New Delhi, Sep 3 (IANS) The Insolvency and Bankruptcy Board of India (IBBI) has proposed an amendment to the liquidation regulations under the Insolvency and Bankruptcy Code, 2016 to allow public auction of non-readily realisable assets (NRRA) to third parties in a bid to avoid the stalemate or delay created in the liquidation process due to such assets.
IBBI in its recent discussion paper on corporate liquidation process noted that some assets, which require an indefinite time for realisation on account of peculiar nature of such assets or special circumstances, fall in the category of sundry debts.
They include refunds from government and its agencies, contingent receivables, disputed receivables, subjudice receivables, disputed assets, and assets underlying avoidance transactions.
“It is proposed to provide in the liquidation regulations that the liquidator may explore the possibility of assignment of NRRA through public auction to third parties,” it said.
In case an auction is not possible, the assignment may be done on arm's length basis, according to IBBI's proposal.
A transaction done on an arm's length basis refers to one in which the buyer and the seller act independently and have no relationship with each other.
The board noted that assignment of such assets by the liquidator may be absolute or with recompense facility and shall be subject to Section 29A of the Insolvency and Bankruptcy Code (IBC).
Under the option of absolute assignment of NRRAs, the assignee, who is assigned the assets by the liquidator, will have the right over the assets and any action related thereto.
The assignment would include transfer of all the legal rights, remedies and power to bring the action to an end without the interference of the assignor or the liquidator.
The option of assignment with recompense facility would allow the liquidator to assign the asset with an initial price.
Any subsequent net discovery of the value over and above the initial price would be shared between the assignee and the assignor, as per the terms of the engagement entered into to enforce the assignment.
As per the discussion paper, the liquidator shall be required to consult the ‘stakeholders' consultation committee' (SCC) and if the advice of the SCC is not adhered to, the liquidation shall record the reasons in writing for such contrary view and mention it in subsequent progress report or final report submitted to the adjudicating authority.
IBBI has sought public comments on the proposal by September 16, 2020.