On a motion made by the resolution professional after and in terms of the exercise aforesaid, the Adjudicating Authority, in its turn, shall have to examine if the referred transaction answers to all the descriptions noted above and shall then decide as to what order is required to be passed, for avoidance of the impugned transaction or otherwise. Looking to the legal fictions created by Section 43 and looking to the duties and responsibilities of the resolution professional and the Adjudicating Authority, ordinarily an adherence to the process illustrated hereinabove shall ensure reasonable clarity and less confusion; and would aid in optimum utilization of time in any insolvency resolution process.
Nevertheless, it’s not always the case that a promoter has an ill-will to defraud the creditors and therefore there has been provided certain provisions in law under which a promoter can regain control of its company which is facing bankruptcy proceedings, for instance, Section 12A provides for “withdrawal of application admitted under section 7,9 or 10 of the code, and further, section 230 0f the Companies Act, 2013, which provides for compromise or arrangement of companies. However, Currently, neither Section 230 of the Companies Act, nor the IBC/Liquidation Regulations extend the application of Section 29A of the IBC to schemes under Section 230. This may lead to a situation where persons (including promoters) who were ineligible to submit a resolution plan in the CIRP, may wish to propose a scheme under Section 230. Experts feel defaulting promoters might misuse the Companies Act provision to get a backdoor entry into their firms. “The Section 29A of IBC and Section 230 of Companies Act are conflicting in spirit.
Analysis of CIRPs, Liquidation Process, Voluntary Liquidation, Registered Insolvency Professionals & Registered Valuers with IBBI etc.. in Chart & Diagrams...
The Supreme Court's ruling in the case of B.K. Educational Services Private Limited v. Parag Gupta and Associates holds good, i.e., the limitation period for the application under the IBC shall start from the date of default. This means that, if an application under the IBC is filed after three years from the date of default, the same shall not be accepted provided if there is a condonation of delay or continuous cause of action. Thus, acknowledgement of debt comes under the category of continuous cause of action and will give rise to the new limitation period if done within the prescribed period from the last acknowledgement of liability.
From the above description of the laws of Insolvency and bankruptcy for Financial service providers it can be inferred that, NBFCs form an important part of the economy. DHFL a systematically important deposit accepting company came under the liquidity crunch and as a reminder to RBI and government about scrutinizing the laws and such NBFCs. On 7th June, 2019 amidst the NBFCs fallout, one by one, it was evidentiary to analyse the situation of such NBFCs and its asset liquidity ratio way before it gets out of control, hence RBI issued directions ‘Prudential framework for resolution of stressed assets’ which cover NBFC-D as well. The directions prescribe an effective framework to curb liquidity issues in the long run as they are the watch-keeper of accounts of NBFCs.
Section 29A laid down a multiple layered and comprehensive standard of disqualification that will exclude bona fide resolution applicants. The application of the section might also disbar crucial stakeholders to bid for the revival of the company. Therefore, certain amount of leniency by the courts in deciding the issue of disqualification is the need of the hour to maximize the objectives of the Code. As an alternate to the current restriction, a middle ground could be adopted, which permits promoters to bid for the corporate debtor, while ensuring there are sufficient safeguards in place to ensure that the lenders make the most of the resolution process.