Impact of Insolvency and

Bankruptcy Code on Corporate

India and Banking Sector

Todays Discussion

Success Factors of IBC

Evolution of IBC and Replacements

Tools of IBC

Increasing ease of Voluntary Winding up

Practical Life Data Analysis

Some Landmark Judgements

Summing up the Impact on Corporate Sector and Banking Sector

Insolvency Bodies in Other Countries

Some Fallacies and “Ill Effects”

Success Factors of IBC

Strict 180 days guideline (Plus 90 days if extension granted).

Fast Track Insolvency for simple cases (to be completed within 90 days).

Creditor is the King and IBC id Creditor Driven.

Involvement of Competent Insolvency Professionals to drive the process faster.

Involvement of NCLT to avoid court related delays.

Strict compliance checks on each and every stage.

Created a sense of Credit Security in Corporate India

Easier Voluntary Winding up Process for Corporates.

Helped Banks recover NPA’s in a more structured and easier way.

Provisions even for Insolvency of Individuals and Partnership Firms (Not yet under NCLT).

Evolution of IBC

The Provincial Insolvency

Act, 1920

Presidency Towns

Insolvency Act, 1909

No proper definition of

Default

No Timeline for Justice

Easy provisions for

Staying the Case

Only defined acts of

Insolvency but not

Creditors

Mainly Included Property

and applied to only

Presidency Towns.

No proper definition

of Default

Only limited to

some Individual

Insolvency Cases

No method of

recourse for

Corporate or

Banking Sector of

India.

IBC, 2016 came into force on

28th May, 2016.

Tools of IBC

Tools

Insolvency of Operational

Creditor

Insolvency of Financial

Creditor

Insolvency of Individuals and

Partnership Firms

Voluntary Winding Up

Increasing ease of Voluntary Winding up

The Code has also done away with the distinction of

members' voluntary winding-up and creditors' voluntary

winding-up and envisages that for a voluntary winding-up

a special resolution is required to be passed by the

company's members, which is to be approved by 2/3 of

creditors by value, if any.

Following is a brief checklist for Voluntary Winding Up:

Checklist For Voluntary Winding UpSI EVENT DOCUMENTS

1. Hold Board Meeting Copy of Board Resolution

2. File Declaration of Solvency (DOS)

DOS on Rs. 100/- Stamp Paper and signing by 2 Majority

Directors and Notarisation

Attaching Financials of Last 2 FY and the Latest

Financial Position signed by an Auditor

Filing of Form GNL-2 with ROC

3.Passing of Special Resolution for Approval of Voluntary Liquidation,

Appointment of Liquidator and Approving his Remuneration

Copy of Notice for EGM, Extract of SR, Explanatory

Statement, Consent of Liquidator

Filing of Form MGT-14 with ROC

4.Forward a Copy of the Resolution and Notice of EGM to ROC/IBBI/GST

Dept./ RBI/ITBy Hand Delivery/Mail

5. Public AnnouncementForm A in one English and a Vernacular Daily and a claim

period to be kept open for 30 days.

6.Claim Period to remain open for 30 days from Passing of

Special Resolution-

7.Liquidator to prepare Preliminary Report and give a copy to

IBBI/ROC/IT/GST Dept etc. Copy of Preliminary Report

8. Pay Liabilities, if any -

9. Payment of Left over proceeds to Shareholders

No objection or Tax clearance certificate from Income

Tax Department.

Auditor's certificate confirming that all liabilities have

been either fully paid or adequately provided for.

Auditor's certificate to the effect that the winding up

is in accordance with the provisions of the Companies

Act and IBC, 2016.

An auditor's certificate to the effect that there is no

legal proceedings pending in any court in India against

the applicant or the company under liquidation and

there is no legal impediment in permitting the

remittance.

10. Audit of Liquidators’ account by Statutory Auditor Report of the Statutory Auditor

11. Preparation of Final Report by Liquidator Final Report along with Annexures

12. Apply to NCLT for Liquidation Order

Apply in petition in Form I with requisite Fee along

with Affidavit of Service and serve a Copy to

ROC/RD/IT/IBBI

13. NCLT to pass order Obtain Certified copy of the order.

14. Serve a copy of the order to ROC/RD/IBBI/IT -

Practical Life Data Analysis

NPA’s Recovered by Banks due to enabling provisions of

IBC

Major NPA Hit Banks

Reports on further recoveries

Insolvent Companies seeing Takeovers

NPA’s Recovered by Banks due to enabling

provisions of IBC

Continued….“Banks recovered Rs 365.51 billion in the first

quarter of 2018-19.

During 2017-18, banks recovered Rs 745.62

billion.”

With two major cases at the final stage of

resolution, the Finance Ministry expects bad

loan recoveries to touch ₹1.80 lakh crore during

the current fiscal.

So far, banks have recovered ₹1 lakhcrore under the Insolvency andBankruptcy Code (IBC). The recovery isexpected to touch ₹ 1.80 lakh crore byMarch 2019 with some of the resolutionsat the final stage.

Lenders are expecting to recoveralmost ₹52,000 crore loan in case ofEssar Steel while ₹18,000 crore fromBhushan Power & Steel Ltd.

Major NPA Hit Banks

Insolvent Companies seeing Takeovers

NPA Resolution Plan

Electrosteel Steels Limited Vedanta Group

Bhushan Steel Limited Tata Steel

Alok Industries Limited RIL-JM (Undergoing)

Essar Steel Arcelor Mittal

Monnet Ispat Ltd JSW Steel Ltd. and Aion Capital

Partners Ltd

Some Landmark Judgements

Innoventive Industries Ltd. v. ICICI Bank

Supreme Court’s verdict in the case of Innoventive Industries Ltd. v. ICICI Bank,

whereby the Apex Court was of the view that if the application under Section 9 is

complete and there is no ‘existence of dispute’ and there is a ‘debt’ and

‘default’ and then the Adjudicating Authority is bound to admit the application

and IBC will override SARFAESI Act.

Radius Infratel Pvt. Ltd. …Appellant Vs. Union Bank of India

In the instant case, the Company being the Corporate Debtor had preferred

appeal against order passed by National Company Law Tribunal, whereby the

Tribunal had admitted Financial Creditor’s i.e. Union Bank of India application

under Section 7 of the Insolvency and Bankruptcy Code, 2016 for appointment of

the Interim Resolution Professional.

Insolvency Bodies in Other Countries Australia : In Australia the members of ARITA (Australian Restructuring Insolvency &

Turnaround Association) and ASIC (Australian Securities and Investments Commission) are therecognised insolvency bodies of Australia, can act as insolvency practioners.

United Kingdom : The members of the following bodies can act as Insolvency Practioners:-

1. Institute of Chartered Accountants of England and Wales( ICAEW)

2. Institute of Chartered Accountants of Scotland (ICAS)

3. Institute of Chartered Accountants of Ireland (ICAI)

4. Association of Chartered Certified Accountant (ACCA)

5. Solicitors Regulation Authority (SRA)

6. Law Society of Scotland (LSS)

7. Insolvency practitioners Association (IPA)

Greece: In Greece Insolvency Administrators called ‘syndikos’ are appointed to administerthe process of insolvency etc.

All over the world the Countries have professionals who manage insolvency proceedings andare regulated by the applicable law of the country.

Some Fallacies and “Ill Effects”

Strict Eligibility under Regulation 29A for Bidding.

Then there are cases where the second highest bidder has offered to bid

again after coming to know of the final bid by the winner.

Admission of the matter for CIRP is becoming time taking.

Small Shareholders value and Investment has been almost eroded in certain

cases (Electrosteel Steels Limited)

The game play of Hair Cut.