Yes, provided the outstanding amount as on the date of issuance of notice u/s 13(2) is paid within time.

The secured creditor may appoint any officer not less than the chief manager of a public sector bank or equivalent or any other person or authority as specified by the Board of Directors/Trustees as the case may be.

Any asset, movable or immovable, given as security whether by way of mortgage, hypothecation or creation of a security interest in any other form except those excluded u/s 31 of the Act.

Only those property given as security can be proceeded under the provisions of SARFAESI Act.

Any rights created in favour of any third party before the creation of security interest in the asset will not be affected.

No, there is no provision for exemption for any property secured to the bank/financial institution including mortgaged residential house save and except those specified u/s 31 of the Act.

The borrower can raise objections/representations, if any in writing to the secured creditor who has to deal with the same and reply back in writing.

No, S. 13(13) prohibits the borrower from transferring the asset after receipt of the notice u/s 13(2) save and except in the usual course of business.

The Debts Recovery Tribunals have been established by the Government of India under an Act of Parliament (Act 51 of 1993) for expeditious adjudication and recovery of debts due to banks and financial institutions.

Where a bank or financial institution has to recover any debt from any person, it makes an application called Original Application (OA) to the Tribunal against such person.

Rs.12,000/- if the amount appealed against is less than Rs.10 lakhs.

Rs.20,000/- if the amount appealed against is Rs.10 to 30 lakhs.

Rs.30,000/- if the amount appealed against is more than 30 lakhs.

The Insolvency and Bankruptcy code 2016(2) provides for the liquidation of the assets of the company. Here the liquidation process is initiated after considerable amount of time has been invested in the Insolvency process. Liquidation in normal terminology means selling off assets of the company to infer maximum amount of profit to be distributed among the creditors. In the Code Under section 33, the National Company Law Tribunal(3) can order for liquidation on the following grounds:-

• If there is non-receipt of a valid resolution plan

• If there is non-compliance of order 37 and 38 of the code and regulations stated there in

• If the committee of creditors decides for the liquidation process before confirming the resolution plan

• If the corporate debtor himself contravenes with any of the terms specified in the resolution plan

Under this section, the NCLT makes a public announcement for the same, within 5 days of such announcement, a Liquidator is to be appointed. Here, until a Liquidator is appointed the Resolution Professional will be the Liquidator until declined by the NCLT.

After the public announcement is made and the liquidator is appointed, another public announcement is made by the Liquidator calling for claims of creditors and stakeholders, within 30 days from the date of which such an announcement is made. A moratorium period begins after such an announcement. This means that no suit or legal proceedings can be initiated by or against the corporate debtor during the ongoing proceedings.

During the entire process the entire management of the company stands dissolved, the Liquidator takes over all the assets of the company and initiates the liquidation process after consolidation and verification of all claims of the creditors.

A Liquidator is appointed by the NCLT within 5 days of the public announcement pertaining to the initiation of the Liquidation process. There are certain powers vested in the hands of the liquidator under the Code. The powers and duties are as follows as per the NCLT case status:

• The duty to verify all the claims of the creditors

• The duty to take custody of all assets and preservation of any such assets of the creditors So that maximum value can be enhanced after the auction during the liquidation process.

• The duty to frame a strategy to sell off all the movable as well as the immovable estates and assets of the creditor to the maximum value of its worth

• The power to obtain any professional assistance for the process of liquidation

• The power and duty to invite and settle all claims of the creditors and to distribute the proceeds

• The duty to institute and defend any suit on behalf of the corporate debtor

• The power to investigate the financial affairs of the corporate debtor and determine any undervalued or preferential transactions

• The duty to submit the necessary reports about the proceedings 15 days after the end of each quarterly to the adjudicating authority i.e. the NCLT

• The power to consult the stakeholders

• Any other actions that need to be performed as specified by the Board specifically regarding the matter

The liquidator has to either admit or reject the claims put forward by the creditors within 7 days. If you are aggrieved by the decision of the corporate debtor you can file an appeal against the decision in the NCLT within 14 days of the decision.

A Corporate Debtor can file for a voluntary liquidation under Section 7 and Section 8 of the Insolvency and Bankruptcy Code which was earlier mentioned in section 304- section 313 of the Company’s Act 2013. He can initiate such proceedings against himself in the following two conditions:-

• If he has never defaulted in paying his debts and dues since incorporation

• If he is a solvent

There are certain procedural conditions which the corporate debtor has to follow to initiate such proceedings.

1. Declaration by majority of its directors to the Registrar of the companies, which says that:-

• Either they are free of debt; or

• The debt can be cleared off by the liquidation process, i.e. realisation of the assets.

The Declaration consists of the following two elements: -

• Not liquidating to defraud any individual. Creditor or stakeholder. The declaration shall also be accompanied by the following documents. (a) Audited financial statement of the previous 2 years. (b) Valuation of the assets. (c) List of creditors and the amount which is due.

• Within 4 weeks of declaration the company has to commence a General meeting of the stakeholders, directors and members. In the General meeting a special resolution has to be passed where the majority votes for initiation of voluntary liquidation process. Then after passing the resolution, they have to name a liquidator for initiation of the process or The Memorandum of Association of the company says that the date and day of liquidation process was specified hence the liquidation should commence.

2. After the resolution, the creditors have to approve the resolution in a reasonable time period.

3. Within 7 days of Approval by Creditors notice of information has to be given to the Registrar of the company and the IBBI with a copy of the resolution.

4. After this, the commencement of voluntary liquidation occurs.

The Central government introduced the Insolvency and Bankruptcy Code(IBC) in 2016 to resolve claims involving insolvent companies. This was intended to tackle the bad loan problems that were affecting the banking system. Two years on the IBC has succeeded in a large measure in preventing corporates from defaulting on their loans. The IBC process has changed the debtor-creditor relationship. A number of major cases have been resolved in two years, while some others are in advanced stages of resolution.

• Insolvency and Bankruptcy Code, 2016 is considered as one of the biggest insolvency reforms in the economic history of India.

• This was enacted for reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons.

Background

• The era before IBC had various scattered laws relating to insolvency and bankruptcy which caused inadequate and ineffective results with undue delays. For example,

• Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act SARFAESI –for security enforcement.

• The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI) for debt recovery by banks and financial institutions.

• Companies Act for liquidation and winding up of the company.

• Ineffective implementation, conflict in one of these laws and the time-consuming procedure in the aforementioned laws, made the Bankruptcy Law Reform Committee draft and introduce Insolvency and Bankruptcy Law bill.

Objectives of IBC

• Consolidate and amend all existing insolvency laws in India.

• To simplify and expedite the Insolvency and Bankruptcy Proceedings in India.

• To protect the interest of creditors including stakeholders in a company.

• To revive the company in a time-bound manner.

• To promote entrepreneurship.

• To get the necessary relief to the creditors and consequently increase the credit supply in the economy.

• To work out a new and timely recovery procedure to be adopted by the banks, financial institutions or individuals.

• To set up an Insolvency and Bankruptcy Board of India.

• Maximization of the value of assets of corporate persons.

• National Company Law Tribunal (NCLT) – The adjudicating authority (AA), has jurisdiction over companies, other limited liability entities.

• Debt Recovery Tribunal (DRT) has jurisdiction over individuals and partnership firms other than Limited Liability Partnerships.

• The Insolvency and Bankruptcy Board of India (IBBI) – apex body for promoting transparency & governance in the administration of the IBC; will be involved in setting up the infrastructure and accrediting IPs (Insolvency Professionals (IPs) & IUs (Information Utilities).

• It has 10 members from Ministry of Finance, Law, and RBI.

• Information Utilities (IUs) - a centralized repository of financial and credit information of borrowers; would accept, store, authenticate and provide access to financial data provided by creditors.

• IPs- persons enrolled with IPA (Insolvency professional agency (IPA) and regulated by Board and IPA will conduct resolution process; it will act as Liquidator/ bankruptcy trustee; they are appointed by creditors and override the powers of the board of directors.

• IPs have the power to furnish performance bonds equal to assets of the company under insolvency resolutions

• Adjudicating authority (AA) - would be the NCLT for c

• IBC proposes a paradigm shift from the existing 'Debtor in possession' to a 'Creditor in control' regime.

• IBC aims at consolidating all existing insolvency related laws as well as amending multiple legislation including the Companies Act.

• The code aims to resolve insolvencies in a strict time-bound manner orporate insolvency; to entertain or dispose of any insolvency application, approve/ reject resolution plans, decide in respect of claims or matters of law/ facts thereof.

Key aspects of the Insolvency and Bankruptcy Code- the evaluation and viability determination must be completed within 180 days.

• Moratorium period of 180 days (extendable up to 270 days) for the Company. For startups and small companies the resolution time period is 90 days which can be extended by 45 days.

• Introduce a qualified insolvency professional (IP) as intermediaries to oversee the Process

• Establishment of Insolvency and Bankruptcy board as an independent body for the administration and governance of Insolvency & bankruptcy Law; and Information Utilities as a depository of financial information.

• Due to the institution of IBC, we have seen that many business entities are paying up front before being declared insolvent. The success of the act lies in the fact that many cases have been resolved even before it was referred to NCLT.

• 4452 cases were dismissed at the pre-admission stage. Hence, it shows the effectiveness of IBC.

• Presently, there are 1332 cases before NCLT.

• Realization by creditors around Rs 80,000cr in resolution cases.

• Banks recovered Rs 5.28 lakh crore in 2017-18, compared to just Rs 38500 cr in 2016-17.

• The maximum amount recovered was Rs 4, 92,500 cr from 21 companies.

• 12 big cases are likely to be resolved this year, and the realization in these cases is expected to be around Rs 70000 Cr.

• The President has assented to the promulgation of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 on June 6, 2018. The two key amendments would help both the real estate sector and the MSMEs

• Homebuyers Recognized as Financial Creditors- giving them due to representation in the Committee of Creditors (CoC). Thus, now home buyers will be an integral part of the decision making process.

• Special Provisions for MSME- now, the promoters of MSMEs are allowed to bid for their companies as long as they are not willful defaulters and don’t attract any other related disqualification. This has corrected the anomaly in the section 29A of the existing act which had barred promoters of defaulting assets from bidding for their assets.