PRE-PACK INSOLVENCY RESOLUTION PROCESS FOR MICRO, …areionart.com/uploads/frontend/Pre-Pack for MSMEs.pdf · 2021. 5. 11. · A/301,Kanakia Zillion, Junction of LBS Road and CST

Areion Resolution & Turnaround Private Limited

(An Insolvency Professional Entity recognised by IBBI)

A/301,Kanakia Zillion, Junction of LBS Road and CST Road,

BKC Annexe, Kurla (West), Mumbai - 400 070

Website: www.areionart.com | Linkedin: https://rb.gy/wmqryl

PRE-PACK INSOLVENCY RESOLUTION PROCESS FOR

MICRO, SMALL AND MEDIUM ENTERPRISES

(MSMEs)

http://www.areionart.com/

https://rb.gy/wmqryl

PRE-PACK INSOLVENCY RESOLUTION PROCESS FOR MSMEs

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PROMULGATION OF THE

INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ORDINANCE, 2021

The President promulgated the Insolvency and Bankruptcy Code (Amendment)

Ordinance, 2021 on 4th April 2021. The Cabinet had approved on 31st March 2021

the proposal to make amendments in the Insolvency and Bankruptcy Code, 2016

(Code), through the Insolvency and Bankruptcy Code (Amendment) Ordinance,

2021. The amendments aims to provide an efficient alternative insolvency resolution

framework for corporate persons classified as micro, small and medium enterprises

(MSMEs) under the Code, for ensuring quicker, cost-effective and value

maximising outcomes for all the stakeholders, in a manner which is least disruptive

to the continuity of MSMEs businesses and which preserves jobs. The initiative is

based on a trust model and the amendments honour the honest MSME owners by

trying to ensure that the resolution happens and the company remains with them. It is expected that the incorporation of Pre-Packaged insolvency resolution process

for MSMEs in the Code will alleviate the distress faced by MSMEs due to the impact

of the pandemic & the unique nature of their business, duly recognizing their

importance in the economy. It provides an efficient alternative insolvency resolution framework for corporate

persons classified as MSMEs for timely, efficient & cost-effective resolution of

distress thereby ensuring positive signal to debt market, employment

preservation, ease of doing business and preservation of enterprise capital. Other

expected impact and benefits of the amendment in Code are lesser burden on

Adjudicating Authority, assured continuity of business operations for corporate

debtor (CD), less process costs & maximum assets realization for financial

creditors (FC) and assurance of continued business relation with CD and rights

protection for operational Creditors (OC). The Amendment Ordinance seeks to amend sections such as 4, 5, 11, 33, 34, 61,

65, 77, 208, 239, 240 & insert new sections such as 11A, 67A, 77A and a new

chapter as IIIA on Pre-Packaged insolvency resolution process for MSMEs in the

Code based on recommendations made by the Insolvency Law Committee (ILC).

https://ibbi.gov.in/uploads/press/c4ca4238a0b923820dcc509a6f75849b.pdf

https://ibbi.gov.in/uploads/press/c4ca4238a0b923820dcc509a6f75849b.pdf


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TABLE OF CONTENT

S. No. Particulars Page No.

Part I

1 Definition of MSMEs 3

2 Regulating Provisions for Pre-Packs under IBC,2016 3

3 New Definitions under the Code 4

4 Flowchart Explaining Pre Pack Insolvency Resolution

Process (“PPIRP”)

5

5 Difference between CIRP & PPIRP 6

Part II

6 Key Highlights of PRIRP 7-13

Part III

7 Introduction of additional new Provisions 14-15

Part IV

8 Amendments in the Existing Provisions 16-17


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PART I

DEFINITION OF MSMEs Micro, Small and Medium Enterprises Development Act, 2006 defines MSMEs as follows:

Type of Enterprise Investment in Plant and

Machinery or Equipment (Rs.)

Turnover (Rs.)

Micro not exceeding 1 Crore not exceeding 5 Crores

Small not exceeding 10 Crores not exceeding 50

Crores

Medium not exceeding 50 Crores not exceeding 250 Crores

(For a particular class of enterprise, the threshold for investment and turnover to be read

in conjunction.)

REGULATING PROVISIONS FOR PRE-PACKS UNDER IBC,2016

A new Chapter namely Chapter III A (Pre-Packaged Insolvency Resolution Process)

has been inserted in the Insolvency and Bankruptcy Code, 2016 (“Code”) providing for

following sections:

Section 54A Corporate debtors eligible for pre-packaged insolvency resolution process

Section 54B Duties of resolution professional before initiation of pre-packaged

insolvency resolution process.

Section 54C Application to initiate prepackaged insolvency resolution process.

Section 54D Time-limit for completion of pre-packaged insolvency resolution

process.

Section 54E Declaration of moratorium and public announcement during

prepackaged insolvency resolution process

Section 54F Duties and powers of resolution professional during prepackaged


Section 54G List of claims and preliminary information memorandum.

Section 54H Management of affairs of corporate debtor.

Section 54I Committee of creditors.

Section 54J Vesting management of corporate debtor with resolution professional.

Section 54K Consideration and approval of resolution plan.

Section 54L Approval of resolution plan.

Section 54M Appeal against order under section 54L.

Section 54N Termination of pre-packaged insolvency resolution process.

Section 54O Initiation of corporate insolvency resolution process

Section 54P Application of provisions of Chapters II, III, VI, and VII to this

Chapter.


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Apart from the above, following news sections are also being inserted in the Code:

Section 11A Disposal of applications u/s 54C/7/9/10.

Section 67A Fraudulent management of corporate debtor during prepackaged


Section 77A Punishment for offences related to pre-packaged insolvency resolution process.

NEW DEFINITIONS UNDER THE CODE

In Section 5 of the Code, following new definitions have been inserted:

(2A) Base Resolution Plan means a resolution plan provided by the corporate debtor under

clause (c) of sub-section (4) of Section 54A.

(23A) Preliminary Information Memorandum means a memorandum submitted by the

corporate debtor under clause (b) of sub-section (1) of Section 54G.

(23B) Pre-Packaged Insolvency Date means the date of admission of an application for

initiating the pre-packaged insolvency resolution process by the Adjudicating Authority under

clause (a) of sub-section (4) of Section 54C.

(23C) Pre-Packaged Insolvency Resolution Process Costs means:

the amount of any interim finance and the costs incurred in raising such finance;

the fees payable to any person acting as a resolution professional and any expenses

incurred by him for conducting the pre-packaged insolvency resolution process during

the prepackaged insolvency resolution process period, subject to sub-section (6) of

section 54F;

any costs incurred by the resolution professional in running the business of the

corporate debtor as a going concern pursuant to an order under sub-section (2) of

section 54J;

any costs incurred at the expense of the Government to facilitate the pre-packaged

insolvency resolution process; and

any other costs as may be specified;

(23D) Pre-Packaged Insolvency Resolution Process Period means the period beginning

from the pre-packaged insolvency commencement date and ending on the date on which an

order u/s 54L(1), 54N(1) or 54O(1), as the case may be, is passed by the Adjudicating

Authority.


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FLOWCHART EXPLAINING PRE PACK INSOLVENCY RESOLUTION PROCESS

(“PPIRP”)


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DIFFERENCE BETWEEN CIRP & PPIRP


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PART II

KEY HIGHLIGHTS OF PRIRP

Minimum Default (Reference Section 4 of the Code)

CG has specified minimum amount of default of Rs 10 Lakhs.

Applicant for initiating PPIPR (Reference Section 5(5) of the Code)

An application for initiating pre-packaged insolvency resolution process may be made by a corporate applicant which means

any of the following:

Corporate Debtor (“CD”).

Member or partner of the corporate debtor who is

authorized to make an application for CIRP under the

constitutional document of the corporate debtor. An individual who is in charge of managing the operations

and resources of the corporate debtor.

A person who has the control and supervision over the financial affairs of the corporate debtor.

CD eligible for

PPIRP (Reference Section 54A of the Code)

An application for initiating PPIRP may be made in respect of a CD

classified as MSME subject to the following conditions:

It has not undergone PRIRP or completed CIRP during the

period of 3 years preceding the initiation date. it is not undergoing a CIRP.

No order requiring it to be liquidated is passed under

Section 33 of the Code. CD is eligible to submit a resolution plan under section 29A

of the Code.

Appointment of IP for PPIRP (Reference Section 54A of the Code)

The financial creditors of the CD (not being its related parties) representing such number and such manner as may be

specified, have proposed the name of the insolvency

professional to be appointed as resolution professional. The financial creditors of the CD (not being its related parties)

representing not less than 66% in value of the financial debt

due to such creditors, have approved such proposal.

Where CD does not have any financial creditors, not being its related parties, the proposal and approval under this clause

shall be provided by such persons as may be specified.

Declaration from

Majority

Directors/Partners

and Special Resolution (Reference Section 54A

The majority of the directors or partners of the CD shall made a

declaration stating that CD shall file an application for

initiating PPIRP within a definite time period not

exceeding 90 days, PRIRP is not being initiated to defraud any person and name of the IP proposed and

approved to be appointed as RP.


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of the Code) The members of the CD shall pass a special resolution or resolution passed by at least 3/4 of the total number of

directors/partners of CD approving the filing of an

application for initiating PPIRP.

Prior to seeking approval from financial creditors for initiating PPIRP, CD shall provide such financial creditors with the

aforesaid declaration, the special resolution, base

resolution plan and such other information and documents as may be specified.

The CD shall obtain an approval from its financial creditors, not

being its related parties, representing not less than 66% in

value of the financial debt due to such creditors for the filing of an application for initiating PPIRP.

Duties of RP before initiation of

PPIRP (Reference Section 54B of the Code)

To prepare a report confirming whether CD meets the requirements of Section 54A of the Code and the base

resolution plan, file such reports and other documents,

with the Board and performs such other duties as may be

specified. The above duties of the IP insolvency professional shall cease,

if CD fails to file an application within the time specified

in the declaration of majority of the directors or partners or the application for initiating PPIRP is admitted or

rejected by the Adjudicating Authority.

Fees payable to RP shall be determined and borne in such manner as may be specified and such fees shall form part of

the PPIRP Costs upon admission of the application.

Application to initiate PPIRP (Reference Section 54C of the Code)

Application for initiating PPIRP shall be made in such manner and with such fees as may be prescribed and shall furnish the

declaration, special resolution or resolution, approval of

financial creditors for initiating PPIRP, the name and written consent of IP, a declaration regarding the existence of any

transactions of CD that may be within the scope of provisions in

respect of avoidance of transactions/ fraudulent or wrongful

trading and information relating to books of account of the CD. AA shall within a period of 14 days of the receipt of the

application, by an order, admit the application, if it is complete;

or reject the application, if it is incomplete. AA shall before rejecting an application, give notice to the applicant to rectify

the defect in the application within 7 days from the date of

receipt of such notice from the AA. The pre-packaged insolvency resolution process shall

commence from the date of admission of the application.

Time limit for

completion of

PPIRP shall be completed within a period of 120 days from

the pre-packaged insolvency commencement date.


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PPIRP (Reference Section 54D of the Code)

RP shall submit the resolution plan approved by the CoC to the AA within a period of 90 days from the pre-packaged

insolvency commencement date.

Where no resolution plan is approved by CoC within the period

of 90 days, RP shall on the day after the expiry of such time period, file an application with the AA for termination of PPIRP.

Moratorium (Reference Section 54E of the Code)

Upon admission of PPIRP, AA shall declare moratorium (Section 14 of the Code to apply mutatis mutandis), apply RP and cause public

announcement to be made by RP in the specified manner.

Moratorium to have effect till the termination of PPIRP.

Duties of RP

during PPIRP (Reference Section 54F of the Code)

To confirm the list of claims submitted by the CD.

To inform the creditors regarding their claims as may be

specified. To update list of claims.

To monitor the management of the affairs of the CD.

To inform the CoC about breach of any of the obligations of

the Directors/Partners. To constitute CoC and convene and attend all its meetings.

To prepare the information memorandum on the basis of

the preliminary information memorandum. To file applications for avoidance of transactions/ fraudulent

or wrongful trading.

Powers of RP during PPIRP (Reference Section 54F of the Code)

To access all books of accounts, records and information available with CD, government authorities, statutory

auditors, accountants etc.

To access the electronic records of CD from information utility having financial information of CD.

To attend meetings of members, Board of Directors and

committee of directors/partners of CD.

To appoint accountants, legal or other professionals. To collect all information relating to the assets, finances and

operations of CD for determining the financial position of

the CD and the existence of avoidance/fraudulent/wrongful transactions relating to business operations, financial

and operational payment for previous two years from

pre pack insolvency commencement date and assets and liabilities as on initiation date.

From the date of appointment of RP, the financial

institutions maintaining accounts of CD shall furnish all

information relating to CD with RP and personnel of CD, its promoters and any other person associated with the

management of CD to extend all assistance and cooperation

to RP. (Provisions of sub-sections (2) and (3) of Section 19 to apply mutatis mutandis).

The fees of RP and any expenses incurred by him shall be

determined in such manner as may be specified. CoC may


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impose limits and conditions on such fees and expenses. Fees and expenses for the period prior to the constitution of

the CoC shall be subject to ratification by it.

List of claims and preliminary

information

memorandum (Reference Section 54G of the Code)

CD shall within two days of the pre-packaged insolvency commencement date submit to RP the list

of claims along with details of the respective

creditors, their security interests and guarantees and preliminary information memorandum.

Where any person has sustained any loss or damage as a

consequence of the omission of any material information or

inclusion of any misleading information in the list of claims or the preliminary information memorandum submitted by

CD, every person who is a promoter or director or partner of

the CD at the time of submission of the list of claims or the preliminary information memorandum by CD or has

authoriZed the submission of the list of claims or the

preliminary information memorandum by CD shall be liable

to pay compensation to every person who has sustained such loss or damage.

No person shall be liable if the list of claims or the

preliminary information memorandum was submitted without his knowledge or consent.

Any person, who sustained any loss or damage as a

consequence of omission of material information or inclusion of any misleading information, shall be entitled to move a

court having jurisdiction for seeking compensation for such

loss or damage.

Management of

affairs of CD

during PPIRP (Reference Section 54H of the Code)

The management of the affairs of CD shall continue to vest

in the Board of Directors/Partners of CD subject to such

conditions that the Board of Directors/Partners of CD shall make every endeavor to protect and preserve the value of

the property of CD and manage its operations as a going

concern and shall exercise and discharge their contractual

or statutory rights and obligations in relation to the CD as may be prescribed.

Committee of Creditors (Reference Section 54I of the Code)

RP shall within a period of 7 days of the pre-packaged insolvency commencement date, constitute a CoC

based on the list of claims.

Composition of CoC shall be altered on the basis of the

updated list of claims and such alteration shall not affect the validity of any past decision of CoC.

The first meeting of CoC shall be held within 7 days of

the constitution of CoC. Provisions of Section 21 of the Code to apply mutatis

mutandis.


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Vesting management of

CD with RP (Reference Section 54J of the Code)

If during PPIRP, CoC by a vote of not less than 66% of the voting shares, resolves to vest the management of CD with

RP, RP shall make an application before AA and AA shall

pass an order vesting the management of CD with RP if the

affairs of CD have been conducted in a fraudulent manner or there has been gross mismanagement of the affairs of

CD.

Consideration and

approval of

resolution plan (Reference Section 54K of the Code)

Base Resolution Plan

CD shall submit the base resolution plan to RP within 2

days of the pre-packaged insolvency commencement date and RP shall present it to CoC. CD being a resolution

applicant may submit the base resolution plan either

individually or jointly with any other person. CoC may provide CD an opportunity to revise the base

resolution plan prior to its approval or invitation of

prospective resolution applicants.

CoC may approve the base resolution plan for submission to AA if it does not impair any claims owed by CD to

operational creditors.

If CoC does not approve the base resolution plan or base resolution plan impairs any claims owed by the CD to the

operational creditors, RP shall invite prospective resolution

applicants to submit a resolution plan or plans, to compete with the base resolution plan.

Resolution Plan

The resolution applicants submitting resolution plans shall

fulfill such criteria as may be laid down by RP with the

approval of the CoC having regard to the complexity and scale of operations of the business of CD and such other

conditions as may be specified.

RP shall provide to the resolution applicants: Basis for evaluation of resolution plans and the relevant information

referred to in section 29, which shall, mutatis mutandis

apply.

RP shall present to CoC for its evaluation, resolution plans which conform to the requirements and CoC shall evaluate

the resolution plans presented by the resolution professional

and select a resolution plan from amongst them.

Base Resolution Plan Vs. Resolution Plan

On the basis of laid down criteria if CoC decides that the

selected resolution plan is significantly better than the base

resolution plan, such resolution plan may be selected for

approval.


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If the selected resolution plan is not considered for approval or does not fulfill the specified requirements, it shall

compete with the base resolution plan and one of them shall

be selected for approval and submission to AA.

Where the selected resolution plan is not approved by CoC, RP shall file an application for termination of PPIRP.

Final Resolution Plan

The approval of the resolution plan by CoC shall be by a

vote of not less than 66% of the voting shares, after

considering its feasibility and viability, the manner of distribution proposed, taking into account the order of

priority amongst creditors as laid down in sub-section (1) of

section 53, including the priority and value of the security interest of a secured creditor and such other requirements

as may be specified.

While considering the feasibility and viability of a resolution plan, where the resolution plan submitted by CD provides

for impairment of any claims owed by the CD, the CoC may

require the promoters of the CD to dilute their shareholding

or voting or control rights in the CD. Provided that where the resolution plan does not provide for such dilution, CoC

shall, prior to the approval of such resolution plan shall

record the reasons for its approval.

Approval of

resolution plan (Reference Section 54L & 54M of the Code)

If AA is satisfied that the resolution plan as approved by the

CoC meets the specified requirements, AA shall within

thirty days of the receipt of such resolution plan, by order approve the resolution plan.

AA shall, before passing an order for approval of a

resolution plan satisfy itself that the resolution plan has provisions for its effective implementation.

Where AA is satisfied that the resolution plan does not

conform to the requirements, it may within 30 days of the receipt of such resolution plan, reject the

resolution plan and pass an order terminating PPIRP.

Where AA has passed an order u/s 54J(2) i.e vesting of

management of CD with RP and the resolution plan approved by CoC does not result in the change in the

management or control of the CD to a person who was not

a promoter or in the management or control of the CD, the AA shall pass an order: rejecting such resolution plan,

terminating PPIRP and passing a liquidation order for

CD and declaring that the PPIRP costs (if any) shall be included as part of the liquidation costs for the

purposes of liquidation of the CD.

Any appeal from an order approving the resolution plan

shall be on the grounds laid down in Section 61(3) of the


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Code.

Termination of

PPIRP (Reference Section 54N of the Code)

Where RP files an application with AA for termination of

PPIRP on account of non-approval of resolution plan

by CoC or non-approval of resolution plan by CoC within the specified time, AA shall within 30 days of the

date of such application by an order: Terminate the

PPIRP and provide for the manner of continuation of proceedings initiated for avoidance of transactions

under Chapter III or proceedings initiated under

section 66 and section 67A, if any.

Where RP at any time after the pre-packaged insolvency commencement date, but before the approval of resolution

plan intimates AA of the decision of CoC approved by a vote

of 66% to terminate PPIRP, AA shall pass an order accordingly and CD shall bear the PPIRP costs (if any).

Initiation of CIRP (Reference Section 54O of the Code)

CoC at any time after the pre-packaged insolvency

commencement date but before the approval of resolution plan by a vote of 66% of the voting shares, may resolve to

initiate CIRP of CD, if such CD is eligible for CIRP.

Notwithstanding anything to the contrary contained in Chapter II, where the resolution professional intimates the

Adjudicating Authority of the decision of the committee of

creditors under sub-section (1), the Adjudicating Authority

shall, within thirty days of the date of such intimation, pass an order to: Terminate PPIRP and initiate CIRP,

appointing same RP as IP for CIRP if consent for the

same has been duly given and PPIRP costs if any to be included in CIRP cost.

If acting RP fails to give his consent to act as IP for CIRP,

AA may appoint IP for CIRP upon reference to IBBI. Where AA passes an order for initiating CIRP, such

order shall be deemed to be an order of admission of

an application u/s 7 of the Code, CIRP shall

commence from the date of such order, the proceedings initiated for avoidance of transactions

under Chapter III or proceedings initiated u/s

66/67A shall continue during CIRP , for the purposes of Sections 43, 46 and 50, references to “insolvency

commencement date” shall mean “pre-packaged

insolvency commencement date” and in computing the relevant time or the period for avoidable

transactions, the time-period for the duration of the

PPIRP shall also be included, notwithstanding

anything to the contrary contained in Sections 43, 46 and 50 of the Code.


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PART III

INTRODUCTION OF ADDITIONAL NEW PROVISIONS

Insertion of Section 11A of the Code [Disposal of applications under Section 54C

and under Section 7/9/10]

Where an application filed u/s 54C (Application to initiate PPIRP) is pending, AA shall

pass an order to admit or reject such application, before considering any application

filed u/s 7/9/10 of the Code during the pendency of such application u/s 54C in respect

of the same CD.

Where an application u/s 54C is filed within 14 days of filing of any application

u/s 7/9/10 of the Code, which is pending in respect of the same CD, then AA shall

first dispose of the application under section 54C.

Where an application under section 54C is filed after fourteen days of the filing of

any application u/s 7/9/10 of the Code in respect of the same CD, the AA shall

first dispose of the application u/s 7/9/10 of the Code.

The provisions of this section shall not apply where an application u/s 7/9/10 of the

Code is filed and pending as on the date of the commencement of the Insolvency and

Bankruptcy Code (Amendment) Ordinance, 2021.

Insertion of Section 67A of the Code [Fraudulent management of corporate debtor

during prepackaged insolvency resolution process]

On and after the pre-packaged insolvency commencement date, where an officer of the

CD manages its affairs with the intent to defraud creditors of the CD or for any fraudulent

purpose, the AA may, on an application by the RP pass an order imposing upon any such

officer, a penalty which shall not be less than One Lakh Rupees, but may extend

to One Crore Rupees.

Insertion of Section 77A of the Code [Punishment for offences related to pre-

packaged insolvency resolution process]

Where:

a) a corporate debtor provides any information in the application under section 54C which

is false in material particulars, knowing it to be false or omits any material fact,

knowing it to be material; or

b) a corporate debtor provides any information in the list of claims or the preliminary

information memorandum submitted under sub-section (1) of section 54G which is

false in material particulars, knowing it to be false or omits any material fact, knowing

it to be material; or


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c) any person who knowingly and willfully authorized or permitted the furnishing of such

information under sub-clauses (a) and (b), such corporate debtor or person, as the

case may be;

Shall be punishable with imprisonment for a term which shall not be less than

three years, but which may extend to five years or with fine which shall not be

less than One Lakh Rupees, but which may extend to One Crore Rupees, or with

both.

If a director or partner of CD, deliberately contravenes the provisions of Chapter III-A,

such person shall be punishable with imprisonment for not less than three years,

but which may extend to five years, or with fine which shall not be less than One

Lakh Rupees, but which may extend to One Crore Rupees, or with both.

Explanation.–For the purposes of this section, and sections 75, 76 and 77, an application

shall be deemed to be false in material particulars in case the facts mentioned or omitted

in the application, if true, or not omitted from the application as the case may be, would

have been sufficient to determine the existence of a default under this Code.


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PART IV

AMENDMENTS IN THE EXISTING PROVISIONS

Amendment in Section 11 of the Code [Persons not entitled to make application]

The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:

a corporate debtor undergoing a corporate insolvency resolution process;

a financial creditor or an operational creditor of a corporate debtor undergoing a prepackaged insolvency resolution process;

a corporate debtor having completed corporate insolvency resolution process twelve

months preceding the date of making of the application; a corporate debtor in respect of whom a resolution plan has been approved

under Chapter III-A, twelve months preceding the date of making of the

application;

a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an

application under this Chapter;

a corporate debtor in respect of whom a liquidation order has been made.

Amendment in Section 61 of the Code [Appeals and Appellate Authority]

An appeal against a liquidation order passed under Section 33 or sub-section (4) of section 54L, or sub-section (4) of section 54N, may be filed on grounds of

material irregularity or fraud committed in relation to such a liquidation order.

An appeal against an order for initiation of corporate insolvency resolution

process passed under sub-section (2) of section 54-O may be filed on grounds of material irregularity or fraud committed in relation to such an order.

Amendment in Section 65 of the Code [Fraudulent or malicious initiation of proceedings]

If, any person initiates the insolvency resolution process or liquidation proceedings

fraudulently or with malicious intent for any purpose other than for the resolution of

insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose upon a such person a penalty which shall not be less than One Lakh Rupees, but may

extend to One Crore Rupees.

If, any person initiates voluntary liquidation proceedings with the intent to defraud any

person, the Adjudicating Authority may impose upon such person a penalty which shall

not be less than One Lakh Rupees but may extend to One Crore Rupees.

If, any person initiates the pre-packaged insolvency resolution process

fraudulently or with malicious intent for any purpose other than for the

resolution of insolvency; or with the intent to defraud any person, the


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Adjudicating Authority may impose upon such person a penalty which shall

not be less than One Lakh Rupees, but may extend to One Crore Rupees.”

Amendment in Section 65 of the Code [Functions and obligations of insolvency

professionals]

Where any insolvency resolution, fresh start, liquidation or bankruptcy process has

been initiated, it shall be the function of an insolvency professional to take such actions

as may be necessary, in the following matters, namely: –

a) a fresh start order process under Chapter II of Part III;

b) individual insolvency resolution process under Chapter III of Part III;

c) corporate insolvency resolution process under Chapter II of Part II;

d) pre-packaged insolvency resolution process under Chapter III-A of Part

II;

e) individual bankruptcy process under Chapter IV of Part III; and

f) liquidation of a corporate debtor firm under Chapter III of Part II

After sub-section (1), the following sub-section shall be inserted, namely:–

Where the name of the insolvency professional proposed to be appointed as a

resolution professional, is approved under clause (e) of sub-section (2) of

section 54A, it shall be the function of such insolvency professional to take

such actions as may be necessary to perform his functions and duties prior to

the initiation of the pre-packaged insolvency resolution process under

Chapter III-A of Part II.”

Documents

PRE-PACK INSOLVENCY RESOLUTION PROCESS FOR MICRO, …areionart.com/uploads/frontend/Pre-Pack for MSMEs.pdf · 2021. 5. 11. · A/301,Kanakia Zillion, Junction of LBS Road and CST