May 29, 2025
IBBI/Regulation 17B
Why in News? The Insolvency and Bankruptcy Board of India (IBBI) has introduced a key reform by making it mandatory for Resolution Professionals (RPs) to notify the National Company Law Tribunal (NCLT) if a personal guarantor fails to submit a repayment plan.
Relevance : UPSC Pre & Mains
Prelims : Regulation 17B/IBBI
Mains : GS 3 ( Economy)
The new regulation, codified as Regulation 17B, aims to enhance accountability among personal guarantors and prevent delays in the insolvency process.
Key Highlights of Regulation 17B:
Mandatory Reporting of Non-Submission:
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- If a personal guarantor does not submit a repayment plan under Section 105 of the Insolvency and Bankruptcy Code (IBC), the RP is required to:
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- File an application with creditors’ approval before the NCLT.
- Inform the NCLT about the non-submission of the repayment plan.
- Seek appropriate directions from the NCLT.
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Addressing Procedural Gaps:
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- Previously, there was no clear directive for cases where repayment plans were not submitted, often stalling the resolution process. Regulation 17B closes this gap, ensuring timely resolution.
Personal Guarantors under the IBC:
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- Personal guarantors are treated as a distinct category under the IBC.
- Their insolvency resolution is independent but aligned with the Corporate Insolvency Resolution Process (CIRP).
- The NCLT can issue time-bound directions or initiate bankruptcy proceedings against personal guarantors.
Legal and Historical Context:
Supreme Court Judgment (2021):
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- The Supreme Court upheld the validity of bringing personal guarantors under the IBC framework.
- Creditors can initiate insolvency proceedings against personal guarantors, irrespective of whether the corporate debtor’s resolution process is ongoing or completed.
Framework for Personal Guarantors:
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- Introduced in December 2019, the framework facilitates insolvency resolution for personal guarantors.
- The process operates independently but ensures coordination with corporate insolvency proceedings.
2024 Amendment and Regulation 17A:
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- Regulation 17A presumed that a repayment plan would be submitted and required RPs to present it during the creditors’ meeting.
- Regulation 17B builds on this by addressing scenarios where repayment plans are not submitted.
Current Insolvency Landscape:
- As of March 2025, data reveals that 1,194 CIRPs resulting in resolution plans took an average of 597 days—more than double the extended 270-day deadline stipulated under the IBC.
- Delays in insolvency processes, including personal guarantor cases, highlight the need for stricter compliance mechanisms like Regulation 17B.
| Insolvency and Bankruptcy Board of India (IBBI):
The Insolvency and Bankruptcy Board of India (IBBI) is the apex regulatory authority responsible for overseeing the implementation and enforcement of the Insolvency and Bankruptcy Code (IBC), 2016. It ensures a systematic and time-bound resolution of insolvency cases while balancing the interests of all stakeholders, including debtors, creditors, and investors. Establishment and Mandate:
About National Company Law Tribunal (NCLT): · The National Company Law Tribunal (NCLT) is a quasi-judicial body in India established under the Companies Act, 2013 to handle corporate law matters. · It serves as a specialized tribunal for resolving disputes related to corporate governance, insolvency, and bankruptcy. Establishment and Mandate:
Key Functions of NCLT Corporate Disputes:
Insolvency Resolution:
Merger and Amalgamation:
Company Law Compliance:
Revival and Rehabilitation:
Investor and Creditor Protection:
Structure and Composition: The NCLT consists of: President:
Judicial Members:
Technical Members:
Jurisdiction of NCLT: Under the Companies Act, 2013:
Under the IBC, 2016:
Other Laws:
Appeals
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January 30, 2025
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