New Delhi | Jagran Business Desk: Nirmala Sitharaman, the Finance and Corporate Affairs Minister introduced the Insolvency and Bankruptcy Code (Amendment Bill), 2021 in the Lok Sabha on July 26. The Bill will replace the Insolvency and Bankruptcy Code Amendment Ordinance 2021 promulgated in the month of April.
The Bill, just like its precursor ordinance, introduces a resolution mechanism for the MSMEs (Micro, Small and Medium Enterprises) with defaults up to ₹1 Crore. The highlight of the bill remains that the debtors continue to keep the control of their firm under debt during the insolvency process.
The Distressed Corporate Debtors are allowed to begin a pre-packaged insolvency resolution process (PIRP) with a prior approval of two-thirds of their creditors to come to the final terms about their outstanding debt. However, a base resolution plan must be submitted at the time of the initiating Pre-packaged Insolvency Resolution Process (PIRP).
In case the creditors are not paid all 100 per cent of their outstanding dues, the Pre-packaged Insolvency Resolution Process (PIRP) allows for an alternate Swiss challenge to the resolution plan. Under this, any third party will be permitted to submit a fresh resolution plan. The original insolvency applicant will either have to match the improved resolution plan or must forego the investment.
The bill also specifies the duties of resolution professional before initiation of pre-packaged insolvency resolution process.
Section 54-A (2) (e) specifies that a resolution professional must be proposed by the financial creditors of the organisation in debt for conducting the pre-packaged insolvency resolution process.
The bill further specifies that the resolution professional shall, within seven day sof the pre-packaged insolvency commencement date, constitute a committee of creditors, based on the list of claims.
Section 54D (1) of the bill specifies the time-limit for completion of pre-packaged insolvency resolution process as 120 days from the pre-packaged insolvency commencement date. The sub-clause (2) of Section 54D says that the resolution plan must be submitted within a period of ninety days from the pre-packaged insolvency commencement date.
In case the resolution plan isn’t approved by the committee of creditors within the time frame, the resolution professional must file an application with the adjudicating authority for termination of the pre-packaged insolvency resolution process.
Posted By: Mukul Sharma