Introduction
The Insolvency and Bankruptcy Board of India (IBBI) has released a discussion paper aimed at gathering feedback on specific challenges within the Corporate Insolvency Resolution Process (CIRP). In this discussion paper, IBBI has suggested amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) with a view to address the identified challenges and enhance the effectiveness and efficiency of the CIRP. Set out below is a summary of some of the proposed key amendments:
The law regarding moratoriums imposed under Section 14 of the Insolvency and Bankruptcy Code[1] (hereinafter referred to as the IBC 2016) has been often explained and clarified by various judicial pronouncements, which aptly interpret the multitudes contained in Section 14 of the IBC.
In a recent judgment passed by the National Company Law Appellate Tribunal (NCLAT), in the case of Somesh Choudhary v Knight Riders Sports Private Limited & Anr1, it was held that claims arising out of Intellectual Property Rights would come within the ambit of Section 5 (21) of the Insolvency and Bankruptcy Code, 2016
The Insolvency and Bankruptcy Code (Code) provides the right to a financial creditor to make an application to the National Company Law Tribunal (NCLT) for initiation of corporate insolvency resolution process (CIRP) against a corporate debtor in the event the debtor fails to repay its debt owed to the creditor. The Code as well as precedents developed by insolvency courts have consistently held that the test for admission of an insolvency application of a financial creditor is twofold, existence of a debt and default on that debt.
Stamp duty implications are required to be assessed carefully for restructuring plan involving merger, demerger or slump sale. Even if the court/tribunal approved restructuring schemes are tax neutral, it may not necessarily avoid the stamp duty implications.
The Supreme Court (“SC”) in the case of M. K. Rajagopalan v. Dr. Periasamy Palani Gounder & Anr., has held that, while commercial wisdom of the Committee of Creditors (“CoC”) must be respected, certain factors having a material bearing on the process of approval of the resolution plan should also be borne in mind.
In its recent judgment in State Bank of India vs Moser Baer Karamchari Union[1], the Apex court has reiterated the settled legal position of law pertaining to treatment of Employees’ provident fund, pension fund and gratuity Fund (“EPF Dues”) under the Insolvency and Bankruptcy Code, 2016 (“Code”).
The Supreme Court of India, in its recent judgment passed in the case of M. Suresh Kumar Reddy v Canara Bank and Ors., has held that the existence of a financial debt and proof of default on the part of Corporate Debtor are the only factors to be considered by the Adjudicating Authority to admit an Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”).
May, 2023 For Private Circulation - Educational & Informational Purpose Only A BRIEFING ON LEGAL MATTERS OF CURRENT INTEREST KEY HIGHLIGHTS * Supreme Court: Directors cannot escape penal liability in cheque dishonoring cases by citing company's dissolution. ⁎ Bombay High Court: A share purchase agreement containing option to sell the shares does not amount to derivative contract, thereby does not violate provisions of SCRA. * NCLAT: Fraud for the purpose of Section 66 of the IBC includes a debt where the debtor has no intention to repay.