The Insolvency and Bankruptcy Board of India (IBBI) has released a paper that proposes increasing the fee on service providers it appoints, seeking a buttress its finances as statutory independent body.
The IBBI is short of about Rs 21 crore to be self-sufficient and must shift from relying on the government to a system where the it recovers all or part of its costs by levying fees, said the paper.
It proposed levying regulation fee on resolution in the insolvency process and fee on other professionals by insolvency professionals.
Only 20 per cent of the IBBI’s funds come from fees on service providers, the examinations it conducts and income from insolvency form filings and frivolous complaints. The rest comes from government aid.
The paper predicted IBBI’s expenditure will increase in the next five years as India’s insolvency process is updated. To prepare for such spending, the board must be strengthened. IBBI will also need funds to build infrastructure for implementing new insolvency laws.
The Insolvency and Bankruptcy Code gives power to the Board to levy fees or other charges for carrying out the purpose of the Code. The Madras High Court also in one of its judgments recognised the Board’s power to levy fees and other charges under the Code.
Keeping this in mind, the IBBI has proposed to review the existing fee structure and introduce the fee and other charges on service providers, professionals appointed by IP, and on the processes under the Code. “This has been proposed to not only make the Board more independent but also to improve the quality of the officials of the Board. It’s a welcome step,” said Abhishek Swaroop, partner at Saraf and Partners.