KEY PROVISIONS RELATING TO INTERIM RESOLUTION PROCESS ROLE OF - PowerPoint PPT Presentation

18/07/2017 BY CMA NAYANA P SAVALA B.COM,BGL(LAW),ICMAI, CISA , Dip in Computer Forensic, CAME, CFAP, LA 9001:2015 , BBI/IPA-003/IP-N00051/2017-18/10491

INTRODUCTION TO BASIC FRAMEWORK KEY PROVISIONS RELATING TO INTERIM RESOLUTION PROCESS ROLE OF INTERIM RESOLUTION PROFESSIONAL

THE ECO - SYSTEM OF IBC IPA AND IP IU AA IBBI Adjudicating The Insolvency and Information Insolvency Professional Authority Bankruptcy Board of India Utilities Agencies Insolvency Professional NCLT Creditors committee - operation and Financial Creditors Corporate Applicant DRT

BIRD’S EYE VIEW OF THE CODE TOTAL SECTIONS - 255 ; 5 PARTS ; 11 SCHEDULES PART – 2 – CORPORATE PART – 1 PART – 3 DEBTORS INSOLVENCY PRELIMINARY INSOLVENCY RESOLUTION & RESOLUTION & SECTIONS 1 LIQUIDATION OF BANKRUPTCY OF TO 3 CORPORATES INDIVIDUALS & (7 CHAPTERS) (SECTIONS PARTNERSHIPS SCHEDULES 4-77) (7 CHAPTERS) THE 11 ACTS (SECTIONS 78 TO 1. Partnership Act 187) 2. Central Excise Act 3. Income Tax Act PART – 5 PART -4 VARIOUS 4. Customs Act 5. Bank Recovery CG POWER/ OVER- AUTHORITIES – Act RIDING EFFECT ON OTHER BOARD/IP/IPA/COMMITTEES 6. Finance Act, LAWS AND AMENDMENTS (7 CHAPTERS) 1994 TO OTHER 11 ACTS (SECTIONS 188 TO 223) 7. SAARFAESI 8. SICA 9. Pymt Settl Act Section 244 – Transitional Provisions with 10. LLP Act 11. Companies Act Schedules

Slew of Legislations leading to a fragmented legal structure PRE-INDEPENDENCE LEGISLATIONS * Presidency Towns Insolvency Act 1909 – PTIA (covering individuals, partnerships and association of individuals in Chennai, Kolkata and Mumbai) * Provincial Insolvency Act 1920 - PIA – Other than Presidency Towns ; Subordinate courts for hearing insolvency cases, with District Court being the Court of appeal POST INDEPENDENCE LEGISLATIONS * Recovery of Debts due to Banks and Financial Institutions Act, 1993 * Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) 2002 * Sick Industrial Companies (Special Provisions) Act, (SICA) 1985 * Companies Act, 195 6 read with 2013 implemented in a phased manner * Limited Liability Partnership Act, 2008 * Business models like ARC’s empowered by SARFAESI ACT AND licensed by RBI to recover NPA

* Recovery of Debts due to Banks and Financial Institutions Act, 1993 – BANK WAS MIGHT AND MIGHT WAS RIGHT * Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) 2002 - * Sick Industrial Companies (Special Provisions) Act, (SICA) 1985 – only to corporates – misused by defaulters stand repealed today * Companies Act, 195 6 read with 2013 implemented in a phased manner * Limited Liability Partnership Act, 2008 * Corporate Debt Restructuring * Joint Lenders Forum * Strategic Debt Restructuring * Scheme for Sustainable Structuring of Stressed Assets - 4’S * PTIA - Presidency Towns Insolvency * PIA- Provincial Insolvency Act * ARC – Asset Reconstruction Company Except SICA all are still continued

Corporate Debt Restructuring Strategic Debt Restructuring Mechanism Scheme I. It covers all categories of assets in the books The Scheme covers assets which have been of creditors classified in terms of RBI’s restructured by CDR or any other restructuring prudential asset classification standards. exercise undertaken by the companies. II. It involves restructuring the existing debt by It provides for conversion of debt into equity by increasing the repayment period or by the lenders. reducing the rate of interest or by granting of fresh loans III. It has a three-tier structure which includes The lenders form a Joint Lenders’ Forum to CDR Cell, Empowered Group and a Standing decide on the conversion of debt into equity as Forum. The final decision on restructuring is per the Scheme taken by Standing Forum.

UNDER OLD PROVSIONS NEW PROVISIONS LAWS V/S CODES MANY LAW - PTIA-1909,PIA- CODE 2016 1920,SICA-1985,SARFEASI 2002,TP-1882,CCP -1908 CO ACT 1956 , BIFR Etc OBJECTIVE Elimination of Bankrupt and Remodelling and Restucturing Insolvent Entities STATUS Offence to continue GOING CONCERN - the business may continue under a declared protective arrangement while alternative options to achieve recovery are worked Periodicity Ages date after date delaying Speed – 270 days tactics Society Protection to debtors from Social Legislation humiliation and oppression by his creditors Litigation Creditors barred Initiation of Insolvency process by creditors ,debtors Takeaways 3 tier structure cell, Restructuring Freedom after 270 days start a existing Debt,Equity,interest ,time fresh. limit etc

* a) SICA, 1985 * b) Recovery of Debts Due to Banks and Financial Institutions Act, 1993 * c) SARFAESI Act, 2002; and * d) Companies Act, 2013 Amendments of 11 enactments while repealing Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920:- * The Indian Partnership Act 1932 * The Central Excise Act 1944 * The Income Tax Act 1961 * The Customs Act. 1962 * Recovery of Debts Due to Banks and Financial Institutions Act, 1993 * The Finance Act 1994 * The Securitisation & Reconstruction of Financial Assets and Enforcement of Security Act 2002 - SARFAESI Act * Sick Industrial Companies (Special Provisions) Repeal Act, 2003 * The payment and Settlement Systems Act 2007 * The Limited Liability Partnership Act 2008 * The Companies Act, 2013

The objective of this Code as stated in the preamble to the Code “ is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto ” Audi alteram partem (or audiatur et altera pars) is a Latin phrase meaning "listen to the other side", or "let the other side be  heard as well". It is the principle that no person should be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against them. The Supreme Court of India in a recent judgment 2 , while interpreting the maxim, held that every litigant before a court of law has the inherent expectation from the concerned court to be heard, being a fundamental facet of the principles of natural justice  With the enforcement of the Insolvency and Bankruptcy Code, 2016 (" Code ") in India, all the multiple laws related to I & B are consolidated.  One of the fundamental features of the Code is that it allows creditors to assess the viability of a debtor as a business decision, and agree upon a plan for its revival or a speedy liquidation The main vision of this act is to encourage entrepreneurship and innovation. Some business ventures  will always fail, but they will be handled rapidly and swiftly. Entrepreneurs and lenders will be able to move on, instead of being bogged down with decisions taken in the past POINTS TO PONDER Will our justice system rise to this expectations ?? Deliberately left out right of debtor to be heard of ! 

1. Provision of certainty in the market to promote efficiency and growth. 2. Maximization of value of assets. 3. Striking a balance between liquidation and re-organization. 4. Ensuring equitable treatment of similarly situated creditors. 5. Provision of timely, efficient and impartial resolution of insolvency. 6. Preservation of the insolvency estate to allow equitable distribution to creditors. 7. Ensuring a transparent and predictable insolvency law that contains incentives for gathering and dispensing information. 8. Recognition of existing creditor rights and establishment of clear rules for ranking priority of claims. 9. Establishment of a framework for cross-border insolvency. As stated in Volume I of the Bankruptcy Law Reforms Committee (Source : UNCITRAL*, 2005 – Legislative Guide on Insolvency) *United nations commission on International Trade law

* Greater emphasis on cash flow as against security of lending * Allows genuine cases of sustainable businesses to tide over temporary difficulties * Faster movement of factors of production – labour and capital to more productive business – makes economic sense * Encourage FDI as it promotes Ease of Doing Business * Auctions will get better values as against the present system, where values fetched are more of distress cases * Bankruptcy reform would yield higher recovery rates for corporate bond holders, and remove one barrier that impedes the corporate bond market.