NEW DELHI: The Insolvency and Bankruptcy Board of India (IBBI), in amendments to its liquidation norms on Tuesday, clarified that persons who were not eligible under the code to submit a plan to resolve a bankruptcy, shall not be a party in any manner to a compromise or arrangement of the corporate debtor, and a secured creditor cannot sell to such persons.
A number of people, including promoters and related parties of promoters, are barred from participating in bankruptcy resolutions as they could misuse the resolution process by buying back assets at lower rates, while settling their debts with banks. This amendment was seen by analysts as a move to plug any loopholes such as the banks selling part of any asset, or any such related parties being partners to any-bankruptcy resolution proposals.
“The amendment clarifies that a person, who is not eligible under the code to submit a resolution plan for insolvency resolution of the corporate debtor, shall not be a party in any manner to a compromise or arrangement of the corporate debtor under Section 230 of the Companies Act, 2013,” IBBI said in a press note.In norms that were made public on Tuesday, it enjoined on secured creditors to contribute their share towards workmen’s dues and towards costs incurred in insolvency resolution, within 90 days of the liquidation commencement date.
They shall also have to pay in the excess of money realised from sale of assets to the liquidator, within 180 days of the liquidation commencement date. In case the secured creditor fails to pay such amount to the liquidator within 90 days or 180 days, as the case may be, the asset shall become part of Liquidation Estate.The new amendments also lay down that a liquidator must deposit the amount of unclaimed dividends and undistributed proceeds in a liquidation process, along with any income earned from them, into the corporate liquidation account before an application for dissolution is submitted.
Those who can’t participate
Promoters and related parties of promoters, are barred from participating in bankruptcy resolutions as they could misuse the resolution process