Page 46 - DTPA Journal Aug 18

DTPA - J | 2017-18 | Volume 3 | August 2018

Major amendments introduced in

Insolvency and Bankruptcy Code, 2016

CA Binay Kumar Singhania

The amendment ordinance passed in the month of June ØWithdrawal of petition after admission
closely followed by an amendment in CIRP regulation in The Code previously did not provide for withdrawal of
the month of July, development apart from offering relief the Insolvency application once the application is
to the distraught home buyers and the defaulting admitted by the Adjudicatory Authority under any
promoters of micro, small and medium enterprises section. In absence of a specific provision in the matter
(MSME) the amendment also provides clarity in various of Lokhandwala Kataria Constructionsand Uttara
provisions getting rid of the existing loopholes.
Foods and Feeds relief was granted to the partiesunder
The majorhighlightsof the amendments are enlisted article 142 by the Hon'ble Supreme Court by using its
below:- inherent power to record the mutual settlement
undertaken by the parties post admission of application
ØAdvance paid towards purchase of real
estate: Financial Debt initiating CIRP. Through the Ordinance section 12A was
inserted which gave the Adjudicating Authority (NCLT)
Insertion of explanation in section 5(8) of the Code power to allow the withdrawal of the application made
which states thatany amount given as an advance by the applicant with the approval of ninety percent
towards purchase of real estate shall be treated as voting shares of the committee of creditors.
Financial Debt.
ØRegulations pursuant to Section 12A:
Till now though as seen in various rulings the home Withdrawal of application post admission
buyers under assured return projects were considered
to be Financial Creditors, whereas the ordinary home An application for withdrawal of an application admitted
buyer did not get any preferences. The June,2018 under section 7, 9 or 10 of the Code may be submitted to
amendment ordinanceshall prove to be a very stern the IRP or the RP, as the case may be, before issue of
step for the real estate developers as CIRP against the invitation for expression of interest, along with a bank
company could initiated by any home buyers upon guarantee towards estimated cost incurred for
delay in delivery/ refund to the flat buyer, though this certain purposes under the process. The committee
new insertion shall protect the interest of the home of creditors (CoC) shall consider the application within
buyers by giving them an important role to play in the seven days of its constitution or seven days of receipt of
CIRP by making them a part of the CoC. the application, whichever is later. If the application is
approved by the CoC with 90% voting share, the
ØInsolvency Professional representing class resolution professional shall submit the application to
of creditor. the Adjudicating Authority on behalf of the applicant,
On one hand where the ordinance provided the home within three days of such approval.
buyers relief by categorising them as Financial Creditor ØChanges in voting percentage to claim
the amendment in the regulations made sure that their Majority.
interest is protected by inserting a new regulation in
relation to appointing Insolvency Professional who shall The Code's objective was to resolve the insolvency and
representclasses of creditors when a corporate debtor ensure maximisation of the value of Assets by aiming
has at least ten creditors in the class, the IRP appointed for revival of the troubled corporate and taking
shall offer the creditors a choice of three insolvency liquidation as the last resort. The former requirement of
professionals in the public announcement, who shall 75 per cent majority for every minute decision and
act as the authorised representative of creditors in each transaction proved to be a difficult task which almost led
class. A creditor may indicate its choice of an insolvency to derailing the entire process.
professional amongst the three choices provided by the Similar situation was experienced in the matter of
IRP. The insolvency professional having highest Kamineni Steels, where the COC could notachieve the
number of votes of creditors in the class, shall be approval of 75% of the member due to various reasons
appointed as the authorised representative of the and the resolution plan was passed by a lower
creditors of the respective class. percentage of COC votes was accepted by NCLT,
Hyderabad Bench to avoid failure of the Resolution

43 | Direct Taxes Professionals' Association - Journal www.dtpa.org