Indian President signed off on an ordinance amending the Insolvency and Bankruptcy Code, 2016 ("IBC") to help prevent defaulters from bidding for their assets in resolution process and regaining control while lender banks were forced to swallow losses. (Ordinance are issued when Parliament is not in session and approval of law Bill is urgently required).
A person shall not be eligible to submit a resolution plan, if such person is -
(a) Undischarged Insolvent;
(b) Wilful Defaulter as per guidelines of the Reserve Bank of lndia issued under the Banking Regulation Act, 1949;
(c) Persons whose accounts are classified as non-performing asset (NPA) and period of one year or more has lapsed from the date of such classification and who has failed to make the payment of all overdue amounts with interest thereon and charges relating to non-performing asset before submission of the resolution plan;
(d) has been convicted for any offence punishable with imprisonment for 2 years; or
(e) Disqualified Directors ;
(f) prohibited by SEBI from accessing the securities markets;
(g) Person indulged in undervalued transaction or fraudulent transaction as per order passed by Adjudicating Authority under IBC;
(h) has executed an enforceable guarantee in favour of a creditor in respect of a corporate debtor;
(i) Connected Person in respect of persons specified in clauses (a) to (h) above.
(j) Person subject to any disability, corresponding to clauses (a) to (i), under any foreign law.
Text of the Notification is provided below
MINISTRY OF LAW AND JUSTICE
(Legislative Department)
New Delhi, the 23rd November, 2017
Promulgated by the President in the
Sixty-eighth Year of the Republic of India.
WHEREAS
the Insolvency and Bankruptcy Code, 2016 (the Code), inter alia, provides a
framework for insolvency resolution of corporate persons in a time bound manner
for maximisation of value of assets of such persons;
AND
WHEREAS the provisions relating to corporate insolvency resolution process of
the Code have come into force on 1st day of December, 2016;
AND
WHEREAS in order to strengthen further the insolvency resolution process, it
has been considered necessary to provide for prohibition of certain persons
from submitting a resolution plan who, on account of their antecedents, may
adversely impact the credibility of the processes under the Code;
AND
WHEREAS it is also considered necessary to make provisions to specify certain
additional requirements for submission and consideration of the resolution plan
before its approval by the committee of creditors;
AND
WHEREAS Parliament is not in session and the President is satisfied that
circumstances exist which render it necessary for him to take immediate action;
NOW,
THEREFORE, in exercise of the powers conferred by clause (1) of article 123 of
the Constitution, the President is pleased to promulgate the following
Ordinance :-
1.
(1) This Ordinance may be called the
Insolvency and Bankruptcy Code (Amendment) Ordinance ,2017
(2) It shall come into force at once.
2.
In
the Insolvency and Bankruptcy Code, 2016 (hereinafter referred 31 of 2016 to as
the principal Act), in section 2,-
(i) in clause (d), the word “and”
shall be omitted;
(ii) for clause (e), the
following clauses shall be substituted, namely:-
(e)
personal guarantors to corporate debtors;
(f)
partnership firms and proprietorship firms; and
(g)
individuals, other than persons referred to in clause (e),”
3.
In
section 5 of the principal Act,-
(a) for clause (25), the following clause
shall be substituted, namely:-
'(25)
"resolution applicant" means a person, who individually or jointly
with any other person, submits a resolution plan to the resolution professional
pursuant to the invitation made under clause (h) of sub-section (2) of section
25;'
(b) in clause (26), for the words "any
person", the words "resolution applicant" shall be substituted.
4.
In
section 25 of the principal Act, in sub-section (2), for clause (h), the
following clause shall be substituted, namely:-
"(h)
invite prospective resolution applicants, who fulfil such criteria as may be
laid down by him with the approval of committee of creditors, having regard to
the complexity and scale of operations of the business of the corporate debtor
and such other conditions as may be specified by the Board, to submit a
resolution plan or plans.".
5.
After
section 29 of the principal Act, the following section shall be inserted,
namely:-
"29A.
A person shall not be eligible to submit a resolution plan, if such person, or
any other person acting jointly with such person, or any person who is a
promoter or in the management or control of such person,-
(a) is an undischarged insolvent;
(b) has been identified as a wilful
defaulter in accordance with the guidelines of the Reserve Bank of lndia issued
under the Banking Regulation Act, 1949;
(c) whose account is classified as
non-performing asset in accordance with the guidelines of the Reserve Bank of
India issued under the Banking Regulation Act, 1949 and period of one year or
more has lapsed from the date of such classification and who has failed to make
the payment of all overdue amounts with interest thereon and charges relating
to non-performing asset before submission of the resolution plan;
(d) has been convicted for any offence
punishable with imprisonment for 2 years or more; or
(e) has been disqualified to act as a
director under the Companies Act, 2013;
(f)
has been prohibited by the
Securities and Exchange Board of India from trading in securities or accessing
the securities markets;
(g) has•indulged in preferential transaction
or undervalued transaction or fraudulent transaction in respect of which an
order has been made by the Adjudicating Authority under this Code;
(h) has executed an enforceable guarantee in
favour of a creditor, in respect of a corporate debtor under insolvency
resolution process or liquidation under this Code;
(i) where any connected person in respect
of such person meets any of the criteria specified in clauses (a) to (h).
Explanation.- For the purposes of
this clause, the expression "connected person" means-
(i) any person who is promoter or in the management or control
of the resolution applicant; or
(ii) any person who shall be the promoter or in management or
control of the business of the corporate debtor during the implementation of
the resolution plan; or
(iii) the holding company, subsidiary company, associate company or
related party of a person referred to in clauses (i) and (ii)
(j) has been subject to any disability,
corresponding to clauses (a) to (i),
under any law in a jurisdiction outside India.".
6.
In
section 30 of the principal Act, for sub-section (4), the following sub-section
shall be substituted, namely:-
"( 4) The committee of
creditors may approve a resolution plan by a vote of not less than seventy-five
per cent. of voting share of the financial creditors, after considering its
feasibility and viability, and such other requirements as may be specified by
the Board:
Provided
that the committee of•creditors shall not approve a resolution plan, submitted
before the commencement of the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2017, v,rl1ere the resolution applicant is ineligible under section
29A and may, where no other resolution plan is available with it, require the
resolution professional to invite a fresh resolution plan.".
7.
In
section 35 of the principal Act, in sub-section (J), in clause (j), the
following proviso shall be inserted, nan1ely:-
"Provided
1hat the liquidator shall not sell the immovable and movable property or
actionable claims of the corporate debtor in liquidation to any person who is
not eligible to be resolution applicant.”
8.
After
section 235. of the principal. Ac1, the following section shall be inserted,
namely:-
''235A.
If any person contravenes any of the provisions of this Code or the rules or
regulations made there under for which no penalty or punishment is provided in
this Code, such person shall be punishable with fine which shall not be less
than one lakh. rupees but which may extend to two crore rupees.".
9.
In
section 240 of the principal Act, in sub-section (2),-
(i) after clause (s), the following clause
shall be inserted, namely:-
"(sa)
other conditions under clause (h) of sub-section (2) of section 25;'\
(ii) after clause (w), the following clause
shall be inserted,
namely:-
"(wa)
other requirements under sub-section (4) of section 30;".
RAM NATH KOVIND,
President.
DR.G.N YANARAJU,
Secretary to the Govt. of India.
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