UNDERSTANDING THE INSOLVENCY AND BANKRUPTCY … 2017/presentation/CS Vin… · passed the...

THE INSOLVENCY AND

BANKRUPTCY CODE, 2016

“Opportunities &

Challenges for a

Resolution Professional”

INTRODUCTION

The Code offers a uniform,

comprehensive insolvency

legislation encompassing all

companies, partnership firms and

individuals (other than financial

firms). The Government is

proposing a separate framework

for bankruptcy resolution in

failing banks and financial

sector entities

After a public consultation

process and recommendations from

a joint committee of Parliament,

both houses of Parliament have

passed the Insolvency and

Bankruptcy Code, 2016 (Code).

While the legislation of the Code

is a historical development for

economic reforms in India, its

effect will be seen in due course

when the institutional

infrastructure and implementing

rules as envisaged under the Code

are formed.

BACKGROUND

India ranks 136 out of 189 countries in the World Bank's index

on the ease of resolving insolvencies.

India's weak insolvency regime, its significant inefficiencies

and systematic abuse are some of the reasons for the distressed

state of credit markets in India today.

The Code promises to bring about far-reaching reforms with a

thrust on creditor driven insolvency resolution. It aims at

early identification of financial failure and maximizing the

asset value of insolvent firms. The Code also has provisions to

address cross border insolvency through bilateral agreements

and reciprocal arrangements with other countries.

Year Committee Outcome

1964 24th Law Commission Amendments to the Provincial Insolvency Act, 1920

1981 Tiwari Committee (DCA) SICA, 1985

1991 Narasimham Committee I (RBI) RDDBFI Act, 1993

1998 Narasimham Committee II (RBI) SARFAESI Act, 2002

1999 Justice Eradi Committee (GOI) Companies (Amendment) Act, 2002, Proposed repeal ofSICA

2001 L. N. Mitra Committee (RBI) Proposed a comprehensive bankruptcy code

2005 Irani Committee (RBI) Enforcement of Securities Interest and Recovery of DebtsBill, 2011. (With amendments to RDDBFI and SARFAESI)

2008 RaghuramRajan Committee (PlanningCommission)

Proposed improvements to credit infrastructure

2013 Financial Sector Legislative ReformsCommission (MoF)

Draft Indian Financial Code which includes a ResolutionCorporation for resolving distressed financial firms

2014 Dr. T K Vishwanathan chaired BankruptcyLaw Reforms Committee (DEA,MoF)

Insolvency & Bankruptcy Code, 2016 (being notified inphases)

Source: Volume 1 of BLRC Final Report, Nov 2015 with latest updations

Government Committees on Bankruptcy

Reforms

Date Event

22-Aug-2014 DEA, MoF, GOI formed Bankruptcy Law & Reforms Committee (BLRC)

05-Feb-2015 Interim Report submitted by BLRC

04-Nov-2015 Final Report in 2 Volumes submitted by BLRC (Vol I Rationale & Design; Vol II

Draft Insolvency & Bankruptcy Code)

21-Dec-2015 Code introduced in Parliament

23-Dec-2015 Code referred to JPC...chaired by Sh. Bhupendra Yadav

28-Apr-2016 JPC submitted its report on the Code

05-May-2016 Passed by LokSabha

11-May-2016 Passed by RajyaSabha

28-May-2016 Received President’s Assent

Destination Insolvency & Bankruptcy Code, 2016

Date Event

05-Aug-2016 Sections 188 to 194 came into force

19-Aug-2016 Sections 3(1), (5), (22), (26), (28), (37), 221 to 223, 225, 226, 230, 232 to 233, 239

(partly), 240 (partly), 241 & 242 came into force

01-Nov-2016 Provisions relating to powers and functions of IBBI [Sections 3(2) to (4), (6) to (21), (23)

to (25), (27), (29) to (36), 196-197, 239 & 240 (partly), 244, 246 to 248, 250, 252] came

into force

15-Nov-2016 Provisions relating to Insolvency Professional Agencies. Sections 199 to 207, 208(1)(c)

& (e), 208(2), 217 to 220, 251, 253 to 255 came into force

30-Nov-2016 Provisions relating to CIRP [Sections 2(a) to (d) except with regard to Liquidation &

Bankruptcy, 4 to 32, 60 to 77, 198, 231, 236 to 238, 239(2) (a) to (f)] Appointed date

1st December, 2016

09 Dec 2016 Provisions relating to liquidation [section 33 to section 54 (both inclusive)] appointed

date 15th day of December, 2016


(Date of notification of various Provisions)

Date Event

30 Mar 2017 [Provisions of Vol. Liquidation, IU and Cross-Border Insolvency came into force

(1) section 59; (2) section 209 to section 215 (both inclusive); (3) sub-section (1) of

section 216; and (4) section 234 and section 235] appointed date 1st April, 2017

15 May 2017 Provisions of Voluntary Liquidation or bankruptcy come into force (provisions of

clause (a) to clause (d) of section 2 of the Code) appointed date 1st April, 2017

14 Jun 2017 Notification regarding Fast Track Corporate Insolvency Resolution process for (a) a

small company; (b) a Startup (other than the partnership firm) (c) an unlisted

company with total assets, as reported in the financial statement of the immediately

preceding financial year, not exceeding rupees one crore.

18 Oct 2017 Provisions of section 247 of the Companies Act, 2013 (Valuation by registered

valuers) come into force.

23 Oct 2017 Delegation of powers and functions under section 247 of the Companies Act, 2013

to the IBBI

……Destination Insolvency & Bankruptcy Code, 2016

(Date of notification of various Provisions)

Date Event

28-May-2016 Insolvency And Bankruptcy Code, 2016

21-Nov-2016

IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies)

Regulations, 2016.

21-Nov-2016 IBBI (Insolvency Professional Agencies) Regulations, 2016.

23-Nov-2016 IBBI (Insolvency Professionals) Regulations, 2016

30-Nov-2016 IBBI (Application to Adjudicating Authority) Rules, 2016.

15-Dec-2016 IBBI (Liquidation Process) Regulations, 2016.

31-Jan-2017 IBBI (Engagement Of Research Associates And Consultants) Regulations, 2017.

31-Jan-2017 IBBI (Procedure For Governing Boards Meetings) Regulations, 2017


(Rules Regulations and amendments )

Date Event

31-Mar-2017 IBBI (Voluntary Liquidation Process) Regulations, 2017

24-May-2017 Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 2017

14-Jun-2017 IBBI (Inspection and Investigation) Regulations, 2017

24-Aug-2017 IBBI (Employees Service) Regulations, 2017

29-Sep-2017 IBBI( Information Utilities) Regulations, 2017 ( last amended on 29 September 2017)

5-Oct-2017

IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017

(Amended upto 05 Oct 2017)

5-Oct-2017

IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

(Amended upto 05 Oct 2017)

18-Oct-2017 The Companies (Registered Valuers and Valuation) Rules, 2017

25-Oct-2017 Clarification regarding resolution plan under section 30 and 31 of IBC, 2016


(Rules Regulations and amendments )

For Individuals and Firms

Insolvency and Bankruptcy Board of India

9th October, 2017

Press Release

IBBI invites public comments on:

(i) draft Insolvency and Bankruptcy (Application to Adjudicating Authority for

Insolvency Resolution Process for Individuals and Firms) Rules, 2017, and

(ii) draft Insolvency and Bankruptcy Board of India (Insolvency Resolution Process

for Individuals and Firms) Regulations, 2017.

IBBI invites public comments on these draft rules and regulations by 31st October

2017. For providing comments

http://ibbi.gov.in/webadmin/pdf/press/2017/Oct/Press%20release%20modified%20Ind%20In

sol.pdf

http://ibbi.gov.in/webadmin/pdf/press/2017/Oct/Press release modified Ind Insol.pdf

OBJECTIVE OF THE IBC (‘the

Code’)

An Act to consolidate and amend the laws relating toreorganisation and insolvency resolution of corporatepersons, partnership firms and individuals in a timebound manner for maximisation of value of assets of suchpersons, to promote entrepreneurship, availability ofcredit and balance the interests of all the stakeholdersincluding alteration in the order of priority of paymentof Government dues and to establish an Insolvency andBankruptcy Board of India, and for matters connectedtherewith or incidental thereto.

INSOLVENCY ADJUDICATION

PROCESS

Individual

Insolvency

Insolvency of

Partnership

Firms

Insolvency of Limited Liability

Partnership

Corporate Insolvency

Supreme Court

National Company law Tribunal

(NCLT)

National Company

Law Appellate Tribunal (NCLAT)

Debt Recovery Tribunal (DRT)

Debt Recovery

Appellate Tribunal (DRAT)

THE REGULATORY MECHANISM

The Insolvency and Bankruptcy Board of India

Information Utilities Insolvency Professional Agencies

Insolvency Professionals

FRAMEWORK OF THE INSOLVENCY AND

BANKRUPTCY CODE 2016

Part I – Preliminary

Section 1 to section 3

Part II- Insolvency

Resolution and

Liquidation for

Corporate Persons


Part III- Insolvency

Resolution and Bankruptcy

for individuals and

partnership firms


Part IV- Regulation of

Insolvency

professionals, agencies

and information utilities


Part V-Miscellaneous


Eleven schedules (amendment to different legislation)

THE FRAMEWORK OF PART II

of IBC

Chapter I- Preliminary

Section 4 & section 5

Chapter II Corporate

Insolvency Resolution

Process


Chapter III Liquidation

Process


Chapter IV – Fast Track

Corporate Insolvency

Resolution Process


Chapter V-Voluntary

Liquidation of

Corporate Persons

Section 59

Chapter -VI Adjudicating Authority for corporate persons


Chapter- VII

Offences and penalties Section 68 to section 77

The creditors and the

debtor will engage in

negotiations to arrive at

an agreeable

repayment plan for

composition of the

debts and affairs of the

debtor, supervised by a

resolution professional.

CORPORATE INSOLVENCY RESOLUTION PROCESS

Comm.

Of CIRP

On admission of

application

By NCLT

CIRP shall be

completed

within 180days from *comm. of

CIRP

Subject to section

12(2) NCLT may grant extension

of a period not

exceeding

90 days

*only once*

NCLT shall, after

*comm. of IRP Declare

a Moratorium

till the completion

of CIRP

Resolution professional shall present the resolution

plan to the committee of creditors for its approval

(75%)

Resolution professional shall submit

the resolution plan as

approved by committee to

NCLT

NCLT on being

satisfied, may order to approve

the resolution

plan

*commencement date shall be date of admission of application not the date of filing of application

An

Ov

er

vie

w

COMMON PROCEDURE FOR COMMENCEMENT OF

CIRP

Corporate debtor commits

default

Minimum amount of default involved shall be

Rs.1,00,000

C.G. may by notification specify higher value (up to Rs. 1,00,00,000)

-Financial creditor/

-Operationalcreditor*/

-Corporateapplicant

Shall apply adjudicating authority (NCLT) NCLT shall with in 14 days ascertain default

NCLT may by order admit application

On satisfying itself about the application

Insolvency resolution process shall commence on the date of admission of

application

NCLT may by order reject application

On the grounds mentioned in Section 7,9 or 10 of

Chapter II, as the case may be

NCLT shall ,before rejecting, give a notice to the

applicant to rectify the defect in application within 7 days

Interim Resolution Professional

(1) The applicant, wherever he is required to propose or proposes

to appoint an insolvency resolution professional, shall obtain a

written communication in Form 2 from the insolvency professional

for appointment as an interim resolution professional and enclose

it with the application made under rules 4, 6 or 7 as the case may

be.

(2) The application under sub-rule (1) shall be accompanied by a

certificate confirming the eligibility of the proposed insolvency

professional for appointment as a resolution professional in

accordance with the Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons) Regulations,

2016.

ROLE OF IRP/RP

Resolution Professional

"Resolution Professional", means an insolvency professional

appointed to conduct the corporate insolvency resolution

process and includes an interim resolution professional”

According to the provisions of section 23 Of the IBC; the resolution

professional shall conduct the entire corporate insolvency resolution

process and manage the operations of the corporate debtor during the

corporate insolvency resolution process period and shall exercise

powers and perform duties as are vested or conferred on the interim

resolution professional under Chapter II of Part II of the IBC,2016.

Eligibility for Resolution

Professional

1)An insolvency professional shall be eligible to be appointed as a resolution

professional for a corporate insolvency resolution process of a corporate

debtor if he, and all partners and directors of the insolvency professional

entity of which he is a partner or director, are independent of the corporate

debtor

(2)A resolution professional shall make disclosures at the time of his

appointment and thereafter in accordance with the Code of Conduct

(3)A resolution professional, who is a director or a partner of an insolvency

professional entity, shall not continue as a resolution professional in a

corporate insolvency resolution process if the insolvency professional entity

or any other partner or director of such insolvency professional entity

represents any of the other stakeholders in the same corporate insolvency

resolution process.

Explanation (Independent)

A person shall be considered independent of the corporate debtor, if he:

(a) is eligible to be appointed as an independent director on the boardof the corporate debtor under section 149 of the Companies Act, 2013(18 of 2013), where the corporate debtor is a company;

(b) is not a related party of the corporate debtor; or

(c) is not an employee or proprietor or a partner:

(i) of a firm of auditors or company secretaries in practice or cost auditorsof the corporate debtor; or

(ii) of a legal or a consulting firm, that has or had any transaction with thecorporate debtor amounting to ten per cent or more of the gross turnover ofsuch firm,

in the last three financial years.

Duties of IRP (Under the code)

S.18

Following are the duties that interim resolution professional (IRP)shall perform:

(a) collect all information relating to the assets, finances andoperations of the corporate debtor for determining the financialposition of the corporate debtor, including information relating to—

(i) business operations for the previous two years;

(ii) financial and operational payments for the previous two years;

(iii) list of assets and liabilities as on the initiation date; and

(iv) such other matters as may be specified;

(b) receive and collate all the claims submitted by creditors to him,pursuant to the public announcement made under sections 13 and 15;

(c)constitute a committee of creditors;

(d)monitor the assets of the corporate debtor and manage itsoperations until a resolution professional is appointed by thecommittee of creditors;

(e)file information collected with the information utility, if necessary; and

(f)take control and custody of any asset over which the corporatedebtor has ownership rights as recorded in the balance sheet of thecorporate debtor, or with information utility or the depository of securitiesor any other registry that records the ownership of assets including—

(i) assets over which the corporate debtor has ownership rights which may belocated in a foreign country;

(ii) assets that may or may not be in possession of the corporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiary of the corporate debtor,financial instruments, insurance policies;

(vi) assets subject to the determination of ownership by a court or authority;

Management of operations of

corporate debtor as going

concern(S.20)

(i)The interim resolution professional shall make every

endeavor to protect and preserve the value of the property

of the corporate debtor and manage the operations of the

corporate debtor as a going concern.

(2)For the purposes of sub-section (1), the interim

resolution professional shall have the authority—

(a) to appoint accountants, legal or other professionals as may be

necessary;

(b) to enter into contracts on behalf of the corporate debtor or to

amend or modify the contracts or transactions which were entered into

before the commencement of corporate insolvency resolution process;

(c) to raise interim finance

provided that no security interest shall be created over any

encumbered property of the corporate debtor without the

prior consent of the creditors whose debt is secured over

such encumbered property:

Provided that no prior consent of the creditor shall be

required where the value of such property is not less than

the amount equivalent to twice the amount of the debt.

(d) to issue instructions to personnel of the corporate debtor as

may be necessary for keeping the corporate debtor as a going

concern; and

(e) to take all such actions as are necessary to keep the

corporate debtor as a going concern

Duties of resolution

professional S.25

(1) It shall be the duty of the resolution professional topreserve and protect the assets of the corporate debtor,including the continued business operations of the corporatedebtor;

(2) For the purposes of sub-section (1), the resolutionprofessional shall undertake the following actions, namely:

(a)take immediate custody and control of all the assets of thecorporate debtor, including the business records of thecorporate debtor;

(b)represent and act on behalf of the corporate debtor withthird parties, exercise rights for the benefit of thecorporate debtor in judicial, quasi-judicial or arbitrationproceedings;

c) raise interim finances subject to the approval of the committeeof creditors under section 28;

d) appoint accountants, legal or other professionals in the manneras specified by Board;

e) maintain an updated list of claims;

f) convene and attend all meetings of the committee of creditors;

g) prepare the information memorandum in accordance withsection 29;

h) invite prospective lenders, investors, and any other persons toput forward resolution plans;

i) present all resolution plans at the meetings of the committee ofcreditors;

j) file application for avoidance of transactions in accordancewith Chapter III, if any; and

k) such other actions as may be specified by the Board.

Functions of IRP/RP Under CIRP

Regulations

1. An insolvency professional shall make a public announcementimmediately on his appointment as an interim resolution professional;(R.6)

2. The interim resolution professional or the resolution professional,as the case may be, shall verify every claim, as on the insolvencycommencement date, within seven days from the last date of thereceipt of the claims, and thereupon maintain a list of creditorscontaining names of creditors along with the amount claimed by them,the amount of their claims admitted and the security interest, ifany, in respect of such claims, and update it; (R.13)

3. Where the amount claimed by a creditor is not precise due to anycontingency or other reason, the interim resolution professional orthe resolution professional, as the case may be, shall make the bestestimate of the amount of the claim based on the informationavailable with him; (R.14)

4. The interim resolution professional or the resolution professional, asthe case may be, shall revise the amounts of claims admitted,including the estimates of claims made under sub-regulation (1), assoon as may be practicable, when he comes across additionalinformation warranting such revision; (R.14)

5. The interim resolution professional shall file a report certifyingconstitution of the committee to the Adjudicating Authority on orbefore the expiry of thirty days from the date of his appointment;(R.17)

6. The interim resolution professional shall convene the first meeting ofthe committee within seven days of filing aforesaid report; (R.17)

7. When notice or notifications of availability of notice are sent by an e-mail, the resolution professional shall ensure that it uses a systemwhich produces confirmation of the total number of recipients e-mailed and a record of each recipient to whom the notice hasbeen sent and copy of such record and any notices of any failedtransmissions and subsequent re-sending shall be retained as ‘‘proofof sending’’; (R.20)

8. The resolution professional shall make necessary arrangements to ensureuninterrupted and clear video or audio and visual connection; (R.23)

9. The resolution professional shall take due and reasonable care-

(a) to safeguard the integrity of the meeting by ensuring sufficient security andidentification procedures;

(b) to ensure availability of proper video conferencing or other audio and visualequipment or facilities for providing transmission of the communications for effectiveparticipation of the participants at the meeting;

(c) to record proceedings and prepare the minutes of the meeting;

(d) to store for safekeeping and marking the physical recording(s) or other electronicrecording mechanism as part of the records of the corporate debtor;

(e) to ensure that no person other than the intended participants attends or has accessto the proceedings of the meeting through video conferencing or other audio andvisual means; and

(f) to ensure that participants attending the meeting through audio and visual means areable to hear and see, if applicable, the other participants clearly during the course ofthe meeting:

Provided that the persons, who are differently abled, may make request to theresolution professional to allow a person to accompany him at the meeting;(R.23)

10.The resolution professional shall act as the chairperson of the

meeting of the committee; (R. 24)

11.The resolution professional shall ensure that the required quorum is

present throughout the meeting; (R. 24)

12.The resolution professional shall ensure that minutes are made inrelation to each meeting of the committee and such minutes shall

disclose the particulars of the participants who attended the

meeting in person, through video conferencing, or other audio and

visual means; (R. 24)

13.The resolution professional shall circulate the minutes of the meeting

to all participants by electronic means within forty eight hours of the

said meeting; (R. 24)

14.At the conclusion of a vote at the meeting, the resolution

professional shall announce the decision taken on items along with

the names of the members of the committee who voted for or

against the decision, or abstained from voting; (R. 25)

15. if all members are not present at a meeting, a vote shall not be taken

at such meeting and the resolution professional shall-

(a) circulate the minutes of the meeting by electronic means to all members of

the committee within forty eight hours of the conclusion of the meeting; and

(b) seek a vote on the matters listed for voting in the meeting, by electronic

voting system where the voting shall be kept open for twenty four hours from the

circulation of the minutes; (R. 25)

16.The resolution professional shall provide each member of the

committee the means to exercise its vote by either electronic meansor through electronic voting system in accordance with the provisions

of this Regulation; (R.26)

17.At the conclusion of a vote held under this Regulation, the resolution

professional shall announce and make a written record of the

summary of the decision taken on a relevant agenda item along with

the names of the members of the committee who voted for or against

the decision, or abstained from voting; (R.26)

18.The resolution professional shall circulate a copy of the record madeunder sub-regulation (4) to all participant by electronic means withintwenty four hours of the conclusion of the voting; (R.26)

19.The interim resolution professional shall within seven days of hisappointment, appoint two registered valuers to determine theliquidation value of the corporate debtor in accordance withRegulation 35; (R.27)

20.The interim resolution professional or the resolution professional, as thecase may be, may make an application to the Adjudicating Authorityfor an order seeking the assistance of the local district administration indischarging his duties under the Code or these Regulations; (R.30)

21.The interim resolution professional or the resolution professional, as thecase may be, shall submit an information memorandum in electronicform to each member of the committee and any potential resolutionapplicant containing such content as required; (R.36)

22.The resolution professional shall provide such information to all memberswithin reasonable time if such information has a bearing on theresolution plan; (R.36)

23.The interim resolution professional or the resolution professional, asthe case may be, shall share the information memorandum afterreceiving an undertaking from a member of the committee; (R.36)

24.The resolution professional shall present all resolution plans that meetthe requirements of the Code and these Regulations to thecommittee for its consideration; [R.39(2)]

25.The resolution professional shall examine each resolution planreceived by him to confirm that each resolution plan [S. 30 (2)]

(a) provides for the payment of insolvency resolution process costs in a mannerspecified by the Board in priority to the repayment of other debts of the corporatedebtor;

(b) provides for the repayment of the debts of operational creditors in suchmanner as may be specified by the Board which shall not be less than the amountto be paid to the operational creditors in the event of a liquidation of thecorporate debtor under section 53;

(c) provides for the management of the affairs of the Corporate debtor afterapproval of the resolution plan;

(d) the implementation and supervision of the resolution plan;

(e) does not contravene any of the provisions of the law for the time being in force;

(f) conforms to such other requirements as may be specified by the Board.

26. The resolution professional shall submit the resolution plan approved

by the committee to the Adjudicating Authority with the

certification that:

a) the contents of the resolution plan meet all the requirements of the

Code and the Regulations; and

b) the resolution plan has been approved by the committee; (R.39)

27.The resolution professional shall send a copy of the order of the

Adjudicating Authority approving or rejecting a resolution plan to

the participants and the resolution applicant; (R.39)

Activity Time period prescribed under the

Code/Regulations

Insolvency Commencement date Date of admission of Application by NCLT

Appointment of Interim Resolution

Professional

Date of receipt of CTC of Order

Taking control of the management

of the company

From the date of appointment of IRP

Public Announcement To be made within 3 days of appointment of IRP

Appointment of 2 Registered

Valuers by IRP

To be made within 7 days of appointment of IRP

Prospective timeline for a IP


Code/Regulations

Last date for receiving claims

from all creditors in specified

Forms

To be submitted by claimant; with in 14

days of public announcement

Verification of Claims by IRP

To be done within 7 days of receipt of

claims

Filing of List of Creditors with

NCLT*

As per the regulation 13(2)(d); upon

verifying the claims

Filing of Report Certifying

Constitution of CoC by IRP*

on or before the expiry of 30 days from

the appointment of IRP

Notice Convening 1st Meeting of

CoC

To be sent 7 days before the meeting

To submit a copy of the records of every proceeding

before the Adjudicating Authority to the Board as

well as to the insolvency professional agency of

which he is a member;

*It shall be the function of an insolvency professional:

S.208(1)

(d)


Code/Regulations

Submission of IM (Regulation

36(1)(a) [after receiving the

necessary undertaking]

Before the first meeting

Holding of 1st Meeting of CoC

As per regulation 17(2) within 7 days of

filing of Report certifying the

constitution of the CoC

Submission of IM (Regulation

36(1)(b)With in 14 days of first meeting

Expression of interest for

inviting Resolution Plan as

per the need

For inviting the bids from the prospective

buyers keeping into the mind regulation 39

of CIRP.

Holding Meeting of CoC For finalization of Resolution Plan

Application to NCLT for the

resolution Plan

After finalization of the Resolution Plan

RECENT

PRECEDENTS

Invocation of Corporate

Guarantee is prohibited under

Moratorium

Where a direction was sought by the financial creditor from the NCLT; to

Resolution Professional to accept the claim of applicant as a financial creditor to

the extent amount of debt on account of innovation of corporate guarantee by the

applicant

Facts: Corporate Guarantee was invoked after the Insolvency Commencement Date

Hon’ble NCLT Principal Bench Held that :

“A Perusal of aforesaid provision [(i.e. Provisions of 14(1)(c)] makes it

absolutely clear that there would be moratorium prohibiting any action to

foreclose, recover or enforce any security interest created by Corporate Debtor in

respect of its property. It appears to us that invocation of corporate guarantee

against corporate Debtor would result in violation of moratorium provisions of

section 14(1)(c) of the code”

In Re: Order passed by Hon’ble NCLT Principal Bench in the matter: IB-

102(PB)/2017, Axis Bank Vs Edu Smart Services Pvt Ltd dated 27th Oct, 2017

Garnishee proceedings are to be

stayed until Moratorium

Facts: where a CD filed a application for stay on proceedings including the proceedings

initiated under section 226 (3) of the income tax Act, 1961

Findings of the Hon’ble Tribunal : By giving a conjoint reading to sub-section l(a) and

sub section 3 of Section 14 and also by seeing other provisions of IB Code, now it (Govt

Dues) has not been treated as crown debt, it has been made like any of the debt falling

within the ambit of operational debt, therefore, the dues of the Government now cannot be

seen as considered as before, i.e. under Companies Act, 1956.

Since the legislature itself made government dues as a part of operational debt and for

there being a power vested with Central Government to notify the debts as and when it

requires, realizing such dues while moratorium pending against the company shall be put

on hold until mortarium period is completed.

Hon’ble NCLT Mumbai Bench Held that :

“Therefore, R3( Assistant commissioner of Income Tax) is hereby directed not to act on

garnishee notices until moratorium period is completed.”

In Re: Order passed by Hon’ble NCLT Mumbai Bench in the matter: MA

377/2017, Bharti Defense and Infrastructure Limited Vs. Commissioner of

Income Tax and Ors dated 5th Oct, 2017

Submit an Interim Resolution

Plan within 45 days

Hon’ble NCLT Allahabad on 9th August, 2017 admitted the application for CIRP against Jaypee Infratech

Limited (JIL)

On 4th Sep, 2017 Hon’ble Supreme Court : Upon hearing a writ Petition filed by Chitra Sharma & Ors.,

Hon’ble Supreme Court has passed the order to stay the order passed by the Hon’ble NCLT (Allahabad

Bench).

Subsequent to an Interlocutory Application field by the IDBI Bank, Hon’ble Supreme Court Held that :

The IRP shall forthwith take over the Management of JIL. The IRP shall formulate and submit an

Interim Resolution Plan within 45 days before this Court. The Interim Resolution Plan shall make

all necessary provisions to protect the interests of the home buyers.

JAL which is not a party to the insolvency proceedings, shall deposit a sum of Rs.2,000

crores(Rupees two thousand crores) before this Court on or before 27.10.2017.

In Re: Order passed by Hon’ble Supreme Court of India; in the matter:

CHITRA SHARMA & ORS VERSUS UNION OF INDIA & ORS. dated 11th Sep,

2017

Thank you

Vineet Chaudhary (Practicing Company Secretary & Insolvency Professional)

+91 9811577123

[email protected]

www.resolutionprofessionals.in

mailto:[email protected]

http://www.resolutionprofessionals.in/

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