Filing Claims and Representing on Behalf of Operational and Financial Creditors

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ELIGIBILITY OF RESOLUTION PROFESSIONAL

1. Any insolvency professional shall only be eligible to be nominated as a resolution professional for a typical corporate insolvency resolution process of a corporate debtor in case he, along with all partners as well as directors of the insolvency professional entity of which he is a partner or director, is independent of the corporate debtor.
   Elaboration— An individual shall be treated independent of the corporate debtor, in case he:
   a. is an appropriate choice to be nominated as an independent director on the board of the corporate debtor under section 149 of the Companies Act, 2013 (18 of 2013), where the corporate debtor is a company;
   b. is notn’t a connected party of the corporate debtor; or
   c. is not a proprietor or an employee or a partner:
   (i) of a firm of auditors or CS (i.e. company secretaries) in exercise or cost auditors of the corporate debtor; or
   (ii) of a firm (legal or consulting), that has or had any transaction with the corporate debtor equivalent to ten percent or more of the gross turnover of such firm, during the last three financial years.
2. A resolution professional ought to make a revelation once he is appointed only in accordance with the Code of Conduct.
3. Any resolution professional, that is a partner or a director of an insolvency resolution professional entity, shall not continue as a resolution professional in a corporate insolvency resolution process in case the insolvency professional entity or any other partner or director of such insolvency professional entity presents any of the other stakeholders in the same corporate insolvency resolution process.

ACCESS TO BOOKS

Without any bias to section 17(2)(d), the interim resolution professional may evaluate the records, books of account, and other relevant documents as well as information, to the extent appropriate for discharging his duties under the Code, of the corporate debtor held with‑

• information utilities;
• professional advisors of the corporate debtor;
• depositories of securities;
• other registries that record the ownership of assets;
• contractual counterparties of the corporate debtor; and
• members, promoters, partners, the board of directors, and joint venture partners of the corporate debtor.

EXTORTIONATE CREDIT TRANSACTION

Any transaction shall be treated as extortionate under section 50(2) where:

• the terms are unconscionable as per the principles of law relating to contracts, or
• the terms need the corporate debtor to make extravagant payments in respect of the credit provided.

PUBLIC ANNOUNCEMENT

1. An insolvency professional is needed to make a public announcement instantly on his nomination as an interim resolution professional.
   Elaboration: ‘Instantly’ means not more than three days from the date of his appointment.
2. The public announcement referred to in sub-regulation (1) shall:
   a. be in Form A as per the Schedule;
   b. be published‑
   (i) in minimum one English and one regional language newspaper which is widely circulated both at the location of the registered office and principal office, in case any, of the corporate debtor and any other location wherein the opinion of the corporate debtor or the interim resolution professional conducts material business operations;
   (ii) on the official website, in case any, of the corporate debtor; and
   (iii) on the official website, in case any, entitled by the Board for the purpose,
   c. providing the last date for submission of proofs of claim, which shall be 14 days from the date of appointment of the interim resolution professional.
3. The applicant ought to bear the expenditure of the public announcement which may be repaid by the committee to the extent it ratified them.

Clarification- The expenditure on the public announcement shall not form part of insolvency resolution process costs.

CLAIMS BY OPERATIONAL CREDITORS

1. Any person who is claiming to be an operational creditor, other than a workman or employee of the corporate debtor, shall have to submit evidence of claim to the interim resolution professional by post, in person, or by electronic means in Form B of the Schedule:
2. Even such a person may deposit supplementary documents or clarifications in support of the claim before the constitution of the committee.

• The debt due (in case any) of the operational creditor under this Regulation may be demonstrated on the basis of‑
• the shreds of evidence handy with an information utility, if any; or
• other relevant documents, including –
  (i) a contract for the supply of goods as well as services with the corporate debtor;
  (ii) any invoice demanding payment for the goods/services provided to the corporate debtor;
  (iii) any court or tribunal order that has adjudicated upon the non-payment of a debt, in case any; or
  (iv) financial accounts

CLAIMS BY FINANCIAL CREDITORS

Any person who is claiming to be a financial creditor of the corporate debtor ought to submit evidence of claim to the interim resolution professional in electronic form in Form C of the Schedule:

Although, such a person can deposit supplementary documents or clarifications in support of the claim before the constitution of the committee.

The existence of debt due to the financial creditor can be proved on the basis of ‑
(a) the availability of records with an information utility, in case any; or
(b) other relevant documents, inclusive of –
(i) any financial contract backed by financial statements as evidence of the debt;
(ii) a record proving that the amounts bound by the financial creditor to the corporate debtor under a facility have been utilized by the corporate debtor;
(iii) financial statements depicting that the debt has not been reimbursed; or
(iv) an order of a court or tribunal that has arbitrated upon the non-payment of a debt, in case any.

SUBSTANTIATION OF CLAIMS

The resolution professional or the interim resolution professional, as the case may be, may call for such other confirmation or clarification as he considers fit from a creditor for validating the entire or part of its claim.

COST OF PROOF

A creditor ought to bear the cost of proving any debt that is due to such creditor.

SUBMISSION OF PROOF OF CLAIMS

• As per sub-regulation (2), a creditor ought to submit evidence of claim on or before the last date mentioned in the public announcement.
• A creditor, who was unsuccessful in submitting evidence of claim within the stipulated time after the public announcement, may submit such evidence to the interim resolution professional or the resolution professional, as the case may be until the resolution plan is approved by the committee.
• Where the creditor is a financial creditor under sub-regulation (2), it shall be contained in the committee from the date of admission of such claim provided that such inclusion shall not affect the validity of any decision that is taken by the committee prior to such inclusion.

VERIFICATION OF CLAIMS

• The resolution professional or the interim resolution professional, as the case may be, shall verify each and every claim, as on the insolvency commencement date, within 7 days from the last date of the receipt of the claims, and thereon retain a list of creditors including names of creditors along with the amount claimed by them, the amount of their allegation confessed and the security interest, in case any, in respect of such claims, and update it.
• The list of creditors shall be –
  (a) available for inspection by the persons who have submitted evidence of claim;
  (b) available for inspection by partners, members, directors, and even the guarantors of the corporate debtor;
  (c) displayed on the website of the corporate debtor, in case any;
  (d) filed with the Adjudicating Authority; and
  (e) conferred at the initial meeting of the committee

DETERMINATION OF AMOUNT OF CLAIM

1. Where the amount demanded by a creditor is not accurate due to any contingency or other reason, the resolution professional or the interim resolution professional, as the case may be, shall make the best estimate of the amount of the claim on the basis of the information available with them.
2. The resolution professional or the interim resolution professional, as the case may be, shall amend the amounts of claims accepted, inclusive of the estimates of claims made under sub-regulation (1), as soon as may be achievable, when he comes across additional information warranting such revision.

DEBT IN FOREIGN CURRENCY

The claims designated in foreign currency ought to be valued in Indian currency at the official exchange rate as on the date of insolvency commencement.

Explanation – “official exchange rate” is referred to the reference rate as published by the Reserve Bank of India or derived from such reference rates.

COMMITTEE WITH ONLY OPERATIONAL CREDITORS

1. In a case where the corporate debtor has no financial debt or where all financial creditors are related parties of the corporate debtor, the committee shall be set up as per this Regulation.
2. The committee that is formed under this Regulation shall consist of members as under ‑
   (a) 18 largest operational creditors in terms of their value:
   Provided that if the number of operational creditors is less than 18, the committee needs to include all such operational creditors;
   (b) one representative that is elected by all workmen other than those workmen included under sub-clause (a); and
   (c) a single representative who is elected by all employees other than those employees included under sub-clause (a).
3. A member of the committee formulated under this Regulation shall have voting rights in the ratio of the debt due to such creditor or debt represented by such person, as the case may be, to the total debt.
   Explanation – For the intent of this sub-regulation, ‘total debt’ is the sum total of‑
   (a) the amount of debt due to the creditors listed in sub-regulation 2(a);
   (b) the amount of the aggregate debt due to workmen under sub-regulation 2(b); and
   (c) the amount of the aggregate debt due to employees under sub-regulation 2(c).

A committee formed under this Regulation and its members shall have the same rights, powers, duties and obligations as a committee comprising financial creditors and its members, as the case may be.

INITIAL MEETING OF THE COMMITTEE

The interim resolution professional shall file a report declaring the constitution of the committee to the Adjudicating Authority on or before 30 days from the date of his appointment.

The interim resolution professional shall summon the first meeting of the committee within 7 days of filing the report under this Regulation.

FAQ’S

Q. How can a creditor file a claim?
The evidence of claim is to be deposited by way of particularized forms along with an affidavit (on a non-judicial stamp paper of INR 100) (witnessed by a notary or oath commissioner) and relevant documentary evidence in support of the claim, as guided under IBBI (Insolvency and Bankruptcy Board of India) (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”)