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News from the desk of Ministry of Law and Justice and News from the Desk of RBI

April 09, 2021

News and Updates from the desk of Ministry of Law and Justice

The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 (“Ordinance”) passed by the Hon’ble President of India to amend Insolvency and Bankruptcy Code, 2016 (“IBC”).

The Ordinance has been brought for the purpose of providing efficient alternative insolvency resolution process for corporate persons classified as Micro, Small and Medium Enterprises (“MSME”) under the Insolvency and Bankruptcy Code, 2016, ensuring quicker, cost-effective and value maximizing outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of their businesses and which preserves jobs .In order to achieve these objectives, it is considered to introduce a pre-packaged insolvency resolution process for corporate persons classified as MSME.

The following, inter-alia, are major amendments introduce through the Ordinance:

A whole new chapter has been inserted after chapter III namely:- III-A, PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS which clarifies eligibility for pre-packaged insolvency resolution process, duties & powers of resolution professional, application procedure, timelines etc,.

To give effect to the newly added chapter-III-A the following amendments have been made in the existing provisions:-

  1. In section 5, clause 2(A) has been inserted which defines “base resolution plan” means a resolution plan provided by the corporate debtor under clause (c) of sub-section (4) of section 54A;
  2. Section 5 (5)(b) shall be read as “a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution process or the pre-packaged insolvency resolution process, as the case may be under the constitutional document of the corporate debtor;
  3. In section 5(11) shall be read as, "initiation date" means the date on which a financial creditor, corporate applicant or operational creditor, as the case may be, makes an application to the Adjudicating Authority for initiating corporate insolvency resolution process or the pre-packaged insolvency resolution process, as the case may be;
  4. In section 5 (15) shall be read as, “interim finance" means any financial debt raised by the resolution professional during the insolvency resolution process period or by the corporate debtor during the pre-packaged insolvency resolution process period, as the case may be and such other debt as may be notified;
  5. After section 67 of IBC, section 67(A) has been added which deals with the fraudulent management of corporate debtor during pre-packaged insolvency resolution process.
  6. After section 77 of IBC, section 77(A) has been added which deals with the punishments offences related to pre-packaged insolvency resolution process.

The said rules shall be effective from the date it was notified i.e. 4th day of April, 2021.

The complete text of the Circular may be viewed at below link:

https://www.ibbi.gov.in/uploads/legalframwork/04af067c22275dd1538ab2b1383b0050.pdf

 

From the Desk of RBI

RBI has issued a notification on the External Commercial Borrowings (ECB) Policy for providing relaxation in the period of parking of unutilised ECB proceeds in term deposits. RBI has announced that the unutilised external commercial borrowing (ECB) proceeds drawn down before March 1, 2020, can be parked in term deposits with banks in the country, up to March 1, 2022, in a relief to borrowers who could not utilise the proceeds due to lockdown. Under the extant ECB framework, borrowers are allowed to place ECB proceeds in term deposits with banks in India for a maximum period of 12 month, however, based on requests from stakeholders, including Industry associations, and with a view to providing relief to the ECB borrowers affected by the Covid-19 pandemic, it has been decided to relax the above stipulation as a one-time measure.  All other provisions of the ECB policy remain unchanged.

The complete text of the notification may be viewed at below link:

https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12070&Mode=0

Last updated: 09/04/2021

Article contributed by:

Munesh Gaur

Senior Associate- Legal

MBG Corporate Services

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