India attends G20 Working Group Meeting at Brasilia (See 'Corp Brief') SEBI ICDR Regulations, 2018 - By not locking entire pre-preferential allotment shareholding of two allottees Noticee violated SEBI ICDR Regulations : SEBI (See 'Legal Desk') Arbitration Act - Serving officer of respondent shall act as arbitrator is invalid stipulation which makes it incumbent on Court to appoint independent sole arbitrator to adjudicate disputes : HC (See 'Legal Desk') SEBI Act - Appellant is misleading its investors that it is registered with SEBI as investment advisor and played fraud in violation of IA Regulations : SAT (See 'Legal Desk') CCI okays subscription to CCPS B of API Holdings by MEMG LLP and 360 ONE (See 'Corp Brief') PMLA - Court will not cancel interim bail granted to respondent as interim bail is about to expire within short period of time : HC (See 'Legal Desk') CCI approves 100% acquisition of Lanco Amarkantak Power by Adani (See 'Corp Brief') CGST Act - Case does not fall under ambit of Anti-Profiteering provisions of CGST Act : CCI (See 'Legal Desk') BRO connects strategic Nimmu-Padam-Darcha road in Ladakh (See 'Corp Brief') Arbitration Act - Any party having failed to make substantive claim in arbitral proceedings, cannot seek recovery by way of interim mandatory injunction u/s 17 : HC (See 'Legal Desk') SEBI Act - Trading pattern of appellants with other noticees indicate that there is meeting of mind between appellants and other noticees : SAT (See 'Legal Desk') SARFAESI Act - Respondent shall not take any coercive steps against Petitioner prior to 15th March, 2024 provided Petitioners file appeal before DRAT on or before March 01, 2024 : HC (See 'Legal Desk') Guj Govt sets up Telecom Facilitation Centre to support stakeholders (See 'Corp Brief') SEBI Act - SEBI shall not initiate any enforcement action against Applicant for SAST violations provided representation made in settlement proceedings are subsequently not found untrue : SEBI (See 'Legal Desk') India, Bhutan ink MoUs on clean energy, agriculture & tourism (See 'Corp Brief') PMLA - Surgery of knee cannot be categorized as 'life-threatening situation' and surgery which is to be undergone by applicant is not of such nature which necessitates applicant's release on interim bail only : HC (See 'Legal Desk') NCC, NPCIL ink MoU to raise awareness on peaceful use of nuclear power (See 'Corp Brief') SEBI - Any violation committed by Company which is fraudulent in nature has to be attributed to individual acting as Director at relevant point of time : SAT (See 'Legal Desk') Golden Jubilee Celebration of KVKs held in Puducherry (See 'Corp Brief') PMLA - Court declined to grant bail to Satyendar Jain in money laundering case and also cancelled interim bail granted as there are sufficient material collected by ED to show that he is prima facie guilty of alleged offences : SC (See 'Legal Desk') 42nd IPHE Steering Committee to be hosted by EU (See 'Corp Brief') IBC - Application filed u/s 7 of code can be admitted as debt and default has been established : NCLT (See 'Legal Desk')

The Insolvency and Bankruptcy Code, 2016 (IBC)

Published: Apr 20, 2017

FEATURES AND INSTITUTIONAL SETUP

The Insolvency and Bankruptcy Code, 2016 (IBC) was passed by the Parliament on 11 May 2016, received Presidential assent on 28 May 2016 and was notified in the official gazette on the same day. IBC aims to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

This act has an overriding effect on multiple laws for the recovery of debts and insolvency and liquidation process like Chapter XIX & Chapter XX of Companies Act, 2013, Chapter XIX & Chapter XX of Companies Act, 2013, RDDBFI Act, 1993, SARFAESI Act, 2002, SICA Act, 1985, The Presidency Towns Insolvency Act, 1909, The Provincial Insolvency Act, 1920, Chapter XIII of the LLP Act, 2008 .

All these laws were inadequate to provide a single clearance or single window resolution system and many a time authorities with different jurisdiction and agencies overlapped and resulted in delayed case solving process and further complexities.

This article covers the key features or requirement of Act and framework of Act.

Key features of the IBC are:

• The code would have an overriding effect on all other laws relating to Insolvency &Bankruptcy. This code includes all persons including corporate, individuals, partnership firms and LLPs as well, however it shall not be applicable to corporate persons who are regulated financial service providers like Banks, Financial Institution (FIs) and Insurance Companies .

• IBC aims at consolidating all existing insolvency related laws as well as amending multiple legislation including the Companies Act. The code has replaced multiple laws covering the recovery of debts and insolvency and liquidation process and provides single window clearance to all the matters pertaining to insolvency and bankruptcy and applicant gets the appropriate relief at the same authority unlike earlier position of law where laws and authorities overlapped each other.

• The code aims to resolve insolvencies in a strict time-bound manner - the evaluation and viability determination must be completed within 180 days. The code provides fixed time frame for insolvency matters for companies and individuals. The process is to be completed within 180 days (Moratorium period) and will be extended by 90 days more. So the matters have to be resolved in not more that 270 days. Also there is a fast-track resolution process for corporate insolvency in 90 days and if it cannot be resolved assets of borrower can be sold in order to repay the creditors.

• Insolvency professionals to take over the management of the Company. IBC proposes a paradigm shift from the existing Debtor in possession' to a ‘Creditor in control' regime.

• There is a simple and clear Framework of authorities under the Act. The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies and Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individual.

• Sets clearly order of priority at the time of liquidation i.e.

• Insolvency related costs

• Secured creditors and workmen dues up to 24 months

• Other employee's salaries/dues up to 12 months

• Financial debts (unsecured creditors)

• Government dues (up to 2 years)

• Any remaining debts and dues

• Equity

Institutional Setup under IEC

The Act provides a time bound process for speedy disposal of the matters and for maximization of value of assets, promotes entrepreneurship, improves ease of doing business and also protects the interest of workman and employees. It provides a base to create a good environment for business and benefit to all. The Implementation of any law not only depends on good framework of law but also on effective and efficient functioning of institutions involved in the administration and execution of the same. The IBC is based on five pillars and they are:

IBB - Insolvency and Bankruptcy Board of India- This is the apex body for regulating, promoting transparency & governance in the administration of the IBC; will be involved in setting up the infrastructure and accrediting IPs & IUs; also perform legislative, quasi-judicial function with respect to IPs & IUs and IPAs.

IUs - Information Utilities: This is the centralized depository of financial and credit information of borrowers; would collect, collate and disseminate financial data provided by creditors.

IPs - Insolvency professional - The persons enrolled with IPA and regulated by Board and IPA will conduct resolution process; to act as Liquidator/ bankruptcy trustee; appointed by creditors and override the powers of board of directors. The role of IP includes a wide range of function which includes adhering to procedure of law, accounting as well as finance related functions.

Adjudicating authority (AA) - This 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.

IPA - Insolvency Professional Agencies - This is registered by the board and shall enroll IPs as its members in accordance with the Insolvency and Bankruptcy Code, 2016 read with its regulations.

Conclusion: The IBC is not only a well-drafted law but also has a strong institutional set up.

(Author is a Practicing Company Secretary)

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