Insolvency and Bankruptcy Code, 2016 brought in a substantial financial discipline among Indian Companies. Prior to the said Code, taking advantage of delay in litigations due to high pendency of cases in the courts, companies were always dragging the payments. The above said Code mandated that if a company is not able to make the payment within 10 days from the date of receipt of a demand notice from the creditor, it is treated as default. Hence, the creditor can approach National Company Law Tribunal (NCLT) seeking to initiate insolvency proceedings against the defaulter.

Impact of COVID 19 Outbreak on Courts

In terms of the number of registered Covid-19 data across the world, India lies at the bottom of the list. However, in the last few weeks, India has witnessed a rapid increase in the number of confirmed coronavirus cases. As a result, there lies a possibility that India might witness a severe outbreak of this pandemic disease within a short period of time if its spread is left unchecked.

On March 24, 2020, the Finance Minister announced several relief measures across sectors, relating to Statutory and Regulatory compliance matters, in view of the COVID-19 outbreak in the country. The main relief measures have been detailed below, along with their implications for businesses. 

In response to the global outbreak of coronavirus disease 2019 (COVID-19), governments in many countries have issued emergency legislation to mitigate the impact of the pandemic on companies’ day-to-day operations. Since March 24, 2020, the Indian government has been announcing various measures aimed to ease corporate and tax compliance for companies doing business in India, as well as other measures pertaining to employment and bankruptcy matters. Below is a high-level overview of some of the most relevant aspects of these measures as they pertain to India subsidiaries of US companies.

THE ISSUE

In a recent judgment, i.e., on 17 January 2020, the Indian appellate insolvency tribunal, namely, the National Company Law Appellate Tribunal (NCLAT) held in M. Ravindranath Reddy v. G. Kishan, that the lease of immovable property cannot be considered as supply of goods or rendering any services and therefore the due amount cannot fall within the definition of operational debt under the Insolvency and Bankruptcy Code, 2016 (Code).

Key Points:

No provision in the Code or insolvency regulations dictates that the bid of any Resolution Applicant has to match liquidation value of the estate of the Corporate Debtor. If the resolution plan has been approved by the Committee of Creditors by application of their commercial sense, as well as the plan has been considered as proper in terms of Section 30 of the Code, the Adjudicating Authority cannot interfere or re-assess the same under Section 31 of the said Code.

INTRODUCTION 

The Supreme Court has recently in its judgment dated 21 January 2020, in the case of Standard Chartered Bank v MSTC Limited [SLP (C) No 20093 of 2019], provided clarity on the interplay between the provisions of Recovery of Debts and Bankruptcy Act 1993 (RDB Act) and Limitation Act 1963 (Limitation Act). Supreme Court has in doing so refused to condone a delay of 28 days in filing of a review application by the government borrower entity against a decree in favour of the bank.  

BRIEF BACKGROUND: 

INTRODUCTION  

With the much awaited-judgment in the Insolvency and Bankruptcy regime; the Supreme Court of India (hereinafter “SC” or “apex court”) cleared off the long-standing confusions encompassing the Insolvency and Bankruptcy Code, 2016 (hereinafter the “Code” or “IBC”) with its landmark in Committee of Creditors of Essar Steel Ltd. v. Satish Kumar Gupta & Orsi on November 15, 2019.  

In order to protect the Corporate Debtor and its assets from liabilities for offences committed prior to the commencement of Corporate Insolvency Resolution Process (CIRP), the President of India has on 28th of December 2019 promulgated an Ordinance – Insolvency and Bankruptcy (Amendment) Ordinance, 2019.

At the end of December, the Indian government promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 (the “Ordinance”) to iron out certain issues faced by buyers of assets in a corporate insolvency resolution process (the “CIRP”).

While the Insolvency and Bankruptcy Code, 2016 (the “Code”) has largely achieved its objectives, certain aspects of the Code have caused bottlenecks in the CIRP, which has, inter alia, deterred last-mile funding to distressed corporate debtors.