2. PRESENTATION ON INSOLVENCY AND BANKRUPTCY CODE 2016 – RECENT CHANGES
METTUR-SALEM CHAPTER
10TH FEBRUARY 2018
5.30 p.m. to 8.30 p.m.
CS N SANTHANAM

3. INSOLVENCY AND BANKRUPTCY CODE 2016 – RECENT CHANGES
DEFINITION
CURRENT SCENARIO
NEED FOR A NEW CODE
REGULATORY MECHANISM
BANKRUPTCY BOARD OF INDIA
INSOLVENCY PROFESSIONALS AND AGENCIES
INSOLVENCY PROCESS
LIQUIDATION PROCESS

4. Definition of Insolvency
Insolvency is a situation where an entity cannot raise enough cash to meet its obligations or to pay debts as they become due to payment.

5. Definition of Bankruptcy
Bankruptcy is when a person voluntarily declares him as an insolvent and goes to the Court.
On declaring the person as “Bankrupt”, the court is responsible to liquidate the personal property of the insolvent and distribute it among the creditors of the insolvent.

6. IB CODE 2016 – CURRENT SCENARIO
INSOLVENCY AND BANKRUPTCY PROCESS DONE THROUGH JURISDICTIONAL COURTS
CIVIL COURTS, HIGH COURTS, SUPREME COURT
LACK OF TIMELY FINANCIAL INFORMATION OF DEBTORS
TIME DELAY
PROLONGED PROCESS
COURTS ARE ALREADY LOADED WITH MULTIPLE CASES
NEED FOR A SPECIAL AUTHORITY TO DEAL WITH.

7. APPLICABLE LAWS For individual cases:
Presidency Towns Insolvency Act 1909
Provincial Insolvency Act 1920

8. APPLICABLE LAWS For Corporates:
Sick Industrial Companies (Special Provisions) Act 1985
Recovery of Debt Due to Banks and Financial Institutions Act, 1993
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI)
BIFR and Debt Recovery Tribunals

9. CURRENT SCENARIO CASES PENDING BETWEEN NO. OF CASES (lacs)
Over 10 years
6.81
Between 5 to 10 years
11.89
Between 2 to 5 years
22.42
Less than 2 years
TOTAL PENDING CASES
34.37
75.50

10. TIME TAKEN FOR SETTLEMENT OF CASES AROUND THE GLOBE
COUNTRY
TIME TAKEN FOR DECIDING INSOLVENCY PETITION
SINGAPORE
8 MONTHS
MALAYSIA / U.K.
1 YEAR
UNITED STATES
1.5 YEARS
INDIA
4.3 TO 6 YEARS
INDIA RANKS 130TH IN WORLD BANK’S EASE OF DOING BUSINESS INDEX OUT OF 189 COUNTRIES

11. OBJECTIVES OF NEW CODE
TO CREATE A NEW INSTITUTIONAL FRAMEWORK CONSISTING OF:
INSOLVENCY AND BANKRUPTCY BOARD
INSOLVENCY PROFESSIONAL AGENCIES
INSOLVENCY PROFESSIONALS
INFORMATION UTILITIES AND
ADJUDICATING AUTHORITIES.
TO OFFER A UNIFORM AND COMPREHENSIVE LEGISLATION.

12. OBJECTIVES OF NEW CODE
TO FACILITATE TIME BOUND INSOLVENCY RESOLUTION PROCESS AND LIQUIDATION
TO IMPROVE EASE OF DOING BUSINESS IN INDIA AND ALSO TO SET UP A BETTER AND FASTER DEBT RECOVERY MECHANISM IN INDIA.

13. COVERAGE INDIVIDUALS PARTNERSHIP FIRMS
THEY ARE GOVERNED BY THE DEBT RECOVERY TRIBUNAL (DRT)
CORPORATES (INCLUDING DISPUTE OF CORPORATE DEBTORS AND PERSONAL GUARANTORS)
LIMITED LIABILITY PARTNERSHIPS - GOVERNED BY N.C.L.T.

14. NOT COVERED
THE INSOLVENCY AND BANKRUPTCY CODE 2016 IS NOT APPLICABLE TO :
NBFCs
INVESTMENT COMPANIES

15. “CREDITOR” definition made wide
Under the Provincial Insolvency Act 1920, creditor includes a judgment debtor.
Under the new code, “creditor” means any person to whom a debt is owed and includes:
A financial creditor
An operational creditor
A secured creditor
An un secured creditor and
A Decree Holder

16. REGULATORY MECHANISM
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (IBB) : A BODY CORPORATE.
A 10 member board appointed by the CG.
Chairperson
Three members from MOF, MCA, MOL (ex-officio)
One RBI nominee
Five other members out of which three are whole-time members.

17. Role of BBI Regulating all matters relating to I & B process
Setting out eligibility requirements of Insolvency Intermediaries (II)
Regulating entry, registration and exit of II
Making model bye-laws for IPAs
Setting out regulatory standards for insolvency professionals
Specifying manners in which Information Utilities can collect and store data.

18. INSOLOVENCY PROFESSIONAL AGENCIES
To register with BBI and obtain Certificate.
Roles: Promotion of-
Professional development and regulation of IPs
Good professional and ethical conduct among IPs
Protect interests of debtors, creditors etc
Services of competent IPs to cater to needs of debtors, creditors etc
Growth of IPA for effective resolution of I & B processes under this code.

19. INSOLVENCY PROFESSIONALS (IPs)
Plays a key role in the efficient working of Insolvency and Bankruptcy Process.
Insolvency professionals will be enrolled as a member of the Insolvency Professional Agency and registered with the Insolvency and Bankruptcy Board.
Board may specify categories of professionals or persons possessing such qualifications and experience in the field of finance, law, management, insolvency or such other field as it deems fit.

20. INFORMATION UTILITY
To register with BBI and obtain certificate of registration to carry on its business as Information Utility under the code.
Information Utility removes the information dependency on the debtors for critical information required for resolving insolvency.
Information available to creditors, resolution professionals, liquidators and other stakeholders in insolvency and bankruptcy proceedings.

21. ADJUDICATING AUTHORITIES
NATIONAL COMPANY LAW TRIBUNAL
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
DEBT RECOVERY TRIBUNAL
DEBT RECOVERY APPELLATE TRIBUNAL

22. WHO CAN APPLY ?
Financial Creditors : creditors to whom corporate debtor owes financial debt
Operational creditors : creditors to whom corporate debtor owes operational debts such as claims for goods and services, employees etc
Corporate Applicant : corporate debtor or his shareholders, partner, management personnel or employees.

23. INSOLVENCY RESOLUTION PROCESS
DECLARATION OF MORATORIUM
CAUSE A PUBLIC ANNOUNCEMENT
APPOINTMENT OF AN INTERIM RESOLUTION PROFESSIONAL
COMMITTEE OF CREDITORS
RESOLUTION PLAN
TIME LIMIT

24. FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS
(a) corporate debtor with assets and income below a level as may be notified by Central Government.
(b) corporate with such class of creditors or such amount of debt as may be notified by CG.
(c) such other category of corporate persons as may be notified by CG.
90 DAYS DAYS EXTENSION = 135 DAYS

25. LIQUIDATION PROCESS
Liquidation process starts when the insolvency process completes.
Liquidation process involves identification of assets and liabilities and distribution mechanism among creditors

26. TIME FRAME
240 DAYS FROM THE DATE OF FILING OF APPLICATION FOR INSOLVENCY.

27. STATUS OF CASES FILED UNDER IBBI
AS ON DEC 2017, 470 CASES ADMITTED BY NCLT.
AS PER RBI’s DIRECTIVE IN JUNE 2017, LENDERS HAVE SOUGHT TO RESOLVE 12 BIG CORPORATE DEFAULTERS
AS PER RBI DATA, 4300 APPLICATIONS UNDER CORPORATE INSOLVENCY RESOLUTION PROCESS WERE FILED BEFORE VARIOUS BENCHES OF NCLT.
RESOLUTION WOULD ESSENTIALLY MEAN FINDING BUYERS TO EXTRACT BEST OUT OF THE ASSETS.
AN AMOUNT OF RS 3,73,379 CRORE AS ON AS PER RBI ACCOUNT FOR THE TOTAL OUTSTANDING FROM TOP 50 STRESSED BORROWERS.
CONCERN OVER PRICING OF ASSETS BY POTENTIAL BUYERS AND THE NUMBER OF BIDDERS

28. STATUS OF CASES FILED UNDER IBBI
UNCERTAINTY ON PRICING
UNKNOWN LIABILITIES: SERVICE TAX DUES, LABOUR DUES, OPERATIONAL CREDITORS, ELECTRICITY ETC.
POSSIBLE BUYERS IN FRAY: LONDON BASED ARCELOR MITTAL, BROOKFIELDS, POSCO, BLACKSTONE, TATA GROUP, KOTAK GROUP,SHAPOORJI PALLANJI, PIRAMAL GROUP AND SAJJAN JINDAL’S JSW GROUP FOR BUYING THE STRESSED ASSETS BEFORE NCLT

29. CONCLUSION PROCESS HAS STARTED TEETHING TROUBLES EXIST
MEANS TO SORT OUT THESE LOOSE ENDS
INDIA WILL DEFINITELY ACHIEVE THE DEADLINE IF NOT IN FULL
WELCOME CODE

30. THANK YOU