Now ‘interim representative’ may represent certain creditors in CIRP: IBBI

In a significant move, the insolvency regulator IBBI has introduced the concept of appointing an “interim representative” who will act as representative of the class of creditors during the period during which the appointment of the authorised representative is being considered for approval by NCLT.

The Insolvency and Bankruptcy Board of India (IBBI) has made an amendment to this effect in the Corporate Insolvency Resolution Process (CIRP) regulations.

The interim representative has the same rights and obligations as an authorized representative during meetings of the creditors’ committee, IBBI said.

The amended regulations will come into effect from 24 September 2024.

According to IBBI, the changes are intended to facilitate the effective representation of certain classes of creditors who are present in large numbers, such as home buyers, during the bankruptcy process.

‘Amended regulations must fill the gap’

Hari Hara Mishra, CEO, Association of ARCs in India, said the amended regulations aim to fill the gap. It would pave the way for an interim representative to look after a select class of creditors such as homebuyers, pending the appointment of an authorised representative by the competent authority. “This measure will help in representing and protecting the interests of homebuyers right from the beginning of the resolution process,” Mishra said.

Siddharth Srivastava, partner at Khaitan & Co, said the key clarification brought about by the latest amendments to the CIRP regulations is the addition of a proviso to Regulation 16A(2), which now entitles the authorised representative of the class of financial creditors to attend the meetings of the CoC as interim representative while the application for his appointment is pending before the deciding authority.

The inclusion of this reservation will put an end to the conundrum created by procedural delays in the appointment of the AR, which either postpone the first CoC meeting or prevent the presentation of interests of such financial creditors in the CoC until the appointment of the AR is confirmed, he added.

Sonam Chandwani, Managing Partner, KS Legal, said: “By rejecting late filings of Form CA and allowing an interim representative to step in while the final one is being approved, the waiting periods that would otherwise slow down the process will be reduced. These amendments are aimed at expediting the insolvency process by ensuring that a representative for financial creditors is appointed without unnecessary delays, thereby making the process more efficient and avoiding gaps in decision-making during crucial stages.”