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INSOLVENCY PROFESSIONAL AGENCY OF INSTITUTE OF COST ACCOUNTANTS OF INDIA

INSTITUTE OF COST ACCOUNTANTS OF INDIA CMA BHAWAN, 3, INSTITUTIONAL AREA

4TH FLOOR, LODHI ROAD NEW DELHI- 110003

Fortnightly Bulletin: 01.04.2017-15.04.2017

“While the Challenges are great, so are the opportunities- Bill Ford”

Dear Professional Colleagues,

As we are aware that the “Insolvency and Bankruptcy Code, 2016” (IB 2016) is a big boost to Ease of

Doing Business in India and would facilitate investment leading to higher GDP and economic

development. It will also give a quantum leap to the functioning of the credit market and would take

India from among relatively weak insolvency regimes to becoming one of the world's best insolvency

regimes. IBC 2016 provides for time bound Resolution Process for Corporate Persons, Individuals and

Partnership Firms. It is built on intuitional pillars viz. Insolvency Professionals, Insolvency Professional

Agencies, Information Utilities, Adjudicating Authorities (NCLT, NCLAT, DRT, DRAT) and Insolvency and

Bankruptcy Board of India.

INSTITUTIONS UNDER THE IBC-2016

Insolvency and Bankruptcy Board of India (IBBI)

Information Utilities (IUs) Insolvency Professional Agencies (IPAs)

Insolvency Professionals (IPs)

Insolvency Professionals Entities

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The Insolvency Professional Agency of Institute of Cost Accountants of India (IPA ICAI), a section 8

company incorporated under the Companies Act 2013 has been promoted by the Institute of Cost

Accountants of India on 30th November 2016 to enrol and regulate Insolvency Professionals (IPs) as its

members in accordance with provisions of the Insolvency and Bankruptcy Code 2016, Rules, Regulations

and Guidelines issued thereunder.

As per the Regulations issued by Insolvency and Bankruptcy Board of India and Bye-Laws of the Agency,

the enrolment is open to professionals (Cost Accountants, Chartered Accountants, Company Secretary,

Advocates and Graduate who are having experience in management. [Please refer Regulation 5 of

Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations 2016].

The above enrolment by Insolvency Professional Agencies shall not discriminate on the grounds of

religion, race, caste, gender, place of birth or professional affiliation.

Vide S.O. 3569(E) dated 1st December 2016, clause (b) of section 4 of the Board for Industrial and

Financial Reconstruction (BIFR) repealed and new Profession of “Insolvency Professionals” has taken

birth on 1st December 2016.

Ministry of Corporate Affairs vide G.S.R. 1119(E) dated December 07, 2016 has notified, Companies

(Transfer of Pending Proceedings) Rules, 2016. A brief summary of these Rules are provided below:

S.No. Particulars Explanation

1. Transfer of pending

proceedings relating to cases

other than Winding up

Effective Date: 15th

Dec16

All proceedings under the Act, including proceedings

relating to arbitration, compromise, arrangements and

reconstruction, other than proceedings relating to winding

up on the date of coming into force of these rules shall

stand transferred to the Benches of the Tribunal exercising

respective territorial jurisdiction:

Provided that all those proceedings which are reserved for

orders for allowing or otherwise of such proceedings shall

not be transferred.

Transfer of Pending Cases

Repealing of BIFR and Insolvency Professionals

Insolvency Professional Agency of Institute

2. Pending proceeding relating to

Voluntary Winding up

All applications and petitions relating to voluntary winding

up of companies pending before a High Court on the date

of commencement of this rule, shall continue with and

dealt with by the High Court in accordance with provisions

of the Act.

3. Transfer of pending

proceedings of Winding up on

the ground of inability to pay

debts

(1) All petitions relating to winding up under clause (e) of

section 433 of the Act on the ground of inability to pay its

debts pending before a High Court, and where the petition

has not been served on the respondent as required under

rule 26 of the Companies (Court) Rules, 1959 shall be

transferred to the Bench of the Tribunal established under

sub-section (4) of section 419 of the Act, exercising

territorial jurisdiction and such petitions shall be treated as

applications under sections 7, 8 or 9 of the Code, as the

case may be, and dealt with in accordance with Part II of

the Code:

Provided that the petitioner shall submit all information,

other than information forming part of the records

transferred in accordance with Rule 7, required for

admission of the petition under sections 7, 8 or 9 of the

Code, as the case may be, including details of the proposed

insolvency professional to the Tribunal within sixty days

from date of this notification, failing which the petition shall

abate.

(2) All cases where opinion has been forwarded by Board

for Industrial and Financial Reconstruction (BIFR), for

winding up of a company to a High Court and where no

appeal is pending, the proceedings for winding up initiated

under the Act, pursuant to section 20 of the Sick Industrial

Companies (Special Provisions) Act, 1985 shall continue to

be dealt with by such High Court in accordance with the

provisions of the Act.

4. Transfer of pending

proceedings of Winding up

matters on the grounds other

than inability to pay debts

All petitions filed under clauses (a) and (f) of section 433 of

the Companies Act, 1956 pending before a High Court and

where the petition has not been served on the respondent

as required under rule 26 of the Companies (Court) Rules,

1959 shall be transferred to the Bench of the Tribunal

exercising territorial jurisdiction and such petitions shall be

treated as petitions under the provisions of the Companies

Act, 2013 (18 of 2013).

5. Transfer of Records Pursuant to the transfer of cases as per these rules the

relevant records shall also be transferred by the respective

High Courts to the National Company Law Tribunal Benches

having jurisdiction forthwith over the cases so transferred.

6. Fees not to be paid Notwithstanding anything contained in the National

Company Law Tribunal Rules, 2016, no fee shall be payable

in respect of any proceedings transferred to the Tribunal in

accordance with these rules.

Chapter II (Section 6 to 32) of IBC 2016 deals with the Corporate Insolvency Resolution Process

(CIRP). As per Section 6 of IBC 2016, where any corporate debtor commits a default, a financial

creditor (section 7), an operational creditor (section 9) or the corporate debtor itself may

initiate corporate insolvency resolution process.

Corporate Insolvency Resolution Process CIRP

o can initiate CIRP ection Application to C T

a Financial Creditor ection perational Creditor ection

c Corporate e tor ection

THE PROCEDURE FOR INITIATING THE CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP) UNDER

THE PROVISIONS OF THE CODE IS EXPLAINED BELOW:

Financial Creditor/Operational Creditor or Corporate Debtor as the case may be, initiate the CIRP by

application to NCLT under section 7 [Financial Creditor], 9 [Operational Creditor] and 10 [Corporate

Applicant] respectively.

• Financial Creditor on Default and operational Creditor after ten days from the date of delivery of demand notice can initiate CIRP.

• A Financial Creditor and Corporate Debtor shall propose the name of IRP and Operational Creditor may propose the name of IRP. Eligibility of IRP shall be as per Reg. 3 of IBBI (IRP for Corporate Persons) Regulations 2016 dated 15.12.16

• NCLT within 14 days of receipt of application by order admit or reject application(before rejecting* give notice to rectify the defect within 7 days of receipt of notice)

*Grounds of rejection – default has not been occurred or any disciplinary proceedings against the proposed resolution professional by financial creditor or corporate applicant as the case may be.

Intimation of admission or rejection to be given by NCLT within seven days of admission or rejection.

NCLT to declare Moratorium, appoint Interim Resolution Professional (IRP) for a term not exceeding thirty days from the date of appointment and cause public announcement.

Public announcement by IRP shall be not later than 3 days from the date of his appointment. Public announcement shall contain the information, such as - name and address of the corporate debtor under the CIRP, name of the authority with which corporate debtor is registered, the last date for submission of claims, which shall be 14days from date of appointment of IRP etc. [Refer Schedule A: Public Announcement read with Regulation 6 of IBBI (Insolvency Resolution Process for Corporate Persons]

Insolvency Commencement date starts from the date of admission of application and is to be completed within 180 days of commencement which can be extended to ninety days (one time) by NCLT.

Interim Resolution Professional to constitute Committee of Creditors comprising all financial creditors.

Meetings of Committee of Creditors shall be as per Chapter VI of IBBI (IRP for Corporate Persons)

Regulations 2016 dated 15.12.16. IRP shall file a report for constitution of committee to AA within 30 days

of his appointment. The first meeting of committee shall be within 7 days of filing the report with NCLT.

Where the corporate debtor has no financial debt or where all financial creditors are related parties of

the corporate debtor, the committee shall be set up in accordance with this Regulation.

Moratorium: Management of affairs of corporate debtor as a going concern, powers of Board of Directors or the partners of debtor shall stand suspended and exercised by the IRP or RP.

Committee of Creditors within 7 days of its constitution either to resolve to appoint IRP as Resolution Professional (RP) or replace IRP with another RP.

Proof of Claims of Financial Creditors, Operational Creditors and other Debts shall be as per Chapter VI of IBBI (IRP for Corporate Persons) Regulations 2016 dated 15.12.16. Verification of claims to be done by IRP within 7 days from the last date of receipt of claims. Cost of proving debts is to be borne by creditors.

RULES, REGULATIONS, ORDERS AND NOTIFICATIONS NOTIFIED UNDER THE CODE TILL DATE:

To make the Act operational, the IBBI has notified the following Rules and Regulations:

Rules Enforcement Date

Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

30th Nov 2016

Regulations Enforcement Date

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

31st Mar 2017

Insolvency and Bankruptcy Board of India (Voluntary 31st Mar 2017

All decisions of committee of creditors shall be taken by vote of not less than 75% of voting share @of financial creditor. Quorum of meeting shall be 33% of voting rights either in persons or by video conferencing or other audio and visual means. Modify %age for future meetings if resolved by meeting of CC.

@Section 5(28) defines “voting share” means the share of the voting rights of a single financial creditor in the committee of creditors which is based on the proportion of the financial debt owed to such financial creditor in relation to the financial debt owed by the corporate debtor.

IRP to appoint two registered valuers within 7 days of his appointment to determine the liquidation value of

corporate debtor in accordance with Reg. 35 of IBBI (Insolvency Resolution Process for Corporate Persons)

Regulations 2016 dated 15th

Dec16.

Preparation of information memorandum by RP for formulation of Resolution Plan. The contents of Resolution Plan should be as per Chapter X of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016 dated 15th Dec16.

Submission of Resolution Plan by Resolution Applicant to be examined by RP and to be approved by 75% of voting share of financial creditor. RP should include its implementation schedule, manner of determination of liquidation values, components of resolution process costs and scope of essential supplies. CC to fix Resolution Professional cost to be incurred on or by RP, which includes resolution professional fees and other expenses including cost of engaging other professionals.

RP to submit approved Resolution Plan to NCLT which shall Approve or Reject/Order for Liquidation.

The approved plan shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.

Moratorium ends on the date of approval.

Appeal may be made to NCLAT on Rejection

Liquidation process) Regulations, 2017

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

15th Dec 2016

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

30th Nov 2016

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

23th Nov 2016

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

21st Nov 2016

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

21st Nov 2016

Orders Enforcement Date

Matter of Mr. Vimal Prakash Dubey 14th Mar 2017

Gist of ecision: Vimal Parkash Dubey Case:- As per regulation 4(g) of the IBBI (Insolvency

Professionals) Regulations 2016, no individual shall be eligible to be registered as an IP if he is

not a fit and proper person. Among others, integrity, reputation and character are taken into

account to determine if an individual is a fit and proper person. While considering the

application of Mr. Vimal Prakash Dubey by IBBI for registration as IP, it was observed by IBBI that

three criminal proceedings were pending against the applicant under section 58A(10) of the

Companies Act, 1956 before the Additional Chief Metropolitan Magistrate (40th Court) Gurgaon,

Mumbai for contravention of section 58A(9) of the Act. Accordingly, the IBBI formed a prima

facie opinion that the registration to Mr Vimal Prakash Dubey ought not be granted as he is not a

fit and proper person to be registered as an IP.

Matter of Mr. Gaurav Jain 2nd Mar 2017

Gist of ecision: Gaurav Jain Case:- Under regulation 7(2) (a) of the IBBI (Insolvency

Professionals) Regulations 2016, the registration of an IP is subject to a condition that he shall at

all times abide by the code of conduct as specified in the First Schedule to the Regulations.

Clause 23 of the said code of conduct requires that an IP must not engage in any employment.

Accordingly, a person cannot hold registration as an IP and be in employment simultaneously.

While considering the application of Mr. Gaurav Jain for registration, it was observed by the IBBI

that the applicant was employed with Ernest & Young LLP as Assistant Vice President. Therefore,

IBBI formed a prima facie opinion that the registration ought not be granted to the applicant, as

he does not meet the conditions of registration as an IP.

The following is the list of Notifications made with respect to the IBC-2016

Notifications Enforcement Date

Provisions relating to liquidation came into force on 15th December 2016.

15th Dec 2016

Some of Provisions relating to Corporate Insolvency Resolution process notified and came into force with effect from 1st December 2016

1st Dec 2016

Some Provisions relating to powers and functions of IBBI came into force with effect from 1st November 2016

1st Nov 2016

Provisions relating to Insolvency Professional Agencies came into force with effect from 15th November 2016.

15th Nov 2016

Provisions relating to powers and functions of IBBI came into force with effect from 15th November 2016

1st Nov 2016

Establishment of IBBI and appointment of Chairperson. 1st Oct 2016

Provisions of Insolvency and Bankruptcy Code-Regarding. 19th Aug 2016

Provisions of Insolvency and Bankruptcy Code-Regarding. 5th Aug 2016

LIST OF CASES FILED WITH NCLT AND ADMITTED BY NCLT TILL DATE :-

. o

Name of Corporate Debtor

ame of Benc

Creditor/ e tors filing t e Case

ection Insolvency Professionals

Amount of efault in Rs. Crore

1 M/s. Hotel Gaudavan Pvt. Ltd.(HGPL)

New Delhi Financial Creditor

7 Mr. Arunava Sikdar

2 M/s. Blossom Oils & Fats Limited

Hyderabad Corporate Debtor

10 Mr. Arun Kumar Malani

3 JODPL Private Limited Allahabad Corporate Debtor

10 Mr. Dinkar T. Venkatasubramanian

4 JEKPL Private Limited Allahabad Corporate Debtor

10 Mr. Dinkar T. Venkatasubramanian

5 M/s. Recorders and Medicare Systems Pvt. Ltd.

Chandigarh Corporate Debtor

10 Mr. Purushottam Ram Singhania

80.84

6 M/s. Kadevi Industries Limited.

Hyderabad Corporate Debtor

10 Mr. Raghu Babu Gunturu

171

7 M/s. Gupta Coal India Pvt. Ltd. (GCIPL)

New Delhi Corporate Debtor

10 Mr. Devendra Singh

2580

8 M/S VNR Infra Metals Private Ltd

Hyderabad Corporate Debtor

10 Mr. Arun Kumar Malani

1102.78

9 M/s. Shree Rajeshwar Weaving Mills Pvt. Ltd.

Mumbai Corporate Debtor

10 Mr. Hemant Sharma

1.58

10 M/s.REI Agro Limited Kolkata Operational Creditor

9 Mr. Anil Agarwal 1.2

11 M/s. Chhaparia Industries Private Limited

Mumbai Corporate Debtor

10

Mr. Vikram Bajaj 38.35

12 M/s. Raipur Power & Steel Limited

New Delhi Principal Branch

Financial Creditor

7 Mr. Sanjay Grover

17.37

13 M/s. Hind Motor Mohali Private Limited

Chandigarh Corporate Debtor

10 Mr. Manik Goyal 3

14 Keshav Sponge & Energy Pvt. Ltd.

Kolkata Corporate Debtor

10 Mr. A.K Mehta 85.48

15 M/s. Hind Motors Ltd. Chandigarh Corporate Debtor

10 Mr. Manik Goyal 6.2

. o

Name of Corporate Debtor

ame of Benc

Creditor/ e tors filing t e Case

ection Insolvency Professionals

Amount of efault in Rs. Crore

16 M/s VNR Infrastructures Limited

Hyderabad Corporate Debtor

10 Mr.Devendra Padamchand Jain

1102.78

17 M/s. Kamineni Steel & Power India Private Limited

Hyderabad Corporate Debtor

10 Mr.Chodavarapu Bala Mouli

1405.01

18 U.B.Engineering Ltd. Mumbai Corporate Debtor

10 Mr. A.K Mehta 116

19 Sree Metaliks Limited Kolkata

Financial Creditor

7 Interim IP Mr. Vinod Kothari Insolvency Resolution Professional Mr. S.M.Gupta

108

20 Synergies-Doorey Automotive Limited

Hyderabad Corporate Debtor

10 Ms. Mamta Binani

741.33

21 Rave Scans Pvt. Ltd. New Delhi Principal Branch

Corporate Debtor

10 Ms. Ritu Rastogi

13.6

22 Bhupen Electronic Limited

Mumbai Corporate Debtor

10 Mr. Manish Gupta

4.8

23 Nicco Corporation Limited

Kolkata Corporate Debtor

10 Mr. Kunal Banerjee

405

24 Innoventive Industries Limited

Mumbai Financial Creditor

7 Mr. Dhinal Shah

101

SOME RECENT CASE LAWS IN RESPECT OF THE CASES FILED WITH NCLT

Mukesh Kumar & anr Vs. AMR Infrastructures Limited

The matter was filed under section 9 of The Insolvency & Bankruptcy Code, 2016 before the Principal Bench of National Company Law Tribunal. The amount of claim due to the petitioner was Rs. 29,44,175/- towards the allotment of commercial shops.

This matter was dismissed on the ground that the petitioner cannot be treated as “Operational Creditor” within the meaning of section 9 of the Code as the debt incurred by the respondents has not arisen out of provision of goods, services or employment. It can also not be considered ‘Financial Debt’ within the meaning of section 5 (8) to mean a debt which is disbursed against the consideration of the time, value or money.

M/s Deem Roll-tech Limited Vs. M/s R.L. Steel & Energy Limited

The matter was filed under section 9 of The Insolvency & Bankruptcy Code, 2016 before the Principal Bench of National Company Law Tribunal. The amount of claim due to the petitioner was Rest. 5,59,660/- towards sale of goods. As the petitioner had previously initiated a summary suit to recover the amount in the civil court, this matter was dismissed on the ground that the petitioner cannot seek to avail multiple remedies in respect of the same cause of action and thus venture into forum shopping.

FORTHCOMING EVENTS BY THE IPA OF ICAI

Programmes on Insolvency and Bankruptcy Code

S.No. Date Topic Speaker City Time Duration (in Hrs)

1. 13.04.2017 Insolvency & Bankruptcy Code- 2016

CMA Harshad Deshpande

Nasik 4

2. 21.04.2017 Seminar on Insolvency & Bankruptcy code,2016- “Practical Aspects for Bankers”

Chief Guest: Dr. M.S. Sahoo, Chairperson- IBBI Guest of Honour: Shri V.P. Singh NCLT- Head Eminent speakers: Ms Rekha, Regional Director- Eastern Region RBI and

Kolkata 4

CMA J K Budhiraja, CEO of IPA and Senior Director (Technical), Institute of Cost Accountants of India

Programme for Limited Insolvency Examination Guidance:

A programme to support and guide the aspirants who wish to appear for the Limited

Insolvency Examination is being organized on 20th April 2017 at EIRC of the Institute of

Cost Accountants of India.

The members can perform an excellent job as Insolvency Professionals by utilizing their expertise in revival and resolution process of the sick companies. I urge our professional colleagues to come forward and make the best use of this opportunity and get themselves enrolled with the Insolvency Professional Agency of the Institute. With Best Wishes: CMA J K Budhiraja Chief Executive Officer (CEO) Insolvency Professional Agency of Institute of Cost Accountants of India CMA Bhawan, 3, Institutional Area, Lodhi Road, New Delhi - 110003 Phone No: 011-24666112 Email: ipa@icmai.in Contacts:

Ms. Kimi Thareja Head- Education and Training Insolvency Professional Agency of ICAI Phone No: 011-24666141 Email: ipa@icmai.in

Ms Sarika Agarwal Head (Finance), Insolvency Professional Agency of ICAI, CMA Bhawan, 3 ,Institutional Area, Lodhi Road, New Delhi – 110003 Phone No: 011-24666107 Email: ipa@icmai.in

Mr. Pranav Sharma, Senior Officer (Technical) CMA Bhawan, 3 ,Institutional Area, Lodhi Road, New Delhi - 110003 011-24666120

Ms Ridhima Singh, Senior Officer (Technical) CMA Bhawan, 3 ,Institutional Area, Lodhi Road, New Delhi - 110003 011-24666120

Related websites of Insolvency: 1. www.ipaicmai.in 2. www.ibbi.gov.in