अध्ययन : Learning & Studying

Two Day Mega Seminar

Organised by
Akola Branch of WICASA
NPA’s In India
 Insolvency Act & Other countries
• German insolvency law
is governed by a
comprehensive
Insolvency Code which
entered into force on
January 1, 1999 and has
been amended from time
to time, the last major
reform being the Act for
the Further Facilitation of
the Restructuring of
Companies (ESUG)
which largely came into
force as of 1 March
2012.
• he first
• These laws came into
effect in April 2001. The
Corporate
Reorganization Law(Kai
sha-Kosei Ho) was
totally renewed in
December 2002,
35 years after its last
substantial revision in
1967, and came into
force in April 2003.
modern Bankruptcy Act
in America, sometimes
called the "Nelson Act",
was initially entered into
force in 1898. The
current Bankruptcy Cod
e was enacted in 1978
by § 101 of
the Bankruptcy Reform
Act of 1978, and
generally became
effective on October 1,
1979

Germany China
United States
Difference between Act & Code

Act Code

A formal decision, law, or the A Code is a type of legislation

like, by a legislature, ruler, court, that tries to exhaustively cover a
or other authority; decree or complete system of laws as it
edict; statute; judgment, existed at the time the code
resolve, an instrument or was enacted, by a process of
document stating something codification. Basically, all laws
done or transacted, to operate that existed in form of statutes or
or function in a particular way; customs or rules or regulations
per-form specific duties or related to a matter are
functions compiled and given a formal
sanction under one umbrella.
 Purpose behind the enactment of the Insolvency &
Bankruptcy Code, 2016

1. The Insolvency & Bankruptcy Code, 2016 is intended to strike the right
balance of interests of all the stakeholders of the business enterprise
so that the corporates and other business entities enjoy availability of
credit and at the same time the creditor do not have to bear the
losses on account of default.
2. The purpose of the code is as under:
(a) To consolidate and amend the laws relating to reorganisation and
insolvency resolution of corporate persons, Partnership firms and
individuals.
(b) To fix time periods for execution of the law in a time bound manner.
(c) To maximise the value of assets of interested persons
(d) To promote entrepreneurship
(e) To increase availability of credit
(f) To balance the interests of all the stakeholders including alteration
in the order of priority of payment of government dues
(g) To establish an Insolvency & Bankruptcy Board of India as a
regulatory body for the Insolvency & Bankruptcy Law.
3. Multiple laws dilemma: In India there are number of laws which deals
with the insolvency and the bankruptcy of Individuals, Firms &
Companies , etc. such as:

Recovery of debts
Presidency Towns due to Banks &
SARFAESI Act 2002
Insolvency Act 1909 Financial Institutions
Act 1993

Provincial Insolvency Sick Industries

Companies Act 2013
Act 1920 Companies Act 1985

Insolvency &
Indian Partnership
Companies Act 1956 Bankruptcy Code
Act 1932
2016
4. There were multiple overlapping laws and adjudicating forums dealing with
financial failure and insolvency of companies and individuals in India.

5. The existing laws also were not aligned with the market realties, had
several problems and were inadequate.

6. Resolution and jurisdiction vesting with multiple agencies with overlapping

powers was leading to delays and complexities in the process

7. To facilitate easy and time bound closure of business in India and to

overcome these challenges, a strong bankruptcy law was required
The Insolvency and Bankruptcy Code, 2016
provides a new regulatory mechanism with
an institutional set-up comprising of five
pillars
• Insolvency Professionals (IPs)
• Insolvency Professional Agency (IPA)
• Information Utilities (IUs)
• Insolvency & Bankruptcy Board of
India
• Adjudicating Authority
Insolvency Professionals (IPs)

•The Code provides for insolvency Professionals as

intermediaries who would play a key role in the efficient
working of the bankruptcy process. The role of the IP

1. encompass a wide range of functions, which include

adhering to procedure of the law, as well as accounting
and finance related functions.

•In the resolution process, the IP verifies the claims of the

creditors, constitutes a creditor committee, runs the

2. debtors business during the moratorium period and helps

the creditors in reaching a consensus for a revival plan. In
liquidation, the IP acts as a liquidator and bankruptcy
trustee.
Insolvency Professional Agency (IPA)

The code provides for the

establishment of the insolvency
professional agencies to enroll and
regulate insolvency professionals as its
membersin accordance with the
Insolvency and Bankruptcy Code 2016
and read with regulations.
Information Utilities (IUs)

A notable feature of the code is the creation of

information utilities to collect, collate, authenticate and
disseminate financial information of debtors in
centralised electronic database.
The code requires creditors to provide financial
information of debtors to multiple utilities on an ongoing
basis. Such information would be available to creditors,
resolution professionals, liquidators and other
stakeholders in insolvency & bankruptcy proceedings.
The purpose of the same is to remove information
asymmetry and dependency on the debtor’s
management for critical information that is needed to
swiftly resolve the state of insolvency
Insolvency and Bankruptcy Board of
India (IBBI)

The code provides for the establishment

of a regulator who will oversee these
entities and to perform legislative,
executive and quasi judicial functions
with respect to Insolvency professionals,
Insolvency Professional Agency, and
Information utilities. The IBBI was
established on October 1, 2016. The
head office of the board is located at
New Delhi.
Adjudicating Authority

• The adjudicating authority for corporate insolvency and liquidation is

the National Company Law Tribunal (NCLT). Appeals arising out of
orders lie to National Company Appellate Tribunal (NCLAT) and
thereafter to the Supreme Court of India.
• The code has created one chain of authority for adjudication under
the code. Civil Courts have been prohibited to interfere in the matters
related with application pending before the adjudicating authority.
No injuction shall be granted by any Court, Tribunal or Authority in
respect of any action taken by the NCLT.
• For individuals and other persons, the adjudicating authority is the
Debt Recovery Tribunal (DRT). Appeals arising out of DRT orders lie to
the Debt Recovery Appellate Tribunal (DRAT) and thereafter to the
Supreme Court of India.
The Code shall apply for insolvency, liquidation,
voluntary liquidation or bankruptcy of the following
entities:-
(a)Any Company incorporated under the Companies
Act, 2013 or under any previous law
(b)Any other company governed by any special act
for the time being in force, except in so far as the
said provision is inconsistent with the provisions of
such special act.
(c) Any Limited Liability Partnership under the LLP Act,
2008
(d)Any other body incorporated under any law for
the time being in force, as the central government
may by notification specify in this behalf.
(e) Personal guarantors to corporate debtors
(f) Partnership Firms and Proprietorship Firms and
(g)Individuals other than referred to in clause (e)
Insolvency Process Overview

• Commitment of Default
• Application with the AA
• Appointment of IRP
• Formation of CoC
• Appointment of RP by CoC
• Preparation of information Memorandum by RP
• Resolution Plan proposed by Resolution Applicant
• Plan approved by CoC with 75% Majority
• Approval of Resolution Plan by AA or Liquidation
 WHO CAN INVOKE
Financial Creditor
- Any person to whom a financial debt is owed &
- Includes a person to whom such debt legally assigned or transferred

Operational Creditor
- A person to whom an operational debt is owed &
- Includes any person to whom such debt legally assigned or transferred

Corporate Debtor

- A corporate person who owes a debt to any person

Persons not entitled to make
Application

The following persons shall not be entitled to

make an application to initiate corporate
insolvency resolution process, namely:-

A corporate debtor undergoing a corporate insolvency

resolution process; or

A corporate debtor having completed corporate insolvency

resolution process twelve months preceding the date of making of
the application; or

A corporate debtor in respect of whom a liquidation

order has been made
• Comprehensive Law
• Withering away of multiplicity of Laws
• Low Time Resolution

• One Window Clearance

• Clarity in Process
• One Chain of Authority

• Protects the interest of Workmen &

Employees
• New Regulatory Authority
• Establishment of Information Utilities
Following are the challenges faced:
 To create Large pool of Insolvency
Professionals.
 Draft Procedural Rules for
• Insolvency Professionals
• Information Utilities
 Establishment of several new
institutional mechanisms.
 High value of Performance Bond
 Order of priority to Distribute Assets
 Formation of Multiple Information
Utilities
• Interim Resolution Professional
• Resolution Professional
• To prepare Resolution plan
• To Represent
- Financial Creditor;
- Operational Creditor;
- Corporate Debtor
before NCLT- DRT & NCLAT- DRAT
• To represent the Winding Up cases
before the Tribunal
• Liquidator
• To prepare scheme & seek approval
from Tribunal for Revival &
Rehabilitation of Sick Cos.
 Compete Learn Art of
with Best DRAFTING;A
DVOCACY;
BRAIN PLEADING

Prove Expectation
of
our
COMPETENCIES CLIENTS