Introduction: The Insolvency and Bankruptcy Code, 2016 (IBC 2016) serves as a pivotal legal framework designed to resolve insolvency and bankruptcy issues within India efficiently. A critical aspect of this process involves the role of the Resolution Professional (RP), who examines insolvency applications and reports findings to the Adjudicating Authority. Recent circulars from the Insolvency and Bankruptcy Board of India (IBBI) highlight an essential procedural update regarding the sharing of the RP’s report prepared under Section 99 of the IBC 2016 with both the debtor and the creditor, aiming to foster transparency and fairness in the insolvency resolution process.
Detailed Analysis: Under Chapter III of Part III of the IBC 2016, the RP plays a crucial role in examining the applications filed under sections 94 or 95 and subsequently submitting a report to the Adjudicating Authority. This report is pivotal, outlining the RP’s recommendations for either the approval or rejection of the insolvency application. Historically, the code mandated under Sub-section (10) of section 99 that the RP share this report with either the debtor or the creditor, depending on the case’s specifics.
However, inconsistencies have emerged, with instances where RPs did not share the report equally with both involved parties, leading to an imbalance in information access. Such practices undermine the principles of fairness and transparency critical to the insolvency resolution process. Recognizing this issue, the IBBI issued a circular dated 12th February 2024, advising RPs to provide a copy of their report to both the debtor and creditor in all cases.
This directive is significant for several reasons. Firstly, it ensures that both parties are equally informed about the RP’s findings and recommendations, promoting a more transparent and equitable process. Secondly, it aids in informed decision-making, allowing both debtor and creditor to understand the basis for the RP’s recommendations. Lastly, it aligns with the broader objectives of the IBC 2016, which strives to consolidate and amend laws relating to reorganization and insolvency resolution in a timely manner.
Conclusion: The IBBI’s recent circular is a commendable step towards enhancing the procedural fairness and transparency of the insolvency resolution process under the IBC 2016. By mandating the sharing of the RP’s report with both the debtor and creditor, the IBBI ensures that the principles of equitable treatment and informed decision-making are upheld. This move not only reinforces the integrity of the insolvency resolution process but also strengthens the confidence of stakeholders in the legal framework governing insolvency and bankruptcy in India.
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Insolvency and Bankruptcy Board of India
7th Floor, Mayur Bhawan, Connaught Place, New Delhi-110001
Circular No. No. IBBI/II/66/2024 Dated: 12th February, 2024
To
All Registered Insolvency Professionals
All Recognised Insolvency Professional Entities
All Registered Insolvency Professionals Agencies
(By mail to registered email addresses and on website of the Board)
Dear Madam / Sir,
Subject: Sharing of the Report prepared by the Resolution Professional under section 99 of the Insolvency and Bankruptcy Code, 2016 to both debtor and creditor.
The resolution professional (RP) in an insolvency resolution process of a debtor under Chapter III of Part III of the Insolvency and Bankruptcy Code, 2016 (Code) examines the application filed under section 94 or 95 of the Code and submits a report to the Adjudicating Authority under sub-section (1) of section 99 of the Code, recommending for approval or rejection of the application. Sub-section (10) of section 99 mandates the RP to share a copy of this report to the debtor or the creditor, as the case may be.
2. 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.
3. Therefore, it is hereby advised that the RP shall provide a copy of the report to both debtor and creditor in all cases. This will ensure that the debtor and the creditor are well-informed about the evaluation and recommendations made by the RP, thereby promoting transparency and informed decision-making.
4. This is issued in exercise of powers conferred under section 196 of the Code.
Yours faithfully,
Sd/-
(Sushanta Kumar Das)
Deputy General Manager
E-mail: das.sushanta@ibbi.gov.in
