MORE AMENDMENTS IN INSOLVENCY & BANKRUPTCY CODE 2016

MORE AMENDMENTS IN INSOLVENCY & BANKRUPTCY CODE 2016

INSOLVENCY AND BANKRUPTCY BOARD OF INDIA NOTIFICATION New Delhi, dated 27th March, 2018

Meaning of “Expenses under Regulation 33 & 34

For the purposes of this regulation, “expenses” include the fee to be paid to the interim resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the interim resolution professional”.

Meaning of Disclosure of Costs

“34A. Disclosure of Costs. - The interim resolution professional or the resolution professional, as the case may be, shall disclose item wise insolvency resolution process costs in such manner as may be required by the Board.”

Identification of Resolution Applicant

“35A. Identification of Resolution Applicant.- The resolution professional shall identify the prospective resolution applicants on or before the 105th day from the insolvency commencement date.”.

Additional Details about IRP or RP in Form A

8	NAME AND REGISTRATION NUMBER OF THE INSOLVENCY PROFESSIONAL ACTING AS INTERIM RESOLUTION PROFESSIONAL
9	ADDRESS AND E-MAIL OF THE INTERIM RESOLUTION PROFESSIONAL, AS REGISTERED WITH THE BOARD
10	ADDRESS AND E-MAIL TO BE USED FOR CORRESPONDENCE WITH THE INTERIM RESOLUTION PROFESSIONAL, IF DIFFERENT FROM THOSE GIVEN AT SL. NO. 9.
11	LAST DATE FOR SUBMISSION OF CLAIMS.”.

“DECLARATION IN FORM B

DECLARATION

1. [Name of corporate debtor], the corporate debtor was, at the insolvency commencement date, being the…………..day of………………20….., actually indebted to me in the sum of Rs. [insert amount of claim].

2. In respect of my claim of the said sum or any part thereof, I have relied on the documents specified below: [Please list the documents relied on as evidence of claim].

3. The said documents are true, valid and genuine to the best of my knowledge, information and belief and no material facts have been concealed therefrom.

4. In respect of the said sum or any part thereof, neither I nor any person, by my order, to my

knowledge or belief, for my use, had or received any manner of satisfaction or security whatsoever, save and except the following:

[Please state details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim].

VERIFICATION

 I, [Name] the claimant hereinabove, do hereby verify that the contents of this proof of claim are true and correct to my knowledge and belief and no material fact has been concealed therefrom. Verified at … on this …… day of ………., 20… (Signature of the claimant) [Note: In the case of company or limited liability partnership, the declaration and verification shall be made by the director/manager/secretary and in the case of other entities, an officer authorised for the purpose by the entity]”.

RECENT AMENDMENTS TO INSOLVENCY AND BANKRUPTCY CODE 2016

RECENT AMENDMENTS TO INSOLVENCY AND BANKRUPTCY CODE 2016

• ·       Now , an Applicant has to pass the Limited Insolvency Examination within twelve months before the date of his application for enrollment with the insolvency professional agency;
• 
  
• ·       He has to complete a pre-registration educational course after his enrollment as a professional member with IBBI.
• 
  
• ·       He has to disclose as to whether he was an employee of or has been in the panel of any financial creditor of the corporate debtor

·       . An insolvency professional shall disclose the fee payable to him

GAZETTE OF INDIA

EXTRAORDINARY

PART III, SECTION 4

PUBLISHED BY AUTHORITY

NEW DELHI, 27th MARCH, 2018

INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

NOTIFICATION

 New Delhi, 27th March, 2018

Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment Regulations, 2018

IBBI/2017-18/GN/REG027 - In exercise of the powers conferred by sections 196, 207 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Insolvency and Bankruptcy Board of India hereby makes the following regulations to amend the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, namely: -

1. (1) These regulations may be called the Insolvency and Bankruptcy Board of India

(Insolvency Professionals) (Amendment) Regulations, 2018.

(2) They shall come into force on 1^st April, 2018.

2. In the Insolvency and Bankruptcy Board of India (Insolvency Professionals)

Regulations, 2016 (hereinafter referred to as principal regulations), in regulation 3, for sub-regulation (3), the following sub-regulation shall be substituted, namely: -

“(3) The syllabus, format, qualifying marks and frequency of the Limited Insolvency

Examination shall be published on the website of the Board at least three months before the examination.”.

3. In the principal regulations, for regulation 5, the following regulation shall be substituted, namely: -

“5. Qualifications and experience.-

Subject to the other provisions of these regulations, an individual shall be eligible for registration, if he -

(a) Has passed the Limited Insolvency Examination within twelve months before the date of his application for enrolment with the insolvency professional agency;

(b) Has completed a pre-registration educational course, as may be required by the Board, from an insolvency professional agency after his enrolment as a professional member; and

 (c) has-

(i) successfully completed the National Insolvency Programme, as may be approved by the Board;

(ii) successfully completed the Graduate Insolvency Programme, as may approved by the Board;

(iii) fifteen years’ of experience in management, after receiving a Bachelor’s degree from a university established or recognised by law; or

(iv) ten years’ of experience as –

(a) chartered accountant registered as a member of the Institute of Chartered Accountants of India,

(b) Company secretary registered as a member of the Institute of Company  

Provided that the insolvency professional entities recognised as on the date of commencement of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment) Regulations, 2018 shall comply with the provisions of clauses (a), (b) (c) and (d) on or before 30th September, 2018 and the provisions of clauses (e), (f) and (g) on or before 30th June, 2018.”.

6. In the principal regulations, in the First Schedule, -

(i) for “[ Under regulation 7(2)(g)]” the following shall be substituted, namely: - “[Under regulationA 7 (2) (h)]”;

PRE-DISCLOSURE REQUIREMENTS

(ii) after item (8), the following item shall be inserted, namely: -

“8A. An insolvency professional shall disclose as to whether he was an employee of or has been in the panel of any financial creditor of the corporate debtor, to the committee of creditors and to the insolvency professional agency of which he is a professional member and the agency shall publish such disclosure on its website.”;

(iii) after item (25), the following item shall be inserted, namely: -

“25A. An insolvency professional shall disclose the fee payable to him, the fee payable to the insolvency professional entity, and the fee payable to professionals engaged by him to the insolvency professional agency of which he is a professional member and the agency shall publish such disclosure on its website.”.

7. In the principal regulations, in the Second Schedule, for FORM A, the following Form A.

According to the amendment regulations,

a. Subject to meeting other requirements, an individual shall be eligible for registration as an insolvency professional if he has passed the Limited Insolvency Examination within the last 12 months and has completed a pre-registration educational course from an insolvency professional agency, as may be required by the Board.

b. The syllabus, format, qualifying marks and frequency of the ‘Limited Insolvency Examination’ shall be published on the website of the IBBI at least three months before the examination.

c. An individual with the required experience of 10 / 15 years is eligible for registration as an insolvency professional. In addition, an individual with little or no experience shall be eligible for registration as an insolvency professional on successfully completing the Graduate Insolvency Programme, as may be approved by the IBBI.

d. As a condition of registration, an insolvency professional shall undergo continuing professional education as may be required by the IBBI.

e. An insolvency professional shall not outsource any of his duties and responsibilities under the Code.

f. A company, a registered partnership firm or a limited liability partnership shall be eligible for recognition as an insolvency professional entity, 

if –

i. its sole objective is to provide support services to insolvency professionals, who are its partners or directors, as the case may be;

ii. It has a net worth of not less than one crore rupees;

iii. Majority of its shares is held by insolvency professionals, who are its directors, in case it is a company;

iv. Majority of capital contribution is made by insolvency professionals, who are its partners, in case it is a limited liability partnership firm or a registered partnership firm;

Important amendments effected by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2018 are:

Important amendments effected by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2018 are:

Time Line for Prospective Resolution Applicants

a.     The regulations provide timelines for various activities in a resolution process. The amendments now require the resolution professional to identify the prospective resolution applicants on or before the 105^th day from the insolvency commencement date.

Insolvency Resolution Process Costs

b.    The regulations provide that the expenses to be incurred on or by the interim resolution professional / the resolution professional shall be fixed / ratified by the Committee of Creditors and such fixed / ratified expense will form part of insolvency resolution process costs. The amendments now provide that such expenses means the fee to be paid to the interim resolution professional, the fee to be paid to insolvency professional entity, if any, and the fee to be paid to professionals, if any, and other expenses to be incurred by the interim resolution professional / resolution professional.

Item Wise Insolvency Resolution Process Costs

c.     The interim resolution professional / the resolution professional shall disclose item wise insolvency resolution process costs in such manner, as may be required by the Board.

Disclosure by a Financial Creditor

d.    A financial creditor submitting a claim to the interim resolution professional shall declare whether it is or is not a related party in relation to the corporate debtor.

No Need to File Affidavits

e.     The forms for submission of claims required affidavit from the claimant. The amendments have dispensed with the requirement of affidavit.

To sell the corporate debtor as a going concern.

a.     The regulations allow a liquidator to sell an asset on a standalone basis. These also allow the liquidator to sell the assets in a slump sale, a set of assets collectively, or the assets in parcels. The amendments now allow the liquidator to sell the corporate debtor as a going concern.

Interest on Interim Finance

b. The amendments provide that the liquidation cost includes interest on interim finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower.

5. The amendment regulations are effective from 1^st April, 2018. These are available at www.mca.gov.in and www.ibbi.gov.in

Excess Remuneration Taken By Resolution Personnel Is the Main Allegation against Deloitte in Binani Cement Insolvency Case

Excess Remuneration Taken By Resolution Personnel Is the Main Allegation against Deloitte in Binani Cement Insolvency Case

RP to provide criteria for selection of bidder, minutes of meetings by March 26, 2018

A single-member judge in the Kolkata bench of the National Company Law Tribunal (NCLT) has ordered the resolution professional for Binani Cement to submit by March 26 the criteria and the procedure for selection of the bidder, minutes of meetings, and a timeline of proposals and decisions taken after counsel for Binani Cement and UltraTech Cement mounted their opposition to the way the resolution plan had been concluded.

Opposition against Decision of Resolution Personnel

The plan approved by resolution professional Vijay Kumar Iyer resulted in the Dalmia Bharat Cement-led consortium winning the bid for Binani Cement. The judge also sought details of the proceedings and outcome of the March 14 meeting when the Committee of Creditors (CoC) approved the joint resolution plan of Dalmia Bharat Cement and Bain Capital’s Resurgent India Fund.

Resolution Personnel Has to Submit final progress report on the resolution plan

According to the directive by Jinan K R, member judge at the Kolkata NCLT, Iyer will also have to submit the final progress report on the resolution plan. Iyer has already submitted the resolution plan approved by the CoC to the NCLT for approval. Citing pending cases, the judge did not hear Binani Cement’s plea for termination of insolvency proceedings. After obtaining a ‘comfort letter’ from UltraTech Cement by agreeing to a 98.43 per cent stake sale by the promoters for Rs 72.66 billion, Binani Cement had on March 19 informed the NCLT that it was seeking termination of insolvency proceedings against it.

Lenders Allege Fraud

Meanwhile, the counsel representing the lenders stated the alleged fraud by the company’s promoters as claimed by Iyer will not impact the selling procedure and appealed to the judge to consider the proposal if he finds it “proper”.

A series of questionable transactions

A source close to the lenders said that when the bidders had placed their bids, they knew about a series of questionable transactions and their bids had taken this factor into consideration. The primary charge leveled against the Iyer by Binani Cement is over the money spent in the resolution process.

Excessive Remuneration for Resolution Personnel

The counsel representing the company alleged that excessive funds were spent by the resolution professional in the process. Binani Cement has said apart from a monthly remuneration of Rs 3.5 million, insurance worth Rs 7.25 million was also claimed as expenses by the resolution professional.

The company also alleged that Rs 24 million had been facilitated towards Deloitte India, the firm Iyer is associated with.

Defence by Deloitte

Iyer’s counsel defended the claims, stating the resolution professional had to visit many factories of Binani Cement where labour protests were occurring and hence he needed insurance. The judge pointed out there was no cap on remuneration or costs associated with the resolution process. But all expenses by the resolution professional will need the approval by the creditors.

Representative of Binani Cement was barred

According to sources close to Binani Cement, the remuneration and other allowances of the resolution professional should be on a par with employees of government-owned companies. The Binani Cement counsel further alleged that despite an order of the Delhi bench of the NCLT directing the resolution professional to allow participation by a representative of Binani Cement, the person was not allowed entry in meetings.

Contention of UltraTech Cement

The UltraTech Cement counsel argued that no reason was provided to the firm why its bid was rejected and the resolution professional did not provide an explanation. Moreover, it wanted to know from the resolution professional that despite it revising its bid to Rs 72.66 billion, higher than that made by Dalmia Bharat Cement, why its offer was not considered.

Maximisation of value is the ultimate goal of the NCLT 

 “Maximisation of value is the ultimate goal of the NCLT and a time-bound process is just the procedure,” a source close to UltraTech Cement said. The resolution process for Binani Cement will end on April 21, after which no extension can be provided, according to provisions of the Insolvency and Bankruptcy Code.

Out of a total of 14 applications in this case that were up for hearing on Thursday, only four were heard in part and other applications, including one by State Bank of India Hong Kong, one of the secured lenders that voted against the Dalmia Bharat-led consortium’s proposal, have been put up for hearing on March 27.

Courtesy : Business Standard

Whether a conviction under Section 29(A) of IBC Code 2016 outside India’s jurisdiction would bar the Tata Steel and Vedanta to Submit Resolution Plan for Electro Steels , Calcutta?

Whether a conviction under Section 29(A) of IBC Code 2016  outside India’s jurisdiction would bar the Tata Steel and Vedanta to Submit Resolution Plan for Electro Steels , Calcutta?

NCLT (Calcutta) Direction to IRP of Electrosteel Steels

The Kolkata bench of the National Company Law Tribunal (NCLT) has directed the resolution professionals (RPs) for Electrosteel Steels to provide reasons for the eligibility of bidders Tata Steel and Vedanta in three days.

Renaissance Steel India Challenges IRP decision

The decision of the RPs has been challenged by Renaissance Steel India. Renaissance will have three days to file objections. Then, the RPs will have to place before the committee of creditors (CoC) their decision, along with the objections.

Applicability of Section 29 (A) of IBC Code 2016

Also a bidder for Electrosteel, Renaissance had challenged the eligibility of the other bidders under Section 29(A) of the Insolvency and Bankruptcy Code (IBC). According to it, Tata Steel UK was guilty of an industrial accident and Konkola Copper Mines, a subsidiary of Vedanta, was guilty of pollution in Zambia. Thus both were ineligible to bid for the stressed asset.

Sources said the Electrosteel case was testing one of the clauses of Section 29(A): Whether a conviction outside India’s jurisdiction would be valid.

Bhushan Steel Case

A decision against the bidders in this case might have a bearing on other cases. For instance, in Bhushan Steel, the employees have moved the NCLT against Tata Steel’s bid, formally announced as the highest.

CoC has to consider the Objection Raised

The objections are the same as those raised in this case. The Delhi bench of the NCLT has asked the CoC to consider the objections raised by the employees and communicate them to the tribunal. Tata Steel, however, is not the highest bidder for Electrosteel. Sources said in the last CoC meeting, Vedanta got the highest score among the four bidders.

 It has not been declared as the highest bidder yet. Discussions were on with PwC and legal advisors. There are four bidders for Electrosteel: Vedanta, Tata Steel, Renaissance Steel India, and Edelweiss Alternative Assets Advisors. The company owes banks about Rs 103 billion.

Also a bidder for Electrosteel, Renaissance had challenged the eligibility of the other bidders under Section 29(A) of the Insolvency and Bankruptcy Code (IBC). According to it, Tata Steel UK was guilty of an industrial accident and Konkola Copper Mines, a subsidiary of Vedanta, was guilty of pollution in Zambia. Thus both were ineligible to bid for the stressed asset.

Sources said the Electrosteel case was testing one of the clauses of Section 29(A): Whether a conviction outside India’s jurisdiction would be valid.

Mr. Anil Kumar, ‘IRP’ Vs Rolex Cycles Pvt. Ltd-Resolution Personnel Role under IBC Code 2016 is not a Cakewalk Going

Resolution Personnel Role under IBC Code 2016 is not a Cakewalk Going

Mr. Anil Kumar, ‘IRP’ Vs Rolex Cycles Pvt. Ltd

An application was filed against the Debtor, its personnel and chartered accountant by the Interim Resolution Professional claiming non-cooperation.

The personnel of the debtor contended that the IRP was acting out of jurisdiction and that the 30-day period of his appointment had expired. The NCLT (Chandigarh) held that the IRP was acted within his powers and that the Debtor had to extend co-operation for the completion of CIRP.

NCLT CHANDIGARH :

Held that Police protection to IRP in ‘stressful’ circumstances; Directs creditors' & auditors' cooperation NCLT (Chandigarh Bench) disposes application filed by Interim Resolution Professional (Mr. Anil Kumar, ‘IRP’ / ‘Applicant’) u/s 19(2) and 19(3) of Insolvency and Bankruptcy Code, 2016 (‘Code’) against Rolex Cycles Pvt. Ltd. and Directors (‘Corporate Debtor’ / ‘Interveners’);

NCLT sought  explanation from Statutory Auditor and Co. Directors for their inaction with regard to handing over statutory records and not complying with IRP’s instructions respectively, while directing Police Commissioner to provide police protection / assistance to IRP in performing his functions;

IRP visited Corporate Debtor’s site to take over the control of management, however, the Interveners refused to extend cooperation and advised IRP to visit on some other day;

 In the next visit, IRP could not find any plant and machinery, spare parts, tool kit, raw material, work in progress, finished goods, books of accounts, records or any computer system at the office of Corporate Debtor;

Whether IRP can Continue as Resolution Personnel after 30 days of his Appointment?

On issue whether the Applicant as an IRP can function after the expiry of original term of appointment for 30 days, NCLT peruses the provisions of Sec. 16(5) of the Code and refers to SC ruling in Commissioner of Income Tax, Mumbai vs NOTEWORTHY RULINGS UNDER INSOLVENCY & BANKRUPTCY CODE, 2016 Anjum M.H. Ghaswal wherein it was held that inherent powers in Settlement Commission cannot be exercised contrary to express provisions of Income Tax Act;

Commissioner of Income Tax, Mumbai vs Anjum M.H. Ghaswal

Applying said principle to present case, NCLT rules that “….consequences of non-appointment of Resolution Professional before the expiry of 30 days period of IRP have not been provided in the Code.

The proceedings before the IRP or the Resolution Professional, as the case may be, cannot be left in the lurch as there is a specific period for completion of insolvency process as provided in Section 12 of the Code….”;

As to whether provisions in the Code w.r.t. fixing the term of IRP are mandatory or directory, NCLT peruses IBBI (CIRP) Regulations, 2016 whereby in terms of Regulation 17(1), IRP is required to file the report certifying constitution of Committee of Creditors (‘COC’) on or before 30 days from date of his appointment;

RULING BY NCLT CHANDIGARH

Hence, in light thereof as also the facts of present case, NCLT observes, “Facts are self-explanatory reflecting as to under what stressful and difficult circumstances the Applicant is working and facing an uphill task…..

Looking at the circumstances and the dilly dallying tactics of the Financial Creditors, necessary directions apart from the directions to the responsible officers of the Bank needs to be issued”;

NCLT Ruled that the Applicant appointed as IRP would continue as Resolution Professional, while stating that “IRP does not become functus officio to stall the resolution process in the petition which has already been admitted..”:

RULING BY NCLAT

In Appeal , NCLAT held that the Committee-of-Creditors had the decision to allow the IRP to continue or to appoint a new Insolvency-Resolution-Professional and directed NCLT(Chandigarh) to act accordingly.