IBBI Discussion paper on amendments to IBBI (Insolvency Resolution Process for Corporate Process) Regulations, 2016
The IBBI recently released a discussion paper for amendments in IBBI (Insolvency Resolution Process for Corporate Process) Regulations, 2016 which propose to make it unequivocally clear that the submission or approval of a resolution plan for a corporate debtor under the IBC does not automatically release guarantors from their liability to repay the debt, among other proposals.
It now seeks to amend its CIRP Regulations to ensure that submitting a resolution plan does not prevent creditors from enforcing their rights against the personal guarantor (PG).
To clarify that approving a resolution plan does not automatically discharge a PG’s liabilities from an independent contract, the IBBI has followed the Supreme Court’s approach in Lalit Kumar Jain vs Union of India.
In the Lalit Kumar Jain vs Union of India judgment, the Supreme Court upheld the November 15, 2019 MCA notification enforcing the IBC’s provisions on personal guarantors’ insolvency. The court also ruled that approving a resolution plan does not absolve PGs from their obligations or extinguish their liability.
Further, IBBI has suggested that for the resolution of a stressed firm up to Rs. 1,000 crore and those classified as micro, small and medium enterprises, only one registered valuer (instead of the current two or, in some cases, three) can be roped in to assess their fair and the liquidation values. This is aimed at reducing the time taken for resolution and the costs involving not-so-big bankrupt companies, according to the discussion paper.
Comments may be submitted electronically by 10th July, 2024.
