THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ORDINANCE,
2021
Promulgated by the President in the Seventy-second Year
of the Republic of India.
An Ordinance further to
amend the Insolvency and Bankruptcy Code, 2016.
WHEREAS COVID-19 pandemic has impacted businesses, financial
markets and economies all over the world, including India, and has impacted the
business operations of micro, small and medium enterprises and exposed many of
them to financial distress;
AND WHEREAS the Government has taken several measures to mitigate
the distress caused by the pandemic, including increasing the minimum amount of
default for initiation of corporate insolvency resolution process to one crore
rupees, and suspending filing of applications for initiation of corporate insolvency
resolution process in respect of the defaults arising during the period of one
year beginning from 25th March 2020;
AND WHEREAS such suspension for filing of applications for
initiation of corporate insolvency resolution process has ended on 24th March
2021;
AND WHEREAS the country has shown remarkable resilience, be it
tackling the pandemic or ensuring economic recovery;
AND WHEREAS micro, small and medium enterprises are critical for
India?s economy as they contribute significantly to its gross domestic product
and provide employment to a sizeable population;
AND WHEREAS it is considered necessary to urgently address the
specific requirements of micro, small and medium enterprises relating to the
resolution of their insolvency, due to the unique nature of their businesses
and simpler corporate structures;
AND WHEREAS it is considered expedient to provide an efficient
alternative insolvency resolution process for corporate persons classified as
micro, small and medium enterprises under the Insolvency and Bankruptcy Code,
2016, ensuring quicker, cost-effective and value maximising outcomes for all
the stakeholders, in a manner which is least disruptive to the continuity of
their businesses and which preserves jobs;
AND WHEREAS in order to achieve these objectives, it is considered
expedient to introduce a pre- packaged insolvency resolution process for
corporate persons classified as micro, small and medium enterprises;
AND WHEREAS Parliament is not in session and the President is satisfied
that circumstances exist which render it necessary for him to take immediate
action;
NOW, THEREFORE, in exercise of the powers conferred by clause (1) of
article 123 of the Constitution, the President is pleased to promulgate the
following Ordinance: ?
Short title and commencement. 1. (1) This Ordinance may be
called the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021.
(2) It shall come into force
at once.
Amendment of section 4.? 2. In the Insolvency and Bankruptcy Code, 2016 (hereinafter
referred to as the principal Act), in section 4, after the proviso, the
following proviso shall be inserted, namely:?
?Provided further that the
Central Government may, by notification, specify such minimum amount of default
of higher value, which shall not be more than one crore rupees, for matters
relating to the pre-packaged insolvency resolution process of corporate debtors
under Chapter III-A.?.
Amendment of section 5. 3. In section 5 of the
principal Act,?
after clause (2), the following clause shall be inserted,
namely: ?
?(2A) ?base resolution plan?
means a resolution plan provided by the corporate debtor under clause (c) of
sub-section (4) of section 54A;?;
(ii)in clause (5), in sub-clause (b), after the words
?corporate insolvency resolution process?, the words ?or the pre-packaged
insolvency resolution process, as the case may be,? shall be inserted;
(iii)in clause (11), after
the words ?corporate insolvency resolution process?, the words ?or pre-packaged
insolvency resolution process, as the case may be? shall be inserted;
(iv)inclause (15), after the
words, ?process period?, the words ?or by the corporate debtor during the
pre-packaged insolvency resolution process period, as the case may be,? shall
be inserted;
(v)in clause (19), after the
words ?for the purposes of?, the words and figures ?Chapter VI and? shall be
inserted;
(vi)after clause (23), the following clauses shall be
inserted, namely: ?
?(23A)?preliminary
information? means a memorandum submitted by the corporate debtor under clause
(b) of sub-section (1) of section 54G;
(23B)?pre-packaged
insolvency date? means the date of admission of an application for initiating
the pre-packaged insolvency resolution process by the Adjudicating Authority
under clause (a) of sub-section (4) of section 54C;
(23C)?pre-packaged insolvency resolution
(a) the amount of any interim finance and the costs
incurred in raising such finance;
(b) the fees payable to any person acting as a resolution
professional and any expenses incurred by him for conducting the pre-packaged
insolvency resolution process during the prepackaged insolvency resolution
process period, subject to sub-section (6) of section 54F;
(c) any costs incurred by the resolution professional in
running the business of the corporate debtor as a going concern pursuant to an
order under sub-section (2) of section 54J;
(d) any costs incurred at the expense of the Government
to facilitate the pre-packaged insolvency resolution process; and
(e) anyother costs as may be specified;
(23D) ?pre-packaged insolvency resolution process period?
means the period beginning from the pre-packaged insolvency commencement date
and ending on the date on which an order under sub-section (1) of section 54L,
or sub-section (1) of section 54N, or sub-section (2) of section 54-O, as the
case may be, is passed by the Adjudicating Authority;?;
(vii) in clause (25), after the words, brackets and
figures ?of sub-section (2) of section 25?, the words, figures and letter ?or
pursuant to section 54K, as the case may be? shall be inserted;
(viii) in clause (27), after the words ?corporate
insolvency resolution process?, the words ?or the prepackaged insolvency
resolution process, as the case may be,? shall be inserted.
Amendment of section 11. 4. In section 11 of the principal Act,?
(i) in clause (a), after the words ?corporate insolvency
resolution process?, the words ?or a prepackaged insolvency resolution process?
shall be inserted;
(ii)after clause (a), the following clause shall be inserted,
namely:??
?(aa) a financial creditor
or an operational creditor of a corporate debtor undergoing a pre- packaged
insolvency resolution process; or?;
(iii)after clause (b), the following clause shall be inserted,
namely:?
?(ba) a corporate debtor in
respect of whom a resolution plan has been approved under Chapter III-A, twelve
months preceding the date of making
of the application; or?.
Insertion of new section 11A. 5. After section 11 of the
principal Act, the following section shall be inserted, namely: ?
Disposal of applications
under section 54C and under section 7 or section 9 or section 10.? ?11A. (1) Where an application filed under section 54C is
pending, the Adjudicating Authority shall pass an order to admit or reject such
application, before considering any application filed under section 7 or
section 9 or section 10 during the pendency of such application under section
54C, in respect of the same corporate debtor.
(2) Where an application
under section 54C is filed within fourteen days of filing of any application
under section 7 or section 9 or section 10, which is pending, in respect of the
same corporate debtor,then, notwithstanding anything contained in sections 7, 9
and 10, the Adjudicating Authority shall first dispose of the application under
section 54C.
(3) Where an application
under section 54C is filed after fourteen days of the filing of any application
under section 7 or section 9 or section 10, in respect of the same corporate
debtor, the Adjudicating Authority shall first dispose of the application under
sections 7, 9 or 10.
(4)The provisions of this section shall not apply where an
application under section 7 or section 9 or section 10 is filed and pending as
on the date of the commencement of the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2021.?.
Amendment of section 33. 6. In section 33 of the principal Act, in sub-section (3),
after the words, ?approved by the Adjudicating Authority?, the words, figures,
brackets and letter ?under section 31 or under sub-section (1) of section 54L,?
shall be inserted.
Amendment of section 34. 7. In section 34 of the principal Act, in sub-section (1),
after the words and figures, ?under Chapter II?, the words, figures and letter
?or for the pre-packaged insolvency resolution process under Chapter III-A?
shall be inserted.
Insertion of new Chapter III-A. 8. After Chapter III of the
principal Act, the following Chapter shall be inserted, namely:?
?CHAPTER III-A
PRE-PACKAGED INSOLVENCY RESOLUTION
PROCESS
Corporate debtors eligible
for pre-packaged insolvency resolution process.?
54A.(1) An application for
initiating pre-packaged insolvency resolution process may be made in
respect of a corporate debtor classified as a micro, small or medium enterprise
under sub-section (1) of section 7 of the Micro, Small and Medium Enterprises
Development Act, 2006.
(2)Without prejudice to sub-section (1), an application for
initiating pre-packaged insolvency resolution process may be made in respect of
a corporate debtor, who commits a default referred to in section 4, subject to
the following conditions, that??
(a) it has not undergone
pre-packaged insolvency resolution process or completed corporate insolvency
resolution process, as the case may be, during the period of three years
preceding the initiation date;
(b) it is not undergoing a corporate insolvency
resolution process;
(c) no order requiring it to be liquidated is passed
under section 33;
(d) it is eligible to submit a resolution plan under
section 29A;
(e) the financial creditors
of the corporate debtor, not being its related parties, representing such
number and such manner as may be specified, have proposed the name of the
insolvency professional to be appointed as resolution professional for
conducting the pre-packaged
(f) insolvency resolution
process of the corporate debtor, and the financial creditors of the corporate
debtor, not being its related parties, representing not less than sixty-six per
cent. in value of the financial debt due to such creditors, have approved such
proposal in such form as may be specified:
Provided that where a
corporate debtor does not have any financial creditors, not being its related
parties, the proposal and approval under this clause shall be provided by such
persons as may be specified;
the majority of the
directors or partners of the corporate debtor, as the case may be, have made a
declaration, in such form as may be specified, stating, inter alia, ?
that the corporate debtor
shall file an application for initiating pre-packaged insolvency resolution
process within a definite time period not exceeding ninety days;
(ii) that the pre-packaged
insolvency resolution process is not being initiated to defraud any person; and
(iii) the name of the
insolvency professional proposed and approved to be appointed as resolution
professional under clause (e);
(g) the members of the
corporate debtor have passed a special resolution, or at least three-fourth of
the total number of partners, as the case may be, of the corporate debtor have
passed a resolution, approving the filing of an application for initiating
pre-packaged insolvency resolution process.
(3)The corporate debtor shall obtain an approval from its
financial creditors, not being its related parties, representing not less than
sixty-six per cent. in value of the financial debt due to such creditors, for
the filing of an application for initiating pre-packaged insolvency resolution
process, in such form as may be specified:
Provided that where a
corporate debtor does not have any financial creditors, not being its related
parties, the approval under this sub -section shall be provided by such persons
as may be specified.
(4)Prior to seeking approval from financial creditors under
sub-section (3), the corporate debtor shall provide such financial creditors
with ?
(a)
the declaration referred to
inclause (f) of sub-section (2);
(b)? the special
resolution or resolution referred to in clause (g) of sub-section (2);
(c)? a base resolution plan which conforms to the requirements referred
to in section 54K, and such other conditions as may be specified; and
(d)? such other
information and documents as may be specified.
Duties of resolution
professional before initiation of pre-packaged insolvency resolution
process.? 54B. (1) The insolvency professional, proposed to be
appointed as the resolution professional, shall have the following duties
commencing from the date of the approval under clause (e) of sub-section (2) of
section 54A, namely:?
(2)
prepare a report in such
form as may be specified, confirming whether the corporate debtor meets the
requirements of section 54A, and the base resolution plan conforms to the
requirements referred to in clause (c) of sub-section (4) of section 54A;
(b)? file such
reports and other documents, with the Board, as may be specified; and
(c)?? perform such
other duties as may be specified.
(2)The duties of the insolvency professional under
sub-section (1) shall cease, if, ?
(a) the corporate debtor
fails to file an application for initiating pre-packaged insolvency resolution
process within the time period as stated under the declaration referred to in
clause (f) of sub-section (2) of section 54A; or
(b)? the application for initiating pre-packaged insolvency resolution
process is admitted or rejected by the Adjudicating Authority,
(3)The fees payable to the insolvency professional in
relation to the duties performed under sub-section (1) shall be determined and
borne in such manner as may be specified and such fees shall form part of the
pre-packaged insolvency resolution process costs, if the application for
initiation of pre-packaged insolvency resolution process is admitted.
Application to initiate
prepackaged insolvency resolution process.?
54C. (1) Where a corporate debtor
meets the requirements of section 54A, a corporate applicant thereof may
file an application with the Adjudicating Authority for initiating pre-packaged
insolvency resolution process.
(2)The application under sub-section (1) shall be filed in
such form, containing such particulars, in such manner and accompanied with
such fee as may be prescribed.
(3)The corporate applicant shall, along with the
application, furnish?
(a) the declaration, special
resolution or resolution, as the case may be, and the approval of financial
creditors for initiating pre-packaged insolvency resolution process in terms of
section 54A;
(b) the name and written
consent, in such form as may be specified, of the insolvency professional
proposed to be appointed as resolution professional, as approved under clause (e)
of sub-section (2) of section 54A, and his report as referred to in clause (a)
of sub-section (1) of section 54B;
(c) declaration regarding
the existence of any transactions of the corporate debtor that may be within
the scope of provisions in respect of avoidance of transactions under Chapter
III or fraudulent or wrongful trading under Chapter VI, in such form as may be
specified;
(d) information relating to
books of account of the corporate debtor and such other documents relating to
such period as may be specified.
(4) The Adjudicating
Authority shall, within a period of fourteen days of the receipt of the
application, by an order,??
(a) admit the application,
if it is complete; or
(b) reject the application,
if it is incomplete:
Provided that the
Adjudicating Authority shall, before rejecting an application, give notice to
the applicant to rectify the defect in the application within seven days from
the date of receipt of such notice from the Adjudicating Authority.
(5)The pre-packaged insolvency resolution process shall
commence from the date of admission of the application under clause (a) of
sub-section (4).
Time-limit for completion of
pre-packaged insolvency resolution process. 54D. (1) The pre-packaged insolvency resolution process
shall be completed within a period of one hundred and twenty days from the
pre-packaged insolvency commencement date.
(2)Without prejudice to sub-section (1), the resolution
professional shall submit the resolution plan, as approved by the committee of
creditors, to the Adjudicating Authority under sub-section (4) or sub-section
(12), as the case may be, of section 54K, within a period of ninety days from
the pre-packaged insolvency commencement date.
(3) Where no resolution plan is approved by the committee of
creditors within the time period referred to in sub-section (2), the resolution
professional shall, on the day after the expiry of such time period, file an
application with the Adjudicating Authority for termination of the pre-packaged
insolvency resolution process in such form and manner as may be specified.
Declaration of moratorium
and public announcement during pre[1]packaged insolvency resolution process.? 54E. (1) The Adjudicating Authority shall, on the pre-packaged
insolvency commencement date, along with the order of admission under section
54C ?
(2) declare a moratorium for the purposes referred to in
sub-section (1) read with sub-section
(3)of section 14, which shall, mutatis mutandis
apply, to the proceedings under this Chapter;
(f)
appoint a resolution
professional ?
as named in the application,
if no disciplinary proceeding is pending against him; or
(ii) based on the
recommendation made by the Board, if any disciplinary proceeding is pending
against the insolvency professional named in the application.
cause a public announcement
of the initiation of the pre-packaged insolvency resolution process to be made
by the resolution professional, in such form and manner as may be specified,
immediately after his appointment.
(2)The order of moratorium shall have effect from the date
of such order till the date on which the pre-packaged insolvency resolution
process period comes to an end.
Duties and powers of
resolution professional during prepackaged insolvency resolution process. 54F. (1) The resolution professional shall conduct the
pre-packaged insolvency resolution process of a corporate debtor during the
pre-packaged insolvency resolution process period.
(2)The resolution professional shall perform the following
duties, namely:?
(a) confirm the list of
claims submitted by the corporate debtor under section 54G, in such manner as
may be specified;
(b) inform creditors
regarding their claims as confirmed under clause (a), in such manner as may be
specified;
(c) maintain an updated list of claims, in such manner as
may be specified;
(d) monitor management of the affairs of the corporate
debtor;
(e) inform the committee of
creditors in the event of breach of any of the obligations of the Board of
Directors or partners, as the case may be, of the corporate debtor, under the
provisions of this Chapter and the rules and regulations made thereunder;
(f) constitute the committee of creditors and convene and
attend all its meetings;
(g) prepare the information
memorandum on the basis of the preliminary information memorandum submitted
under section 54G and any other relevant information, in such form and manner
as may be specified;
(h) file applications for
avoidance of transactions under Chapter III or fraudulent or wrongful trading
under Chapter VI, if any; and
(i) such other duties as may
be specified.
(3)The resolution professional shall exercise the following
powers, namely:?
(a) access all books of accounts, records and information
available with the corporate debtor;
(b)access the electronic
records of the corporate debtor from an information utility having financial
information of the corporate debtor;
(c)access the books of
accounts, records and other relevant documents of the corporate debtor
available with Government authorities, statutory auditors, accountants and such
other persons as may be specified;
(d)attend meetings of
members, Board of Directors and committee of directors, or partners, as the
case may be, of the corporate debtor;
(e)appoint accountants, legal or other professionals in
such manner as may be specified;
(f) collect all information relating to the assets,
finances and operations of the corporate debtor for determining the financial
position of the corporate debtor and the existence of any transactions that may
be within the scope of provisions relating to avoidance of transactions under
Chapter III or fraudulent or wrongful trading under Chapter VI, including
information relating to ?
(g) business operations for
the previous two years from the date of pre-packaged insolvency commencement
date;
(ii) financial and
operational payments for the previous two years from the date of pre-packaged
insolvency commencement date;
list of assets and liabilities as on the initiation date;
and
(iv)such other matters as
may be specified;
take such other actions in such manner as may be
specified.
(4)From the date of appointment of the resolution
professional, the financial institutions maintaining accounts of the corporate
debtor shall furnish all information relating to the corporate debtor available
with them to the resolution professional, as and when required by him.
(5)The personnel of the corporate debtor, its promoters
and any other person associated with the management of the corporate debtor
shall extend all assistance and cooperation to the resolution professional as
may be required by him to perform his duties and exercise his powers, and for
such purposes, the provisions of sub-sections (2) and (3) of section 19 shall, mutatis
mutandis apply, in relation to the proceedings under this Chapter.
(6)The fees of the
resolution professional and any expenses incurred by him for conducting the
pre-packaged insolvency resolution process shall be determined in such manner
as may be specified:
Provided that the committee
of creditors may impose limits and conditions on such fees and expenses:
Provided further that the
fees and expenses for the periodprior to the constitution of the committee of
creditors shall be subject to ratification by it.
(7) The fees and expenses
referred to in sub-section shall be borne in such manner as may be specified.
List of claims and preliminary information memorandum. 54G.
(1) The corporate debtor shall, within two days of
the pre-packaged insolvency commencement date, submit to the resolution
professional the following information, updated as on that date, in such form
and manner as may be specified, namely:?
(a)a list of claims, along with details of the respective
creditors, their security interests and guarantees, if any; and
(b) a preliminary
information memorandum containing information relevant for formulating a
resolution plan.
(2)Where any person has sustained any loss or damage as a
consequence of the omission of any material information or inclusion of any
misleading information in the list of claims or the preliminary information
memorandum submitted by the corporate debtor, every person who?
(b)
is a promoter or director or
partner of the corporate debtor, as the case may be, at the time of submission
of the list of claims or the preliminary information memorandum by the
corporate debtor; or
(b)? has authorised the submission of the list of claims or the
preliminary information memorandum by the corporate debtor, shall, without
prejudice to section 77A, be liable to pay compensation to every person who has
sustained such loss or damage.
(3)No person shall be liable under sub-section (2), if the
list of claims or the preliminary information memorandum was submitted by the
corporate debtor without his knowledge or consent.
(4) Subject to section 54E, any person, who sustained any
loss or damage as a consequence of omission of material information or
inclusion of any misleading information in the list of claims or the
preliminary information memorandum shall be entitled to move a court having
jurisdiction for seeking compensation for such loss or damage.
Management of affairs of
corporate debtor.? 54H. During the pre-packaged insolvency resolution process
period,?
(a)the management of the affairs of the corporate debtor
shall continue to vest in the Board of Directors or the partners, as the case
may be, of the corporate debtor, subject to such conditions as may be
specified;
(b)? the Board of Directors or the partners, as the case may be, of the
corporate debtor, shall make every endeavour to protect and preserve the value
of the property of the corporate debtor, and manage its operations as a going
concern; and
(c)the promoters, members, personnel and partners, as the
case may be, of the corporate debtor, shall exercise and discharge their
contractual or statutory rights and obligations in relation to the corporate
debtor, subject to the provisions of this Chapter and such other conditions and
restrictions as may be prescribed.
Committee of creditors. 54
-I. (1) The resolution
professional shall, within seven daysof the pre-packaged insolvency
commencement date, constitute a committee of creditors, based on the list of
claims confirmed under clause (a) of sub-section (2) of section 54F:
Provided that the
composition of the committee of creditors shall be altered on the basis of the
updated list of claims, in such manner as may be specified, and any such
alteration shall not affect the validity of any past decision of the committee
of creditors.
(2)The first meeting of the committee of
creditors shall be held within seven days of the constitution of the committee
of creditors.
(3)Provisions of section 21, except sub-section (1) thereof,
shall, mutatis mutandis apply, in relation to the committee of creditors
under this Chapter:
Provided thatfor the
purposes of this sub-section, references to the ?resolution professional? under
sub-sections (9) and (10) of section 21, shall be construed as references to
?corporate debtor or the resolution professional?.
Vesting management of corporate
debtor with resolution professional.? 54J.
(1) Where the committee of creditors, at any time
during the pre-packaged insolvency resolution process period, by a vote of not
less than sixty-six per cent. of the voting shares, resolves to vest the management
of the corporate debtor with the resolution professional, the resolution
professional shall make an application for this purpose to the Adjudicating
Authority, in such form and manner as may be specified.
(2)On an application made under sub-section (1), if the
Adjudicating Authority is of the opinion that during the pre-packaged
insolvency resolution process?
(a)the affairs of the corporate debtor have been conducted
in a fraudulent manner; or
(b)? there has been
gross mismanagement of the affairs of the corporate debtor,it shall pass an
order vesting the management of the corporate debtor with the resolution
professional.
(3)Notwithstanding anything to the contrary contained in
this Chapter, the provisions of ?
(a) sub-sections (2) and
(2A) of section 14;
(b) section 17;
(c)clauses (e) to (g) of section 18;
(d) sections 19 and 20;
(e) sub-section (1) of section 25;
(f) clauses (a) to (c) and clause (k) of sub-section (2) of
section 25; and
(g) section 28, shall, mutatis mutandis apply, to the
proceedings under this Chapter, from the date of the order under sub-section
(2), until the pre-packaged insolvency resolution process period comes to an
end.
Consideration and approval
of resolution plan.? 54K. (1) The corporate debtor shall submit the base resolution
plan, referred to in clause (c) of sub-section of section 54A, to the
resolution professional within two days of the pre-packaged insolvency
commencement date, and the resolution professional shall present it to the
committee of creditors.
(2) The committee of
creditors may provide the corporate debtor an opportunity to revise the base
resolution plan prior to its approval under sub-section
(4)or invitation of prospective resolution applicants under
sub-section (5), as the case may be.
(3) The resolution plans andthe base resolution plan,
submitted under this section shall conform to the requirements referred to in
sub-sections (1) and (2) of section 30, and the provisions of sub-sections (1),
(2) and (5) of section 30 shall, mutatis mutandis apply, to the
proceedings under this Chapter.
(4)The committee of creditors may approve the base
resolution plan for submission to the Adjudicating Authority if it does not
impair any claims owed by the corporate debtor to the operational creditors.
(5)Where ?
(a) the committee of creditors does not approve the base
resolution plan under sub-section (4); or
(b) the base resolution plan impairs any claims owed by the
corporate debtor to the operational creditors,
the resolution professional
shall invite prospective resolution applicants to submit a resolution plan or
plans, to compete with the base resolution plan, in such manner as may be
specified.
(6)The resolution applicants submitting resolution plans
pursuant to invitation under sub-section (5), shall fulfil such criteria as may
be laid down by the resolution professional with the approval of the committee
of creditors, having regard to the complexity and scale of operations of the
business of the corporate debtor and such other conditions as may be specified.
(7)The resolution professional shall provide to the
resolution applicants, ?
(a) the basis for evaluation
of resolution plans for the purposes of sub-section (9), as approved by the
committee of creditors subject to such conditions as may be specified; and
(b) the relevant information
referred to in section 29, which shall, mutatis mutandisapply, to the
proceedings under this Chapter, in such manner as may be specified.
(8)The resolution professional shall present to the
committee of creditors, for its evaluation, resolution plans which conform to
the requirements referred to in sub-section (2) of section 30.
(9) The committee of creditors shall evaluate the resolution
plans presented by the resolution professional and select a resolution plan
from amongst them.
(10)Where, on the basis of such criteria as may be laid down
by it, the committee of creditors decides that the resolution plan selected
under sub-section (9) is significantly better than the base resolution plan,
such resolution plan may be selected for approval under sub-section (12):
Provided that the criteria
laid down by the committee of creditors under this sub-section shall be subject
to such conditions as may be specified.
(11)Where the resolution plan selected under sub-section (9)
is not considered for approval or does not fulfil the requirements of
sub-section (10), it shall compete with the base resolution plan, in such
manner and subject to such conditions as may be specified, and one of them
shall be selected for approval under sub-section (12).
(12)The resolution plan selected for approval under
sub-section (10) or sub-section (11), as the case may be, may be approved by
the committee of creditors for submission to the Adjudicating Authority:
Provided that where the
resolution plan selected for approval under sub-section (11) is not approved by
the committee of creditors, the resolution professional shall file an
application for termination of the pre-packaged insolvency resolution process
in such form and manner as may be specified.
(12) The approval of the resolution plan under
sub-section (4) or sub-section (12), as the case may be, by the committee of
creditors, shall be by a vote of not less than sixty-six per cent. of the
voting shares, after considering its feasibility and viability, the manner of
distribution proposed, taking into account the order of priority amongst
creditors as laid down in sub-section of section 53, including the priority and
value of the security interest of a secured creditor and such other
requirements as may be specified.
(13)While considering the feasibility and viability of a
resolution plan, where the resolution plan submitted by the corporate debtor
provides for impairment of any claims owed by the corporate debtor, the
committee of creditors may require the promoters of the corporate debtor to
dilute their shareholding or voting or control rights in the corporate debtor:
Provided that where the
resolution plan does not provide for such dilution, the committee of creditors
shall, prior to the approval of such resolution plan under sub-section (4) or
sub-section (12), as the case may be, record reasons for its approval.
(15)The resolution professional shall submit the resolution
plan as approved by the committee of creditors under sub-section (4) or
sub-section (12), as the case may be, to the Adjudicating Authority.
Explanation I.??For the removal of doubts, it is hereby
clarified that, the corporate debtor being a resolution applicant under clause
(25) of section 5, may submit the base resolution plan either individually or
jointly with any other person.
Explanation II.??For the purposes of sub-sections (4) and (14), claims
shall be considered to be impaired where the resolution plan does not provide
for the full payment of the confirmed claims as per the updated list of claims
maintained by the resolution professional.
Approval of resolution
plan.? 54L. (1) If the Adjudicating Authority is satisfied that
the resolution plan as approved by the committee of creditors under sub-section
(4) or sub-section (12) of section 54K, as the case may be, subject to the
conditions provided therein, meets the requirements as referred to in
sub-section (2) of section 30, it shall, within thirty days of the receipt of
such resolution plan, by order approve the resolution plan:
Provided that the
Adjudicating Authority shall, before passing an order for approval of a
resolution plan under this sub-section, satisfy itself that the resolution plan
has provisions for its effective implementation.
(2)The order of approval under sub-section (1) shall have
such effect as provided under sub-sections (1), (3) and (4) of section 31,
which shall, mutatis mutandis apply, to the proceedings under this
Chapter.
(3) Where the Adjudicating Authority is satisfied that the
resolution plan does not conform to the requirements referred to in sub-section
(1), it may, within thirty days of the receipt of such resolution plan, by an
order, reject the resolution plan and pass an order under section 54N.
(4) Notwithstanding?
anything? to? the?
contrary contained in this section, where the Adjudicating Authority has
passed an order under sub-section (2) of section 54J and the resolution plan
approved by the committee of creditors under sub-section (4) or sub-section
(12), as the case may be, of section 54K, does not result in the change in the
management or control of the corporate debtor to a person who was not a
promoter or in the management or control of the corporate debtor, the
Adjudicating Authority shall pass an order ?
(g)
rejecting such resolution
plan;
(b) terminating the pre-packaged insolvency resolution
process and passing a liquidation order in respect of the corporate debtor as
referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section of
section 33; and declaring that the pre-packaged insolvency resolution process
costs, if any, shall be included as part of the liquidation costs for the
purposes of liquidation of the corporate debtor.
Appeal against order under
section 54L. 54M. Any appeal from an order
approving the resolution plan under sub-section (1) of section 54L,
shall be on the grounds laid down in sub-section (3) of section 61.
Termination of pre-packaged
insolvency resolution process.? 54N. (1) Where the resolution professional files an application
with the Adjudicating Authority, ?
(a)under the proviso to sub-section (12) of section 54K; or
(b) under sub-section (3) of section 54D, the Adjudicating Authority
shall, within thirty days of the date of such application, by an order, ?
(i)terminate the pre-packaged insolvency resolution process;
and
(ii) provide for the manner of continuation of proceedings
initiated for avoidance of transactions under Chapter III or proceedings
initiated under section 66 and section 67A, if any.
(2)Where the resolution professional, at any time after the
pre-packaged insolvency commencement date, but before the approval of
resolution plan under sub-section (4) or sub-section (12), as the case may be,
of section 54K, intimates the Adjudicating Authority of the decision of the
committee of creditors, approved by a vote of sixty-six per cent. of the voting
shares, to terminate the pre-packaged insolvency resolution process, the
Adjudicating Authority shall pass an order under sub-section (1).
(3) Where the Adjudicating Authority passes an order under
sub-section (1), the corporate debtor shall bear the pre-packaged insolvency
resolution process costs, if any.
(4) Notwithstanding anything to the contrary contained in
this section, where the Adjudicating Authority has passed an order under
sub-section (2) of section 54J and the pre-packaged insolvency resolution
process is required to be terminated under sub-section
(1), the Adjudicating
Authority shall pass an order ?
(a) of liquidation in
respect of the corporate debtor as referred to in sub-clauses (i), (ii) and
(iii) of clause (b) of sub-section (1) of section 33; and
(b) declare that the pre-packaged insolvency resolution
process costs, if any, shall be included as part of the liquidation costs for
the purposes of liquidation of the corporate debtor.
Initiation of corporate
insolvency resolution process.? 54-O. (1) The committee of creditors, at any time after
the pre-packaged insolvency commencement date but before the approval of
resolution plan under sub-section (4) or sub-section (12), as the case may be,
of section 54K, by a vote of sixty-six per cent. of the voting shares, may
resolve to initiate a corporate insolvency resolution process in respect of the
corporate debtor, if such corporate debtor is eligible for corporate insolvency
resolution process under Chapter II.
(2)Notwithstanding anything to the contrary contained in
Chapter II, where the resolution professional intimates the Adjudicating
Authority of the decision of the committee of creditors under sub-section (1),
the Adjudicating Authority shall, within thirty days of the date of such
intimation, pass an order to ?
(a) terminate? the?
pre-packaged? insolvency resolution
process and initiate corporate insolvency resolution process under Chapter II
in respect of the corporate debtor;
(b) appoint the resolution
professional referred to in under clause (b) of sub-section (1) of section 54E
as the interim resolution professional, subject to submission of written
consent by such resolution professional to the Adjudicatory Authority in such
form as may be specified; and
(c)declare that the pre-packaged insolvency resolution
process costs, if any, shall be included as part of insolvency resolution
process costs for the purposes of the corporate insolvency resolution process
of the corporate debtor.
(3)Where the resolution professional fails to submit written
consent under clause (b) of sub-section (2), the Adjudicating Authority shall
appoint an interim resolution professional by making a reference to the Board
for recommendation, in the manner as provided under section 16.
(4) Where the Adjudicating Authority passes an order under
sub-section (2) ?
(a) such order shall be
deemed to be an order of admission of an application under section 7 and shall
have the same effect;
(b)the corporate insolvency resolution process shall
commence from the date of such order;
(c)the proceedings initiated
for avoidance of transactions under Chapter III or proceedings initiated under
section 66 and section 67A, if any, shall continue during the corporate
insolvency resolution process;
(d)for the purposes of
sections 43, 46 and 50, references to ?insolvency commencement date? shall mean
?pre-packaged insolvency commencement date?; and
(d) in computing the relevant time or the period for
avoidable transactions, the time-period for the duration of the pre-packaged
insolvency resolution process shall also be included, notwithstanding anything
to the contrary contained in sections 43, 46 and 50.
Application of provisions of
Chapters II, III, VI, and VII to this Chapter. 54P. (1) Save as provided under this Chapter, the provisions
of sections 24, 25A, 26, 27, 28, 29A, 32A, 43 to 51, and the provisions of
Chapters VI and VII of this Part shall, mutatis mutandis apply, to the
pre-packaged insolvency resolution process, subject to the following, namely:?
(a) reference to ?members of
the suspended Board of Directors or the partners? under clause (b) of
sub-section (3) of section 24 shall be construed as reference to ?members of
the Board of Directors or the partners,unless an order has been passed by the
Adjudicating Authority under section 54J?;
(b) reference to ?clause (j)
of sub-section (2) of section 25? under section 26 shall be construed as
reference to ?clause (h) of sub-section (2) of section 54F?;
(c) reference to ?section 16? under section 27 shall be
construed as reference to ?section 54E?;
(d) reference to ?resolution professional? in sub-sections
(1) and (4) of section 28 shall be construed as ?corporate debtor?;
?
(e) reference to ?section 31? under sub-section
(3)of section 61 shall be construed as reference to
?sub-section (1) of section 54L?;
(f) reference to ?section 14?
in sub-sections (1) and (2) of section 74 shall be construed as reference to
?clause (a) of sub-section (1) of section 54E?;
(g) reference to ?section
31? in sub-section (3) of section 74 shall be construed as" reference to
?sub-section (1) of section 54L?.
(2)Without prejudice to the provisions of this Chapter and
unless the context otherwise requires, where the provisions of Chapters II,
III, VI and VII are applied to the proceedings under this Chapter, references
to ?
(a) ?insolvency commencement
date? shall be construed as references to ?pre-packaged insolvency commencement
date?;
(b) ?resolution professional? or ?interim resolution
professional?, as the case may be, shall be construed as references to the
resolution professional appointed under this Chapter;
(c)?corporate insolvency resolution process? shall be
construed as references to ?pre-packaged insolvency resolution process?; and
(d) ?insolvency resolution process period? shall be construed as references to
?pre-packaged insolvency resolution process period.?.?.
Amendment of section 61. 9. In section 61 of the principal Act, for sub-section (4),
the following sub-sections shall be substituted, namely:?
?(4) An appeal against a liquidation order passed under section 33, or
sub-section (4) of section 54L, or sub-section (4) of section 54N, may be filed
on grounds of material irregularity or fraud committed in relation to such a
liquidation order.
(5) An appeal against an order for initiation of corporate insolvency
resolution process passed under sub-section (2) of section 54-O may be filed on
grounds of material irregularity or fraud committed in relation to such an
order.?
Amendment of section 65. 10. In section 65 of the principal Act, after
sub-section (2), the following sub-section shall be inserted, namely: ??
?(3) If,
any person initiates the pre-packaged insolvency resolution process?
(a)fraudulently or with malicious intent
for any purpose other than for the resolution of insolvency; or
(b) with the intent to defraud any person, the
Adjudicating Authority may impose upon such person a penalty which shall not be
less than one lakh rupees, but may extend to one crore rupees.?.
Insertion of new section 67A. 11. After section 67 of the principal Act,
the following section shall be inserted, namely:??
Fraudulent
management of corporate debtor during pre packaged insolvency resolution
process.? ?67A. On and after the pre-packaged
insolvency commencement date, where an officer of the corporate debtor manages
its affairs with the intent to defraud creditors of the corporate debtor or for
any fraudulent purpose, the Adjudicating Authority may, on an application by the
resolution professional, pass an order imposing upon any such officer, a
penalty which shall not be less than one lakh rupees, but may extend to one
crore rupees.?.
Omission of Explanation to section 77.
12. In
section 77 of the principal Act, the Explanation shall be omitted.
Insertion of new section 77A.? 13.After section 77 of the principal Act,
the following section shall be inserted, namely:??
Punishment
for offences related to pre-packaged insolvency resolution process.? ?77A. (1) Where?
(a)a corporate debtor provides any
information in the application under section 54C which is false in material
particulars, knowing it to be false oromits any material fact, knowing it to be
material; or
(b) a corporate debtor provides any
information in the list of claims or the preliminary information memorandum
submitted under sub-section (1) of section 54G which is false in material
particulars, knowing it to be false or omits any material fact, knowing it to
be material; or
(c) any person who knowingly and wilfully
authorised or permitted the furnishing of such information under sub-clauses
(a) and (b),
such
corporate debtor or person, as the case may be, shall be punishable with
imprisonment for a term which shall not be less than three years, but which may
extend to five years or with fine which shall not be less than one lakh rupees,
but which may extend to one crore rupees, or with both.
(2)If a director or partner of the
corporate debtor, as the case may be, deliberately contravenes the provisions
of Chapter III-A, such person shall be punishable with imprisonment for not
less than three years, but which may extend to five years, or with fine which
shall not be less than one lakh rupees, but which may extend to one crore
rupees, or with both.
Explanation
.??For the purposes of this
section, and sections 75, 76 and 77, an application shall be deemed to
be false in material particulars in case the facts
mentioned
or omitted in the application, if true, or not omitted from the application as
the case may be, would have been sufficient to determine the existence of a
default under this Code.?
Amendment
of section 208. 14. In section
208 of the principal Act,??
(i) after
clause (c), the following clause shall be inserted, namely:??
?(ca)
pre-packaged insolvency resolution process under Chapter III-A of Part II;?;
(ii) after
sub-section (1), the following sub-section shall be inserted, namely:??
?(1A)
Where the name of the insolvency professional proposed to be appointed as a
resolution professional, is approved under clause (e) of sub-section (2) of
section 54A, it shall be the function of such insolvency professional to take
such actions as may be necessary to perform his functions and duties prior to
the initiation of the pre-packaged insolvency resolution process under Chapter
III-A of Part II.? .
Amendment
of section 239.15. In section
239 of the principal Act, in sub-section (2),after clause (fc), the following
clauses shall be inserted, namely:??
?(fd) the
form, particulars, manner and fee for making application before the
Adjudicating Authority under sub-section (2) of section 54C;
(fe) the
conditions and restrictions with which the promoters, members, personnel and
partners of the corporate debtor shall exercise and discharge contractual or
statutory rights and obligations under clause (c) of section 54H;?.
Amendment
of section 240. 16. In
section 240 of the principal Act, in sub-section (2),??
(i) after
clause (e), the following clause shall be inserted, namely:?
?(ea) the other costs under sub-clause (e) of clause (23C) of section 5;?
(ii) after
clause (zk), the following clauses shall be inserted, namely:??
?(zka)such
number of financial creditors and the manner of proposing the insolvency
professional,
and the form for approving such insolvency professional by the financial
creditors under clause (e), the persons who shall provide approval under the
proviso to clause (e), the form for making a
declaration under clause (f) of sub-
section (2) of section 54A;
(zkb) the
form for obtaining approval from financial creditors under sub-section (3), and
the persons who shall provide approval under the proviso to sub-section (3) of
section 54A;
(zkc) the other conditions for the base resolution plan under clause (c), and such
information and documents under clause (d) of sub-section (4) of section
54A;
(zkd) the
form in which the report is to be prepared under clause (a), such reports and
other documents under clause (b), and such other duties under cause (c) of
sub-section (1), and the manner of determining the fees under sub-section (3)
of
section
54B;
(zke) the
form for providing written consent of the insolvency professional under clause
(b), the form for declaration under clause (c),the information relating to
books of account and such other documents relating to such period under clause
(d) of sub-section (3) of section 54C;
(zkf) the form and manner for? making application for termination of the
pre-packaged insolvency resolution process under sub-section (3) of section
54D;
(zkg) the form and manner of making public announcement under
clause (c) of sub-section (1) of section 54E;
(zkh) the manner of confirming the list of claims under clause
(a), the manner of informing creditors under clause (b),???? the manner of maintaining an updated
list of claims under clause (c), the form and manner of preparing the information memorandum
under clause (g), and such other duties under clause (i) of sub-section (2) of
section 54F;
(zki) such
other persons under clause (c), the manner of
appointing accountants, legal or other professionals under clause (e), such
other matters under sub-clause (iv) of clause (f) and the manner of taking
other actions under clause (g) of sub-
section (3) of section 54F;
(zkj) the manner of determination of fees and expenses
as may be incurred by the resolution professional under sub-section (6) of
section 54F;
(zkk)
manner of bearing fees and expenses under sub-section (7) of section 54F;
(zkl) the form and manner of list of claims and preliminary
information memorandum under sub- section (1) of
section 54G;
(zkm)? the?
conditions? under? clause?
(a)? of section 54H;
(zkn) the manner of alteration? of the composition
of the committee of creditors under the proviso to sub-section (1) of section
54I;
(zko) the form and manner of?? making application under sub-section (1) of
section 54J;
(zkp) the manner
of inviting prospective resolution?
applicants? under? sub-section?
(5)? of section 54K;
(zkq)
other conditions under sub-section (6) of section 54K;
(zkr) the
conditions under clause (a) and the manner of providing the basis for
evaluation of resolution plans and the information referred to in section 29
under sub-section (7) of section 54K;
(zks) the
conditions under the proviso to sub- section (10) of section 54K;
(zkt) the
manner and conditions under sub- section (11) of section 54K;
(zku) the
form and manner of filing application under the proviso to sub-section (12) of
section 54K;
(zkv)? other?
requirements? under? sub-section (13) of section 54K;
(zkw) the
form for submission of written consent under clause (b) of sub-section (2) of
section 54-O;?.
Amendment
of section 240A. 17. In section
240A of the principal Act, in sub-section (1), after the words ?corporate
insolvency resolution process?, the words ?or pre-packaged insolvency
resolution process? shall be inserted.