The Insolvency and Bankruptcy Code, 2016 is an Act to consolidate the laws relating to insolvency and bankruptcy of corporate persons, partnership firms and individuals. It has been mentioned in the Statement of Objects and Reasons of the Code that the objective of the Act is to ensure resolution of such proceedings in a time-bound manner and maximization of the value of assets of such persons in order to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues. Suitable amendments have been done in the existing laws to make all insolvency and bankruptcy proceedings subject to the provisions of the Insolvency and Bankruptcy Code, 2016. The Code would have an overriding effect on all other laws relating to insolvency and bankruptcy. To this effect, Sections 245 to 255 of the Code amend a plethora of existing laws, viz. the Indian Partnership Act, 1932, the Central Excise Act, 1944, the Income Tax Act, 1961, the Customs Act, 1962, the Recovery of Debts due to banks and Financial Institutions Act, 1993, the Finance Act, 1994, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Sick Industrial (Special Provision) Repeal Act, 2003, the Payment and Settlement Systems Act, 2007, the Limited Liability Partnership Act, 2008 and the Companies Act, 2013.
Insolvency and Bankruptcy Board of India (IBBI) has strengthened its Due Diligence Framework under the Insolvency and Bankruptcy Code, 2016
Now prior to approval of a Resolution Plan, the Resolution Applicants, including promoters, will be put to a stringent test with respect to their credit worthiness and credibility; Amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Resolution Process, 2016 impose a greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.
Insolvency and Bankruptcy Board of India (IBBI) has amended its Corporate Insolvency Resolution Process Regulations to ensure that as part of due diligence, prior to approval of a Resolution Plan, the antecedents, credit worthiness and credibility of a Resolution Applicant, including promoters, are taken into account by the Committee of Creditors.
With a view to ensure that the Corporate Insolvency Resolution Process results in a credible and viable Resolution Plan, the Insolvency and Bankruptcy Board of India (IBBI) has carried-out amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Resolution Process, 2016 (CIRP Regulations).
The Revised Regulations make it incumbent upon the Resolution Professional to ensure that the Resolution Plan presented to the Committee of Creditors contains relevant details to assess the credibility of the Resolution Applicants. The details to be provided would include details with respect to the Resolution Applicant in terms of convictions, disqualifications, criminal proceedings, categorization as willful defaulter as per RBI guidelines, debarment imposed by SEBI, if any, and transaction, if any, with the Corporate Debtor in the last two years.
Apart from the above, the Resolution Professional has to also submit details in respect of transactions observed or determined, if any, covered under Section 43 (Preferential Transactions); Section 45(Undervalued Transactions); Section 50 (Extortionate Credit Transactions); Section 66 (Fraudulent Transactions) under Insolvency and Bankruptcy Code, 2016.
By virtue of the above mentioned changes in the Regulations, the Resolution Applicants, including promoters, are put to a stringent test with respect to their credit worthiness and credibility. Further, it also imposes greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.