Insolvency ordinance: A boon or a bane?

The Insolvency and Bankruptcy Code (Amendment) Act, 2017, is based on an ordinance promulgated by the president on 23 November. It is intended to improve the credibility of the corporate insolvency resolution process (CIRP) and makes some ground-breaking changes with respect to the eligibility of resolution applicants, including promoters and persons connected to them.

With insertion of the new section 29A in the code, the following categories of persons have been disqualified from submitting a resolution plan: (a) undischarged insolvent; (b) wilful defaulter under Reserve Bank of India (RBI) guidelines; (c) person whose account has been classified as a non-performing asset under RBI guidelines for one year or more and who has not paid all overdue amounts, interest and charges relating to the account; (d) person convicted an offence punishable with imprisonment for two years or more; (e) disqualified director under the Companies Act, 2013; (f) person prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities market; (g) person who has indulged in an undervalued, preferential or fraudulent transaction in respect of which an order has been made by the adjudicating authority under the code; (h) guarantor of the corporate debtor against which a CIRP has been initiated under the code; (i) any person who is subject to similar disabilities in a jurisdiction outside India as per clause (a) to (i) above; and (j) connected person to a person above.

SNG & Partners has offices in Delhi, Mumbai, Singapore and Doha. Amit Ronald Charan is a principal associate and Satish Anand Sharma is a qualified insolvency professional.