RESOLUTION APPLICANT(S) BE AWARE
The Insolvency and Bankruptcy Board of India (IBBI) vide its notification No. IBBI/2019-20/GN/REG040 introduced the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2019 which came into effect from 24.01.2019. The amendments have been introduced in the light of recent failure/non-seriousness of the successful Resolution Applicant(s) to meet the commitments proposed by them in the Resolution Plan approved by Committee of Creditor of Corporate Debtor as well as the Hon'ble Adjudicating Authority (National Company Law Tribunal) under Section 31 of the Insolvency and Bankruptcy Code, 2016 (Code). Due to failure of the commitments the time, energy and efforts put by all those who were involved in Corporate Insolvency Resolution Process of a Corporate Debtor go into vein. Further, it leads to a peculiar situation as liquidation also cannot be commenced as this type of situation is not even contemplated under Section 33(3) of the Code.
The changes proposed vide these amendments are:
1. Performance Security:
Sub regulation (4A) has been inserted after the sub regulation 4 in regulation 36B of IBBI (CIRP) Regulations, 2016.
Inserted sub-regulation (4A) read as follows:
"(4A) The request for resolution plan shall require the resolution applicant, in case its resolution plan is approved under sub-section (4) of section 30, to provide a performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule.
With the insertion of sub-regulation (4A), it has now become mandatory that in case a resolution plan is approved by the Committee of creditors, a performance security will mandatorily needs to be given by the successful Resolution Applicant. The nature of the security as well as value, duration and source, will be as may be approved by the Committee of Creditors, having regard to the nature of resolution plan and business of the Corporate Debtor.
2. Statement w.r.t previous Resolution plan submitted
Sub-regulation (1B) has been inserted after sub-regulation (1A) in regulation 38 of IBBI (CIRP) Regulations, 2016.
Inserted sub-regulation (1B) read as follows:
"(1B) A resolution plan shall include a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past".
As per the above insertion of sub-regulation (1B) in regulation 38, it has now made a pre-requisite that the resolution applicant while providing its resolution plan should also give a declaration in the form of statement whether the Resolution Applicant itself or any of its related parties have in past have failed to implement any Resolution Plan proposed by them in respect to any Corporate Debtor which was successfully approved by the CoC as well as Adjudicating Authority.
With the insertion of the sub-regulation (1B) in regulation 38 and sub regulation (4A) in regulation 39, there is a corresponding change in the paragraph 9 of the Form H.
3. Right to aggrieved Creditor w.r.t non-implementation of Resolution plan:
Sub-regulation (9) has been inserted after the sub-regulation (8) in regulation 39 of IBBI (CIRP) Regulations, 2016.
Inserted sub-regulation (9) read as follows:
"(9) A creditor, who is aggrieved by non-implementation of resolution plan approved under section (1) of section 31, may apply to the Adjudicating Authority for directions."
The new sub regulation now enables a creditor, who is aggrieved by non-implementation of a resolution plan approved by the Adjudicating Authority, to apply to the Adjudicating Authority for appropriate directions.
4. Substitution of the table in Paragraph 7 of Form H
The table in paragraph 7 in Form H (Compliance Certificate) is now substituted with new table. The said table deals with the amounts provided to the various stakeholders under the Resolution Plan. The earlier categories like Dissenting secured financial creditors/dissenting secured creditors/other secured financial creditors/other unsecured financial creditors have been removed.
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