[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN INDIA]
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the corporate debtor continues as a going concern. The Code also contains provisions governing penalties and punishments for extortionate and improper transactions, both prior to and during the insolvency process and proceedings. In the process of liquidation, the timelines would depend upon facts and circumstances of each case such as complexity in sale of assets of the company, finalization of liabilities and any disputes related to rejection of any party’s claims by the liquidator, any pending legal proceedings, tax disputes, appeals, realization of receivables, etc. During the course of liquidation of a corporate debtor, a liquidator is also open to compromise or settlement if the same is being recommended by the committee of creditors. 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, decl ares “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. 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- initiation stage is formal. The informality at pre- initiation stage offers flexibility for the corporate
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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