By Dr. Sailaja Petikam
Recently, the Insolvency and Bankruptcy Code, 2016, the Bill was passed by Lok Sabha on 05-05-2016 (Bill No. 349-C of 2015). It is a comprehensive legislation relating to insolvency, liquidation etc., irrespective of whether insolvency relates to companies, individuals or partnership firms.
At present, companies can be liquidated either voluntarily or through court under the Companies Act, 2013 and, as far as insolvency of individuals is concerned, provisions are laid down under the Insolvency Act.
Now, the Insolvency and Bankruptcy Code, 2016 applies to: (a) any company incorporated under the Companies Act, 2013 or under any previous company law; (b) any other company governed by any special Act, until the provisions of the special Act are consistent with this Code; (c) any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008; (d) such other body incorporated under any law for the time being in force as the Central Government may, by notification, specify; and (e) partnership firms and individuals, in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.
This Code contains five Parts. The Second Part applies to matters relating to insolvency and liquidation of Corporate Debtors, where the minimum amount of default is one lakh rupees, subject to the power of the Central Government to specify a higher value not exceeding one crore rupees.
The Third Part deals with fresh start insolvency and bankruptcy of individuals and partnership firms where the amount of default is not less than one thousand rupees, subject to the power of the Central Government to specify a higher amount not exceeding one lakh rupees.
As per the provisions of the Insolvency Act, a Receiver will be appointed to discharge the debts of an insolvent. According to this new Code, 2016, a Bankruptcy Trustee will be appointed for conducting the bankruptcy process and shall charge such fees as may be specified in proportion to the value of the estate of the bankrupt. The committee of creditors may, at a meeting, by a vote of seventy-five percent of voting share, propose to replace the bankruptcy trustee.
A bankruptcy trustee may resign on giving notice to the Adjudicating Authority if he intends to cease practising as an insolvency professional or if there is a conflict of interest or change of personal circumstances which precludes the further discharge of his duties.
The Adjudicating Authority in relation to insolvency matters of individuals and firms shall be the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain.
If any suit or application in the name and on behalf of a debtor is to be instituted or filed under the Limitation Act, 1963 or any other law, then the period during which moratorium is in place shall be excluded in computing the period of limitation. On the date of admission of the application, the moratorium period shall commence in respect of all the debts.
Jurisdiction, Appeals and Punishments
No civil court or authority shall have jurisdiction to entertain any suit or proceeding in respect of any matter on which the Debt Recovery Tribunal or Debt Recovery Appellate Tribunal has jurisdiction under this Code. No injunction shall be granted by any court, tribunal or authority in respect of any action taken, or to be taken, in pursuance of any power conferred on the DRT or DRAT by or under this Code.
An appeal from an order of the Debt Recovery Tribunal under this Code shall be filed within thirty days before the Debt Recovery Appellate Tribunal. The DRAT may, if satisfied that a person was prevented by sufficient cause, allow the appeal to be filed within a further period not exceeding fifteen days. An appeal from an order of the DRAT on a question of law shall be filed within forty-five days before the Supreme Court, subject to the statutory extension permitted by the Code.
Punishments will be imposed for giving false information, concealment etc., either by the creditor or debtor in the insolvency process. Similarly, punishments will be imposed on the bankruptcy trustee for certain actions.
The Central Government may, by notification, appoint and establish a Board by the name of the Insolvency and Bankruptcy Board of India as a body corporate.
The Board may register insolvency professional agencies, insolvency professionals and information utilities; specify minimum eligibility requirements; specify standards for their functioning; call for information and records; monitor performance and issue directions; publish information, data and research; promote transparency and best practices; issue necessary guidelines; and conduct periodic studies, research and audits.
Any insolvency professional agency, insolvency professional or information utility aggrieved by the order of the Board may prefer an appeal to the National Company Law Appellate Tribunal in the prescribed manner.
Ultimately, this Code comprehensively covers insolvency, liquidation and bankruptcy of individuals, corporations and partnership firms respectively.