In view of new amended Regulation 27 of the CIRP Regulations, Resolution Professional (RP) shall appoint two registered valuers to determine fair value and liquidation value in the manner laid down in Regulation 35 (1) of the CIRP Regulations. Therefore, it appears that valuation of assets on aggregate basis may be required to be calculated when determining fair value and valuation of assets on individual basis may be required to be calculated when determining liquidation value.

Regulation 35 (1) of the CIRP Regulations provides that that the Fair value and Liquidation value shall be determined by two Registered Valuers based on estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor; In case of variation in the value of assets as appearing in the Balance Sheet of the Corporate Debtor and physical verification, Physical verification of assets should be considered and the said variation must be highlighted to Committee of Creditors.

Section 15 (1) (c) of the Code provides that the public announcement of the CIRP shall contain the last date for submission of claims. Regulations 12 (2) of the CIRP Regulations provides that a creditor, who failed to submit proof of claim within the time stipulated in the public announcement, may submit such proof to the interim resolution professional or the resolution professional, as the case may be, till the approval of a resolution plan by the committee. NCLT, Principal Bench, New Delhi, in Alchmesit Asset Reconstruction Co. Ltd. and Moser Baer India Limited, observed that Regulation 12 (2) of the CIRP Regulations is in direct conflict with section 15 (1) (c) of the Code. NCLT observed “We do not think that by subordinate legislation the timeline provided by the Insolvency and Bankruptcy Code could be eroded in such a manner to as to cause delay in corporate insolvency resolution process”. In view of the aforesaid NCLT judgment, it appears that IP may not admit a claim after the period of submission of claims is over, as stated in public announcement. However, considering the preamble of the Code and to balance the interest of all stakeholders, claim may be accepted after the specified date as the situation warrants.

IRP/RP should intimate claimant that CIRP process stands closed in view of order passed by Hon’ble Supreme Court.

Section 21 of the Code provides that the IRP shall, after collation of all claims received against CD and determination of all the financial position of the CD, constitute Committee of Creditors. Thus, IRP/RP may also look into the claim of a creditor appearing in books of accounts who has not submitted the claim and also ask for proof of claim from those creditors.

Section 77 (3) of the Companies Act, 2013 provides that no charge created by a company shall be taken into account by the liquidator appointed under this Act or the Code, as the case may be or any other creditor unless it is duly registered with ROC. Thus, it appears that a charge which is not registered with ROC while evaluating claims may not be treated as secured claim. As a result, the creditor may not be treated as secured creditor by the RP and hence will fall lower in order of priority under section 53 (1) (d) of the Code for the purposes of distribution of assets.

Section 21 (2) of the Code provides that the committee of creditors shall comprise all financial creditors of the corporate debtor. In such a case, it appears that Committee of Creditors would consist of only one Financial Creditor.

Section 21 (1) of the Code provides that IRP shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. In view of aforesaid, it appears that unless claims are received, Committee of Creditors cannot be constituted. However, RP may initiate steps to ask major creditors to file proof of claims, based on the financial position of the Corporate Debtor determined by him under Section 21 of the Code.

Regulation 24 (7) of the CIRP regulations provides that the RP shall circulate the minutes of the meeting to all participants by electronic means within forty eight hours of the said meeting. Regulation 25 (5) (a) of the CIRP Regulations provides that the RP shall circulate the minutes of the meeting by electronic means to all members of the committee and the authorized representative, if any within forty-eight hours of the conclusion of the meeting. In view of CIRP regulations, as a best practice: • Minutes of Committee of Creditors meetings should record members who voted in favor, who voted against, and who abstained from voting in relation to each agenda item. • Any dissent should also be recorded. • Often there is a practice of sending draft minutes to the members for finalization of minutes. However, it is advisable that such a practice may not be followed by RP for the purposes of Code keeping in mind Regulation 24(7) and 25(5) of CIRP Regulations. • The practice of seeking comments on draft minutes may result in non compliance of timelines provided under Regulation 24 (7) and 25 (5). In this regard, only final minutes may be circulated by RP and any material comments by members of Committee of Creditors may be dealt by Committee of Creditors in next meeting.

As per the Code, IP is under obligation to ensure that company remains a going concern. Section 20 (1) of the Code provides that the IRP shall make every endeavor to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. In view of aforesaid position, it appears that IRP/RP is required to do all those things which are in the interest of the company undergoing CIRP including recovery of the amount due from debtors in the ordinary course of business and for this he may issue legal notice, file suit or complaint as may be necessary.

Section 28 (1) (j) and (l) of the Code provides that RP, during the CIRP, shall not take make any change in the management of the corporate debtor or its subsidiary ; make changes in the appointment or terms of contract of such personnel as specified by the committee of creditors, without the prior approval of the committee of creditors. Thus, if action of IRP/RP has effect of change in management of Corporate Debtor or has the effect of making changes in appointment of such persons as may be specified by Committee of Creditors, he shall take approval of Committee of Creditors in terms of section 28 (1) (j) and (l) of Code. IRP may take action against an employee of Corporate Debtor for hindering the CIRP process if he does not provide assistance and cooperation to IRP. However, by way of abundant caution, IRP may also place the matter before Committee of Creditors before taking any action. That said, it may be noted that IRP may also approach NCLT under section 19 (2) of the Code for necessary directions.

Section 17 (1) (b) of the Code provides that the powers of the board of directors or the partners of the Corporate Debtor, shall stand suspended and be exercised by IRP. It may be noted that though the powers of the Board of Directors (Board) are suspended, they are bound to provide all assistance to IP as only the powers of the Board are suspended and not their duties. Further, section 19 (1) of the Code provides that the personnel of the Corporate Debtor, its promoters or any other person associated with the management of the Corporate Debtor shall extend all assistance and cooperation to the IRP as may be required by him in managing the affairs of the corporate debtor. In the aforesaid context, it appears that IRP/RP along with existing Directors of Corporate Debtor shall sign the financial statements of Corporate Debtor undergoing CIRP.

In terms of Regulation 33 of CIRP Regulations, expenses to be incurred by IRP shall be fixed by applicant and same be reimbursed by Committee of Creditors to the extent it ratifies. It appears that where applicant fails to fix the expenses, NCLT shall fix the expenses. In this regard, it may be noted that in Inox Wind Ltd. vs. Jeena& Co., (decided on 28th July 2017), NCLAT, while setting aside the judgment of NCLT, directed the applicant to pay the fees of the IRP for the period he had worked.

Section 12 (2) of the Code provides that RP shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of sixty-six per cent of the voting shares. However, in this regard, it may be noted that NCLAT in Quantum Limited vs. Vs. Indus Finance Corporation Limited(decided on 20th February 2018) allowed an application filed after 180 days. In view of aforesaid, it appears that RP should ensure that the resolution approving the extension by Committee of Creditors should have been passed before the expiry of 180 days, although the application for extension may be filed after 180 days.

Section 12(2) of the Code provides that the RP can file an application to NCLT for extension of period of the CIRP, only if instructed to do so at a meeting of Committee of Creditors by a vote of 66% of the voting shares. However, reading the aforesaid provision, it appears that provision does not stipulate that such application for extension of period of CIRP is to be filed before NCLT within 180 days. Therefore, in view of aforesaid, it appears that is not mandatory that an application for extension of period of 180 days must be filed within the 180 days period. However, the approval of the Committee of Creditors must occur within the 180 days period. [Quantum Limited V. Indus Finance Corporation Limited decided on 20.02.2018 by NCLAT].

No, it appears that the settlement agreement cannot be termed as a valid resolution plan and RP has to follow the process prescribed under the Code.

Since section 53(1) (e) (i) of the Code provides for payment of any amount due to Central Government and State Government only for a period of two years preceding the liquidation commencement date, the dues beyond 24 months would fall in Section 53 (1) (e) (f) i.e. “any remaining debts and dues”.

Section 61 of the Code initiates with non obstante clause and provides that any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal. The NCLAT, vide order dated 29th August, 2017 passed in the matter of Steel Konnect (India) Private Limited vs. M/s Hero Fincorp Limited [Company Appeal (AT)(Insolvency) No. 51 of 2017, held that he Corporate Debtor can prefer appeal under section 61 of the Code through the Board of Directors, which stand suspended after admission of an application for initiation of CIRP. In view of above, the Board of Directors of a corporate debtor stand suspended for a limited period of corporate Resolution Process maximum 180 days or extended period of 90 days i.e. 270 days, but they continued to remain as Directors and members of the Board of Directors for all purpose in the records of Registrar of Companies under the Companies Act 20

The Code being silent on the issue and the applicant having no other alternative efficacious remedy, NCLT can appoint another IRP for meeting the ends of justice and to prevent the abuse of process of the NCLT and to proceed with the insolvency process as per NCLT order dated 7th September, 2017 in the matter of Macro Leafin Private Limited vs. Arrow Resources Limited [CA No. 259(PB)/2017 in CP No. (IB)-152(PB) of 2017].

Pendency of recovery proceedings before DRT cannot be said that default has occurred by the Corporate Debtor. NCLT, Ahmedabad Bench, in State Bank of India vs. RadheshyamFibres Pvt. Ltd., [C.P. (I.B.) No. 51/7/NCLT/AHM/2017], on 7th August, 2017 held that pending proceedings, though is not a proof of the occurrence of the default, is in no way contradictory to the fact of the occurrence of default. The opposite party needs to establish a good defence in such case to prove that no default occurred.

The IRP is being appointed in supersession of Board of Directors of the Corporate Debtor. Therefore the IRP, may, as provided in the Companies Act, 2013, discharge the functions of Board of Directors with regard to approving of annual accounts and reports pertaining to the periods prior to the appointment of IRP as per NCLT Kolkata bench order, in the matter of Nicco Corporation Ltd, [C.P No. 03/2017], dated 9th February 2017.

NCLT is a judicial body having both incidental and ancillary powers to give full effect to the provisions of the Code and to accomplish the intention with which this code had been enacted. Therefore, NCLT can grant a petitioner a liberty to amend the petition on technical grounds (Technicalities do not absolve a person from the Liabilities in question) as perNCLT, Mumbai Bench Order dated 28.03.2018 in the matter of State Bank of India v/s Videocon Industries Limited.

Section 138 of the Negotiable Instrument Act is a penal provision which empowers the Court of competent jurisdiction to pass order of imprisonment or fine and imposition of file cannot be held to be a money claim or recovery against the Corporate Debtor nor order of imprisonment, if passed by the court of competent jurisdiction on the Directors, they cannot come within the preview of Section 14. In fact no criminal proceeding is covered under Section 14 of Insolvency and Bankruptcy Code. (NCLAT Order dated 31.07.2018 in the matter of Shah Brothers Ispat Pvt. Ltd v. P. Mohanraj&Ors)

As per Section 24(5) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 4A and 16A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 only an Insolvency Professional other than the Resolution Professional of that Corporate Debtor can be appointed as the Authorised representative.

Suspended Board of Directors are invited to attend Committee of Creditors meetings for the purpose of aiding the Creditors and Resolution Professional in terms of providing information or clarifications related to the Corporate Debtor and another objective is to ensure the transparency. These objectives would not be achieved as representative may not be in position to provide any clarification w.r.t operations or financials of the corporate debtor. The Insolvency and Bankruptcy Code provides an option to appoint Insolvency Professionals as authorized representatives only for Financial Creditors. There is no such provision for directors and ideally directors should be present in the meetings otherwise purpose of inviting them would be defeated.

As per section 25(2)(h) of the Code, it is the statutory duty of Resolution Professional to invite prospective resolution applicants. The very object/intention of the Code is to revive a company under the Corporate Insolvency Resolution Process and not to liquidate it. Therefore, Committee of Creditors along with Resolution Professional shall explore all the possibilities for revival of the Company and follow the complete procedure even if the company is non operational. (NCLT order dated 04.05.2018 in the matter of Sunrise PolyfilmsPvt Limited (applicant) in the matter of CIRP between Punjab National Bank v/s Siddhi Vinayak Logistic Limited)

After the declaration of moratorium, no adjustment can be made by the Corporate Debtor against any amount even if the Corporate Debtor acts as the creditor in that transaction. No adjustment would be allowed during the moratorium period. (NCLT, Kolkata bench order dated 25.05.2017 in the matter of NIcco Corporation Limited)

A lawyer cum Insolvency Professional representing Financial Creditor or Operational Creditor in the court at the time of filing the application u/s 7 or 9 cannot act as the Interim Resolution Professional or Resolution Professional as it would impact the civil rights of the Corporate Debtor in view of the fact that the IRP/RP is instrumental in filing of the application and will, under the provisions of the Code, take over the management of the Appellant Corporate Debtor, which will be detrimental to the Corporate Debtor, its earnest revival attempts and its settlement attempts with its secured creditors. (Company Appeal filed in the matter of SreeMetaliks Ltd v/s Srei Equipment Finance Limited)

As per Regulation 12 of IBBI (Insolvency Professionals) Regulations, 2016, an IPE shall have majority of the Insolvency Professionals as the shareholders/directors/partners. The Insolvency Professionals can be Chartered Accountants or Company Secretaries. However, the Chartered Accountants or Company Secretaries who are not Insolvency Professionals can also form IPE subject to the conditions that the majority of shareholders/directors/partners etc shall be IPs.

As per IBBI circular dated 6th July, 2018, an IPE’s sole objective is to provide support services to the insolvency Professionals, who are its partners or directors, as the case may be. As per our understanding, raising invoices in the name of an IPE for the services rendered by Partners as Resolution Professional / Interim Resolution Professionals is covered under support services.

The resolution professional can file an application to amend the petition filed by Financial/Operational Creditor to include a legal ground and the Adjudicating authority may accept the same if the same is just and equitable to remove the controversy between the parties. (NCLT, Chennai bench order dated 17th August, 2018 in the matter of Mr. V Nagarajan v/s M/s ICICI Bank Ltd.)

The Adjudicating Authority can give liberty on case to case basis to the appellants to file fresh application for removal of technical errors which can manifestly turn into technical defects which may ultimately prove fatal. (NCLAT order dated 01.10.2018 in the matter of Nizamiya Construction Pvt. Ltd. Vs Thyssenkrupp Industries India Pvt. Ltd.)

The timelines that are to be adhered to by the NCLT and NCLAT are of great importance, and that reasons must be recorded by either the NCLT or NCLAT, if the matter is not disposed of within the time limit specified. (Judgement dated 4th October, 2018 of the Hon’ble Supreme Court of India in the matter of Arcelor Mittal India Private Limited Vs. Satish Kumar Gupta and Ors. arising from Corporate Insolvency Resolution Process (CIRP) of Essar Steel India Limited)

The voting thresholds for the decision of the committee of creditors would not be mandatory in the cases of class of creditors where the prospective buyers of real estate alone constitute the CoC. In case of deadlock, the preference can be given to the decisions taken by the highest percentage in the committee of creditors. The class of creditors like real estate (Commercial & residential) are distinct than the other class of creditors. (NCLT Principal Bench judgment dated 29.09.2018 in the matter of Nikhil Mehta 7 Sons (HUF) & Others v. M/s AMR Infrastructure Ltd.)

The pendency of petition under Section 19 of ‘The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 cannot be a ground to set aside the admission order of NCLT. (NCLAT order dated 17.09.2018 in the matter of BabulalVardharjiGurjar v/s Veer Gurjar Aluminium Industries Pvt. Ltd. &Anr.)

The “I & B Code” defines ‘Resolution Plan’ as a plan for insolvency resolution of the ‘Corporate Debtor’ as a going concern. Functionally, the ‘Resolution Plan’ must resolve insolvency (rescue a failing, but viable business); should maximise the value of assets of the ‘Corporate Debtor’, and should promote entrepreneurship, availability of credit, and balance the interests of all the stakeholders. • It is not a sale. • It is not an auction. • It is not recovery. • It is not liquidation. (NCLAT order dated 14.11.2018 in the matter of Binani Industries Limited v/s Bank of Baroda &Anr)

The Code and regulations do not provide any provision for the settlement. However, by an amendment to the Code w.e.f 6th June, 2018, withdrawal has been allowed under a stringent procedure with the approval of Adjudicating Authority. Further, the Resolution Professional cannot assume the role of Supreme Court and to do complete justice under Article 142 of the Constitution. (IBBI Order dated 12.11.2018 in the matter of Mr. Matin S.K. Golla, Insolvency Professional)

The Interim Resolution Professional/ Resolution Professional (IRP/RP) can revise the amount of claim admitted as per Regulation 14 of CIRP regulations, though the IRP/RP needs to collect additional information warranting such revision. However, ideally the IRP/RP shall intimate the NCLT regarding such revision.

In terms of Regulation 33 of the CIRP Regulations, initially the responsibility of payment of IRP costs for one-month period remains on the applicant. After ratification of that amount by CoC, it is to be reimbursed by the CoC. (NCLT order dated 31.10.2018 in the matter of Aqua Omega Services Pvt Ltd. v/s Great United Energy Pvt. Ltd.)

After completion of 270 days of ‘Corporate Insolvency Resolution Process’, the Adjudicating Authority can pass order under Section 31 of the ‘I&B Code’, if a ‘Resolution Plan’ has been approved by the ‘Committee of Creditors’. In absence of any ‘Resolution Plan’, the Adjudicating Authority is bound to pass order under Section 33 by initiating liquidation proceeding against the ‘Corporate Debtor’. After completion of 270 days, the ‘Committee of Creditors’ ceased to exist and thereby they have no jurisdiction to replace a ‘Resolution Professional’ under Section 22 of the ‘I&B. Even if the decision to replace the ‘Resolution Professional’ is taken prior to 270 days, in absence of any order passed by the Adjudicating Authority, such decision cannot be entertained on completion of 270 days. (NCLAT order dated 03.01.2019 in the matter of Sanjay Kumar Ruia v/s Catholic Syrian Bank Ltd. &Anr.)

As per Section 30 of the code read with Regulations 31, 34 & 38 of IBBI (CIRP) Regulations, it is clear that the ‘Committee of Creditors’ is required to determine the resolution cost to be incurred by ‘Resolution Professional’. It is only thereafter when the Adjudicating Authority either approve(s) the ‘Resolution Plan’ under Section 31 of the ‘I&B Code’, the ‘Resolution Professional’ is entitled to know the actual expenses allowed, as approved by the ‘Committee of Creditors’ . Once the ‘Resolution Plan’ is determined by the ‘Committee of Creditors’, the Adjudicating Authority cannot differ with the same nor can sit in appeal, except in cases where there is an arithmetical error. (NCLAT order dated 03.01.2019 in the matter of Sanjay Kumar Ruia v/s Catholic Syrian Bank Ltd. &Anr.)

The ‘Fast Track Corporate Insolvency Resolution Process’ is different from ‘Corporate Insolvency Resolution Process’. As per sub-section (2) of Section 55 of the ‘I&B Code’ an application for ‘Fast Track Corporate Insolvency Resolution Process’ can be made against (i) the ‘Corporate Debtor’ whose assets and income is below a level, as may be notified by the Central Government or (ii) the ‘Corporate Debtor’ with such class of creditors or (iii) such other category of corporate persons as may be notified by the Central Government. Admittedly, the Corporate Debtor does not come within the category of ‘Corporate Debtor’ in terms of clauses (a) or (b) or (c) of sub-section (2) of Section 55, Therefore, Section 55 cannot be invoked against the ‘Corporate Debtor’. The adjudicating authority exceeded its jurisdiction by extending the period of 90 days after completion of 270 days of the ‘Corporate Insolvency Resolution Process’ wrongly exercising its power under sub-section (2) of Section 55 which is not applicable. (NCLAT order dated 03.01.2019 in the matter of Sanjay Kumar Ruia v/s Catholic Syrian Bank Ltd. &Anr.)

The Adjudicating Authority was of the view that the spirit of the Code is first and then comes the other things. The rejection of the Resolution Plan by the CoC even without opening the envelope containing the Resolution Plan on the ground that the same is submitted after the expiry of the stipulated time fixed by the CoC, is certainly against the law/Code. They were of the view that when there is a clash/ conflict between the Regulations and the Code, the object of the Code is paramount and not the Regulations which are formed only for the just implementation of the Code. Purely on the basis of technicalities, the rejection of Resolution Plan even without looking into its merits is certainly an act which shall go against the very spirit of the Code and may even result in a huge loss to the Company. (NCLT, Mumbai bench order dated 21.12.2018 in the matter of ICICI Bank Limited v/s Unimark Remedies Ltd. and Omkara Asset Reconstruction Pvt. Ltd. v/s Resolution Professional of Unimark Remedies Ltd.)

Yes, as there is no provision in the code prohibiting the appointment of same person for valuation during liquidation process.

The Adjudicating Authority has no jurisdiction to decide the claim or counter claim with regard to the parties. The Corporate Insolvency Resolution Process is not a money claim nor a suit or litigation. The claim is not against the Corporate Debtor or its subsidiaries but includes inter-se claim for the same very material, such dispute cannot be decided by the Adjudicating Authority under Sub-section (5) of Section 60of the I&B Code. It is only after the completion of the period of moratorium and it is finally decided that the material belongs to the Corporate Debtor, it will be open to the persons to file suit before appropriate forum claiming authority. (NCLAT order dated 30.01.2019 in the matter of M/s Dynepro Private Limited v/s Mr. V. Nagarajan)

Section 8 (1) of the Code read with Rule 5 of the AA Rules provides that an operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in Form 3 or Form 4, as the case may be and the same may be delivered to the corporate debtor either at the registered office by hand, registered post or speed post with acknowledgement due or by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor. The NCLAT vide its order dated 21st January, 2019 passed in the matter of ‘Alloysmin Industries v/s Raman Casting Private Limited’, while facilitating the process, held that ‘if the demand notice under Section 8 (1) is served on Corporate Debtor either on its Registered Office or its Corporate Office, it should be treated to be valid service of notice under Section 8 and application under Section 9 on failure of payment, if filed after 10 days, is maintainable.’ In view of above, an operational creditor can deliver the notice or copy of invoice demanding payment of amount involved in the default either at the registered office or corporate office of the corporate debtor in the manner provided under the Code read with rules.

Section 17 read with Section 19 and Section 23 of the Code provides that during the CIRP process, the management of the affairs of the corporate debtor shall vest in the IRP or RP from the date of appointment and the powers of the board of directors or the partners of the corporate debtor, shall stand suspended and be exercised by the IRP or RP. The personnel of the Corporate Debtor, its promoters or any other person associated with the management of the Corporate Debtor shall extend all assistance and cooperation to the IRP or RP as may be required by him in managing the affairs of the Corporate Debtor. In case any personnel of the Corporate Debtor, its promoter or any other person required to assist or cooperate with the IRP or RP does not assist or cooperate, the IRP or RP may make an application the Adjudicating Authority for necessary directions. The NCLT vide order dated 16th January 2019 passed in the matter of Asset reconstruction Company (India) Private Limited v/s Shivam water Treaters Private Limited, held that ‘the Insolvency Professional is acting as an officer of the Court and any hindrance in the working of the CIRP will amount to contempt of court. Police assistance is granted to the Resolution Professional so that he can take full control of the company without any interference from ex Director’s or his officials. All the powers of the Corporate Debtor and its Directors relating to the operation of the Bank Account anywhere in India are frozen and are to be exercised by the Insolvency Professional.’. In view of above, after initiation of CIRP process, all the powers of the Board of Directors are suspended and vest with the IRP or RP. All the personnel of the corporate debtor including promoter, directors or any other person associated with the corporate debtor are required to assist or cooperate with the IRP or RP.

The Adjudicating Authority held that loan was appearing in the Balance Sheet of the Corporate Debtor which is acknowledgement of liability and Corporate Debtor has not disputed the fact of loan being shown as liability in its Balance Sheet. Thus, the liability shown in the balance sheet is a clear acknowledgement of debt by the Corporate Debtor and is not barred by Limitation even if 3 years has lapsed prior to the date of filing of the application.