Date: 15 October, 2020
by Achintaya Soni, UILS, Panjab University
TIMELINE OF IBC, 2016
22.08.2014 - Bankruptcy Law Reform Committee (BLRC) set up under chairmanship of Mr. T.K. Vishwanathan
05.02.2015 - BLCR submitted Interim Report to Ministry of Finance
21.12.2015 - Bankruptcy Code introduced in Parliament
23.12.2015 - Bankruptcy Code referred to Joint Parliamentary Committee under chairmanship of Mr. Bhupendra Yadav
28.04.2016 - Report by Joint Parliamentary Committee
05.05.2016 - Bankruptcy Code passed by Lok Sabha
11.05.2016 - Bankruptcy Code passed by Rajya Sabha
28.05.2016 - Presidential assent to Bankruptcy Code
ACTS AMENDED BY IBC:
Companies Act, 2013
SARFAESI Act, 2002
Provincial Insolvency Act, 1920
Presidential Towns Insolvency Act, 1909
Sick Industrial Companies Act, 1985
Recovery of Debts Due to Banks and Financial Institutions Act, 1993
SOME FEATURES OF IBC:
Fastrack Corporate Insolvency Resolution Process, which needs to be completed within 180 days (maximum period is 330 days)
Establishment of Supervisory Board I.e. Insolvency and Bankruptcy Board of India
Ensures Maximum value of assets of debtors
Debtor can negotiate in the assessment of validity without fear of debt recovery enforcement by creditors
Voluntary liquidation of corporate persons
Exclusive jurisdiction of Adjudicating Authority to NCLT and DRT
Insolvency and Bankruptcy Board-
1. Insolvency Professional Agency
2. Information Utility
3. Adjudicatory Authority
IMPORTANT FEATURES OF IBC AMENDMENT ACT, 2018
Moratorium imposed by NCLT u/s 14(1) not to apply to Guarantee contracts in relation to the corporate debtor's debt.
Section 60 of IBC has been amended to ensure that NCLT will also have jurisdiction over insolvency resolution of corporate guarantor
The Voting threshold of CoC has been lowered to 51% from initial 75%
Addition of Section 12A which permits NCLT to now allow insolvency proceedings to be withdrawn, provided it has consent of 90% of the voting share of CoC members. This is subject to certain additional conditions prescribed under the regulations.
60% votes required for approval for these resolutions: approving extension of corporate insolvency process beyond 180 days; relating to matters listed out u/s 28; approving a resolution plan; replacing a resolution professional.
INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ORDINANCE, 2020
On 5th June, 2020, the President promulgated the Insolvency and Bankruptcy Code (A) Ordinance, 2020 with immediate effect. The Ordinance introduces Section 10A to the IBC, which suspends the applicability of Section 7 (Insolvency application by a financial creditor), Section 9 (Insolvency application by an operational creditor) and Section 10 (Voluntary insolvency application by the corporate debtor).
This suspension has been introduced for a period of six months, on account of payment defaults that occur on or after 25th March, 2020 and maybe extended for a maximum period of up to one year, by a Government Notification.
The objective of the Ordinance is to protect the corporate entities which have witnessed a sudden halt in the operations and consequently defaulted on their repayment obligations, from being dragged into insolvency.
The Ordinance also amended Section 66(1) of IBC to prohibit a resolution professional from filing an application under section 66(2) against a partner or director of a corporate debtor in respect of a default that has occurred during the suspension period.
The ordinance, however, doesn't impact the remedies under other statutes like security enforcement, debt recovery etc. Also, the personal Insolvency proceedings under the IBC would continue to be available as an alternative remedy in respect of personal guarantors.