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Pre-Packaged Insolvency Process

Introduction
The entire world has been suffering from the pandemic since 2019 and has been witness the crisis on its economy due to the pandemic. Covid-19 has also impacted the micro, medium and small businesses in India and expose them into tremendous financial distress.

Though the Government took various steps to boost the economy and protect the small, micro, medium businesses of the country but yet the covid consistently become a big trouble for such businesses therefore the President of India by exercising his constitutional power promulgate the IBC (Amendment) Ordinance 2021 to give relief to such businesses.

Implication
Implication of the said ordinance is that it has amended the various sections of the principle Act, 2016 and also inserted new provisions and chapter III – A in the principle Act, 2016 to introduce speedy, cost effective and easy process to resolve the insolvency of such businesses. Have a glimpse of those amendments closely.
 
Section New Provision Old Provision Amendment
4 The Central Government may, by notification, notify the amount of default which shall not be more than one crore rupees against which application can be filed before adjudicating authority wrt pre- packaged insolvency resolution process The Central Government may, by notification, notify the amount of default which shall not be more than one crore rupees against which application can be filed before adjudicating authority wrt corporate insolvency resolution process New proviso is inserted after old proviso in the principle Act,2016
5(2A) “BASE YEAR PLAN” means a resolution plan filed by corporate debtor under 54A 4 (c) of the principle Act, 2016. NA New clause 2A has been inserted in section 5 of the principle Act, 2016.
5 (5)(b)
 
 
 
 

 


 
The member or the partner of the corporate debtor (CD) who is authorized to make an application for CIRP or the prepackaged IRP, as the case may be, under the constitutional documents of the CD. The member or the partner of the corporate debtor (CD) who is authorized to make an application for CIRP under the constitutional documents of the CD. words or pre-packaged IRP, as the case may be, has been added in the clause (5) (b) of the principle Act, 2016
5(11) Initiation date shall be the date on which the application by financial or operational creditor or the corporate applicant to initiate the CIRP or the pre-packaged IRP, as the case may be, has been filed to the Adjudicating Authority. Initiation date shall be the date on which the application by financial or operational creditor or the corporate applicant to initiate the CIRP has been filed to the Adjudicating Authority. words or pre-packaged IRP, as the case may be, has been added in the clause (5) (11) of the principle Act, 2016.
5(15) Interim finance means the amount raised by the resolution professional during the CIRP period or by the CD during pre-packaged IRP period, as the case may be, and the debt as may be notified Interim finance means the amount raised by the resolution professional during the CIRP period and the debt as may be notified words or pre-packaged IRP, as the case may be, has been added in the clause (5) (15) of the principle Act, 2016.
5(19) The Officer in default for the purpose of Chapter VI and Chapter VII of this part shall have same meaning as defined under section 2(60) of the Companies Act, 2013. The Officer in default for the purpose of Chapter VII of this part shall have same meaning as defined under section 2(60) of the Companies Act, 2013. Words and figures “Chapter VI and” has been inserted after for the purpose of.
5 (23A) Pre-packaged information memorandum means a memorandum submitted by the CD under 54 G (1) (b)  NA New section has been introduced.
5 (23B) Pre-packaged insolvency commencement date means the date of admission of application wrt pre-packaged insolvency by the Adjudicating Authority.  NA New section has been introduced.
5 (23C) Pre-packaged insolvency cost means:
  1. Interim finance and the cost incurred to raise such finance
  2. The fees payable to resolution professional and the cost incurred by him but subject to 54F.
  3. The cost incurred by the RP to run the business of CD as a going concern.
  4. The cost incurred by him to facilitate pre-packaged insolvency process at the expense of government.
  5. Any other specified cost.
NA New section has been introduced.
5(23D) Pre-packaged insolvency process period means the period which begins from the date of admission of application of pre-packaged insolvency by Adjudicating Authority and ends on the order made by the Authority in pursuant to section 54 L (1); or 54 N (1); or 54O (2). NA New section has been introduced.
5(25) Resolution applicant means the person who, individually or jointly, submits the resolution plan to the resolution professional in pursuant to invitation made under section 25(2)(h) or the 54K, as the case may be.   Resolution applicant means the person who, individually or jointly, submits the resolution plan to the resolution professional in pursuant to invitation made under section 25(2)(h)
 
Words and figures 54K, as the case may be, has been introduced.
5(27) Resolution professional means, the Insolvency Professional who is appointed as the resolution professional to conduct the CIRP, or the pre-packaged insolvency process and it includes interim resolution professional. Resolution professional means, the Insolvency Professional who is appointed as the resolution professional to conduct the CIRP and it includes interim resolution professional. Words “or the pre-packaged insolvency professional, as the case may be”.
11(a)


 
A corporate person during the CIRP or the pre-packaged insolvency resolution process, as the case may be. A corporate person during the CIRP or the pre-packaged insolvency resolution process, as the case may be, has been inserted.
11(aa)


 
A financial creditor or the operational creditor of corporate debtor already undergoing CIRP. NA New clause has been inserted in section 11 after clause (a).
11(ba) The corporate debtor in respect of whom pre-packaged insolvency resolution process (PIRP) has been completed under chapter III-A of the principle Act, 2016 in twelve months prior to date of making application. NA New clause has been inserted in section 11 after clause (a).
33 If the plan approved by the Adjudicating Authority under Section 31 (1) or the 54L is contravened by the concerned CD, any person other than CD whose interest is prejudicially affected by such contravention may make an application to the Adjudicating Authority for making an order of liquidation of the CD in accordance with section 33(1)(i) or (ii) or (iii). If the plan is approved by the Adjudicating Authority is contravened by the concerned CD, any person other than CD whose interest is prejudicially affected by such contravention may make an application to the Adjudicating Authority for making an order of liquidation of the CD in accordance with section 33(1)(i) or (ii) or (iii). The section 31 (1) and 54L has been introduced.
34 When Adjudicating Authority passes an order for liquidation under section 33, the RP appointed for CIRP under chapter II or for PIRP under chapter IIIA, as the case may be, shall act as liquidator, subject to written his consent to the Authority, unless he is replaced by another RP under sub section 4 When Adjudicating Authority passes an order for liquidation under section 33, the RP appointed for CIRP under chapter II or for PIRP under chapter IIIA, as the case may be, shall act as liquidator, subject to written his consent to the Authority, unless he is replaced by another RP under sub section 4 Or for PIRP under Chapter IIIA has been inserted.

Besides above the section 11A and the new chapter IIIA has also been introduced to the principle Act, 2016.

Section 11A
  1. If the application under section 54C is pending and still application under section 7, 9 or 10 of the Act, 2016 is also filed against the same corporate debtor, then the Adjudicating Authority shall first dispose of the application under section 54C before considering the application under section 7,9 or 10
     
  2. If the application under section 54C is filed within 14 days from the filing of the application under section 7,9 or 10 against the same corporate debtor, then notwithstanding anything mentioned in the section 7, 9 or 10 the Adjudicating Authority shall first dispose of the application under section 54C before considering the application under section 7,9 or 10.
     
  3. If the application under section 54C is filed after 14 days from filing of application under section 7,9 or 10 against the same corporate debtor, the Adjudicating Authority shall first dispose of the application under section 7,9 or 10.
     
  4. The above provisions shall not applicable to the application filed under section 7, 9 or 10 as on the date off commencement of the IBC (Amendment) Ordinance 2021.

PROCESS
The pre-packaged insolvency process is defined under section 5(23D) of the Insolvency and Bankruptcy Code, 2016 while the explicit process is enumerated under Chapter IIIA of the Code, 2016.

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