The National Company Law Appellate Tribunal, New Delhi (NCLAT) on 7 November 2017 passed a judgment in the case of M/s Speculum Plast Private Limited v. PTC Techno Private Limited, putting to rest the question of the applicability of the Limitation Act, 1963 (Limitation Act) to the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC). The present judgment comes in the wake of the decision of the NCLAT in Neelkanth Township and Construction Pvt. Ltd.

In a recent decision of M/s Ksheeraabd Constructions Private Limited v M/s Vijay Nirman Company Private Limited, the National Company Law Appellate Tribunal (NCLAT) has held that proceedings pending under Section 34 of the Arbitration and Conciliation Act, 1996 (Act) does not constitute a ‘dispute’ under Section 8 of the Insolvency and Bankruptcy Code, 2016 (Code) and cannot come in the way of initiation of the insolvency resolution process, in terms of Section 9 of the Code.

Background

Introduction:

Incorporated with the objective of promoting maximization of value of assets in a time bound manner, the Insolvency and Bankruptcy Code (hereinafter referred to as “IBC”) works towards effective protection to honest creditors against unscrupulous debtors who may misuse insolvency to evade of their liabilities. The conducive and efficacious implementation of the IBC has instilled confidence in the creditors for a systematic and speedy reform. The remedy under the IBC is also available to the unpaid employees of the debtor which is now being recognized judicially as well.

The objective of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ’Code’) is multi-faceted. Not only does it seek to promote entrepreneurship, by making availability of credit more transparent, but it also balances the interests of all stakeholders by consolidating and amending the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals, in a time bound manner and for maximization of the value assets of such persons and other related matters.

Introduction

Recently, in Neelkanth Township and Construction Pvt. Ltd. v.Urban Infrastructure Trustees Ltd, Company Appeal (AT) (Insolvency) No. 44 of 2017 (Neelkanth Township), the National Company Law Appellate Tribunal (NCLAT) addressed several issues with regard to the Insolvency and Bankruptcy Code, 2016 (IBC).

Owing to the dynamic nature and demand of the business, the entities require to constantly modify their business model. Corporate restructuring is an instrument to effectively implement the strategies devised by changing the business model, management team or financial structure of the corporations. Growth of these corporations is either through organic means (through internal means like financial restructuring) or inorganic means in order to obtain accelerated growth (through external sources like mergers, acquisition).

Need for Merger

The efficacious implementation of the comprehensive and systematic Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as “IBC”) has instilled confidence in the creditors being a comprehensive, systemic and speedy reform thereby paving way for development and progress. The latest revision in the IBC by the Insolvency and Bankruptcy Board of India (hereinafter referred to as “IBBI”) has further tightened the reins over the dishonest and fraudulent debtors by implementation of stricter policies controlling their conduct.

Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as “IBC”) has been introduced by the Government of India in 2016, as an Act to consolidate and amend the laws relating to reorganization and insolvency resolution in a time-bound manner for maximization of value of assets, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. The Supreme Court has elaborately discussed the scope and applicability of the IBC[1].

Introduction:

The Insolvency and Bankruptcy Board of India amended regulations regarding Corporate Insolvency Resolution Process wherein it has stated that the resolution plans with respect to Section 30 and Section 31 of the Insolvency and Bankruptcy Code, 2016, will be required to contain details of the resolution applicant as well as the connected Persons.