The Insolvency and Bankruptcy Code, 2016 (31 of 2016)
Key words of Preamble to the Insolvency and Bankruptcy Code, 2016 (IBC):-
- reorganization and insolvency resolution of- corporate person, partnership firms and individuals
– in a time bound manner
- for maximization of value of assets
-
to promote entrepreneurship
-
availability of credit
-
balance the interest of all the stakeholders (including alteration in the order of priority of payment of Government dues)
-
to establish an Insolvency and Bankruptcy Board of India (IBB or IBBI)
What happened and when:
| Date | What |
| 28/5/2016 | IBC notified |
| 05/08/2016 | IBB related provisions notified |
| 19/08/2016 | Provisions empowering CG notified |
| 29/08/2016 | Salary Rules notified |
| 01/10/2016 | IBB established with office at New Delhi
Mr. M. S. Sahoo Chairperson Ex-officio of Ministry of Finance, Ministry of Corporate Affairs, Ministry of Law and Justice and the Reserve Bank of India notified |
| 01/11/2016 | Provisions empowering IBB notified.
Also, Schedules to IBC notified – change in Central Excise, Service Tax, SICA |
| 15/11/2016 | Regulations for IPA and IP notified
Also, Schedules to IBC notified – change in SARFAESI, LLP Act 2008, Companies Act 2013, Payment and Settlement Systems Act, 2007 |
| 21/11/2016 | IBBI (IPA) Regulations 2016 notified w.e.f. 21/11/2016 |
| 23/11/2016 | IBBI (IP) Regulations 2016 notified w.e.f. 29/11/2016 |
| 30/11/2016 | Ss. 4 to 32 – Provisions relating to Insolvency Resolution Process for Corporate Persons notified w.e.f. 01/12/2016
S. 236 Offences under IBC, triable by Special Court under CA 2013 – notified w.e.f. 01/12/2016 S.237 IBC overrides all other laws – notified w.e.f. 01/12/2016 S.231 No injunction notified w.e.f. 01/12/2016 S.239(2)(a) to (f) – CG to make Rules for application to NCLT IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 notified w.e.f. 01/12/2016 |
| 01/12/2016 | Ss. 4 to 32 of IBC notified (except for individuals, partnership firm and voluntary liquidation)
S. 60 transitory – for Court to NCLT for Personal Guarantor |
| 01/12/2016 | IB (Application to Adjudicating Authorities) Rules, 2016 notified
For filing applications u/s.7,8,9 of IBC |
The Insolvency and Bankruptcy Code, 2016 (the ‘IBC’).
As you might be aware that the Government of India has notified the substantive provisions of the IBC with effect from 01 December 2016. The Government has also issued notifications for repeal of the Sick Industrial Companies (Special Provisions) Act, 1985 (the ‘SICA’). Thus, SICA is repealed with effect from 01st December 2016 and all proceedings, reference, inquiry or appeal before BIFR and AAIFR stands abated with effect from 01st December 2016.
Further with effect from 01st December, 2016, all matters relating to winding-up (except voluntary winding-up) of Companies and Limited Liability Partnerships (LLPs) are dealt with by the NCLT. Thus, High Courts (and in some part of the Country District Courts) do not have jurisdiction for dealing with new cases of winding-up on and after 01 December 2016. Cases of Voluntary winding-up to be dealt with by the NCLT on and after 01 April 2017.
Further, with effect from 15th December, 2016, cases relating to compromise, arrangement and reconstruction (including merger, amalgamation and demerger), reduction of share capital, variation of shareholder’s rights, recovery of property of company in wrongful possession of employees or ex-employees of Company etc. would be dealt with exclusively by the NCLT.
To have birds eye view of the transitory provisions for transfer of cases from High Courts to the NCLT, a tabular presentation is given below:
TRANSITORY PROVISIONS
The Insolvency and Bankruptcy Code, 2016 (the ‘IBC’).
National Company Law Tribunal (NCLT).
Section 434 (1) (c) of the Companies Act 2013 – as amended by Eleventh Schedule of IBC and further amendment by Order S.O. 3676(E) dated 7th December 2016.
| Subject Matter | Transferred to NCLT | Retained with High Court |
| Winding-up under supervision of Court | No. | Yes. |
| Voluntary winding-up (Sec.484 of CA 1956)
(Rule 4) |
No.
New cases to be filed with NCLT w.e.f. 01 April, 2017 as per the IBC. Note that provisions relating to voluntary winding-up under the Companies Act, 2013 are omitted by the IBC.
|
Yes, for cases filed upto 31st March 2017. |
| Winding-up for inability to pay (Sec. 433(e) of CA 1956)
(Rule 5) |
Yes, where petition has not been served on the Respondent.
Such petition to be treated as application u/Ss. 7, 8 or 9 of IBC. Petitioner to submit additional information, including proposed insolvency professional, within 60 days from date of notification of the Rules on 07 December 2016. Thus, by 05 February, 2017. Failing which petition shall abate. |
Yes, where petition has been served on the Respondent |
| Winding-up by Court
[Sec. 433(a) and (f)] (Rule 6) |
Only those cases where the petition has not been served on the respondent. | Yes, where the petition has been served on the respondent. |
| BIFR u/s.20 of SICA
[S. 434(1)(d) of CA 2013 r/w Rule 5(2)] w.e.f. 01/12/2016 Sick Industrial Companies (Special Provisions) Repeal Act, 2003 brought to force, including section 4(b) thereof. |
No.
Proceedings before BIFR and AAIFR abates. However, reference within 180 days can be made to NCLT as per Companies Act 2013. |
Yes, where opinion has been forwarded by BIFR and no appeal is pending and winding up is initiated u/s. 20 of SICA. |
| Arbitration, Compromise, arrangement and reconstruction
(Second proviso to Section 434(1)(c) of CA 2013 read with Rule 3) |
Yes, except those cases reserved for orders for allowing or otherwise, i.e. final disposal (cases heard but orders reserved) w.e.f. 15th December, 2016 | Those cases reserved for orders for allowing or otherwise (Cases heard and pronouncement of order is pending or reserved) w.e.f. 15th December, 2016 |
| Reduction of Capital (Sec. 100 of CA 1956 – corresponding Sec. 66 of CA 2013) | As above | As above |
| Cancellation or variation of rights of shareholders (Sec. 106 of CA 1956 –corresponding sec. 48(1) of CA 2013) | As above | As above |
| To restrain fraudulent persons from managing companies (Sec. 203 of CA 1956) | As above | As above |
| For order that affairs of a Company ought to be investigated (Sec. 237 of CA 1956 – corresponding sec. 213 of CA 2013) | As above | As above |
| Applications under section 439 for the winding-up of a company, or under section 583 for the winding up of an unregistered company, or under section 584 for the winding-up of a foreign company
(Corresponding Sec.376 of CA 2013) |
As above | As above |
| Applications for a declaration under section 542 (XI Schedule) in the course of proceedings under section 397 or 398 that a person who was knowingly a party to carrying on business in a fraudulent manner shall be personally liable for all or any of the debts or other liabilities of the company
(Corresponding Sec.339 of CA 2013) |
As above | As above |
| Applications by a creditor or member under section 543 (XI Schedule) in the course of proceedings under section 397 or 398, to enquire into the conduct of any of the persons mentioned in section 543 (XI Schedule) and compel him to repay or restore any money or property to the company or pay compensation.
(Corresponding Sec.340 of CA 2013) |
As above | As above |
| Applications under section 633(2) by an officer of a company for relief.
(Corresponding Sec.463 of CA 2013) |
As above | As above |
| Applications under section 560(6) to restore a company’s name to the Register of Companies
(Corresponding Sec.248 of CA 2013 – does not contain similar provision) |
As above | As above |
| Applications under section 579 to confirm the alteration in the form of the constitution of a company by substituting a memorandum and articles for a deed of settlement.
(No corresponding provision under CA 2013) |
As above | As above |
All proceedings transferred from High Court to NCLT, to be dealt with as per the Companies Act, 1956 and the Company (Court) Rules, 1959. [Third proviso to Section 434(1)(c) of the Companies Act 2013].
All proceedings transferred from High Court to NCLT, to be dealt with from the same stage as were before their transfer. [Section 434(1)(c) of the Companies Act 2013].
