Insolvency regulator proposes longer timeline for submission of creditors claims

The insolvency regulator has proposed the extension of the timeline for submission of creditors claims to 90 days from the insolvency commencement date, or up to the date of issue of latest RFRP (request for resolution plan) under Regulation 36B, whichever is later.

The Insolvency and Bankruptcy Board of India (IBBI) has in a discussion paper said that as per the current stipulation, creditors are required to submit creditors claims with proof on or before the last date mentioned in the public announcement, or no later than the 90th day of the insolvency commencement date in case of delayed submissions.

However, it argues that the current timeline for submission of creditors claims may pose constraints for certain creditors, particularly in complex insolvency cases with numerous stakeholders. In many cases, the creditors file their claims after 90th day after obtaining permission from the AA, thus increasing the burden of the adjudicating authority leaving them less time to deal with more important matters.

According to the discussion paper, this extension will provide greater flexibility for creditors, especially in complex cases, allowing for a more thorough and inclusive claim gathering process.

“As per model timeline, both translate to the same timeline. However, in several cases, the process is delayed and, in such cases, extended time will be available to the claimants to file claims and for the RP to consider the claims,” it says.

As per the IBBI proposal, while considering the claims filed by the creditors after the due date of 90 days from Insolvency Commencement Date (ICD), the resolution professional (RP) will prima facie make a decision on acceptance or rejection of the claims. Where the RP decides the acceptance of the claims, he will make a list of such claims and file application on behalf of such creditors for condonation of delay. On the other hand, where the RP decides not to accept the claims, he will intimate the creditors about the same and if the creditor is not satisfied with the reason provided by the RP, he can approach the AA.

“This will ensure that no creditor is unfairly excluded from the process due to delays in submission of their claims. A single application filed for condonation of delay reduce the burden of AA in hearing and deciding the claims application,” says the IBBI discussion paper.

Also See: Voluntary Liquidation: A comprehensive analysis of wilful business closure