7. Consolidation &
amendments of
Law
7
OBJECTIVES
Time bond
process
Maximizatio
n of value of
assets
Entreprene
urship
Availability
of credit
Balancing
stakeholders
interest
IBBI
Variety of debit
instruments
Revival
Mechanism
Cross border
Insolvency
Data base
defaulters
12. DURING COVID-19
12
Suo-moto Order of Hon’ble Supreme Court dated 23.02.2020, thereby exclusion lockdown period for determining
limitation
Minimum default threshold for Filing application increased to Rs. 1,00,00,000/- w.e.f. 24.03.2020
CIRP Regulations- Reg. 40C- Relaxation in time- Lines for excluding lockdown Period
IBBI (Insolvency Professionals) Regulations, 2016- Extension for payment of fee till 30.06.2020
Suo-moto Order of Hon’ble NCLAT dated 30.03.2020, w.r.t. extension of CIRP period & validity of interim
orders
Enrollment for Limited Insolvency Examination and Valuation Examination suspended till 14.04.2020
Liquidation Regulations- Reg 47A- Relaxation in timelines for excluding lockdown period
13. JUDICIAL PRONOUNCEMENTs
13
S.NO NAME OF THE CASE GIST OF DECESSION
1 M/S. Innoventive Industries Ltd vs ICICI
Bank
The court ruled that the previous directors, who
are no longer managing, will clearly no longer
hold an appeal on behalf of the corporation until
an insolvency professional has been named to
administer the firm
2 Macquarie Bank Limited vs Shilpi Cable
Technologies Ltd.
Whether a demand notice of an unpaid
operational creditor under Section 8 can be
issued by a lawyer on behalf of the operational
creditor
3 Mobilox Innovations Private Ltd vs
Kirusa Software Private Ltd
The court held that the expression “and”
occurring in Section 8(2)(a) may be read as “or”
in order to further the object of the statute and/
or to avoid an anomalous situation
14. 4 Surendra Trading Company vs Juggilal
Kamlapat Jute Mills
The NCLAT to approve or deny the submission, for a
period of 14 days pursuant to Section 9(5).
5 K.Kishan vs M/S Vijay Nirman Company Pvt.
Ltd
Article 14 of the Limitation Act, the insolvency
procedure cannot be implemented
6 Transmission Corporation Of vs Equipment
Conductors And Cables
Arbitral Council rejected the defendant’s claim as
time was not allowed.
7 Anand Rao Korada Resolution vs M/S
Varsha Fabrics (P) Ltd.
The Supreme Court dismissed the contested
provisional orders of the Court of Appeal dated
14.08.2019 and 05.09.2019 passed by the Odisha
High Court and held that it should not have audited
the property of corporate debtors as soon as the
proceedings under the International Business Center
had begun and that NCLT was ordering the
declaration of a moratorium.
14
CONT…
15. Swiss Ribbons Pvt. Ltd. V. Union of India:
The Constitutionality of IBC Upheld
15
Appointment of the Chairmen and members of NCLT and NCLAT was made in
accordance to due process laid under Law
Differentiation between Financial Creditor and Operational Creditor is
constitutional
Constitutional validity of Section 29Aof IBC (Persons not eligible to be resolution
applicant.)
The constitutional validity of insolvency bankruptcy code
Provisions of the code are not contrary to the objects sought to be achieved by the
legislation
16. Lalit Kumar Jain Vs Union of India (Supreme Court of India),
Transferred Case (Civil) No. 245/2020, Date of Order- 21-05-2021
• Settlement of principle law relating to insolvency of personal guarantors.
• Discharge/Release of principle borrower from the debt owed to its creditors.
• Liability to creditors with insolvency proceedings does not absolve the sureties/
guarantors liabilities.
• Upholding the validity of impugned notification.
16
17. 17
• Amendment in section 5(12)-Insolvency commencement date
• Amendment in section 5(15)-Interim finance
• New Notification u/s 5(15)
• Amendment in section 7(1)-(Initiation of corporate insolvency resolution
process by financial creditor)
• Amendment in section 11-Persons not entitled to make application
• Existing Section 11-Persons not entitled to make application
• Existing Section 11-Persons not entitled to make application
AMENDMENTS
18. 18
• Amendment in section 14(1), (2) & (3)-Moratorium
(This amendment is necessitated in view of the Hon’ble Supreme Court
Judgment in the matter of Embassy Property Development Pvt. Ltd. Vs.
State of Karnataka, Civil Appeal No. 9170 of 2019 dated December 3,
2019.)
• Amendment in section 16(1)-Appointment and tenure of interim
resolution professional
CONT…
20. UNIQUE FEATURES
Source: STANDING COMMITTEE ON FINANCE (2020-2021) REPORT 2021
A comprehensive regime dealing with all aspects of insolvency and bankruptcy of
all kinds separating commercial aspects of insolvency and bankruptcy
proceedings from judicial aspects and empowered stakeholders and
adjudicating authorities to decide the matters within domain expeditiously.
Moving away from erosion of net worth to a mare objective default in payment for
initiation of the insolvency process.
Moving away from the ’debtor-in-possession’ regime to a ’creditors-in-control'
regime where creditors decide matters with the assistance of insolvency
professionals.
Providing collective mechanism to resolve insolvency rather than recovery of loan
by a creditor and achieving insolvency resolution in a time bound manner and
empowers the stakeholders to complete transactions in time.
20
21. REPORT CARD OF THE SYSTEM
Source: STANDING COMMITTEE ON FINANCE (2020-2021) REPORT 2021
21
23. achievements
The Insolvency arid Bankruptcy Code, 2016 was enacted on Friday
28,2016 with the twin objectives of time bound insolvency resolution and
value maximization of assets and aims to promote entrepreneurship and
availability of credit. The enactment of the Code has been considerable
landmark legislation and the biggest economic reform next to GST. A
comparison of the World Bank Ease of Doing Business Report 2017 and
2020 clearly indicates a shift in India's 'doing business‘ rankings pre and
post IBC enactment.
The information furnished by the Ministry of Corporate Affairs reveal that
while India's resolving insolvency rank improved from 136 in 2017 to 52
in 2020, the average time taken for resolution was reduced from 4.3
years in 2017 to 1.6 years in 2020; lndia's rank in ease of doing business
improved from 155 In 2017 to 63 in 2020, getting credit rank improved
from 62 in 2017 to 25 in 2020 and starting a business rank improved
from 151 in 2017 to 136 in 2020.
23
24. DEVIATIONS
• The basic design of the statute and given a different orientation to
the code not originally envisioned. While taking into consideration
the impact of the pandemic on the implementation of the code
• It was found that the haircuts and delay have substantially
deviated from the core principles of the IBC
• The process has become a recovery mechanism
• With any legislative enactment and implementation needs to
constantly evolve to meet the challenges in the ever changing
ecosystem,
• The actual operationalisation of amendments made so far may have
altered and even digressed from:
24
26. POINTS TO PONDER
IS OBTAINING CONSENT BY THE FC’s FROM THE RP A GOVERNANCE ISSUE?
CAN THE CORPORATE INSOLVENCY RESOLUTION PROCESS BE SHIFTED TO TECHNICALLY
INTEGRATED MODES?
CAN THE SECTION 12A OF IBC, CODE BE AMENDED OR MODIFIED?
HOW TO REDUCE THE REGULATORY TIME LAG & HOW TO MAKE A SINGLE POINT OF
CONTACT FOR ACHIEVING CONCURRENCE OF ALL REGULATORS?
METHODS WITH WHICH REDUCTION IN FRICTION AMONG VARIOUS PROFESSIONALS AND
ENTITIES DURING THE PROCESS OF IBC?
IS THE THRESHOLD LIMIT FOR DEFAULT TO BE INCREASED MORE OR ANY OTHER
ADDITIONAL CONDITIONS OR CRITERIA TO BE ATTACHED FOR ADMITTING THE CASE?
IS THE PERSONAL GUARANTOR BE ABLE TO FILED INDEPENDENTLY WITHOUT LINKING IT
WITH THE CIRP/LIQUIDATION CASE OF CORPORATE DEBTOR?
IS THERE ANY NEED FOR GRIEVIENCE MECHANISM BE INTRODUCED FOR RESOLUTION
PROFESSIONAL AND OTHER STAKEHOLDERS?
IS CONSTITUTION OF SEPARATE INSTITUTE FOR DISCIPLINARY MATTERS FOR
INSOLVENCY PROFESSIONALS WILL GIVE SOLUTION OF INDEPENDENCE AND AVOIDING
MULTIPLE LITIGATIONS?
MODE THROUGH WHICH THE STRUCTURE OF IBC CAN BE LEVELLED ON PAR WITH
GLOBAL STRATEGIES? 26
Editor's Notes
The legal framework for insolvency and bankruptcy in India prior to the enactment of Insolvency and Bankruptcy Code, 2016 was fragmented and ineffective. The evolution of the economic and financial ecosystem rendered it necessary to overhaul the existing debt restructuring system. The Presidential Towns Insolvency Act, 1909 and the Provincial Insolvency Act,1920 meant for personal insolvency were hardly used, while in case of corporate, the Recovery of Debts Due to Banks and Financial Institution Act, 1993, the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interests Act, 2002, have not been very effective in terms of recovery, the Sick Industrial Companies (Special Prov.sions) Act, 1985 was bogged down with inordinate delays and consequent value erosion.
In the present case Hon’ble Apex Court settled the principal of law relating to insolvency of personal guarantors and held that;
The Court upheld the impugned notification to be validly issued and exercise of power in issuing the impugned notification under Section 1(3) is therefore, not ultra vires.
The release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability.
The court dismissed the petition challenging notification dated 15.11.2019 and the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019
1. The status of the allover Insolvency and Liquidation cases
2. If you observe closely the lenders have taken a hit of up to 90%-95%
3. Causing harm to the economy as the amount foregone is wiped out from the economy