The Indian Insolvency and Bankruptcy Code, 2016 (the IBC) represents a radical rewriting of India’s corporate insolvency procedures, enabling creditors to restructure bad debts and rehabilitate corporate debtors within specified timelines.
It is timely, with further reform of the new Indian Bankruptcy Code (IBC) in prospect, to outline our thoughts on some of the current issues on which various market participants have requested an understanding of the approach and learnings of overseas practitioners.
The President of India promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance 2018 on 6 June 2018 (Ordinance) to amend the Insolvency and Bankruptcy Code 2016 (IBC). In the short history of around one and half years since the provisions relating to corporate insolvency resolution process under IBC came into force in December 2016, the Ordinance marks the second amendment to IBC. |
Between 31 May to 1 June, the Securities and Exchange Board of India (SEBI) amended a number of securities regulations to provide certain dispensations for listed companies undergoing the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code 2016 (IBC). These amendments follow SEBI’s discussion paper of March 2018, which set out specific proposals for adjusting the regulatory framework to allow listed companies to comply with their obligations under securities laws. |
TIME LIMIT FOR RECTIFICATION AND ADMISSION IS DIRECTORY
It is pertinent to note thatSection 9 (5) of Insolvency and Bankruptcy Code, 2016 provides the time limit for admission and rejection of the application and also the time limit for rectification of the defect in the application:
SECTION 9(5)
Employees as Operational Creditor
The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “Code”) considers all employees and workmen as operational creditors.
Operational Creditor is defined under Section 5 (20) of the IB Code as:
"Operational creditor"means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;”
TIME LIMIT FOR RECTIFICATION AND ADMISSION IS DIRECTORY
It is pertinent to note that Section 9 (5) of Insolvency and Bankruptcy Code, 2016 provides the time limit for admission and rejection of the application and also the time limit for rectification of the defect in the application:
SECTION 9(5)
“Section 9 (5) – The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—
It is known that I & B Code came into effect from 01.12.2016. Subsequently, it perspired during various proceedings in NCLT that it has no specific provision for limitation period and/or categorical applicability of Limitation Act on initiation of insolvency process under the Act.
However, the limitation period is prescribed under the Limitation Act for every suit instituted, appeal preferred, and application made under the law.
As per Section 5(14) of the IB Code "Insolvency Resolution Process Period" is 180 days.
“Period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day;”
COMPLETION OF INSOLVENCY RESOLUTION PROCESS - It must be noted that Section 12 of the IB Code prescribes the time limit for completion of Insolvency Resolution process.
National Company Law Appellate Tribunal has held that ‘Moratorium’ under Section 14 of the Insolvency and Bankruptcy Code will not only be applicable to the property of the ‘Corporate Debtor’ but also on its ‘Personal Guarantor’.
Brief Facts: