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Article Details
Insolvency and Bankruptcy Code as amended by Amendment Act, 2018 : Day to day practice management
Section 2: Applicability of Insolvency and Bankruptcy Code to Individual Guarantor of Corporate Debtor

The section 2 has been amended and now the provisions of Insolvency and Bankruptcy Code also applicable to personal guarantor of the Corporate Debtor w.e.f. 27/11/2017.

In other words, incase of personal guarantor of corporate guarantor, a petition can be filed before NCLT instead of DRT

It is specifically mentioned that the provisions of Part III of Insolvency and Bankruptcy code relating to Individual and partnership firm will not be applicable to the personal guarantor of corporate Debtors

Section 3(7): Non applicability of the code to the corporate in financial sector

As per section 3(7) of the Code, the definition of “corporate person” shall not include any financial service provider. Thus the code does not cover

Bank, Financial institution, Insurance company, Asset Reconstruction Company, Mutual Funds, Collective Investment Scheme or Pension Funds

Section 3(23): person includes Person resident outside India

A person resident outside India means a person other than a person   resident in India

A person resident in India has same meaning as assigned to such term in Section 2(iv) of FEMA

Section 5(25): Joint preparation of Resolution Plan

As per the amended provisions, the resolution plan can be prepared by more than one individual. In other words, AOP or Joint Venture can be constituted to prepare resolution plan

Section 5(26): Resolution plan can be prepared by Resolution Applicant only and not by any person

Section 25(2)(h): Criteria of person who can submit Resolution Plan

Insolvency Professional can fix criteria of persons who can submit the Resolution Plan.

These criteria can be fixed in consultation with Committee of Creditor (COC).

Section 29A: Defaulting Corporate Debtor cannot make back door entry

The person should not be ineligible resolution applicant as defined in Section 29A of Insolvency Code to submit resolution plan. The corporate debtor cannot make back door entry through its associate or group companies or entities

This will ensure that (a) only persons with sufficient resources and technical and financial competency submit the resolution plan
(b) unscrupulous or defaulting persons do not gain the control of defaulting corporate debtor by making back door entry

The associate company or group companies of the defaulter cannot make the back door entry by submitting resolution plan. This is specifically inserted

Section 29A: Resolution person is ineligible if the connected person is ineligible

The resolution applicant is connected to the persons who is ineligible as per section 29A of the Code than the resolution applicant can also become ineligible to submit the resolution plan or resolution plan submitted by him is also become ineligible  
Connected person means
  1. Any person who is the promoter or in the management or control of the resolution applicant or
  2. Any person who shall be the promoter or in the management or control of the business of the corporate debtor during the implementation of the resolution plan or
  3. The holding company, subsidiary company, associate company or related party of the person referred to in clause (1) and (2)
Provision will not be applicable to Schedule Bank or Asset Reconstruction Company (ARC) or Alternate Investment Fund. They will not be treated as defaulters for the purpose of submitting resolution plan

Section 30(4)(1): Provisions of section 29A applicable to the existing Resolution plan not yet approved

Provisions of Section 29A relating to ineligibility applicable to the resolution plan which has not been approved by the Committee of Creditors (COC) till 23/11/2017

Section 35(1)(f): Ineligible persons cannot purchase property of the defaulting Corporate Debtor

Section 235A: Residual Punishment

The provision for fine for violation of the Code is inserted. Since the word use is “fine” and not “penalty”, the fine can be imposed only by the special court and not by NCLT

Section 238: The Insolvency and Bankruptcy Code, 2016 has overriding effect

The code has overriding effect over other laws. Section 53 and 178 of Code provide that distribution from sale of assets will be as specified in that section, notwithstanding anything to the contrary contained in any law enacted by the parliament or any State Legislature for the time being in force
However, many tax laws (including CGST ACT, 2017 and SGCT Act, 2017) provides for first charge on assets of the taxable person. This is also an overriding provision.

Insolvency Code overrides Relief Undertaking Act

Insolvency code overrides Maharashtra Relief Undertaking (Special Provisions) Act. Any direction given under that act does not affect passing of order under Insolvency Code

Applicability of Limitation Act if the recovery has become time barred?

As per the NCALT decision incase of Neelkanth Township Vs. Urban Infrastructure Trustees (2017) 143 SCL538=85 taxmann.com 128, it has been held that the limitation act does not apply to Insolvency and Bankruptcy Code, as the action is not for recovery of money claim.