Thursday, 23 November 2017

THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ORDINANCE, 2017


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.






Note: For information purposes only. Blog readers are requested to go through the original gazette notification as no responsibility or liability is assumed by the Author.  All rights reserved.   For corporate regulatory updates visit www.nclt.in

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