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THE INSOLVENCY AND BANKRUPTCY CODE, 2016 “Opportunities & Challenges for a Resolution Professional”

INTRODUCTION

• The

Code

• ffers

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

• f

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

• n 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

• n

creditor driven insolvency resolution. It aims at early identification

• f

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 of SICA 2001

• L. N. Mitra Committee (RBI)

Proposed a comprehensive bankruptcy code 2005 Irani Committee (RBI) Enforcement of Securities Interest and Recovery of Debts Bill, 2011. (With amendments to RDDBFI and SARFAESI) 2008 RaghuramRajan Committee (Planning Commission) Proposed improvements to credit infrastructure 2013 Financial Sector Legislative Reforms Commission (MoF) Draft Indian Financial Code which includes a Resolution Corporation for resolving distressed financial firms 2014

• Dr. T K Vishwanathan chaired Bankruptcy

Law Reforms Committee (DEA,MoF) Insolvency & Bankruptcy Code, 2016 (being notified in phases)

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

Destination Insolvency & Bankruptcy Code, 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

Destination Insolvency & Bankruptcy Code, 2016 (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

Destination Insolvency & Bankruptcy Code, 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

OBJECTIVE OF THE IBC (‘the Code’)

An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution

• f

corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability

• f

credit and balance the interests of all the stakeholders including alteration in the order of priority of payment

• f

Government dues and to establish an Insolvency and Bankruptcy Board

• f

India, and for matters connected therewith 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 Section 4 to section 77 Part III- Insolvency Resolution and Bankruptcy for individuals and partnership firms Section 78 to section 187 Part IV- Regulation of Insolvency professionals, agencies and information utilities Section 188 to section 223 Part V-Miscellaneous Section 224 to section 255

Eleven schedules (amendment to different legislation)

THE FRAMEWORK OF PART II

• f IBC

Chapter I- Preliminary Section 4 & section 5 Chapter II Corporate Insolvency Resolution Process Section 6 to section 32 Chapter III Liquidation Process Section 33 to section 54 Chapter IV – Fast Track Corporate Insolvency Resolution Process Section 55 to section 58 Chapter V-Voluntary Liquidation of Corporate Persons Section 59 Chapter -VI Adjudicating Authority for corporate persons Section 60 to section 67 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

• f

the debts and affairs of the debtor, supervised by a resolution professional.

CORPORATE INSOLVENCY RESOLUTION PROCESS

Comm. Of CIRP On admission

• f

application By NCLT

CIRP shall be completed within 180 days from *comm. of CIRP Subject to section 12(2) NCLT may grant extension

• f a period

not exceeding

90 days

*only

• nce*

NCLT shall, after *comm. of

IRP Declare

a

Moratorium

till the

completion

• f 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 Over view

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/
• Operational

creditor*/

• Corporate

applicant

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

• f

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

• f

a corporate debtor if he, and all partners and directors

• f

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

• f

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

• r

any

• ther

partner

• r

director

• f

such insolvency professional entity represents any

• f

the

• ther

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 board

• f 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 auditors

• f the corporate debtor; or

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

• perations
• f

the corporate debtor for determining the financial position 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

• f

the corporate debtor and manage its

• perations

until a resolution professional is appointed by the committee of creditors; (e)file information collected with the information utility, if necessary; and (f)take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities

• r any other registry that records the ownership of assets including—

(i)

assets over which the corporate debtor has ownership rights which may be located 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

• f

the corporate debtor and manage the

• perations
• f

the corporate debtor as a going concern. (2)For the purposes

• f

sub-section (1), the interim resolution professional shall have the authority—

(a) to appoint accountants, legal

• r
• ther

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

• f

the resolution professional to preserve and protect the assets

• f

the corporate debtor, including the continued business operations of the corporate debtor; (2) For the purposes

• f

sub-section (1), the resolution professional shall undertake the following actions, namely:

(a)take immediate custody and control of all the assets of the

corporate debtor, including the business records

• f

the corporate debtor;

(b)represent

and act

• n

behalf

• f

the corporate debtor with third parties, exercise rights for the benefit

• f

the corporate debtor in judicial, quasi-judicial or arbitration proceedings;

c) raise interim finances subject to the approval of the committee

• f creditors under section 28;

d) appoint accountants, legal or other professionals in the manner

as 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 with

section 29;

h) invite prospective lenders, investors, and any other persons to

put forward resolution plans;

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

creditors;

j) file application for avoidance of transactions in accordance

with 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 announcement immediately on his appointment as an interim resolution professional; (R.6)

• 2. The

interim resolution professional

• r

the resolution professional, as the case may be, shall verify every claim, as on the insolvency commencement date, within seven days from the last date

• f

the receipt

• f

the claims, and thereupon maintain a list

• f

creditors containing names of creditors along with the amount claimed by them, the amount

• f

their claims admitted and the security interest, if any, in respect of such claims, and update it; (R.13)

• 3. Where

the amount claimed by a creditor is not precise due to any contingency or other reason, the interim resolution professional

• r

the resolution professional, as the case may be, shall make the best estimate

• f

the amount

• f

the claim based

• n

the information available with him; (R.14)

• 4. The interim resolution professional or the resolution professional, as

the case may be, shall revise the amounts of claims admitted, including the estimates of claims made under sub-regulation (1), as soon as may be practicable, when he comes across additional information warranting such revision; (R.14)

• 5. The

interim resolution professional shall file a report certifying constitution of the committee to the Adjudicating Authority on or before the expiry of thirty days from the date of his appointment; (R.17)

• 6. The interim resolution professional shall convene the first meeting of

the 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 system which produces confirmation of the total number of recipients e- mailed and a record of each recipient to whom the notice has been sent and copy of such record and any notices of any failed transmissions and subsequent re-sending shall be retained as ‘‘proof

• f sending’’; (R.20)

• 8. The resolution professional shall make necessary arrangements to ensure

uninterrupted 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 and identification procedures; (b) to ensure availability of proper video conferencing or other audio and visual equipment or facilities for providing transmission of the communications for effective participation 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 electronic recording mechanism as part of the records of the corporate debtor; (e) to ensure that no person other than the intended participants attends or has access to the proceedings of the meeting through video conferencing or other audio and visual means; and (f) to ensure that participants attending the meeting through audio and visual means are able to hear and see, if applicable, the other participants clearly during the course of the meeting:

Provided that the persons, who are differently abled, may make request to the resolution 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 in

relation 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

• f

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

• f

the committee the means to exercise its vote by either electronic means

• r through electronic voting system in accordance with the provisions
• f 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 made

under sub-regulation (4) to all participant by electronic means within twenty four hours of the conclusion of the voting; (R.26)

19.The interim resolution professional shall within seven days of his

appointment, appoint two registered valuers to determine the liquidation value

• f

the corporate debtor in accordance with Regulation 35; (R.27)

20.The interim resolution professional or the resolution professional, as the

case may be, may make an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in discharging his duties under the Code or these Regulations; (R.30)

21.The interim resolution professional or the resolution professional, as the

case may be, shall submit an information memorandum in electronic form to each member of the committee and any potential resolution applicant containing such content as required; (R.36)

22.The resolution professional shall provide such information to all members

within reasonable time if such information has a bearing on the resolution plan; (R.36)

23.The interim resolution professional or the resolution professional, as

the case may be, shall share the information memorandum after receiving an undertaking from a member of the committee; (R.36)

24.The resolution professional shall present all resolution plans that meet

the requirements

• f

the Code and these Regulations to the committee for its consideration; [R.39(2)]

25.The resolution professional shall examine each resolution plan

received by him to confirm that each resolution plan [S. 30 (2)]

(a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor; (b) provides for the repayment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53; (c) provides for the management of the affairs of the Corporate debtor after approval 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

• f 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

Activity Time period prescribed under the 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*

• n 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)

Activity Time period prescribed under the 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

• f 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

• f

aforesaid provision [(i.e. Provisions

• f

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

• f

moratorium provisions

• f

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

• n 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

• f

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 Vineet@resolutionprofessionals.in www.resolutionprofessionals.in