INSOL India is an independent leadership body representing practitioners and other associated professionals specialising in the fields of restructuring, insolvency and turnaround. It is an association with an architecture that facilitates key stakeholders to come together and share experiences while preserving their independence.



Welcome to INSOL India Newsletter Volume 25, Issue MAY/JUNE | Jun 01, 2020

Editor's Message
Ashwin Bishnoi
It is surreal that every human I pick up the phone to, in whichever part of the Globe, is faced with the same crises, some surely more than others. I hope and pray that you and your dear ones remain safe. These are difficult times, but as Freddie Mercury famously said, “the show must go on”. I am pleased to join the Insol India Editorial Board to contribute to its goal of enriching our insolvency knowledge.
 

Is it the case of - “The IBC is dead, long live the IBC”? 
 


The Hon’ble Finance Minister in her address recently announced that: (A) a special insolvency framework for MSMEs will be notified shortly; (ii) fresh initiation of insolvency proceedings will be suspended for up to one year depending upon the pandemic situation; and (iii) the Central Government will be empowered to exclude Covid 19 related debt from the definition of default under the IBC for the purpose of triggering IBC.

The MSME point in (A) is laudable and much needed. Clarity on (B) and (C) is needed. Keep a look out for the text of the notification to clarify the following discussion points:
  • Will the Government use an objective 1 March 2020 “bright line test” to determine which are Covid 19 related debts? Or, will it be a subjective one? The RBI has in circulars used 1 March 2020 as the date from whereon Covid 19 impacted Indian credit. An objective test lends clarity but leaves out unintended debtors. So, the ambit of who the suspension applies to will be key to ensure no unintended consequences. 
  • In an earlier announcement Sections 7, 9 and 10 of the IBC were proposed to be suspended. Some have questioned why Section 10 is being suspended and how that sits uneasily with the non-suspension of Section 66. 
  • There does not appear to be any proposal to suspend the notified personal guarantor provisions. 
  • There also does not appear to be any proposal to suspend other enforcement laws such as SARFAESI. Understandably, these are required for creditors’ comfort. On the flip side, it may encourage individual enforcement actions rather than a collective rescue effort. 
  • It is important to note that only the trigger provisions are sought to be suspended, and so debtors and creditors are put to notice that avoidance powers will continue (and rightly so). Question being - whether the time lost due to IBC suspension will be added to the look-back period in the avoidance sections. 
  • There is also no proposal to relax the statutory demand provisions and it is likely that debtors and creditors will continue to exchange demand notices to reserve rights. 
  • Most importantly, all eyes are on the Government and the RBI to fill the void that will be left after the IBC suspension – whether that is an amendment to RBI’s restructuring norms or a new pre-pack regime.
Undoubtedly, the suspension of the IBC is a huge step in the Indian credit space. It is very important for debtors and creditors to have clarity on points such as these and that there is a hard fixed timeline for the period of suspension, otherwise this could impact the availability of credit during the period of the suspension.

“The Queen is dead, long live the Queen” was used to signify the death of a monarch and rise of another. Similarly: (i) there are various provisions of the IBC which will continue to have a very important effect on transactions even during suspension and beyond; (ii) it is important for the market to have confidence that the IBC suspension is temporary and so the institution continues; and (iii) the restructuring and pre-pack norms that must fill the temporary void will need to ensure that the institution of insolvency and restructuring continues. 

So – the IBC is not dead, long live the IBC. 

 
Section 66 imposes a duty on directors against fraudulently or wrongfully trading. Countries such as Australia have given relief from this provision.  
President's Message
A. S. Chandhiok
Hope all readers of this newsletter are safe and keeping well. May it be so in future as well, and let us hope that safe and good times are not distant. Until then, we cannot lower our guard, for the virus shows no mercy.

Insolvency resolution is, undoubtedly, a kind of judicial process. Every process has to have an assessment process, which ultimately decides its efficacy. We may call it judicial efficiency. This kind of an efficiency does not just depend on working of the judicial officers or authorities, but more on the right kind of implementation of the law, rules, regulations and doctrines etc., which of course, sets the pace of the process as well. Recent amendments to the Insolvency and Bankruptcy Code are meant for efficient implementation of the process, backed by the experience and concern for the future. Certainly time will tell whether more amendments are required or not.  

The Government has now suspended filing of new insolvency proceedings for a period of one year, so that because of the added COVID-19 hardship, companies will not be forced into insolvency. In March, the Government had raised the threshold default amount for invoking insolvency proceedings under IBC to Rs. 1 crore from the then threshold of Rs.1 lakh, with a view to preventing such proceedings against small and medium enterprises. It has been said that suspension of the IBC would be a temporary breather for the Indian credit market. 

No doubt, the Covid lockdown has made the law practice and justice delivery technology driven more than ever before.  We had thought of E-Courts few years ago and started moving towards it. All of a sudden, because of the Coronavirus lockdown, it has become a pressing priority. Sooner than later, each law office is likely to be no less than a broadcasting studio. And if, genuinely tried, this could be a better platform to effect mediation faster, for mediation does not require high profile court room performances. This idea gains weight since NCLAT has upheld the order of NCLT admitting mediation, and directed the parties to engage in mediation to arrive at a settlement (Parvinder Singh v. Intec Capital Limited and Others; Company Appeal (AT) (Insolvency) No. 968 of 2019).  With mediation gaining universal appreciation and acceptance more than ever before post the Singapore Convention 2019, the path looks clearer. However, how many amongst the fraternity could cling to this may be a tough situation, as we have members of the Bar around and below the poverty line aplenty, apart from those who are not so savvy to digital innovations. Survival of the fittest may be the pointer here also, in terms of affordability and readiness to familiarise with the movement.

To attain the best possible perfection, perhaps we will have to think of the future of the future!
The usual items appear in the following pages, which I am sure, you would enjoy and find useful.  

Stay safe!

Best

A.S. Chandhiok
President, INSOL India
 
SIG 24
AAA Insolvency Professionals LLP
ASC Consulting Private Limited
AZB & Partners
Chandhiok & Mahajan, Advocates and Solicitors
Cyril Amarchand Mangaldas
Dhir & Dhir Associates
Duff & Phelps
Edelweiss Asset Reconstruction Company Ltd.
Ernst & Young Global Limited
Grant Thornton India LLP
J Sagar Associates
Kesar Dass B & Associates
Khaitan & Co
KPMG India private Limited
Link Legal
Luthra & Luthra Law Offices New Delhi
PHOENIX LEGAL
Shardul Amarchand Mangaldas Shroff & Co.
Talwar Thakore & Associates
E-Newsletter Editorial Board
Editorial Team
Divyanshu Pandey
Partner, J. Sagar Associates
Editorial Team
Ashish Chhawchharia
Partner - Advisory, Head - Restructuring Services, Grant Thornton Advisory Pvt Ltd
Editorial Team
Anju Agarwal
Director, ASC Consulting Pvt. Ltd.
Editorial Team
Ashwin Bishnoi
Partner, Khaitan & Co.
Upcoming Events and Activities
9th
June, 2020

Venue: New Delhi

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Headlines

Various people in the IIA have raised concerns in relation to the amendment of Section 4 of the IBC stating that such amendment is against the interests of MSMEs. In a letter, the IIA has stated … read more

Resolutions under the IBC may face a difficult time after the pandemic of COVID-19 as bankers fear that winning bidders will review their interest in companies undergoing CIRP and may attempt to … read more

NCLT has made it mandatory for all the financial creditors to file “Default Records” from information utility while filing section 7 of the IBC Code. This is a mandatory directive issued, … read more

The Department of Telecommunications is likely to knock the doors of the Apex Court in order to exclude the spectrum held by Aircel from the scope of moratorium imposed on Aircel. The Department of … read more

There has been some announcements made by the Finanace Minister in the light of the Covid-19 situation. The government has tried to ease the business by bringing following announcements: 1. … read more

A separate bench of the National Company Law Appellate Tribunal will be set up at Chennai with such bench possessing jurisdiction and authority to hear and adjudicate upon appeals against orders of … read more

It was held by the NCLAT, in Bimal Kumar v. Bank of India(Company Appeal (AT) (Insolvency) No. 1166 of 2019), that pendency of SARFAESI proceedings before Debt Recovery Tribunals (DRT) will not … read more

The Finance Minister, Nirmala Sitharaman, has suggested that the continuation of the prevalent situation in the country on account of COVID-19 and any change for the worse in relation to the same … read more

1. Special insolvency resolution framework for MSMEs under Section 240A of the Code to be notified soon 2. Empowering Central Government to exclude COVID 19 related debt from the definition … read more

In view of the Covid-19 and the lockdown condition, the Ministry of Corporate Affairs by its General Circular No. 21/2020 dated 11th March 2020, on receiving representations to clarify on the mode of … read more

In view of the COVID-19 Pandemic, Securities and Exchange Board of India by its circular No. SEBI/HO/CFD/CMD1/CIR/P/ 2020/79 dated 12th May 2020 in exercise of powers conferred by Section 11(1) of … read more

SEBI vide its circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/81 dated 14th May 2020 in exercise of powers conferred on it under Section 11(1) of the Securities and Exchange Board of India Act, 1992, read … read more

In view of the Covid-19 pandemic, and the lockdown imposed by the Government of India and the State Governments, the SEBI by its circular No. SEBI/HO/MIRSD/DOP/CIR/P/2020/82 dated 15th May 2020 in … read more

Insolvency filing under the IBC has been barred or suspended for a period of one year. In order to deal with the Covid-19 situation, the Reserve Bank of India is likely to soften its restructuring … read more

The Ministry of Housing and Urban Affairs (Housing Section), through the Central Advisory Council (“CAC”) vide notification dated 13 May 2020, confirmed Covid-19 as a … read more

Form INC-28 is to be filed after the appointment: The IRP/RP/Liquidator is required to file the order of the NCLT approving him/her as the IRP/RP/Liquidator in form INC-28 on the MCA-21 portal. … read more

By virtue of Regulation 40C, the period of lockdown imposed by the Central Government due to the outbreak of COVID-19 shall not be counted for the purposes of computation of timeline of CIRP and such … read more

By virtue of Regulation 47A, the period of lockdown imposed by the Central Government due to the outbreak of COVID-19 shall not be counted for the purposes of computation of the timeline for … read more

“(4) The filing of a Form under this Regulation after due date of submission, whether by correction, updation or otherwise, shall be accompanied by a fee of five hundred rupees per Form for … read more

1. Payment of registration fees by insolvency professionals:The registration fee, payable by the insolvency professional for the financial year 2019-20, shall be paid to the IBBI on or before … read more

Articles

By Ashwin Bishnoi Partner Khaitan & Co. Ankur Saxena

The global economy is facing daunting challenges as a result of Covid 19. Supply chain disruptions and demand deficiency has crippled economic activity and is likely to result in increasing defaults in debt repayments. Governments across the globe …

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DISCLAIMER

INSOL India is a society registered under the provisions of Societies Registration Act XXI of 1860. A certificate to this effect was issued by the Registrar of Societies, Government of National Capital Territory of Delhi on 11th January 2000.

The formation of INSOL India fulfilled the long cherished desire of the members of the legal fraternity, chartered accountants, company secretaries and other persons, bodies and institutions in India, to have an association to promote closer co-operation, exchange of ideas, dissemination of information and an empathetic understanding of law of insolvency and related lawhe formation of INSOL India fulfilled the long cherished desire of the members of the legal fraternity, chartered accountants, company secretaries and other persons, bodies and institutions in India, to have an association to promote closer co-operation, exchange of ideas, dissemination of information and an empathetic understanding of law of insolvency and related laws.
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