The Insolvency and Bankruptcy Code, 2016 (IBC) has been widely considered a landmark legislation that has brought about a paradigm shift in the recovery and resolution process.
However, during the implementation of the IBC over the past two years and eight months, several challenges have emerged, including:
Introduction
The Supreme Court in Pioneer Urban Land and Infrastructure Limited vs. Union of India (Pioneer Judgment)[1], has upheld the constitutionality of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (Amendment Act)[2].
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 Hon’ble National Company Law Appellate Tribunal (‘NCLAT’), has recently in its suigeneris judgment in UI Pulp and Paper Industries Pvt. Ltd. vs. M/s Roxcel Trading GMBH Company Appeal (AT) (Insolvency) No. 664 of 2019 (‘Roxcel Trading’), affirmed the view of the National Company Law Appellate Tribunal, wherein, it had imposed ‘moratorium’ on the Corporate Debtor even before initiation of corporate insolvency resolution process.
Analysis of the Judgement- Imposition of Pre IBC ‘Moratorium’
In State Bank of India v Moser Baer Karamchari Union [Company Appeal (AT) (Insolvency) Number 396 of 2019] (Moser Baer), the National Company Law Appellate Tribunal, New Delhi (NCLAT), ruled on the scope of ‘workmen’s dues’ under Section 53 of the Insolvency and Bankruptcy Code, 2016 (IBC) from the perspective of the dues of an employer towards provident fund, pension fund and gratuity. Background |
Corel Corporation vs. Mahabali Innovative Technologies Private Limited, CS (COMM) 711/2016
A suit was instituted for permanent injunction, against the Defendant to restrain the Defendant from infringing the copyright of the Plaintiff in various software programmes of the Plaintiff including the Corel DVD MovieFactory 7 software and for ancillary reliefs.
It is now a settled position that the prime objective of the Insolvency and Bankruptcy Code, 2016 (“IBCâ€) is resolution or revival of the Corporate Debtor; followed by maximising the value of the assets of the Corporate Debtor; and lastly to promote entrepreneurship and availability of credit. The proceedings under the IBC are not intended to substitute recovery proceedings.
The Reserve Bank of India (“RBI”) has issued the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 (“New Framework”) on June 07, 2019[1] in which the RBI has continued the core principles of its circular dated February 12, 2018 (“February 12 Circular”) and has added provisions encouraging both informal and formal restructuring in India.
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.