This is in succession to our previous con-call held on August 9, 2019. The Supreme Court in its judgment of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta dated November 14, 2019 (“Judgment”) has set aside the decision of the National Company Law Appellate Tribunal (“NCLAT”).
NCLAT has held that a secured financial creditor while opting out of liquidation process is barred from selling secured assets to promoters or its related party or persons who are ineligible in terms of Section 29A of I&B Code.
Tribunal in SBI v. Anuj Bajpai observed that even if Section 52(4) is silent on sale of secured assets to one or other persons, the explanation in Section 35(1)(f) makes it clear that assets cannot be sold to those who are ineligible under Section 29A.
The Government of India introduced the Insolvency and Bankruptcy Code, 2016 (IBC) to simplify and consolidate various existing laws relating to insolvency and bankruptcy and to provide for a single legal framework to deal with all instances of insolvency and bankruptcy in India.
In recent times, there have been multiple instances of delay in completion of the corporate insolvency resolution process (“CIRP”) as per the timelines prescribed under the Insolvency and Bankruptcy Code, 2016 (“Code”). This is primarily due to the filing of multiple legal proceedings by stakeholders, and their long continuing pendency.
The Insolvency and Bankruptcy Code 2016 (the ‘Code’) provides the creditors with a comprehensive solution for recovery of dues from willful defaulters. While this legislation has been facing teething issues and inconsistencies from its inception, the proactive approach of the government in amending this liquidation law from time to time has led to its significant implementation.
Supreme Court has upheld constitutional validity of various provisions of Insolvency and Bankruptcy Code, 2016. It noted that the Code is a beneficial legislation which puts corporate debtor back on its feet, not being a mere recovery legislation for creditors.
Observing that there is no liquidation, even in the preamble, the court noted that the Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors. Unless such reorganization is effected in a time-bound manner, the value of the assets of such persons will deplete.
In Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd., the Supreme Court has held that an Insolvency Petition may be filed against a corporate debtor irrespective of the pendency of a winding-up petition before a High Court
Revision of ECB framework: The Reserve Bank of India (RBI) on December 17, 2018 revised and consolidated the provisions related to borrowing and lending transactions into one single regulation i.e. the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 ("ECB Regulations").
Banning of Unregulated Deposits Schemes Ordinance, 2019 By Sudish Sharma and Vishakha Singh
Indian economy in the recent times has witnessed a plethora of fraudulent corporate malpractices. The issue of illegal deposit-taking activities has been a concerning one, causing various financial frauds in forms of 'ponzi' schemes, 'chit funds' scams etc. There has been
a dire need to counter such illicit practices, and to
initiate another deterrent action against the black
money generated out of such illicit-deposit taking
Supreme Court has declared the RBI Circular dated 12-02-2018, by which the RBI promulgated a revised framework for resolution of stressed assets, ultra vires Section 35AA of the Banking Regulation Act. It declared all actions proceeded against debtors, triggered under Section 7 of the Insolvency Code, as a result of the said circular as non-est.
The Court however held that the Banking Regulation (Amendment) Act, 2017, which inserted Section 35AA, i.e., provisions which give the RBI certain regulatory powers, is not manifestly arbitrary.