Insolvency regulator IBBI has advised insolvency professionals (IPs) to proactively provide prompt information to the regulator on cases where important issues relating to vires, interpretations and applicability of IBC provisions are being contested before the Supreme Court and the High Courts.
IBBI has to informed by the IPs not only on assignments handled by them as on date, but also in respect of any future case that comes to their notice/knowledge, IBBI has said in a circular.
The latest circular has been issued in light of the concern expressed that the stand of the Indian government(corporate affairs ministry) or IBBI has not been placed before the courts in certain crucial matters as they were not made parties.
‘Of great concern’
“Of late, it has been observed that in a few matters Supreme Court and several High Courts have considered and delivered judgements wherein stand of Union of India (MCA) or IBBI remained unrepresented since both these institutions were not a party in the concerned proceedings. This matter is of great concern as in some of such cases scheme of the Code was in question which required to defended earnestly. While we are trying to retrieve the situation through further legal recourse, our apprehension is that there could be many more such important matters pending or might arise in future”, said the IBBI circular.
Insolvency professionals must proactively provide prompt information and papers to the IBBI to enable it to examine the provision of statute under question with a view to implead itself for appropriate defence, the regulator said.
Experts’ say
Sushmita Gandhi, Partner, IndusLaw, said that the recent plea challenging constitutional validity of provisions on personal guarantors seems to have triggered this safeguard fencing by IBBI. “Inviting a word from the regulator and the legislator, when the vires of the Code are being questioned, is undeniably prudent. Although the direction in its entirely seems to have sketchy implementation and may require a more foolproof answer than putting entire onus on insolvency professionals”, she added.
Insolvency professional Sripriya Kumar said this is a timely measure and will enable early intervention on matters pending before courts. “With this IBBI may also consider setting up of an Authority for Advance Ruling that can enable formal opinions on contentious matters faced by stakeholders.
This would also reduce the need for such stakeholders to approach adjudicating authorities”, she added.
Siddharth Srivastava, Partner, Restructuring & Insolvency, Khaitan & Co, said this is in fact a very good move which will ensure that regulators’ (IBBI’s) perspective is also adequately represented in courts. “Any judgment regarding vires/ validity of the regulations framed by IBBI should ideally take into account regulators’ views as well. This will help further streamline the IBC process for the benefit of stakeholders,” Srivastava said.
Tahira Karanjawala, Principal Associate, Karanjawala and Company Advocates, said this IBBI ask is not an unreasonable one or an unfair expectation on the insolvency professionals. “It is appropriate that the MCA and IBBI be allowed to place their stand in a matter where a provision of the Code or a regulation is challenged. In fact, the view of the IBBI may be crucial in many matters where the intent behind a regulation is to be elaborated”, she added.