A Study of Insolvency And Bankruptcy Code And Its Impact During Covid

Author: Saloni Singh (University of Petroleum and Energy Studies)

INTRODUCTION

The RECOVERY OF DEBTS AND BANKRUPTCY ACT (RDB ACT), 1993  provides law for the establishment of Debts Recovery Board (DRTs) with original jurisdiction and Debts Recovery Appellant Board (DRATs) with appellant jurisdiction, for the purpose of expeditious adjudication and recovery of debts because of banks and financial institutions, insolvency resolution and bankruptcy of people and partnership firms and connected matters etc. therewith. The Act aims to preventive the interest of banks and financial institutions as lenders, while not discouraging borrowers. The Board haven’t yet commenced taking on insolvency resolution and bankruptcy matters because the related provisions don’t seem to be yet operative.

The government introduced the insolvency and bankruptcy code 2016 to resolve claims which involved insolvent companies. The IBC is the bankruptcy law of India that seeks to consolidate the existing framework. The adjudication of the resolution for the companies is done by the national companies law tribunal(NCLT) and for individuals, it is done by the debt recovery tribunal(DRT) The code also has 10 members from the ministry of finance law and RBI.

The NCLT earlier existed as a forum for adjudication of disputes for companies but after the IBC came into force it became the adjudicating authority for corporate insolvency resolution and resolution.

Notwithstanding, with new NCLT seats set up across different states and an increment in seat strength at the Delhi and Mumbai seats, the circumstance is probably going to improve.

PURPOSE OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016

The objectives of IBC are to consolidate and amend all laws related to insolvency in India, to expedite the insolvency and bankruptcy proceedings in the country, to protect the interest of creditors and stakeholders of a company, revival of company, promotion of entrepreneurship, increase the credit supply in the economy, new speedy recovery system for banks, increasing the values of assets of corporate, promotion of entrepreneurship.

PROCEDURE TO RESOLVE INSOLVENCY IN THE CODE

On occurrence of default resolution process can be initiated, it can be initiated by the debtor or the creditor, the insolvency professional administrates the process The professional gives monetary data of the indebted person from the data utilities to the creditor and deal with the account holder’s resources. Sec. 12 of the Code expresses that any Insolvency Resolution Process will be finished inside a period of 180 days from the date of confirmation of the application to start the process Be that as it may, the NCLT may provide one expansion which will not expand over 90 days. After the initiation process A committee comprising of the creditors who loaned money to the debtors will be framed by the insolvency professional. The creditor’s panel will take a choice in regards to the fate of the debt owed to them.  They may decide to resuscitate the debt owed to them by changing the reimbursement schedule, or sell (liquidate) the resources of the account holder to reimburse the debt owed to them.

Continues from the offer of the borrower’s resources are circulated in a order of priority-

1) Insolvency fixing costs, including the compensation to the insolvency professional,

2) Creditors who are secured, whose loans are sponsored by collateral, dues of workers, different employees,

3) Creditors who are not secured,

4) Dues to the state,

5) Priority shareowners

6) Equity shareowners.

AMENDMENTS IN THE INSOLVENCY AND BANKRUPTCY CODE, 2016

The government and the IBBI have likewise been proactive in explaining and settling issues as and when they show up through the execution of the enactment. This discloses regular amendments to both the IBC and different guidelines given under it. The code has been amended 5 times.

The code has been amended 5 times. The two main amendments would help both the real estate and for micro, small and medium enterprises (MSMEs) Homebuyers recognized as financial creditors giving them due in the committee of creditors. Extraordinary provisions for MSMEs now the advertisers of MSMEs are permitted to offer for their organizations as long as they are not defaulters at will and don’t draw in some other related preclusion. The Government made changes to relieve the impacts of the Coronavirus on companies.

The limit of obligation for commencement of the corporate insolvency resolution process has been raised to rupees 1 crore from the existing threshold of Rs. 1 lakh. It is applicable to feature that this change is for future petitions and will not affect those creditor’s petitions that had effectively been filed before 24 March 2020. 

Lank Mark case:- 

K. Virupaksha & Anr. V. The State of Karnataka & Anr

FACTS

The case involves a 3-acre property in Hubballi, Karnataka, India. The property bearing Survey Number is 213/2002 which was situated at Anchatageri Village. It was offered as security for the loan and a charge was created. Canara Bank has invoked the power under Section 13(2) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. The secured asset was thereafter evaluated and was brought to the auction through the public notice dated 13 December 2013. No amount was received in the auction proposed on 15 November 2013 and since the same was a public holiday declared in the State of Karnataka the auction was postponed to 04 de December 2013.

ISSUES

• The petitioner filed the case against the accused of invoking section482 of Cr.P.C and for disrespecting the order on 20 May 2016 which was gone by the civil judge.
• The fir was filled on the bases of the Hubballi SubUrban police headquarters for the alleged offenses punishable under Sections 511, 109, 34, 120B, 406, 409, 420, 405, 417, and 426 of IPC.

ANALYSIS

Canara Bank revised the correct valuation, indicating the reserve price as Rs.1.10 Crore. The sooner reserve price at a better rate had not attracted purchasers and issued the fresh auction notice. Complainant claiming that such action, assailed the auction notice during a Writ Petition filed before the judicature of Karnataka.

The complainant said that the order by filing a Writ Appeal before the Division Bench in WA No. 100349/2014. The Division Bench through the order dated 19 august 2014 dismissed the Writ Appeal. The Complainant thereafter availed the remedy under Section 17(1) of the SARFAESI Act by applying and also accompanying the identical with an application under Section 5 of the Limitation Act. The complaint from the Canara Bank is extremely placed officials and also the appellants, the valuers, and therefore the auction purchaser was shown because the accused. The learned Magistrate has referred the identical for investigation under Section 156(3) of Cr.P.C. and to submit a report.

IBBI’s information shows that the total number of CIRP cases conceded for the IBC procedures remained at 4,008. 277 finished in resolution and 1,025 in orders for liquidation.

CONCLUSION

The government has been proactive in guaranteeing that issues are dealt with therefore the courts have also with the exception of some occasional stray orders avoided overturning the choices of the COC. Sanguinely after the Corona virus pandemic is managed considerably the government will pull together its endeavours on guaranteeing that the code is executed decisively and made completely operational.