Cracking The Insovency & Bankruptcy Code, 2016

Q1. Have all provisions of the Insolvency and Bankruptcy Code, 2016 been notified?

A1. Not all provisions of the Code have been notified. Following is a list of the provisions that are in force:

Sr. No.Enforcement DateProvisions of the Code enforced
1.August 5th 2016[Part IV Chapter 1] sections 188 to 194 [both inclusive] – Establishment of Insolvency and Bankruptcy Board of India
2.August 19th 2016
  • section 3(1) – Definition of “Board”;
  • section 3(5) – Definition of “Chairperson”
  • section 3(22) – Definition of “notification”
  • section 3(26) – Definition of “prescribed”
  • section 3(28) – Definition of “regulations”
  • section 3(37) – reference to Indian Contract Act, 1872, the Indian Partnership Act, 1932, the Securities Contact (Regulation) Act, 1956, the Securities Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Limited Liability Partnership Act, 2008 and the Companies Act, 2013 in case the words and expressions are not defined in the Code.
  • section 221 – Grants to the Insolvency Board by Central Government;
  • section 222 – Fund of the Insolvency and Bankruptcy Board;
  • section 225 – Insolvency Board to be bound by directions of Central Government on policy matters;
  • section 226 – Power of Central Government to supersede the Insolvency Board;
  • section 230 – Delegation of powers by the Insolvency Board to its member/officer;
  • section 232 – Members, officers and employees of Board to be public servants;
  • section 233 – Protection of action taken in good faith by Insolvency Board or Government;
  • section 239(1) and 239(2)(zd) – Power of Central Government to make rules regarding salaries of the Chairperson and members of the Board
  • section240(1) and 240(2)(zt) – Power of Insolvency Board to make regulations regarding appointment of other officers and their salaries.
  • section 241 – Every rule and regulation made must be presented before Parliament;
  • section 242 – Power of Central Government to remove difficulties in giving effect to provisions of the Code.
3.November 1st 2016
  • section 3(2) – Definition of “bench”
  • section 3(3) – Definition of “bye-laws”
  • section 3(4) – Definition of “charge”
  • section 3(6) – Definition of “claim”
  • section 3(7) – Definition of “corporate person”
  • section 3(8) – Definition of “corporate debtor”
  • section 3(9) – Definition of “core services”
  • section 3(10) – Definition of “creditor”
  • section 3(11) – Definition of “debt”
  • section 3(12) – Definition of “default”
  • section 3(13) – Definition of “financial information”
  • section 3(14) – Definition of “financial institution”
  • section 3(15) – Definition of “financial product”
  • section 3(16) – Definition of “financial service”
  • section 3(17) – Definition of “financial service provider”
  • section 3(18) – Definition of “financial sector regulator”
  • section 3(19) – Definition of “insolvency professional”
  • section 3(20) – Definition of “insolvency professional agency”
  • section 3(21) – Definition of “information utility”
  • section 3(23) – Definition of “person”
  • section 3(24) – Definition of “person resident in India”
  • section 3(25) – Definition of “person resident outside India”
  • section 3 (27) – Definition of “property”
  • section 3 (29) – Definition of “Schedule”
  • section 3(30) – Definition of “secured creditor”
  • section 3(31) – Definition of “security interest”
  • section 3(32) – Definition of “specified”
  • section 3(33) – Definition of “transaction”
  • section 3(34) – Definition of “transfer”
  • section 3(35) – Definition of “transfer of property”
  • section 3(36) – Definition of “workman”
  • section 196 – Powers and functions of the Insolvency Board;
  • section 197 – Constitution of advisory and executive Boards by the Insolvency Board;
  • section 223 – Accounts and Audit to be maintained by the Insolvency Board;
  • section 239(2)(ze) – (zh) – Central Government making rules for other functions, funds and annual statement of accounts of the Insolvency Board;
  • section 239(2)(zl) to (zm) – Form and time for preparing budget and annual report by the Insolvency Board;
  • section 240(2)(a) to (zm);
  • section 240(2) (zu) to (zzzc);
  • section 244 – Central Government to exercise power until the Board is constituted;
  • section 246 – amendment provision of Central Excise Act, 1944
  • section 247 – amendment provision of Income Tax Act, 1961
  • section 248 – amendment provision of The Customs Act, 1962
  • section 250 – amendment provision of Finance Act, 1944;
  • section 252 – amendment provision of Sick Industrial Companies (Special Provisions) Repeal Act, 2003
4.November 15th 2016
  • section 199 to section 207 [both inclusive] – Insolvency Professional Agencies and Insolvency Professional;
  • section 208 (1)(c) and (e) – functions of Insolvency professionals.
  • section 208(2) – obligations of Insolvency professionals.
  • section 217 to section 220 [both inclusive] – Inspection and investigation of insolvency professional agency/ insolvency professional/ information utility made by Insolvency Board
  • section 251 – amendment provision of SARFAESI Act, 2002;
  • section 253 – amendment provision of Payment and Settlement Systems Act, 2007;
  • section 254 – amendment provision of Limited Liability Partnership Act, 2008;
  • section 255 – amendment provision of Companies Act, 2013
5.December 1st 2016
  • section 2(a) – (d) (except with regard to voluntary liquidation or Bankruptcy) – Application of the Code
  • section 4 to section 32 [both inclusive] – Insolvency resolution and Liquidation for Corporate persons;
  • section 60 to section 77 [both inclusive] – Adjudicating Authority for corporate persons (NCLT and NCLAT);
  • section 198 – Condonation of delay;
  • section 231 – Bar of Civil Court jurisdiction;
  • section 236 to section 238 [both inclusive] – Offences triable by Special Courts;
  • section 239(2)(a) – (f) – Power of Central Government to make rules.
6.December 15th 2016Section 33 – 54 [both inclusive] – Liquidation Process

Q2. Is NCLT the adjudicating authority under the Insolvency and Bankruptcy Code? If yes, has the provision been notified?

A2. Section 5 and section 60 of the Code pronounce the National Company Law Tribunal1 as the adjudicating authority. [Both the provisions are enforced since December 1st, 2016]2.

Q3. Has NCLAT been appointed? Where is the Court?

A3. The National Company Law Tribunal (NCLT) and The National Company Law Appellate Tribunal (NCLAT) have been constituted with effect from 1st June, 20163. The NCLAT is located at New Delhi. There is only one NCLAT having territorial jurisdiction all over India.

Q4. How many NCLT are there? What are their jurisdictions?

A4. There are 11 NCLT benches around the country4 including the Principal bench and 10 regular benches. The Principal Bench is where the President of NCLT presides. Following table enumerates the National Company Law Tribunal benches with their jurisdiction:

Sr.NCLT BenchLocationJurisdiction
1.a) NCLT Principal Bench

b) NCLT Delhi Bench		New Delhi(1) State of Haryana.
(2) State of Rajasthan.
(3) Union territory of Delhi.
2.NCLT Ahmedabad BenchAhmedabad(1) State of Gujarat.
(2) State of Madhya Pradesh.
(3) Union territory of Dadra and Nagar Haveli.
(4) Union territory of Daman and Diu.
3.NCLT, Allahabad BenchAllahabad(1) State of Uttar Pradesh.
(2) State of Uttarakhand.
4.NCLT Bengaluru BenchBengaluruState of Karnataka
5.NCLT Chandigarh BenchChandigarh(1) State of Himachal Pradesh.
(2) State of Jammu and Kashmir.
(3) State of Punjab.
(4) Union territory of Chandigarh.
6.NCLT Chennai BenchChennai(1) State of Kerala.
(2) State of Tamil Nadu.
(3) Union territory of Lakshadweep.
(4) Union territory of Puducherry.
7.NCLT Guwahati BenchGuwahati(1) State of Arunachal Pradesh.
(2) State of Assam.
(3) State of Manipur.
(4) State of Mizoram.
(5) State of Meghalaya.
(6) State of Nagaland.
(7) State of Sikkim.
(8) State of Tripura.
8.NCLT Hyderabad BenchHyderabad(1) State of Andhra Pradesh.
(2) State of Telangana
9.NCLT Kolkata BenchKolkata(1) State of Bihar.
(2) State of Jharkhand.
(3) State of Odisha.
(4) State of West Bengal.
(5) Union territory of Andaman and Nicobar Islands.
10.NCLT Mumbai BenchMumbai(1) State of Chhattisgarh.
(2) State of Goa.
(3) State of Maharashtra.

Q5. Has the Insolvency and Bankruptcy Board been constituted? If yes, has it been notified?

A5. Section 1885 of the Insolvency and Bankruptcy Code 2016 provides for the establishment of the Insolvency and Bankruptcy Board. The Central Government established the Insolvency and Bankruptcy Board of India since 1st October 20166. The head office of the Insolvency and Bankruptcy Board of India is at New Delhi. The Central Government has appointed Madhu Sudan Sahoo as Chairperson of the Insolvency and Bankruptcy Board of India with effect from 1st October, 2016 i.e. date of assumption of the charge for a period of five years or upto sixty-five years of age or until further orders, whichever is the earlier7.

Q6. Under which Ministry are all these authorities being setup?

A6. These authorities are being set up under the Ministry of Corporate Affairs, Central Government of India.

Q7. Discuss the hierarchy of the adjudicating authorities under the Insolvency and Bankruptcy Code, 2016.

A7. There are two streams of authorities to adjudicate insolvency and bankruptcy applications.

In relation to insolvency matters of individuals and unlimited liability partnership firms, the adjudicating authority is the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain8. Appeals from the Debt Recovery Tribunal (DRT) would be filed before the Debt Recovery Appellate Tribunal (DRAT) within 30 days of the Order9. An appeal from an order of the DRAT on a question of law under the Code can be filed within forty-five days before the Supreme Court10.

In matters regarding limited liability corporate entities, the National Company Law Tribunal (“NCLT”) is the adjudicating authority11. Appeals from NCLT would be filed before the National Company Law Appellate Tribunal (NCLAT) within 30 days of the Order12. The Supreme Court has appellate jurisdiction over the orders of the NCLAT13.

Q8. Has the form under section 7(2) of the Code been prescribed?

A8. The form required under section 7(2) of the Code has been prescribed as ‘Form 1’ under The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 which has come into force from December 1st, 201614.

Q9. Does the Code override the provisions of the SARFAESI Act 2002 and the Companies Act, 2013?

A9. The Insolvency and Bankruptcy Code 2016 provides for amendments in the SARFAESI Act, 2002 under section 251 in the manner specified in the Seventh Schedule and the Companies Act, 2013 under section 255 in the manner specified in the Eleventh Schedule to function harmoniously.

Q10. What is the role of the Insolvency and Bankruptcy Board of India?

A10. The Insolvency and Bankruptcy Board of India has been established under the Code as an Insolvency Regulator. Sections 196, 207 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016 spell out powers that are conferred on the Board. In pursuance of these powers and functions15, the Board is expected to register and regulate insolvency professional agencies, insolvency professionals and information utilities. The Board has made the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 201616 to lay down guidelines for the eligibility, registration and conduct of Insolvency Professionals. The Board exercises the powers of a Civil Court under the Code of Civil Procedure, 1908 while trying a suit in matters pertaining to Insolvency Agencies and concerning:

  1. The discovery and production of books of account and other documents, at such place and such time as may be specified by the Board.
  2. Summoning and enforcing the attendance of persons and examining them on oath
  3. Inspection of any books, registers and other documents of any person at any place.
  4. Issuing of commissions for the examination of witnesses or documents.

Q11. Which forum should be approached to challenge an order of the Insolvency and Bankruptcy Board of India?

A11. Any insolvency professional agency that is aggrieved by the order of the Board made under section 201 of the Code, may prefer an appeal to the National Company Law Appellate Tribunal17. An information utility may also refer an appeal to the NCLAT against the orders of the Board18.

Q12. Has the concept that the secured creditors stand outside of winding up gone away?

A12. The concept that secured creditors can stand outside of winding up has not gone away. Section 52 of the Insolvency and Bankruptcy Code reflects this concept.

Footnotes

1. constituted under section 408 of the Companies Act, 2013

2.http://www.mca.gov.in/Ministry/pdf/CommencementNotification_01122016.pdf

3.http://www.mca.gov.in/Ministry/pdf/Notification_02062016_II.pdf

4.http://www.mca.gov.in/Ministry/pdf/Notification_02062016_I.pdf

5. Section 188 is in force since August 5th, 2016 http://www.mca.gov.in/Ministry/pdf/Notificationdated05.08.2016.pdf

6.http://www.mca.gov.in/Ministry/pdf/Notification_01102016_II.pdf

7. Ibid

8. Section 179 Insolvency and Bankruptcy Code, 2016

9. Section 181(1) Insolvency and Bankruptcy Code, 2016

10. Section 182(1) Insolvency and Bankruptcy Code, 2016

11. Section 60 Insolvency and Bankruptcy Code, 2016

12. Section 61(2) Insolvency and Bankruptcy Code, 2016

13. Section 62 Insolvency and Bankruptcy Code, 2016

14.http://nclt.gov.in/notification/1108%20e.pdf

15. Section 196 Insolvency and Bankruptcy Code, 2016

16. Enforced since 29th November, 2016 http://mca.gov.in/Ministry/pdf/IBBIRegulation_25112016.pdf

17. Section 202 Insolvency and Bankruptcy Code, 2016

18. Section 211 Insolvency and Bankruptcy Code, 2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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