We hope that you and your dear ones are safe and healthy! India has now entered the third phase of the lockdown and there have been some relaxations in some areas in terms of permissible activities.
The government, regulatory authorities and the judiciary are all working towards taking measures to balance the interests of creditors and corporate debtors. The Indian government is even considering the suspension of Sections 7, 8 and 10 of the Insolvency and Bankruptcy Code, 2016 for an initial term of 6 months, a move that has been questioned by some (also, see here). This period may even be extended up to a year. The government is also reportedly mulling over the introduction of pre-packaged deals to reduce backlog and reach a faster resolution in some cases, in a bid to mitigate the COVID-19 delays.
The Insolvency and Bankruptcy Board of India amended the Liquidation Process and the CIRP Regulations to exclude the period of lockdown imposed by the central government in light of the Covid-19 outbreak for the purpose of computation of any time-line for any task that could not be completed due to the lockdown.
It is anticipated that potential investors would seek to revise their offers submitted as part of the CIRP process in light of the drastic changes to economic conditions in India.
Meanwhile, the NBCC has filed an appeal with the NCLAT in respect of the order passed by the NCLT where it approved the resolution plan in respect of Jaypee Infratech Limited with some modifications.
From the Docket
In Shakuntla Educational & Welfare Society v. Punjab & Sind Bank, the Delhi High Court restrained for the interim, the respondent bank from declaring the borrower’s loan accounts as Non-Performing Assets. The High Court relied on Anant Raj Limited v. Yes Bank Limited to hold that, the intention of the RBI while issuing the regulatory package was to maintain status quo with regard to the classification of accounts of the borrowers as they existed on 01.03.2020. In this light, the court was of the opinion that the borrower had made out a prima facie case for grant of interim injunction.
In Electrosteel Steels v. Jharkhand, a division bench of the Jharkhand High Court has held that a claim for value added tax was maintainable even after the resolution plan had been approved by the adjudicating authority as no public announcement as required under the CIRP Regulations had been made in the state of Jharkhand, where the corporate debtor had its registered office. The tax department had been unable to participate in the CIRP and make a claim before the resolution professional. In this light, the High Court was of the opinion that the resolution plan was not binding on the tax department as Section 31 of the Code very clearly states that the resolution plan is binding only on those stakeholders who were involved in the resolution process. In the concurring judgment, the High Court also held that the amendment to Section 31 in 2019 became effective prospectively from 16.08.2019 and that no express retrospective effect was given to it.
Thank you for reading! We will be back in your inbox next month with more updates from the world of insolvency and bankruptcy law, in what are hopefully better circumstances.