(With inputs from Hitoishi Sarkar)
The Insolvency and Bankruptcy Board of India (Liquidation Process) (Fourth Amendment) Regulations, 2020 were notified on 13th November. These regulations allow the liquidator to assign or transfer an asset to any person, in consultation with the stakeholders’ consultation committee, provided that the liquidator’s attempts to sell such assets have failed.
Two new regulations: 30A and 37A have been inserted.
Regulation, 37A states:
A liquidator may assign or transfer a not readily realisable asset through a transparent process, in consultation with the stakeholders’ consultation committee in accordance with regulation 31A, for a consideration to any person, who is eligible to submit a resolution plan for insolvency resolution of the corporate debtor.
What this means is that “any asset included in the liquidation estate which could not be sold through available options and includes contingent or disputed assets and assets underlying proceedings for preferential, undervalued, extortionate credit and fraudulent transactions” can now be assigned to a third party.
This should help create a robust market for third party funding of litigation (particularly in the context of insolvency) in India. As the IBBI’s discussion paper noted, such assignment of assets by the liquidator is already allowed in countries like UK, Australia, Honk Kong and Singapore. The litigation funding market for liquidation claims is fairly developed in most of these jurisdictions