Jurisdiction:

It extends to the whole of India. Provided that Part III (INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS) of this Code shall not extend to the State of Jammu and Kashmir.

Effectiveness of the Code:

Insolvency & Bankruptcy code, 2016 (IBC) received the assent of president on 28/05/2016. The code has become an Act and provisions will be effective from a date to be notified. Still not date of notification of the same.

Even those different dates may be appointed for different provisions of this Code and any reference in any such provision to the commencement of this Code shall be construed as a reference to the commencement of that provision.

Applicability: The provisions of this Code shall applying relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.

  • Companies under Companies Act
  • Special Companies under special Act
  • Limited Liability Partnerships
  • Other body Corporate as notified by CG
  • Individuals
  • Partnership Firms

Meaning of the word:

This code defined the 36 definitions. If any words and expressions used but not defined in this Code then meaning of such word will as assigned to them in the below mentioned acts:

  • Indian Contract Act, 1872,
  • The Indian Partnership Act, 1932,
  • The Securities Contact (Regulation) Act, 1956,
  • The Securities Exchange Board of India Act, 1992,
  • The Recovery of Debts Due to Banks and Financial Institutions Act, 1993,
  • The Limited Liability Partnership Act, 2008
  • The Companies Act, 2013

Chapter IV of theI&B Code prescribed the provisions about Insolvency Professionals.

PILLARS OF INSOLVENCY AND BANKRUPTCY CODE, 2016:

Insolvency and Bankruptcy code have Four (4) pillars. This code standing on these pillars.

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A. Insolvency Professionals

They would play a key role in the efficient working of the bankruptcy process. They would be regulated by Insolvency Professional Agencies.

Section 3(19) of code- Insolvency professional” means a person enrolled under section 206 with an insolvency professional agency as its member and registered with the Board as an insolvency professional under section 207;

Section207- Every insolvency professional shall, after obtaining the membership of any   Insolvency professional agency, register himself with the Board within such time, in such Manner and on payment of such fee, as may be specified by regulations.

Section 206- No person shall render his services as insolvency professional under this Code Without being enrolled as a member of an insolvency professional agency and registered With the Board.

Section 3(20) of code- Insolvency professional agency” means any person registered with the

Board under section 201 as an insolvency professional agency.

Registration of Insolvency Professionals:

Every insolvency professional shall, after obtaining the membership of any insolvency professional agency, register himself with the Board within such time, in such manner and on payment of such fee, as may be specified by regulations.

Qualification of Professionals

The Board may specify the categories of professionals or persons possessing such qualifications and experience in the field of finance, law, management, insolvency or such other field, as it deems fit.

Section 208 Functions

Where any insolvency resolution, fresh start, liquidation or bankruptcy process has been initiated, it shall be the function of an insolvency professional to take such actions as may be necessary, in the following matters, namely:—

(a) A fresh start order process under Chapter II of Part III;

(b) Individual Insolvency resolution process under Chapter III of Part III

(c) Corporate Insolvency resolution process under Chapter II of Part II;

(d) Individual Bankruptcy process under Chapter IV of Part III; and

(e) Liquidation of a corporate debtor firm under Chapter III of Part II.

Obligations:

i. to take reasonable care and diligence while performing his duties;

ii. to comply with all requirements and terms and conditions specified in the bye-laws of the insolvency professional agency of which he is a member;

iii. to allow the insolvency professional agency to inspect his records;

iv. to submit a copy of the records of every proceeding before the Adjudicating

v. Authority to the Board as well as to the insolvency professional agency of which he is a member; and

vi. to perform his functions in such manner and subject to such conditions as may be specified.

B. Information Utility:

Section 3(21) of code- information utility ” means ” a person who is registered with the Board as an information utility under section 210.

Section 209-216 Chapters V

These would store facts about lenders and terms of lending in electronic databases. This would eliminate delays and disputes about facts when default does take place

Who can carry business Information Utility?

Section 210- A [1]person received certificate of registration by the [2]Board for this behalf can carry business as information utility under this Code.

How to Register Information Utility?

Authority for Application: Every application for registration shall be made to the Board in such form and manner, containing such particulars, and accompanied by such fee, as may be specified by regulations.
Process by Board on Receipt of Application:

  • Every application received by the Board shall be acknowledged within seven days of its receipt.
  • On receipt of the application he Board may, on being satisfied that the application conforms to all requirements specified under 210(1), grant a certificate of registration to the applicant or else, reject, by order, such application
  • Certificate of Registration: The Board may issue a certificate of registration to the applicant in such form and manner and subject to such terms and conditions as may be specified.
  • Renew of Certificate of Registration: The Board may renew the certificate of registration from time to time in such manner and on payment of such fee as may be specified by regulation.

Power to Cancel Registration: The Board may, by order, suspend or cancel the certificate of registration granted to an information utility on any of the following grounds, namely. This order can be pass only by Whole Time Member of the Board.

But no order shall be made under this sub-section unless the information utility concerned has been given a reasonable opportunity of being heard.

a) that it has obtained registration by making a false statement or misrepresentation or any other unlawful means;

b) that it has failed to comply with the requirements of the regulations made by the Board;

c) that it has contravened any of the provisions of the Act or the rules or the regulations made thereunder;

d) on any other ground as may be specified by regulations.

Appeal against the order of the Board: Any information utility which is aggrieved by the order of the Board made under section 210 may prefer an appeal to the National Company Law Appellate Tribunal in such form, within such period, and in such manner, as may be specified by regulations.

Services to be provide by the Information Utility:

An information utility shall provide [3]such services as may be specified including Core Services to any person if such person complies with the terms and conditions as may be specified by regulations

Obligation: For the purposes of providing core services to any person, every information

utility shall:_

a) Create and store financial information in a universally accessible format;

b) Accept electronic submissions of financial information from persons who are under obligations to submit financial information under sub-section (1) of section 215, in such form and manner as may be specified by regulations;

c) Accept, in specified form and manner, electronic submissions of financial information from persons who intend to submit such information;

d) Meet such minimum service quality standards as may be specified by regulations;

e) Get the information received from various persons authenticated by all concerned parties before storing such information;

f) Provide access to the financial information stored by it to any person who intends to access such information in such manner as may be specified by regulations;

g) Publish such statistical information as may be specified by regulations;

h) Have inter-operatability with other information utilities.

C. Adjudication:

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DRT: The Debt Recovery Tribunal (“DRT”) shall be the Adjudicating Authority with jurisdiction over individuals and unlimited liability partnership firms. Appeals from the order of DRT shall lie to the Debt Recovery Appellate Tribunal (“DRAT”).                                                                .

NCLT: The National Company Law Tribunal (“NCLT”) shall be the Adjudicating Authority with jurisdiction over companies, limited liability entities and other entities with limited liabilities. The jurisdiction of the NCLT shall be based on the registered office of the debtor. Appeals from the order of NCLT shall lie to NCLAT.                                               .

NCLAT: The National Company Law Appellate Tribunal (“NCLAT”) shall be the appellate authority to hear appeals arising out of the orders passed by the Board in respect of insolvency professionals or information utilities.

Supreme Court: The Supreme Court will have appellate jurisdiction over the orders of the DRAT or the NCLAT.              

D. Regulator:

In this Code Regulator means “The Insolvency and Bankruptcy Board of India.”  Works of the Board Like: This body will have regulatory oversight over the Insolvency Professional, Insolvency Professional agencies and information utilities.

Establishment of the Board:

Central Government may, by notification, shall be established, a Board for the purpose of this code. The Board shall be called as The Insolvency and Bankruptcy Code of India.

Feature of Board:

  • The Board shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power, subject to the provisions of this Code, to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued.
  • The head office of the Board shall be at such place in the [4]National Capital Region,as the Central Government may, by notification, specify.
  • The Board may establish offices at other places in India

Constitution of the Board: A: Chairperson, B: three members from amongst the officers of the Central Government not below the rank of Joint Secretary or equivalent, one each to represent the Ministry of Finance, the Ministry of Corporate Affairs and Ministry of Law, exofficio; C: one member to be nominated by the Reserve Bank of India, ex officio D) five other members to be nominated by the Central Government, of whom at least three shall be the wholetime members.

Functions of the Board: (1) The Board shall, subject to the general direction of the Central Government, perform all or any of the following functions namely:—

  • register insolvency professional agencies, insolvency professionals and information utilities and renew, withdraw, suspend or cancel such registrations;
  • specify the minimum eligibility requirements for registration of insolvency professional agencies, insolvency professionals and information utilities;
  • levy fee or other charges for the registration of insolvency professional agencies, insolvency professionals and information utilities;
  • specify by regulations standards for the functioning of insolvency professional agencies, insolvency professionals and information utilities;
  • lay down by regulations the minimum curriculum for the examination of the insolvency professionals for their enrolment as members of the insolvency professional agencies; ETC.

Conclusion:

The intention of the Code is to do away with the antiquated existing laws covering aspects of insolvency and bankruptcy. Though the Code sets out certain provisions to amend and override the existing laws to avoid future litigation, a clear provision needs to be introduced to explicitly state the existing laws being repealed by the introduction of this legislation.

Thus it is a comprehensive and systemic reform, which will give a quantum leap to the functioning of the credit market. It would take India from among relatively weak insolvency regimes to becoming one of the world’s best insolvency regimes. It lays the foundations for the development of the corporate bond market, which would finance the infrastructure projects of the future. The passing of this Code and implementation of the same will give a big boost to ease of doing business in India.

[1] “person” includes— (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a trust; (e) a partnership; (f) a limited liability partnership; and (g) any other entity established under a statute, and includes a person resident outside India;

[2] Section 2(1) “Board” means the Insolvency and Bankruptcy Board of India established under sub-section (1) of section 188

[3] Still not defined under the code will be describe under regulations.

[4] For the purposes of this section, the expression “National Capital Region” shall have the same meaning as assigned to it in clause (f) of section 2 of the National Capital Region Planning Board Act, 1985

Section 2(f) Any Area specified in the schedule

CS Divesh Goyal(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

Read Other Articles Written by CS Divesh Goyal

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written consent of the author.

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