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THE INSOLVENCY AND BANKRUPTCY CODE 2015
MukeshMukesh ChandChand, ,
GM (Legal) SIDBIGM (Legal) SIDBI
JOURNEY SO FARØ Government committees on bankruptcy reforms Year Committee
Outcome :
Ø 1964 24th Law Commission Amendments to the ProvincialInsolvency Act, 1920.
Ø 1981 Tiwari Committee (Department of Company Affairs) SICA,1985.
Ø 1991 Narasimham Committee I (RBI) RDDBFI Act, 1993.Ø 1998 Narasimham Committee II(RBI) SARFAESI Act, 2002.Ø 1998 Narasimham Committee II(RBI) SARFAESI Act, 2002.Ø 1999 Justice Eradi Committee (GOI) Companies (Amendment) Act,
2002, Proposed repeal of SICA.Ø 2001 L. N. Mitra Committee (RBI) Proposed a comprehensive
bankruptcy code.Ø 2005 Irani Committee (RBI) Enforcement of Securities Interest and
Recovery of Debts Bill, 2011. (With amendments to RDDBFI andSARFAESI).
Ø 2008 Raghuram Rajan Committee (Planning Commission)Ø 2013 Financial Sector Legislative Reforms Commission (Ministry
of Finance) Proposed improvements to credit infrastructure.
ORIGINORIGIN• Pursuant to the proposal contained in budget of
2014-15 and by order dated 10.11.2014 Committeeheaded by Shri T. K. Vishwanathan, a committeeconsisting of 15 prominent members from legal andother fraternity was appointed to make suggestionfor “Entrepreneur Friendly legal bankruptcyframework. The Committee was to submit its report inframework. The Committee was to submit its report intwo phases:
• 1) Interim Report by February 2015 and
• 2) Final report within 12 months thereafter.
• The Committee submitted its final report inNovember, 2015.
BASIC PHILOSOPHY
q The failure of some business plans is integral to theprocess of the market economy.
q When business failure takes place, the best outcome forsociety is to have a rapid renegotiation between thefinanciers, to finance the going concern using a newarrangement of liabilities and with a new managementteam.team.
q If this cannot be done, the best outcome for society is arapid liquidation. When such arrangements can be put intoplace, the market process of creative destruction will worksmoothly, with greater competitive vigor and greatercompetition
EXPECATIONSEXPECATIONS
§ India is in the process of laying the foundations of amature market economy.
§ This involves well drafted modern laws, that replacethe laws of the preceding 100 years, and highperformance organisations which enforce thesenew laws.new laws.
§ The Committee has endeavored to provide onecritical building block of this process, with a moderninsolvency and bankruptcy code, and the design ofassociated institutional infrastructure which reducesdelays and transaction costs.
EXPECTATIONS
¢ We hope that the implementation of this report willincrease GDP growth in India by fostering theemergence of a modern credit market, andparticularly the corporate bond market.
¢ GDP growth will accelerate when more credit isavailable to new firms including firms which lacktangible capital. While many other things need to bedone in achieving a sound system of finance andfirms, this is one critical building block of that edifice.
ISSUES WITH THE PRESENT SYSTEMISSUES WITH THE PRESENT SYSTEM
¢ Failure of auctions At present, in many public sector settings,auctions tend to go wrong because some bidders proposevalues which are too low. The bidders know that in the absenceof an efficient bankruptcy process, they will not be displacedfrom their concession agreement, and they will have the abilityto renegotiate terms from a position of strength.
¢ An efficient bankruptcy code would yield a better answer:¢ An efficient bankruptcy code would yield a better answer:When a project gets into trouble, it would be resolved using theformal bankruptcy process.
¢
¢ Corporate bond market development The natural financingstrategy in all countries is for large companies (e.g. the top 500firms) to obtain all their debt financing from the bond market.This channel has been choked off in India, partly owing to thefact that corporate bond holders obtain particularly badrecovery rates under the present arrangements.
CONFLIT IN CREDITOR DEBTOR CONFLIT IN CREDITOR DEBTOR NEGOTIOATIONNEGOTIOATION
Ø The outcome of such a negotiation is optimal whenthe interests of the debtor and creditors are alignedto maximise economic value of the enterprise.
Ø However, there are several elements in thenegotiation that increase rather than preventconflict between the two.conflict between the two.
Ø One conflict arises because the asymmetry ofinformation between the creditor and the debtor.Since the debtor will always have more informationabout the enterprise than the creditor, they tend tohave the upper-hand in the negotiation.
CONFLIT IN CREDITOR DEBTOR CONFLIT IN CREDITOR DEBTOR NEGOTIOATIONNEGOTIOATION
¢ Another conflict arises in the approach of thecreditors and debtor to preserving the timevalue of their own investment.
¢ The creditor has the incentive to close out herinvestment quickly so as to avail of alternativeinvestment opportunities.investment opportunities.
¢ The debtor has the incentive to hold on to theassets, either to benefit from potentially higherreturns by deploying the assets in more riskyventures or to benefit by stripping asset value.
¢ Conflicts tend to be exacerbated when there aremultiple levels and types of liabilities in anenterprise.
NEED FOR HEALTHY RESOLUTIONNEED FOR HEALTHY RESOLUTION
¢ The idea that promoters should be held personally financiallyresponsible for defaults of the firms that they control. However,the following perspectives are useful in the context ofenterprises:
1. Some business plans will always go wrong. In a growingeconomy, firms make risky plans of which some plans will fail,economy, firms make risky plans of which some plans will fail,and will induce default. If default is equated to malfeasance,then this can hamper risk taking by firms. This is an undesirableoutcome, as risk taking by firms is the wellspring of economicgrowth. Bankruptcy law must enshrine business failure as anormal and legitimate part of the working of the marketeconomy.
2. Control of a company is not divine right. When a firm defaults onits debt, control of the company should shift to the creditors. Inthe absence of swift and decisive mechanisms for achievingthis, management teams and shareholders retain control afterdefault.
PPRESENTRESENT ARRANGEMENTSARRANGEMENTS ININ IINDIANDIA
¢ Individual bankruptcy and insolvency Ø The Presidency Towns Insolvency Act, 1909, covers the
insolvency of individuals and of partnerships andassociations of individuals in the three erstwhile Presidencytowns of Chennai, Kolkata and Mumbai.
Ø The 1861 Indian High Courts Act led to the setting up of theHigh Court system in place of the Presidency towns SupremeCourts, which also has jurisdiction over insolvency relatedCourts, which also has jurisdiction over insolvency relatedmatters in the Presidency towns.
Ø The Provincial Insolvency Act 1920, is the insolvency law forindividuals in areas other than the Presidency towns, dealswith insolvency of individuals, including individuals asproprietors. Section 3(1) of the Provincial Insolvency Act,1920, allows the State Government to empower subordinatecourts to hear insolvency petitions, with district courts actingas the court of appeal.
EXISTING MECHANISM FOR CORPORATE INSOLVENCYEXISTING MECHANISM FOR CORPORATE INSOLVENCY
Ø Corporate bankruptcy and insolvency Companies areregistered under the Companies Act, 2013.
Ø Limited liability partnerships are registered under theLimited Liability Partnership Act, 2008.
Ø The Micro, Small and Medium Enterprise DevelopmentAct, 2006, registers MSMEs but does not yet haveprovisions for resolving insolvency and bankruptcy.
Ø Partnership firms are registered under the IndianPartnerships Act, 1932, insolvency and bankruptcyresolution of partnership firms is treated the same asunder individual insolvency and bankruptcy law.
DEBT RECOVERY MECHANISMDEBT RECOVERY MECHANISM
Ø A civil court of relevant jurisdiction is the basic mechanism thatis available to any creditor for debt recovery.
Ø If the loan is backed by security, this is enforced as a contractunder the law.
Ø The Recovery of Debt Due to Banks and Financial InstitutionsAct (RDDBFI Act) 1993 gives banks and a specified set ofAct (RDDBFI Act) 1993 gives banks and a specified set offinancial institutions greater powers to recover collateral atdefault.
Ø Under certain specified conditions, the Securitisation andReconstruction of Financial Assets and Enforcement ofSecurity Interest Act (SARFAESI) 2002 enables securedcreditors to take possession of collateral without requiring theinvolvement of a court or tribunal.
CORPORATE INSOLVENCYCORPORATE INSOLVENCYØ Companies Act 2013 contains provisions for rescue and
rehabilitation of all registered entities in Chapter XIX, andLiquidation in Chapter XX. [ to be notified]
Ø The law for rescue and rehabilitation remains the Sick IndustrialCompanies (Special Provisions) Act (SICA), 1985. Under SICA, aspecialised Board of Industrial and Financial Reconstruction (BIFR)assesses the viability of the industrial company. Once it has beenassessed to be unviable, BIFR refers the company to the High Courtfor liquidation.
Ø The SICA was repealed in 2003, but the repealing act could not beØ The SICA was repealed in 2003, but the repealing act could not benotified as the National Company Law Tribunal proposed by a 2002amendment to the Companies Act, 1956 got entangled in litigation.
Ø The current legal framework for bankruptcy resolution (calledwinding up of a company on inability to pay debt) continues to bethe Companies Act 1956.
Ø Out-of-court mechanisms set up after 2000 for banks to restructureloan contracts with debtors include Corporate Debt Restructuring(CDR) and more recently, the Joint Lending Forum and the StrategicDebt Restructuring.
ISSUES UNDER THE PRESENT ARRANGMENTSISSUES UNDER THE PRESENT ARRANGMENTS
¢ Cases that are decided at the tribunal. often come for review tothe High Courts. This gives rise to two types of problems inimplementation of the resolution framework.
¢ The first is the lack of clarity of jurisdiction. In a situation whereone forum decides on matters relating to the rights of the creditor,while another decides on those relating to the rights of thedebtor, the decisions are readily appealed against and eitherstayed or overturned in a higher court.
¢ Ideally, if economic value is indeed to be preserved, there must bea single forum that hears both sides of the case and make ajudgement based on both.
¢ A second problem exacerbates the problems of multiple judicialfora. The fora entrusted with adjudicating on matters relating toinsolvency and bankruptcy may not have the business or financialexpertise, information or bandwidth to decide on such matters.This leads to delays and extensions in arriving at an outcome, andincreases the vulnerability to appeals of the outcome /BIFR
OTHER ECONOMIESOTHER ECONOMIES
¢ The insolvency resolution framework in the UK is theInsolvency Act of 1986, which was substantially modifiedwith the Insolvency Act of 2000, and the Enterprise Act of2002.
¢ The first Act for bankruptcy resolution in the US that lastedfor a significant time was the Bankruptcy Act of 1989. Thiswas followed by the Act of 1938, the Reform Act of 1978, thewas followed by the Act of 1938, the Reform Act of 1978, theAct of 1984, the Act of 1994, a related consumer protectionAct of 2005.
¢ Singapore proposed a bankruptcy reform in 2013, while thereare significant changes that are being proposed in the US andthe Italian bankruptcy framework this year in 2015. Severalof these are structural reforms with fundamentalimplications on resolving insolvency.
UNICITRAL LEGISLATIVE GUIDE ON INSOLVENCY UNICITRAL LEGISLATIVE GUIDE ON INSOLVENCY 20052005
It emphasis on the following objectives for a collective insolvency resolution regime:
1. Provision of certainty in the market to promote efficiency andgrowth.
2. Maximization of value of assets.3. Striking a balance between liquidation and reorganization.4. Ensuring equitable treatment of similarly situated creditors.5. Provision of timely, efficient and impartial resolution of5. Provision of timely, efficient and impartial resolution of
insolvency.6. Preservation of the insolvency estate to allow equitable
distribution to creditors.7. Ensuring a transparent and predictable insolvency law that
contains incentives for gathering and dispensing information.8. Recognition of existing creditor rights and establishment of
clear rules forranking priority of claims.9. Establishment of a framework for cross-border insolvency
UNIVERSAL APPROACHUNIVERSAL APPROACH
¢ These principles are derived from three corefeatures that most well developed bankruptcy andinsolvency resolution regimes share:
¢ a linear process that both creditors and debtorsfollow when insolvency is triggered;follow when insolvency is triggered;
¢ a collective mechanism for resolving insolvencywithin a framework of equity and fairness to allstakeholders to preserve economic value in theprocess;
¢ a time bound process either ends in keeping thefirm as a going enterprise, or liquidates anddistributes the assets to the various stakeholders.
MAIN FEATURE OF THE CODEMAIN FEATURE OF THE CODE
¢ Objectives The Committee set the following asobjectives desired from implementing a new Code toresolve insolvency and bankruptcy:
¢ 1. Low time to resolution.
¢ 2. Low loss in recovery.
¢ 3. Higher levels of debt financing across a widevariety of debt instruments.
¢ The performance of the new Code inimplementation will be based on measures of theabove outcomes.
PPRINCIPLESRINCIPLES DRIVINGDRIVING THETHE DESIGNDESIGN
The Code will facilitate the assessment of viability of the enterprise at a very early stage.
1. The viability of the enterprise is a matter of business, andthat matters of business can only be negotiated betweencreditors and debtor.While viability is assessed as a negotiation between creditors
and debtor, the final decision has to be an agreement amongcreditors who are the financiers willing to bear the loss in theinsolvency.insolvency.
2. The legislature and the courts must control the process ofresolution, but not be burdened to make business decisions.
3. The law must set up a calm period for insolvency resolutionwhere the debtor can negotiate in the assessment of viabilitywithout fear of debt recovery enforcement by creditors.
4. The law must appoint a resolution professional as themanager of the resolution period, so that the creditors cannegotiate the assessment of viability with the confidence that thecreditor will not take any action to erode the value of theenterprise.
ROLE OF PROFESSIONALSROLE OF PROFESSIONALS
¢ The professional will have the power andresponsibility to monitor and manage theoperations and assets of the enterprise.
¢ The professional will manage the resolutionprocess of negotiation to ensure balance ofprocess of negotiation to ensure balance ofpower between the creditors and debtor, andprotect the rights of all creditors.
¢ The professional will ensure the reduction ofasymmetry of information between creditorsand debtor in the resolution process.
INFORMATION UTILITIESINFORMATION UTILITIES
¢ The Code will enable symmetry of information betweencreditors and debtors.
¢ The law must ensure that information that is essentialfor the insolvency and the bankruptcy resolution processis created and available when it is required.is created and available when it is required.
¢ The law must ensure that access to this information ismade available to all creditors to the enterprise, eitherdirectly or through the regulated professional.
¢ The law must enable access to this information to thirdparties who can participate in the resolution process,through the regulated professional.
TIME BOUND PROCESSTIME BOUND PROCESS
¢ The Code will ensure a time-bound process to better preserve economic value.
¢ Delaying tactics in these negotiations will not extend thetime set for negotiations at the start.
¢ The Code will ensure a collective process.¢ The law must ensure that all key stakeholders will
participate to collectively assess viability.¢ The law must ensure that all creditors who have the
capability and the willingness to restructure theircapability and the willingness to restructure theirliabilities must be part of the negotiation process.
¢ The liabilities of all creditors who are not part of thenegotiation process must also be met in any negotiatedsolution.
The Code will respect the rights of all creditors equally.
¢ The law must be impartial to the type of creditor incounting their weight in the vote on the final solution inresolving insolvency.
EXPECTED OUTCOMEEXPECTED OUTCOME
It is expected that when the negotiations fail to establish viability, the outcome of bankruptcy must be
binding
¢ If the liquidation of an enterprise which has been foundunviable. This outcome of the negotiations should beprotected against all appeals other than for veryexceptional cases.The Code ensure clarity of priority, and that the rights of¢ The Code ensure clarity of priority, and that the rights ofall stakeholders are upheld in resolving bankruptcy.
¢ Lay out the priority of distributions in bankruptcy to allstakeholders. The priority must be designed so as toincentivise all stakeholders to participate in the cycle ofbuilding enterprises with confidence.
¢ It incentivise collective action in resolving bankruptcy,there must be a greater flexibility to allow individual actionin resolution and recovery during bankruptcy comparedwith the phase of insolvency resolution.
THE CODE THE CODE
¢ The Insolvency and Bankruptcy Code, 2015¢ The Insolvency and Bankruptcy Code, 2015 was
introduced by the Minister of Finance, Mr ArunJaitley, in Lok Sabha on December 21, 2015.
¢ The Code seeks to create a unified framework forresolving insolvency and bankruptcy in India.
¢ Insolvency is a situation where individuals ororganisations are unable to meet their financialobligations.
RREPEALEPEAL ANDAND AAMENDMENTSMENDMENTS
¢ The Code seeks to repeal the Presidency TownsInsolvency Act, 1909 and Provincial Insolvency Act,1920. In addition, it seeks to amend 11 laws,including the Companies Act, 2013, Recovery ofDebts Due to Banks and Financial Institutions Act,1993 and Sick Industrial Companies (SpecialProvisions) Repeal Act, 2003, among others.Provisions) Repeal Act, 2003, among others.
¢ The Code will apply to companies, partnerships,limited liability partnerships, individuals andany other body specified by the centralgovernment.
BROAD ARRANGEMENTSBROAD ARRANGEMENTS
¢ Insolvency Resolution: The insolvency resolution process (IRP)for individuals varies from that of companies. These processesmay be initiated by either the debtor or the creditors.
¢ Resolution process for companies and limited liabilitypartnerships: The resolution process will have to be completedwithin a maximum period of 180 days from the date ofregistration of the case. This period may be extended by 90 daysif 75% of the financial creditors agree. The process will involvenegotiations between the debtor and creditors to draft aresolution plan.resolution plan.
¢ The process will end under two circumstances, (i) when aresolution plan is agreed upon by a majority of the creditors andsubmitted to the adjudicating authority, or (ii) the time period fornegotiation has come to an end. In case a plan cannot benegotiated upon, the company will go into liquidation.
¢ There will be provision for a fast track insolvency resolutionprocess for companies with smaller operations. The process willhave to be completed within 90 days, which may be extended if75% of financial creditors agree.
BROAD ARRANGEMENTSBROAD ARRANGEMENTS
¢ Resolution process for individuals and partnerships: Beforegoing in for insolvency resolution, the debtor may apply forforgiveness of a specified amount of debt, provided that hisassets are below a limit set by the central government. Thisprocess will have to be completed within six months.
¢ In case of insolvency resolution, negotiations between thedebtor and creditors will be supervised by an insolvencyprofessional. If negotiations succeed, a repayment plan, agreedprofessional. If negotiations succeed, a repayment plan, agreedupon by a majority of the creditors, will be submitted to theadjudicator. If they fail, the matter will proceed to bankruptcyresolution.
¢ Insolvency professionals and agencies: The IRP will bemanaged by a licensed professional. The professional will alsocontrol the assets of the debtor during the process.
¢ The Code also proposes to set up insolvency professionalagencies. These agencies will admit insolvency professionalsas members and develop a code of conduct and evolveperformance standards for them.
NEW PLAYERSNEW PLAYERS¢ Information Utilities: The Code proposes to establish
information utilities which will maintain a range of financialinformation about firms. These utilities will collect, collate anddisseminate this information to facilitate insolvency resolutionproceedings.
¢ Insolvency regulator: The Code seeks to establish theInsolvency and Bankruptcy Board of India, to overseeinsolvency resolution in the country. The Board will have 10members, including representatives from the centralgovernment and Reserve Bank of India. It will registermembers, including representatives from the centralgovernment and Reserve Bank of India. It will registerinformation utilities, insolvency professionals and insolvencyprofessional agencies under it, and regulate their functioning.
¢ Insolvency and Bankruptcy Fund: The Code creates anInsolvency and Bankruptcy Fund. Deposits to the Fund willinclude: (i) grants made by the central government, (ii) amountdeposited by persons, and (iii) interest earned on investmentsmade from the Fund. Any person who has contributed to theFund may apply for withdrawal, in case of proceedingsagainst him.
ADJUDICATORSADJUDICATORS
¢ Bankruptcy and Insolvency Adjudicators: The Codeproposes two separate tribunals to adjudicate grievancesrelated to insolvency, bankruptcy and liquidation of differententities under the law:
¢ (i) the National Company Law Tribunal will have jurisdiction overcompanies and limited liability partnerships, and
¢ (ii) the Debt Recovery Tribunal will have jurisdiction overindividuals and partnership firms.
¢ Appeals against orders of these tribunals may be¢ Appeals against orders of these tribunals may bechallenged before their respective Appellate Tribunals, andfurther before the Supreme Court.
¢ Offences and penalties: The Bill specifies that for mostoffences committed by a debtor under corporate insolvency (likeconcealing property, defrauding creditors, etc.), the penalty willbe imprisonment of up to five years, with a fine of up to onecrore rupees. For offences committed by an individual (likeproviding false information), the imprisonment will vary based onthe offence. For most of these offences, the fine will not exceedfive lakh rupees.
THE INSOLVENCY AND BANKRUPTCY CODE, THE INSOLVENCY AND BANKRUPTCY CODE, 20152015
PART -I¢ TOTAL SECTIONS – 3 (Mainly extent of operation &
definitions.PART – II
CORPORATE INSOLVENCY RESOLUTION PROCESS¢ Chapter-I - Application & definitions¢ Chapter-II - Corporate Insolvency Resolution Process (Sec
6 to 32 total 37)6 to 32 total 37)¢ Chapter-III - Liquidation Process- (Sec 33 to 54 total 27)¢ Chapter-IV - Fast Track Corporate Insolvency Resolution
Process- (Sec 55 to 58 total 4)¢ Chapter-V - Voluntary Liquidation – Section 59¢ Chapter-VI - Adjudicating Authority-Corporate – (Sec 60 to
67 total 8)¢ Chapter-VII - Offences & Penalties (Sec 68 to 77 total 10)
INSOLVENCY RESOLUTIONINSOLVENCY RESOLUTION-- INDIVIDUAL /PARTNERSHIP FIRMSINDIVIDUAL /PARTNERSHIP FIRMS
PART-III¢ Chapter-I - Application & Definitions (Sec 78-79)¢ Chapter-II - Fresh Start Process (Sec 80 to 93 total 14)¢ Chapter-III - Insolvency Resolution Process (Sec 94 to
120 total 26)¢ Chapter-IV - Bankruptcy Orders (Sec 121 to 148 total 29)Chapter-IV - Bankruptcy Orders (Sec 121 to 148 total 29)
¢ Chapter-V - Administration & Distribution of Estate of Bankrupt (Sec 149 to 178 total 31)
¢ Chapter-VI - Adjudicating Authority (Sec 179 to 183 total 5)
¢ Chapter-VII - Offences & Penalties (Sec 184 to 187 total 4)
REGULATION OF INSOLVENCY PROFESSIONALS, REGULATION OF INSOLVENCY PROFESSIONALS, AGENCIES AND INFORMATION UTILITIESAGENCIES AND INFORMATION UTILITIES
PART IV¢ Chapter-I - The Insolvency & Bankruptcy Board of India
(Sec 188 to 195)¢ Chapter-II - Powers and Functions of the Board (Sec 196
to 197)¢ Chapter-III - Insolvency Professional Agencies (199 to¢ Chapter-III - Insolvency Professional Agencies (199 to
206)¢ Chapter-IV - Insolvency Professionals (Sec 207 to 208)¢ Chapter-V -Information Utilities (Sec 209 to 216)¢ Chapter-VI- Inspection and Investigation (Sec 217 to
220)¢ Chapter-VII - Finance, Accounts and Audit
MISCELLANEOUS PROVISIONSMISCELLANEOUS PROVISIONS
PART – V [Sec 224 to 252]¢ 224 - Insolvency and Bankruptcy Fund¢ 225 - Power of CG to issue Directions¢ 226 - Powers of CG to supersede Board¢ 227 - Power of CG to Notify financial sector providers etc¢ 228 - Budget¢ 229 - Annual Report¢ 230 - Delegation¢ 230 - Delegation¢ 231 - Bar of Jurisdiction ¢ 232 - Members, officers and employees of Board to be Pub
Servants¢ 233 - Protection of Action Taken¢ 234 - Provisions of the Code to override other laws¢ 235-39 - Powers to make rules/regulations/before
Parliament/remove difficulties/repeals and savings¢ 240 - Special Courts/ Section 241 – Transitional provisions
SSOMEOME IMPORTANTIMPORTANT DDEFINITIONSEFINITIONS
Section 2 (6) “claim” means—¢ (a) a right to payment, whether or not such right is
reduced to judgment,¢ fixed, disputed, undisputed, legal, equitable, secured, or
unsecured;
¢ (b) right to remedy for breach of contract under any lawfor the time being in force, if such breach gives rise to aright to payment, whether or not such right is reduced tojudgment, fixed, matured, unmatured, disputed,undisputed, secured or unsecured;
DDEFINITIONSEFINITIONS CONTDCONTD …..…..¢ (10) “creditor” means any person to whom a debt is owed and includes
a financial creditor, an operational creditor, a secured creditor, anunsecured creditor and a decree holder;
¢ (20) “operational creditor” means a person to whom an operationaldebt is owned and includes any person to whom such debt has beenlegally assigned or transferred (including a person resident outsideIndia);
¢ (11) “debt” means a liability or obligation in respect of a claim which isdue from any person and includes a financial debt and operational debt;due from any person and includes a financial debt and operational debt;
¢ (21) “operational debt” means a claim in respect of the provision ofgoods or services including employment or a debt in respect of therepayment of dues arising under any law for the time being in force andpayable to the Central Government, any State Government or any localauthority;
¢ (12) “default” means non-payment of debt when whole or any part orinstallment of the amount of debt has become due and payable and isnot repaid by the debtor or the corporate debtor, as the case may be;
INFORMATION UTILITIESINFORMATION UTILITIES
¢ (21) “information utility” means a person who is registered with the Board as an information utility under section 210;
¢ (9) “core services” means services rendered by aninformation utility for—
¢ (a) accepting electronic submission of financial informationin such form and manner a may be specified;in such form and manner a may be specified;
¢ (b) safe and accurate recording of financial information;¢ (c) authenticating and verifying the financial information
submitted by a person; and ¢ (d) providing access to information stored with the
information utility to persons as may be specified;
IINFORMATIONNFORMATION UUTILITIESTILITIES --FFINANCIALINANCIAL IINFORMATIONNFORMATION
Section 2 (13) “financial information”, in relation to a person, means one
or more of the following categories of information, namely :—
¢ (a) records of the debt of the person;(a) records of the debt of the person;¢ (b) records of liabilities when the person is solvent;¢ (c) records of assets of person over which security interest
has been created;¢ (d) records, if any, of instances of default by the person
against any debt; and¢ (e) records of the balance sheet and cash-flow statements of
the person; and¢ (f) such other information as may be specified;
DDEFINITIONSEFINITIONS ….….
¢ (23) “person” includes—¢ (a) an individual; (b) a Hindu Undivided Family; (c) a
company; (d) a trust; (e) a partnership; (f) a limitedliability partnership; and (g) any other entityestablished under a statute, and includes a personresident outside India;
¢ (27) “property” includes money, goods, actionableclaims, land and every description of property situatedanywhere and every description of interest includingpresent or future or vested or contingent interestarising out of, or incidental to, property;
WHO CAN INITIATE INSOLVENCY PROCESSWHO CAN INITIATE INSOLVENCY PROCESS
CORPORATE
DEFUALT OF > ONE LAKH
DEFAULT TO
ANY FC
PARTNERSHIP FIRM & INDIVIDUALS
DEFUALAT > RS 1000
DEBTOR[FIRM – MAJORITY
PARTNERS]
ADJUDICATING AUTHORITY
CORPORATAE- [SEC 60] & PERSONAL GUARANTORS
NCLT HAVING TERRITORIAL JURISDICTION
[VESTED WITH ALL POWERS OF DRTS]ANY FC
HIMSELF
FINANCIAL CREDITOR/ WITH
OTHER FC
OPRN CRED- After notice of demand
u/s 8
PARTNERS]
CREDITOR/WITH OTHER CREDITORS
AGAINST FIRMINDIVIDUAL PARTNER
POWERS OF DRTS]
INDV/FIRM- DRT- HAVING TERRITORIAL
JURISDICTION OVER INDIVIDUAL
SECTION 179
PROCESS OF ADJUDICATIONPROCESS OF ADJUDICATION
COMMENCEMENT OF PROCEEDINGS - Order to be communicated within two days of And/Rejection
DAT OF ADMISSION OF APP /U/S 5 (a) I R to be completed within 180 days (s. 12) +Max 90 days by 75% Committee of Creditors (Extn only once)
ADJUDICATING AUTHORITY [WILTHIN 14 DAYS OF RECEIPT OF APP
ACCEPT- Satisfied – Default + Complete + No DP against IP
REJECT - IF CONDITIONS NOT SATISFIED 15 DAYS NOTICE TO RACTIFY
Management of affairs of corporate debtor by interim resolution professional [section 17]
MORATORIUM/PUBLIC ANNOUNCEMENT/ APPT IP (Sec 13 to 16)
MORATORIUM – TILL RESOLUTION (270DAYS) PUBLIC ANNOUNCEMENT APPT IP+TENURE
MMANAGEMENTANAGEMENT OFOF AFFAIRSAFFAIRS OFOF DEBTORDEBTOR DURINGDURING INTERREGNUMINTERREGNUM
NO FINANCIAL CREDITORS [FC]- COMMITTEE TO BE APPOINTED BY THE
IP (INTRIM) TO MANAGE AFFAIRS AND ASSETS OF DEBTOR AS GOING CONCERN
COLLATE ALL CLAIMS AGAINST DEBT
CONSTITUTE COMMITTEE OF ALL
CRDITORS
NO RELATED PARTY TO HAVE REP
RP TO CONDUCT AFFAIRS OF THE DEBTOR IN RESOLUTION PROCESS
MANAGE AFFAIRS [SAME AS INTRIM IP] CONDUCT MEETING OF FC
NO FINANCIAL CREDITORS [FC]- COMMITTEE TO BE APPOINTED BY THE BOARD
DECISION BY 75% OF FINANCIAL CREDITORS TO APPOINT RP WITHIN 3 DAYS
MMEETINGEETING OFOF CREDITORSCREDITORS –– CRITICALCRITICAL ASPECTSASPECTS
(1) The members of the committee of creditors may meet in person or bysuch other electronic means as may be specified.
(2) All meetings of the committee of creditors shall be conducted by the resolution professional.
(3) …suspended board of directors or the partners of the corporate person, as the case may be.
(4) The directors and partners may attend meetings of the committee ofcreditors but shall not have any voting right. Absence of any suchdirector or partner, shall not invalidate proceedings of such meeting.
(5) Any creditor who is a member of the committee of creditors may appoint(5) Any creditor who is a member of the committee of creditors may appointan insolvency professional other than the resolution professional torepresent such creditor in a meeting of the committee of creditors. Thefees payable to such insolvency professional shall be borne by suchcreditor.
(6) Each creditor shall vote in accordance with the voting share assigned tohim based on the financial debts owed to such creditor.
(7) The resolution professional shall determine the voting share to beassigned to each creditor in the manner specified by the Board. (8) Themeetings of the committee of creditors shall be conducted in suchmanner as may be specified.
PPRIORRIOR APPROVALAPPROVAL OFOF COMMITTEECOMMITTEE REQUIREDREQUIRED FORFOR
(a) raise any interim finance in excess of the amount as may bedecided by the committee of creditors in their first meeting;
(b) create any security interest(c) change the capital structure(d) any change in the ownership interest of the corporate debtor;(e) give instructions to financial institutions maintaining accounts for
a debit transaction from any such accounts in excess of theamount as may be decided by the committee of creditors in theirfirst meeting;amount as may be decided by the committee of creditors in theirfirst meeting;
(f) undertake any related party transaction;(g) amend any constitutional documents of the corporate debtor;(h) delegate its authority to any other person;(i) dispose of or permit the disposal of shares of any shareholder of
the corporate debtor or their nominees to third parties;(j) make any change in the management of the corporate debtor or
its subsidiary;
APPROVAL OF CR COM REQUIRED SEC APPROVAL OF CR COM REQUIRED SEC --2828(k) transfer rights or financial debts or operational debts under material
contracts otherwise than in the ordinary course of business;(l) make changes in the appointment or terms of contract of such personnel,
as specified by the committee of creditors; or (m) make changes in theappointment or terms of contract of statutory auditors or internal auditorsof the corporate debtor.
(2) RP shall convene a meeting of the committee of creditors and seek thevote of the creditors prior to taking any of the actions under sub-section(1).
(3) No action under sub-section (1) shall be approved by the committee ofcreditors unless approved by a vote of seventy-five per cent. of the votingshares.
(4) action under sub-section (1) without seeking the approval of thecommittee of creditors in the manner as required in this section, shall bevoid.
(5) The committee of creditors may report the actions of the RP under sub-section (4) to the Board for removal of RPf or undertaking such actions.
SSTEPSTEPS REQUIREDREQUIRED BYBY INSOLVENCYINSOLVENCY PROFESSIONALPROFESSIONAL
Sections¢ 29 - PREPARATION OF INFO MEMO¢ 30 - APPROVAL OF RESOLUTION PLAN BY COMMITTEE OF CREDITORS¢ 31 - APPROVAL OF RESOLUTION PLAN BY ADJUDICATING AUTHORITY [AA]
¢ May Approve: It will be binding on the Corp Debtr, its employees, members, creditors, guarantors and other stakeholders involved in resolution plan.
¢ -The Moratorium order passed by AA u/s 14 shall cease to have effect¢ May Reject: AA may reject RP if it does not conform to the requirement ref to in clauses (a) and (b) of sub-
section (l).
¢ 32- Grounds of Appeal against the order of AA- on the ground of Section 61 (3)¢ 32- Grounds of Appeal against the order of AA- on the ground of Section 61 (3)
¢ (i) the approved resolution plan is in contravention of the provisions of any law for the time being inforce;
¢ (ii) there has been material irregularity in exercise of the powers by the resolution professional during the corporate insolvency resolution period;
¢ (iii) the debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified by the Board;
¢ (iv) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or
¢ (v) the resolution plan does not comply with any other criteria specified by the Board.¢ (4) An appeal against a liquidation order passed under section 33 may be filed on grounds of material
irregularity or fraud committed in relation to such a liquidation order.
FFASTAST TRACKTRACK PROCEDUREPROCEDURE
¢ 57. An application for fast track corporate insolvency resolutionprocess may be initiated by a creditor or corporate debtor as thecase may be, by furnishing: [For this assets & income & categoryas to be notified]
¢ (a) the proof of the existence of default as evidenced by recordsavailable with an information utility or such other means as maybe specified by the Board; and
¢ (b) such other information as may be specified by the Board toestablish that the corporate debtor is eligible for fast track
¢ (b) such other information as may be specified by the Board toestablish that the corporate debtor is eligible for fast trackcorporate insolvency resolution process. Manner of initiatingfast track corporate insolvency resolution process. [To becompleted within 90 days+45 days (only once) by AA with 75% ofCreditors consent]
¢ 58. The process for conducting an corporate insolvencyresolution process under Chapter II and the provisions relating tooffences and penalties under Chapter VII shall apply to thisChapter as the context may require.
LLIQUIDATIONIQUIDATION PROCESSPROCESS TOTO BEGINBEGIN WHENWHEN
¢ NO RESOLTION PLAN SUBMITED
¢ AA REJECTED RP FOR NON COMPLIANCE WITH REQUIREMENTS
¢ PASS AN ORDER THAT CORP DEBTOR TO BE LIQUIDATED
¢ COMINITTEE CREDITORS DECIDE TO LIQUIDATE ¢ CORPORATE DEBT RESOLUTION PLAN IS
CONTRAVENED [PERSON WHOSE INTT AREAFFECTED)
RRIGHTIGHT OFOF SECUREDSECURED CREDITORCREDITOR
¢ A] Relinquish its security interest to the liquidation estate and receiveproceeds from the sale of assets by the liquidator and accept distribution as persection 53.
¢ B] Realize its security interest in the manner specified in section 52 [subject toverification by liquidator and prove by (a) by record with IU or (b) by meansspecified by Board.
¢ C] A secured creditor may enforce, realise, settle, compromise or deal with thesecured assets in accordance with such law as applicable to the securityinterest being realised and to the secured creditor and apply the proceeds torecover the debts due to it.
¢ If secured creditor faces resistance from the corporate debtor or any¢ If secured creditor faces resistance from the corporate debtor or anyperson connected therewith in taking possession of, selling or otherwisedisposing off the security, the secured creditor may make an application to theAdjudicating Authority to facilitate the secured creditor to realise such securityinterest which may pass such order as may be necessary to permit a securedcreditor to realise security interest in accordance with law for the time being inforce.
¢ The amount of insolvency resolution process costs, due from secured creditorsshall be deducted from the proceeds of any realisation by such securedcreditors,
¢ Where the proceeds of the realisation of the secured assets are not adequate torepay debts owed to the secured creditor, the unpaid debts of such securedcreditor shall be paid by the liquidator in the manner specified in section53.
PPROCESSROCESS OFOF LIQUIDATIONLIQUIDATION SECTIONSECTION 3333¢ Moratorium - No suit or legal proceedings to be initiated by and against the corporate debtor.
Moratorium shall not prevent a secured creditor from realising its security in accordance with Section 52.
¢ Discharge of staff - Shall be deemed to be a notice of discharge to the officers, employees and workmen of the corporate debtor, except when the business of the corporate debtor is continued during the liquidation process by the liquidator.
¢ Liquidator - Resolution Professional appt under Chap II shall act as liquidator. All power of BoD/KPM/Partner shall cease and be vested in liquidator.
¢ Personnel of Cop Debt to extend cooperation to liquidator
¢ Fee - In proportion to the value of the liquidation estate assets¢ Fee - In proportion to the value of the liquidation estate assets
¢ Powers - Verify claim/custody of all assets etc/evaluate assets/preserve/carry on business for beneficial liquidation/sell property/actionable claims by public auction or private contract, draw negotiable insts/obtain professional assistance/institute and defend suits/ investigate financial affairs to evaluate undervalued or preferential transaction/ obtain orders from AA and other order
¢ Fiduciary capacity - The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors.
¢ Access to information - shall have the power to access any information systems for the purpose of admission and proof of claims and identification of the liquidation estate assets relating to the corporate debtor
¢ Claim in 30 days - shall receive or collect the claims of creditors within a period of thirty days from the date of the commencement of the liquidation process.
¢ Vary claim- A creditor may withdraw or vary his claim under this section within fourteen days of its submission.
PPROCESSROCESS OFOF LIQUIDATIONLIQUIDATION
¢ Admission / rejection - The liquidator may, after verification of claims under section 39, either admit or reject the claim, in whole or in part. Where a claim is rejected he shall record in writing the reasons for such rejection and communicate decision of admission or rejection of claims to the creditor and corporate debtor within three days
¢ Valuation - Determine the value of claims admitted under section 40 in such manner as may be specified by the Board
¢ Appeal - A creditor may appeal to the Adjudicating Authority against the decision of the liquidator rejecting the claims within fourteen days of the receipt of such decision.
¢ Avoidance of Preferential transaction - shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44.
¢ Exempted assets (sec 36)¢ (a) assets owned by a third party which are in possession of the corporate debtor, including —¢ (i) assets held in trust for any third party; (ii) bailment contracts; (iii) contributions in respect of ¢ (i) assets held in trust for any third party; (ii) bailment contracts; (iii) contributions in respect of
employee pensions;¢ ( iv) other contractual arrangements which do not stipulate transfer of title but only use of the
assets; and¢ (v) such other assets as may be notified by the Central Government in consultation with any
financial sector regulator;¢ (b) assets in security collateral held by financial services providers and are subject to netting and
set-off in multi-lateral trading or clearing transactions;¢ (c) personal assets of any shareholder or partner of a corporate debtor as the case may be
provided such assets are not held on account of avoidance transactions that may be avoided under this Chapter;
¢ (d) assets of any Indian or foreign subsidiary of the corporate debtor; or (e) any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor;
DISTRIBUTION OF ESTATE (PRIORITY)
¢ 53. (1) Notwithstanding anything to the contrary contained in anylaw enacted by the Parliament or any State Legislature for the timebeing in force, the proceeds from the sale of the liquidation assetsshall be distributed in the following order of priority and withinsuch period as may be specified, namely:—
¢ (a) the insolvency resolution process costs and the liquidation costs paid in full;
¢ (b) the following debts which shall rank equally between andamong the following:—among the following:—
¢ (i) debts owed to a secured creditor in the event such securedcreditor has relinquished security
¢ (ii) workmen’s dues for the period of twelve months preceding theliquidation commencement date;
¢ (c) wages and any unpaid dues owed to employees other thanworkmen for the period of twelve months preceding theliquidation commencement date;
¢ (d) financial debts owed to unsecured creditors;
DDISTRIBUTIONISTRIBUTION OFOF ESTATEESTATE
¢ (e) the following dues shall rank equally between and among the following:—
¢ i) any amount due to the Central Government and the State Governmentincluding the amount to be received on account of the Consolidated Fund inrespect of the whole or any part of the period of two years preceding theliquidation commencement date;
¢ (ii) debts owed to a secured creditor for any amount unpaid following theenforcement of security interest;
¢ (f) any remaining debts and dues;¢ (g) preference shareholders, if any; and (h) equity shareholders or partners,
as the case may be.as the case may be.¢ (2) Any contractual arrangements¢ (3) The fees payable to the liquidator shall be deducted proportionately from
the proceeds payable to each class of recipients.¢ Explanation.—For the purposes of this section,— (i) it is hereby clarified that
at each stage of the distribution of proceeds in respect of a class of recipientsthat rank equally, each of the debts will either be paid in full, or will be paidin equal proportion within the same class of recipients, if the proceeds areinsufficient to meet the debts in full; and (ii) the term “workmen’s dues”shall have the same meaning as assigned to it in section 326 of theCompanies Act, 2013.
AAVOIDANCEVOIDANCE OFOF CERTAINCERTAIN TRANSACTIONSTRANSACTIONS
PPREFERENTIALREFERENTIAL TRANSACTIONSTRANSACTIONS
¢ The preference must have been given during¢ the two years preceding the insolvency commencement date if
given to related parties and¢ one year preceding the insolvency commencement date if given
to all other persons.¢ Providing longer time periods for preferences given to related
parties would be important for avoiding such transactions as aProviding longer time periods for preferences given to relatedparties would be important for avoiding such transactions as anumber of transactions diminishing creditor wealth entered intowith related parties occur not only in the 'zone of insolvency' butas soon as early signals of trouble are visible.
¢ Related parties often have superior information of the corporatedebtor's financial affairs and may collude with the corporatedebtor to siphon off assets with the knowledge that thecorporate debtor may become insolvent in the near future.
XCEPTIONSXCEPTIONS
¢ For the purposes of sub-section (2) of Section 43, a preference shall not include the followingtransfers—
¢ (a) transfer made in the ordinary course of the business or financial affairs of the corporatedebtor or the transferee;
¢ (b) any transfer creating a security interest in property acquired by the corporate debtor to theextent that—
¢ (i) such security interest secures new value and was given at the time of or after the signing of asecurity agreement that contains a description of such property as security interest, and wasused by corporate debtor to acquire such property; and
¢ (ii) such transfer was registered with an information utility on or before thirty days after thecorporate debtor receives possession of such property:corporate debtor receives possession of such property:
¢ Provided that any transfer made in pursuance of the order of a court shall not preclude suchtransfer to be deemed as giving of preference by the corporate debtor.
¢ Explanation.—For the purpose of sub-section (3) of this section, “new value” means money or itsworth in goods, services, or new credit, or release by the transferee of property previouslytransferred to such transferee in a transaction that is neither void nor voidable by the liquidatoror RP under this Code, including proceeds of such property, but does not include a financial debtor operational debt substituted for existing financial debt or operational debt.
¢ (4) A preference shall be deemed to be given at a relevant time, if — (a) it is given to a relatedparty (other than by reason only of being an employee), during the period of two years precedingthe insolvency commencement date; or (b) a preference is given to a person other than a relatedparty during the period of one year preceding the insolvency commencement date.
UUNDERVALUEDNDERVALUED TRANSACTIONSTRANSACTIONS
¢ 45 provides for the avoidance of transactions at undervalue suchas (a) gifts, or (b) transactions where the value of theconsideration received by the corporate debtor is significantly lessthan the value provided by such corporate debtor.
¢ A transaction shall be considered undervalued where thecorporate debtor—corporate debtor—
¢ (a) makes a gift to a person; or¢ (b) enters into a transaction with a person which involves the
transfer of one or more assets by the corporate debtor for aconsideration the value of which is significantly less than thevalue of the consideration provided by the corporate debtor, andsuch transaction has not taken place in the ordinary course ofbusiness of the corporate debtor.
UUNDERVALUEDNDERVALUED TRANSACTIONSTRANSACTIONS CONTDCONTD....
¢ 46. (1) In an application for avoiding a transaction atundervalue, the liquidator or the resolution professional,as the case may be, shall demonstrate that—
¢ (i) such transaction was made with any person within theperiod of one year preceding the insolvencycommencement date; or
¢ (ii) such transaction was made with a related party withinthe period of two years preceding the insolvencycommencement date.
¢ (2) The Adjudicating Authority may require anindependent expert to assess evidence relating to thevalue of the transactions mentioned in this section.
TTRANSACTIONSRANSACTIONS DEFRAUDINGDEFRAUDING CREDITORSCREDITORS
¢ 49. Where the corporate debtor has entered into anundervalued transaction as referred to in sub-section (2) ofsection 45 and the Adjudicating Authority is satisfied thatsuch transaction was deliberately entered into by suchcorporate debtor—
¢ (a) for keeping assets of the corporate debtor beyond the¢ (a) for keeping assets of the corporate debtor beyond thereach of any person who is entitled to make a claim againstthe corporate debtor; or
¢ (b) in order to adversely affect the interests of such aperson in relation to the claim
[NO TIME LIMIT FIXED]
EEXTORTIONATEXTORTIONATE TRANSACTIONSTRANSACTIONS
¢ 50. (1) Where the corporate debtor has been part of a credittransaction involving the receipt of financial or operational debtduring the period within two years preceding the insolvencycommencement date, the liquidator or the resolutionprofessional as the case may be, may make an application foravoidance of such transaction to the Adjudicating Authority if theterms of such transaction required exorbitant payments to bemade by the corporate debtor.made by the corporate debtor.
¢ (2) The Board may specify the circumstances in which atransactions which shall be covered
¢ Explanation.—For the purpose of this section, it is clarified thatany debt extended by any person providing financial serviceswhich is in compliance with any law for the time being in forcein relation to such debt shall in no event be considered as anextortionate credit transaction.
JJURISDICTIONURISDICTION OFOF ADJUDICATINGADJUDICATING AUTHORITYAUTHORITY
¢ Notwithstanding anything to the contrary contained inany other law for the time being in force, the NationalCompany Law Tribunal shall have jurisdiction toentertain or dispose of -
¢ (a) any application or proceeding by or against thecorporate debtor or corporate person;corporate debtor or corporate person;
¢ (b) any claim made by or against the corporatedebtor or corporate person, including claims by oragainst any of its subsidiaries situated in India; and
¢ (c) any question of priorities or any question of law orfacts, arising out of or in relation to the insolvencyresolution or liquidation proceedings of thecorporate debtor or corporate person under this Code
EEXTENSIONXTENSION OFOF LIMITATIONLIMITATION PERIODPERIOD
¢ In computing the period of limitation specified forany suit or application in the name and on behalf ofa corporate debtor for which an order of moratoriuma corporate debtor for which an order of moratoriumhas been made under this Part, the period duringwhich such moratorium is in place shall beexcluded.
AAPPEALPPEAL FROMFROM THETHE ORDERORDER OFOF AAAA
GROUNDS
APPEAL TO CLAT
WITHIN 45 DAY MAX ADDL TIME 15 DAYS
Debts owed to operational creditors of the corporate debtor have not been provided for in the resolution plan in the manner specified
IR process costs have not been provided for
repayment in priority to all other debts
RP does not comply with any other criteria specified by the Board
Approved resolution plan is in contravention of the provisions of any law
Material irregularity in exercise of the powers by the resolution professional
ADJUDICATION BY AAADJUDICATION BY AA
COMMENCEMENT OF PROCEEDINGS - Order to be communicated within two days of And/Rejection
DAT OF ADMISSION OF APP /U/S 5 (a) I R to be completed within 180 days (s. 12) +Max 90 days by 75% Committee of Creditors (Extn only once)
ADJUDICATING AUTHORITY [WILTHIN 14 DAYS OF RECEIPT OF APP
ACCEPT- Satisfied – Default + Complete + No DP against IP
REJECT - IF CONDITIONS NOT SATISFIED 15 DAYS NOTICE TO RACTIFY
Management of affairs of corporate debtor by interim resolution professional [section 17]
MORATORIUM/PUBLIC ANNOUNCEMENT/ APPT IP (Sec 13 to 16)
MORATORIUM – TILL RESOLUTION (270DAYS) PUBLIC ANNOUNCEMENT APPT IP+TENURE
AAPPEALPPEAL FROMFROM CLAT CLAT TOTO SC (62)/TSC (62)/TIMEIME BOUNDBOUND DISPOSALDISPOSAL
To Supreme Curt - Appeal from an order of the NCLAT on a question of law arising out of such
¢ order under this Code within sixty days from the date of receipt of such order.- Maybe allowed to file appeal on sufficient ground l within ninety days, allow the appealto be filed within a furtherperiod not exceeding thirty days.
¢ No civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which NCLT/NCLAT has jurisdiction under this Code(Section 63)
¢ Timebound Disposal of cases : If an application is not disposed of or order is notpassed within the period specified in this Code, NCLT/NCLAT shall record the reasonsfor not doing so.
¢ President of NCLT/NCLAT may, after taking into account the reasons so recorded,extend the period specified in the Act but not exceeding ten days.
¢ No Injunction : No injunction shall be granted by any court, tribunal or authority inrespect of any action taken, or to be taken, in pursuance of any power conferred onNCLT/NCLAT by or under this Code.
DDUTIESUTIES OFOF INTERIMINTERIM INSOLVENCYINSOLVENCY PROFESSIONALPROFESSIONAL
(a) collect all information relating to the assets, finances and operations of the corporate debtor fordetermining the financial position of the corporate debtor, including information relating to —
(i) business operations for the previous two years; (ii) financial and operational payments for the previoustwo years;
(iii) list of assets and liabilities as on the initiation date; and (iv) such other matters as may be specified;(b) receive and collate all the claims submitted by creditors to him, pursuant to the public announcement
made under sections 13 and 15; (c) constitute a committee of creditors;¢ (d) monitor the assets of the corporate debtor and manage its operations until a resolution professional
is appointed by the committee of creditors; (e) file information collected with the information utility, ifnecessary; and (f) take control and custody of any asset over which the corporate debtor has ownershiprights as recorded in the balance sheet of the corporate debtor, or with information utility or thedepository of securities or any other registry that records the ownership of assets (i) assets over whichthe corporate debtor has ownership rights which may be located in a foreign country;
¢ (ii) assets that may or may not be in possession of the corporate debtor; (iii) tangible assets, whethermovable or immovable; (iv) intangible assets including intellectual property; (v) securities includingshares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (vi) assetssubject to the determination of ownership by a court or authority; (g) to perform such other duties asmay be specified by the Board.
¢ Explanation.—For the purposes of this sub-section, the term “assets” shall not include the following, namely:—
¢ (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment ; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and
¢ (c) such other assets as may be notified by the Central Government in consultation with any financialsector regulator.
OOFFENCESFFENCES ANDAND PENALTIESPENALTIES
OFFENCES AND PENALTIES
¢ 68. Punishment for concealment of property. ¢ 69. Punishment for transactions defrauding creditors. ¢ 70. Punishment for misconduct in course of corporate
insolvency resolution process. ¢ 71. Punishment for falsification of books of corporate debtor. ¢ 72. Punishment for wilful and material omissions from 72. Punishment for wilful and material omissions from
statements relating to affairs of corporate debtor. ¢ 73. Punishment for false representations to creditors. ¢ 74. Punishment for contravention of moratorium or the
resolution plan. ¢ 75. Penalties for false information furnished in application.¢ 76. Penalty for non-disclosure of dispute or repayment of debt
by operational creditor. ¢ 77. Penalty for providing false information in application made
by corporate debtor.
PART III INSOLVENCY RESOLUTION AND BANKRUPTCY FOR PART III INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMSINDIVIDUALS AND PARTNERSHIP FIRMS
FRESH START PROCESS ¢ 80. Eligibility for making an application. ¢ 81. Application for fresh start order. ¢ 82. Appointment of resolution professional. ¢ 83. Examination of application by resolution professional. 84.
Admission or rejection of application by Adjudicating Authority. ¢ 85. Effect of admission of application.¢ 86. Objections by creditor and their examination by resolution 86. Objections by creditor and their examination by resolution
professional. ¢ 87. Application against decision of resolution professional. 88.
General duties of debtor.
¢ 89. Replacement of resolution professional.¢ 90. Directions for compliances of restrictions, etc. ¢ 91. Revocation of order admitting application. ¢ 92. Discharge order. ¢ 93. Standard of conduct.
THANK Y0U
