The Time and Money are the two side of a coin. Certainly, as Benjamin Franklin has referred “Time is money”, he has simply meant time is an important resource and one should have a count on it. So, it is worth remembering when one is dealing with a situation relating financial debts and losses. Previously, an insolvency or liquidation procedures used to involve a long and time taken procedure, the enactment of the Insolvency and Bankruptcy Code of 2016 had made the procedure of insolvency or liquidation much easier. The Act was enacted with a goal of making restructuring and insolvency resolutions easier for corporations, partnerships, and other specified individuals.
The code was enacted by the Bankruptcy Law Reforms Committee (BLRC) and the code had a special provision in itself which expedite the insolvency procedures for the small businesses, start-ups, and unlisted firms with a total asset value of less than Rs 1 crore was covered. It acted as a saviour for the creditors, this special provision of fast-track insolvency procedure is covered under part-II, chapter-4 under Sections 55 to 58 which include the specific provisions for the starting procedure. This code only allows designated person to submit their application to start the process and the time duration that is involved in the said procedure is less as compared to other law for resolve disputes. Consequently, the fast-track process framed to mainly aimed at improving the insolvency resolution process for MSMEs, according to the World Bank’s Report on the Treatment of MSME Insolvency. The fast-track process is defined as a method that reduces timelines to make general insolvency law more suitable for MSMEs.
Analyzing a Fast Tract Resolution Process:
In a fast tract resolution procedure firstly a resolution professional is appointed. Then the resolution professional makes a public announcement within 3 days of his appointment. The parties to the claim (creditor & the financial creditor) submits there claim with authorized proofs in a particularly prescribed manner within 10 days to the interim resolution professional and attaching all the supporting documents and clarifications. Following receipt of the claims, the interim resolution expert must verify them within 7 days of the end date of receipt and publish the creditors’ list. Then a committee of creditors is formed by the interim resolution professional. The interim resolution professionals are responsible for leading the meeting of Committee of Creditors and the meeting has to be scheduled within 7 days from report submission and the meeting notice should be served one week prior to the meeting date. The professional also has to appoint a registered valuer within 7 days for initiating liquidation of the corporate debtor. Then the resolution professional must create an electronic memorandum of information and distribute it to all members of the Committee of Creditors and the drafted information must be in according to the need of creditors. Then the resolution plan is submitted for approval. Lastly the approval or Rejection of plan has to be made by the Adjudicating authority.
The Fast-Track method is a well-designed system that evicts the difficult procedure for small businesses, making it easier to do business. The goal is to encourage and create corporate culture in order to help India’s economy grow.
Advantage of Fast track merger process:
1. There is no requirement for NCLT approval.
2. There is no need for a public announcement.
3. There is no court-ordered meeting.
4. Administrative burden is reduced
5. It is possible to avoid a series of hearings.
6. The registration of a plan has the effect of dissolving the transferor firms without the need for a winding-up procedure.
7. It is less expensive in comparison.
Legal framework governing Fast Track Merger in India:
Fast track mergers were introduced by Section 233 of the Companies Act of 2013. It made an exemption to the standard merger process. Small companies and holding and subsidiary companies entering into merger arrangements were exempted from the regular merger procedure as stipulated under sections 230-232 of the Companies Act, 2013. Section 233 of the Companies Act, 2013, as well as Rule 25 of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016, set out the entire legal framework for fast-track mergers.
Judicial Pronouncement of Fast track insolvency process:
In Chitra Sharma vs Union of India in this case the essence of Fast track process was explained by the court whereby the court had disposed the proceeding and hap also granted liberty to the concerned parties to adopt appropriate proceedings in accordance with law.
Analyzing the key amendments relating to the rules:
Previously in accordance with the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2017 the Fast-track merger could be entered into between Fast track merger could be entered into between two or more companies or between a holding company and its wholly owned subsidiary company. But in the new amendment Act under 1(a) to the existing rule 25 where it has been stated that a fast-track merger can be now even entered by two or more start-up, and it can be also entered by one or more start-up company with one or more small company.