Personal Guarantors under IBC

-Megha Mittal

(resolution@vinodkothari.com)

The Ministry of Corporate Affairs, vide notification dated 15.11.2019, has notified sections 94-187 , read with section 60 of the Insolvency and Bankruptcy Code, 2016, dealing with insolvency resolution and bankruptcy process for non-corporate insolvency, insofar as they relate to personal guarantors to corporate debtors.  Further, the rules & regulations w.r.t. insolvency process of personal guarantors, along with regulations on bankruptcy process of personal guarantors have also been notified.

Our presentation on insolvency and bankruptcy process of personal guarantors to corporate debtors is here- http://vinodkothari.com/wp-content/uploads/2019/11/Personal-Insolvency-and-Bankruptcy-2019.pdf

 

Sectoral regulators empowered to petition insolvency of financial services providers: Central Govt notifies insolvency rules

Vinod Kothari

(resolution@vinodkothari.com

The Central Govt on 15th November notified rules of procedure for insolvency proceedings for financial services providers, thereby indicating that the resolution and liquidation process for financial services entities has been taken out from the proposed enactment dealing with distress of financial entities. Notably, the actions in case of distress of financial services firms is not limited to insolvency – regulators take prompt corrective action, depending on the severity of the distress.

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Supreme Court’s status-quo on Essar Steel-How the tables could turn for ArcelorMittal!

– CS Megha Mittal

(mittal@vinodkothari.com)

[This article is intended for academic debate on the law around powers of the Committee of Creditors vis-à-vis the adjudicatory authorities, as it continues to evolve] Read more

RBI’s 12th February circular: The Last Word Becomes the Lost World

RBI’s 12th February circular:

The Last Word Becomes the Lost World

Abhirup Ghosh (abhirup@vinodkothari.com)

The 12th February 2018 circular of the Reserve Bank of India (RBI)[1] (Circular), arguably one of the sternest of measures requiring banks to stop ever-greening bad loans, and resolve them once for all, with a hard timeline of 6 months, or mandatorily push the matter into insolvency resolution, was aimed at being the last word, overriding several of the previous measures such as CDR, JLF, SSSS-A, etc. However, with the Supreme Court striking it down, in the case of Dharani Sugars and Chemicals Limited vs Union of India and Ors.[2], the mandate of the RBI in directing banks with how to deal with stressed loans has fallen apart. While the SCI has used very technical grounds to quash the 12th Feb circular, the major question for the RBI is whether it should continue to micro-manage banks’ handling of bad loans, and the major question for the banks is when will they grow up into big boys and stop expecting RBI to tell them how to clean up the mess on their balance sheet. Read more

Reversibility of Liquidation Order?

By Richa Saraf (resolution@vinodkothari.com)

Insolvency and Bankruptcy Code was framed with the object to provide opportunity for revival to an insolvent company, however, since the rising number of liquidation cases, as against resolution, is a cause of worry.

“After more than a year of the Insolvency and Bankruptcy Code proceedings, there have been more liquidation cases than resolution of the non-performing assets accounts. According to a data from the Insolvency and Bankruptcy Board of India, in the National Company Law Tribunal, around 78 companies got liquidation orders since February 2017[1].”- quoted in an article in Business Standard.

“An analysis of companies that have completed the Corporate Insolvency Resolution Process (CIRP) till December reveals that liquidation orders were passed for as many as 30 companies. This is three times the number of 10 cases for which resolution was approved at the culmination of the CIRP, as per latest data available with the Insolvency and Bankruptcy Board of India.[2] quoted in an article in Indian Express. Read more

Financial Creditors & Committee of Creditors: What, Why and How?

By Megha Mittal (resolution@vinodkothari.com)

IBBI issues clarification w.r.t. voting powers of CoC

Brief Background:

Pursuant to the Insolvency and Bankruptcy (Amendment) Code, 2018, the crucial reduction of voting threshold from 75% to 66% for critical matters like approval of Resolution Plan, Extension of CIRP, and all matters of section 28 of the Insolvency and Bankruptcy Code, 2016 (Code), came into effect.

However, there still prevailed ambiguity as to how to determine this threshold of 66%. What shall be the fate of those financial creditors who abstained from voting? Read more

LOOK- BACK PERIOD VIS-À-VIS FRAUDULENT TRANSACTIONS

By Richa Saraf  (richa@vinodkothari.com)

Sections 45, 49, 66, 69 of the Insolvency and Bankruptcy Code, 2016 requires and empowers the Liquidator to apply to the Adjudicating Authority for appropriate orders in case of any vulnerable transactions that the Liquidator comes across during the process of liquidation. Such transactions may either be with respect to breach of applicable law, or deleterious to the interests of creditors or stakeholders, or otherwise, not transactions designed to be in good faith. The transactions, whether being undervalued or fraudulent shall be considered vulnerable to the interest of the stakeholders of the Company.

The article hinges on the crucial question of applicability of the limitation to the aforementioned sections. In this regard, we shall discuss how the provisions were imbibed in the Code, despite there being no equivalent in the Companies Act, 2013 or previous Companies Act. The general notion is that limitation should be applicable to all transactions, including fraudulent transactions referred to in Section 49 of the Code. However, the article will explain as to how undervalued transaction, done deliberately without due compliance, partakes the nature of a fraudulent transaction, and since fraud is a nullity forever, in case of such transactions, as covered by Section 49, there is no question of any look- back period at all. Read more