Professional Documents
Culture Documents
TOPIC:
CAPITAL BUDGETING
SUBMITTED BY:
NAME BHARAT KUMAR BOHRA
REG NO 220875666/05/2010
DECLARATION BY THE STUDENT
We hereby declare that “CAPITAL BUDGETING” is the result of the
project work carried out by me as fulfilment of (E-MSOP by ICSI-)
We also declare that this project is the outcome of my own efforts and
that it has not been submitted to any other Degree or Diploma or
Certificate.
ACKNOWLEDGEMENTS
(3) New products and services: New products and services require
more complex decision-making processes, and careful capital budgeting
decisions are necessary.
However, these provisions were not notified nor was National Company
Law Tribunal (“NCLT”) constituted to exercise powers in relation to sick
industrial companies.
• The Sick Industrial Companies (Special Provisions) Act, 1985 (“SICA”)
was the only central corporate rescue law in force but it applied to
industrial companies only.
• The Recovery of Debt Due to Banks and Financial Institutions Act
(RDDBFI Act) 1993 gave banks and a specified set of financial
institutions greater powers to recover collateral at default.
• The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act (SARFAESI), 2002 envisaged
specialised resolution agencies in the form of Asset Reconstruction
Companies (“ARCs”) to resolve Non-performing Assets (“NPAs”) and
other specified bank loans under distress.
• RBI had Strategic Debt Restructuring Scheme (SDR) and Scheme for
Sustainable Structuring of Stressed Assets (S4A) for structuring of debts
overdue to financial institutions.
Hence, it is evident that the earlier process of dealing with stressed and
bad debts was highly fragmented and scattered over numerous
legislations with varied enforcement and judicial agencies.
Why Code?
Generally, an enactment/a statute/a bill/a regulation which has passed
through several legislative steps needed for it and which has become
law is called an ACT whereas a specific type of action made by
legislature that tries to cover a complete system of laws in a given area is
called a CODE. India now has three pieces of legislation referred to as
Code: Indian Penal Code 1860, The Code of Criminal Procedure (CrPC),
1973 and now Insolvency and Bankruptcy Code, 2016. Another Code by
name of Direct Tax Code is in draft stage since past many years, which if
enacted will simplify direct tax laws in India. It is pertinent to note that
the most supreme Indian Legislation, which is Constitution of India has
neither the word Act or Code nor year affixed to it. Article 393 of the
Constitution which gives the short title to it simply refers to it as the
Constitution of India.
The Insolvency and Bankruptcy Code is referred as Code and not an Act
as it deals with the topic of debt resolution and recovery in India
comprehensively (except for financial service providers) including both
corporate, non-corporate business structures, individuals and to limited
extent even cross border insolvency. It is also comprehensive as it allows
for resolution as well as liquidation processes.
The enactment is also referred to as Code because as per section 238 of
the Code, provisions of the Code override other laws where they are
inconsistent with other laws. Here it is pertinent to note that w.e.f 6th
June, 2018, Section 238A has been introduced and the provisions of the
Limitation Act, 1963 has been specifically made applicable to the
proceedings or appeals before the adjudicating and appellate authorities
under the Code through Section 34 of the IBC (Amendment) Ordinance,
2018 and later through IBC (Second Amendment) Act, 2018. Note that
the period of limitation specified for various kinds of suits under THE
SCHEDULE annexed to the Limitation Act, 1963 varies from 10 days to
thirty years. For instance, suit by a mortgagor to redeem or recover
possession of immovable property mortgaged can be filed anytime
within 30 years of the day when right to redeem or to recover possession
accrues. Similarly, any suit (except a suit before the Supreme Court in
the exercise of its original jurisdiction) by or on behalf of the Central
Government or any State Government, including the Government of the
State of Jammu and Kashmir can be filed within 30 years of the day
when the period of limitation would begin to run under Limitation Act
against a like suit by a private person.
Also note that the period of limitation will not apply on filing of claims
by the creditors but only on proceedings and appeals before
adjudicating and appellate authorities.
The Insolvency and Bankruptcy Code, 2016
Though the Insolvency and Bankruptcy Code, 2016, came into effect
from May 28, 2016, but its sections were first notified on August 5, 2016.
The Code has been first amended by the Insolvency and Bankruptcy
(Amendment) Ordinance, 2017, passed on November 23, 2017, vide
Notification No. DL – N (04)/0007/2013-17 in order to strengthen the
existing insolvency resolution process under the Insolvency and
Bankruptcy Code, 2016.
This Ordinance became an Act on January 18, 2018, after being passed
by both the houses of Parliament and receiving President’s assent. It is
known as the Insolvency and Bankruptcy Code (Amendment) Act, 2018.
It was made applicable from November 23, 2017. The Ordinance had 9
Sections and the final Act had 10 Sections, the 10th Section being
inserted to repeal the Ordinance.
Sections 2, 5, 25, 30, 35 and, 240 of the Code were amended, and new
Sections 29A and 235A were inserted in the Code.
The second amendment is made vide The Insolvency and Bankruptcy
Code (Amendment) Ordinance, 2018, issued by the President on June 6,
2018, vide notification No. DL– N (04)/0007/2003 – 18. This amendment
incorporates the recommendations made by the Insolvency Law
Committee and smoothens out many difficulties faced earlier. The
Ordinance inserted four new sections 12A, 25A, 238A and 240A and
amended a few other sections.
The Insolvency and Bankruptcy (Second Amendment) Bill, 2018 was
introduced in the monsoon session of the parliament on 23rd July, 2018 to
repeal the IBC (Amendment) Ordinance, 2018. It was passed in Lok
Sabha and Rajya Sabha on 31st July and 10th August respectively. It
received the assent of the President on the 17th August, 2018 and thus the
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 was
promulgated. The IBC (Second amendment) Act, 2018 are in lines with
the ordinance except for few minor incidental changes.
Legislative Framework &Structure of the Code
After all the amendments, the structure of the Code is as follows:
The Code Comprises of 5 parts, 261 sections (255 at the onset + 6sections
added by amendments) and 12 Schedules. (12th schedule added as per
the IBC (Second Amendment) Act, 2018)
Schedules
THE FIRST SCHEDULE - Amendment to the Indian Partnership Act,
1932- Section 245
THE SECOND SCHEDULE - Amendment to the Central Excise Act,
1944- Section 246
THE THIRD SCHEDULE - Amendment to the Income-Tax Act, 1961-
Section 247
THE FOURTH SCHEDULE - Amendment to the Customs Act, 1962-
Section 248
THE FIFTH SCHEDULE - Amendment to the Recovery of Debts Due
to Banks and Financial Institutions Act, 1993-Section 249
THE SIXTH SCHEDULE - Amendment to the Finance Act, 1994-
Section 250
THE SEVENTH SCHEDULE - Amendment to the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002- Section 251
THE EIGHTH SCHEDULE - Amendment to the Sick Industrial
Companies (Special Provisions) Repeal Act, 2003- Section 252
THE NINTH SCHEDULE - Amendment to the Payment and
Settlement Systems Act, 2007- Section 253 THE TENTH SCHEDULE -
Amendment to the Limited Liability Partnership Act, 2008- Section 254
THE ELEVENTH SCHEDULE - Amendments to the Companies Act,
2013- Section 255
THE TWELFTH SCHEDULE – Acts for the purpose of Section29A(d)
(inserted by the Insolvency and Bankruptcy Code(Second Amendment)
Act, 2018, effective from August 17, 2018.
Rules under the Code
The following four Rules have been notified by the Central Government
under the Code:
• The Insolvency and Bankruptcy Board of India (Salary, Allowances
and other Terms and Conditions of Service of Chairperson and
members) Rules, 2016 on 29th August, 2016;
• The Insolvency and Bankruptcy (Application to
AdjudicatingAuthority) Rules, 2016 on 30th November 2016;
• The Insolvency and Bankruptcy Board of India (Form of Annual
Statement of Accounts) Rules, 2018 on 1st May, 2018;and
• The Insolvency and Bankruptcy Board of India (Annual Report) Rules,
2018 on 1st May, 2018.
Regulations under the Code
The Insolvency and Bankruptcy Board, principle regulator of the Code
has issued following 14 Regulations so far:
1. Insolvency and Bankruptcy Board of India (Model Bye- Laws and
Governing Board of Insolvency Professional Agencies) Regulations, 2016
2. Insolvency and Bankruptcy Board of India (Insolvency Professional
Agencies) Regulations, 2016
3. Insolvency and Bankruptcy Board of India (Insolvency Professionals)
Regulations, 2016
4. Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016
5. Insolvency and Bankruptcy Board of India (Liquidation Process)
Regulations, 2016
6. Insolvency and Bankruptcy Board of India (Engagement of Research
Associates and Consultants) Regulations, 2017
7. Insolvency and Bankruptcy Board of India (Procedure for Governing
Board Meetings) Regulations, 2017
8. Insolvency and Bankruptcy Board of India (Advisory Committee)
Regulations, 2017
9. Insolvency and Bankruptcy Board of India (Information Utilities)
Regulations, 2017
10. Insolvency and Bankruptcy Board of India (Voluntary liquidation
Process) Regulations, 2017
11. Insolvency and Bankruptcy Board of India (Inspection and
Investigation) Regulations, 2017
12. Insolvency and Bankruptcy Board of India (Fast Track Insolvency
Resolution Process for Corporate Persons) Regulations, 2017
13. Insolvency and Bankruptcy Board of India (Employee Services)
Regulations, 2017
14. Insolvency and Bankruptcy Board of India (Grievance and
Complaint Handling) Regulations, 2017
Besides, Draft Rules and Regulations have been issued under the
Insolvency Resolution Process for Individuals and Firms
i. Draft Insolvency and Bankruptcy (Application to Adjudicating
Authority for Insolvency Resolution Process for Individuals and Firms)
Rules, 2017, and
ii. Draft Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Individuals and Firms) Regulations, 2017.
iii. IBBI (Mechanism for Issuing Regulations) Regulations, 2018
Extent, Applicability and Preamble of the Code
This Code is applicable to
• Companies and LLPs (termed as Corporate debtor)
• Personal guarantors to corporate debtors
• Partnership Firms and proprietorship firms
• Individuals
• Any other body incorporated under any law for the time being in
force, as the Central Government may by notification specify in this
behalf.
Part II of the Code is Applicable to Companies and LLP where amount
of default is rupees one lakh or more, though central government may
by notification specify a higher amount not exceeding one crores rupees.
Part III of the Code when notified will be applicable to Individual and
Partnership Firms, where amount of default is rupees one thousand or
more.
This Code is applicable to whole of India except Part III which provides
the provisions for Partnership firms and Individuals, is not applicable
for the State of Jammu and Kashmir.
Preamble of the Code
Preamble to the Code, establishes the purpose of the Act which areas
follows: -
(a) To consolidate and amend the laws relating to reorganisation and
insolvency resolution of corporate persons, partnership firms and
individuals.
(b) To fix time periods for execution of the law in a time bound manner.
(c) To maximize the value of assets of interested persons.
(d) To promote entrepreneurship
(e) To increase availability of credit.
(f) To balance the interests of all the stakeholders including alteration in
the order of priority of payment of Government dues.
(g) To establish an Insolvency and Bankruptcy Board of India as a
regulatory body for insolvency and bankruptcy law.
THIS CODE IS NOT APPLICABLE TO FINANCIAL SERVICES
PROVIDERS
Financial Service Providers - U/s 3(17) of the Code Financial Service
Providers means person engaged in the business of providing financial
services in terms of authorisation issued or registration granted by a
financial sector regulator. U/s 3(18) Financial sector regulator includes
the Reserve Bank of India, the Securities and Exchange Board of India,
the Insurance Regulatory and Development Authority of India, the
Pension Fund Regulatory Authority and such other regulatory
authorities as may be notified by the Central Government.
Authorities under the Code
• the insolvency resolution process costs have not been provided for
repayment in priority to all other debts; or
• the resolution plan does not comply with any other criteria specified
by the Board.
Appeal against the order for liquidation passed u/s 33 can be filed on
grounds of material irregularity or fraud committed in relation to such a
liquidation order.
A person aggrieved by the order of NCLAT may file an appeal with the
Supreme Court on a question of law, not later than 45 days. A delay of
maximum 15 days may be condoned, if the Supreme Court is satisfied
that there were sufficient grounds for such delay.
Civil courts will not have any jurisdictions in matters over which NCLT
or NCLAT has jurisdictions, as per the Code. Applications are to be
disposed and orders to be passed by the NCLT/ NCLAT within the
period specified by the Code, and in case of failure to do so, reasons for
the same to be recorded and the President of the NCLT or the
Chairperson of the NCLAT may, after considering the reasons so
recorded, extend the period specified in the Act, but not by more than
ten days.
The Adjudicating Authority may impose a penalty of not less than Rs. 1
lakh which may extend to Rs. 1 crore, on a person, who initiates the
insolvency resolution process or liquidation proceedings with any
malicious or fraudulent intent.
If such person is a creditor of the corporate debtor, then the NCLT may
direct that the whole or any part of any debt owed by the corporate
debtor to that person and any interest thereon shall rank in order of
priority of payment under section 53 after all other debts owed by the
corporate debtor.
Regulation of Insolvency Professionals, Agencies and
Information Utilities
There are in all 7 Chapters in this part, with sections from 189-223. Of
the 7 chapters, 5 chapters deal with Insolvency and Bankruptcy Board of
India and its Powers and Functions, Insolvency Professional Agencies,
Insolvency Professionals and Information Utilities. These facilitators
form the ecosystem of the Code. Each of these can be briefly described
as:
Information Utility
Information Utility is an organization incorporated with a purpose to
store financial information of transaction relating to debt. Data can be
requested during the processes of the Code. At present, National E-
Governance Services Limited is registered as Information Utility under
the Code.
Each of the above facilitators are governed by the sections of the Code
and various rules and regulations issued and amended from time to
time by the Board.
Major Mechanisms Envisaged Under the Code
Insolvency Resolution Mechanisms for Companies
It should be noted herein that the allottee under a real estate project
would be regarded as financial creditor and will be eligible to initiate
CIRP proceedings u/s 7 and to file claim as financial creditor and have
representation and right to vote in Committee of Creditors when
constituted. The expressions, “allottee” and “real estate project” shall
have the meanings respectively assigned to them in the Real Estate
(Regulation and Development) Act, 2016.
Once the application for initiation of CIRP is received, the NCLT shall
within 14 days, by an order, either accept the application, if it is
complete in all aspects or reject it. But before rejection of the application,
it shall give a notice to the applicant to rectify the defects in the
application, within seven days from the date of receipt of such notice.
Once the application for insolvency resolution is admitted, NCLT
(Adjudicating Authority) shall declare moratorium, appoint an interim
resolution professional (IRP) within 14 days from the insolvency
commencement date
Moratorium
On the insolvency commencement date, the NCLT by order declare
moratorium for prohibiting –
Appointment of IRP
The interim resolution professional shall be appointed as per the
suggestion of the applicant or by the recommendation of the Board, on
the request from NCLT within 14 days of application for CIRP. On his
appointment, all the powers of the management will rest with the IRP
and he shall strive to keep the business of the corporate debtor as going
concern. He shall be responsible for complying with the requirement
sunder any law for the time being in force on behalf of the corporate
debtor. Interim resolution professional is principally responsible to
constitute a committee of creditors and receive and to collate all the
claims submitted by creditors to him. The term of IRP shall continue till
the appointment of the Resolution Professional (RP).
Public Announcement
The IRP shall cause a public announcement of the initiation of CIRP in
Form A of the Schedule of IBBI (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016and call for the submission of
claim not later than 3 days of his appointment. The cost of such
announcement shall be borne by the Applicant.
Public Announcement shall be published in one English and one
regional language newspaper with wide circulation at the location of the
registered office and principal office, if any, of the corporate debtor and
any other location where in the opinion of the IRP, the corporate debtor
conducts material business operation, along with on the website, if any,
of the corporate debtor and on the website, if any, designated by the
Board for the purpose.
The public announcement should clearly spell the last date for
submission of claim which shall be 14 days from appointment of IRP.
Wherever the corporate debtor has classes of creditors having at least
ten creditors in the class, the IRP shall offer a choice of three eligible
insolvency professionals, in the public announcement to act as the
authorised representative of creditors in each class. Such insolvency
professionals should be eligible to be RP, should neither be relative or
related parties of IRP and should have expressed their consent in Form
AB to act as AR. A creditor in a class may indicate its choice of an
insolvency professional, from amongst the three choices provided by the
interim resolution professional, to act as its authorised representative.
The insolvency professional, who is the choice of the highest number of
creditors in the class, shall be appointed as the authorised representative
of the creditors of the respective class.
Submission of Claims
All Creditors must submit their claims within the time prescribed in
public announcement. The financial creditor scan submit their claims
only by electronic means. The other creditors can submit their claims
either in person or by post or electronic means. The table below briefs
the form and evidences for different types of creditors for submission of
Claims, in case of CIRP.
Collation of Claims
Within 14 days of his appointment, the IRP shall collect the claims of the
creditors. A creditor who fails to submit the proof of claim within the
stipulated time, may submit such proof to the interim resolution
professional or the resolution professional, on or before the ninetieth day
of the insolvency commencement date.
On the receipt of the claims, the IRP shall verify the same within 7 days
of last receipt of claim. IRP/ RP may call for such other evidence or
clarification as he deems fit from a creditor for substantiating the whole
or part of its claim. In case amount claimed by a creditor is not precise
due to any contingency or other reason, IRP/ RP shall make the best
estimate based on the information available. Claim amount can be
revised later when additional information warranting such revision. The
claims denominated in foreign currency shall be valued in Indian
currency at the official exchange rate as on the insolvency
commencement date. The onus and cost of proving the debt due, is on
the creditor.
Once the claims are verified, the IRP shall make a list of Creditors with
all the relevant details. Such list shall be –
(a) available for inspection by the persons who submitted proofs of
claim;
(b)available for inspection by members, partners, directors and
guarantors of the corporate debtor;
(c) displayed on the website, if any, of the corporate debtor;
(d) filed with the Adjudicating Authority; and
(e) presented at the first meeting of the committee
Resolution Applicant
Section 5(25) of the Code defines Resolution Applicant as a person, who
individually or jointly with any other person, submits a resolution plan
to the resolution professional pursuant to the invitation made u/s
25(2)(h). Section 29A was inserted by the IBC (Amendment) Act, 2018
w.e.f. 23 November, 2017. Consequently, a person shall not be eligible to
submit a resolution plan, if such person, or any other person acting
jointly or in concert with such person—
(a)is an undischarged insolvent;
(b)is a wilful defaulter;
(c)except for financial entity who is not a related party to the corporate
debtor, if such applicant or a corporate in which he is promoter or has
control over management, has an account which has been classified as
NPA for at least one year at time of submission of resolution plan.
However, such prohibition will not apply to a financial entity which has
become related party of the corporate debtor solely on account of
conversion or substitution of debt into equity shares or instruments
convertible into equity shares, prior to the insolvency commencement
date. It will also not apply to a resolution applicant, if such NPA account
was acquired pursuant to a prior resolution plan approved under this
Code for three years from the date of approval of such resolution plan.
(d)has been convicted for any offence punishable with imprisonment for
at least two years under any Act specified under the Twelfth Schedule or
for at least seven years under any law for the time being in force;
(e)is disqualified to act as a director under the Companies Act, 2013;
(f)is prohibited by the SEBI from trading in securities or accessing the
securities markets;
(g)has been a promoter or in the management or control of a corporate
debtor in which a preferential transaction, undervalued transaction,
extortionate credit transaction or fraudulent transaction has taken place;
(h)has executed a guarantee which has been invoked by the creditor of a
corporate debtor under the Code and such guarantee remains unpaid in
full or part;
(i)has any of the ineligibility mentioned in any other country;
(j)has a connected person not eligible under above clauses.
Here the term connected person would mean:
•Any person who is the promoter or in the management or control of
the resolution applicant;
•Any person who shall be the promoter or in management or control of
the business of the corporate debtor during the implementation of the
resolution plan; or
•Holding company, Subsidiary company, Associate Company or a
related party of a person referred to above.
The term 'Person acting in concert' has not been defined under Code.
The definition of the term person acting in concert may however be
borrowed from the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011, which defines Person Acting in Concert as
persons who have the common objective/purpose of acquisition of
shares/ voting rights in/exercising control over a company pursuant to
an agreement or understanding, formal or informal, directly or
indirectly co-operate for acquisition of shares/voting rights in/ exercise
of control of the company.
On a substantive reading of Section 29A it becomes clear that
ineligibility is multi folded as it applies to all of the following:
•where person himself is ineligible;
•where connected person is ineligible;
•where related party is ineligible, and
•where person acting jointly/in concert with any person mentioned
above is ineligible.
To provide some relief from rigorous provisions of section 29 A to
micro, small and medium enterprises (MSMEs), the IBC (Second
Amendment) Act, 2018 inserted a new section 240A. As per this newly
inserted Section 240A, the provisions of clauses (c) and (h) of section 29A
shall not apply to the resolution applicant in respect of CIRP of any
MSMEs. It also provides that the Central Government may in public
interest, by notification may direct that any of the provisions of this
Code shall not apply to MSMEs or apply with such modifications as
maybe specified in notification.
Note to qualify under this exemption, the enterprise must be registered
as an MSME the Micro, Small and Medium Enterprises Development
Act, 2006. As per section 2(e) of the MSMED Act “enterprise” means an
industrial undertaking or a business concern or any other establishment,
by whatever name called, engaged in the manufacture or production of
goods, in any manner, pertaining to any industry specified in the First
Schedule to the Industries (Development and Regulation) Act, 1951 (65
of 1951) or engaged in providing or rendering of any service or services.
Section 2(g), 2(h) and 2(m) refers to section 7(1) for the definition of
medium, micro and small enterprises respectively. Section 7(1) of the
Act which deals with the classification of the enterprise as micro,
medium and small is reproduced below:
7. Classification of enterprises.—
7(1) Notwithstanding anything contained in section 11B of the Industries
(Development and Regulation) Act, 1951 (65 of 1951), the Central
Government may, for the purposes of this Act, by notification and
having regard to the provisions of sub-sections (4) and (5), classify any
class or classes of enterprises, whether proprietorship, Hindu undivided
family, association of persons, co-operative society, partnership firm,
company or undertaking, by whatever name called,—
in the case of the enterprises engaged in the manufacture or production
of goods pertaining to any industry specified in the First Schedule to the
Industries (Development and Regulation) Act, 1951 (65 of 1951), as—
(i)a micro enterprise, where the investment in plant and machinery does
not exceed twenty-five lakh rupees;
(ii)a small enterprise, where the investment in plant and machinery is
more than twenty-five lakh rupees but does not exceed five crore rupees;
or
(iii)a medium enterprise, where the investment in plant and machinery
is more than five crore rupees but does not exceed ten crore rupees;
in the case of the enterprises engaged in providing or rendering of
services, as—
(i)a micro enterprise, where the investment in equipment does not
exceed ten lakh rupees;
(ii)a small enterprise, where the investment in equipment is more than
ten lakh rupees but does not exceed two crore rupees; or
(iii)a medium enterprise, where the investment in equipment is more
than two crore rupees but does not exceed five crore rupees. Explanation
1.—For the removal of doubts, it is hereby clarified that in calculating
the investment in plant and machinery, the cost of pollution control,
research and development, industrial safety devices and such other
items as may be specified, by notification, shall be excluded.
Explanation 2.—It is clarified that the provisions of section 29B of the
Industries (Development and Regulation) Act, 1951 (65 of 1951), shall be
applicable to the enterprises specified in sub-clauses (i) and (ii) of clause
(a) of sub-section (1) of this section.
There is a Bill pending in parliament which proposes to change the
definition of MSME. If approved, the classification will be on the basis of
annual turnover and not on basis of investment in plant machinery or
equipment as presently done. Accordingly, all enterprises irrespective of
being in manufacturing activity or service provider, will be classified as
micro if annual turnover is less than ` 5 Crores, as small if turnover is
between
` 5 and 75 Crores and as Medium enterprise if turnover exceed ` 75 crore
but is less than 150 crores.
Expression of Interest (EoI)
The RP shall publish brief particulars of the invitation for EoI in Form G
of the Schedule at the earliest, not later than 75th day from the
insolvency commencement date, in one English and one regional
language newspaper with wide circulation at the location of the
registered office, principal office and any other location, the corporate
debtor conducts material business operations and on website of
corporate debtor and IBBI. Besides other details of corporate debtor,
Form G must contain leads to the detailed invitation for EoI and last
date for submission of EoI which should be at least 15 days from date of
invitation.
The detailed EoI must specify the criteria specified by CoC and
ineligibility norms for prospective resolution applicants and basic
information about the corporate debtor. A prospective resolution
applicant, who meet the requirements, may submit EoI within the time
specified accompanied by the following:
•an undertaking by the prospective resolution applicant that it meets
the criteria and evidence thereof
•an undertaking that it does not suffer from any ineligibility (u/s 29A)
and evidence thereof
•an undertaking by the prospective resolution applicant that every
information and records provided in expression of interest is true and
correct
•an undertaking of confidentiality and no misuse of information.
On receiving EoI, RP shall conduct due diligence of meeting all
conditions and for purpose may seek any clarification or additional
information or document from the prospective resolution applicant. The
RP shall issue a provisional list of eligible prospective resolution
applicants within 10 days of the last date for submission of expression of
interest to the committee and to all prospective resolution applicants
who submitted the expression of interest. Any objection to inclusion or
exclusion of a prospective resolution applicant may be made with
supporting documents within 5 days from the date of issue of the
provisional list. The RP shall issue the final list of prospective resolution
applicants within 10 days of the last date for receipt of objections, to the
CoC.
Resolution Plan [Section 30, 31 & 32 of the Code r/w Regulation 36B, 37,
38 & 39 of the IBBI (Insolvency Resolution Process of Corporate Person)
Regulation, 2016]
The resolution professional shall issue the information memorandum,
evaluation matrix and a request for resolution plans, within five days of
the date of issue of the provisional list to every prospective resolution
applicant in the provisional list and every prospective resolution
applicant who has contested the decision of the resolution professional
against its non-inclusion in the provisional list. The request for
resolution plan must detail each step in the process, and the manner and
purposes of interaction between the resolution professional and the
prospective resolution applicant, along with corresponding timelines. It
should allow prospective resolution applicants a minimum of thirty
days to submit the resolution plan. RP may modify invitation or
evaluation matrix and also extend time for submission of resolution plan
with prior approval of CoC. Any modification in the request for
resolution plan or the evaluation matrix shall be deemed to be a fresh
issue.
A resolution applicant may submit a resolution plan along with an
affidavit stating that he is eligible under section 29A to the RP.
Resolution plan shall provide for the measures, as may be necessary, for
insolvency resolution of the corporate debtor for maximization of value
of its assets. It must contain the following:
(a)a statement as to how it has dealt with the interests of all
stakeholders, including financial creditors and operational creditors, of
the corporate debtor.
(b)identify specific sources of funds that will be used to pay:
•the insolvency resolution process costs in priority to any other creditor;
A resolution applicant may submit a resolution plan along with an
affidavit stating that he is eligible under section 29A to the RP.
Resolution plan shall provide for the measures, as may be necessary, for
insolvency resolution of the corporate debtor for maximization of value
of its assets. It must contain the following:
(a)a statement as to how it has dealt with the interests of all
stakeholders, including financial creditors and operational creditors, of
the corporate debtor.
(b)identify specific sources of funds that will be used to pay:
•the insolvency resolution process costs in priority to any other creditor
•liquidation value due to operational creditors which is to be made
before the expiry of thirty days after the approval of a resolution plan by
the Adjudicating Authority; and
•liquidation value due to dissenting financial creditors which is to made
before any recoveries are made by the financial creditors who voted in
favour of the resolution plan.
(c)Details like the term of the plan and its implementation schedule,
management and control during the term and means of supervision of
its execution.
A resolution plan shall demonstrate that –
(a)it addresses the cause of default;
(b)it is feasible and viable;
(c)it has provisions for its effective implementation;
(d)it has provisions for approvals required and the timeline for the same;
and
(e)the resolution applicant has the capability to implement the resolution
plan.
RP after inspecting all resolution plans, submit to the committee all
resolution plans which comply with the requirements of the Code, along
with the details of preferential, undervalued, fraudulent and
extortionate credit transactions, if any, and orders of adjudicating
authority in respect thereof.
The committee of creditors shall evaluate the resolution plans received
strictly as per the evaluation matrix to identify the best resolution plan.
It may approve a resolution plan by a vote of not less than 66% of voting
share of the financial creditors, after considering its feasibility and
viability and fulfilment of requirement under the Code and related
regulations. The resolution applicant may attend such meeting where
resolution plan is being considered. The committee may approve any
resolution plan with such modifications as it deems fit. However, it shall
record the reasons for approving or rejecting a resolution plan. The
committee specify the amounts payable from resources under the
resolution plan for liquidation cost, dues to operational creditors and
dissenting financial creditors. RP shall submit the resolution plan as
approved by the committee of creditors to the Adjudicating Authority at
least fifteen days before the expiry of 180 days (or 270 days in case it is
extended) period along with a compliance certificate in Form H of the
Schedule.
If resolution plan approved by the CoC has provisions for its effective
implementation and meets all the requirements of law, Adjudicating
Authority may by order approve the plan. The resolution professional
shall continue to manage the operations of the corporate debtor after the
expiry of the corporate insolvency resolution process period until an
order is passed by the NCLT. Once approved, the resolution plan which
shall be binding on the corporate debtor and its employees, members,
creditors, guarantors and other stakeholders involved in the resolution
plan, after which moratorium will cease and RP shall forward all records
relating to the conduct of the CIRP and the resolution plan to the Board.
The resolution applicant must obtain the necessary approval required
under any law for the time being in force within a period of one year
from the date of approval of the resolution plan.
A person in charge of the management or control of the business and
operations of the corporate debtor after a resolution plan is approved by
the Adjudicating Authority, may make an application to the
Adjudicating Authority for an order seeking the assistance of the local
district administration in implementing the terms of a resolution plan.
Any appeal from an order approving the resolution plan may be made
to NCLAT within 30 days of the order of the NCLT, on the following
grounds, namely: –
•resolution plan is in contravention of the provisions of any law in force;
•there has been material irregularity in exercise of the powers by the RP
during CIRP;
•liquidation cost or 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; or
•the resolution plan does not comply with any other criteria specified by
the Board.
Time Limit for CIRP [Section 12]
The CIRP must be completed within 180 days from the date of
admission of the application. This can be extended by 90 days, by
making an application to the NCLT on approval of the committee by a
vote of 66%, but such extension can only be granted once. The
amended regulation provides model time-line for CIRP on the
assumption that the interim resolution professional is appointed on
the date of commencement of the process and the time available is
hundred and eighty days:
Section / Description of Norm Latest
Regulation Activity Timeline
Section 16(1) Commencement …. T
of CIRP and
appointment of
IRP
Regulation 6(1) Public Within 3 Days T+3
announcement of
inviting claims Appointment
of IRP
Section 15(1)(c) / Submission of For 14 Days T+14
Regulations claims from
6(2)(c) and 12 (1) Appointment of
IRP
Regulation 12(2) Submission of Up to 90th T+90
claims day of
commencement
Verification of Claims
Liquidator may come across some of the following typical
types of claims which should be dealt as follows:
• Where the amount claimed by a claimant is not precise due
to any contingency or any other reason, the liquidator shall
make the best estimate of the amount of the claim based on
the information available with him.
• The claims denominated in foreign currency shall be
valued in Indian currency at the official exchange rate as on
the liquidation commencement date.
Stakeholders List
The liquidator shall prepare a list of stakeholders, category-
wise, on the basis of proofs of claims submitted and accepted
and file it with Adjudicating Authority within 45 days from
the last date for receipt of claims, and the filing of the list
shall be announced to the public.