1. Genesis of
the Code
Multiple laws – multiple fora
Lack of holistic remedy
Insolvency resolution framework for Individuals stagnant
for over 100 years!
The 1861 Indian High Courts Act led to the setting up
of the High Court system in place of the Presidency
towns Supreme Courts, which also has jurisdiction over
insolvency
The Presidency Towns Insolvency Act, 1909,
The Provincial Insolvency Act, 1920,
Framework for resolution of Corporate bankruptcy
Companies Act, 1956
The Micro, Small and Medium Enterprise Development
Act, 2006,
The SARFAESI Act, 2002
The RDDBFI Act, 1993
SICA-1985 (BIFR)
Informal framework (prominently based on RBI Guidelines)
Corporate Debt Restructuring
Joint Lenders Forum
Strategic Debt Restructuring
S4A Sustainable Structuring of Stressed Assets
3. Technical
understanding
requirement
to
act
as
IPs
Responsibility as IRP Responsibility as RP
Act as CEO & MD of the corporate to
maintain gong concern status and
momentum.
Need to arrange interim Finance, if
required..
Collect all information relating to the
assets, finances and operations of the
corporate debtor for past 2 years.
Assess & segregate the Liability of
Financial & Operational Creditors
Identify Related Party, Undervalue,
Erroneous, Preferred transactions,
Prepare information memorandum
Act as CEO & MD of the corporate to
maintain gong concern status and
momentum.
Need to arrange interim Finance, if
required..
Take concurrence from COC on all
matters.
Identify Related Party, Undervalue,
Erroneous, Preferred transactions,
Push for Resolution Plan within 120 days
from takeover
Successfully steer the Resolution plan
according to Code guideline.
Select the appropriate Resolution plan
after following the procedures set in
Ordnance of IBC code.
4. Major
Challenges Establish Related party transaction
After a FDD for last 2 years
Related
Party
Transactions influenced by KMP
Transactions between Subsidiaries
Transactions between JVs
Transactions between Associates
Refer IAS-24, IAS-28, IFRS-3, 10, 11, 12
IndAS- 24, 28, 113, 110, 111, 112
Operational Challenges
Managing changed management situation within
the corporate
Managing inter relationship within external stake
holders
Managing Information flows with complete
security and integrity
Managing Going Concern Momentums
Get the best out of Resolution Package
Not only ends only dealing with Legal issues but a
lots besides.
Assets Valuation- the latest debate, but
new hassle for IP
Infrastructure & Talent pool
Cross Country Insolvency
5. Major
Challenges-
Resolution Issues in Resolution Plan
Prepare most accurate Information
Memorandum of information
Prepare evaluation matrix for submitted
resolution proposal
Establish the credentials of resolution
applicants- Section 29A
Evaluating resolution plan in view to
understand complete stakeholder
satisfaction.
Convince COC on best plan
Convince AA for the best resolution
plant and execution modalities.
Operational Challenges
Cost implication for engaging best professions
(valuers, market intelligence, predictive analytics)
are high. Get resistance from COC.
Developing a
Managing Information flows with complete
security and integrity
Managing Going Concern Momentums
Get the best out of Resolution Package
Not only ends only dealing with Legal issues but a
lots besides.
6. Opportunities
for
CMAs Comparative Strength
Strong process understanding
or incline for process
understanding. This professional
attributes will help to be a
successful resolution
professional
Industry working experience will
help to stand in challenges like
Change management, Man &
Situational management.
Analytical skills of CMAs will
help to identify “what went
wrong”
Glaring weakness
Weak networking and lack in
Team effort.
Poor Visibility and lack of prime
institute support.
Regular updating of skill sets.
Opportunities
Indian banking sector
has second highest NPA
17.78% of GDP after
Italy with 27.22.
Japan has no NPA, USA
2.12%, UK 1.78% Brazil-
11.18%
After increasing in the
rank of ease of doing
business, FIIs are
interested for setting
AMF for stressed assets.
CMAs can convert this
opportunities with
strength after working
on the weakness.
7. Operational Debts
a claim in respect of the provision of
goods or
services including employment or a
debt in respect of the repayment of
dues arising under any law for the
time being in force and payable to the
Central Government, any State
Government or any local authority
Case Matters for reference
The NCLAT in Pslogix Infrastructure Pvt. Ltd. v. lClCl Bank Ltd has held
that a general power of attorney holder is not authorised to present an
insolvency application under sections 7, 9 and 10 of the Insolvency and
Bankruptcy Code, 2016 ("IBC")
International Road Dynamics South Asia Pvt. Ltd. Vs. Reliance
Infrastructure Ltd. Interpreting section 9 of the Code, the Hon’ble
NCLAT held: “We are of the view that different claim(s) arising out of
different agreements or work order, having different amount and
different dates of default, cannot be clubbed together for alleged
default of debt, the cause of action is being separate. For the said
reasons, we hold that the joint application preferred by appellant under
Section 9 is defective, as distinct from incomplete, and, was not
maintainable.”
Default
non-payment of debt when whole
or any part or instalment of the
amount of debt has become due
and payable and is not repaid by the
debtor or
the corporate debtor, as the case
may be;
Minimum Default
Rupees. 1,00,000 Only
Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited-
SC- The Hon’ble Supreme Court has settled several issues in this matter.
As regards ‘existence of a dispute’ under section 8(2)(a) of the Code, it
clarified that what is material is that a dispute must exist in fact. It
should not be spurious, hypothetical or illusory and it should not be a
patently feeble legal argument or an assertion of fact unsupported by
evidence.
8. money borrowed against the payment of
interest;
any amount raised by acceptance under any
acceptance credit facility
any amount raised pursuant to any note
purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;
the amount of any liability in respect of any
lease or hire purchase contract which is deemed
as a finance or capital lease under the Indian
Accounting Standards
receivables sold or discounted other than any
receivables sold on nonrecourse basis;
any amount raised under any other transaction,
including any forward sale or purchase
agreement, having the commercial effect of a
borrowing;
any derivative transaction
any counter-indemnity obligation in respect of a
guarantee, indemnity, bond, documentary letter
of credit or any other instrument issued by a
bank or financial institution;
Case Matters for reference
Financial Debts
Innoventive Industries Limited vs. ICICI Bank Limited-SC
Nikhil Mehta and Sons vs AMR Infrastructure Limited
Committed return plan in a real estate transaction should be
considered as financial debt and the applicant should be
considered as FC.
M/s Uttam Galva Steel Limited
Financial debt is money borrowed to repay on a future date
along with interest. The money is lent for value addition to the
money as agreed between parties.
Bills of exchange along withinterest would become “financial
debt” not “operational debt.”
Industrial & Commercial Bank of China vs Alok Industries
Financial debt is money borrowed to repay on a future date
along with interest. The money is lent for value addition to the
money as agreed between parties.
Bills of exchange along with interest would become “financial
debt” not “operational debt.”
9. Resolution
Plan
"resolution plan" means a plan proposed by any person for insolvency
resolution of the corporate debtor as a going concern in accordance
"resolution applicant" means any person who submits a resolution plan to the
resolution professional;
"resolution professional", for the purposes of this Part, means an insolvency professional appointed
to conduct the corporate insolvency resolution process and includes an interim resolution
professional;
"resolution process cost",
1. amounts due to suppliers of essential goods and services under Regulation 32;
2. amounts due to a person whose rights are prejudicially affected on account of the moratorium imposed
under section 14(1)(d);
3. expenses incurred on or by the interim resolution professional to the extent ratified under Regulation 33;
4. expenses incurred on or by the resolution professional fixed under Regulation 34; and
5. other costs directly relating to the corporate insolvency resolution process and approved by the committee.
10. A resolution plan may provide for the measures required for implementing it, including but not limited to the following- 37 of
the Regulation.
(a) transfer of all or part of the assets of the corporate debtor to one or more persons;
(b) sale of all or part of the assets whether subject to any security interest or not;
(c) the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with
one or more persons;
(d) satisfaction or modification of any security interest;
(e) curing or waiving of any breach of the terms of any debt due from the corporate debtor;
(f) reduction in the amount payable to the creditors;
(g) extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor;
(h) amendment of the constitutional documents of the corporate debtor;
(i) issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other
appropriate purpose; and
(j) obtaining necessary approvals from the Central and State Governments and other authorities.
11. Mandatory contents of the resolution plan.- Regulation 38
(1) A resolution plan shall identify specific sources of funds that will be used to pay the -
(a) insolvency resolution process costs and provide that the insolvency resolution process costs will be paid in priority to any
other creditor;
(b) liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shall in
any event be made before the expiry of thirty days after the approval of a resolution plan by the Adjudicating Authority; and
(c) liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are
made by the financial creditors who voted in favour of the resolution plan.
A resolution plan shall provide:
(a) the term of the plan and its implementation schedule;
(b) the management and control of the business of the corporate debtor during its term; and
(c) adequate means for supervising its implementation.
12. A resolution plan shall contain details of the resolution applicant and other connected persons
‘details’ shall include the following in respect of the resolution applicant and other connected person, namely:-
(a) identity;
(b) conviction for any offence , if any, during the preceding five years;
(c) criminal proceedings pending, if any;
(d) disqualification, if any, under Companies Act, 2013, to act as a director;
(e) identification as a wilful defaulter, if any, by any bank or financial institution or consortium thereof in accordance with the
guidelines of the Reserve Bank of India;
(f) debarment, if any, from accessing to, or trading in, securities markets under any order or directions of the Securities and
Exchange Board of India,; and
(g) transactions, if any, with the corporate debtor in the preceding two years.”;
(ii) the expression ‘connected persons’ means-
(a) persons who are promoters or in the management or control of the resolution applicant;
(b) persons who will be promoters or in management or control of the business the corporate debtor during the
implementation of the resolution plan;
(c) holding company, subsidiary company, associate company and related party of the persons referred to in items (a) and (b)
The resolution professional shall submit to the committee all resolution plans which comply with the requirements of the Code
and regulations made thereunder along with the details of following
(a) preferential transactions under section 43;
(b) undervalued transactions under section 45;
(c) extortionate credit transactions under section 50; and
(d) fraudulent transactions under section 66, and the orders, if any, of the adjudicating authority in respect of such
transactions.”.
13. IBC guides forwinding up, liquidation and dissolution
Section 2(94A) of the Companies Act 2013 defines “winding up”- introduced by section 255 schedule XI of the
IBC 2016, briefly
Corporate
Winding up
Process
Under IBC Companies Act 2016
IBC-2016
(NCLT)
Corporate Insolvency
Resolution Process- (Inability
to pay debts)
Voluntary Liquidation
Companies Act-2013 (HC
Jurisdiction)
Winding up on
grounds other than
inability to pay
Pending cases in HC
filed before IBC
regime
14. Quick idea of global insolvency regimes
Global insolvency regimes may be
classed into
Pro-debtor jurisdictions
Pro-creditor jurisdictions
Indifferent, or unclear
Enacted in countries
USA, France,
UK, and other commonwealth countries
Islamic countries, and until recently, China passed a law in
2006
Indicators of a pro creditor stance of a jurisdiction- identical to Indian Scenario
• The scope and efficiency, in bankruptcy, of security and title financing (such as retention of title,
factoring and financial leasing);
• Insolvency set-off;
• Corporate rehabilitation statutes;
• Ownership of assets in the possession of the debtor (trust, tracing);
• Preferential transfers;
• Contract and lease rescission.
Based on Philip Wood’s write up
15. Why …..CODE….. not an……ACT ??
A "Code", as per Black’s law dictionary
is,
“ACollection or Compendium of
Laws”
Systematic and comprehensive
compilation of laws, rules and
regulations that are consolidated
and classified for a particular
subject.
Codes of India
The Indian Penal Code 1860
The Code of Civil Procedure 1908
The Code of Criminal Procedure 1860
The insolvency and Bankruptcy Code 2016
Companies (excluding BSFI)
LLP
Partnership & Individual
The IBC Codes Applies to……
Other body incorporated
16. Journey
towards the
Code
Committees on bankruptcy reforms in India
1964
26th Report of Law Commission on Insolvency Laws,
recommended consolidation of extant two personal
insolvency laws into one.
1981
1991
1998
Tiwari Committee, led to enactment of SICA, became an Act in 1985
Narasimha Committee-1, led to enactment of the RDDBFI Act, 1993
Narasimha Committee 2, led to enactment of the SARFAESI Act, 2002
1999
2001
2005
2013
2014
Justice Eradi Committee. Recommended amendment in Companies (Amendment) Act, 2002,
proposed setting up of NCLT for rehabilitation of sick companies –but never enforced
L. N. Mitra Committee, First proposed a Comprehensive bankruptcy code
Irani Committee, made aamendments to RDDBFI and SARFAESI
Financial Sector Legislative Reforms Commission, prepared a draft on Indian Financial Code
includes a for resolving distressed financial firms.
The Bankruptcy Law Reform Committee (BLRC) under the Chairmanship of Mr. T.K. Viswanathan,
led to The Insolvency and Bankruptcy Bill, 2015, received the assent of the President on 28th May
2016
17. The IBC does not apply to…….
Part II of the code pertaining to insolvency to
Individuals & Firms – does not apply to State
Jammu & Kashmir
Part II of the code pertaining to insolvency code –
does not apply to Financial Service providers
For MFIs, NBFCs and financial service providers the
Ministry of Finance has released draft of “The
Financial Resolution and Deposit Insurance Bill,
2016”.Cabinet approves proposal to introduce the
Financial Resolution and Deposit Insurance Bill
2017- ref- Press Information Bureau Government of
India -
The Financial Resolution and Deposit Insurance Bill.docx
The IBC-2016 Applies for……...
Insolvency
Liquidation
Voluntary Liquidation
Bankruptcy
Fresh Start process
General Understanding.docx
18. Acts repealed by the Code
Impact of the IBC 2016
Presidency Towns Insolvency Act, 1909
Provincial Insolvency Act, 1920
BIFR and SICA go off completely
Corporate resolutions comes under NCLT
Timelines under the new law – entire process of resolution to be over in 180
to max 270days
Debtors under banker-driven restructuring also go for NCLT/DRT
resolution –In view of mandatory timelines, the case may reach bankruptcy
19. Impact of the IBC 2016
Companies and guarantors can be both brought under a common forum –
NCLT/DRT
While borrowers may file resolution applications seeking moratorium, but
borrower will have to face the threat of liquidation/bankruptcy ;
Accelerating provisioning – faster transition into a case of loss assets.
Brings greater financial discipline
Creditors have an upper hand in resolution plans
If revival does not work out, entity to mandatorily go into liquidation
20. The Finance Bill, 2017
Made the amendments , in turn, provide for amendments to infavour of the Code
The Indian Partnership Act, 1932
The Central Excise Act, 1944
The Income-tax Act, 1961
The Customs Act, 1962
The Recovery of Debts due to Banks and Financial Institutions Act, 1993
The Finance Act, 1994
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
The Sick Industrial Companies (Special Provisions) Repeal Act, 2003
The Payment and Settlement Systems Act, 2007
The Limited Liability Partnership Act, 2008
The Companies Act, 2013
21. the
Code Eco-System of IBC
Insolvency and Bankruptcy
Board of India (IBBI)
IBBI – apex body for promoting transparency & governance in the
administration of the Code; will be involved in setting up the infrastructure and
accrediting IPs & Ius.
IUs - centralized repository of financial and credit information of borrowers;
would validate the information and claims of creditors vis-à-vis borrowers, as
needed
IPAs - professional bodies registered by the Board to promote and regulate the
insolvency profession; these bodies will enrol Ips-
IPs - licensed professionals regulated by the IBBI; will conduct resolution
process; to act as Liquidator; appointed by creditors and will assume the
powers of suspended board of directors National
AA- would be the NCLT for corporate insolvency; to entertain or dispose any
insolvency application, approve/reject resolution plans, decide in respect of
claims or matters of law/facts thereof
CoCs - consists of financial creditors who will appoint and supervise actions of
IPs; need to approve the resolution plan
National
Company
Law
Tribunal
(Adjudicating
Authority)
IPAs IUs
IPs
COCs
Insolvent unit
22. Framework
of the Code
5 Parts, 7 Chapters in Part- II, III, IV
255 Sections & 11 Schedules (245 to 255)
IBC, 2016 – Analysing the 5 Parts
PART-I-
o PRELIMINARY - 1
o Chapter –Section 1
- 3
PART II
CIRP
&
LIQUIDATION
o 7 Chapters - Sections
4-77
o Section 5 definitions
Part III
IIRP
&
BANKRUPCY
o 7 Chapters
o Section 78-187
o Section 79
definitions
Part IV
REGULATION OF
IPA
&
IU
o 7 Chapters
o Section 188-223
Part V
MISCELLANEOUS
o Section 224-255
o (Section 245- 255
enables
o Amendments in
other statutes, 11
legislations
24. Part II of IBC 2016
( S 4 to 77)- CIRP &
Liquidation of Corporate
person
C I Preliminary S 4 & 5
C II Corporate Insolvency
Resolution Process S 6 to 32
C III Liquidation Process S 33 to 54
C IV Fast Track Corporate
Insolvency Resolution Process S
55 to 58
C V Voluntary Liquidation of
Corporate Persons S 59
C VI Adjudicating Authority for
Corporate Persons
C VII Offences and Penalties
Code (Act) Rules & Regulations- framed by IBBI
The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
(w.e.f. 01.12.2016). Specifies the application forms for filing the matters in AA- form 1
to form 6
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process For
Corporate Persons) Regulations, 2016. 3rd Amendment. 7th Nov. 2017)
Insolvency and Bankruptcy Board of India (Voluntary Liquidation process)
Regulations, 2017 3rd Amendment. 7th Nov. 2017)
The Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution
Process for Corporate Persons) Regulations, 2017 (w.e.f. 15th June, 2017) 3rd
Amendment. 7th Nov. 2017)
25. What is 'Insolvency’
Insolvency is when an organization, or individual, can no longer meet its financial obligations with
its lender or lenders as debts become due. Before an insolvent company, or person, gets involved in
insolvency proceedings, it will likely be involved in informal arrangements with creditors, such as
making alternative payment arrangements. Insolvency can arise from poor cash management, a
reduction in cash inflow forecasts or from an increase in expenses.
Read more: http://www.investopidia.com
In legal terminology, the situation where the liabilities of a person or firm exceed its assets. In
practice, however, insolvency is the situation where an entity cannot raise enough cash to meet its
obligations, or to pay debts as they become due for payment. Properly called technical insolvency, it
may occur even when the value of an entity's total assets exceeds its total liabilities. Mere insolvency
does not afford enough ground for lenders to petition for involuntary bankruptcy of the borrower, or
force a liquidation of his or her assets.
Read more: http://www.businessdictionary.com/definition/insolvency.html
General Understanding.docx
26. CIRPis a
360D
Approach
Who can
Trigger
FC
CD
CD
FC- Financial Creditors- any person to whom a financial
debt is owed and includes a person to whom such debt
has been legally assigned or transferred to….
CD/CA-
• corporate debtor; or
• a member or partner of the corporate debtor who is
authorised to make an application for the corporate
insolvency resolution process under the
constitutional document of the corporate debtor; or
• an individual who is in charge of managing the
operations and resources of the corporate debtor; or
• a person who has the control and supervision over
the financial affairs of the corporate debtor
OC- a person to
whom an
operational debt is
owed and includes
any person to
whom such debt
has been legally
assigned or
transferred…
Mandatory Time
for CIRP-180
days with one
time maximum
extension of 90
days. Total 270
days
27.
28. The Code
on the ground
nd
0
50
100
150
200
250
Jan Feb Mar Apr May June July Aug Sep Oct Nov
Series1 9 40 36 36 148 226 217 177 137 74 43
IPS
IPS-1143
Series1
Jan Feb Mar Apr May June July Aug Sep Oct Nov
Series1 4 13 14 24 30 36 43 83 96 39 15
4
13 14
24
30
36
43
83
96
39
15
CASES ADMITTED
397
29. Implementation
Hitches
of
the
Code
IBC was approved by both Houses of the Parliament
and received the presidential assent in May 2016. It
was made operational from 1 December 2016.
Everyone involved has been surprised with the
speed and commitment with which it has moved
forward in the last 12–18 months. IBC is often
touted as the second most important legislative
reform (after GST) that the incumbent Government
has undertaken, as it is expected to resolve
The NPA problem, make the exit process easier
for investors, attract fresh capital and foreign
investors, channelize capital to more
productive assets and give a fillip to India’s
ease of doing business ranking. While the new
Code elicited praises and excitement from
market participants, it also led to concerns
regarding the readiness of the infrastructure
for proper implementation.
The following is a point-of-view onthe top
10 concerns raised at the beginning of the
journey and also how the market seems to
be developing. These are our views and
understanding of the on-ground situation
and are purely based on our experience in
the last few months and interactions with
other IPs, lawyers, bankers, creditors,
promoters and various other stakeholders
involved
Concerns Remarks
Constitutional
Validity of the Code
IBC is a transformational reform in many ways and looks to make some very important
structural changes. Many concerns were raised initially around the constitutional validity of
some of the provisions of the Code. Essar Steel filed a petition in Gujarat High Court
Challenging Reserve Bank of India’s decision to refer it to the NCLT to start CIRP. Similarly,
multiple cases/appeals are filled against the applications filed for CIRP; however, no appeal has
significantly impacted the CIRP process, once initiated. In the first case admitted under IBC,
Innovative vs. ICICI Bank, a writ petition was filed challenging the constitutional validity
of section 4 to section 32 of the Code. However, NCLAT decided that the provisions of the Code
shall have effect notwithstanding the provisions of any other law for the time being in force.
The Innovative matter is currently. Presentation 2.pptx
The NCLT may not
be able to handle
plethora of
proceedings under
IBC
The NCLT may not be able to handle plethora of proceedings under IBC. The NCLT was
constituted on 1 June 2016 with 10 benches and one principal bench. A major challenge
foreseen for the Code was the tidal flow of cases to the NCLT. In addition to new cases filed for
resolution under IBC, there was a significant backlog of cases that were transferred from CLB.
Also, winding up cases with high courts, corporate recovery cases with the debt recovery
tribunals (DRTs) and rehabilitation cases with the BIFR were transferred to the NCLT. We
understand that as of now ~ 1,540 cases are filed with the NCLT under IBC, of which ~ 299 are
admitted, and we understand that the NCLT has coped well with the workload. The NCLT would
continue to play a very critical role in the IBC ecosystem as more complex filings happen over
the next few months. We also understand that, discussions are already onto increase the
number of benches and change single-member benches to double-member
30. Concerns Remarks
Role of Regulator IBBI has a critical role in holding thee tire ecosystem of IBC together and making sure the Code is moving
forward in the right direction. It was established on 1 October 2016 and has already made significant progress in
setting up the IPA, conducting exams to registers IPs and issuing multiple regulations to support the smooth
implementation of the Code. IBBI has been at the forefront in building capacity, educating the market and
proactively supporting the implementation of the Code. However, the job has not been easy and the
expectations are high. Looking at the role played by the regulator in matured markets, we believe IBBI must
continue to provide a lead role in a smooth implementation of the Code over the next few years.
Stringent Timelines
provided in the Code
One of the hallmark of IBC is the strict time-bound resolution process it proposes. Erstwhile insolvency laws and
regulations were not very effective in terms of standing by the timelines specified. The specified time limits for
resolution under IBC is a breath of fresh air to the creditors but at the same time, is considered an uphill task to
achieve. There have been deviations in a few cases from the 14-day timeline for the NCLT to admit or reject a
case. NCLAT in the case of J K Jute Mills Company Limited. stated that the 14-day timeline for the NCLT was not
mandatory. However, other procedural timelines, for example, for public announcement, have been broadly
adhered to. The real test for IBC timelines would be to get cases resolved within a period of 180/270 days with
all necessary approvals.
No Information
Utilities is in place
In the IBC design, the IU enables quicker initiation of cases by providing access to irrefutable and transparent
evidence of default. In the absence of IUs, initiating a case as well as forming the CoC will take longer and be
more challenging than envisaged. This in turn will make it difficult to meet the 180-day timeline. IBBI notified
Information Utilities Regulations, effective from 1 April 2017. The regulations provide for a framework and
technical standards for registration and regulation of IUs. National E-Governance Services Limited has been
appointed as IU on 27th Sep 2017.
Speed of decision
making by COC
The CoC is a key decision making bodyin every CIRP. The speed of decision making at the CoC should match the
pace at which the Code has progressed. Banks are in the process of developing internal guidelines & decision
matrices to enable the attendees of CoC to have efficient decisions in time. The speed of CoC would also depend
upon the expertise of the IP. The IP should provide relevant information before time to CoC members, to help
them take internal approvals and come better prepared for CoC voting.
31. Concerns Remarks
OCs misusing the
intent of the Code
Since the trigger of the Code is a default of only INR1 lakh, there were concerns regarding frivolous fillings by
OCs. Out of the ~ 299 cases admitted by the NCLT, ~ 50% have been initiated by OCs. Also, most of the cases
withdrawn from the total of ~1,000 filed, are related to cases where the corporate debtor and OC make an out-
of-court settlement. This has resulted in the use of IBC as a mechanism for recovery instead of resolution.
However, this is also driven by lack of other remedies available to OCs following the introduction of the Code
Better understanding of the position of OCs under liquidation waterfall and the costs involved as an
Availability of IPs IPs form the backbone of the Code. However, with limited guidance and significant liabilities, there were
initially many apprehensions around professionals coming forward to take up the role of IP. Their role requires
a fine balancing act, given that they are in charge of managing the debtor company and are accountable to the
CoC and the adjudicating authority for their actions. Equally important are and there are already ~ 1095 IPs
registered with more than 10 years of professional experience. Only ~ 299 cases have been admitted untill now
and the outcome of most of them would only be tested in the next few months, hence most of the registered IPs
still do not have practical experience of successfully running and closing CIRP. Therefore, while the supply side
concern has been addressed, the jury is still out on the quality and performance of IPs. Personal qualities, such as
integrity and independence. Fortunately, professionals have reacted very positively toward the opportunity
Pushback from the
promoters/
managements.
Transition from
“Debtors in
possession to
creditors in control”
would be
challenging
Taking control of the corporate debtor and suspending the powers of the BoD (promoters) has been seen a major
challenge in the implementation of the Code. Based on our experience and discussion with other IPs, if the
communication is kept clear and transparent with the promoters and other stakeholders, promoters are largely
co-operating with the process. Promoters genuinely interested in the revival of enterprises. At the same time,
there have been sporadic instances of physical threats to IPs from promoters and promoters threatening to sue
IPs for loss of a contract. CIRP has to be seen and communicated by IP as a resolution process for the benefit of
all stakeholders. The experience and knowledge of the BoD (promoters) should be actively leveraged by IP, to
maintain a going concern and cause minimal disruption to operations while a resolution is being worked out to
maximize return for all stakeholders. would not see their displacement as threat but as an opportunity to focus
on putting together a resolution plan.
32. Who
to
become
an
IP
Applicable for the period 1st July, 2017 to 31st December, 2017……..
Syllabus_revised_LIE_2.pdf
Applicable for the period 1st Jan, 2018 to 31st Mar, 2018…….
. Exam Syllabus-Jan-2018.docx
Applicable for the period 1st April, 2018 to 30th June, 2018…….
Proposed change in examination pattern-
LIE_consultation_paper (3).pdf
33. Examination
Resources Bare Acts- www.ibbi.gov.in
Mock Papers from www.icsiipa.com
E-Reources from www.iiipaicai.in
Books from Taxman- IBC code
Case Laws from IBC practical cases-ICSI publications
General Laws from ICSI intermediate study materials
Case laws from www.ibbi.gov.in
Finance and accounts- CMA final study materials
Miscellaneous topics NCERT- Civics- class X & IX
Pass Mark- 60
Total Marks
100
Questions-87
Negative
Marks-25%
Test time- 2
hours
