A company bidding for a stressed asset in the same sector in which it is operating will now have to get the Competition Commission of India’s (CCI’s) approval ahead of finalisation of bids during insolvency process, sources said.
This is a part of the latest round of amendments proposed by the government in the Insolvency and Bank
Once the latest set of proposed changes come into force, the CCI nod will be required before approval of the resolution plan by the Committee of Creditors (CoC) in combination cases, as per the amendment proposed in Section 31(4) of the IBC. So far, a company with the winning bid can get clearance from CCI within one year from the date of approval of the resolution plan by the National Company Law Tribunal (NCLT).
“You could land in a situation where NCLT approved a resolution plan, but CCI rejected it after it found that the acquisition might impact market dynamics. In such a scenario, there was no way left for the company to revive and avoid liquidation, which triggered at the expiry of the 270-day deadline,” says Ramakant Rai, partner at Trilegal.
The cost of hiring a resolution professional or an authorised representative by homebuyers and fixed deposit holders will now be part of the insolvency resolution process cost, to be borne by the company undergoing insolvency. So far, the cost is jointly borne by the financial creditors.
Experts said this will bring clarity on who will bear the cost of the Corporate Insolvency Resolution Process (CIRP). The changes proposed in the cost of the insolvency resolution process are aimed at taking the burden off creditors so that they don’t end up paying more for the cost of interim resolution professional appointed as their authorised representative, sources said.
This would also simplify the payment process considering that there could be a huge number of creditors under the class of creditors, as per the proposed amendment in section 21(6B) (ii) of the IBC, the clause related to the resolution process cost.
The government has also decided to allow the Insolvency and Bankruptcy Board of India (IBBI) to make regulations regarding the withdrawal of cases from the NCLT under Section 12A of IBC. IBBI will specify the form, fee and manner of withdrawal of application. The recent ordinance allows a case to be withdrawn from the NCLT if 90% of the committee of creditors agreed.
To allow full 180 days for resolution under the IBC, the insolvency resolution proceedings will start from the date of appointment of resolution professional by the tribunal, sources said. At present, operational creditors have to approach IBBI at the time of filing application for insolvency for recommending an Interim Resolution Professional (IRP). This sometimes took 2-3 months, experts said. The changes will be made in the Section 5(12) of the Code.
ruptcy Code (IBC) 2016. It will also include changes to bring down the cost of the resolution process for homebuyers, fixed deposit as well as debenture holders, sources said.
“These amendments are likely to be taken up by the Cabinet for approval in its next meeting as early as Wednesday,” sources in the corporate affairs ministry told DNA Money. “The IBC (Amendment) Bill will be tabled before Parliament during the monsoon session,” a source said.
One-and-a-half years after the IBC was implemented, the government is still in the process of fine-tuning resolution procedures. The latest tweaks have been made mostly to the amendments introduced last month through an ordinance to give relief to homebuyers and micro, small and medium enterprises. The first set of amendments was brought in November 2017 through an ordinance, in order to prevent promoters who are wilful defaulters or have an non-performing asset for more than a year from participating in the IBC process.
Source: July 16, 2018, DNA