Statutory departments and enforcement agencies need to be well-informed about key Insolvency and Bankruptcy Code (IBC) provisions, including its overriding effect on other legislation and the onset of moratorium on statutory proceedings, a new IIIPI Survey has recommended.
This Survey has found that Insolvency Professionals (IPs) —who are the backbone of IBC process — end up expending significant time and effort in dealing with various issues related to Statutory Authorities (Taxation, Land Authority, EPFO etc.) and Enforcement Agencies including CBI, ED, EOW, SFIO.
This Survey was conducted by Indian Institute of Insolvency Professionals of ICAI(IIIPI).
IIIPI, promoted by the Institute of Chartered Accountants of India (ICAI), is the largest frontline regulator under IBC in India with about 63 percent of Insolvency Professionals as its Members.
As per the survey, while time and efforts depend on the nature of business, specific circumstances and issues involved, in some cases the time taken in responding or interfacing with such authorities/agencies goes up to 25 percent of timelines under IBC process.
Such authorities and agencies, working in the public interest, have a stake in either recovering past dues or concluding the criminal proceedings against the previous erring promoters.
- Also read: IBC should build on the positives
In this context, the Survey report makes the case for mutual interaction of key stakeholders as such, highlighting challenges and plausible solutions.
“While statutory authorities and enforcement agencies expect timely conclusion of their proceedings/claims against the CDs, IPs experience the practical difficulties in responding to them, for matter which are prior to commencement of CIRP, or where past records are not available/handed over to RP, or where only promoters/ ex-management are accountable.
Moreover, proceedings in departments and agencies take considerable time in getting finality,”Ashok Haldia, Chairman, IIIPI-Board, said.
There is imminent need for streamlining the interface on mutual roles and expectations among IPs, government departments/agencies, he added.
The IBC mandates Resolution Professionals/ Liquidators to take control of the assets of companies undergoing Corporate Insolvency Resolution Process (CIRP)/ Liquidation.
In discharging their duties, IPs are required to interact with statutory authorities and enforcement agencies, on a regular basis, which can be critical for successful outcomes of the CIRPs.
OTHER FINDINGS
The challenges faced by IPs include initiation of statutory/penal proceedings against corporate debtor (CD) despite onset of moratorium, summons or notices being sent to IPs for civil and criminal matters or acts or omissions pertaining to period prior to commencement of CIRP, the Survey has found.
A Nodal Officer at Head Quarter (HQ) level and also regional/ zonal office level may be designated for coordinating the matters related to IBC, keeping in tview the timeliness as one of the core objectives, IIIPI has suggested.
An ecosystem may be developed for mutual cooperation and collaboration between such authorities/agencies and IRP/RP/Liquidator as officers of Court under IBC, it added.