The Statement of Objects and Reasons of the Insolvency and Bankruptcy Code, 2016 ('the Code') states that the Code is enacted with the aim to achieve insolvency resolution of corporate persons in : (i) a time bound manner; and (ii) while ensuring maximization of value of its assets. This aim is linked with the goal to promote entrepreneurship, availability of credit and balancing the interests of all the stakeholders.
In order to achieve the aforementioned object, the Hon'ble National Company Law Tribunal ('Adjudicating Authority') has a significant role to discharge. Upon the admission of an application for initiation of Corporate Insolvency Resolution Process ('CIRP'), the role of the Adjudicating Authority does not end. It is but natural that in the execution of such a complex process, there will arise occasions when interests will clash and conflicts will emerge amongst various competing stakeholders. The Code and the Regulations framed thereunder recognise this possibility and empower the Adjudicating Authority to adjudicate upon all such disputes and ensure the smooth execution of the CIRP proceedings.
The present Article, Part II of this Series, shall focus on the scope of jurisdiction and the role of the Adjudicating Authority during the CIRP proceedings and will illustratively deal with the following aspects:
The immediate initial steps taken by the Adjudicating Authority post admitting a Section 7, 9 or 10 application.
Timely implementation of the process – monitoring the extensions and exclusions of time period from the CIRP proceedings.
Optimisation of value – ensuring fairplay amongst the various stakeholders during the CIRP, which shall involve consideration of the following stages:
IMMEDIATE INITIAL STEPS TAKEN POST ADMISSION OF APPLICATION
60. Adjudicating Authority for Corporate Persons
x x x x
(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of--
EXTENSIONS AND EXCLUSIONS UNDER THE CODE
Extension of the CIRP Period:
Therefore, the CIRP proceedings were required to be completed within 180 plus 90 – i.e., 270 days. However, as has been explained @ 2 below, certain periods of exclusions, for good reasons, were being granted by the Adjudicating Authority. This resulted in the elongation of the time limit well beyod the prescribed period of 270 days and stuck at the root of of one of the principal goals of the Code – namely, the timely completion of the CIRP.
Exclusion from the CIRP period:
It is also pertinent to mention that if the CIRP is delayed on account of lackadaisical approach of the Resolution Professional, the Adjudicating Authority may take appropriate action or recommend that the Insolvency and Bankruptcy Board of India ('the Board') may initiate disciplinary proceedings against the Resolution Professional. It may be noted that while the proceedings may be initiated on the recommendation of the Adjudicating Authority, it does not exercise supervisory jurisdiction over such disciplinary proceedings. However, in the matter of Insolvency and Bankruptcy Board of India V/s Shri Rishi Prakash Vats & Ors., there was a delay in the proceedings due to inexplicable lackadaisical attitude of the Resolution Professional leading to the Adjudicating Authority passing a direction to the Board to initiate proceedings against him, the Hon'ble NCLAT observed and held that the Adjudicating Authority does not have the power to quash the proceedings initiated by the Board even though the same were initiated on the recommendation of the Adjudicating Authority.
ENSURING FAIR CONDUCT ON THE PART OF THE RESOLUTION PROFESSIONAL
Submission Of Claims
Constitution of Committee of Creditors and conducting its Meetings
Upon receipt of an application by a creditor forming part of the CoC aggrieved by the violation of the aforementioned provision, the Adjudicating Authority may pass appropriate directions to the Resolution Professional to ensure that a fair and transparent procedure is adopted while conducting CIRP proceedings.
Insolvency Resolution Process Cost
Inviting Expression of Interest and Declaration of Prospective Resolution Applicants
(Role of Adjudicating Authority in interaction with Resolution Applicants)
Upon receipt of the Resolution Plan(s), the foremost duty of a Resolution Professional involves undertaking a thorough check and verification as to whether the Plans are compliant with the statutory requirements of Section 30(2), Regulation 37 to 39 of the CIRP Regulations. Subsequently, he is required to place the compliant Resolution Plans before the CoC for evaluation and voting.
Presentation of Resolution Plan to the Committee of Creditors
Participation in CoC Meeting:
Filing of Resolution Plan before the Adjudicating Authority for approval
Finally, the Resolution Professional places the Resolution Plan approved by the CoC by a majority vote of not less than 66%, before the Adjudicating Authority for approval as required under Section 30(6) of the Code and sub-regulation 4 of Regulation 39 of the CIRP Regulations. This section has been dealt in the subsequent and concluding Article of this Series.
It is apparent that as far as interrelation between the Resolution Professional, the CoC and the Resolution Applicant is concerned, the Resolution Professional is a facilitator of the insolvency process whose administrative functions are overseen and supervised by the CoC and the Adjudicating Authority. Adjudication on any alleged unfair play by the Resolution Professional will fall within the jurisdiction of the Adjudicting Authority. However, while dealing with commercial or business matters, the commercial wisdom of CoC is given paramount status without any scope for judicial intervention. In a manner, the endeavour is to ensure that the process should be fair while being tied to the twin goals of ensuring completion of the process within the prescribed timelines and maximising value.
Mr. Sandeep Bhuraria, is an accomplished legal professional with over 28 years of legal experience. He is a partner at Zeus Law and specialises in Corporate and Commercial Transactional Advisory in the field of Corporate Restructuring. He has deep knowledge and experience in the Insolvency and Bankruptcy Code and regularly appears before NCLT and NCLAT. Mahima Malhotra is an associate in the Corporate Restructuring team of Zeus Law and has worked extensively on corporate and commercial matters.
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