IBC Forms- Insolvency and Bankruptcy Code 2016 – Forms, Demand Notices, Returns

IBC Forms- Insolvency and Bankruptcy Code 2016 – Forms, Demand Notices, Returns

www.carajput.com; IBBI

www.carajput.com; IBBI

The implementation of the 2016 Insolvency and Bankruptcy Code (“IBC”) in India has provided a fundamental change in attitude to addressing the issue of rising non-performing assets (NPA) and assisting the financial sector with early detection, rehabilitation and restructuring steps of stressed assets.

www.carajput.com;IBBI Code & Regulation

www.carajput.com; IBBI Code & Regulation

Various Kind of Demand Notice Forms issued under the IBC Code, Insolvency is that state when one is unable to pay the debt. Demand Notice to recover the debt is sent under of IBC Code, 2016 by the creditor/ Employee/ Workman or any other person to the corporate debtor. IBC Code also prescribes the procedure to file an insolvency proceeding before NCLT.

Insolvency Resolution Process for Corporate Person- Time Limits under IBC

www.carajput.com;Flowchart

www.carajput.com; Flowchart

Key point Under the IBC

As per IBC sections 7 and 9, it is not mandatory to allow the corporate debtor the chance to be heard until IBC’s application is accepted. And as set out in section 14, once the IBC application is accepted, the management team goes into the hands of IRP proposed by such an applicant. Therefore, there are high chances that even a small default could cause a situation where the business goes to hands. It is because, on the one hand, creditors recover debts from the bankrupt company while, on the other, certain creditors use IBC to intimidate and harass the corporate debtor. It is a manipulation of new legislation to place pressure on corporate debtors to recover the fraudulent/falsified claims.

The civil recovery issues take a very long time to determine which is a well-known reality. There is a weak credit control in trade, due to poor recoverability. It has influenced companies, as it also contributes to a high demand for capital investment and leading to greater pressure on profitability.

Insolvency & Bankruptcy Code (IBC) has made a big change, and now an operational creditor can take action under IBC to recover their duties in a very cost-effective manner. Various Forms Specified areas under Insolvency Resolution Process for Corporate Person:

Forms Description Go to
Form A Public Announcements Click here
Form AA Consent to act as Resolution Professional Click here
Form AB Consent to act as an authorized representative Click here
Form B Proof of claim Click here
Form C Submission of a claim by the financial creditor Click here
Form CA Submission of a claim by the financial creditor in a class Click here
Form D Proof of claim by workman or employee Click here
Form E Proof of claim by workman or employee by an authorized representative Click here
Form F Submission of a claim by creditors Click here
Form FA Application for withdrawal of CIRP Click here
Form G Invitation for expression of interest Click here
Form H Compliance certificate Click here
Form 1 Application by financial creditor to initiate CIRP Click here
Form 2 Written communication by proposed IRP Click here
Form 3 Form of Demand Notice demanding payment under IBC code, 2016 Click here
Form 4 Form of Notice with which Invoice demanding payments to be attached Click here
Form 5 Application of Operational Creditor to initiate CIRP Click here
Form 6 Application by Corporate Applicant to start CIRP Click here
Due dates Under the IBC 

Fast Insolvency Resolution Process for Corporate Person

www.carajput.com;IBBI Section55 to 58

www.carajput.com; IBBI Section55 to 58The aim of the Fast Insolvency Resolution Process for Corporate Person is to speed up the CIRP of start-ups and small businesses with less complexity and the time taken to complete an insolvency resolution to nearly half as opposed to the standard Code procedure. The Fast Insolvency Resolution Process for Corporate Person must be done within a period of ninety (90) days, as compared in other situations to one-eighty (180) days. The adjudicating authority may, however, extend the duration of ninety ( 90 ) days by a further period of up to forty-five (45) days to complete the proceedings. However, this extension can only be given once and can only be applied for if COC agrees that in a resolution adopted and approved by a majority of 75% of the voting share

The Regulations and the Fast Track Resolution process apply to the following corporate debtor categories-:

(I) a small enterprise as described in the 2013 Companies Act;

(ii) a start-up (other than a partnership) as set out above;

(iii) an unlisted corporation with total assets not exceeding one crore, as stated in the financial statement of the financial year immediately preceding it.

Various Forms Specified areas under Fast Insolvency Resolution Process for Corporate Person :

Forms Description Go to
Form A Public Announcements Click here
Form B Proof of claim Click here
Form C Submission of a claim by the financial creditor Click here
Form D Proof of claim by workman or employee Click here
Form E Proof of claim by workman or employee by an authorised representative Click here
Form F Submission of a claim by creditors Click here

The Laws as a whole provide for the resolution process from the commencement of the corporate debtors’ insolvency resolution until its completion, with the adjudicating authority’s approval of the resolution plan within the specified deadlines, thus guaranteeing the extremely viable of any case under the fast track procedure.

Liquidation Process

www.carajput.com;IBC

www.carajput.com; IBC

 

www.carajput.com;IBC process

www.carajput.com; IBC process

Under the following conditions, the winding-up process is activated under section 33 of the Insolvency and Bankruptcy Code 2016-

  • When no resolution plan is presented by qualified interim resolution as provided from the adjudicating authority at or before the insolvency resolution period expires.
  • If the resolution strategy is not consistent with section 31 as provided by IRP.
  • When a request from the creditor’s committee is issued for the liquidation of the corporate debtor during the corporate insolvency resolution process, the same shall be conveyed to the adjudicating authority by the interim resolution professional.
  • If the corporate debtor refuses to obey the resolution plan authorized by the adjudicating authority and the individual or creditor impacted by this files an application for the liquidation of the corporate debtor and the adjudicating authority considers the corporate debtor responsible.

When the mechanism of liquidation is begun in compliance with the above requirements, the moratorium will begin. During the suspension, a public statement shall be made on the liquidation of the corporate debtor.

As per section 34, a liquidator is named and the fee to be charged to him in respect of the trial is determined. The liquidator fee is part of liquidation assets proceeds. The Professional Counsel also serves as a liquidator until NCLT replaces him.

Liquidation trust shall be established in compliance with section 36 of the Code of Insolvency and Bankruptcy. Each section is the cornerstone of the corporate liquidation process as it determines which corporate debtor’s assets will form part of the liquidation estate, how the assets will be allocated by the liquidator, and who will retain the estate as a fiduciary for all creditors’ benefit.

Various Forms Specified areas under Liquidation Process :

Forms Description Go to
Form A Performa for Reporting consultations with Stakeholders Click here
Form B Public Announcements Click here
Form C Submission of a claim by the financial creditor Click here
Form D Proof of claim by workman or employee Click here
Form E Proof of claim by workman or employee by an authorized representative Click here
Form F Submission of a claim by creditors Click here
Schedule 111 Form for cashbook, general ledger, bank ledger, register of assets, securities, and investment registers, tenants ledger, etc. Click here

The creditors’ claims are then assessed. There are different parts assisting in this process. Section 38 specifies how financial and operational creditors’ claims should be combined, section 39 specifies how claims should be checked, and section 40 describes the procedure for approving and rejecting claims, and under section 42 of IBC describe how the applications against the liquidator decision shall be processed.

Voluntary Liquidation Process

www.carajput.com;IBC

www.carajput.com; IBC

The company isn’t always flourishing. This may face other difficulties, such as liquidity crisis and economic downturn, as a result of which the corporate debtor delays meeting its creditor’s responsibility.

If the corporate debtor has been unable to discharge his debts and does not have adequate resources such as available funds, then the corporate debtor will voluntarily file the insolvency petition for the Corporate Insolvency Resolution Process and NCLT must accept it if the petition has not been submitted to defraud the creditors.

Forms Description Go to
Form A Public Announcements Click here
Form B Proof of claim Click here
Form C Submission of a claim by the financial creditor Click here
Form D Proof of claim by workman or employee Click here
Form E Proof of claim by workman or employee by an authorized representative Click here
Form F Submission of a claim by creditors Click here
Schedule 11 Form for cashbook, general ledger, bank ledger, register of assets, securities, and investment registers, tenants ledger, etc. Click here

Connect to us for expert legal consultation for more effective legal aid or knowledge about the value of claim notice under the insolvency and bankruptcy code.

The insolvency law requires a financial creditor and operational creditor to file insolvency proceedings against a defaulting corporation after determining that there is a dispute between the parties. The first move is to give the corporate defaulter a claim notice (Form 3 of IBC) to recover operating debt under insolvency law. To creditors that are not financial creditors and operational creditors, to example: homebuyers, submission of a “Form F” is necessary to file a claim.

Depending on the facts and details of the operating debt to be recovered, a good corporate lawyer will draft a notice of claim on your behalf.

Want Legal Assistance? Consult with Rajput Jain & Associates most accomplished lawyers anywhere in India!

How does the Role of Resolution Professional help under IBC

Fresh IBC has been suspended for one year. As per the declaration of FM.

Just contact us at info@carajput.com or call us at 9555-555-480 now.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

IBC Ordinance, 2020 after the Impact Covid-19: COVID Period Defaults cannot be triggered by CIRP

www.carajput.com;IBC after the Impact covid-19

www.carajput.com; IBC after the Impact COVID-19

COVID-19 outbreak has caused confusion and industry stress for reasons beyond their control. India was closed on 25 March 2020 to battle COVID-19, leading to the chaos of daily business activities. It is difficult to find an adequate number of resolution applicants for the rescue of corporate persons who may default on their debt obligations. Distress is about because of an extraordinary situation and business entities are being forced into insolvency proceedings under the Legislation. Defaults arising from an unprecedented event to be excluded for the reasons of insolvency proceedings under the Code. Following Below is an impact low down on the IBC Ordinance, 2020.

  • The aim of the new IBC Reform Regulation is to make it easier for companies with breathing space to recalibrate their operations and industry to an all-new standard and keep businesses from dying prematurely. The key points are:
  • No claim shall ever be made for the commencement of corporate insolvency proceedings against a corporate debtor for defaults arising within the time of suspension under sections 7, 9, and 10 of IBC. Section 10 A for COVID Period Defaults has been inserted in the Code suspending the initiation of CIRP under sections 7, 9, and 10. No complaint under sections 7, 9, and 10 can be filed for defaults occurring on or after 25 March 2020 for a period of 6 months (COVID Time), i.e. until 24 September 2020 (‘COVID Time Defaults’).
  • Applications already filed under IBC for the commencement of insolvency proceedings and even on-going insolvency court cases will keep going to be dealt with in line with the appropriate.
  • The gov’t has retained the power to extend the COVID period to one year, i.e. 24 March 2021. The Order provides permanent protection to corporate debtors for COVID period defaults. No claim for approval of CIRP can ever be lodged by any borrower for such defaults.
  • The introduction of CIRP on the grounds of defaults that happened prior to 25 March 2020 is permitted. By the same token, defaults arising after the COVID period will entitle creditors and corporate debtors to initiate CIRP. Defaults not related to COVID-19 will, however, proceed to be dealt with under the Code. Insolvency proceedings may be initiated in respect of defaults that occurred prior to 25 March 2020 or that occurred after the period of COVID-19.
  • Default occurring within the period COVID-19 shall not be the grounds for the commencement of insolvency proceedings at any time. This will prevent companies from being forced into insolvency due to their inability to comply with the repayment obligations due to the business disruptions on the basis of COVID.
  • Does a question need to be asked that application can be submitted for initiation of CIRP if the COVID Duration Default extends past COVID Time? Conjunct interpretation of Section 10A, a proviso to Section 10A, and Clarification show the COVID Time Default needs to be expunged. Such a default can not cause CIRP to be triggered at any time. Logically, therefore, the quantum of the COVID Default period must be excluded as it is not in the eyes of the law. Put it simply, COVID Period Default = No Default. New default of the minimum amount of Rs. 1 Crore should be used to initiate CIRP after the COVID period. However, the default amount after the COVID duration may be compared with the default amount before March 25, 2020.
  • The creditors and corporate debtors will have to spend all their time proving the exact date of default as the Adjudicating Authority will be bound to determine the timeline for default.
  • A further amendment to Section 66 helps protect the parties engaged in the business of the corporate debtor from the order of contribution, as the default period of COVID does not fall within the bracket of fraudulent trading or unfair trading.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Union cabinet confirms 6 month IBC holidays for NPAs; what will be the effect on banks?

Union cabinet confirms 6 month IBC holidays for NPAs; what will be the effect on banks?

www.carajput.com;IBC

www.carajput.com; IBC

This will apply to NPAs (non-performing assets) after March 25. This was one of the suggestions that Finance Minister Nirmala Sitharaman revealed in her press conference sequence on the Rs 20 Lakh Crore Economic Package.

The central government cleared the suggestion to suspend insolvency and bankruptcy proceedings for bank defaulters for a period of six months, with a provision to extend the time for up to one year, CNBC-TV18 said in a news flash.

The move will provide relief to a number of companies that have been battered by the COVID-19 crisis, as these corporations will not be dragged into the IBC proceedings for the time being. Even so, the verdict may not be a good one for the banking sector, as banks will have to sit on bad assets for a long time to come. They’re not going to be able to transfer those accounts to IBC for a swift resolution. It might lead to possible future stress and lower implementation through the resolution process.

As per Icra, the outbreak of COVID-19 and the suspension of new procedures under IBC are expected to result in substantially lower realizations of up to 30-40 percent for financial creditors in FY20-21.

In view of the economic impact of the Covid-19, the Government decided to suspend the IBC proceedings. To fight COVID, the government announced a national lockdown beginning on March 25, which continues with some relaxation even now. The extended lockout has had a significant effect on companies and has seriously restricted their ability to repay loans to banks. In this sense, the IBC holiday was declared.

The new provision supersedes sections 7, 9, and 10 of the IBC. Section 7 deals with financial creditors initiating insolvency proceedings, Section 9 deals with operational creditors initiating proceedings. Section 10 requires a defaulting corporation to seek access to the National Corporate Law Tribunal (NCLT) to find it insolvent.

The Government had previously decided to grant this relief to companies from being dragged into insolvency proceedings for the next six months, by way of a proposal from the Cabinet, which was cleared on 22 April but did not set a time limit for which the clause should be considered.

The provision of section — Section 10A — is to suspend sections 7, 9, and 10 for a period of six months or until further notice, with a rule that the amendment clause can not be extended for more than one year and will be a one-time measure.

The plan approved by the union cabinet is to push the reforms via the promulgation of an ordinance. Sources said that a formal announcement on the ordinance is now expected after the president’s nod comes. It should be remembered that the old prosecutions will continue.

Of the 12 cases reported to the IBC by the Reserve Bank of India ( RBI) in 2017, a resolution was reached in six cases, while liquidation orders were passed against two companies. A resolution has occurred in two companies, but the banks have not received payment. In addition, the resolution plan failed in the case of another company and therefore the process has been restarted, according to the report. The six companies that have found a resolution are Electrosteel Steels, Bhushan Steel, Monnet Ispat, Essar Steel, Alok Industries, and Jaypee Infratech. A resolution has occurred in Jyoti Structures and Bhushan Power and Steel, but payment is still to be obtained.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Penalties imposed Rs 34.22 on RP by IBBI on breach of moratorium condition

www.carajput.com;IBBI

www.carajput.com; IBBIPenalties imposed Rs 34.22 on RP by IBBI on breach of moratorium condition

IBBI assigns Rs 34.22 a lakh penalty for insolvency professional on breach of the condition of moratorium by enabling the movement of funds of the corporate debtor during the CIRP

Insolvency regulator IBBI’s Disciplinary Committee (DC) has levied a fine of Rs 34.22 for insolvency practitioners, Mohan Lal Jain for violation of some provisions of the Insolvency and Bankruptcy Code (IBC).

The penalty imposed is equivalent to 25% of the service charge that Mack Soft-Tech Pvt Ltd obtained as a Professional Resolution (RP) in the Corporate Insolvency Resolution Process (CIRP).

The violation connected to the RP going to continue to make payments to HDFC after obtaining the approval of the members of the Creditors’ Committee (CoC) during the CIRP, which is in violation of the moratorium requirements found in the IBC and inflicted by the Adjudication Authority on 11 August 2017.

The main point which had to be discussed in the current context was whether or not the payout of EMIs to a financial creditor (in this case HDFC) made after the CIRP moratorium was in breach of IBC.

In its submissions, RP — Mohan Lal Jain — contested that the decision to continue paying regular EMIs on the lease invoices of Corporate Debtor in the ordinary course of business had been taken by CoC with a 100% voting share before taking over as RP and was part of the business decision of the CoC taken in the interest of the corporate debtor. It was also submitted by the RP that payment of EMIs was a routine business transaction undertaken by the RP to keep the corporate debtor as a cause of importance and thus can not be regarded as a transfer of an asset.

The Disciplinary Committee concluded, nevertheless, that the RP not just to refused to address the concerns of the CoC the prohibition put on the transfer of the properties of the Corporate Debtor during the CIRP under Section 14 of the IBC, but also permitted a consistent violation of the moratorium by allowing the EMIs to be deducted from the cash flow / rental income of the Corporate Debtor. “It demonstrates the casualness and ignorance of RP in fulfilling its role as RP and its misconception of the rules,” the Investigative Committee said.

The Disciplinary Committee noted that Mohan Lal Jain had a casual and negligent approach during the conduct of the CIRP. In the present situation, the RP lost its integrity and agreed to pay EMIs to the financial creditor during the CIRP from the assets of the Corporate Debtor, the Investigative Committee said.

The provisions of the IBC Moratorium provide for the restriction of the institution of a suit by that are against the corporate debtor, the transfer, alienation or disposal of any of the assets or legal rights or interest of the corporate debtor, the foreclosure, recovery or enforcement of any security interest of the corporate debtor in respect of its property. The moratorium period is similar to the period of insolvency resolution.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Overviews of Principles of Avoidable Preferential Transactions: IBC 2016

Elements of Avoidable Preferential Specified Transactions under IBC 2016

www.carajput.com;IBC

www.carajput.com; IBC

As per the 2016 Insolvency and Bankruptcy Code, Section 43 to 51 deals with avoidable transactions. These transactions are also kept referring to as vulnerable transactions. As per the code, there are three types of avoidable transactions. These are preferential transactions, undervalued transactions, and extortionate credit transactions that the corporate debtor must avoid during the relevant period.

Section 43: Preferential Transaction  

To the advantage of the borrower, a sale of the assets or property of the corporate debtor shall be made on account of the previous financial obligation or other liabilities. Such a move has the effect of placing the borrower in a place of profit rather than the allocation of the properties referred to in section 53

Not considered as preferential transactions

  1. Transfer made in the ordinary course of business of the corporate debtor or the transferee
  2. Any transfer creating a security interest in the property acquired by the corporate debtor to the extent that,
  3. Such security interest secures “new value” and was given at the time of or after the signing of a security agreement that contains a description of such property as a security interest and was used by corporate debtor to acquire such property
  4. Such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property
  5. Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor

New Value: means money or its worth in goods, services, or new credit, or release by the transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the liquidator or the resolution professional under this Code, including proceeds of such property, but does not include a financial debt or operational debt substituted for existing financial debt or operational debt.

Relevant Time: it is given to a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date; or

A preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date.

Section 44: Orders in case of Preferential Transactions

The Adjudicating Authority may on application made by the resolution professional or liquidator, by an order

  1. require any property transferred in connection with the giving of the preference to be vested in the corporate debtor
  2. require any property to be so vested if it represents the application either of the proceeds of sale of property so transferred or of money so transferred;
  3. release or discharge (in whole or in part) of any security interest created by the corporate debtor;
  4. require any person to pay such sums in respect of benefits received by him from the corporate debtor, such sums to the liquidator or the resolution professional, as the Adjudicating Authority may direct;
  5. direct any guarantor, whose financial debts or operational debts owed to any person were released or discharged (in whole or in part) by the giving of the preference, to be under such new or revived financial debts or operational debts to that person as the Adjudicating Authority deems appropriate;
  6. direct for providing security or charge on any property for the discharge of any financial debt or operational debt under the order, and such security or charge to have the same priority as a security or charge released or discharged wholly or in part by the giving of the preference; and
  7. direct for providing the extent to which any person whose property is so vested in the corporate debtor, or on whom financial debts or operational debts are imposed by the order, are to be proved in the liquidation or the corporate insolvency resolution process for financial debts or operational debts which arose from, or were released or discharged wholly or in part by the giving of the preference:

Provided that an order under this section shall not—

  1. affect any interest in property which was acquired from a person other than the corporate debtor or any interest derived from such interest and was acquired in good faith and for value;
  2. require a person, who received a benefit from the preferential transaction in good faith and for value to pay a sum to the liquidator or the resolution professional.

Section 45: Undervalued Transactions

If, as the case may be, the liquidator or the resolution professional finds, after reviewing the transactions of the corporate debtor, that such transactions have been made within the applicable time under section 46 which have been undervalued, he shall make an appeal to the adjudicating authority to declare certain transactions null and void and to reverse the effect of such transactions in compliance with that clause.

A transaction shall be considered undervalued where the corporate debtor

  1. makes a gift to a person; or
  2. enters into a transaction with a person which involves the transfer of one or more assets by the corporate debtor for a consideration the value of which is significantly less than the value of the consideration provided by the corporate debtor,
  3. and such transaction has not taken place in the ordinary course of business of the corporate debtor.

Section 46: Relevant period for avoidable transactions

In an application for avoiding a transaction at undervalue, the liquidator or the resolution professional, as the case may be, shall demonstrate that—

  1. such transaction was made with any person within the period of one year preceding the insolvency commencement date; or
  2. such a transaction was made with a related party within the period of two years preceding the insolvency commencement date.

Section 47: Application by creditor in case of undervalued transactions

Where an undervalued transaction has taken place and the liquidator or resolution professional, as the case may be, has not informed the adjudicator, the borrower, the employee or the spouse of the corporate debtor, as the case may be, the appeal to the adjudicator to render those transactions null and void in compliance with this Clause.

Where the Adjudicating Authority, after examination of the application made under sub-section (1), is satisfied that—

  1. undervalued transactions had occurred; and
  2. the liquidator or the resolution professional, as the case may be, after having sufficient information or opportunity to avail information of such transactions did not report such transaction to the Adjudicating Authority,

It shall pass an order—

  1. restoring the position as it existed before such transactions and reversing the effects thereof in the manner as laid down in section 45 and section 48;
  2. requiring the Board to initiate disciplinary proceedings against the liquidator or the resolution professional as the case may be.

Section 48: Order in case of undervalued transactions

The order of the Adjudicating Authority under sub-section (1) of section 45 may provide for the following:

  1. require any property transferred as part of the transaction, to be vested in the corporate debtor;
  2. release or discharge (in whole or in part) any security interest granted by the corporate debtor;
  3. require any person to pay such sums, in respect of benefits received by such person, to the liquidator or the resolution professional as the case may be, as the Adjudicating Authority may direct; or
  4. require the payment of such consideration for the transaction as may be determined by an independent expert.

Section 49: Transactions defrauding creditors

Where the corporate debtor has entered into an undervalued transaction and the Adjudicating Authority is satisfied that such transaction was deliberately entered into by such corporate debtor—

  1. for keeping assets of the corporate debtor beyond the reach of any person who is entitled to make a claim against the corporate debtor; or
  2. in order to adversely affect the interests of such a person in relation to the claim,
  3. the Adjudicating Authority shall make an order—
  4. restoring the position as it existed before such transaction as if the transaction had not been entered into; and
  5. protecting the interests of persons who are victims of such transactions:

Provided that an order under this section—

  1. shall not affect any interest in property which was acquired from a person other than the corporate debtor and was acquired in good faith, for value and without notice of the relevant circumstances, or affect any interest deriving from such an interest, and
  2. shall not require a person who received a benefit from the transaction in good faith, for value and without notice of the relevant circumstances to pay any sum unless he was a party to the transaction.

Section 50: Extortionate credit transactions

Where a corporate debtor has been a party to an extortionate credit facility involving the acquisition of financial or operational liability for a period of two years before the date of commencement of insolvency, the liquidator or the resolution professional may, as the case may be, make an appeal to the Adjudicating Authority to prevent such an agreement if the terms of that transaction are met.

Section 51: Orders of Adjudicating Authority in respect of extortionate credit transactions

Where the Adjudicating Authority after examining the application made under sub-section (1) of section 50 is satisfied that the terms of a credit transaction required exorbitant payments to be made by the corporate debtor, it shall, by an order—

  1. restore the position as it existed prior to such transaction;
  2. set aside the whole or part of the debt created on account of the extortionate credit transaction;
  3. modify the terms of the transaction;
  4. require any person who is, or was, a party to the transaction to repay any amount received by such person; or
  5. require any security interest that was created as part of the extortionate credit transaction to be relinquished in favor of the liquidator or the resolution professional, as the case may be.

Therefore, the rules for the prohibition of transactions ensure that transactions that have no other business intent and which have been conducted solely to the benefit of certain creditors or to obstruct the insolvency or liquidation process are put aside. The laws aim to remedy the condition when a certain transfer of assets is made merely to hold the property away from the pool of assets to be shared by creditors. However, the principles of deterrence must be strictly followed to ensure that legal activities conducted in the usual course of business are not overturned.

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)

Important Updates on the reduction compliance obligation under Atmanirbhar Scheme:

Important Relevant updates on the reduction of compliance obligation under the Atmanirbhar Scheme:

www.carajput.com; Sitharaman

www.carajput.com; Sitharaman

TODAY ‘S FIFTH AND LAST TRANCH OF ANNOUNCEMENTS FOCUS ON 8 SECTORS:

1. MGNREGA Scheme 

Total budget was Rs 61,000 crores

• The extra Rs 40,000 crores allotted

2. HEALTH’s

• Setting up the public system

• Block all districts to avoid infectious diseases

• Public health laboratories to be set up at block level in all districts;

3. EDUCATION-driven technology

• PM e-Vidya multi-mode control system

• One-nation interactive school under DIKSHA for school education

• One-year Television channel for each class;

• Extensive use of radios

• Special e-content for children of Divyang

 Top 100 universities must ultimately be allowed to start online courses by 30 May 2020.

 4.  Significant support to distressed firms: Fresh IBC has been suspended for one year. As per the declaration of FM.

A.    IBC related – debts related to COVID 19 are out of IBC default

B.    No further insolvency lawsuits can be launched for up to a year. i.e No fresh insolvency case will be initiated for up to a year

C.   Minimum limit of IBC would be Rs. 1 Cr. i.e Total insolvency requirement lifted from Rs 1 lakh to Rs 1 crore

D.   Decriminalised all the sections. Few Non Compoundable offenses would become compoundable offenses.

E.    Compounding by ROC

F.    Direct listing in foreign destinations

G.   NCD listing would not be treated as listed companies for the purpose of Companiesct

H.   Covid-related loans should be exempt from default under IBC

I.      For MSMEs, a special insolvency framework will be notified

Fresh IBC proceedings suspended for a year; debts related to Covid ...

 5. State seeks to decriminalize losses under the Companies Act

• Bulk of compound crimes parts to be transferred to the Internal Adjudication System (IAM) and improved RD forces for compounding.

• 7 compounding crimes dropped entirely and 5 to be dealt with in an alternate system.

 6. Simplify of doing business for companies

• Clear listing of shares by Indian listed corporations within international jurisdiction. Pvt firms that issue non-convertible bonds (NCDs) on stock exchanges not to be considered as public entities.

All industries are now open to private parties

7. Fresh Public Sector Business Strategy

• The Pvt sector will be able to invest in all markets, while public sector companies will continue to play a significant role.

• a new policy that will categorize strategic sectors and others.

• The list of strategic sectors requiring the presence of PSEs in the public interest shall be notified.

A list of strategic sectors needing the participation of PSEs in the public interest will be identified.

• There will be at least one PSE in these strategic sectors, but the pvt sector will also be authorized.

• The PSEs should be privatized in other industries.

• To reduce unnecessary operating expenses, the number of firms in key markets will usually be just three or four, while others will be privatized / mixed / brought under holding companies.

 8. Policy management and services

• The Center has agreed to raise the State Borowing Limit from 3% to 5% for FY21. This will provide extra Rs 4.28 lakh crore capital to states.

A.   Part of the loan would be related to specific reforms. The relation between the reforms will be in four areas:

1. One Nation One Ration Card,

2. Ease of Doing Business,

3. Power distribution,

4. Urban local body revenues.

 B.   The Department of Spending should be told of a particular scheme

• Unconditional 0.50 percent rise

• 1% in 4 tranches of 0.25% for each tranche linked to specifically specified, tangible and feasible policy actions;

• 0.5 per cent of targets was reached in at least three of the four improvement regions.

Post by Rajput Jain & Associates

 

Disclaimer: 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; before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. carajput.com is committed to helping entrepreneurs and small business owners to start, manage and grow their business with peace of mind. Our goal is to support the entrepreneur on legal and regulatory requirements and to be a partner throughout the entire business life cycle, offering support to the company at every stage to ensure that it is compliant and consistently growing. Hope the information will assist you in your Professional endeavors. For query or help, contact: info@carajput.com or call at 09811322785/4 9555 5555 480)