in the public announcement, may submit such proof to the interim resolution professional or the RP, as the case may be, till the approval of a resolution plan by the committee of creditors.

    Newly inserted Regulation 12A provides for ‘Updation of Claim’. It states that “a creditor shall update its claim as and when the claim is satisfied, partly or fully, from any source in any manner, after the insolvency commencement date.

    A con-joint reading of Regulation 12A with Section 3(6) of the Code provides that, as and when the creditor receives any amount against the right of payment from the corporate debtor, such creditor shall update the claim so as to reflect the true picture of the accounts to other stake holders involved in the CIRP.

  2. Revised timeline in the Amendment
    1. Filing of Form CIRP 7

      Regulation 40A of the CIRP Regulations 2016 provides for a model timeline for carrying out various activities envisaged in a CIRP. Regulation 40B of the CIRP Regulations 2016 require an interim resolution professional/ RP to file a set of forms (CIRP 1 to CIRP 6) within seven days of completion of specific activities to enable monitoring progress of CIRP.

      Amendment CIRP Regulations 2021 has further amended Regulation 40B, wherein after sub-regulation (1), sub-regulation (1A) is inserted. Regulation 40B (IA) casts a responsibility on the resolution professional to file form CIRP 7 within 3 (three) days from said date (please see citation no. 2) and shall continue to file Form CIRP 7, every 30 (thirty) days (to be counted from the date of filing of Form CIRP 7 for the first time), until the said activity remains incomplete. Following are the activities requiring filing of Form CIRP 7 said activity remains incomplete:

      1. Public announcement is not made by T2+3rd day;
      2. Appointment of RP is not made by T+30th day;
      3. Information memorandum is not issued within 51 days from the date of public announcement;
      4. RFRP is not issued within 51 days from the date of issue of information memorandum;
      5. CIRP is not completed by T+180th day.

      Provided that subsequent filing of Form CIRP 7 shall not be made until thirty days have lapsed from the filing of an earlier Form CIRP 7. Also, only one Form CIRP 7 shall be filed at any time whether one or more activity is not complete by the specified date.

      Furthermore, IBBI has vide Circular no. IBBI/CIRP/41/2021 dated March 18, 20201, introduced Form CIRP 73.

    2. Changes to Form C

      Regulation 8 of the CIRP Regulations 2016 provides for submission of claim of financial creditors through Form C. Amendment CIRP Regulations 2021 has also carried out changes to Form C, which is in respect of ‘submission of claim by financial creditors’. Requirement of filing Form C arises after an application is admitted by the Adjudicatory Authority and the RP is appointed, after which claim by various financial creditors along with other stake holders are filed with the RP.

      IBBI has time and again, been very active in removing the discrepancies in the working of the Code. Updation of claim and the revised timeline has certainly brought some clarity on the amount of the claim admitted by the RP.

2 Here, T refers to Insolvency Commencement Date
3 Circular - Reporting of status of ongoing corporate insolvency resolution processes through Form CIRP 7 dated March 18, 2021;