Welcome to INSOL India Newsletter Volume 27, Issue AUGUST / SEPTEMBER | Sep 05, 2020

Greetings to all INSOL India members and readers! On behalf of the editorial board and myself, I pray that you and your loved ones are safe. As the Coronavirus disease (COVID-19) pandemic tears through our lives, it has caused some irreparable damage and brought our economy to its knees. Over the last few months, the Government and RBI have introduced several relief measures to alleviate the pain, pursuant to which we can see some revival and hope. Of course, the undying spirit of Indians and will to survive means that we will emerge stronger on the other side.
 
As the world changes and we endeavor to adapt to it, we have seen new businesses emerge and the old way of doing things being challenged.
 
Priorities including continuing education and judiciary have been a focus and this has led to some drastic changes in the delivery models. NCLT, NCLAT, and Supreme Court judges have rapidly adapted to delivering justice via remote online hearings. The IPA's updated guidelines state that considering the COVID-19 pandemic, it is necessary to continue online delivery of education beyond September 30, 2020, in addition to the classroom mode, wherever possible. They are now valid until March 31, 2021, subject to revocation or extension.
 
Recently there have been some interesting changes in the CIRP regulations with respect to Approval of Resolution Plans by the CoC whereby they are now required to vote on all compliant plans simultaneously rather than on the highest scoring plan only.
 
Interestingly, IBBI has proposed to impose a limit on the number of assignments to be handled by an Insolvency Professional at a certain point of time in a discussion paper dated July 1, 2020, dealing with the issue on ‘Restricting the Number of Assignments to be Handled by the IP’. The objectives as stated in the discussion paper is that it will increase the efficiency of an IP, and in turn, help achieve the objective of maximization of the value of assets of the Corporate Debtor. Such limits are not known to have been imposed in any other jurisdiction
 
Further, everyone eagerly awaits the outcome of the proceedings in Delhi High Court on the plea challenging the Insolvency and Bankruptcy Code (IBC) Ordinance 2020 which suspended proceedings against COVID-related defaults for a period of six months. It claimed that suspension of section 10 of the IBC will push the companies towards liquidation, discourage entrepreneurship, and defeat the objectives of the Code. The court has sought Centre's reply by August 31, 2020.
 
In this edition, we give an overview of the amendments to insolvency law (including the changes in CIRP and liquidation regulations), provide snapshots of some of the important judicial pronouncements along with the news in of events and developments related to insolvency regime in India.  Also, it features an interesting article on the Cross-Border insolvency framework in India and where it could be headed.
 
I hope you will find the newsletter informative. As always, please do share your valuable feedback, especially on the topics you would like us to address.  Also, I encourage the readers to share their vast knowledge on this subject by contributing articles to this monthly newsletter. You may write to our editorial team at newsletter@insolindia.com.
 
 

As mentioned in the previous columns, Covid lockdown has kept the courts, tribunals and other establishments locked down. Now the High Court has opened on trial and rotational basis from September 1, but we have to keep our fingers crossed as to how it will go, considering the daily increase in Covid infection.

This time also, we have amendments to the IBBI Regulations. One is by way of a clarification to the Liquidation Process. It relates to fee to the liquidator corresponding to the amount realised by him or to the amount distributed by him. This clarification has been necessitated to minimise discrepancy in the amount realised or distributed by the liquidator. This would help eliminate any loophole and make the process fault-free. Time will tell how friction-free this clarification would be, inasmuch the term “corresponding” looks a bit opaque. There are other amendments, details whereof are in other pages.

The IBBI now proposes to impose a limit on the number of assignments an Insolvency Professional can handle at a given point of time. The number of assignments is linked or say equated with the turnover of the corporate debtor. Five assignments have been permitted where turnover is of less than a thousand crore and only one assignent is permitted where the turnover is more than fifty thousand crore.  

Needless to say, the challenges ahead are very likely to demand new processes that are more effective and faster.

The litigation before the High Court of Delhi challenging the IBC Ordinance 2020, which suspended proceedings against defaults arising on or after March 25, 2020 for a period of six months because of the pandemic, was to be listed on August 31. We have yet to know the outcome of the hearing.
 
The NCLAT has observed that a judicial member and a technical member should form part of a bench in conformity with the order passed by the Supreme Court in Sonu Cargo Movers (I) Pvt. Ltd. v. Union of India (2019). The Appellate Tribunal held that insolvency proceedings would be governed by the Limitation Act and date of default would reckon three years of limitation.

Looked at closely, almost every matter will seemingly have a funny side also. Some are worthy of a smile.  

The reader will certainly find much news and more information in the following pages. No doubt, we would always welcome readers’ suggestions and inputs to improve the newsletter. Please do not forget this.

Enjoy reading, stay safe and take care.

 A.S. Chandhiok