TaxTMI 
TaxTMI 
TaxTMI 
Withdrawal of application
Section 12A was inserted with effect from 06.06.2018. Section 12A provides that the application filed for initiation of CIRP, if the 90% of Committee of Creditors voted for the same, may be withdrawn.
The Amendment substituted a new Section for the existing section. The newly substituted section 12A provides that the application for withdrawal of the CIRP cannot be entertained by the Adjudicating Authority before the constitution of Committee of Creditors or after the first invitation for submission of resolution plan has been issued by the Resolution Professional. The Adjudicating Authority shall pass the order on the application for withdrawal within 30 days from the date of receipt of the application. If the Adjudicating Authority does not pass order within 30 days the Authority shall record the reasons for the same.
Moratorium
The Act brought amendments to Section 14(1) and 14(3). Section 14 deals with the moratorium declared by the Adjudicating Authority during the CIRP. Section 14(1) provides that subject to the provisions of Section 14(2),14(2A) and 14(3) the Adjudicating Authority shall declare moratorium.
The amendment inserted an explanation to the Section 14(3). The said explanation clarified that the provisions of sub-section (1) shall also apply where the surety seeks to initiate or continue any action or proceedings against the corporate debtor pursuant to a contract of guarantee.
Appointment and terms of the IRP
Section 16(2) of the Code provides for the appointment of Interim Resolution Professional by the Adjudicating Authority. The Financial creditor or the corporate debtor while filing application for IRP it may recommend the name of any IP to act as IRP, the said IP shall be appointed by the Adjudicating Authority if there are no disciplinary proceedings against the said insolvency professional. The Amendment made the said provision applicable to Financial Creditors and not to Corporate Debtor.
The Amendment inserted a new section 16(3A) which deals with the appointment of IRP on the application filed by the corporate debtor. The said section provides that where an application for the corporate insolvency resolution process is made under section 10, the Adjudicating Authority shall make a reference to the Board for the recommendation of an insolvency professional who may act as an interim resolution professional.
Duties of IRP
Section 18 of the Code prescribed the duties of IRP in CIRP. The Amendment brought an amendment to Section 18(1)(b) of the Code by inserting an explanation. The said explanation clarified that the interim resolution professional, while collating the claims, shall verify them, and, if required, determine the value of such verified claims.
Persons to extend co-operation to IRP
Section 19 of the Code requires persons of the corporate debtor shall extend to the IRP in the CIRP process. The Amendment Act substituted a new section for the existing 19(1). The newly substituted section 19(1) provides that any person who is or has been personnel of the corporate debtor or its promoter or associated with the management of the corporate debtor, or engaged in a contract for service with the corporate debtor, shall extend all assistance and cooperation to the IRP as may be required by him for the purposes of managing the affairs of the corporate debtor or performing the duties conferred on him. An explanation is inserted to the Section 19(3) of the Code which clarified that the references to IRP shall also include references to the resolution professional.
Committee of Creditors
Section 22 of the Code provides the procedure for the constitution of Committee of Creditors (‘CoC’ for short). The Amendment inserted a new Section 22(11). The said new section provides that where the liquidation process of the corporate debtor is initiated under Chapter III, the CoC constituted under this section shall also supervise the conduct of the liquidation process by the liquidator, and the provisions of this section and section 24 shall apply to such liquidation process under Chapter III as the context may require.
The Board may specify any other class or classes of creditors, who may attend the meetings of the committee of creditors during liquidation process, but shall not have any right to vote in such meetings.
The explanation to this section declared that the provisions of sub-section (11) of this section, section 34A and sub-section (2) of section 35, as amended by the Act, shall apply to––
- the liquidation process of a corporate debtor initiated after the date of commencement of the Act; and
- the ongoing liquidation process of a corporate debtor as on such date of commencement, where the liquidator has not made an application under section 54, for which the committee of creditors shall continue for the remainder of the liquidation process.
Appointment of RP
Section 22 of the Code provides the procedure for the appointment of RP. The Act amended Section 22(3) of the Code. After incorporating the amendment, the said section will provide that where the CoC resolves to continue the IRP as RP on receipt of consent form the IRP, then such person shall be deemed to be appointed as the resolution professional from the date of such resolution, and this decision shall be communicated to the interim resolution professional, the corporate debtor, and the Board.
Duties of RP
Section 25 of the Code prescribes the duties to be performed by the RP in the process of CIRP. The Act substituted Section 25(j) for a new section which provides that the RP file an application to the Adjudicating Authority in respect of an avoidance transaction or fraudulent or wrongful trading, if any.
Application for avoidance transactions
The Act substituted the section 26 of the Code for a new section. The newly substituted section 26 of the Code provides that the filing of an application in respect of an avoidance transaction or fraudulent or wrongful trading or under section 47, shall not affect the
proceedings of the corporate insolvency resolution process or the liquidation process, as the case may be.
The explanation to this section clarifies that the completion of the CIRP or the liquidation process shall not affect the continuation of proceedings in respect of an avoidance transaction or fraudulent or wrongful trading or under section 47, as the case may be.
Approval of CoC for certain actions
Section 28 requires RP to obtain the approval of CoC before taking certain actions in the course of CIRP. The Act inserts a new section 28A in the Code. The newly inserted section 28A (1) provides that notwithstanding anything contained in this Code or any other law for the time being in force, where a creditor of the corporate debtor has taken possession of an asset of a personal guarantor or corporate guarantor of the corporate debtor by enforcing its security interest over such asset under any law for the time being in force which empowers the creditor to transfer the asset, the creditor may, during the corporate insolvency resolution process of the corporate debtor, permit the transfer of such an asset as part of its insolvency resolution with prior approval of the committee of creditors in such manner and subject to such conditions as may be specified.
The first proviso to this section provides that where the corporate guarantor is undergoing a corporate insolvency resolution process or the liquidation process, transfer of the asset under this sub-section shall take place upon approval of the committee of creditors of the corporate guarantor, by a vote of not less than 66% of the voting share, and the amount received pursuant to the transfer shall form part of the corporate insolvency resolution process or the liquidation estate of the corporate guarantor, as the case may be.
The second proviso to this section provides that during the liquidation process of the corporate guarantor, the approval of the CoC under the first proviso is required only where the creditor has relinquished such asset to the liquidation estate under section 52.
The third proviso to this section provides that where the personal guarantor is undergoing an insolvency resolution process or the bankruptcy process and the creditor has forfeited or surrendered his right in relation to an asset, the transfer of such asset under this sub-section shall take place upon approval by a majority of more than three-fourths in value of the creditors of the personal guarantor, and the amount received pursuant to the transfer shall form part of the insolvency resolution process or the bankruptcy process of the personal guarantor, as the case may be.
Section 28(2) provides that the transfer of such asset under a resolution plan shall vest in the transferee all rights in, or in relation to the asset, as if the transfer had been made by the owner of such asset.
Section 28(3) provides that the amount received pursuant to the transfer of the asset shall be adjusted towards the amount of debt owed by the guarantor in accordance with the applicable law, subject to any costs, charges and expenses incurred in respect of the preservation and protection of the asset before its transfer, and where such amount is more than the debt owed, the surplus shall be paid to the guarantor.