New Delhi, October 12, 2017
The working group constituted by the Insolvency and Bankruptcy Board of India has laid out draft regulations for repayment plan for individuals and firms declaring insolvency, providing a framework for resolution of personal insolvency.
According to the draft regulations, the plan should include among other things the duration of repayment, implementation schedule and a minimum budget for the survival of the debtor and immediate family for the repayment period. The repayment plan must also specify the manner in which funds held for the purpose are to be banked, invested or otherwise dealt with, pending distribution to creditors, as per draft regulations put out for comments.
“Where the amount claimed by a creditor is not precise due to any reason, the resolution professional shall make the best estimate of the amount of the claim based on the information available with him,” says the draft. Anshul Jain, partner, Luthra & Luthra said, “There are major gaps that need to be tweaked. We need to have a process for identifying creditors since the process is more creditor-driven. In case of individuals it is very difficult to verify… In some cases, the resolution professional is supposed to decide the claim value.”
Draft regulations specify excluded assets, such as unencumbered personal ornaments or house in use by the individual, will not be transferred or sold. Procedures to be followed by creditors and duties of the insolvency resolution professional in carrying out the proceedings for individuals and guarantors have also been laid out.
In the rules for insolvency for individuals, the working group has laid out the formula for calculating actual value of a dwelling unit using three methods — rent capitalisation, comparable land and building method.
“The government is now more informed on the matter and there is a more mature mind behind rules. Now that it is open to public comments, loopholes should get covered,” said Diwakar Maheshwari, partner, Khaitan & Co.
Experts also expressed concern over individual insolvency matter to be dealt by the Debt Recovery Tribunal, saying it may lack the required infrastructure and knowledge. Corporate insolvency resolution is handled at National Company Law Tribunal, constituted in June 2016.
By October 31, comments need to be submitted on Draft Insolvency & Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Individuals and Firms) Rules, 2017, and Draft Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Individuals and Firms) Regulations, 2017.
[The Economic Times]