NEW CENTRALIZED AUCTION PLATFORM FOR LIQUIDATION ASSETS UNDER IBC

In a significant development for the insolvency process in India, the Insolvency and Bankruptcy Board of India (IBBI) has announced the launch of a centralized platform for listing and auctioning assets undergoing liquidation under the Insolvency and Bankruptcy Code (IBC). This initiative, a collaboration with the Indian Banks’ Association (IBA), aims to improve transparency and efficiency in asset sales.

Insolvency and Bankruptcy Board of India, 7th Floor, Mayur Bhawan, Connaught Place, New Delhi-110001 in its CIRCULAR No. IBBI/LIQ/78/2024 29th October, 2024.

Regulation 33 (1) of the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) provides that, “The liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in Schedule I.” Further, Clause (7) of Para 1 of Schedule I of the Liquidation Regulation provides that, “From a date to be notified through circular by the Board, the liquidator shall sell the assets only through an electronic auction platform empanelled by the Board.” Currently, the liquidators in the various liquidation process are selling the assets through various auction platforms and the details of a company’s assets are typically made public only at the time of the auction notice.

This practice leads to information asymmetry, as potential buyers have limited time to assess the value of the assets, often resulting in lower recovery rates. A centralised listing and auction platform where details of all assets under liquidation of CD are continuously available to the public provides an effective solution to these problems.

To address the above challenges, IBBI has collaborated with the Indian Banks’ Association (IBA) to facilitate the auction of assets through the eBKray platform which is presently owned and managed by PSB Alliance Private Limited (a consortium of 12 public sector banks). eBKray has been conducting auctions for assets mortgaged to public sector banks under the SARFAESI Act for the past five years.

The auction process will be conducted via the eBKray platform, which is operated by PSB Alliance Private Limited, a consortium comprising 12 public sector banks. For the past five years, eBKray has facilitated auctions for assets mortgaged to these banks under the SARFAESI Act.

The new platform is set to enter a pilot phase, with a full rollout planned for the future based on feedback from users. This initiative is scheduled to commence on November 1, 2024.

The IBBI has stated that PSB Alliance has developed a specialized module within eBKray to handle the listing and auctioning of assets under the IBC. The platform aims to enhance bidder participation, streamline auction processes, and maximize returns for creditors, all while providing better outcomes for bidders through improved transparency and advanced technology.

Currently, liquidators employ various auction platforms, which often leads to limited public access to asset information until the auction notice is released. This creates information asymmetry, giving potential buyers insufficient time to evaluate asset values, which can negatively impact recovery rates. The IBBI believes that a centralized platform with continuous asset availability will effectively address these issues.

Experts view these new guidelines as a much-needed reform for the evolving IBC framework, which has faced challenges such as delays and low recovery rates resulting in significant financial haircuts. According to Jyoti Prakash Gadia, Managing Director at Resurgent India, the proposed mechanism is expected to broaden the market for potential buyers, facilitate better price discovery, and enhance recovery outcomes.

Features of the eBKray Platform

The eBKray platform is designed to be a comprehensive, centralized listing and auction platform for all assets under the IBC liquidation process. Key features include:

• Detailed Asset Information: The platform will provide extensive information about corporate debtor assets, including photographs, videos, geographical coordinates, and the status of any liens or attachments.
• Continuous Public Access: Unlike the current system where asset details are only available at the time of auction notices, eBKray will ensure that information is continuously available to the public, allowing potential buyers ample time to evaluate assets before bidding.
• User-Friendly Interface: The platform will be accessible to Insolvency Professionals (IPs) and prospective buyers, facilitating easier participation in the auction process.

With this initiative, the IBBI aims to create a more robust and transparent insolvency process, benefiting both creditors and prospective bidders alike. The introduction of the centralized electronic auction platform represents a crucial step forward in reforming the insolvency process in India. By leveraging technology to create a more transparent and efficient marketplace for liquidation assets, the IBBI hopes to improve outcomes for both creditors and bidders. As stakeholders prepare for this new framework, the initiative is expected to reshape the landscape of asset liquidation, ultimately leading to higher recovery rates and a more robust insolvency regime in the country.

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