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Forced Contributions to Infructuous Liquidations: Understanding Regulation 2A

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-Megha Mittal

(resolution@vinodkothari.com)

Since its inception, the Insolvency and Bankruptcy Code, 2016 (“Code”), along with its regulations, has been subject to many reforms, some aimed at establishing new legal principles and some for removing difficulties faced during the insolvency resolution and/ or liquidation process; one such reform was the introduction of Regulation 2A[1] in the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”), which provides for contribution by financial creditors of the corporate debtor to contribute towards liquidation costs, if so called upon by the liquidator.

In this article, we shall briefly understand the backdrop in which the said provision was introduced, throw light upon the extant provisions and then address the elephant in the room- is it obligatory upon the financial creditors to make such contribution when sought by the liquidator?

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MCA need not be mandatorily impleaded in applications: NCLAT sets-aside directions issued by of Principal Bench

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–Megha Mittal

(resolution@vinodkothari.com)

The Hon’ble National Company Law Appellate Tribunal (‘NCLAT’), vide its order dated 22nd May, 2020[1] set aside the directions issued by the Hon’ble Principal Bench for impleadment of Ministry of Corporate Affairs (‘MCA’) as a respondent-party to all applications filed under the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016.

This comes in light of the order dated 22nd November, 2019 of the Hon’ble National Company Law Tribunal, Principal Bench of New Delhi (‘NCLT’/ ‘Principal Bench’), in the matter of Oriental Bank of Commerce v. Sikka Papers Ltd. & Ors[2], wherein the Hon’ble NCLT directed that “…In all cases of Insolvency and Bankruptcy Code, and Company Petition, the Union of India, Ministry of Corporate Affairs through the Secretary be impleaded as a party respondent so that authentic record is made available by the officers of the Ministry of Corporate Affairs for proper appreciation of the matters..”(‘Impugned Directions’). The said requirement was directed to be made applicable in all benches of NCLT, pan-India.

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