Background
Ever since the Hon’ble Finance Minister of India announced the suspension of initiation of corporate insolvency under the Insolvency and Bankruptcy Code 2016 (IBC) in wake of the COVID-19 pandemic, there have been several market speculations about the nature and extent of the proposed suspension and its implications. With the promulgation of the amendment ordinance to IBC, most of these speculations have been put to rest, however owing to the language of the Ordinance, a new set of issues may have arisen.
In India, the Corporate Insolvency Resolution Process (hereinafter referred to as ‘CIRP’) is governed under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘Code’). Insolvency laws in India provides for an expeditious settlement of insolvency cases, protecting the interests of the creditors through a balanced procedure, in a time bound manner. A financial creditor, an operational creditor and the corporate debtor are eligible to initiate the CIRP.
Introduction
The Government of India announced that Sections 7, 9 and 10 of the Insolvency & Bankruptcy Code, 2016 shall continue to remain suspended for another three months i.e. till March 31, 2021 on account of the COVID -19 pandemic. Sections 7, 9 and 10 deal with the initiation of corporate insolvency proceedings by financial and operational creditors against corporate debtors.
The Supreme Court has held that transfer of winding up proceedings from High Court to NCLT on application of financial creditor not party to proceedings before Court is permissible.
Observing that the proceedings for winding up of a company are actually proceedings in rem to which the entire body of creditors is a party, the Court held that the words ‘party or parties’ appearing in 5th proviso to Section 434(1)(c) of the Companies Act, 2013 would take within its fold any creditor of the company in liquidation.
I. Delhi HC: If the original contract in entirety is put to an end, the arbitration clause, which is a part of it, also perishes along with it The Hon’ble High Court of Delhi (“DHC”) has in its judgement dated October 22, 2020 (“Judgement”) in the matter of Sanjiv Prakash v. Seema Kukreja and Others [ARB. Pet. 4/2020], held that if the contract is superseded by another, the arbitration clause, being a component/part of the earlier contract, falls with it.
The Insolvency and Bankruptcy Board of India (IBBI) on 13 November 2020 issued the Insolvency and Bankruptcy Board of India (Liquidation Process) (Fourth Amendment) Regulations, 2020 (Amendment) which introduced seminal changes to the liquidation regime under the Insolvency and Bankruptcy Code, 2016 (IBC). The Amendment has been introduced on the back of the discussion paper issued by IBBI on 26 August 2020 on Corporate Liquidation Process (Discussion Paper).
Abhishek Tripathi and Mani Gupta, Sarthak Advocates & Solicitors
This is an extract from the 2021 edition of GRR's the Asia-Pacific Restructuring Review. The whole publication is available here.
In summary
The Insolvency & Bankruptcy Code, 2016 (IBC) was introduced when insolvency resolution in India took around 4 years on an average. Therefore, completing the resolution process within a fixed timeline was at the heart of the new framework. But the instances of delays still kept cropping up and the code has been amended continually to impose stricter time frames and ensure compliance.
The aim of this Article is to analyze the timelines provided for corporate insolvency resolution process (CIRP) under the IBC and the latest amendments thereon.
The Division Bench of the Hon’ble High Court of Kerala comprising of Chief Justice S Manikumar and Justice Shaji P Chaly in Sulochana Gupta and another v. RBG Enterprises Pvt Ltd and others, has recently ruled that the Writ Jurisdiction of the High Court under Article 226 cannot be invoked to challenge an order passed by National Company Law Tribunal (hereinafter referred to as “NCLT”).