KEY UPDATES

Recent Judgements

Cross-border Insolvency - Control and custody of assets of the Corporate Debtor outside India can be taken by the Resolution Professional only with an approved arrangement with the foreign insolvency court appointed Administrator of the Corporate Debtor.

Jet Airways(India) Ltd. (Offshore Regional Hub/office), Holland Vs. State Bank of India & Anr.

[C.A.(AT)(Insolvency) No. 707 of 2019]

The Hon'ble National Company Law Appellate Tribunal (NCLAT hereinafter) has observed that it is the duty of the Interim Resolution Professional to take control and custody of all the assets that the Corporate Debtor has ownership right even if it is situated outside India.

In the order dated 21.08.2019 passed by the Hon'ble NCLAT it was observed that there would be joint insolvency proceedings against the Corporate Debtor, against whom two proceedings have been initiated one in India and one in Holland. The Hon'ble NCLAT directed the Resolution Professional to draft an agreement denoting terms and conditions that the Administrator of Holland can agree upon.

The Hon'ble NCLAT also allowed the Committee of Creditors to guide the Resolution Professional in drafting of the said terms and conditions. If the draft is approved by the Administrator of Holland, then it will be placed before the Hon'ble NCLAT for further consideration.

NCLAT upholds that during the period of moratorium, the restriction on government from either recovering any amount or even issuing a demand notice.

Union of India & Anr. v. Videocon Industries Ltd. & Ors. [C.A.(AT) (Insolvency) No. 408 of 2019]

The Hon'ble NCLAT dismissed an Aapeal filed by the Government in claiming the unpaid share of "profit petroleum" from the Corporate Debtor. The dispute was first referred to International Arbitration Tribunal, wherein the pleas of the Corporate Debtor were partially upheld. Then an appeal was filed by the Government in the High Court of Kuala Lampur, Malaysia and the Federal Court of Malaysia, where the appeal was dismissed based on jurisdictional issues. The matter was then taken up by the Hon'ble National Company Law Tribunal, Mumbai, which observed that a Demand Notice cannot be issued to the Corporate Debtor during the moratorium period

A Product Sharing Contract was executed between the Government on one side and the Corporate Debtor and certain other oil and gas corporations on the other side. Based on this Contract, the Government claimed its share of profit from the petroleum product. The Government further claimed that Petroleum is the property of Union of India and the profits from petroleum is public property. The Government also claimed that the Demand Notice that was served by the Government to the Corporate Debtor does not fall under the ambit of "recovery".

The Hon'ble NCLAT upheld the decision of NCLT, Mumbai and observed that during the moratorium period, the Government cannot claim the unpaid share and instead the concerned ministry can seek to file its claim before the Resolution Professional of the Corporate Debtor.

Policy Updates

Insolvency and Bankruptcy Code (Amendment) Act, 2019

The Insolvency and Bankruptcy Code (Amendment) Bill, containing 8 amendments to the Insolvency and Bankruptcy Code, 2016, (referred to as the Code hereinafter) was approved by the Union Cabinet on 17th July, 2019 and received the assent of the President on 5th August, 2019.

The Salient features of the Amendment Act:

  1. Resolution Plan – Clause 26 was inserted in Section 5, whereby it is clarified that a resolution plan may include provisions for the purpose of restructuring of the Corporate Debtor including by way of merger, amalgamation and demerger.
  2. Existence of default –Section 7 clause 4 was inserted in the Code, whereby the Hon'ble National Company Law Tribunal has the duty to record reasons for not being able to admit or reject the application within the prescribed fourteen-day period.
  3. Time period - In Section 12 (3) of the Code, a proviso has been inserted whereby the mandatory period of completion of the Corporate Resolution Process(CIRP) is affixed as 330 days from the date of commencement of the CIRP. This period is inclusive of both, any extension of the CIRP granted under Section 12 of the Code and the time taken in legal proceedings. If the CIRP for a Corporate Debtor is pending and has not been completed within the above – mentioned period, vthen the process has to be completed within a period of Ninety days from the date of Commencement of this Amendment Act.
  4. Authorized Representative of Financial Creditors – Sub-section 3A was inserted in Section 25 A of the Code, whereby it has been provided that notwithstanding anything contrary to Section 25A (3), the Authorized Representative, under Section 21 (6A), on behalf of all the financial creditors shall cast his vote based on the decision taken by a vote of more than fifty per cent of the voting share of the financial creditors. If the Authorized Representative has to cast a vote for an application under Section 12A of the Code, then he has to do so in accordance with the provisions of Section 25A (3).
  5. Clarification with respect to Operational Creditors - The newly substituted section 30(2)(b) provides for the payment of debts to the Operational Creditors in the manner specified by the Board. However, the amount should not be less than-
    1. Amount to be paid to such creditors in case of liquidation under Section 53
    2. Amount that would be paid in case of resolution plan in accordance with the order of priority as under Section 53 (1).
  7. It not only provides for the higher amount of the above two to be paid to the Operational Creditors but also provides for the payment of debts to the Financial Creditors who have voted against the resolution plan in accordance with Section 53(1). From the date of commencement of the Amendment Act, the abovementioned provision will apply to the CIRP of the Corporate Debtor where –
    1. The resolution plan has not been approved or rejected by the Adjudicating Authority
    2. An appeal has been filed under Section 61 or Section 62 or such an appeal which is not time barred.
    3. Where a legal proceeding has been initiated in any court against the decision of the Adjudicating Authority regarding the resolution plan.
  9. Committee of Creditors – An explanation has been added to Section 33 of the Code, whereby it has been declared that the Committee of the Creditors may take a decision to liquidate the Corporate Debtor any time after the constitution of the Committee and before even the preparation of the information memorandum.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.