Hello! Welcome to the updates from Indian insolvency law for July, 2020.
In what could be considered a reversal of the trend, the Reserve Bank of India has allowed one time restructuring of loans taken by corporate borrowers and personal loans. The facility is available to borrowers whose accounts were standard on March 1, 2020 and which remain standard until the date of invocation of the restructuring. Similarly, the existing window for one time restructuring of MSME advances has been extended to all MSME debts which were standard as on March 1, 2020. The Government is also expected to notify a separate insolvency resolution framework for MSMEs which may follow ‘debtor in possession’ model as opposed to the ‘credit in control’ model currently in force.
The issue of recovery of AGR Dues from the insolvency telecom companies has acquired a new twist with the Supreme Court asking the Government to explain if spectrum of telecom companies under IBC can be sold. The decision may have far reaching implications for the CIRP process of telecom companies, which may be left with no choice but liquidation if the spectrum cannot be sold.
The IBBI has introduced amendments to the liquidation rules to clarify that the fee of a liquidator who realises any amount, but does not distribute the same, shall be entitled to a fee corresponding to the amount realised by him. Similarly, the liquidator who distributes any amount, which is not realised by him, shall be entitled to a fee corresponding to the amount distributed by him.
Further, with a view to aid resolution professionals and liquidators to identify various red flags which may point to the need for a review of avoidance transactions under the Code, the IBBI has released a Red Flag Document.
From the Docket
The Supreme Court has clarified that the period of limitation for filing a petition under Section 7 of the Code is 3 years from the date when the default occurred in Babulal Gurjar v. Veer Gurjar Aluminium Industries as provided in Article 137 of the Limitation Act. The apex court has also clarified that the purpose and object of the IBC is not to give a fresh lease of life to time-barred debts.
In Venkata Siva Kumar v. IBBI, the Madras High Court has upheld the constitutional validity of subordinate legislation framed by IBBI whereby Resolution Professionals and/ or IPE were required to deposit fee with the IBBI on the basis of the annual remuneration earned from activities carried out as RP/ IPE in the previous financial year. The High Court held that the IBC contains adequate safeguards to ensure that the Parliament effectively supervises all rules and regulations with the power to modify or even annul the same. Likewise, adequate safeguards are in place to ensure that the funds of the IBBI are utilised for the purposes of fulfilling the role of the IBBI under the IBC.
In V Nagarajan v. SKS Ispat and Power, the NCLAT rejected an appeal inter alia on the ground of limitation though, as per the appellant, the limitation was expiring on 11 April 2020, when the suo moto order of Supreme Court extending limitation period was operative.
In Bank of Baroda v. Sisir Kumar Appikatla, the NCLAT held that those persons who contributed to default by the corporate debtor with their misconduct have to be excluded from submitting a Resolution Plan or acquiring the assets of the Corporate Debtor when pushed into liquidation. The Adjudicating Authority has to ensure that the Successful Resolution Applicant(s) are not ineligible to submit Resolution Plan within the ambit of Section 29A and that the approved Resolution Plan complies with the mandate of Section 30(2) of the IBC.
In Anil Goel v. Directorate of Enforcement, the NCLT, Kolkata Bench, held that Section 32A inserted by Insolvency and Bankruptcy Code (Amendment) Act, 2020, is applicable to liquidation proceedings only and not just when a resolution plan is present in respect of a corporate debtor. Resultantly, the NCLT permitted the liquidator to sell the assets which were attached by the Enforcement Directorate on a going concern basis in liquidation.
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