Insolvency professionals have been directed to exclusively use the Baanknet (formerly eBKray) auction platform for conducting auctions for the sale of assets during the liquidation process where an auction notice is issued on or after April 1.
The Insolvency and Bankruptcy Board of India (IBBI) made it mandatory for insolvency professionals to list details of all the unsold assets in respect of ongoing liquidation processes on this e-auction platform, by way of its October 2024 circular. This centralised listing and auction platform addresses the issue of information asymmetry, as details of the assets under liquidation are continuously available to the public (as opposed to being available only at the time of the auction notice). It is also expected to enhance bidder participation, streamline operations, and maximise returns for creditors.
Under IBBI’s January 2025 circular, the exclusive use of the Baanknet auction portal was mandated w.e.f. April 1. However, it has now been clarified that this mandate applies only when the auction notice is issued on or after said date.
Earlier, liquidators were required to conduct due diligence of all prospective bidders before they could participate in the auction, including verification of KYC documents and ensuring compliance with Section 29A of the Insolvency and Bankruptcy Code, 2016 (which stipulates that undischarged insolvents, wilful defaulters, etc. are ineligible to be resolution applications). However, since liquidators were spending a significant amount of time verifying/ inspecting the eligibility of all bidders, the Board notified amendments to the IBBI (Liquidation Process) Regulations, 2016, earlier this year to allow prospective bidders in the auction process on the basis of a declaration of eligibility under section 29A.
According to the IBBI’s latest circular, the auction notice must state that prospective bidders are required to submit the requisite documents – including a declaration of eligibility under Section 29A) – and deposit the Earnest Money Deposit (EMD) via the Baanknet auction platform. Further, the auction notice should specify that if the bidder is found ineligible, their EMD will be forfeited, as mentioned in the Amendment Regulations.