The efficacious implementation of the comprehensive and systematic Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as “IBC”) has instilled confidence in the creditors being a comprehensive, systemic and speedy reform thereby paving way for development and progress. The latest revision in the IBC by the Insolvency and Bankruptcy Board of India (hereinafter referred to as “IBBI”) has further tightened the reins over the dishonest and fraudulent debtors by implementation of stricter policies controlling their conduct.
With the advent of the recent modifications, resolution applicants would be subject to more stringent scrutiny before approval of their insolvency resolution plans by the Committee of the Creditors (constituted by the Resolution Professional under the provisions of IBC). The amendments to regulations (Regulation 37, 38 & 39) empower Committee of Creditor to carry out due diligence of resolution plan submitted with respect to the insolvency proceedings thereby bestowing them with the duty to assure that the most viable plan in the said regard is accepted . The resolution plan should come from resolution professional or any person, who can really rescue the insolvent business. In order to approve the best plan the Committee of Creditors needs to satisfy itself that:
(a) the plan is viable, and
(b) the persons who submit and implement the plan are credible
The resolution plan should disclose the following details of:
- The resolution applicant and other persons connected with it to enable the Committee of Creditors to assess their credibility.
- Persons who will be promoters and participate in the management or control of the business of the corporate debtor during the implementation of the resolution plan;
- The holding companies, subsidiary companies, associate companies and related parties of the business entity;
- The convictions, pending criminal proceedings, disqualifications under the Companies Act, 2013, orders or directions issued by SEBI, categorization as a willful defaulter.
The Resolution Professional under the provisions of the IBC shall submit to the Committee of Creditors all resolution plans which comply with the requirements of the IBC and regulations made thereunder, along with details of preferential transactions under Section 43, undervalued transactions under Section 45, extortionate credit transactions under Section 50, and fraudulent transactions under Section 66 of the IBC noticed by him.
The primary objective of IBC being resolution of insolvency of the corporate persons in a time bound manner for maximization of value of their assets could be achieved only with a credible resolution plan drawn up realistically and implemented successfully. The introduction of firm surveillance prior to according consent to the resolution plans submitted by the resolution applicants aims to ensure that only suitably best plans are approved which do not lead to liquidation, post resolution are prevented.
The IBC and the amendments introduced therein have reposed the faith in the judicious approach of the legislature by imposing strict measures against unscrupulous debtors escaping and delaying the repayment of debts incurred by using the legislative framework thereby preventing taking advantage of one’s own wrong.