[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN INDIA]
35
proceedings, tax disputes, appeals, realization of receivables, etc. PROTECTION GRANTED TO THE DEBTOR: The foremost protection that the Code accords to the corporate debtors is the “moratorium” which commences with commencement of the CIRP. The NCLT, while admitting an application of a creditor against a company or an application by the company itself, declares “moratorium.” The “moratorium” continues through the CIRP and puts an embargo on institution or continuation of suits including execution of any judgment, decree, or order of any court of law, arbitration panel or any other authority. In addition to this, the moratorium also restricts the transfer, alienation or disposal of any assets or legal right or beneficial interest of the corporate debtor. Also, no action can be taken during the moratorium period to foreclose, recover or enforce any security interest created by the corporate debtor. The moratorium seeks to provide an atmosphere for revival of the corporate debtor. The protection under moratorium is granted only qua the property, rights, and obligations of the corporate debtor. Irrespective of the moratorium, fresh criminal prosecutions can be lodged, and those lodged earlier can continue, against the corporate debtor as also against its directors/promoters, etc., for any criminal offences. The benefit of moratorium under the Code is also not available to the guarantors and sureties of the corporate debtor. After the initial conflicts in interpretation, and subsequent observations by the Supreme Court of India, the Code was amended in June 2018 to clarify that no moratorium would apply to the legal actions of recovery against the surety and guarantors of a corporate debtor.
Moratorium also does not apply to the writs as also on the constitutional powers of the Supreme Court and the High Courts. The IRP is expected to appear in, and contest in the best interest of the corporate debtor, all matters which do not fall under moratorium, as also to ensure compliance with all the applicable laws during the CIRP period. End to Suspension Period Imposed by the Indian Government due to the Coronavirus: The COVID – 19 pandemic had a severe impact on the various industries and different economies around the world. In 2020, the Indian Government after rounds of discussion and deliberations, assessed the adversity that may be caused due to the Coronavirus on Indian economy. Thereafter the Indian Government considered and imposed a suspension on the IBC proceedings to curtail the devastating impact of the Coronavirus and increased the threshold limit of a default to drag a defaulting company to the insolvency tribunal to INR 10 million, from the earlier threshold of INR 0.1 million. The aforesaid suspension for initiation of IBC cases finally came to an end on March 24, 2021, vide an Ordinance dated April 24, 2021, but the increased threshold is unlikely to be reduced to the original limits. Pre-Packaged Insolvency Resolution Process (PPIRCP): The Insolvency and Bankruptcy (Amendment) Ordinance, 2021 has introduced a new concept of PPIRCP. PPRICP is a framework provided for resolution of stress of corporate MSMEs (as covered under MSME Act, 2006). Unlike Corporate Insolvency Resolution Process, PPRICP is available to defaults where the default is at least INR 1 million arising between March 25, 2020, to March 24, 2021. The PRICP is a hybrid process, where pre- initiation phase is largely informal and post-
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
Made with FlippingBook Online newsletter maker