Dr. Rajkumar S. Adukia Chairman Competent Insolvency ...drrajkumaradukia.com/image/Dr_adukia_insolvency_ppt09122017.pdf · Presentation Agenda • The need for an Insolvency and Bankruptcy

Dr. Rajkumar S. Adukia

Chairman

Competent Insolvency Professionals Pvt LtdB. Com. (Hons.), FCA, FCS, FCMA, LL.B., M.B.A,

DIPR, Dip IFRS (UK), Dip LL&LW, dip in criminology, Ph.D.

98200 61049/ [email protected]

[email protected] 14/12/2017 1

Presentation Agenda

• The need for an Insolvency and Bankruptcy ‘Code’ and not an ‘Act’

• Analysis of The IBC, 2016

• Corporate insolvency resolution process-CIRP

• Liquidation process

• Fast track CIRP

• Voluntary Liquidation Process

• Rules & Regulations

• Related amendments to other Enactments

• FRDI Bill

• Recent updates

• Professional opportunities

• How to master the subject?

• How to get work?

• How to pass Limited Insolvency Examination?


Why ‘CODE’ and Not an ‘ACT’ ??

• A code, as per Black’s law dictionary –

• “A Collection or Compendium of Laws”

• Systematic and comprehensive compilation of• Laws,

• Rules and Regulations that are

• Consolidated and classified for

• A particular subject.


The Codes of India..

1. The Indian Penal Code, 1860

2. The Code of Civil Procedure, 1908

3. The Code of Criminal Procedure, 1973

4. The Insolvency and Bankruptcy Code, 2016 (The IBC 2016)

5. Land Revenue Code of various States


The IBC 2016 Applies to…..

Companies

Companies governed by any special Acts

LLPs

Such other body incorporated as notified

Partnerships and Individuals


The Code does not apply to..

• Part III of the Code pertaining to insolvency of Individuals andFirms – does not apply to State of Jammu and Kashmir

• Part II The Code is not applicable to Financial Service Providers.

• DRAFT “FINANCIAL RESOLUTION AND DEPOSIT INSURANCE BILL, 2017” has been referred to a Joint Parliamentary Committee and the Joint Committee invited views and suggestions from various stakeholders.

• www.dicgc.org under DICGC Act 1961 will become regulator


http://www.dicgc.org/

Draft “Financial Resolution and Deposit Insurance Bill, 2017”

▪ The Insolvency and Bankruptcy Code, 2016 is not applicable to financial service providers. Aseparate legislation for financial service providers is in draft stage.

• Status: On June 14, 2017, the Union Cabinet chaired by Prime Minister, Mr. Narendra Modi approved the proposal to introduce the Financial Resolution and Deposit Insurance Bill, 2017.

• On 10th August, 2017, the Financial Resolution and Deposit Insurance Bill, 2017 was introduced in Lok Sabha.

• The Financial Resolution and Deposit Insurance Bill, 2017 has been referred to a Joint Parliamentary Committee and the Joint Committee invited views and suggestions from various stakeholders and public at large on the provisions of the Bill till 29th September, 2017.

▪ The Bill would provide for a comprehensive resolution framework for specified financial sectorentities to deal with bankruptcy situation in banks, insurance companies and financial sectorentities.

▪ It will result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961and proposed to amend 21 other Acts.


The IBC 2016 Applies for….

For Company and LLP-

Insolvency Resolution Process

Liquidation Process

Fast Track Insolvency Resolution Process

Voluntary Liquidation Process


The IBC 2016 Applies for….

For Individual & Partnership-

• Fresh Start Process

• Insolvency Resolution Process

• Bankruptcy Order


The IBC 2016 Aims to….

1• To promote entrepreneurship;

2• To make credit available;

3

• To balance the interest of all stakeholders by consolidating and amending the existing laws relating to insolvency and bankruptcy;

4• To reduce the time of resolution for maximizing the value of assets.


Significant Features of the IBC 2016

❖ Single insolvency and bankruptcy framework. It replaces/modifies/amends certain existing laws.

❖Overriding effect on all other laws relating to Insolvency & Bankruptcy. S 238

❖Not applicable to corporate financial service providers like Banks, NBFC, Insurance Co’s etc. there will be separate legislation.

❖ Provides for moratorium period from insolvency commencement date

❖ The Code shifts the focus from “Debtors” in possession to “Creditors in Control”.

❖ The test of insolvency has been shifted from “erosion of net worth” to “payment

default”.

❖ Time bound resolution process at each [email protected] 14/12/2017 11

Significant Features of the IBC 2016 Contd…

❖ Establishment of The Insolvency and Bankruptcy Board of India - a regulator as an independent body.

Section 188 it will be a body corporate

❖ A clearly defined distribution of recovery proceeds.

❖ Insolvency Professional to take over management and control of the Corporate Debtor.

❖ Government dues would rank below the claims of other creditors.-section 53 distribution of assets

53(1)(e) 5th position out of 8 position below financial unsecured creditors

❖ Have provisions to deal with concealment, fraud and /or manipulation leading to fine and/or

imprisonment.

❖ Provide confidence to Lenders and Investors in the debt market.


Insolvency Resolution Framework for Individuals, Firms and AOI

Presidency towns/ Supreme Court

High Courts system

The Presidency Towns Insolvency Act, 1909 (PTIA) –Individuals, Firms and AOP

The Provincial Insolvency Act, 1920 –Insolvency other than PTIA areas

The Insolvency and Bankruptcy Code, 2016


11Enactments Amended by the IBC 2016 (S 245 to 255 ) schedules first to eleventh

1.The Indian Partnership Act,1932

2.The Central Excise Act, 1944

3.The Income-tax Act, 1961

4.The Customs Act,1962

5.The Recovery of Debts due to Banks and Financial Institutions Act, 1993

6.The Finance Act, 1994

7.The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

8.The Sick Industrial Companies (Special Provisions) Repeal Act, 2003

9.The Payment and Settlement Systems Act, 2007

10.The Limited Liability Partnership Act, 2008

11.The Companies Act, 2013


Acts Repealed by the Code

The Presidency Towns Insolvency Act, 1909 (Sec 243)

The Provincial Insolvency Act, 1920 (Sec 243)


Impact of the IBC 2016

BIFR and SICA go off completely;

Corporate resolutions come under NCLT;

Tight timelines under the new law – entire process of resolution to be over in 180 to 270 days;

May lead to greater financial discipline;

Creditors have an upper hand in resolution plans;

Moratorium is not indefinite – limited moratorium;

If revival does not work out, entity to mandatorily go into liquidation;[email protected] 14/12/2017 16

Impact of the IBC 2016

Companies and guarantors can be both brought under a common forum – NCLT/DRT;

While borrowers may file resolution applications seeking moratorium, but borrower will have to face the threat of liquidation/bankruptcy ;

Can debtors under banker-driven restructuring also go for NCLT / DRT resolution –yes. In view of mandatory timelines, the case may reach bankruptcy stage faster;

Accelerating provisioning – faster transition into a case of loss assets.


The Insolvency and Bankruptcy Code, 2016

5 Parts- 7 chapters in each Part II,III,IV

255 Sections

11 Schedules (Sections 245 to 255)


IBC, 2016 – Analysing the Parts I to V

Part I

PRELIMINARY - 1 Chapter - Section 1 -3

Part II applies to corporate persons other

than financial service providers

Part – III applies to individuals and

partnership firms except those located in

state of Jammu & Kashmir proviso S1(2)

Section 3 definitions

Part II

INSOLVENCY RESOLUTION AND LIQUIDATION FOR

CORPORATE PERSONS -

7 Chapters - Sections 4-77

Section 5 definitions

Part III(not yet notified) INSOLVENCY RESOLUTION FOR INDIVIDUALS AND PARTNERSHIP FIRMS

• 7 Chapters

• Section 78-187

• Section 79 definitions

Part IV

REGULATION OF INSOLVENCY PROFESSIONALS, AGENCIES AND INFORMATION UTILITIES

• 7 Chapters

• Section 188-223

Part V

MISCELLANEOUS

• Section 224-255

• (Section 245-255 enables amendments in other statutes, 11 legislations )


4

Journey of the Code


Insolvency Law Committee

• Steps taken by IBBI for betterment of the Code.

• Insolvency Law Committee were constituted on 16.11.2017 for improvement in the process prescribed in the code.

• The committee is constituted to submit its recommendation for further improvement in the Code within two months from its first meeting.


Notification of Sections of the IBC, 2016

S. No. Date of Notification Sections Notified

1. 5th August, 2016 Sections 188-194

2. 19th August, 2016 Section 3 clause (1),(5),(22),(26),(28),(37)Sections 221, 222, 225, 226, 230, 232, 233,Section 239(1) & (2)(zd)Section 240(1) & (2) (zt)Section 241, 242

3. 1st October, 2016 Insolvency and Bankruptcy Board of India establishedWith Head Office at New DelhiShri M S Sahoo, Chairperson IBBI

4. 1st November, 2016 Section 3 (2) to (4)Section 3 (6) to (21)Section 3 (23) to (25)Section 3 (27)Section 3 (29) to (36)Section to 196,197,223Section 239 (2) (ze) to (zh) & (zl) to (zm)Section 240(2) (a) to (zm) & (zu) to (zzzc)Section 244, 246 to 248, 250, 252


Notification of Sections of the IBC, 2016

S.No Date of Notification Sections Notified

5. 15th November, 2016 Section 199 to 207Section 208 (1)( c ) & (e) & (2)Section 217 to 220)Section 251,253,254,255

6. 1st December, 2016 Section 2(a) to (d)Section 4 to 32Section 60 to 77Section 198, 231Section 236 to 238Section 239 (2) (a) to (f)

7. 15th December, 2016 Sections 33 -54

8.

9.

30th March, 2017

14th June, 2017

Sec 59, 209-215, 216(1), 234 and 235(w.e.f 1st April 2017)

Sections 55-58 (w.e.f 14th June, 2017)

[email protected]

14/12/2017 23

Rules relevant to the IBC 2016 ( S 239)/CA 2013

Events Notification/ Effective Date

1. The Insolvency and Bankruptcy Board of India (Salary, Allowances

and other Terms and Conditions of Service of Chairperson and

members) Rules, 2016.

29th August, 2016 w.e.f. 29th august 2016

2. The Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016.

30th November 2016, w.e.f. 1st December,

2016

3. The Companies (Transfer of Pending Proceedings) Rules, 2016

7th December, 2016, w.e.f. 15th December,

2016, except

Rule 4 which shall come into effect from 1st

April, 2017

4. The National Company Law Tribunal Rules, 2016 21st July, 2016

5. The National Company Law Appellate Tribunal Rules,2016. 21st July, 2016


Regulations under the IBC 2016( S 240)Events Notification/ Effective Date

1. The Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016

21st November, 2016 w.e.f. 22nd November, 2016

2. The Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulations, 2016

21st November, 2016 w.e.f. 22nd November, 2016

3. The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016

23rd November, 2016, w.e.f. 29th November, 2016

4. Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

5. The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016

30th November, 2016, w.e.f. 1st December, 2016

15th December, 2016

[email protected]

14/12/2017 25

7. The Insolvency and Bankruptcy Board of India (Engagement of Research Associates and Consultants) Regulations, 2017

30th January, 2017 w.e.f. 31st January, 2017

8. The Insolvency and Bankruptcy Board of India (Procedure for Governing Board Meetings) Regulations, 2017

30th January, 2017 w.e.f. 31st January, 2017

9.The Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017

30th March 2017 w.e.f 1st April 2017

10.Insolvency and Bankruptcy Board of India(Voluntary Liquidation) Regulations, 2017

11. The Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017

30th March 2017 w.e.f 1st April 2017

12th June, 2017

14/12/2017 26

12. The Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017

14th June, 2017

13. The Insolvency and Bankruptcy Board of India (Employees’ Service) Regulations, 2017

24th August, 2017

14. IBBI (Grievance and Complaint Handling Procedure) Regulations, 2017

6th December, 2017


S. No. Aspects The IBBI (Liquidation Process) Regulations, 2016

The IBBI (Voluntary Liquidation) Regulations,

2017

1. Regulations 46 40

2. Chapter 7 7

3. Schedules 3 2

4. When does it apply? Under Part II - Chapter III onLiquidation Process – Wheretime exceeds as per sec 12 or sec56 or the plan is rejected by theadjudicating authority (AA)then the AA shall pass an orderfor insolvency resolution underChapter III of part II the IBC2016

Section 59 of the IBC 2016 (Notified w.e.f 1st April

2017)

5. Who is the AA? NCLT NCLT (sec 59 is notified w.e.f 1st April 2017)


Amendment in Regulations-

• The IBBI(Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2017- 07 Nov 2017

• The IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2017- 07 Nov 2017

• The IBBI(Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2017- 05 Oct 2017

• The IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2017- 05 Oct 2017

• The Insolvency and Bankruptcy Board of India (Information Utilities) (Amendment) Regulations, 2017-29th September, 2017

• The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2017- 16 Aug 2017

• The Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2017-16 Aug 2017


The Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017- notified on 12th June, 2017

Inspection & Investigation- Part-IV, Chapter VI, S 217 to 220

• 5 Chapters, 14 Regulations & FORM A (submission of claims)

• The IBBI announced the regulations in exercise of its powers conferred by sections 196, 217, 218, 219, 220 read with section 240 of the Insolvency and Bankruptcy Code, 2016.

• These regulations provide the power to conduct inspections of records of service provider, procedure of inspection, investigation of a service provider, procedure for conducting the investigation, submission of an interim and final investigation report, issuance of a show-cause notice and the requirements for a valid show-cause notice.


IBBI (Grievance and Complaint Handling Procedure) Regulations, 2017-notified on 06.12.2017

• 5 Chapters, 8 Regulations, Form A

• A stakeholder may file a complaint in Form A along with a demand draft for two thousand and five hundred rupees or an online acknowledgement of two thousand and five hundred rupees.

• Complaint shall be filed within forty-five days of the occurrence of the cause of action which may be extended for 30 days.

• A grievance or a complaint shall be filed with the Board online at [email protected]


http://ibbi.gov.in/webfront/whatsnewiframe.php

mailto:[email protected]

Guidelines issued by IBBI

• Insolvency Professionals to act as Interim Resolution Professionals (Recommendation) Guidelines, 2017-25 May 2017

• Guidelines for Internships with IBBI- 16 Aug 2017


Understanding terminologies-

• Insolvency - inability to pay debts different from solvency

• Liquidation – process of selling assets and paying creditors - used only for corporate persons

• Winding up – larger term includes liquidation & removal of names used only for corporate persons

• Removal of name – like death certificate for individuals

• Bankruptcy – like liquidation and insolvency for corporate persons


THE INSOLVENCY AND BANKRUPTCY CODE(AMENDMENT)ORDINANCE,2017passed on 23rd November 2017

• Insertion of section 29A –persons not eligible to be resolution applicant

a) undischarged insolvent

b) willful defaulter

c) whose account is NPA

d) Convicted for offence for imprisonment for 2 years

e) Disqualified as director

f) SEBI prohibition

g) Has done preferential transaction


Ordinance

h) executed enforceable guarantee

I) connected person

J) any disqualification occurred outside India


Section 3(37) IBC 2016 residuary definitions

As defined in these legislations

• The Indian contract Act, 1872

• The Indian Partnership Act, 1932

• The Securities Contract (Regulation) Act, 1956

• The Securities Exchange Board of India Act, 1992

• The Recovery of Debts Due to Banks and Financial Institutions Act, 1993

• The Limited Liability Partnership Act, 2008

• The Companies Act, 2013


Time Limit for Completion of Insolvency Resolution Process

Time Limit

Sec 12 of the IBC 2016 – 180 days may be extended by further period not exceeding 90 days

Sec 56 of IBC – fast track 90 days may be extended by 45 days only once, initiated by a creditor or a corporate debtor


Part II of IBC 2016 ( S 4 to 77)

CORPORATE INSOLVENCY RESOLUTION PROCESS AND LIQUIDATION FOR CORPORATE PERSONS

➢C I Preliminary S 4 & 5

➢C II Corporate Insolvency Resolution Process S 6 to 32

➢C III Liquidation Process S 33 to 54

➢C IV Fast Track Corporate Insolvency Resolution Process S 55 to 58

➢C V Voluntary Liquidation of Corporate Persons S 59

➢C VI Adjudicating Authority for Corporate Persons S 60 to 67

➢C VII Offences and Penalties S 68 to 77


Insolvency resolution process for corporate

An operational creditor send a demand

notice to the corporate debtor. Within the 10

days, if the operational creditor does not

receive payment or notice of dispute, it

applies before NCLT for resolution process.

A defaulting corporate debtor may also file

an application for initiating corporate

insolvency resolution process with the NCLT

the Adjudicating Authority

A corporate commits a default

Within 14 days, the AA accepts the

application if it is complete Else rejects

allowing 7 days time to rectify mistakes

AA declares moratorium for prohibiting certain

things

Makes public announcement for the initiation of

the process, call for the submission of claims.

Appointment of an interim resolution

professional.

Within 14 days of application receipt, if AA is

satisfied about the default and all other

parameters are met it accepts the application.

Else rejects allowing 7 days time to rectify

mistakes

Within 14 days of application receipt, AA

admits the application if default has not been

rectified and if application is complete. Else

rejects allowing 7 days time to rectify

mistakes

Commencement of corporate insolvency resolution process

The financial creditor, individually or jointly with

other financial creditors may files an application

for initiating the insolvency resolution process

against the corporate debtor before NCLT, the

Adjudicating Authority. (AA)

Cont’d…[email protected] 14/12/2017 39

Insolvency Resolution Process for Corporates

ion process for corporate

Corporate debtors goes into Liquidation

Constitute a Committee of Creditors (CoC)

Appointment of the resolution professional (RP) (Either Interim resolution professional can continue or a new

one can be appointed by CoC with backing of 75% majority (in Value terms)

RP prepares Information Memorandum. Resolution Applicant prepares resolution plan and submit to

RP. RP examines all Resolution Plan and presents such plan to CoC which meets the criteria

AA accepts Resolution

plan

AA rejects resolution

plan

CoC accepts one of the Plans CoC rejects all Plans

RP submits Resolution Plan to Adjudicating Authority approves or

rejects the plan

Corporate debtors goes into LiquidationRP implements Resolution plan and handover

management to existing/new promoters

Corporate Debtors doesn’t

comply with resolution plan


Application on default to NCLT

Reject Accept

Interim RP appointment + Moratorium + Public Announcement

Constitute a Committee of Creditors (CoC)

Appointment of RP by CoC

Preparation of Information Memorandum

RP submits resolution plan to CoC

CoC Accepts CoC Rejects

RP submits plan to AA

AA Accepts AA Rejects

RP implements

the plan

Corporate debtor goes into liquidation

RP: Resolution Professional, AA: Adjudicating Authority

Summary of insolvency resolution process for corporate

n p

Debtor doesn’t comply with

resolution plan


Initiation of CIRP by Financial

Creditor (S 7)

Occurrence of

Default by C. Dr.

Notice to F. Cr. by AA

for rectification of

defects

Ascertainment of

existence/non-existence

of default byAA

Application by F.

Cr(s). toAA

Default exists +

Application complete

+ No disciplinary

proceeding against

proposed IRP?

Admission of

Application

Defects

rectified?

Rejection of

Application

No

No

Yes

Yes

Order

Communicated to

F. Cr.

Order Communicated to

F. Cr. and C. Dr.

Within 7

days of

receipt of

notice

Within 7

daysWithin 7

days

Commencement

of CIR

Within 14

days

28


Initiation of CIRP by

Operational Creditor (S 9)Application by

O. Cr. To AA

Demand

notice by

O.Cr. To C.

Dr.

Occurrence

of Default

by C. Dr.

C. Dr. shows

evidence of

repayment?

C. Dr. shows a

dispute?

Within

10 days

of

receipt

of

demand

notice

Rejectionof

Application

Admission of

Application

Communication

to O.Cr. and

C.Dr.

No

No

action

Yes

Yes

No further Commencementof CIR

Within 14

days

29

Notice to O.

Cr. by AA for

rectification

of defects

Defects

rectifie

d?

No

Application

complete + no

repayment by C. Dr.

+ demand notice

delivered by O.Cr.

+ no dispute notice

received by O.

Cr./no record of

any dispute?

Yes

No

Within 7

days of

receiptof

Yes notice


Initiation of CIRP by Corporate

Applicant

Occurrenceof

Default byC.Dr.

Application by

C.Dr. to AA

Rejection of

Application

Admission of

Application

Communication

by AA to C.Dr.

Within 14days

Commencement of CIR

30

Notice to C.Dr. by AA

for rectification of

defects

Application is

complete

Defects

rectified?

Yes No


Once CIRP commences . . .

Commencement

of CIRP

Public

announcement of

Initiation of CIRP

u/s 15

Declaration of

Moratorium

u/s 13

Call for

submission of

Claims

Appointment of

IRP by AA

u/s 22

Within 14

days of

Insolvency

Commence

m ent Date

Manage

m ent of

affairs of

C.Dr.

Consolidation

of Claims

against C.Dr.1st meetingof

Crs.Committee

Constitutionof

Crs.Committee

Review of

Financial

Position of

C.Dr.

Appointment ofRP for Conduct

ofCIRP

Within 7 days

Max. 30 days tenure for IRP

31


Appointment of resolution

professional

Constitution of Crs.

Committee by IRP

Application to AA

for appointment of

proposed RP

1st meeting of Crs.Committee

Intimation to IRP,

C.Dr., & AA

Propose to

replace the

RP

AA to direct the IRP to

continue as RP until

Board confirms

otherwise

AA forwards the

name to Board

Existing IRP

appointed as

RP?

AA

appoints

RP

NoNo

Yes

Board

confirm

s within

10

days?

Yes

Within 7 days

32


Conduct of CIRP by RP

Preparation of

Information

Memorandum by

RP

Submission of

Resolution Plan

by Resolution

Applicant

Review of

Resolution

Planby RP

Approval of

a Resolution

Plan by Crs.

Committee

Selection of

Resolution Plan(s)

confirming to

specified

conditions

Presentation of

selected

Resolution Plan(s)

to Crs. Committee

Submission of

approved

Resolution Plan

to AA by RP

Review of

Resolution

Plan by AA

Order of

AA

Admit the

Resolution Plan

Reject the

Resolution Plan

33


3 Stages of Corporate Insolvency

Resolution

• Insolvency application accepted, plan not yet sanctioned▫ Moratorium of SARFAESI action, any other action

• Resolution plan sanctioned▫ Creditor action will depend on the resolution plan; resolution

plan mandatory on all

• Liquidation proceedings▫ Secured creditor staying in liquidation process

Security interest relinquished, secured creditor cannot

take enforcement action

▫ Secured creditor stays out of liquidation

Security interest enforcement/SARFAESI permitted

34


Effect of Moratorium Order

• AA shall declare moratorium order on the insolvencycommencement date prohibiting –▫ institution of suits or continuation of pending suits or

proceedings against the C.Dr.including execution of any judgment, decree or order in any court of

law, tribunal, arbitration panel or other authority

any of its▫ transferring, encumbering, alienating or disposing of assets or any legal right or beneficial interest

▫ recovery of any property by an owner or lessor

▫ action to foreclose, recover or enforce any security interest created by the C.Dr. in respect of its propertyincluding any action under the SARFAESI Act, 2002

• Moratorium shall have effect till the completion of the CIR process or liquidation order

35


Effect of Moratorium order on SARFAESI Proceedings36

• Code prohibits SARFAESI proceedings during moratorium period.• Following circumstances might arise –▫ Moratorium starts before sending notice under section 13(2)Notice shall be served after completion of 180 days (or 270 days, if an

extension is granted)

▫ Moratorium starts after sending notice under section 13(2) to the borrowerFresh notice under section 13 (2) shall be served after completion of 180 days

or 270 days, as the case may be.▫ Moratorium starts after sending notice under section 13(2) to the

borrower + repossessing the assetRepossessed asset shall be sold only after completion of 180 days or 270 days,

as the case may be.

▫ Moratorium starts after sending notice under section 13(2) tothe borrower + repossessing the asset + sale of repossessed

assetSuch secured creditor shall rank 5th in the waterfall priority to the extent of

unsecured [email protected] 14/12/2017 50

Implementation of the Resolution Plan

• There is nothing in the Code for implementation▫ Unlike non-corporate resolution, where implementation of

repayment plan is under the aegis of the resolution professional

• Resolution plan is binding [Sec 31 (1) ]▫ On debtor▫ Employees▫ Members▫ Creditors▫ Guarantors▫ Other stakeholders

• What is the effect of non adherence?▫ In case of non corporate persons, failure to implements leads

to bankruptcy

37


Appointment of Resolution Professional• An insolvency professional shall be eligible to be appointed as a resolution

professional -

▫ 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

• Independent of the corporate debtor shall mean –

▫ Eligible to be appointed as an independent director on the board of the

corporate debtor under Section 149 of the Companies Act, 2013

▫ Is not a related party of the corporate debtor; or

▫ Is not an employee or proprietor or a partner, in the last 3 FY of:

A firm of auditors or PCS or cost auditors of the corporate debtor; or

A legal or a consulting firm, that has or had any transaction with the corporate

debtor amounting to 10% or more of the gross turnover of such firm.

• Whether an insolvency professional needs to be independent of the creditor(s)

filing an application against the corporate debtor?

39


Duties of Resolution Professional• Make disclosure of independence at the time of appointment (Reg 3

(2))• Make a public announcement (in form A) on appointment as an IRP▫ Within 3 days from the date of appointment

• File a report certifying constitution of the committee tothe Adjudicating Authority▫ Within 30 days from the date of appointment

• Circulate the minutes of the meeting to all participants by electronic means▫ Within 48 hours of the said meeting

• A record of the summary of the decision taken on a relevant agenda item shall be circulated▫ Within 24 hours of the conclusion of the voting

• Appoint 2 registered valuers to determine the liquidation value ofthe corporate debtor▫ Within 7 days from the date of appointment

40


Duties of Resolution Professional• Submit an information memorandum in electronic form

▫ To each member of the committee and any potential resolution applicant (upon submission of an undertaking)Before 1st meeting – matters listed in paragraphs (a) to (i)

of Reg. 36 (2)

Within 14 days of the 1st meeting - matters listed in paragraphs (j) to (l) of Reg. 36 (2)

• Submit the resolution plan approved by the committeeto the AA with the certification that -▫ the contents of the resolution plan meet all the

requirements of the Code and the Regulations; and

▫ the resolution plan has been approved by the committee

41


Registered valuer under The Companies (Registered Valuers and Valuation) Rules, 2017-notified on 18th October, 2017

• Registered Valuer- Section 247 under chapter XVII of the Companies Act, 2013

• 6 Chapters, 21 Rules, 4 Annexures, 5 Forms in Annexure II

• Deals with eligibility, qualifications and registration of valuers, recognition of registered valuer organisation, valuation standards, disciplinary proceedings.

• Valuation examination has to be passed to become a registered valuer


Registered valuers organisation

• Eligibility: member of a registered valuers organisation, passed the

valuation examination

• Registered Valuers Organization: registered under section 25 of the

Companies Act, 1956 or section 8 of the Companies Act, 2013 with the sole

object of dealing with matters relating to regulation of valuers of an asset

class or asset classes and has in its bye laws the requirements; or

• a professional institute established by an Act of Parliament enacted for

the purpose of regulation of a profession;


Committee of Creditors• Committee of creditors shall be formed with financial creditors

only.

▫ Financial creditors which are related parties of the corporate

debtor shall not form part of committee

• What if the corporate debtor has no financial creditor?

• Where all financial creditors are related parties of the corporate

debtor?

▫ Committee shall be formed with 18 largest O.Cr. By valueIf the number of O.Cr. is less than 18 then all the O.Cr. shall be included

▫ 1 representative elected by all workmenOther than those included in 18 members

▫ 1 representative elected by all employeesOther than those included in 18 members

42


Who will bear the stage wise cost?• Expenses of public announcement

▫ Shall be borne by applicant which may be reimbursed by the Committee to the extent ratified

• Cost of proving the debt

▫ Shall be borne by respective creditors

• Cost of IRP/ RP

▫ Any expenses to be incurred or payment to be made to IP – applicant shall borne the expense

▫ As soon as the committee meets – proposal shall be laid before the committee and committee shall

either ratify the expenses or reject the proposal

If committee ratifies the proposal – expenses shall be borne by the committee to the extent they agree to ratify

If committee rejects the proposal – expenses shall be borne by the applicant

▫ Once the resolution plan is approved – the expenses shall be borne by the corporate

debtor and shall rank first as far as priority is concerned (Ref. Reg 38 of IRP for CP)

▫ If the resolution plan is rejected -- the expenses shall be borne by the corporate debtor and shall rank

first as far as priority is concerned (Ref. section 53 of the Code)

43


Amendments to the Companies Act, 2013 under IBC

• Section 255 of the Code notified on 15th November, 2016 brought about anumber of amendments to the Companies Act, 2013 under EleventhSchedule

• MCA through its notification dated 07th December, 2016 has notified theprovisions of Chapter XX of the Companies Act, 2013 w.e.f. 15th

December, 2016

Sec 255 of the IBC, 2016

Before 15th

November 2016

Voluntary winding up under Tribunal –Companies Act, 1956

Winding up by Tribunal –

Companies Act, 1956

After 15th NovemberExplained in the next


Post Notification of Sec 255 (15th Nov, 16)

Winding up on Inability to Pay Debts

Winding up on grounds other than Inability to pay debts

Voluntary Winding up

Section 2(94A) of the Companies Act, 2013 has been amended to define “WindingUp” as “winding up under this Act or liquidation under Insolvency and BankruptcyCode, 2016”


Winding Up on Inability to Pay Debts• Section 271(1)(a) of the Companies Act, 2013 omitted by Section 255 of the Code

• Section 271(1)(a) deals with Winding up by Tribunal on account of Inability to Pay Debts

• Section 7 to 9 of the Code now deals with it

• Application to AA for initiation of Corporate Insolvency Resolution Process can be made where there is a ‘default’

• ‘Default’ defined in the Code to mean non-repayment of a debt, whether in whole or in part, has become due and payable by a corporate person

• Which means under the Code insolvency resolution can be initiated even against financially solvent company that has defaulted payment

• Once the resolution process is accepted by the Tribunal, Insolvency Professional is appointed to conduct the Corporate Insolvency Resolution Process

• The process to be completed within 180days from the date of admission of the application by the Tribunal

• On failure of which the Tribunal will order for Liquidation of the Corporate Person


Winding up on grounds other than inability to pay debts

• Section 271 of the Companies Act, 2013 deals with the following

271(a)Passing of special resolution to that effect

271(b)Acting against Sovereignty and Integrity of India, security of state

271(c)Conducting affairs in a fraudulent manner

271(d)Default in filing of financial statements or annual returns with the registrar

• 271(e)On just and equitable ground in the opinion of the Tribunal

• These provisions are notified under Chapter XX w.e.f .15th December 2016, therefore winding up application for the above grounds shall be made to the Tribunal

• Provisions of Companies Act, 2013 shall apply.


Fast Track IRP

• Sections 55 to 58 under chapter IV of Part II (w.e.f. 14th June, 2017)

Applicable to the following categories of corporate debtors:

-a small company, or

-a startup (other than the partnership firm), or

-an unlisted company with total assets, not exceeding Rs.1 crore.

• Default completion time is 90 days from the insolvency

commencement date as against 180 days in other cases.

▫ One-time extension of a maximum of 45 days permissible

▫ Necessity of extension to be determined by AA

44


The Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017

• W.e.f 14th June 2017

• The IBBI announced the regulations in exercise of its powers conferred by sections 58, 196 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016.

• 10 Chapters, 39 Regulations and Schedules

• Various forms are prescribed under Schedule (Form A to F)

• These regulations provide the process for initiation of insolvency resolution of eligible corporate debtors, conduct of the Fast Track Process, proof of claims, approval of the resolution plan by the Adjudicating Authority.


Resolution Plan• Contents- details of the resolution applicant and other connected persons

• Details-

• (a) identity;

• (b) conviction for any offence , if any, during the preceding five years;

• (c) criminal proceedings pending, if any;

• (d) disqualification, if any, under Companies Act, 2013, to act as a director;

• (e) identification as a willful defaulter, if any, by any bank or financial institution or consortium thereof in accordance with the guidelines of the Reserve Bank of India;

• (f) debarment, if any, from accessing to, or trading in, securities markets under any order or directions of the Securities and Exchange Board of India,; and

• (g) transactions, if any, with the corporate debtor in the preceding two years.


Cont…

• ‘connected persons’-

• promoters or in the management or control of the resolution applicant

• will be promoters or in management or control of the business of the corporate debtor during the implementation of the resolution plan

• holding company, subsidiary company, associate company and related party of the above mentioned persons

• (Note: Prescribed under the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2017- notified on 7th Nov. 2017 )


Voluntary Liquidation

Sec 255 of IBC, 2016 repeals part II of chapter XX -sections 304 to 323 on Voluntary winding up under Companies Act, 2013

Sec 59 of IBC, 2016 (on Voluntary winding up applicable w.e.f 1st

April 2017). The IBBI (Voluntary Liquidation Process) Regulations, 2017 comes into force w.e.f 1st April 2017

As per Sec 468(3) of the Companies Act, 2013, the 1956 Act does not apply anymore given Sec 59 of the IBC, 2016 is notified.


Voluntary Liquidation

A corporate person who intends to liquidate itself voluntarily and has not committed any default may initiate voluntary liquidation proceedings.

Time limit- 12 months from the voluntary liquidation commencement date.

• Steps involved-

• Step – 1: Filing of application

• Step – 2: Commencement of voluntary liquidation

• Step – 3: Appointment of Liquidator and Public Announcement

• Step – 4: Submission of Preliminary Report and Completion of Books of Account

• Step – 5: Appointment of Professionals

• Step – 6 Consultation with Stakeholders

• Step – 7: Claims by creditors

• Step – 8: Determination and Verification of Claims

• Step – 9 Preparation of List of Stakeholders

• Step – 10: Realisation and Distribution

• Step – 11: Submission of Final Report

• Step -12: Dissolution


Formats Prescribed under IBBI (Voluntary Liquidation Process) Regulations, 2017


List of Books to be maintained by a Liquidator – Schedule - II


Cont.…


Winding up, liquidation & dissolution

• Sec 2(94A) of the Companies Act, 2013 defines “winding up”-introduced by Sec 255 the Eleventh Schedule of the IBC 2016

• “Winding Up” – ‘winding up under this Act or under Insolvency and Bankruptcy Code, 2016’

Winding up Process

Insolvency and Bankruptcy Code, 2016

Companies Act, 2013

Governed by


Winding up and Applicable Provisions

CORPORATE INSOLVENCY RESOLUTION PROCESS (INABILITY TO PAY)

• IBC, 2016

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

WINDING UP ON GROUNDS OTHER THAN INABILITY TO PAY

• Companies Act, 2013

• Companies Court Rules, 1959

VOLUNTARY WINDING UP

• Section 59 of the IBC, 2016

• The IBBI ( Voluntary Liquidation Process). Regulation, 2017

• (Both w.e.f 1st April 2017)


Liquidation and distribution of recovery proceeds

of recovery proceedsThe Insolvency and Bankruptcy Board of India has framed new regulations under ‘Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 [the regulation]’ to deal with liquidation process

Liquidation Process

Appointment of Liquidator

To make public announcement - to call upon stakeholders to submit their claims as on liquidation commencement date and to provide last

date for submission of claim (30 days from the liquidation commencement date -Y+30)

Submission of the preliminary record to the Adjudicating Authority (Y+75)

Submission of claims by different stakeholders. Verification of stakeholders’ claims and preparation of final list of stakeholders by the

liquidator.

Asset memorandum by the liquidator and valuation by at least two independent valuers.

Asset sale either by auction or by private sale. Distribution of proceeds (Y+2 yrs)

Liquidation commencement date: means the date on which proceedings for liquidation commence in accordance with section 33 or section 59 of the Code (Y)[email protected] 14/12/2017 74

Liquidation waterfall

Section 53 of the Code deals with distribution of assets sale proceeds along with liquidation waterfall.

Entire insolvency resolution process cost and liquidation cost

Workmen’s dues for the period of twenty-four monthspreceding the liquidation commencement date

Debts owed to a secured creditor in the event such securedcreditor has relinquished security in the manner set out insection 52

+

Wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date

Financial debts owed to unsecured creditors

Any amount due to the Central Government andthe State Government

Debts owed to a secured creditor for any amountunpaid following the enforcement of security interest

+

Any remaining debts and dues

Preference shareholders, if any

Equity shareholders or partners, as the case may [email protected] 14/12/2017 75

Part III (S78-187)

INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUAL AND PARTNERSHIP FIRMS

• C I Preliminary S 78 & 79

• CII Fresh Start Process S 80 to 93

• C III Insolvency Resolution Process S 94 to 120

• C IV Bankruptcy Order for Individuals and Partnership Firms S 121 to 148

• C V Administration and Distribution of the Estate of the Bankrupt S 149 to 178

• C VI Adjudicating Authority for Individuals and Partnership Firms S 179 to 183

• C VII Offences and Penalties S 184 to 187


Draft Rules and Regulations issued under the Insolvency Resolution Process for Individuals and Firms

(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.


Fresh Start: Eligibility Conditions

Maximum Gross Annual Income of

Rs. 60000

Maximum aggregate value of assets Rs.

20000

Maximum aggregate value of qualifying debts Rs. 35000

No dwelling unitNot an

undischarged bankrupt

No Fresh Start Process/Insolvency Process/Bankruptcy

process subsisting

No Fresh Start Order in the last 12 months prior to the date of application

86


Fresh Start

Process[Phase I: Admission of Debtor’s

Application]

Admission

Debtor unable to pay

debts

Application to

AA supported

by an

Affidavit

Appointment

of RP

Filed

personally

Order of AA

RP examines application.

Submits Report to AA

recommending

acceptance/rejection. Sends

copy of the report to debtor

Rejection

Filed

throughRP

Eligibility

forFSO

Copy of order + copy of

application to creditors

State the amounts accepted as

Qualifying debts/other amounts

eligible for discharge for Fresh

Start

Challenge by

debtor/creditor;

application to AA

AA to pass

such orders as

deemedfit

Investigation,

acceptance/rejection

by RP

Objection, by

application to RP

Board may take

action against RP

Application

acceptedOrderof

AAApplicatio

nrejected

Order

forwarded

to Board

Within 10 days

Within 14 days

Within 7 days

Within 10 days of receipt

of copy of order

Within 10 days

Within 10 days

Within 14 days

87


Fresh Start

Process

[Phase II: Discharge Order]

Submissionof

the list

Dischargeorder

byAA

Moratorium

ends

ToBoard

Admission of Debtor‟s

Application

Moratorium commences in

respect of all debts

RP prepares final list of

qualifying debts

At least 7 days prior to

end of moratorium

period180 days

88


Insolvency Resolution Process

• Application to AA

▫ By debtor committing the default

Personally or through RP

In respect of a partnership firm, all or majority of the partners shall jointly apply; single partner is not eligible.

Only in respect of debts which are not excluded debts.

An undischarged bankrupt, or a debtor already undergoing FSP, IRP or Bankruptcy order not eligible to apply.Also, if there is an existing IRP, admitted during 12 months preceding the date of submission of application.

▫ Bycreditor

Personally, or jointly with other creditors, or through RP.

Against the firm or any one or more partners of the firm.

Copy of application to the debtor.

• Manner of appointment of RP

▫ Same as that in FSP

• Effect of filing application

▫ Commencement of interim-moratorium

To end on admission of such application

89


Insolvency Resolution Process: Phase I

Application to AA

RejectionApproval

Appointment of RP

RP examines application

Submission of report with

recommendations

Interim-

moratorium

commences

Treatment of application as

FSP Copy of Report to Debtor/Creditor

Within

10

days

Admission of Application

Order of AA

Creditor entitled to file for bankruptcy

order

Rejection ofApplication

Within

14

days

Copy of order + Report of RP + Application to

creditors

Within

7

days

90


Insolvency Resolution Process: Phase II

Order of Admission of Application

Creditors register claims with RP within last date

specified in notice

Preparation of list by RP

Public notice by AA inviting claims from creditors

Within

10 days

Moratorium commences in respect ofall debts

Within

30

days

Submission of repayment plan by RP to AA

alongwith his own report on the plan

Preparation of repayment plan by debtor in

consultation with RP

Within 21

days from

last date

for filing

claims

Meeting of creditors (if

called)

Order of AA, on the basis of report

Copy of Report to creditors, debtor, AA

Report on the meeting by RP

Approval Rejection

Both debtor and creditor entitled

to file for bankruptcy

order

Binding on creditor

and debtor

To Board

To IPA for releasing performance security

91


Insolvency Resolution Process: Phase III

Approval of

repaymentplan

Implementationof

resolution plan

Completion

of repayment

plan?

Report by RP to

AA

Premature end of

repaymentplan

Supervision

by RP

Within 14

days,

extendable

to max. 7

days

Order byAA

Dr./Cr. whose claims

not satisfied, eligible

to apply for a

bankruptcy order

Application for

discharge order by

RP toAA

Before

completion of

repaymentplan

After completion

of repayment

plan

Discharge

order byAA

To the Board and

the IPA for

releasing

performance

security

Yes

Notice of completion and

report by RP to all

persons bound by

repaymentplan

No

92


Application for bankruptcy order

• ToAA• By a creditor, individually or jointly with other creditors• By debtor▫ In case of a firm, application may be filed by any of its partners

• Within 3 months of the order passed by AA under Section 100(4), or115(2), or 118(3), asthe casemay be (refer succeeding slide)

• Applicant may propose an insolvency professional to act asbankruptcy trustee

• Application shall not be withdrawn without the leave of AA• Interim moratorium commences once application is filed▫ Terminates on bankruptcy commencement date▫ Such interim-moratorium provisions not to apply to transactions notified by

the Central Government in consultationwith any financial sector regulator

93


Bankruptcy Order – When can be applied

for?

Bankruptcy Order by

AA

Application for IRP is rejected by AA

under Section 100(4)

Order by AArecording rejection of repayment plan

by meeting of creditors (Section

115(2))

Order of AA on premature endingof the repayment

plan under Section 118(3)

Creditor

entitled to file

application

Both debtor and

creditor entitled to

apply

The debtor or the

creditor, whose

claims have not

been fully satisfied

entitled to apply

94


Appointment of bankruptcy trustee

Proposed Trustee

appointed as

bankruptcy trustee

Board

confirms?

Boardnominates

a trustee

Appointment of

nominated trustee as

bankruptcy trustee

AA seeks

confirmation

from the

Board

Name of

trustee

proposed in

application?

Within

7 days

Within

10

days

Within

10

days

Within

7 daysNo

Nominate

another trustee

as replacement

No

Yes

Yes

AA directs the Board

to nominate a trustee

Name of

trustee

proposed in the

icatiapplthe

on?

95


Bankruptcy Order

• By AA, within 14 days of nomination of bankruptcy trustee

• Effective till discharge of the bankrupt

• Effects▫ the estate of the bankrupt to vest in the bankruptcy trustee

▫ the estate of the bankrupt to be divided among his creditors

▫ bar on a creditor to commence proceedings in respect of a debt claimed as bankruptcy debt

▫ right of a secured creditor to realize or otherwise deal with hissecurity interest not affectedNo entitlement to any interest in respect of debt after the

bankruptcy commencement date if no steps are taken to realise thesecurity within 30 days from the said date.

• Modification or recall of bankruptcy order is possible under Section 142

96


Bankruptcy Order

Application for

bankruptcy order

Nomination of

bankruptcy trustee

Bankruptcy

Order byAA

Notice/Public notice by

AA inviting claims from

creditors

Within

14

daysBankruptcy

commencement

date

Within

10

days

Bankrupt to submit statement of

financial position to the

bankruptcy trustee if the

application was filed by a

creditor within 7 days

Creditors to register

claims with bankruptcy

trustee

Within7

days

Preparation of list

of creditors by

trustee

Completion of administration and

distribution of the estate of bankrupt

Approval of trustee‟s

report by Crs. Committee

and determination of

whether bankruptcy

trustee shall be released

Notice to summon

meeting of creditors

Meeting of

creditors

Within 14 days of

bankruptcy

commencementdate

Within 21 days of

bankruptcy

commencement

date

Report of the administration

by trustee

To be

presented in

Within7

days

Interim-

moratori

um

97


The Estate of the Bankrupt

• Vesting▫ In the bankruptcy trustee immediately from the date of his appointment

▫ Effective without any conveyance, assignment or transfer

• Inclusions in the estate▫ All property belonging to or vested in the bankrupt at the bankruptcy commencement

date

▫ Capacity to exercise powers over such property (or capacity to initiate proceedings

for exercising such powers) existing at the bankruptcy commencement date or before

the date of discharge order

▫ Property, which by virtue of this law, is comprised in the estate

• Exclusions from the estate▫ Excluded assets

▫ Property held on trust

▫ Assets as notified by the Central Government in consultation with financial regulator

98


Discharge order

• Application by bankruptcy trustee to AA• Earlier of –▫ Expiry of 1 year from the bankruptcy commencement date

▫ Within 7 days of the approval of the committee of creditors of the completion of administration of estate of the bankrupt, if the said approval is accorded before the expiry of 1 year from the bankruptcy commencement date

• Effects▫ Bankrupt is released from all bankruptcy debts▫ In case the application for discharge is filed within 7 days of the creditors' approval,

the discharge does not affectfunctions of the bankruptcy trusteethe operation of the provisions of Chapters IV and V of Part III

• These remainunaffected▫ Right of the secured creditor to enforce his security for the payment of a debt from

which the bankrupt is discharged

▫ Bankrupt is not released in respect of debts incurred by means of fraud or breach of trust to which he was a party

▫ Bankrupt is not released from any excluded debt

99


Proof of debt

• Bankruptcy trustee to give notice to every creditor

▫ Within 14 days from days of preparing list of creditors

• Copy of decree – valid proof

• Interest on debt - provable as part of the debt

▫ Except in so far as owed in respect of period after

bankruptcy commencement date

• Proof of debt by secured creditors-

▫ Realises his security, produce proof of the balance due to

him;

▫ Surrenders security to the bankruptcy trustee for the general

benefit of the creditorsMay produce proof of his whole claim

100


Priority of payment

and expenses incurred by the bankruptcyThe coststrustee

Secondly, The workmen's dues for the period of 24 months preceding the

bankruptcy commencement date; and

Debts owed to secured creditors;

Wages and any unpaid dues owed to employees, other thanworkmen, of the bankrupt for the period of 12 monthspreceding the bankruptcy commencement date

Central Government and the State Government dues

All other debts and dues owed by the bankrupt includingunsecured debts

101


Preferential transactions

• Sec 43- Corporates & Sec 165 – Individuals• Examples-▫ payment or set-off of debts not yet due;▫ performance of acts - no obligation to perform;▫ granting of a security interest to secure existing unsecured debts;▫ unusual methods of payment;▫ payment of a debt of considerable size in comparison to the

assets of the debtor;▫ payment of debts in response to extreme pressure from a creditor

• Defences available▫ transaction as consistent with normal commercial practice▫ ordinary course of business▫ new credit & newvalue▫ counterparty proves that it was unaware of a preference▫ no knowledge of the debtor's insolvency

• Creation of an escrow in favour of certain payees was held to be voidable preference in Re Lewis’ of Leicester Ltd(1995)

56


Undervalued transaction

• Sec 45 – Corporate & Sec 164 – Individuals

▫ What is not an arm‟s length transaction is an undervalued

transaction

▫ Imply unequal exchange

• What constitutes an "undervalued transaction"?

▫ Gift

▫ Significantly less value

• Not of "proportionate value" but "ordinary course of

business" – Is it covered under undervalued transaction?

• In Hill vs Spread Trustee Co Limited, creation of security

interest has been regarded as undervalued transaction.

57


Transactions defrauding creditors

• Sec 49- Corporate

▫ the transaction is an undervalued transaction under sub-

section (2) of section 45;

▫ such transaction was deliberately entered into by the

corporate debtor;

▫ the transaction was entered into:

(a) for keeping assets of the corporate debtor beyond

the

reach of any person who is entitled to make a claim

(b) to adversely affect the interests of such a person in

relation to the claim.

58


Extortionate Credit Transactions

• Sec 50 – Corporate & Sec 167 – Individuals

• What constitutes "extortionate"?

• Cannot presume that every regulated financial

services provider will necessarily be compliant with

either the law, or self-framed fair lending code

59


• Broad description of the transaction to be avoided

▫ Any transfer made to a certain creditor, surety or guarantor.

So as to put the recipient in a beneficial position in relation to

other creditors

▫ Gifts or transfer of property at a value significantly lower

than the consideration paid by the debtor.

▫ Any transaction deliberately intended.

to put the assets of entity beyond the reach

adversely affect the interest to any claim

▫ Any financial or operating debt on exorbitant terms.

60

Power of the RP or liquidator to seek avoidance and

reversal of transactions


Distribution of Assets: Order of Priority• Insolvency resolution process costs and the liquidation costs paid in full• debts which shall rank equally▫ debts owed to a secured creditor in the event such secured creditor has relinquished

security▫ workmen‟s dues for the period of 24 months preceding the liquidation commencement

date• wages and any unpaid dues owed to employees▫ other than workmen for the period of 12 monthspreceding the liquidation

commencement date• financial debts owed to unsecured creditors• dues which shall rank equally▫ amount due to the CG and the SGincluding the amount to be received on account of the Consolidated Fund of India and the

Consolidated Fund of a State, if any, in respect of the whole or any part of the period of 2years preceding the liquidation commencement date;

▫ debts owed to a secured creditor for any amount unpaid following the enforcement of security interest;

• any remaining debts and dues;• preference shareholders, if any; and• equity shareholders or partners, as the case may be.• from the proceedsFees payable to liquidator shall be deducted proportionately

payable to each class of aforementioned recipients

61


62

Distribution of Assets: Order of Priority• The section brings very important changes in the priority

of distribution.▫ First, it puts government dues, which, by several specific

statutes are put on the top of the waterfall, to a positionbelow unsecured lenders.

▫ Second, it distinguishes between financial creditors andoperational creditors, putting the former in priority over thelatter.

▫ Third, by putting the unrealized part of a secured creditor‟sclaim who enforces security interest outside liquidation, to aposition subordinated to unsecured creditors, it gives apositive temptation to secured creditors to join the queue inwinding up,and gain priority.


Critical question for Secured Creditor

• Whether to stay in liquidation proceedings, or stay out of liquidation?

▫ Creditors will have to take an early call on Secure Liquidation –Whether to Stay Out of Liquidation or Stay in

Staying out – secured creditor enforces security interest, forremaining claim, he is at par with unsecured lenders

Staying in - secured creditor relinquishes security interest. Assetbecomes part of the common pool. Secured creditor gains firstpriority out of all assets

▫ Decision to be based on:LTV ratio of the secured asset vs. LTV ratio of other free assets

of the entityRecovery rate depends on the choice

▫ Choice once made cannot be changed


Provisioning Implications of the Code

• Once an insolvency resolution application is filed▫ Prima facie, this is an indication of weakness in credit;

should warrant provisioning

• Once resolution application is sanctioned▫ Provisioning may be required based on the fair value

of the restructured facility

• Once company goes into liquidation▫ Deeper provisioning may be required looking at the

deficit on assets

64


Stage-wise Submission of Reports

• The liquidator shall prepare and submit to the AA

▫ sale report(s)

On sale of an asset

▫ minutes of consultation with stakeholders

▫ the final report prior to dissolution

67


Resolution Plan• Section 5 (26) defines “resolution plan” -

▫ a plan proposed by any person for insolvency resolution of

the corporate debtor as a going concern in accordance with

Part II

• Resolution plan is prepared by resolution applicants –

▫ Resolution applicant can be creditors of the corporate

debtor, prospective lenders, prospective investors, or any

other person

• Resolution plan shall be prepared on the basis of

information memorandum prepared by RP

68


Vertical comparison• Section 30(2) of the Code provides for essential

components in the resolution plan which calls for vertical

comparison

▫ Resolution plan must provide for –

Repayment of debts of operational creditors in such

manner as may be specified by the Board

Shall not be less that the amount to be paid to the operational

creditors in the event of liquidation of the corporate debtor under

section 53

• Vertical comparison means a comparison between a

creditor's entitlement in the resolution plan and in a

hypothetical liquidation

69


Duties of liquidator

• Make public announcement

▫ Within 5 days from appointment

• Verify the claims submitted▫ Within 30 days from the last date for receipt of claims

• File the list of stakeholders with AA▫ Within 45 days from the last date for receipt of claims

• Inform the secured creditor if a person is willing to buythe secured asset▫ Within 21 days of receipt of the intimation

• liquidate the corporate debtor▫ Within a period of 2 years

70


Liquidator's fee

• Fee payable to the liquidator shall form part of the

liquidation cost

• Liquidator shall be paid fees as decided by the

committee before a liquidation order is passed under

section 33(1)(a) and 33(2)

• In all other cases, liquidator shall be paid fees as

provided in next slide

71


Liquidator's fee

72


Tabulating Liquidation and Voluntary Liquidation Process under the IBC, 2016

S.No Particulars Part/Regulation Liquidation of Corporate Persons Voluntary Liquidation of Corporate

Persons

1 Sections applicable Both fall under Part II of

the Code on

INSOLVENCY

RESOLUTION AND

LIQUIDATION FOR

CORPORATE PERSONS

Chapter III

Sections 33-54

Chapter V

Section – 59

2 Offence and Penalties Chapter VII of Part II – on

Offences and Penalties

S 69 to 77 for Liquidation – for the penal

provision.

Applicable Chapter VII

3 Regulations Applicable and

w.e.f

IBBI (Liquidation Process) Regulations,

2016

W.e.f 15th December 2016

IBBI (Voluntary Liquidation Process)

Regulations, 2017

W.e.f 1st April 2017

[email protected] 14/12/2017

4 Number of Regulations 41 RegulationsSchedules I&III – Proof of ClaimsII – Books

46 Regulations

Schedules

I, II and III

5 Liquidation

Commencement Date

Defined under IBC code 2016

Section3(17) - "Liquidation

commencement date" means the date

on which proceedings

for liquidation commence in

accordance with section 33 or section

59, as the case may

be;

Insolvency Commencement Date( Sec

50, Sec 46, Sec 43, Sec 36, Date of the

Commencement of the Liquidation

(Sec 38), Liquidation Commencement

Date (Sec 53).

Definition of Insolvency

Commencement Date – Sec 3(12) of the

IBC Code 2016 - "insolvency

commencement date" means the date

of admission of an

application for initiating corporate

insolvency resolution process by the

Adjudicating

Defined under Regulation 2(1)© -

The date on which the proceedings for voluntary liquidation commence as per section 59(5) and Regulation 3(4)


6 Stakeholders Regulations

2(1)(k)

- “stakeholders” means the

stakeholders entitled to

distribution of proceeds

under section 53.

Regulations 2(1)(f) -“stakeholders” mean the stakeholders entitled to proceeds from the sale of liquidation assets under section 53.

7. Creditor’s Approval There is no question of

approval of creditors in a

regular liquidation process

from section 33 to 54, though it

can be initiated by them

Section 59 – Regulations Proviso to Regulation 3(1)© -Creditors representing 2/3rds of the value of debt shall approve within seven days from the date of passing of the resolution


8 Initiation of Liquidation

Process

Liquidation of a Corporate Person

Is Initiated under Section 33 of IBC,

2016 by an order of the

Adjudicating Authority

- When Resolution plan is not

received or

- When the Resolution Plan is

rejected

- Decision of the Committee of

Creditors to liquidate the

Corporate Debtor

- On Contravention of the

Resolution Plan approved by

AA, application to AA by those

whose interest is affected

Voluntary Liquidation Proceedings of a corporate person is initiated by a declaration, resolution, approval and information -Of a company given under Section 59 (3) of the IBC 2016-Other than a company under Regulation 3

9 Appointment of

Liquidator

Section 34 of the IBC, 2016

- Resolution Professional

appointed for CIRP under

Chapter II of Part II shall act as a

Liquidator

Resolution passed in the General

meeting for Voluntary liquidation and

appointment of the Liquidator


10 Replacement of

Liquidator

Under section 34(4) of the IBC, 2016

the AA replaces the liquidator on

two grounds

- The Resolution plan submitted

u/s 30 fails to meet the

requirement

- The board recommends

replacement of liquidator

No specific provision

11. Liquidator’s Fee Section 34(9) states that the

Liquidator’s fee shall be paid from

the proceeds of liquidation estate.

According to Regulation 4

- Fee agreed upon by the

Committee of Creditor before

Liquidation order passed under

33(1)(a) and 33(2). (Reg 4(2))

- Fee as a percentage of assets

realized in all other cases (Reg

4(3))

According to regulation 7 the liquidator remuneration will form part of Liquidation Cost


12 Powers and Duties of the

Liquidator

Section 35 of the IBC 2016 Section 35(1) (a) to (o) defines 15 duties

and powers of the Liquidator

Chapter III covering regulations 5-11

1. Reporting

2. Books to be maintained

3. Appointment of Professionals

4. Consultation with Stakeholders

5. Personnel to extend co-operation

6. Disclaimer of Onerous property

7. Extortionate Credit transactions

Chapter IV covering regulations8-14

1. Reporting

2. Books to be maintained

3. Appointment of Professionals

4. Consultation with Stakeholders

5. Extortionate Credit transactions

6. Public Announcement

13 Power of the Liquidator

to access information

Section 37 of the IBC 2016 Notwithstanding anything contained in

any other law for the time being in

force, the liquidator can access

information from

- an information utility

- credit information systems

- agency of Central, State or Local

Government

- Financial/Non- Financial information

utility

- Information systems for securities

- Database of the board

- Any other source specified by the

board

Same thing applicable for Voluntary

liquidation due to application of section

59(6)

114


14 Liquidation Estate Section 36 (1) to (4) – The

liquidator holds it in a

fiduciary capacity

Estate of the assets listed under section

36 mainly those on which it has

ownership rights. It also includes assets

that do not form part of the assets under

36(4) mainly assets owned by a third

party

Section 59 (6) - The provisions of

sections 35 to 53 of Chapter III shall

apply to

voluntary liquidation proceedings for

corporate persons with such

modifications as may benecessary.

15 Consolidation and

Verification of Claims

Section 38 & 39 of the IBC

2016

- The liquidator shall receive or collect

claims within 30 days from the date of

commencement of Liquidation

- Both financial and operational

creditors shall submit claims with

supporting documents

- Financial creditor (Form

- Claims can be withdrawn within 14

days from the date of submission

- The claims are verified and further

supporting evidence may be

requested by the liquidator

- Same provisions- Section 59(6)

- Claims shall be proved by the

stakeholder (Reg 15)

Following forms are submitted

- Operational Creditor Form B of

Schedule I (Reg 16)

- Financial Creditor Form C Schedule

I (Reg 17)

- Workmen and employees – Form D

of

- Schedule I (Reg 18)

- Other stakeholder Form E of

Schedule I

- The claimant shall bear the cost of

proving its claims

- Foreign Currency debts are

converted into Indian Rupees on

the liquidation commencement date

- The claims shall be verified within

30 days by the liquidator

- The liquidator shall prepare a list of

stake holders within 45 days from

the last date for receipt of claims


Difference between Part II and Part III of the Code


Cont….

[email protected]

CoC Meeting 7 days from the date of Constitution of CoC Nil

IM 14 Day from the date of Constitution of CoC Nil

Plan Resolution Plan Repayment plan

Notice of the Meeting 7 days 14 days

Adjournment of Meeting Next day 7 days

Publication Notice 5 days 10 days

Consolidation of Claims 30 days 7 days

List of Creditors 30 days 14 Days

Meeting of Creditors Nil 21 Days

14/12/2017 117

Cross Border Insolvency

Cross-border insolvency broadly covers three aspects:

1

Where foreign creditors have rights/claims over a debtor's assets in another jurisdiction where insolvency proceedings are underway;

2

• Where a debtor has branches/assets in several jurisdictions, including a jurisdiction other than where the insolvency proceedings are underway; and,

3

• Where a debtor entity is subject to insolvency proceedings simultaneously in one or more jurisdictions.


Cross Border resolution before Code

• Recognition of foreign insolvency proceedings is one of the foremostobjectives of any legal regime that seeks to address cross-borderinsolvency

1

2

3

• Indian law recognises foreign judgments and foreign decrees of some reciprocating territories, such as the UK and Singapore.

• Section 13 and 44A of the Code of Civil Procedure, 1908.

• No recognition has been accorded to foreign proceedings, including insolvency-related proceedings, such as reorganisations.


Cross Border Insolvency & IBC, 2016

A liquidator is empowered to take custody/control of and sell the assets and property (including those situated outside India) of a corporate debtor. (Section 35(1)(b) and (f) of the Code)

Enabling mechanism under which the central government of India may enter into reciprocal agreements with the governments of any country for the purpose of enforcing the provision of the Code (Sec 234)

In the course of the insolvency/bankruptcy proceedings, a resolution professional/ liquidator/bankruptcy trustee may make an application to the relevant adjudicating authority seeking evidence or action in relation to assets of the debtor/guarantor in a country with whom India has entered into a reciprocal arrangement. (Sec 235)


Institutional Entities under the IBC, 2016

Insolvency and Bankruptcy Board of India (IBBI)

Adjudicating Authority (AA) – NCLT , NCLAT, DRT, DRAT, SC

Insolvency Professionals Agencies (IPA)

Insolvency Professionals (IP)

Information Utilities (IU)[email protected] 14/12/2017 121

Insolvency Professional

A person enrolled u/s 206 with an insolvency professional

agency as it’s MEMBER

And Registered with the Board

u/s 207.


Transfer of Proceedings from High Court to Tribunal

COMPANIES (TRANSFER OF PENDING PROCEEDINGS) RULES, 2016 clarifies as follows

• Winding up proceedings pending before High Court (HC) on account of inability to pay debts

• All proceedings pending before HC as on 15th December, 2016

• And the notice for which has not been served on the respondent

• Shall stand transferred to the respective Bench of the Tribunal having jurisdiction

• And shall be dealt with according to the PROVISIONS OF THE CODE

• Winding up proceedings pending before High Court (HC) on account of other than inability to pay debts

• All proceedings pending before HC as on 15th December, 2016

• And the notice for which has not been served on the respondent

• Shall stand transferred to the respective Bench of the Tribunal having jurisdiction

• And shall be dealt with according to the provisions of the COMPANIES ACT, 2013


Transfer of Proceedings from High Court to Tribunal…

• Winding up proceedings pending before High Court (HC) relating to Voluntary Winding Up

• All proceedings pending before HC as on 1st April, 2017

• Shall continue to be dealt with by the High Courts

• In accordance with the provisions of the COMPANIES ACT, 1956

Winding up Proceedings

transferred to NCLT

Inability to Pay Debt IBC, 2016

Other than Inability to Pay Debt

Companies Act, [email protected] 14/12/2017 124

Adjudicating Authority (AA)

AA

For Corporate Persons

Part II

NCLT

For Partnerships and Individuals

Part III

Debt Recovery Tribunal


Adjudicating Authority for corporate persons

• National Company Law Tribunal▫ having territorial jurisdiction over the place where the registered office of the

company is located• Appellate Authority is the National Company Law Appellate Tribunal▫ Appeal to be filed within 30 days▫ Extension of maximum 15 days allowed, provided there is "sufficient cause"

• Appeal to Hon’ble Supreme Court▫ Against orders of NCLAT on a question of law▫ Within 45 days of receipt of NCLAT's order

• Jurisdiction of any Civil Court of authority barred• Strict timelines for NCLT/NCLAT▫ Reasons to be recorded for not passing orders within time limits specified in the

Code▫ Non-obstante provisions – override the Companies Act, 2013▫ President of NCLT/Chairperson of NCLAT may extend the period specified

under the Code to a maximum of 10 days – reasons to be recorded

103


Adjudicating Authority for individuals and Firms

• The Debt Recovery Tribunal (constituted under the RDDBFI Act)▫ having territorial jurisdiction over the place where the individual debtor actually

and voluntarily resides or carries on business or personally works for gain• Appellate authority is the Debt Recovery Appellate Tribunal▫ Appeal to be filed within 30 days▫ Extension of maximum 15 days possible, provided there is "sufficient cause"

• Appeal to Supreme Court▫ Against an order of DRAT(on question of law), within 45 days▫ Extension possible for further 15 days, in case there is "sufficient cause"

• Jurisdiction of any Civil court or authority barred• Abidance to timelines▫ In case order is not passed by DRT/DRAT within specified timelines, reasons shall

be recorded in writing▫ Chairperson of the DRAT may extend the timelines▫ Extension limits not specified, unlike in the case of NCLT/NCLAT

104


Resolution Professional / Liquidator

“Resolution Professional", for the purposes of this Part, means

• an insolvency professional

• appointed to conduct the corporate insolvency resolution process and

• includes an interim resolution professional

“Liquidator" means

• an insolvency professional appointed as a liquidator

• in accordance with the provisions of Chapter III or Chapter V of this Part.


Insolvency Professional Agency

“Insolvency Professional Agency" means anyperson registered with the Board under section 201as an insolvency professional agency”

• Indian Institute of Insolvency Professional of ICAI –

• Web site www.iiipicai.in

• Other IPAs www.icsiipa.com

• www.ipaicmai.in


http://www.iiipicai.in/

http://www.icsiipa.com/

Information Utility

“ Information utility means a person who is registered with the Board under section 210”

National E-Governance Services Limited- Information Utility registered with IBBI

Role and Responsibility

Create and store financial information.

Accept electronic submission of financial information.

Get the information authenticated before storing.

Provide information.

Publish statistical information.


Report of the Technical Committee on Information Utility: 16th August, 2017

• 14 topics of the Technical Standards out of the 18 listed under the Regulation 13(2) under Chapter IV of the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017 (IU Regulations):

• Section I Registration of users (Regulation13(2)(c))

• Section I Identification and Verification of Persons (13(2)(f))

• Section II Unique identifier for each record and each user (13(2)(d))

• Section III Submission of information (13(2)(e))

• Section IV Authentication of information (13(2)(g))

• Section IV Verification of information (13(2)(h))

• Section V Standard terms of service (13(2)(b))


Cont….

• Section VI Consent framework for providing access to information to third parties (13(2)(j))

• Section VII Data integrity (13(2)(i))

• Section VII Security of system (13(2)(k))

• Section VII Security of information (13(2)(l))

• Section VIII Risk management framework (13(2)(m))

• Section IX Preservation of information (13(2)(q))

• Section IX Purging of information (13(2)(r))

Technical Standards related to remaining four topics under Regulation 13 will be notified separately.


Appeals – Sec 61Points for discussion Section 10FQ of the Co

Act, 1956

Section 421 of theCompanies Act, 2013

Section 61 of the Code

The authority the order

of which is appealable

NCLT NCLT NCLT

When an appeal cannot

be filed

Where the order was

made by NCLT with the

consent of parties.

Where the order is made

by NCLT with the consent

of parties.

No such provision

Who can file an appeal? Any person aggrieved Any person aggrieved Any person aggrieved

Appellate authority NCLAT NCLAT NCLAT

Time-limit for filing an

appeal

Within 45 days Within 45 days Within 30 days

Extension of time-limit No limit specified,

though there is a

provision for extension

Not exceeding 45 days Not exceeding 15 days

83


Appeals – Sec62Points of comparison Section 10GF of the

Companies Act, 1956Section 423 of theCompanies Act, 2013

Section 62 of the Code

Who can file an appeal? Any person aggrieved by

the order of NCLAT

Any person aggrieved by

the order of NCLAT

Any person aggrieved by

the order of NCLAT

Appeal may be made

before

Supreme Court Supreme Court Supreme Court

Time-limit for filing an

appeal

Within 60 days Within 60 days Within 45 days

Extension of time-limit Not exceeding 60 days Not exceeding 60 days Not exceeding 15 days

84


Transitional Provisions

Until the Board is constituted or a financialsector regulator is designated under section195 & section 244

• Shall be exercised by the CentralGovernment

Central Government may by regulation provide for

• Recognition of persons having qualification and experience in the field of finance law, management or insolvency as insolvency professional/ agencies

• Recognition of persons with technological, statistical, and data protection capability as information utilities

• Conduct of the CIR, insolvency resolution process, liquidation process, FSP and bankruptcy process


Case Updates

Supreme Court

Uttara Foods And Feeds P Ltd Versus Mona Pharmachem-13th Nov, 2017

Chitra Sharma & Ors. Vs. Union of India & Ors.

Alchemist Asset Reconstruction Company L. Vs. Hotel Gaudavan P. L.&Ors.- 23 Oct2017

Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited- 21 Sep 2017

Surendra Trading Company Vs. Juggilal Kamlapat Jute Mills Co. Ltd.- 19 Sep 2017

Innoventive Industries Ltd. Vs. ICICI Bank & Anr. Civil Appeal Nos.8337-8338 of 2017 -31 Aug 2017

Mothers Pride Dairy India Pvt. Ltd. Vs Portrait Advertising and Marketing Pvt. Ltd. -28th July 17


http://ibbi.gov.in/MothersPrideDairyIndiaVsPortraitAdvertising9286_2017SP.pdf

Supreme Court

Neelkanth Township and Construction Pvt. Ltd. Vs. Urban Infrastructure Trustees Ltd.- 23 Aug 2017

Lokhandwala Kataria Construction Private Limited Vs. Nisus Finance and Investment Managers LLP-24th July 17

Falcon Tyres Ltd. Vs Edelweiss Asset Reconstruction Co. Ltd. Writ Petition No. 16486-2017 (GM-Res)- 5th June 2017

New York Mellon London Branch Vs Zenith Infotech Ltd. -21st Feb 2017


http://www.ibbi.gov.in/BFalconTyresLtd.pdf

http://www.ibbi.gov.in/ABankofNewYorkMellonLondonBranch.pdf

Case Updates

High Court

In the matter of Sanjeev Shriya- 06 Sep 2017

Essar Steel India Ltd. Vs. RBI-17th July 17

Uttam Galva Steels Ltd Vs UOI and Ors- 20th April 17

Sree Metaliks Ltd and Anr vs UOI- 07th Apr 17

Innoventive Industries Limited vs UOI and Ors- 23 Feb 17


Case UpdateNCLAT

CKPL Steels Pvt Ltd Vs. Ashok Magnetics Ltd - 05 Dec 2017

Sobha Limited Vs. Pancard Clubs Ltd.- 04 Dec 2017

Steamline Industries Ltd. Vs. Tecpro Systems Ltd. - 04 Dec 2017

Sysco Industries Ltd. Vs. Ecoplast Ltd. - 31 Aug 2017

Aditya Kumar Jajodia Vs. Srei Infrastructure Finance Ltd.- 30 Nov 2017

Amod Amladi Vs. Sayali Rane & Anr.- 30 Nov 2017

Annapurna Infrastructure Pvt. Ltd. and Anr. Vs. SORIL Infra Resources Ltd. - 29th Aug 2017

Bhash Software Labs Pvt. Ltd. Vs. Mobme Wireless Solutions Ltd. 29th Aug 2017

Design Worx Infrastructure India Pvt. Ltd. Vs Premier Restaurants Pvt. Ltd. –01.08.2017

Shilpi Cable Technologies Ltd. Vs Macquarie Bank Ltd. - 01.08.2017

Inox Wind Ltd. Vs Jeena & Co.- 28.07.2017


http://ibbi.gov.in/DesignWorxInfrastructureIndiaPvtLtdVsPremier73of2017.pdf

http://ibbi.gov.in/ShilpiCableTechnologiesVsMacquarieBank101102of2017.pdf

NCLAT

Rubina Chadha & Anr. Vs AMR Infrastructure Ltd.- 21.07.2017

Unimark Remedies Ltd. Vs Ashok Alco Chem Ltd.-21.07.2017

Nikhil Mehta and Sons Vs AMR Infrastructure Ltd.-21.07.2017

Macquaire Bank Limited. Vs Uttam Galva Metallics Limited.-17.07.2017

M/s. Hotel Gaudavan Pvt. Ltd. Vs Alchemist Asset Reconstruction Co. Ltd.- 17.07.2017

KKV Naga Prasad Vs Lanco Infratech Ltd.- 13.07.2017


Case update NCLT

Principal Bench

• M/s. India bulls Housing Finance Ltd Vs. Deltronix India Ltd-24.11.2017 u/s 7

• M/s.Central Bank of India VS Moser Bear Solar Ltd- 14.11.2017 u/s 7

• M/s. Alchemist Asset Reconstruction Co. Ltd VS Moaser Bear India Ltd-14.11.2017 u/s 7

• M/s. ACPC Enterprises VS Affinity Beauty Salon Pvt ltd.--10.11.2017 u/s 7

• M/s. Central Bank of India VS NCML Industries Ltd--07.11.2017 u/s 7

• M/s.ICICI Bank ltd VS Tirupati Inks Ltd- 02.11.2017 u/s 7

• M/s. Axis Bank Ltd. And DBS Bank Ltd Vs. Edu Smart Services Pvt. Ltd.-27.10.2017 u/s 7

• Free Culture Apparels Pvt. Ltd- 01 Sep 2017 u/s 9.


http://nclt.gov.in/Publication/Principal_Bench/2017/Others/219.pdf







NCLT-Principal Bench

• M/s.State Bank of India Vs Bhushan Steel Limited-26.07.2017 u/s 7

• M/s S2 Infotech International Ltd. VS Inrtarvo Technollgies Pvt. Ltd.-14.07.2017 u/s 9

• M/s Penugodna Saitsh Babu VS Amarpali Biotech India Pvt. Ltd.-04.07.2017 u/s 9

• M/s. Macquarie Bank Ltd. V/s. M/s. Shilpi Cable Technologies Ltd.-24.05.2017 u/s 9


http://nclt.c2k.in/OtherNCLT/Publication/principal_bench/2017/Others/67.pdf



Case Update

• Other Benches:

• M/s. Rudra Mercantile Pvt. Ltd. V. Nugen Machineries Ltd.-07.12.2017 u/s 9

• M/s. Nikhil Intermediates Pvt Ltd v. Vintex Rubber Pvt Ltd--01.12.2017 u/s 9

• M/s. Dhirajlal Vrajlal Selani v. SBI- 01.12.2017 u/s 10

• M/s. L&T Finance Ltd. V. Logix Express Pvt. Ltd.- 29.11.2017 u/s 7

• M/s. Globe Express Services (Overseas Group) Limited & Anr Vs MM Cargo Container Line Private Limited- 27.07.2017 u/s 9

• M/s. Inox India Pvt Lt.d V. JBF Petrochemicals Ltd.- 28.11.2017 u/s 9

• M/s. Shree RAdhe Industries Ltd.-04.12.2017 u/s 7

• M/s. Nvento Foods Technologies Pvt. Ltd-29.11.2017 u/s 7

• M/s. Tehri iron and Steel Casting Ltd. Vs Punjab National Bank- 27.07.2017 u/s [email protected] 14/12/2017 143

http://nclt.c2k.in/OtherNCLT/Publication/New_Delhi_Bench/2017/Others/16.pdf

http://nclt.gov.in/Publication/Ahmedabad_Bench/2017/Others/627.pdf






http://nclt.gov.in/Publication/Mumbai_Bench/2017/Others/1994.pdf

http://nclt.gov.in/Publication/Mumbai_Bench/2017/Others/2025.pdf


NCLT-other benches

• M/s Aggarwal Elastics through Vs Ms Anu Elastics Pvt. Ltd.- 25.07.2017 u/s 9

• M/s State Bnak Of India Vs M/s. Garg Inox Ltd.- 25.07.2017 u/s 7

• M/s Maheshawar Textiles Vs. Zapp India Ltd.- 20.07.2017 u/s 9

•

M/s. Agricore Commodities Pvt. Ltd. v. Anil Ltd.- 25.07.2017 u/s 9

• M/s.Rajesh Lohia, IRP Vs. Bhagwan Motors Pvt. Ltd. & Others- 21.07.2017 u/s 9

• M/s. SREI Infrastructure Finance Ltd. Vs. K.S.Oils Ltd.- 21.07.2017 u/s 7

• M/s. Nagai Power Pvt. Ltd. Vs. GEI Industrial Systems Ltd.- 20.07.2017 u/s 9

• M/s. Spectrum Trimpex Ltd. v Anil Ltd.- 20.07.2017 u/s 7





http://nclt.c2k.in/OtherNCLT/Publication/Ahmedabad_Bench/2017/Others/153.pdf





Case Update

IBBI: In the matter of IP registration

3 cases filed till now

Judgement dated: 02 Mar 2017, 14 Mar 2017, 29 Jun 2017

The name of the applicant are not disclosed

• the applicant had submitted an application under regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 seeking certificate of registration as an Insolvency Professional


The Banking Regulation (Amendment) Act, 2017• The Banking Regulation (Amendment) Ordinance, 2017-Notified on 4th

May, 2017

• dealing with bank’s stressed assets

• The two new Sections has been inserted (viz. 35AA and 35AB)

• It enables:

1) RBI is authorised to issue directions to any bank to initiate insolvency resolution process in respect of a default under the Insolvency and Bankruptcy Code, 2016.

2) The RBI has also been empowered to issue other directions for resolution, and appoint or approve for appointment, authorities or committees to advise banking companies for stressed asset resolution.

• The Banking Regulation (Amendment) Bill, 2017 was introduced in Lok Sabha on 24.07.2017 and passed on 03.08.2017

• Passed in Rajya Sabha on 10.08.2017 and receives President assent-25/08/2017

[email protected]

14/12/2017 146

RBI press release-May 22, 2017

• It was clarified that a corrective action plan could include flexible restructuring, SDR and S4A.

• With a view to facilitating decision making in the JLF, consent required for approval of a proposal was changed to 60 percent by value instead of 75 percent earlier, while keeping that by number at 50 percent.

• Banks who were in the minority on the proposal approved by the JLF are required to either exit by complying with the substitution rules within the stipulated time or adhere to the decision of the JLF

• Participating banks have been mandated to implement the decision of JLF without any additional conditionality.

• The Boards of banks were advised to empower their executives to implement JLF decisions without further reference to them

• It was made clear to the banks that non-adherence would invite enforcement actions.

• On 22 May, 2017, the RBI also announced that it will form a committee to recommend cases for the IBC process. Accordingly, Internal Advisory Committee (IAC) was formed on 13 June, [email protected]

14/12/2017 147

IAC Recommendation-(RBI Press release 13 June, 2017) • 7 Paragraphs are there

• The IAC also arrived at an objective, non-discretionary criterion for referring accounts for resolution under IBC. In particular, the IAC recommended for IBC reference all accounts with fund and non-funbased outstanding amount greater than ₹ 5000 crore, with 60% or more classified d as non-performing by banks as of March 31, 2016.

• The IAC noted that under the recommended criterion, 12 accounts totalling about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC.

• As regards the other non-performing accounts which do not qualify under the above criteria, the IAC recommended that banks should finalise a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC.

• The Reserve Bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT).


12 cases RBI identifies for insolvency proceedings• 1. Essar Steel

•2. Monnet Ispat & Energy

• 3. Bhushan Steel

• 4. Bhushan Power & Steel

• 5. Era Infra Engineering

• 6. ABG Shipyard

• 7. Jaypee Infratech

• 8. Amtek Auto

• 9. Alok Industries

• 10. Lanco Infratech

• 11. Electrosteel Steels

• 12. Jyoti [email protected] 14/12/2017 149

Essar Steel case

• Total Debt- Rs 45,000 crore

• Cases filed at Ahmedabad Bench of NCLT

• M/s.Standard Chartered Bank Ltd vs Essar Steels Ltd- u/s 7- 2.08.17

• M/s.State Bank of India vs Essar Steels Ltd- u/s 7- 2.08.17

• Two separate applications were filed. In case of SCB direction of RBI is not applicable. The direction given to SBI by RBI is held to be valid by High court.

• Name of IRP was proposed by both. IRP proposed by SBI is to be appointed as the value of debt of JLF is far more than the value of SCB.

• IRP-Shri Satish Kumar Gupta




Monnet Ispat & Energy-SBI vs. Monnet Ispat& Energy

• Debt- Rs 1539.33 crore

• Mumbai bench

• Filed u/s 7

• Pronounced on 18.07.17

• Debt due to: State Bank of Patiala, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore

• Since State Bank of Patiala, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore have been merged with State Bank of India, with effect from 1.4.2017, the resulting bank, i.e. State Bank of India has filed this Petition for initiation of Insolvency Resolution Process on the ground that this Debtor defaulted to repay 1539,33,72,303.63 was due outstanding as on 21.6.2017.

• Petition is admitted

• IRP- Mr. Sumit Binani


Bhushan Steel Case-M/s.State Bank of India Vs Bhushan Steel Limited

• Case filed at Principal Bench

• Debt-4390.75 Crore in Indian Currency

• 49,684,877-towards foreign currency loan


• this petition is admitted



Bhushan Power & Steel Case-Punjab National Bank vs. Bhushan Power & Steel-

• Case filed at Principal Bench u/s 7

• defaulted amount under the Term Loan Agreement I as on 31.05.20 17 is Rs. 17,04,00,000/ -

• Term Loan Agreement II , the defaulted amount is claimed to be

• -Rs.34 ,73,00,000/ -

• Pronounced on 26 .07.2017

• this petition is admitted

• IRP- Mr. Mahender Kumar Khandewal


ABG Shipyard-M/s. ICICI Bank Ltd. vs. ABG Shipyard Ltd

• Case filed at Ahmedabad bench u/s 7

• Total debt- 4291.90 crores


• Petition is admitted

• IRP-Mr. Sundares Bhatt


Amendment in press release issued by RBI on 13th June. 2017

• Reserve Bank of India’s Circular dated June 13, 2017 directing National Company Law Tribunal (NCLT) to accord priority to the cases of 12 defaulters identified.

• The third line of paragraph no. 5 of the Press Release, which reads as follows: Such cases will be accorded priority by the National Company Law Tribunal (NCLT).... stands deleted.


Press release challenged by Essar Steel India Ltd

• The Gujarat High Court in Essar Steel India Ltd case, said that RBI has to be careful while issuing press releases; it must be in consonance with the Constitutional Mandates, based upon sound principles of Law, but in any case should not be in the form of advise, guidelines or directions to judicial or quasijudicial authorities in any manner what so ever.

• RBI observed that:

• “such cases will be accorded priority by the National Company Law Tribunal…” was a serious issue, as “nobody is entitled or empowered to advise, guide or direct the judicial or quasi-judicial authority in any manner whatsoever”.


SEBI Requires Disclosure of Loan Defaults

• SEBI issued a Circular dated July 18, 2017 by which it required listed banks to disclose to the stock exchanges divergence in the asset classification and provisioning in certain two circumstances, viz. where

• (i) the additional provisioning requirements assessed by the Reserve Bank of India (RBI) exceed 15 percent of the published net profits after tax for the reference period; or

• (ii) the additional gross non-performing assets (NPAs) identified by the RBI exceed 15 percent of the published incremental gross NPAs for the reference period.

• Circular also provides for the format in which the above disclosures are to be made

[email protected]

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http://www.sebi.gov.in/legal/circulars/jul-2017/disclosure-of-divergence-in-the-asset-classification-and-provisioning-by-banks_35339.html

SEBI circular dated-4th August 2017

Disclosures by listed entities of defaults on payment of interest/ repayment of principal amount on loans from banks / financial institutions, debt securities, etc.

• The disclosures shall be made to the stock exchanges when the entity has defaulted in payment of interest / instalment obligations on debt securities (including commercial paper), Medium Term Notes (MTNs), Foreign Currency Convertible Bonds (FCCBs), loans from banks and financial institutions, External Commercial Borrowings (ECBs) etc.

• The entities shall make disclosures within one working day from the date of default at the first instance of default in the format specified

• The disclosure requirements take effect from October 1, 2017.


Removal of difficulties: the Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 2017

• Notified on 24th May, 2017

• The following proviso shall be inserted Section 4(b) after the second proviso of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003-

“Provided also that any scheme sanctioned under sub-section (4) or any scheme under implementation under sub-section (12) of section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall be deemed to be an approved resolution plan under sub-section (1) of section 31 of the Insolvency and Bankruptcy Code, 2016 and the same shall be dealt with, in accordance with the provisions of Part II of the said Code:

Provided also that in case, the statutory period within which an appeal was allowed under the Sick Industrial Companies (Special Provisions) Act, 1985 against an order of the Board had not expired as on the date of notification of this Act, an appeal against any such deemed approved resolution plan may be preferred by any person before National Company Law Appellate Tribunal within ninety days from the date of publication of this order.”[email protected] 14/12/2017 159

Insolvency Professionals to act as Interim Resolution Professionals (Recommendation) Guidelines, 2017

• Issued on 25th May, 2017

Provides:

• Who can act as IRP?

• Determination of Vicinity

• Expression of Interest of IPs in Form A

• Eligible IPs

• Process of selection of IP


Professional Opportunities

1. Studying the business of the Company and the various business verticals in which it operates.

2. Studying and understanding the entire debt profile of the Company with specific focus on the debt owed to the financial creditor, operational creditor and other stake holders.

3. Analysing the financial statements of the company for the last 3 years.

4. Preparation and filing of the Corporate Insolvency Resolution Process Application with the Adjudicating Authority.

5. Appointing the Interim Resolution Professional / Resolution Professional in consultation with the clients.

6. Assisting on Public Announcement as required under the Code.

7. Advising on the preparation of Information Memorandum and Statement of Affairs as may be desired by the Insolvency Professional in terms of the code.


Professional Opportunities

8. Studying the sanction letters and the correspondences with the financial creditors, operational creditors, committee of creditors and Insolvency and Bankruptcy Board of India during the Corporate Insolvency Resolution Process.

9. Assisting the client in all correspondences with the Lenders, Committee of Creditors, Corporate, NCLT, NCLAT and IBBI.

10. Assisting the client in appointing the Registered Valuers, Legal and other Professionals.

11. Reviewing the Minutes of meeting of Committee of Creditors and any other Meetings of similar nature by creditors and advising the Company on the contents therein.

12. Assisting the Company in evolving strategy from Legal/ financial point of view in the meeting of Committee of Creditor/ various other similar meeting with creditors.

13. Exploring the various available restructuring options. Conceptualize and thereafter strategize a best fit restructuring options or a combination of two or more options for the best possible fast recovery of SEFL dues.

14. Preparation of the financial model and a Resolution Plan based on the mutually agreed commercial viable financial structure.


Professional Opportunities15. Meeting, conference and discussion with the Insolvency Professional on the resolution plan

and making the necessary changes as suggested therein.

16. Drafting, settling and filing all representations, petitions, replies, rejoinders and all other such pleading as may be necessary before the Adjudicating Authority and appearances for hearing before the Adjudicating Authority.

17. Conferences, consultations, legal opinions and advice etc. with respect to any issues relating to proceeding under the code.

18. Filing and defending of any Applications which may be filed by the company or against the company with NCLT/ NCLAT.

19. Performing all Duties of an Interim Resolution Professional/ Resolution Professional by the Partner/ Director/ Empaneled Resolution Professionals in their individual capacity.

20. Any other assignment under Insolvency and Bankruptcy Code 2016.

• An opportunity of internship to students who wish to pursue a professional career in insolvency, liquidation, bankruptcy or any other related field.


How to pass Limited Insolvency Examination

• Be optimistic /use subconscious mind

• Read from bare acts /rules/regulations

• Use memory techniques

• Discuss with peers

• Read on whole syllabus

• Read questions attentively –see what is asked

• Attempt all questions

• Appear again with renewed enthusiasm


Useful websites

• www.mca.gov.in

• www.ibbi.gov.in

• www.insol.org

• www.insolindia.com

• www.iiipicai.org

• www.icsiipa.com

• www.ipaicmai.in

• www.insolvencyprofessionals.org.in


http://www.mca.gov.in/

http://www.ibbi.gov.in/

http://www.insol.org/

http://www.insolindia.com/

http://www.iiipicai.org/

http://www.icsiipa.com/

http://www.ipaicmai.in/

[email protected]

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The Principle of Wilfredo pareto –French Economist




How to master the subject• Buy all books available in market

• Read the act , rules, regulations, BLRC report , websites

• Repealed laws, allied laws

• Be positive, have time bound goal

• Increase rapport with authors, speakers and regulators

• Give observations on draft regulations

• Attend conferences & seminars

• Visit tribunals and DRTs

• Discuss with peers

• Address programmes

• Be a life time [email protected] 14/12/2017 170

How to Develop Practice

1. Make your presence felt

2. Participate in seminars / programme as speakers, panelists, querists

3. Exchange visiting cards

4. Make website / use social media

5. Write article, books

6. Give suggestions to ministry, regulator, trade bodies

7. Make network / joint venture in different areas


Invitation to participate in learning exercise

• Co author of books

• In house Training

• Consultancy areas


[email protected]

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Documents

Dr. Rajkumar S. Adukia Chairman Competent Insolvency ...drrajkumaradukia.com/image/Dr_adukia_insolvency_ppt09122017.pdf · Presentation Agenda • The need for an Insolvency and Bankruptcy