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1 INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (LIQUIDATION PROCESS) REGULATIONS, 20161 [AMENDED UPTO 25.07.2019] IBBI/2016-17/GN/REG005.-In exercise of the powers conferred by sections 5, 33, 34, 35, 37, 38, 39, 40, 41, 43, 45, 49, 50, 51, 52, 54, 196 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Board hereby makes the following Regulations, namely- CHAPTER I PRELIMINARY 1. Short title and commencement. (1) These Regulations may be called the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. (2) These Regulations shall come into force on the date of their publication in the Official Gazette. (3) These Regulations shall apply to the liquidation process under Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016. 2. Definitions. (1) In these Regulations, unless the context otherwise requires- (a) “books of the corporate debtor” means (i) the books of account and the financial statements as defined in section 2(13) and 2(40) of the Companies Act, 2013, (ii) the books of account as referred to in section 34 of the Limited Liability Partnership Act, 2008, or (iii) the books of accounts as specified under the applicable law, as the case may be; 1Vide Notification No. IBBI/2016-17/GN/ REG005, dated 15th December 2016, published in the Gazette of India, Extraordinary, Part III, Sec.4, dated 15th December, 2016 (w.e.f. 15.12.2016). 2 (b) “Code” means the Insolvency and Bankruptcy Code, 2016; 2 [(ba) “consultation committee” means the stakeholders’ consultation committee constituted under sub-regulation (1) of regulation 31A;] (c) “contributory” means a member of the company, a partner of the limited liability partnership, and any other person liable to contribute towards the assets of the corporate debtor in the event of its liquidation; (d) “electronic means” mean an authorized and secured computer programme which is capable of producing confirmation of sending communication to the participant entitled to receive such communication at the last electronic mail address provided by such participant and keeping record of such communication; (e) “identification number” means the Limited Liability Partnership Identification Number or the Corporate Identity Number, as the case may be; 3[4[(ea) “liquidation cost” under clause (16) of section 5 means- (i) fee payable to the liquidator under regulation 4; (ii) remuneration payable by the liquidator under sub-regulation (1) of regulation 7; (iii) costs incurred by the liquidator under sub-regulation (2) of regulation 24; (iv) costs incurred by the liquidator for preserving and protecting the assets, properties, effects and actionable claims, including secured assets, of the corporate debtor; (v) costs incurred by the liquidator in carrying on the business of the corporate debtor as a going concern; (vi) interest on interim finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower; (vii) the amount repayable to contributories under sub-regulation (3) of regulation 2A; (viii) any other cost incurred by the liquidator which is essential for completing the liquidation process: Provided that the cost, if any, incurred by the liquidator in relation to compromise or arrangement under section 230 of the Companies Act, 2013 (18 of 2013), if any, shall not form part of liquidation cost.]] (f) “Preliminary Report” means the report prepared in accordance with Regulation 13; 2 Inserted by Notification No. IBBI/2019-20/GN/REG047, dated 25th July, 2019 (w.e.f. 25-07-2019). 3 Substituted by Notification No. IBBI/2019-20/GN/REG047 dated 25th July, 2019 (w.e.f. 25-07-2019). Prior to substitution it stood as under: “(ea) “liquidation cost” under sub-section (16) of section 5 means- (a) fee payable to the liquidator under regulation 4; (b) remuneration payable by the liquidator under regulation 7; (c) cost incurred by the liquidator under regulation 24; and (d) interest on interim finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower;” 4 Inserted by Notification No. IBBI/2017-18/GN/REG028, dated 27th March, 2018 (w.e.f. 01-04-2018). 3 (g) “Progress Report” means the quarterly report prepared in accordance with Regulation 15; (h) “registered valuer” means a person registered as such in accordance with the Companies Act, 2013 (18 of 2013) and rules made thereunder; (i) “Schedule” means a schedule to these Regulations; (j) “section” means section of the Code; and (k) “stakeholders” means the stakeholders entitled to distribution of proceeds under section 53. (2) Unless the context otherwise requires, words and expressions used and not defined in these Regulations, but defined in the Code, shall have the meanings assigned to them in the Code. 5[2A. Contributions to liquidation costs. (1) Where the committee of creditors did not approve a plan under sub-regulations (3) of regulation 39B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the liquidator shall call upon the financial creditors, being financial institutions, to contribute the excess of the liquidation costs over the liquid assets of the corporate debtor, as estimated by him, in proportion to the financial debts owed to them by the corporate debtor. Illustration Assume that the excess of liquidation costs over liquid assets is Rs.10, as estimated by the liquidator. Financial creditors will be called upon to contribute, as under: Sl. No. Financial creditors Amount of debt due to financial creditors (Rs.) Amount to be contributed towards liquidation cost (Rs.) (1) (2) (3) (4) 1 Financial institution A 40 04 2 Financial institution B 60 06 3 Non-financial institution A 50 00 4 Non-financial institution B 50 00 Total 200 10 (2) The contributions made under the plan approved under sub-regulation (3) of regulation 39B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 or contributions made under sub-regulation (1), as the case may be, shall be deposited in a designated escrow account to be opened and maintained in a scheduled bank, within seven days of the passing of the liquidation order. (3) The amount contributed under sub-regulation (2) shall be repayable with interest at bank rate referred to in section 49 of the Reserve Bank of India Act, 1934 (2 of 1934) as part of liquidation cost. 5 Inserted by Notification No. IBBI/2019-20/GN/REG047, dated 25th July, 2019 (w.e.f. 25-07-2019). 4 2B. Compromise or arrangement. (1) Where a compromise or arrangement is proposed under section 230 of the Companies Act, 2013 (18 of 2013), it shall be completed within ninety days of the order of liquidation under sub-sections (1) and (4) of section 33. (2) The time taken on compromise or arrangement, not exceeding ninety days, shall not be included in the liquidation period. (3) Any cost incurred by the liquidator in relation to compromise or arrangement shall be borne by the corporate debtor, where such compromise or arrangement is sanctioned by the Tribunal under sub-section (6) of section 230: Provided that such cost shall be borne by the parties who proposed compromise or arrangement, where such compromise or arrangement is not sanctioned by the Tribunal under sub-section (6) of section 230.] CHAPTER II APPOINTMENT AND REMUNERATION OF LIQUIDATOR 3. Eligibility for appointment as liquidator. (1) An insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director, is independent of the corporate debtor.
