NUALS IBC E- NEWSLETTER [1] NUALS IBC E- NEWSLETTER Vol. 1, June-July, 2018 * All views expressed are those of the authors. The Newsletter is for private circulation and not for sale. CONTENTS INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT ORDINANCE) 2018 By: Manal Shah…………………………………………………………………………………………..........4. HOME BUYERS UNDER THE IBC-PRE AND POST ORDINANCE 29A By: Manu Sharma……………………………………………………………………………………………..5. ANALYSIS OF THE DRAFT ON CROSS-BORDER INSOLVENCY By: Naveen Kumar…………………………………………………………………………………………….7. CROSS-BORDER INSOLVENCY: IMPACT ON FOREIGN CREDITORS AND ASSET RECONSTRUCTION COMPANIES (ARCS) By: Utkarsh Jhingan and Anjali Anil……………………………………………………………………………9. THE INTERPLAY BETWEEN SECTION 138 OF THE NEGOTIABLE INSTRUMENTS ACT, 1938 AND THE INSOLVENCY AND BANKRUPTCY CODE, 2016. By: Sanjana Banerjee………………………………………………………………………………………….10. CASE UPDATES ………………………………………………………………………………………...11. REGULATORY CHANGES…………………………………………………………………………….16. CIRCULARS……………………………………………………………………………………………..20. AN INITIATIVE OF CENTRE FOR PARLIAMENTARY STUDIES AND LAW REFORMS, NUALS (KOCHI).
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NUALS IBC E- NEWSLETTER[Dr. Anil R. Nair, Associate Professor, Director, CPSLR, NUALS, Kochi.] The Centre for Parliamentary Studies and Law Reforms (CPSLR) under the National University
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NUALS IBC E- NEWSLETTER [1]
NUALS
IBC E- NEWSLETTER Vol. 1, June-July, 2018
* All views expressed are those of the authors. The Newsletter is for private circulation and not for sale.
CONTENTS
INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT ORDINANCE) 2018
Operational Creditor, it entered into a compromise
agreement with the two creditors under which the
directors agreed to transfer 24 bigha of land.
However, this title was not clear and was co-owned
by several people, giving rise to issue of improper
execution of compromise agreement. It was held
that the dispute was limited to the mode of
payment of the debt and the Corporate Debtor has
never disputed his liability to pay the amount.
Therefore, it was held that the dispute between two
would not fall within the definition of ‘dispute’ u/S.
5(6) of the IBC.
July 3, 2018
Pallavi Joshi Bakhru v. Universal Buildwell
Pvt. Ltd., (IB)-456 (ND)/2018.
Petitioner paid 90 lakhs towards two residential
apartments in the project to be developed by the
CD and requisite formalities were also completed.
Later, due to delay in construction work the CD
issued a cheque to the applicant in order to
surrender the allotment of flats to the applicant.
However, when the cheque was presented for
payment, it was dishonored. Thus, the petitioner
sought initiation of the CIRP process, after filing a
proceeding u/S. 138 of the NI Act. The major issue
before the AA was financial creditor’s ability to sue
and ambit of the term ‘financial debt’. Held, flat
owners are also financial creditors in situations
where a construction is delayed and the issuance of
the two cheques counted as novation of the
agreement and acceptance of a financial debt.
Further, dishonour of cheque gives right to seek
payment and falls within the definition of claim
under Section 3(6) IBC. Thus, initiation of CIRP
was mandated and moratorium period under
Section 14 of the Code was declared.
July 3, 2018
Ramsarup Industries Limited v ICICI Bank,
CA (IB) No. 116-KB-2018.
Machinery of Corporate Debtor was in the
warehouse due to non-payment of the Customs
Duty. Consequently, a notice of e-auction was
issued by the Respondents, whereby they sought to
recover the amount by selling unclaimed goods
u/S. 48 of the Customs Act read with S. 150. RP
filed an application to prevent the Respondents
from, firstly, e-auctioning the machineries, and
secondly, dealing with the assets of the Corporate
Debtor, as debt recovery proceedings were
initiated. The object was to prevent the disposing
of the machinery at a substantially lower value. It
was held that the sale transaction was in violation
of S. 14 of the Code as CIRP had already been
initiated and dealing with the assets after
application of the moratorium would be a violation.
July 9, 2018
SECO Tools India Pvt. Ltd. v AS Sales and
Exports Pvt. Ltd, C.P.(IB) No.96-KB-2018.
Application was filed u/S. 9 of the Code against the
Corporate Debtor for a default in payment. Main
issue was the admissibility of the objection raised
by the Corporate Debtor regarding quality and
performance of goods supplied by the Operational
Creditor to the Steel Authority of India. Held,
Corporate Debtor cannot escape liability once it
has accepted the performance of the Operational
Creditor. Further, the Corporate Debtor did not
bring to the notice of Operational Creditor the
dispute w.r.t. the quality of goods within 10 days, as
was required after receiving the notice u/S. 8 of the
IBC, from the Operational Creditor. Therefore, the
application was thereby admitted.
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July 11, 2018
Joydeep Sur Enthuse Incorporated v Lourdes
Textile Pvt. Ltd., CP (IB) No. 186/KB/2018.
In spite of repeated demands and notice u/S. 8 of
IBC, the Corporate Debtor did not make payment
of the goods delivered by the Operational Creditor.
Therefore, a petition was filed u/S. 9 of IBC. Main
issue was whether the Petitioner herein is a Creditor
of the Corporate Debtor u/S. 3(10). Test applied
was whether the Petitioner sold the goods to the
Respondent or were the goods just kept for sale at
the counter whereby the Respondent would get
commission. On perusal of facts, it was found to be
of second category. Held, Petitioner cannot be
considered as a Creditor u/S. 3(10). Therefore, the
matter cannot be covered by Ss. 8 & 9.
July 12, 2018
In Re: ALPFLY Pvt. Ltd., C.P. No. IB-
358/(ND)/2018.
Corporate Applicant, a travel company, faced
downfall in business. However, the cash outflows
kept on increasing. Consequently, various defaults
were made towards customers as well as vendors.
A petition was filed u/S. 9 of IBC whereby the
Corporate Applicant has prayed for a fast track
insolvency process. The Tribunal was of the
opinion that if the AA is satisfied that there is a debt
and default has occurred and the Corporate
Applicant is not ineligible u/S. 11 then the AA has
no other option but to admit the application. The
application was admitted on finding that there exist
defaults at least towards the customers. Therefore,
Resolution Professional was accordingly
appointed.
July 17, 2018
Mr. Joseph Philip v. Mr. Ashish Rathi & Anr,
MA No. 120 of 2018 in CP No.
665/IB/CB/2017.
Erstwhile Directors of a Corporate Debtor entered
into certain transactions with a third party after the
insolvency resolution application was admitted by
the AA. The Applicants had contested that they
didn’t have knowledge of the same. Main issue was
regarding violation of S. 14 of IBC. Held, that the
date of commencement of CIRP was completely
based on the date of admission and was in no way
connected to the date of the
pronouncement/uploading/receipt of the order by
any of the parties. Therefore, the payments made
by erstwhile directors after such period, even
though citing lack of receipt of order, was illegal
under the moratorium imposed.
July 25, 2018
Punjab National Bank v. M/s. Concord
Hospitality Pvt. Ltd & Ors, CA No.130/2018 &
131/2018 In CP (IB) No.43/Chd/Pb/2017.
One of the Financial Creditors raised certain
objections w.r.t. the approved resolution plan
submitted by an Applicant on the grounds that:
firstly, eligibility of the Resolution Applicant as he
was also a guarantor for the loan of the Corporate
Debtor, and secondly, whether the Resolution
Applicant was ineligible as his account was
classified as NPA by the FC only a month prior to
the admission of insolvency application, but the
statutory auditors had classified the same as NPA
before the required limit of one-year u/S. 29A(c).
To this the AA observed: firstly, that Resolution
Applicant is not ineligible since the guarantee was
not invoked by any of the FCs [this has been
clarified by the amendment to S. 29(h)]; and
secondly, the internal record of the Statutory
Auditors would not affect the classification of
Corporate Debtor’s accounts as NPA.
July 23, 2018
SREI Infrastructure Finance Ltd. v. Kannan
Tiruvengadam & Anr., I.A. No. 34/2018 In
CP(IB)/20/GB/2017.
CoC decided that for the purpose of determining
voting rights, the penal interest be disregarded.
While the FC accepted this, they sought to
capitalise the penal interest in their actual claims.
This was disputed by the RP who claimed that such
interest rates were extortionate. Held, under the
Code, voting share would depend on the amount
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under claims made by the creditors and that such
claims cannot be different for different purposes.
Further, levy of penal interest is not permissible
under the law but the Tribunal refused to interfere
with the agreement entered into by the Corporate
Debtor. Lastly, the decision of the AA qua
quantum of claim in no way comes in the way of an
IRP/RP in ascertaining the actual admissible claim.
July 26, 2018
M/s. Ashtech Buildpro India Pvt. Ltd. v. BS
Techno Construct Pvt. Ltd., CP (IB) No.
108/ALD/2018.
Corporate Debtor objected to CIRP application on
the grounds that the statutory demand notice was
not delivered to the address as mentioned in the
MCA portal. Similarly, it was sent to an e-mail id
different from the one mentioned in MCA portal.
Tribunal had to decide whether the notice was duly
served. AA denied the objection as the e-mail id to
which the mail was sent was also operated by the
Corporate Debtor. RP filed application against
accepted resolution plan stating that certain
associate entities of the Resolution Applicant were
defaulters and therefore the Resolution Applicant
is ineligible u/S. 29A of IBC. Held, the entities only
defaulted payment of interest which too was
subsequently paid. Therefore, non-disclosure was
considered not significant in nature.
July 26, 2018
State Bank of India v. Impex Metal & Ferro
Alloys Ltd., CA (IB) No. 641/KB/2018 in CP
(IB) No. 176/KB/2018.
One of the prospective Resolution Applicant had
submitted an EoI after the deadline. Additionally,
the resolution plan was also not submitted within
time as the RP was not in knowledge of the EoI
sent after the deadline. Tribunal had to analyse
IBBI (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 which provides that
EoI received after the specific date shall be rejected.
Held, there was not much substance in the reason
for delay given by the Applicant. However,
considering the objective of the process is
maximisation of value of assets and taking into
consideration the time period remaining, the
Applicant was allowed to submit the plan.
July 27, 2018
Oriental Bank of Commerce v. M/s J.R.
Agrotech Pvt. Ltd., CP (IB) No.
46/Chd/Pb/1/2018.
The CD had availed certain credit facilities from a
consortium of creditors. The FC was one of the
members of the consortium and had initiated CIRP
against the CD. One of the grounds for objection
by the CD was that under certain guidelines and
circulars issued by the RBI, a restructuring proposal
was to be considered in case of stressed assets. The
issue was whether the application for initiation of
CIRP can be dismissed in light of the RBI circulars
and guidelines. Held, the guidelines do not mandate
that restructuring be done in all cases. Further, it is
not required to look into any other factor, including
the question that whether permission or consent
has been obtained from one or the other authority.
Therefore, objections regarding maintainability and
submissions w.r.t. re-structuring proposal were
rejected.
July 31, 2018
SEI Trading India Pvt. Ltd. V. Aishwarya
Technologies and Telecom Ltd., CP(IB) No.
18/9/HDB/2018.
Operational Creditor had initiated CIRP against the
Corporate Debtor. The parties had also entered
into a Distributorship Agreement. Main objection
raised was whether the AA has jurisdiction to try
the matter in view of clauses in the Agreement
regarding territorial jurisdiction and Arbitration
Clauses therein. Held, the parties cannot confer
jurisdiction on the Judicial Forums or Code unless
a particular Forum or Code is having a territorial
jurisdiction over the subject matter of dispute. As
per the provisions of IBC, the appropriate forum
was the AA at Hyderabad and not any other forum
as proposed by parties under an Agreement.
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REGULATORY CHANGES
[SEBI]
August 4, 2017
CIR/CFD/CMD/93/2017
SEBI by this circular has mandated that all listed
entities which have listed any of the following:
specified securities (equity and convertible
securities), non-convertible debt securities and
non-convertible and redeemable preference shares
shall make disclosure to the stock exchanges when
the entity has defaulted in payment of interest /
instalment obligations on debt securities (including
commercial paper), Medium Term Notes (MTNs),
Foreign Currency Convertible Bonds (FCCBs),
loans from banks and financial institutions,
External Commercial Borrowings (ECBs) etc. The
circular was supposed to come into effect with
effect from October 1, 2017 but by the circular
Dated 29th Sept, 2017 the implementation of the
circular was deferred till next notification.
Securities and Exchange Board of India (Issue
of Capital and Disclosure Requirements)
(Fourth Amendment) Regulations, 2017
SEBI made the changes that were required after
coming into force of IBC to SEBI ICDR
Regulations. In Regulation 70, clause 5 and clause
6 have been substituted. It provides that the
Regulations relating to the preferential issue of
equity shares do not apply to the companies under
the scheme approved by tribunal under IBC.
According to Clause (5), provisions of such
Chapter won’t apply where the preferential issue of
equity shares is made to the consortium of banks
and financial institutions pursuant to conversion of
their debt, as part of the strategic debt restructuring
scheme in accordance with the guidelines specified
by the Reserve Bank of India subject to certain
conditions. Newly substituted Clause (6) provides
that the provisions of this Chapter shall not apply
where the preferential issue, if any, of specified
securities is made to person(s) at the time of lenders
selling their holding of specified securities or
enforcing change in ownership in favour of such
person(s) pursuant to a debt restructuring scheme
implemented in accordance with the guidelines
specified by the Reserve Bank of India, subject to
the following conditions.
Securities and Exchange Board of India
(Listing Obligations and Disclosure
Requirements) (Third Amendment)
Regulations, 2018
Amendment was made to Regulation 15 to provide
that Regulation 17 which regulates the Directors is
not applicable during the insolvency resolution
process period in respect of a listed entity which is
undergoing corporate insolvency resolution
process under the Insolvency Code, provided that
the role and responsibilities of the board of
directors as specified under regulation 17 shall be
fulfilled by the interim resolution professional or
resolution professional in accordance with sections
17 and 23 of the Insolvency Code. Clause (2B) was
added which provides that the provisions as
specified in regulations 18, 19, 20 and 21 shall not
be applicable during the insolvency resolution
process period in respect of a listed entity which is
undergoing corporate insolvency resolution
process under the Insolvency Code: Provided that
the roles and responsibilities of the committees
specified in the respective regulations shall be
fulfilled by the interim resolution professional or
resolution professional. Application of certain
other Provisions are also made limited according to
the resolution plan as approved by the Tribunal.
Under Schedule III, certain events in relation to the
corporate insolvency resolution process (CIRP) of
a listed corporate debtor under the Insolvency
Code are needed to be disclosed: such as filling of
application, admission of application by the
Tribunal, appointment of Resolution Professional
etc.
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Securities and Exchange Board of India (Issue
of Capital and Disclosure Requirements)
(Second Amendment) Regulations, 2018
The changes made to Regulation 70 by ICDR
Amendment 2017 was omitted and a single
consolidated provision was added as:
"(1A) The provisions of this Chapter, except the
lock-in provisions, shall not apply where the
preferential issue of specified securities is made in
terms of the rehabilitation scheme approved by the
Board of Industrial and Financial Reconstruction
under the Sick Industrial Companies (Special
Provisions) Act, 1985 [1 of 1986] or the resolution
plan approved under section 31 of the Insolvency
and Bankruptcy Code, 2016 [No. 31 of 2016]
whichever applicable."
Securities Contracts (Regulation)
(Amendment) Rules, 2018
One amendment was made. In rule 19A, after sub-
rule (4), the following sub-rule is inserted, namely:
“(5) Where the public shareholding in a listed
company falls below twenty-five per cent, as a
result of implementation of the resolution plan
approved under section 31 of the Insolvency and
Bankruptcy Code, 2016 (31 of 2016), such
company shall bring the public shareholding to
twenty-five per cent within a maximum period of
three years from the date of such fall, in the manner
specified by the Securities and Exchange Board of
India:
Provided that, if the public shareholding falls below
ten per cent, the same shall be increased to at least
ten per cent, within a maximum period of eighteen
months from the date of such fall, in the manner
specified by the Securities and Exchange Board of
India.”
Securities and Exchange Board of India
(Delisting of Equity Shares) (Amendment)
Regulations, 2018.
Securities and Exchange Board of India (Delisting
of Equity Shares) (Amendment) Regulations, 2018
came into force on 31st May, 2018 vide
Notification No. SEBI/LAD-
NRO/GN/2018/23. By this amendment, an
exception has been made from the application of
these regulations to delisting of equity shares of a
listed entity made pursuant to a resolution plan
approved under the Section 31 of the Insolvency
and Bankruptcy Code 2016 subject to the plan
providing (a) a specific procedure to complete the
delisting of such shares or (b) an exit option to
existing public shareholders at a price specified in
the resolution plan.
This is subject to firstly, that such exit to
shareholders has to be higher than the liquidation
value determined under Regulation 35 of the
Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process of Corporate
Persons) 2016 after paying off dues in the order of
priority as defined under Section 53 of the
Insolvency and Bankruptcy Code 2016. Secondly.,
that if existing promoters or any other shareholders
proposed to be provided an opportunity to exit
under the resolution plan at a price higher than the
price determined in terms of the above proviso, the
existing public shareholders shall also be provided
an exit opportunity at a price which shall not be less
than the price, by whatever name called, at which
such promoters or other shareholders, directly or
indirectly are provided exit.
It provides a one-day window from the day of
approval of resolution plan under Section 31, for
notifying with the details andthe justification of the
exit price in respect of the delisting proposed to the
recognized stock exchange.
After this amendment, an application for listing of
delisted equity shares may be made in respect of a
company which has undergone corporate
insolvency resolution process under the Insolvency
and Bankruptcy Code 2016.
Securities and Exchange Board of India
(Substantial Acquisition of Shares and
Takeovers) (Amendment) Regulations, 2017
Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers)
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(Amendment) Regulations, 2017 came into effect
on August 14, 2017 vide Notification No.
SEBI/LAD-NRO/GN/2017-18/015. It amended
Regulation 10 of the Securities and Exchange
Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations 2011. Regulation 10
lays down those acquisitions which are exempted
from the obligation to make an open offer under
Regulations 3 and 4 of Takeover Regulations and
the conditions to be fulfilled in order to utilize this
exemption.
This amendment extends such exemption to
include an acquisition pursuant to approval of the
resolution plan under Section 31 of the Insolvency
and Bankruptcy Code. It also provides that the
subject to fulfilment of conditions under sub-
regulation (5) Regulation 70 of the Securities and
Exchange Board of India (Issue of Capital and
Disclosure Requirements) Regulations, 2009,
acquisition of shares by the lenders pursuant to the
conversion of their debt as a part of debt
restructuring scheme implemented in accordance
with the guidelines specified by the Reserve Bank
of India (by substituting clause (i) of Regulation
10(1).
It further extends such exemption to include
acquisition of shares by the person(s), by way of
allotment by the target company or purchase from
the lenders at the time of lenders selling their
shareholding or enforcing change in ownership in
favour of such person(s), pursuant to a debt
restructuring scheme implemented in accordance
with the guidelines specified by the Reserve Bank
of India. This is subject to the fulfilment of
conditions specified in Regulation 70(6) of the
Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations,
2009 are complied with.
The Securities and Exchange Board of India
(Substantial Acquisition of Shares and
Takeovers) (Amendment) Regulations, 2018
The Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers)
(Amendment) Regulations, 2018 came into force
on May 31, 2018 vide Notification No.
SEBI/LAD-NRO/GN/2018/20. This
amendment by amending The Securities and
Exchange Board of India (Substantial Acquisition
of Shares and Takeovers) Regulations 2011
exempts acquisition pursuant to a resolution plan
approved under Section 31 of the Insolvency and
Bankruptcy Code 2016 from the obligations under
Regulation 3(2) of the 2011 Regulations.
SEBI- Information sharing between
Debenture trustees and Information Utilities
under IBBI (Information Utilities)
Regulations, 2017
Letter No. MIRSD-3/DT/IU/29468/1/2017
dated November 27, 2018 was addressed to one
Navita Yadav by the Deputy General Manager
(Market Intermediaries Regulations and
Supervision Department) of the Securities and
Exchange Board of India in reference to the
National e-Governance Services Limited (NeSL) in
capacity of a Registered Information Utilities (IUs).
It laid down that the Debenture Trustees may enter
into agreements with the IUs and share the
financial information relating to the assets in
relation to which any security interest has been
created by the Debenture Trustees subject to
sorting out the issues relating to the cost in
gathering and sharing such information, formats of
information, stamp duty and sharing of
information with multiple IUs etc.
RBI
RBI/2017-18/110
DBR. No. Leg. BC. 98/09.08.019/2017-18
SUBMISSION OF FINANCIAL INFORMATION TO
INFORMATION UTILITIES (IU) BY ALL
FINANCIAL CREDITORS REGULATED BY RBI
1. Information Utilities
a. According to the IBC 2016, “Information
utility” means a person who is registered
with the Board as an information utility
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under Section 210, which emphasizes on
the registration and application for an
information utility.
b. Financial creditor and operational creditor
shall submit this financial information and
information relating to the assets in
relation to which the security interest is
created, to the IU.
c. Section 215 of the IBC mandates the
procedure of the submission of the
financial information to the information
utilities. A certain fee is to be paid along
with the information.
d. Section 3 (13) of the Code, defines the
term “Financial information” in relation to
a person.
In that light the present regime under the Code is:
2. The first IU- National E-Governance
Services Limited (NeSL) a Union
government company has received an in-
principle approval under the regulations.
As an IU it shall:
a. act as a ‘custodian’ of all financial
information related to lending and
borrowing activities of financial
institutions.
b. store financial information that helps to
establish defaults as well as verify claims
‘expeditiously’ and thereby facilitating
completion of transactions under the
Insolvency and Bankruptcy Code, 2016 in
a time bound manner.
Hence every stakeholder shall be aware of the
compliance under the IU regulations.
3. All financial creditors regulated by RBI are
thereby advised to adhere to the relevant
provisions of the Code and IU Regulations by
putting in place the compliance mechanism
due to the overriding nature of the Code over
any other law.
CBDT
CBDT relaxes MAT provision for companies
facing insolvency
Section 115JB of income tax provides that for the
purpose of levy of minimum alternate tax in case of
company, the amount of loss brought forward or
unabsorbed depreciation, whichever is less as per
the books of accounts shall be reduced from the
book of profit.
In this regard, there has been relaxation in the
provisions relating to levy of minimum alternate tax
(MAT) for the companies against whom an
application of corporate insolvency resolution
process has been admitted by adjudicating
authorities under section 7 or Section 9 or section
10 of IBC 2016. Representations have been
received from various stakeholders that such
companies are facing hardship due to restriction in
allowance of brought forward loss for computation
of book of profit under section 115JB of the Act.
So as to minimize such hardship for a company
against whom the application for insolvency
resolution process has been admitted, with effect
from Assessment year 2018-2019, the amount of
total loss brought forward (including unabsorbed
depreciation) shall be allowed to be reduced from
the book of profit for the purposes of levy of MAT
undersection 115JB of the Act.
CIRCULARS
January 3, 2018
Circular No IP/003/2018
An insolvency professional cannot outsource any
of his duties and responsibilities cast upon him
under the Insolvency and Bankruptcy Code, 2016.
It is seen to be a common practice that a few
insolvency professionals advise the prospective
resolution applicants to submit a certificate from
another person as a document certifying their
eligibility to be resolution applicants. Such a
certification from a third person is not envisaged by
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the Code and hence, such a certificate shall not be
required.
January 3, 2018
Circular No IP/002/2018
An insolvency professional shall exercise
reasonable care and diligence and take all necessary
steps to ensure that any corporate person
undergoing insolvency resolution process, fast
track insolvency resolution process, liquidation
process or voluntary liquidation process under the
Insolvency and Bankruptcy Code, 2016 complies
with the provisions of the applicable laws during
such process. Loss suffered by the insolvency
professional on account of non-compliance of any
applicable law shall not form part of the insolvency
resolution process cost or liquidation process cost
under the Code.
January 3, 2018
Circular No IP/001/2018
An insolvency professional shall prominently state:
(1) his name, address and email, as registered with
the IBBI, (2) his Registration Number as an
insolvency professional granted by the IBBI, and
(3) the capacity in which he is communicating. This
will apply to all the communications, whether by
way of public announcement or otherwise to a
stakeholder or to an authority. Moreover, a process
specific address and email can also be used subject
to certain conditions: (1) the process specific
address and email are in addition to the basic details
required, and (2) the insolvency professional
continues to service the process specific address
and email for at least six months from conclusion
of his role in the process.
January 16, 2018
Circular No IP/005/2018
An insolvency professional and every other
professional (registered valuers, accountants, legal
professionals) appointed by him for a resolution
process shall make disclosures regarding his
relationship, if any, with (1) the Corporate Debtor,
(2) other Professional(s) engaged by him, (3)
Financial Creditor(s), (4) Interim Finance
Provider(s), and (5) Prospective Resolution
Applicant(s) to the Insolvency Professional Agency
of which he is a member. Such disclosure has to be
done within a specified time period, generally 3
days. Similar disclosure has to be made with regards
to the relationship, if any, of the other
professional(s) engaged by him with (1) himself, (2)
the Corporate Debtor, (3) Financial Creditor(s), (4)
Interim Finance Provider(s), and (5) Prospective
Resolution Applicant(s) to the Insolvency
Professional Agency of which he is a member.
‘Relationship’ shall mean any one or more of the
four kinds of relationships at any time or during the
three years preceding the appointment:
A. Where the Insolvency Professional or the
Other Professional, as the case may be, has
derived 5% or more of his / its gross revenue
in a year from professional services to the
related party
B. Where the Insolvency Professional or the
Other Professional, as the case may be, is a
Shareholder, Director, Key Managerial
Personnel or Partner of the related party.
C. Where a relative (Spouse, Parents, Parents of
Spouse, Sibling of Self and Spouse, and
Children) of the Insolvency Professional or the
Other Professional, as the case may be, has a
relationship of kind A or B with the related
party.
D. Where the Insolvency Professional or the
Other Professional, as the case may be, is a
partner or director of a company, firm or LLP,
such as, an Insolvency Professional Entity or
Registered Valuer, the relationship of kind A,
B or C of every partner or director of such
company, firm or LLP with the related party.
January 16, 2018
Circular No IP/004/2018
The fees payable to a person acting as a resolution
professional has to be included in ‘insolvency
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resolution process cost’ and has to be paid in
priority. Additionally, payment of fees for the
services of an insolvency professional to any person
other than the insolvency professional shall not
form part of the insolvency resolution process cost.
February 23, 2018
Circular No IP(CIPR)/007/2018
Confidentiality as mentioned under clause 21 of the
Code of Conduct appended to the First Schedule
to the Insolvency and Bankruptcy Board of India
(Insolvency Professionals) Regulations, 2016,
section 29 (2) of the Insolvency and Bankruptcy
Code, 2016 and the like provisions. Any
information which is not to be disclosed under the
provisions of the Code, shall be kept confidential
and not be disclosed or provided access to.
February 23, 2018
Circular No IP(CIPR)/007/2018
The particular circular specifies the official websites
for publishing Public Announcements and Brief
Particulars of Invitations of Resolution Plans. The
Forms under the Code also have to be sent to the
Email addresses particularly designated for the
specified purpose in the circular.
April 5, 2018
Circular No IPE/008/2018
The newly passed Insolvency and Bankruptcy
Board of India (Insolvency Professionals)
(Amendments) Regulations, 2018 (notified in the
Gazette of India dated 28th March 2018) relating to
insolvency professional entities have to be
complied with. If the compliance is not met, the
IPE may be derecognized in accordance with
regulation 14.
April 23, 2018
Circular No. LA/010/2018
The Board issued this circular providing details and
clarifications about the disciplinary action related
issues related to an Insolvency Professional. The
scheme of the code provides for the process of
show cause notice to an IP under section 219 and
the setting up of a disciplinary committee under
section 220 while the ambiguity related to the
meaning and scope of the term ‘disciplinary
committee’ remained pending. Therefore, in the
annexure associated alongside this circular, details
about this issue are provided and it is notified that
an IP under scrutiny should not take any new
assignments.
April 19, 2018
Circular No: IPA/009/2018
Board issued a detailed circular on the issue of
‘Annual Compliance Certificate for Insolvency
Professional Agencies’. “The Insolvency and
Bankruptcy Code, 2016 (Code), the IBBI
(Insolvency Professional Agencies) Regulations,
2016, the IBBI (Model Bye Laws and Governing
Board of Insolvency Professional Agencies)
Regulations, 2016 and Guidelines, Circulars, and
Directions issued there under cast several duties,
responsibilities and obligations on the registered
Insolvency Professional Agencies (IPAs).”;
therefore the circular provided for the annual
compliance certificate under annexure A of this
circular, which is to be filed within the first 45 days
of the closing financial year.
April 23, 2018
Circular No. IPA/011/2018
IBBI provided clarifications through the issue of a
circular about the Pre-registration educational
course under regulation 5(b) of the IBBI
(Insolvency Professionals) Regulations, 2016. The
successful attempt at this course is alongside other
qualifications required by an insolvency
professional for proper enrolment.
May 30, 2018
Circular No. RVO/12/ 2018
This circular was issued by the Board with the
purpose of providing the necessities required to be
followed by Registered Valuer Organisations for
their registration and by Registered Valuers for
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their enrolment. An organisation (RVO) is to get its
due recognition as per the Companies (Registered
Valuers and Valuation) Rules, 2017 (Rules).
According to rule 14(c) RVO should only consider
those individuals who satisfy the educational
qualifications for the job. This should be in
accordance with rule 4 of the Rules and as specified
in its recognition certificate, as valuer members.
Furthermore, Clause VI (9) of the Governance
Structure and Model Bye-Laws for RVO requires
that an RVO shall not enroll an individual as a
valuer member if he is not eligible to be registered
as a registered valuer with the Authority.
June 12, 2018
Circular No. IBBI/IP/013/2018
Board issued this circular in furtherance of the
discussion paper published under the title
“Regulation of fee payable to insolvency
professionals and other process costs under
Corporate Insolvency Resolution Process”. This
circular consists of annexure which contain the
details of the conduct-compliances-expenses-fees
of the Insolvency Professionals. Under the scheme
of the code, this duty to take reasonable care and
diligence is placed on the IP under Section 208 (a)
of the IBC, 2016. Furthermore, para 16 of the IBBI
Regulations sheds some light on the same,
therefore, it is in pursuance of providing details to
these provisions in the true spirit of the code that
this circular was issued.
July 13, 2018
Circular No. IBBI/CIRP/015/2018
The Insolvency Professional overseeing the
resolution process would provide the choice of
individuals for representation of creditors where
there are ten or more in a class. This is to be done
in synchronization with Section 21 (6A) (b) read
with regulation 16A (1) of the Insolvency and
Bankruptcy Code.
July 06, 2018
Circular No. IBBI/IPE/014/2018
“It has been observed that a few market
participants are seeking empanelment of IPEs and
a few IPEs are seeking empanelment with market
participants.” This was quoted from the circular
dated 06th July, 2018. An IPE gets his/her due
recognition from the provision 12 (1) of the
Insolvency and Bankruptcy Board of India
Regulations. Naturally so their limited role is to
provide for the help required by the Insolvency
Professionals only and not anyone else in order to
protect the spirit of their duty.
June 12, 2018
Circular No. IBBI/IP/013/2018
Board issued this circular in furtherance of the
discussion paper published under the title
“Regulation of fee payable to insolvency
professionals and other process costs under
Corporate Insolvency Resolution Process”. This
circular consists of annexure which contain the
details of the conduct-compliances-expenses-fees
of the Insolvency Professionals. Under the scheme
of the code, this duty to take reasonable care and
diligence is placed on the IP under Section 208 (a)
of the IBC, 2016. Furthermore, para 16 of the IBBI
Regulations sheds some light on the same,
therefore it is in pursuance of providing details to
these provisions in the true spirit of the code that
this circular was issued.
May 30, 2018
Circular No. RVO/12/ 2018
This circular was issued by the Board with the
purpose of providing the necessities required to be
followed by Registered Valuer Organisations for
their registration and by Registered Valuers for
their enrolment. An organisation (RVO) is to get its
due recognition as per the Companies (Registered
Valuers and Valuation) Rules, 2017 (Rules).
According to rule 14(c) the RVO should only
consider those individuals who satisfy the
educational qualifications for the job. This should
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be in accordance with rule 4 of the Rules and as
specified in its recognition certificate, as valuer
members. Furthermore, Clause VI (9) of the
Governance Structure and Model Bye-Laws for
RVO requires that an RVO shall not enroll an
ENDNOTES
i The amendment requires that continuation of interim resolution professional be subject to written consent from him whereas a written consent is also to be attached to the application to replace the interim resolution professional. ii Col. Vinod Awasthy v. AMR Infrastructure Ltd., NCLT, Principal Bench, Delhi, CP No. (IB)-10(PB)/2017, Date of decision – 20 February, 2017. iii Nikhil Mehta v. AMR Infrastructure, NCLAT, New Delhi, Company Appeal (AT) (Insolvency) No. 07/2017, Date of decision – 21 July, 2017. iv NCLAT New Delhi, Company Appeal (AT) (Insolvency) No. 74/2017, Date of decision – 02 September, 2017. v Form F, IBBI (Insolvency Resolution Process for Corporate Persons), Regulations, 2016. vi Nikhil Mehta v. AMR Infrastructure, NCLAT, New Delhi, Company Appeal (AT) (Insolvency) No. 07/2017, Date of decision – 21 July, 2017. vii Writ Petition(s) (Civil) No.744 of 2017, Supreme Court of India.
individual as a valuer member if he is not eligible to
be registered as a registered valuer with the Author.
viii Samanwaya Rautray and Sanu Sandilya, ‘Supreme Court lifts stay on insolvency move against Jaypee Infra’, (Economic Times, 12 September, 2017), ixhttp://www.uncitral.org/uncitral/en/unncitral_texts/insolvenc/1997Model.html x Report on the Joint Committee on Insolvency and Bankruptcy Code, 2015, pg 44. xi Report of the Insolvency Law Committee, Ministry of Corporate Affairs, Government of India,2018, pg.5. xii Bar Council of India v. A.K Balaji and Ors., AIR 2018 SC 1382. xiii Shah Brothers Ispat Pvt. Ltd. v P. Mohanraj & Ors. New Delhi Company Appeal (AT) (Insolvency) No. 306 of 2018. xiv Ibid at para 3. xv Ibid. at para 6. xvi M/s Meters and Instruments Pvt. Ltd. v Kanchan Mehta (2018) 1 SCC 560. xvii Kaushalya Devi Massand v Roopkishore Khore (2011) 4 SCC 593. xviii Aneeta Hada v M/s Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661. xix Ibid. at para 11(a).