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Presentation on

INSOLVENCY AND BANKRUPTCY CODE, 2016

From the point of view of Bankers

Anup Singh+91 9830726554

CEO & Insolvency Professionals

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BACKGROUND

» Banks in India are going through unprecedented times with stressed loan portfolio touching all-timehigh. There is an apprehension that there could be further significant additions as many stressed loanaccounts have been disguised as standard.

» Realizing the problem, RBI has attempted to force banks to clean up balance sheets and come out withmany regulatory steps aimed at improving banks’ ability to deal with such stressed accounts. However,such frameworks have proved unsuccessful.

» India currently has multiple laws to deal with insolvency, which leads the entire resolution processfragmented, expensive and time-consuming with very low recovery rate.

» In this scenario, the Indian Government has introduced the Bankruptcy and Insolvency Code, 2016which will consolidate the existing frameworks and create a new institutional structure.

» The Code creates time-bound processes for insolvency resolution of companies and individuals whichthereby will help India improve its World Bank insolvency ranking.

Background

Concerns of currently used options

Option Concern

CDR Lost charm after withdrawal of forbearance benefit by RBI from 1st April,

2015.

Not helped much. Too many failures post CDR implies it deferred the

inevitable.

5:25 Available for large cases and a few select industries only – Infrastructure and

Core Industries.

SDR For old cases cannot be forced upon.

Existing management may continue in disguise.

Finding new promoter is always a challenge

Banks not comfortable towards steep discount to debt and need for

refinancing

S4A Current cash flows of company taken as basis to ascertain sustainable debt,

so there are not enough companies which can come under its purview

Terms and conditions of the loan cannot be changed.

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Current stress in the banking sector

March 2013 2014 2015 2016

Total

Gross NPA Ratio (%) 3.27 3.86 4.37 7.61

Net NPA Ratio (%) 1.72 2.17 2.48 4.63

Stressed Assets/advances (%) NA 9.75 11.01 11.5

March 2013 2014 2015 2016

Public Sector Banks

Gross NPA Ratio (%) 3.59 4.34 4.94 9.6

Net NPA Ratio (%) 1.99 2.53 2.9 6.1


March 2013 2014 2015 2016

Private Sector Banks

Gross NPA Ratio (%) 1.86 1.82 2.14 2.7

Net NPA Ratio (%) 0.52 0.63 0.87 1.3


Stressed assets in the banking system

Our intent is to have clean and

fully provisioned

banks’ balance sheets by

March 2017

All out of the court debt restructuring processes like CDR, SDR, S4A and 5:25 have proved unsuccessful and bad loans have piled up in the system after their implementation

Cont’d.Source: RBI

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Resolving insolvency – time and cost matter

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20

30

40

50

60

70

80

90

100

Recovery Rate (Cent/Dollar)

The recovery rate, in terms of cents recovered per dollar debt, is very low in India at 26 cent/dollar. In countries like Finland, Japan, Germany and the United States the recovery rate is extremely high at 90.3 cents, 92.1 cents, 84.4 cents and 78.6 cents per dollar respectively.

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10

15

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25

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1.5

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2.5

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3.5

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4.5

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Time for the recovery and cost of the proceedings

Time (Yr) - LHS Cost (% of estate) - RHS

In India, it takes an average of 4.3 years to resolve bankruptcy, which is extremely high. The cost in term of the percentage of the value of the debtor’s estate is also very high in India (9%).

Source: The World Bank/Doing Business Framework6

Erstwhile Legal Framework

Presidency Towns Insolvency Act, 1909/

Provincial Insolvency Act, 1920/ Indian Partnership ActApplicable to individuals and partnerships

Companies Act, 2013 / Companies Act, 1956

Deals with rehabilitation / revival / winding up of companies

*only court supervised winding up available now under the 2013 Act; other proceedings under the Code

Limited Liability Partnership Act, 2008 r/w. Limited Liability Partnership (Winding up and Dissolution) Rules, 2012

No provisions for rehabilitation / revival of LLPs

SARFAESI / Recovery of Debt Due to Banks and Financial Institutions Act, 1993

Debt recovery / enforcement of security

No revival / rehabilitation of the defaulting entity

SICARevival / rehabilitation of only sick industrial

companies

CDR , JLF, SDR and S4AIntroduced by RBI as out of court process

No legal sanction

Due to the complexity of multiple laws, the entire resolution procedure isfragmented, expensive and time-consuming with very low recovery rate.

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DECODING THE CODE

» The Insolvency and Bankruptcy Code, 2016 has been formed with the followingobjectives:

▪ To promote entrepreneurship;

▪ To make credit available;

▪ To balance the interest of all stakeholders by consolidating and amending the existinglaws relating to insolvency and bankruptcy;

▪ To reduce the time of resolution for maximizing the value of assets.

Objective of the Code

The key theme of the Code is to consolidate all laws relating to insolvency of companies,limited liability entities, unlimited liability partnership and individuals, presently governed bymultiple laws, into a single legislation. The SICA Repeal Act came into force in December 2016,and the AAIFR and BIFR stands dissolved. Several provisions of the Code have been put outduring last few weeks to streamline its operations effectively.

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» The Code brings a paradigm shift from “Debtors in possession” to “Creditors in Control”

» Insolvency test moved from “ erosion of networth ” to “payment default”

» Single insolvency and bankruptcy framework. It replaces/modifies/amends certain existinglaws.

» Time bound resolution process at each stage

» Establishment of Insolvency and Bankruptcy Board-a regulator as an independent body

» A clearly defined distribution of recovery proceeds

» Insolvency Professional to take over management and control of the Corporate Debtor

» Government dues would rank below the claims of other creditors

» Have provisions to deal with concealment, fraud and /or manipulation leading to fineand/or imprisonment

» Provide confidence to Lenders and Investors in the debt market

Key highlights

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Legal structure

National Company Law Tribunal

Supreme Court (Question of law)

National Company Appellate Law Tribunal

Corporate Persons

Debt Recovery Tribunal

Debt Recovery Appellate Tribunal

Individuals / Partnerships

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Institutional infrastructure

The Insolvency and Bankruptcy Code, 2016 has introduced the following entities for

successful implementation and smooth function.

Insolvency and Bankruptcy Board of India (IBBI)

Adjudicating Authority (AA)

Insolvency Professionals Agencies (IPA)

Insolvency Professionals (IP)

Information Utilities (IU)

▪ Regulatory authority of IPA, IP, and IU

▪ Empowered to make regulations in respect of all the processes, appointments, procedures, investigation, monitoring, etc.

▪ NeSL (National e-Governance Services, a govt entity has recdIn-principle.

▪ The AA will exercise jurisdiction during the insolvency and liquidation process.

▪ For corporates,LLPs – NCLT is AA

▪ For individuals and partnerships – DRT is AA

▪ IPA are those specialized bodies/agencies that will be entrusted with the task of registration and governance of IPs

▪ IPs are appointed by IPA, who would take on the roles of Resolution Professional/Liquidator/bankruptcy Trustee in the process of different entities

▪ An IU is an agency that is in charge of collecting, collating, authenticating and disseminating financial information

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Different hats worn by Insolvency Professional

Called As Appointed By

Role Approval / report to

Interim Resolution Professional

Applicantor NCLT

• Verification of Balance Sheets• Collation of claims• Appointment of valuer• Determine financial position of debtor• Formation and conducting of meeting of

COC

None

Resolution Professional

Committee of financial creditors

• Preserve and protect assets• Update list of claims• Convene and attend all COC meetings• Prepare Information Memorandum • Check resolution plan and present to COC.

Committee of creditors

Liquidator AdjudicatingAuthority

• Prepare preliminary report, assets memo-randum, sale report etc

• Maintain relevant records• Realise and distribute

AdjudicatingAuthority

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INSOLVENCY RESOLUTION PROCESS

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Some key definitions

Debt A liability or obligation in respect of a claim which is due from any personand includes financial debt and operational debts

Default Non-payment of debt when whole or any part or installment of the amountof debt has become due and payable and is not repaid by the debtor or thecorporate debtor, as the case may be

Creditors Any person to whom a debt is owed and includes a financial creditor, anoperational creditor, an unsecured creditor and a decree holder

Financial creditors • Any person to whom a financial debt is owed and includes a person towhom such debt has been legally assigned or transferred to;

• Includes Secured and Unsecured Financial Creditors

Operational creditors • A person to whom an operational debt is owed and includes any person towhom such debt has been legally assigned or transferred;

• Includes Secured and Unsecured Operational Creditors

Insolvency commencement date

means the date of admission of an application for initiating corporateinsolvency resolution process by the Adjudicating Authority under sections 7,9 or section 10, as the case may be;

Insolvency resolution process period

means the period of one hundred and eighty days beginning from theinsolvency commencement date and ending on one hundred and eightiethday

» Moratorium

The Adjudicating Authority declares moratorium for prohibiting the following (section 13 of the Code)-

➢ All legal issues, judgement, court orders, tribunals, arbitration etc. against the corporate debtor.

➢ Transferring , encumbering, alienating or disposing of any assets or any legal right or beneficial interesttherein

➢ Any action to foreclose, recover or enforce any security interest created by the corporate debtor inrespect of its property.

➢ The recovery of any property by an owner or lessor where such property is occupied by or in thepossession of the corporate debtor.

➢ The order of the moratorium shall be continued until the completion of corporate insolvency resolutionprocess.

» Exclusion:

➢ There should not be any termination of supply of the essential goods or services to the corporatedebtor during the moratorium period.

➢ The moratorium shall not apply to any transaction as notified by the Central Government inconsultation with any financial sector regulator.

Some key definitions

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Insolvency resolution process for corporate

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Default Moratorium (180-270 days)

Application can be moved by FC, OC or CD

Appointment of RP

BoD suspended; all powers vest with IRP / RP

Restricts• Institution of suits• Assets transfer• Any foreclosure or

enforcement under SARFAESI

Formation of CoC

Consists of FCs only• Approve actions of RP• Voting share based in

the ratio of debt owed• All decision of the CoC

to be approved by 75% of FCs

Resolution Plan

Resolution plan to provide:• Payment of CIRP costs• OCs repayment of dues• How management will

be run post approval of plan Implementation and supervision of plan

Accept and implement

Reject –company goes into liquidation

The committee of creditors shall comprise all financial creditors of the corporate debtor:

▪ Related Party excluded and no right to participate or vote. If Consortium then each financial creditor will have right

▪ If a creditor is both FC and OC then debt to be bifurcated for voting

▪ If assigned then assignee has voting right as original

Meeting of Committee of Creditors

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Voting Share means the share of the voting rights of a single financial creditor in the committee of creditors which is based on the proportion of the financial debt owed to such financial creditor in relation to the financial debt owed by the corporate debtor

Apart from financial creditors following can attend but not vote

▪ Members of the suspended board

▪ One representative of the operational creditors (only if debt is more than 10% of total debt)

However, absence of them will not make meeting invalid

Committee of Creditors (COC)

Voting Share

Who can attend

Timelines for CIRP

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14 days before 0 date

Application to NCLT

Day 0

Admission & moratorium declaration

0 - 14 days

Appointment of IRP

0 - 17 days

Issue public announcement

0 - 21 days

Appoint 2 Registered Valuers

14 - 28 days

Last date of submission of claims by creditors

30 - 37 days

Notice convening First CoC meeting and report to NCLT

0 + 44 days

First CoC meeting and appointment of RP

0 + 65 days

Submission of IM

0 + 150 days

Submission of Resolution Plan

CoC approves plan; submission to NCLT for approval

0 + 180 days

Liquidation in case of rejection

» All financial creditors are obligated to provide information to IU about debt, securities,modification of terms and default

» Any financial creditors of the defaulting company can initiate the process not just thecreditor who has been defaulted against

» No distinction between secured or unsecured financial creditor for the purpose of voting inCOC

» Unsecured creditor can also trigger insolvency resolution process subject to minimumdefault of Rs. 1 lakh.

» Operational creditor to be paid liquidation value in priority to financial creditors within 30days of approval of resolution plan by AA

» Dissenting financial creditor to be paid liquidation value prior to any recoveries made byconsenting financial creditors

» Financial Creditor can appoint separate Insolvency Professional to represent them

» All members of COC are compulsorily required to vote

» Electronic meeting /voting by proxy allowed . Recording of meetings compulsory.

Unique Features of the CIRP

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» Following are the cost of Insolvency Resolution Process

Who bears the cost?

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Cost head Borne by Remark

Application fee Applicant Rs. 2000 if applicant is operational creditor else 25000

Public Announcement cost Applicant Not to form part of IRP

IRP Fee Applicant/Debtor

Fixed by Applicant. To be borne by the debtor to the extent ratified by COC

Other cost including Valuer’s Fees, Forensic Audit Cost, professional advisorsappointed by IRP

Applicant/Debtor

To the extent ratified by COC

Resolution Professional cost Debtor COC to fix

Cost of interim finance Debtor COC to fix limit of interim finance

Other Insolvency Resolution Process Cost

Debtor To be approved by COC

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LIQUIDATION PROCESS

» Liquidation of Corporate Debtor

» Order of liquidation:

▪ Upon decision by CoC to liquidate

▪ Resolution plan is not received by AA, though submitted within the prescribed timeline

▪ Rejection of resolution plan by AA

▪ Contravention of approved resolution plan – on application by person whose interestsare prejudicially affected.

» Liquidation process to be completed within two years unless extended by NCLT

» No suit or other legal proceeding by or against the corporate debtor, except suit orlegal proceeding by liquidator with the prior approval of the NCLT

» Order of liquidation - Notice of discharge to the officers, employees and workmenof the corporate debtor (not applicable if liquidator continues the business of thecorporate debtor during the liquidation process)

Liquidation and Winding-up (Distribution of Assets)

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Liquidation and distribution of recovery proceeds

Liquidation Process

Appointment of Liquidator

To make public announcement - to call upon stakeholders to submit their claims as on liquidation commencement

date and to provide last date for submission of claim (30 days from the liquidation commencement date* -Y+30)

Submission of the preliminary record to the Adjudicating Authority (Y+75)

Submission of claims by different stakeholders. Verification of stakeholders’ claims and preparation of final list of

stakeholders by the liquidator.

Asset memorandum by the liquidator and valuation by at least two independent valuers.

Asset sale either by auction or by private sale. Distribution of proceeds (Y+2 yrs)

*Liquidation commencement date: means the date on which proceedings for liquidation commence in accordance with section 33 or section 59 of the Code (Y)

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» Liquidation of Corporate Debtor (Indicative Timelines)

Liquidation and Winding-up

» Liquidation estate toinclude all assets of theCorporate Debtor,except:

▪ Assets owned by thirdparties but inpossession of theCorporate Debtor

▪ Personal assets ofshareholders orpartners of theCorporate Debtor

▪ Assets of Indian orforeign subsidiaries ofthe Corporate Debtor

IndicativeTimeline

Activity

X Order for liquidation of Corporate Debtor; RP to act as liquidator unless replaced by the NCLT

X + (~ days) Formation of liquidation estate by the liquidator

X + 30 Consolidation of claims by the liquidator; a creditor may withdraw or vary claim within 14 days from submission

X + (~ days) Verification and acceptance / rejection of claims by the liquidator; appeal from any rejection within 14 days

X + (~ days) = Y

Distribution of assets from the liquidation estate (please see distribution waterfall in the following slide)

Y + (~ days) = Z

Dissolution of the Corporate Debtor by the NCLT

Z + 7 Copy of dissolution order to be forwarded to the authority with which the Corporate Debtor is registered

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Liquidation waterfall

Section 53 of the Code deals with distribution of assets sale proceeds along with liquidation waterfall

Entire insolvency resolution process cost and liquidation cost

Workmen’s dues for the period of twenty-fourmonths preceding the liquidation commencementdate

Debts owed to a secured creditor in the event suchsecured creditor has relinquished security in themanner set out in section 52

+

Wages and any unpaid dues owed to employees other than workmen for the period of twelve months preceding the liquidation commencement date

Financial debts owed to unsecured creditors

Any amount due to the CentralGovernment and the State Government

Debts owed to a secured creditor for anyamount unpaid following the enforcement ofsecurity interest

+

Any remaining debts and dues

Preference shareholders, if any

Equity shareholders or partners, as the case may be

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ANALYSIS

» Fast track process: The code allows proposes for insolvency process can be initiated at anearly stage. Time allowed to complete resolution process is 180 days (additional 90 days ifrequired) and the liquidation process required a maximum two years’ time. So, the entireprocedure shall be completed in less than three years’ as against current average of 4.3years.

» Moratorium to restrict asset strapping and siphoning off assets: Moratorium to prohibittransferring of any assets or legal rights by the corporate debtor (Section 14 of the Code)and transfer of management to Resolution Professional under supervision of Committee ofCreditors will prohibit transferring of any assets or legal rights by the corporate debtor(Section 14 of the Code). The violation of provision 14 shall be punishable with a minimumthree years imprisonment term (Section 74 of the Code).

» Management control by insolvency professional: On commencement of the resolutionprocess, the management of affairs of the corporate debtor shall vest on resolutionprofessional (Section 16, 17 and 25 of the Code). The resolution professional can bringexpertise in his team to revamp the business, which can save the business from beingliquidated.

Analysis and implication of the Code

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» Protecting workers and employees: The new code shall protect the interest of the workmenahead of secured creditors. First, the workmen will get the share from assets sale proceedsand then the secured creditors and employees respectively.

» Abolition of the official liquidator: The code abolishes the existing official liquidatorstructure and the insolvency professional shall perform the role of the liquidator in theliquidation process. The official liquidators who are appointed by Central Government andare attached to the High Courts of the respective states have not very successful and mostof the time they are overburdened with multiple assignment. Under the code, theliquidation procedure will be completed in a time-bound and transparent manner by aprofessional agency.

» Opens up Bond Market: The Corporate Bond market activity has relatively been low in Indiacompared to other countries in the world. The code brings in much needed transformationtowards rights of other creditors and bond holders. Similarly, the provision towards rankingdown Government Dues over other creditors in liquidation is expected to give desiredconfidence to all Investors.

Analysis and implication of the Code (2)

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» As per the code upon invocation of Insolvency Process for Corporate Debtors all personalguarantees shall also be dealt by same Adjudicating Authority (NCLT)

» Any pending cases against invocation of personal guarantee shall also be transferred torelevant NCLT

» Process for invocation of personal guarantee shall be same as specified in IBC 2016 forIndividuals.

» However, since provisions for invocation of Bankruptcy laws for individuals are yet to benotified there is lack of clarity on this front

▪ Personal guarantors can propose settlement and release of personal guarantees along with theresolution plan

▪ Alternatively personal guarantee may continue for revised terms of debt as may be considered inResolution plan

» The Code is silent on pledge of shares. However, since code prescribes moratorium andnon alienation of share holding it can be assumed that lenders cannot invoke pledge ofshares without the permission of AA

Personal Guarantees/Pledge of Shares

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LENDERS PERSPECTIVE

» Creditors in control as most decision making with the lenders.

» Time bound and quick solution for stressed and NPA accounts.

» Change of management possible.

» Brings financial lenders to a platform – enabling quick decision making and arriving atconsensus quickly.

» Prepare and examine resolution plan by professionals appointed by creditors ensuringfearless decision making.

» Final approval by NCLT (a legal entity) – so less stress/fear of accountability/ vigilance.

» Fair chance to viable and sustainable units for time bound revival.

» In caser of unviable accounts, faster, transparent and smooth liquidation process.

» Clear and fair distribution of funds in case of liquidation. Government dues to get lastpriority.

» Protection of assets of secured borrowers with maximisation of realisation.

» Positive support from government for realisation and resolution of NPAs

Pros -

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» When account has become irregular and Bank is of the view that borrower is taking mattercasually

» When there are multiple lenders and

▪ Client is keeping account of a few lenders regular but others irregular

▪ When lenders are not able to reach consensus quickly

▪ When certain lenders with senior debt (1st charge holders) or other privileges are dominant andunfair to junior debt (unsecured or 2nd charge holders)

▪ TRA mechanism is not benefitting some lenders in just manner.

» When security coverage is low or very difficult to realise.

» When lenders apprehend that the account is likely to go bad and borrower can siphon awayfunds or strip assets

» Cases where SARFAESI or RDDB can not be applied, but still the account is showing signs ofstress and needs resolution within legal framework

» When lenders doubt about integrity and/or managerial capabilities of existing promoters

» When lenders expect genuine interest for change of management

Ideal Cases for IBC

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» SARFAESI doesn’t consider revival while IBC first considers revival

» SARFAESI doesn’t provide control with Creditors while IBC provides the same through IRP

» SARFAESI doesn’t provide priority of payment to secured creditors over all Govt andStatutory dues.

» Under SARFAESI physical possession passes on to lenders obligating them to arrange forsecurity and maintenance while under IBC it becomes responsibility of an independentagency.

» SARFAESI provides exclusive power to secured creditors and also differentiates between 1st

charge and 2nd charge holders while in IBC all financial creditors are considered at par

» Under IBC quick change of management is possible while under SARFAESI change ofownership / management is possible, but cumbersome.

» SARFAESI process is more time consuming.

» Legal/administrative hurdles of involving DM, Local PS and Trade Unions is passed on toindependent process.

SARFAESI vis a vis IBC

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Applications By FC/OC/CD

Applications Made(No. of Cases)

Applications Accepted (No. of Cases)

Financial Creditors 14 10

Operational Creditors 38 15

Corporate Debtors 22 22

Total 74 47

Summary of Applications files with NCLT as on April 2017

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NCLT Judgements & Takeaways

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Details Case Reference Location Order

Explaining Applicant- FC or OC

NIKHIL MEHTA & SONS (HUF) & OTHERSVSAMR INFRASTRUCTURE LTD.

Applicant booked units in Real Estate projects of CD

CD agreed for assured returns on delayed possessions

Multiple winding up proceedings were filed against CD

Applicant approached NCLT as FC

NCLT Delhi Applicant were not FC as no time value of money available

Dismissed Further in Col.

VINOD AWASTHY VS AMR INFRASTRUCTURE LTD. also dismissed onsimilar grounds.

Applicant filed under OC


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Explaining Applicant- FC or OC

CULROSS OPPORTUNITIES SP AND PETER BECK & PARTNERSVS SHARON BIO – MEDICINELTD. Applicant were FCCB

Holders FCCB to be converted

into Equity Shares at the option of Bondholders

Bondholders extended conversion terms

Applicant approached NCLT as FC

NCLT Mumbai Applicationadmitted as FCCB holders are Financial Creditors (FC)

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Explaining Power of Attorney

ICICI BANKVSPALOGIX INFRASTRUCTURE PVT. LTD. ICICI filed case in IBC Competency of the

Attorney holder to initiate proceedings raised

Strict interpretation & specific authorization from Board required

Whether POA executed before enactment of Code provides right under IBC

NCLT Kolkata No express authority under IBC

Application rejected


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Explaining Power of Attorney

INDIAN BANKVSKADEVI INDUSTRIES LTD. Indian Bank filed case in

IBC POA executed before

enactment of Code

NCLT Hyderabad

POA to be passed by Bank is an internal issue

Resolution under IBC to be available in time bound manner

Application admitted

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Explaining Dispute VDS PLASTIC PVT. LTD.VSPAL MOHAN ELECTRONICS PVT. LTD. OC filed application

considering that no dispute persist since there are no pending suits or arbitration at the time of Notice issuance.

CD showed existence of dispute though no suits/arbitration pending

CD argued that Definition of Dispute is inclusive

NCLT Delhi Definition not limited to prior suit or arbitration

OC submission upheld

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Explaining Dispute DF DEUTSCHE FORFAIT AG AND OTHERSVSUTTAM GALVA STEEL LTD. CD had entered into

supplies of Billets with AIC Handels GmbH

AIC discounted these bills with DF Deutsche through assignment

OC files case with NCLT

NCLT Mumbai No pleading or defending party, the terminology like Petitioner/ Respondent or Plaintiff/ Defendant is not present in IBC

Not an adversarial proceeding

Ratio Legis more important than Ratio Decidendi

Case admitted

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Explaining Dispute ANNAPURNA INFRASTRUCTURE PVT. LTD. & OTHERSVSSOIL INFRA RESOURCES LTD. OC filed with IBC OC had earlier

approached for Arbitration for which Award was pronounced.

Arbitration Award was challenged and appealed.

NCLT Delhi Arbitration Award is not final as the appeal is pending, so dispute exists.

OC has availed one remedy & second remedy under IBC is against principles of Judicial administration

Would promote Forum shopping

Application rejected

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Explaining Time Limits

J K JUTE MILLS COMPANY LTD.VSM/S SURENDRA TRADING CO. NCLT delayed the

proceedings for admitting/rejecting application

CD objection was not taken cognizance

CD approached NCLAT

NCLT, Allahabad & NCLAT

The time period of 14 days prescribed u/s 7, 9, 10 is to be counted from the date of receipt on which it is listed for admission / order.

NCLT can in appropriate cases admit or reject cases after the prescribed period.

Time is the essence of the Code

Application being defective/incomplete to be rejected by NCLT.

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PRIDECO COMMERCIAL PROJECTS PVT. LTD.VSERA INFRA ENGG LTD. OC approached NCLT CD challenged the order

of NCLT citing no Notice of claim u/s 8 provided

OC argued that Notice as issued u/s 271 of Companies Act to be treated as Notice under IBC.

NCLT, Delhi & NCLAT

Notice u/s 8 is mandatory. NCLT Order set aside.

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a) DEEM ROLL-TECH LTD.VSR. L. STEEL AND ENERGY LTD.

b) SPECULUM PLAST PVT. LTD.VSPTC TECHNO PVT. LTD. OC filed under IBC Debt time barred under

the Limitation Act, 1963

NCLT, Delhi Provisions of Section 433 of Companies Act applicable to IBC

Debt being time barred, proceeding under IBC not maintainable.

Cases rejected

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URBAN INFRASTRUCTURE TRUSTEE LTD.VSNEELKANTH TOWNSHIP & CONSTRUCTIONS PVT. LTD. FC filed under IBC

towards recovery of Debentures.

CD claimed that claim time barred.

NCLT, Mumbai

Debt not time barred as admission in financial statement gives fresh limitation period as per Sec 18 of Limitation Act.

Case admitted

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Explaining Powers of IRP/ IP

ALCHEMIST ASSET RECONSTRUCTION CO LTD.VSHOTEL GAUDAVAN PVT. LTD. Non co-operation by CD

to IRP appointed. No details provided and

obstruction to it’s role.

NCLT, Delhi NCLT instructs DGP/SP to provide sufficient security to IRP for functioning.

Banks were asked to accept IRP instructions.

Contempt powers against promoters and KMP

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CONCLUSION

» Consequent to the dissolution of company law Board and repealing of SICA Act, all the matters pending withCLB shall stand transferred to NCLT whereas all existing registered BIFR cases stands abated and suchcompanies may file with NCLT afresh within 180 days. This shall lead to NCLT dealing with backlogs ofCLB/SICA cases. NCLT should possess adequate manpower and infrastructure to deal their cases apart fromthe responsibility of being Adjudicating Authority under this Code.

» The current 33 DRTs set up across the country have huge pendency of recovery proceedings and are currentlybeset with inadequate infrastructure and manpower. With more than 58,000 pending cases, need to beef upits logistics.

» Operationalization of Information Utilities is yet to open which is required to ensure that the data andinformation related to debt and default are authentic and accurate.

» SARFAESI may still be a preferred choice for lenders having sufficient mortgaged assets.

» Secured creditors need to exercise professional judgment towards resolution process as liquidation itself maynot be the best choice.

» Overall development of ecosystem may take time for having adequately skilled insolvency professionals,requisite infrastructure with Adjudicating Authority, proactive training of all intermediaries, development ofcorporate Bond market, well capitalized ARCs, investment in distressed securities etc.

» Arriving at liquidation value is a huge challenge as the Code is yet to be tested in the country.

» Applicability of MAT on write off of loan can result into huge tax liability which can derail resolution plan

Issues & challenges

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Take Home

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• We caution creditors using the Code as a recovery tool as the outcome of an unsuccessfulrescue may lead to liquidation which may not be the outcome contemplated by theapplicant, respondent, defendant or any other stakeholder.

• It may happen that a liquidity crisis or a temporary financial crisis magnifies itself intoliquidation of a corporate debtor as in such an event all creditors and the corporate debtormay suffer.

• If the key stakeholders achieve to resolve a defaulting corporate debtor during the processunder the Code, all creditors, i.e., operational as well as financial, may benefit the most byusing the Code by way of successful resolution.

• The stakeholders and creditors may use the Code to maximize the chances of a rescue, ifsuch rescue is not possible, this process will lead to liquidation of the corporate debtor withthe best possible value from the disposal of assets of such corporate debtor.

Team Sumedha towards IBC Process

51* Passed Limited Insolvency Examination # IP under automatic route

Name of IP /Location Registration No. Name of IPA Enrolled with

1 Mr. Anil Birla # / BangaloreIBBI/IPA-01/IP-00185/2016-

17/1831

The Indian Institute of Insolvency

Professionals of ICAI

2 Mr. Bijay Murmuria * / KolkataIBBI/IPA-001/IP-N00007/2016-17/

10026



3 Mr. Vijay Maheshwari # / KolkataIBBI/IPA-01/IP-00149/2016-

17/1236



4 Mr. Pradip Kumar Roy Chowdhury # / KolkataIBBI/IPA-01/IP-00112/2016-

17/1158



5 Mr Anup Singh Paliwal* / KolkataPassed Limited Insolvency

Examination--

6 Mr. B.S Rathi * / MumbaiPassed Limited Insolvency

Examination --

7 Mr. Udayraj Patwardhan* / MumbaiIBBI/IPA-001/IP-P00024/2016-17/

10057



8 Mr Gaurav Adukia * / MumbaiPassed Limited Insolvency

Examination --

9 Mr Nikhil Dujari * / MumbaiPassed Limited Insolvency

Examination --

10 Mr. Mohan Lal Jain* / New DelhiIBBI/IPA-002/IP-N00006/2016-

17/10006ICSI Insolvency Professionals Agency

KOLKATA8 B, Middleton Street, 6 A, GeetanjaliKolkata – 700071Telephone: +91 33 2229 8936/6758/3237/4473Fax: +91 33 2226 4140 / 2265 5830Email: [email protected]

Contact Us

BANGALORE“Park Plaza” 1st Floor,No.1 Park Road

(Off Infantry Road), Tasker Town,Bangalore – 560001

Telephone: +91 80 4124 2545 / 2546Fax: +91 80 4124 2547

Email: [email protected]

HYDERABAD309/1, “Krishna Plaza”, Khairatabad, Opp: Shadan College,Hyderabad-500 004Telephone: +91 40 4020 2826 / 4026 7272Fax: +91 40 4020 2826Email: [email protected]

AHMEDABADA/82, Parisima Complex, Opp. IFCI Bhawan,

C.G. Road, Ahmedabad – 380 009Telephone: +91 79 3002 3337

Fax: +91 79 2645 0394Email: [email protected]

MUMBAIC-703, Marathon Innova,Off G KMarg

Opp Penninsula Corporate Park,LowerParel (West),Mumbai - 400 013.

Telephone: +91 22 4033 2400/ 4033 2416Fax: +91 22 2498 2878

Email: [email protected]

NEW DELHIB1/12, Safdarjung Enclave, 2nd Floor

New Delhi - 110 029.Telephone: +91 11 4165 4481 / 4482

Fax: +91 11 4165 4483Email: [email protected]

52

Disclaimers• The information contained in this report is extracted from different public sources. Reasonable care has been taken to ensure that the information

contained herein is not misleading or untrue at the time of publication.• The report is for general information only and we are not soliciting any action based on this material.• The document is confidential and prepared for private circulation only. This is not an advertisement material.• Facts and views expressed in the document are subject to change without any notice to the recipient.

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