In this post, we’ll look at how to register a business in Kolkata. Company registration is a procedure through which all businesses are registered on the MCA’s website (Ministry of Corporate Affairs). The Company Registration in Kolkata is a simple procedure, but it requires numerous procedures to complete.

A Private Limited Company offers its stockholders legal protection and limited liability. A privaely held limited firm must have at least positions two working directors. A person can be both a director and a shareholder in a Private Limited Company. After receiving a Certificate of Incorporation, a Private Limited Company (PLC) can begin operations. Within 15 days following its application, a PLC can be implemented.

As a result, we will concentrate on the advantages and procedures of forming a Private Limited Company registrationin Kolkata in this post.

Advantages of forming a private firm company registration in Kolkata

1. A private limited company might have anything from two to fifty directors.
2. It is a legal autonomous body.
3. Directors have limited liability and are not directly responsible for the company’s operations.
4. Directors are only partially liable to creditors.
5. In the event of a default, the bank or creditors will sell the company’s assets rather than personal property.
6. The directors are eligible for tax benefits.
7. Suing or being sued in the name of a registered corporation is possible.
8. Companies that are registered have a higher chance of borrowing money.

Company Registration in Kolkata: Private Company Incorporation Checklist

• Directors: For private company registration in Kolkata, a minimum of two directors is required, with one of them being a resident director.
• The investment must be made in accordance with the business type, and there is no minimum capital investment necessary for a firm.
• Inventive business name: The name of the firm must not be identical or confusingly similar to that of another company.
• Registered address: Every business should have one.

Steps for Incorporation of the Company

The following are the stages of forming a business using the RUN form:

1. After that, create a login account and log in.
2. Enter the name you want to use and cross-reference it with the MCA database.
3. If an established business wants to reverse its name, a CIN will be requested through the RUN e- form.
4. The applicant must specify the name that he or she wishes to keep on file in case the firm’s name is changed or a new company is formed.
5. Then he or she must submit the prospective company’s objects as well as any additional documents in support of the suggested name.

Limited Name Validity

• For a new corporation, an authorised name is valid for 20 days from the date of approval.
• 60 days after the date of authorization for changing the name of an established corporation.

Steps for Private Company Registration in Kolkata

Step 1: Obtain DSC

Because the process is online, a digital signature is required for the incorporation of a private limited company. Members and executives must have a legitimate Class II or Class III DSC.

Step 2: Fill out an application for a DIN number.

A directors must have a DIN and must apply for one on MCA if he does not already have one. A DIN number can be used to become a director in many businesses.

Step 3: Submit an application for name approval

At the time of establishment, the company’s name, as well as SPICe (INC-32) must be submitted for approval. If the name is rejected, it can be resubmitted.

Step 4: e-MoA (INC-33) and e-AoA are the fourth and final steps (INC-34)

Previously, MoA and AoA had to be filed physically, but now they must be filed online on the MCA website. These papers must be digitally signed by the subscribers.

Step 5: PAN and TAN applications

After all of the paperwork have been completed, the applicant should consider applying for a PAN and TAN.

Step 6: Certificate of Incorporation 

MCA & RoC will analyse all of the documentation and issue a Certificate of Incorporation if they are pleased. The Certificate of Incorporation is a legal document that grants the firm legal standing.

7th Step: Open bank Accounts

The firm must create a bank account for any transactions in its name after receiving the certificate of incorporation.

In order to register a company in Kolkata, you’ll need the following documents

Documents required for company registration  in Kolkata:

1. For DSC 
2. DIN (Director Identification Number)
3. Incorporation of a Business

In the case of DSC,

1. Along with the DSC application form, the following papers must be forwarded:
2. The claimant’s photograph (to be stamped across with a blue pen)
3. The director’s address proof (s)
4. Id Proof (Pan Card) of the applicant Passport Aadhar card Driving licence Voter Id card Email Id and contact number (for each director)

DIN

Fill out the e-form DIR -3, which is available on the MCA website. Alongside Form DIR -3, attach the supporting information:

1. Id proof photo of the applicant (attested)
2. Proof of address (attested)
3. Make the payment as directed. The only way to pay is on the internet.
4. There will be a preliminary DIN created.
5. A preliminary DIN becomes an authorised DIN after verification.

• For a Firm’s Registration
• The Firm’s Title
• The firm’s assets
• Investors’ list
• The director’s Id proof is the company’s purpose (s)

1. Aadhar card and passport
2. Id cards for voters and driver’s licence
3. Director’s proof of residence (s)
4. Bank statement Telephone bill
5. The cost of electricity
6. Mobile phone bill (not old than two months)
7. INC-9 Director(s) Consent (form DIR-2) (Affidavit)

• Proof of the registered office’s address

1. Bills of Gas, 
2. Phone, and
3. Electricity

If the office is included in the lease, the lease agreement and a letter of authorization from the owner are required.

Holders of DINs declare themselves

A Private Limited Company Registration in Kolkata is an online operation that should be completed with caution, and once completed, the directors are entitled to all of the privileges of a Private Limited Company.

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Releases from the RBI Monetary Policy 2022 Meeting: The six-member Monetary Policy 2022 Committee (MPC), led by Reserve Bank of India (RBI) Governor Shaktikanta Das, maintained the repo rate at 4% and the reverse repo rate at 3.35 % intact. Here’s what the governor of India’s central bank said.

RBI Monetary Policy 2022: The Reserve Bank of India’s (RBI) Monetary Policy 2022 Committee (MPC) retained the repo rate at 4% for the 11th straight approach achieves a ‘affiliative posture,’ according to RBI Governor Shaktikanta Das on Friday.

The MPC decided unanimously to continue the accommodating approach, according to the central bank governor, and the reverse repo rate was also remained steady at 3.35 percent.

The Marginal Standing Facility (MSF) rates and the lending rate were likewise held steady at 4.25 percent.

On May 22, 2020, the RBI reduced its policy repo rate, or short-term lending rate, in an off-policy cycle to boost demand by decreasing interest rates to a historic low.

In a press conference following the Monetary Policy 2022 meeting, Das stated that the RBI will return the liquidity adjustment facility (LAF) corridor to 50 basis points (bps), as it was pre-Covid. The MSF rate and the bank rate remain at 4.25 percent.

“It also agreed to remain accommodating while concentrating on withdrawal of accommodation to ensure that inflation remains within the goal moving ahead, while encouraging expansion,” 

-he added on the central bank’s attitude.

” It will continue to be part of the RBI’s toolbox, and its use will be at the discretion of the RBI for objectives that are indicated from time to time. The FRRR, in conjunction with the SDF, will increase the flexibility of the RBI’s liquidity management framework.”

The RBI reduced its growth prediction for the current fiscal year to 7.2 percent from 7.8 percent previously, while increasing its inflation forecast to 5.7 percent from 4.5 percent.

He went on to say that, given the inordinate volatility in international oil prices as of early February, as well as the extreme uncertainty surrounding the evolving geopolitical tensions, any projection of growth and inflation is fraught with risk, and is largely dependent on future oil and commodity price developments.

Das addressed liquidity and financial market circumstances in his speech, stating that the RBI will continue to take a sophisticated and agile approach to liquidity risk management while preserving appropriate liquidity in the system.

“At the moment, liquidity management is distinguished by two procedures: variable rate reverse repo (VRRR) bids of varied maturities to swallow liquidity, and variable rate repo (VRR) auctions to fill temporary liquidity problems and offset anomalies.” “We will keep taking this strategy,” he stated.

ATM cash withdrawal without a card that is interoperable

In an effort to combat fraud, the Reserve Bank of India agreed on Friday to allow all banks to use card-less cash withdrawal through ATMs. Currently, card-less cash withdrawal via ATMs is a permissible form of transaction allowed by a few banks in the nation on an as-needed basis (for their customers at their own ATMs).

Economic experts and market analysts reacted as follows:

• The severe reduction in GDP forecasts for FY23 and significant increase in inflation expectations for FY23 might suggest some tightening measures in the future, which would be supported by the shift in posture to focus on withdrawal of accommodation. Current geopolitical developments, supply chain concerns, and commodity price increases are tying the RBI’s hands and pushing it to progressively turn hawkish, despite its desire to maintain its pro-growth perspective. The 10-year Gsec yield has increased to 7%, showing the street’s worry over the massive borrowing programme in the face of rising interest rates.”
• “Retaining the repo rate at 4% and the reverse repo rate at 3.35 percent, continuing with the accommodating posture on expected lines,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. Recognizing the new reality of increased petroleum prices caused by the war, the RBI cut the FY23 GDP growth rate prediction to 7.2 percent from 7.8 percent before and upped the FY23 CPI inflation projection to 5.7 percent from 4.5 percent previously. This is predicated on the premise that crude will be $100 per barrel. This suggests that if crude falls considerably, which is likely if the conflict ends soon, GDP and inflation will improve.The opposite might be true if the battle escalates and petroleum prices rise well beyond $100. The Governor correctly underscored India’s macroeconomic fundamentals, noting to an improvement in the external position aided by record exports, large foreign reserves of $608 billion, and banking sector development. The SDF (Standing Deposit Facility) is a new mechanism established by the central bank to absorb liquidity. 

“The recent RBI Monetary Policy 2022 did not include any surprises,” stated Nish Bhatt, Founder & CEO of Millwood Kane International, “it held rates constant for the 11th straight policy.” However, it has clearly outlined the road to policy unwinding. The emphasis will now be on withdrawing the accommodating policy stance in order to keep inflation under control. The RBI’s statement today plainly suggests the end of loose Monetary Policy 2022, which is reflected in the 10-year benchmark yield, which has reached a multi-year high. The unwinding of liquidity will cause some instability, and it is expected that the RBI would drop the growth rate prediction for FY23 to 7.2 percent, with the inflation target raised to 5.7 percent from 4.5 percent previously. The explicit goal of central banks throughout the world is to manage inflation, unwind lose money, and concentrate on gradual and steady development.“

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Sexual harassment law: The word “workplace” confers to the Sexual harassment at workplace of Women at Workplace (Regulation, Prevention, and Redressal) Posh Act of 2013, and specifically includes:

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Looking For Effective Procedure of Recovery of Bad Debt?

When it comes to reclaiming your money from a debtor, it turns into a herculean task if the debtor evades or dodges you. If the defaulter is a corporate debtor who owes you more than one lakh rupees, as a financial or operational creditor, then there are ways to take professional help in dealing with such defaulters.

The Insolvency and Bankruptcy Code, 2016, (IBC), is a tool that has been worked out to overcome the perils of a fragmented legal system and transited to a unified IBC that aims to expedite the entire process effectively.

How To Initiate Insolvency Against Corporate Debtor?

Part II of the I&B Code, 2016, enumerates the insolvency resolution and liquidation process under IBC of corporate persons. The fundamental requisite for this process is the initiation application that may be filed by the Financial Creditor or the Operational Creditor.

The creditor has to establish that:

• a default has occurred;
•  the debtor owes the debt; and,
• the debt had been legally assigned to the debtor and transferred.

The name of the resolution professional has to be proposed along with the application.

From Insolvency To Liquidation

Within 14 days of submitting the duly filled application to the NCLT, it shall be accepted and the corporate insolvency process shall begin from that date. The appointed Insolvency Resolution Professional (IRP) is bestowed with various powers and has to overlook as well as coordinate all the functionality as well as the legality of the insolvent company.

The liquidation of a company can occur, if:

• any time during the insolvency resolution process, 75% members of the creditor’s committee resolve to liquidate it;
• the creditor’s committee fails to finalize a resolution within the stipulated 180 days;
• the resolution plan submitted by the committee is rejected by the NCLT;
• the corporate debtor contravenes resolution plan provisions; or
• the tribunal passes an order for the company’s compulsory liquidation.

Once the liquidation order is passed a moratorium is imposed on the corporate debtor and his assets & the company’s liquidation process begins.

Role of a Liquidator Is Most Vital!

A Liquidator is then appointed by the committee of creditors, who is the main force in bringing it to a logical conclusion. Generally, the resolution professional looking over the insolvency of the company is acts as the liquidator, unless NCLT directs otherwise.

Playing the most pivotal role in the process, it is but obvious that a liquidator has to perform many duties in an impartial and judicious manner, in accumulating and assessing the assets of the debtor and eventually, selling them off to settle the debts of the creditors.

Duties of A Liquidator!

He is duty-bound to:

1. Assess the claims made by creditors
2. Act as a communicator
3. Undertake genuine valuation of assets
4. Ensure the sale of assets at the best price
5. Equitable distribution of funds among creditors
6. Play an investigative role in comprehending the affairs of the debtor company

Apart from these, there are personal attributes that are mandated in a liquidator. It is obligatory for him to be adept with the necessary skills. He should investigate and act with complete impartiality and due diligence. In the process of liquidation, he has to take utmost care that his personal interests do not ever come in conflict with professional interests. The foremost concern should be to act in the best interest of the creditors.

“A radical simplification in the process of insolvency & bankruptcy has been adopted by IBC to bring problems like bad debts, to a conclusive end, within a stipulated time.”
-Shweta Gupta, Founder, and CEO, MUDS

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The Corporate Insolvency Resolution Process (CIRP) must be accomplished within 330 days of the insolvency commencement date, along with any extension of the time frame of the corporate insolvency resolution process approved under Section 12 of the Insolvency Code and the time taken in legal proceedings in relation to such resolution process of the corporate debtor – second proviso to Section 12 of the Insolvency Code.

The Insolvency and Bankruptcy Code 2016 recently completed its second anniversary successfully. In these two years, the harvests through the IBC process proved to be extremely satisfactory. The entire scenario of the debtor-creditor relationship changed after the implementation of the Code.

After the enforcement of the Code, the creditors are not required to chase the debtor but it’s the debtor who chases the creditors. After the entry of the code, the NCLT has become a trusted forum with high credibility.

With the coming of Code into execution, numerous cases commenced to be filed before NCLT due to NCLT became overcrowded and therefore seeing an alarming situation the capacity of NCLT was further enhanced within due time, and matters under this legislation were disposed off expeditiously in a time-bound manner.

The sparkling statistics of the two successful years themselves portray the future of the Code. To highlight the success story as of now 1,322 cases have been admitted by NCLT. Around 4,452 cases have been disposed off at the pre-admission stage and 66 cases have been resolved after adjudication of these cases.

Of the 66 cases that were resolved after adjudication the realisation achieved was 80,000 crore. By having a glance at the NCLT database, of the 4,452 cases that were disposed off at the pre-admission stage, the amount successfully settled was around 2,02 lakh crores.

The success story does not end here. Some of the big cases like Bhushan Power and Steel Limited; Essar Steel India Limited are under progressing stages and are likely to be resolved in this financial year with hopeful realization of approx. 70,000 crore.

The IBC has a very clear demarcation in respect of the audience it seeks to cover within its umbrella. According to the code has aligned separate Adjudicating authorities to take and resolve matters that fall within their ambit. On this note, the adjudicating authority empowered to handle and resolve cases related to defaults by individuals and partnership firms is the Debt Recovery Tribunal (DRT).

The Code contains provisions for Insolvency & Bankruptcy of individuals and partnership firms in Part III. The provisions and process are designed keeping into account the need of the hour thereby providing a remedy in a time-bound manner. Even though provisions have been drafted for the same but they are not being looked up to but other remedial measures are resorted to for seeking remedy against individuals and partnership firms.

In light of the above, the process flow along with the relevant provisions related to the insolvency of individuals and partnership firms are enshrined in chapter III of part III of the Code. The provisions of the insolvency resolution process for individuals & partnerships are similar to that of the corporate insolvency resolution process for corporate persons.

The major point of difference between the insolvency proceedings of corporate persons and individuals & partnership firm is that the application by corporate persons is filed with NCLT whereas application by individuals & partnership firms is filed with DRT.

Another point of difference is that corporate insolvency creditors are bifurcated under two categories i.e. financial creditors and operational creditors whereas there is no bifurcation of creditors in the case of insolvency for individuals & partnership firms.

The application for insolvency resolution may be filed by the creditor or the concerned debtor himself. Once an application is filed with DRT for initiating insolvency proceedings a Resolution professional shall be appointed to carry forward and supervise the entire process as prescribed in this chapter.

The resolution professional after being duly appointed shall verify the application as submitted by the debtor or creditor for initiating the insolvency process. Once the resolution professional is through with the examination of the submitted application he shall thereafter compile a report suggesting the admission or rejection of the application as submitted to the adjudicating authority.

The Adjudicating Authority shall on the basis of the received report decide whether to admit or reject the application as was initially submitted to it by the debtor or creditor. Once insolvency proceedings are ordered to be initiated by the DRT, a moratorium period shall commence and thereafter seize to be in effect at the end of one hundred and eighth day.

The resolution professional shall play a crucial and significant role in driving and carrying forward the insolvency professional on behalf of the individual or partnership firm. On this note the resolution professional shall in the execution of this process invite claims from the creditors via public notice; after receipt of claims compile a list of creditors; chalk out the repayment plan; submit report on the received repayment plan, and thereafter obtaining approval by creditors and confirmation from DRT on the same.

The resolution professional shall also play an active role in implementing and monitoring the repayment plan thereby ensuring completion of the adopted repayment plan. The resolution professional is the sole commander and controller of the insolvency process.

Having gained a brief insight into the insolvency resolution process for individuals & partnership firms now let’s head toward gaining a detailed glance of the insolvency resolution process as prescribed for individuals and partnership firms.

Who can file an application

An application for initiating insolvency proceeding in respect to individuals and partnership firms may be made by the creditor in an individual capacity, in consortium with other creditors, or via resolution professional. The concerned debtor may also opt for initiating insolvency proceedings in favor of himself by filling an application personally or via the resolution professional.

Debtor

The concerned debtor may by invoking Section 94 of the Code file an application for initiating insolvency proceedings in respect of himself. The application may either be submitted personally by the concerned debtor or through the resolution professional.

In the scenario where the debtor is a partner of a firm then in such a situation, the concerned debtor may make an application for initiating insolvency proceedings with the approval of all or majority partners. While making an application for initiating insolvency proceedings, the concerned debtor is required to comply with the perquisites thereafter he becomes eligible for making an application for initiating the insolvency proceedings. The prerequisites that need to be compiled prior to making an application are as follows:

1. The debtor should not be an undischarged bankrupt;
2. The debtor should be undergoing a fresh start process in relation to his debts;
3. No insolvency resolution proceedings should be in process in relation to the debts against the debtor;
4. The debtor should not be undergoing bankruptcy proceedings
5. No insolvency resolution proceedings should have been admitted during the preceding twelve months to be counted from the date on which a fresh application is filed for invoking the insolvency resolution process.

Once the above-mentioned prerequisites are satisfied, the debtor becomes eligible to file an application for initiating insolvency proceedings.

By Creditor

A creditor for initiating insolvency resolution process in respect of individuals & partnership firm may make an application for the same either by himself, through a consortium with other creditors, or through a resolution professional. In the scenario where the debtor is a partnership firm then the creditor can make an application against either of the partners of the firm.

The application as made by the creditor(s) shall contain the required attachments as are prescribed in the Code. The creditor shall also furnish a copy of the application as filed to the debtor for hid reference. The creditor shall while making the application ensure that the application is in the appropriate format as prescribed in the Code.

Interim Moratorium

On an application being filed by either of the aforesaid, an interim moratorium shall come into force from the date on which application for initiating insolvency proceedings is made and thereafter shall cease to have an effect on the date of admission of the application by DRT.

During the period of interim moratorium neither any legal action nor pending proceedings shall be in execution nor can the creditor initiate any fresh legal action against the debtor. In the scenario where the debtor is a partnership firm then in such a situation, the interim moratorium shall be applicable against all the partners of the firm.

Appointment of Resolution Professional

The Resolution professional is the key person in the insolvency resolution process. He may be said to be the driver of the entire proceedings that fall within the ambit of the insolvency resolution process. the resolution professional may be appointed by undergoing either of the following:

Pre-existing Resolution Professional

There may be scenarios where an application for initiating insolvency resolution process is filed by the Resolution Professional on behalf of the debtor or creditor as the case may be. Under this state the adjudicating authority i.e. DRT shall direct the board (IBBI) to verify that as of date there is no disciplinary proceeding pending against the proposed resolution professional. The verification shall be directed to be conducted by the board within a period of seven days from the date of receipt of the application. The board shall on receipt of direction report its decision i.e. recommending appointment or rejection of resolution professional to the directing adjudicating authority within seven days of receipt of direction.

Fresh Appointment

In the cases where an application for initiating insolvency proceedings is filed by the debtor or creditor without the involvement of a resolution professional then in such a situation, the adjudicating authority shall direct the board to nominate a resolution professional who can drive forward the initiated insolvency resolution process. On receipt of the aforesaid direction, the board shall nominate a suitable resolution professional within a period of ten days. The board while nominating the resolution professional shall verify that no disciplinary proceedings are currently pending against the proposed resolution professional.

The adjudicating authority shall via order appoint the resolution professional as recommended or nominated above to drive forward the insolvency proceedings. The appointed resolution professional shall be provided a copy of the insolvency resolution process application as received by the adjudicating authority from the debtor or creditor.

Submission of Report by Resolution Professional

On receipt of the application as filed initiating for insolvency resolution process, the appointed resolution professional shall examine the application as submitted by the debtor or creditor within a span of ten days to be counted from the date of his appointment. Once the submitted application has been examined the resolution professional shall then prepare a report thereby recommending his decision as to whether the submitted application should be admitted or rejected.

The resolution professional may for arriving at decision ask the debtor to prove repayment of the debts that are being claimed to be unpaid by the creditors. The report as compiled by the resolution professional shall clearly highlight the reasons based on which the decision related to admission or rejection of the submitted application is undertaken. The resolution professional shall furnish a copy of his report to the concerned debtor or creditor as well.

Decision of Adjudicating Authority

Once the adjudicating authority receives the report as submitted by the resolution professional, it shall thereafter within a period of fourteen days pass an order either admitting the application or rejecting the same as, as it feels appropriate. In the scenario where application, as submitted for initiating insolvency resolution process, is admitted by the adjudicating authority, then the adjudicating authority may vide instructions conduct negotiations between the debtor and creditors to finalize a repayment plan.

The adjudicating authority shall furnish a copy of its order admitting or rejecting the application; report of resolution professional as submitted to the adjudicating authority and application as initially submitted for initiating insolvency resolution process to the creditor within a period of seven days from the date of passing the aforesaid order.

Moratorium Period

On the application for insolvency resolution process being admitted by the adjudicating authority, a moratorium period shall come into force and thereafter it shall terminate at the end of one hundred and eighty-day commencing from the date on which application for insolvency resolution process is admitted by the adjudicating authority or the date on which order is passed by adjudicating authority on a repayment plan. A similar situation as that of interim moratorium shall prevail during the moratorium period in relation to the debtor as well as his pending legal actions and debts.

Public Notice and Inviting Claim from Creditors

The adjudicating authority shall after admitting the application for initiating the insolvency resolution process issue a general public notice within a period of seven days from the date of passing order for the sake of inviting claims from all the creditors’ within a period of twenty-one days from the date of public notice.

The aforesaid notice shall be published in one English and one vernacular language newspaper. The notice shall also be affixed in the premises of adjudicating authority and shall also be displayed on the website of the adjudicating authority.

Registration of Claims of Creditors

The resolution professional is the sole authority where the claims are required to be registered by the creditors. Forgetting the claim registered the creditors may use the following medium of communication: electronic communication; courier; speed post or registered post.  

Preparation of List of Creditors

After the invitation and registration of claims received from creditors, the resolution professional shall collate a list of creditors based on the information received from the application as filed by the debtor for initiating the fresh start process and claims received from creditors. The resolution professional shall make best efforts to draft the said list within thirty days from the date of the notice.

Repayment Plan

The debtor shall in collaboration with the resolution professional draft a layout of the repayment plan which shall contain a proposal to creditors to restructure their debts. The repayment plan shall also authorize or grant the resolution professional various powers like carrying on business off debtor on his behalf; realization of assets of debtor and administration or disposal of assets of the debtor.

Resolution Professional’s Report on Repayment Plan

The resolution professional shall after successful drafting of repayment plan submit the same along with the report to the adjudicating authority within a period of twenty-one days to be counted from the last date of submission of the claims.

The report as drafted by the resolution professional shall also highlight the date; time and place of the meeting if there appears a need to summon a meeting of creditors. While fixing the date of the meeting it should be noted that the date of the meeting should not be less than fourteen days and at the same time not more than twenty-eight days to be counted from the date of submission of a report. Also while booking a calendar for convening meetings, the convenience, and availability of creditors shall also be taken into consideration.

Calling Meeting of Committee of Creditors

The resolution professional shall after preparation of his report on repayment plan call a meeting of the committee of creditors by issuing a prior notice in this regard at least fourteen days in advance of the finalized date of the meeting.

The notice of the aforesaid meeting shall be provided to all the creditors mentioned in the list of creditors as chalked out by the resolution professional. The notice of the meeting shall incorporate within it the address of adjudicating authority to whom the repayment plan along with the report of resolution professional on repayment plan was served supported by required annexures.

Convening Meeting of Committee of Creditors

The meeting once called shall be conducted in accordance with the procedures and provisions as are highlighted in the Code. During the course of the convened meeting, the creditors may vide their decision approve, modify or reject the repayment plan as drafted by the resolution professional.

In the convened meetings creditors shall be eligible to vote in proportion to the voting share as assigned to them. The proportion of voting share shall be determined by the resolution professional. The secured creditors shall also be eligible to participate and vote in the convened meeting.

Seeking Approval of Creditors on Repayment Plan

The approval of creditors is a must requirement for carrying on any business on behalf of the debtor. In this regard approval of a majority of creditors representing three fourth in value of the creditors that were present in person or via proxy at the convened meeting of the committee of creditors is a mandatory requirement for seeking approval of repayment plan or any subsequent modification in the repayment plan therein.

Report of Convened Meeting of Creditors  

Once the meeting of creditors has been duly convened for seeking approval of the creditor(s), it shall the duty of the resolution professional to compile a report of the duly convened meeting of the creditors. The report as compiled above shall include the minute-to-minute details of all decisions and discussions that were made during the convened meeting.

Decision of Adjudicating Authority on Repayment Plan

On receipt of the report of the duly convened meeting of creditors, the adjudicating authority shall thereafter vide its decision either approve or reject the repayment plan. The adjudicating authority shall form its decision on the basis of the report of the convened meeting of creditors as received by it from the resolution professional.

The decision of the adjudicating authority as passed shall also contain the directions for implementing the approved resolution plan. In the scenario where the repayment plan is approved by the adjudicating authority then the approved repayment plan shall be in effect as if it was proposed by the debtor and thereafter the plan shall be binding on the creditors as mentioned in the repayment plan and also on the debtor.

Implementation of Repayment Plan

The repayment plan once approved by the committee of creditors and adjudicating authority shall come into force and thereafter commence to be in implementation. On coming of the repayment plan into execution it shall be the sole responsibility of the resolution professional to monitor the implementation and execution of the approved repayment plan.

If any hindrances arise in the smooth execution of the repayment plan then the resolution professional is free to approach the adjudicating authority for seeking the required directions that will enable the smooth execution of the approved repayment plan. On being satisfied by the plea as raised by the resolution professional the adjudicating authority shall pass the necessary directions in this regard.

Completion of Repayment Plan

The resolution professional shall make his best endeavours to complete the execution of the repayment plan within the prescribed time limits in a time-bound manner. In this connection, the resolution professional shall after the successful completion of the repayment plan furnish the prescribed documents to the persons who are covered under the horizon of the repayment plan and to the adjudicating authority as well.

The resolution professional shall ensure that the documents are furnished within the duration of fourteen days from the completion of the repayment plan. If the resolution professional is unable to furnish the same within the due time then in such a scenario he may approach the adjudicating authority for seeking an extension in the time limit for furnishing the same. Once the adjudicating authority is satisfied then it shall grant an extension of not more than seven days to comply with the requirement.

Discharge Order

On time-bound and successful implementation of the approved repayment plan, the resolution professional shall approach the concerned adjudicating authority for seeking a discharge order for debts as are mentioned in the repayment plan.

The resolution professional may approach the adjudicating authority for seeking discharge orders only if the approved repayment plan provides for early discharge or discharge on completion of the repayment plan. The discharge order as granted by the adjudicating authority shall also be furnished to the board for its record.

The insolvency resolution process is the initial step that can be taken against the defaulting individual & partnership firms. On successful completion of the insolvency resolution process or during the course of the insolvency resolution process an application can be made for a bankruptcy order.

During the course of the insolvency resolution process, all persons are it debtor or creditor shall cooperate with the appointed resolution professional so that he may efficiently execute the process of insolvency resolution and thereby seek discharge order.

Stay connected with MUDS for more information.

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A bad debt is a monetary amount owed by a person to a creditor that is now irrecoverable from that person who was supposed to pay the same. The reason for nonpayment by the debtors is that either they go bankrupt, have financial problems or collection by the creditors due to various reasons is not possible. For example – X Limited sells goods on retail to a retailer at 60 days credit.

After 60 days, the company realizes that the debtors have gone bankrupt and now recovery of money is not possible. Thus, where the recovery of money lent seems impossible, it is considered as a bad debt.

Recovery of Bad Debt

Sometimes a debtor whose account had earlier been written off by a creditor as a bad debt may decide to make a payment either wholly or partly, this is called recovery of bad debts. Since it is considered as a loss when it is written off, recovery of bad debts is an income for the creditor and is recorded on the credit side of the income statement. Bad debts can also be recovered from the sale of borrower’s collateral. For instance – X limited sells its goods to Y limited on credit basis.

Later they find out that Y limited is being liquidated and the possibilities of recovering it’s (X’s) dues are very less, hence they write off their receivables. However, the person assigned to oversee the liquidation of Y limited instructs to pay 50% of the total amount in full settlement of its dues. Therefore, the recovery of money is 50%.

Letter Before Action

A Letter before Action (LBA) is a formal letter sent to the debtor by creditor or creditor’s authorized agent, requesting him to pay his debt before commencing any legal action against him. This letter serves as a final reminder and it includes all the necessary information like the date on which the debt was to be paid, any interest that is to be paid etc. Thus, this is a final warning to the debtor to avoid any legal proceedings.

How to recover my bad debts when the debtor becomes insolvent?

Insolvency is a situation when an individual or an organization is unable to meet its financial obligations with its lenders. In legal terms, it is a situation when a firm’s or person’s liabilities exceed their assets and they fail to pay their debt on the due date.

There are various methods for the recovery of money which are earlier written off. Some of the methods are listed below:

How to Recover My Bad Debt from an Insolvent Person?

The insolvency laws in India are provided under a statute called the Provincial Insolvency Act, 1920. It protects the insolvent debtors from being harassed by the creditors whose claim they fail to meet. The statute also provides machinery for the satisfaction of creditors.

The central rule to deal with the insolvency of debtors is derived from the Roman Principle “cessio bonorum” where a debtor voluntarily surrenders his goods to the creditors in lieu of exemption from court proceedings.

If debtors fail to pay their debts, an insolvency petition can be presented before the court by the debtor or creditor. An insolvency petition can be preferred only when the debt amount exceeds five hundred rupees. When an insolvency petition is presented by the debtor, it is considered as an act of insolvency and court may make an order of adjudication where his property may be attached and used to fulfill the debts which are due by him.

The creditor can also file an insolvency petition. However, it must be filed within three months from the act of insolvency.

The insolvency petition can be filed in the district court which exercises jurisdiction over the area where the debtor resides or carries on business or personally works for gain. The order of discharge by the court releases the insolvent from all current and provable debts. Once the person is declared an insolvent, the court appoints an official administrator to oversee the liquidation, take charge on the property of the insolvent and then divide them among the creditors to pay back their debts.

How to Recover My Bad Debt through Alternative Dispute Resolution Methods?

One of the most convenient method of recovery of bad debt is mediation. Mediators are trained professionals appointed to settle the matter between the creditors and the debtors. The mediator is completely neutral and tries to understand each party’s position. He focuses on the issue and then tries to find a solution that suits both the parties. This is a faster process as compared to courtroom litigation and a mediator can be arranged within a day if both the parties agree to resolve their issues through mediation.

How to Recover My Bad Debt? – Debt Collection Agency

The problem of recovery of bad debt can also be solved by contacting a debt collecting agency. These agencies specialize in the recovery of bad debts. Outsourcing of debt collection helps the creditors to save their own time and lay focus on their business. The debt collecting agencies contacts the debtors via phone, emails, notice and other legitimate mediums, in order to recover the debts of their clients. After all amicable methods are exhausted, they may issue legal proceedings against debtors on behalf of the creditors.

Conclusion

In addition to legal proceedings under The Provisional Insolvency Act, 1920, mediation and debt recovery agencies are viable options which can be relied on to recover bad debts. Mediation is a comparatively faster and cheaper option which must be preferred before initiating legal proceedings. This will help the parties save both, time and money. Where it seems that reaching a settlement between the parties is impossible, the parties can always initiate legal proceedings.

The post How to Recover my bad debt? appeared first on MUDS.

Buying a home in today’s time is no less than playing a gamble. The cumbersome processes, elaborate legal formalities and improper enforcement mechanisms to enforce the interest of home buyers clubbed with the risk of delay in obtaining possession of the property have unduly complicated the dream of owning a home today.

Are you also an aggrieved home buyer? If yes, then connect with MUDS to seek relief and relive the dream of owning a home.

The home buyers were always in a safe zone and were given rights to raise their voice to Civil courts or concerned Consumer Courts to get their grievances redressed. Under the Consumer Protection Act(CPA), 1986 there exist consumer dispute redressal agencies at various levels like the District Forum, State Commission and National Consumer Dispute Redressal Commission (NCDRC). Under the CPA, a complaint regarding goods or services may be filed by any consumer or registered association or a group of consumers having the same interest. The complaint filed by home buyers shall be accompanied by the prescribed fee as mentioned in the Consumer Protection Rules, 1987.

The civil courts and consumer forums began becoming overloaded with cases and there was a sincere need to devise alternative means through which remedy could be bestowed to home buyers. In the light of this appeared the Insolvency and Bankruptcy Code 2016 which became the ray of hope for the home buyers. Until now, home buyers had to knock on the doors of the courts to receive their money while creditors and other stakeholders got benefitted from the implementation of the Insolvency and Bankruptcy Code 2016. The Code, when passed was a center point of criticism as such distressed house owners, who accumulate their savings into such housing and real estate projects were ranked at the lowest priority in the list of creditors positioned after financial institution and other industry leaders.

Another welcoming move came for home buyers in the form of new legislation named “Real Estate (Regulation and Development) Act, 2016”( RERA). The RERA seeks to curb the shortcomings of respective ownership acts prevailing in each state. The main intent of RERA was to provide uniform laws throughout the states, thereby protecting the interest of home buyers along with increasing transparency in the operations of construction companies monitoring the chances of defaults and misappropriation of funds by builders.

The home buyers were reaping satisfaction and were getting their payments realized when another feather was added in the cap of home buyers as our Indian President granted his assent to the ordinance amending the Insolvency and Bankruptcy Code, 2016 which had the effect of recognizing and repositioning the home buyers as Financial Creditors. The amendment is a huge relief to home buyers as now after the amendment the home buyers who were ranked as other creditors shall rank at par with the financial creditors. The amendment was made under the Code on the premises and keeping into account the fact that money is raised from such home buyers to finance construction and so these home buyers should be treated as financial creditors. The amendment shall greatly benefit the borrowers who are facing hardships due to incomplete real estate projects. Now after the amendment, the home buyers shall get the right to invoke Section 7 of the IBC against defaulting developer.

Let’s quickly have a glance at the legislation having remedies in place for the home buyers through which they can seek relief against the developers when they are aggrieved by such developers.

1. The Consumer Protection Act, 1986

The Act was enacted to provide speedy redressal mechanism to the consumers. through the establishment of Forums at the District, State, and National Level. The provisions of the Consumer Protection Act are applicable when the consumers highlight unfair trade practice or any deficiency with respect to goods or services. The home buyers came within the ambit of the Consumer Protection Act by the interpretation of the term “Services “as the term services included construction also.

There is three-tier machinery for redressal of consumer grievances under the act. The District Consumer Forum is the initial forum and possesses the jurisdiction to entertain complaints where the value of the house and the compensation if any, claimed does not exceed Rs 20,00,000 (Twenty lakhs).

Where the value of the house and the compensation if any, claimed exceeds Rs. 20,00,000 but does not exceed Rs. 1,00,00,000(One Crore), then such complaints shall be handled by the State Consumer Commission which is established in each state.

Where the value of the house and the compensation if any, claimed exceeds Rs. One Crore then the National Consumer Disputes Redressal Commission will have the jurisdiction to entertain such complaints.

The territorial jurisdiction for filing the complaint shall either be the place where the registered/branch office of the builder is located or the place where the flat purchased from the builder is located.

There is no specific format or form in which complaint is to be filed before the forums under the Act. Therefore a plain paper application would be sufficient in this regard. This has made the filings of complaint easy and convenient for the consumers thereby making the forums easily approachable than civil courts.

In terms of relief granted to the aggrieved home buyer, the relevant forum may pass an order directing the builder or developer to return the money paid to them by the home buyers along with compensation for any loss or damage caused to the concerned home buyers due to the negligence of the builders or the developers. These forums also have the power of granting any punitive damage if they feel necessary. Penalties can also be imposed on such defaulting developers along with imprisonment for a maximum period of three years.

2. The Real Estate (Regulation and Development ) Act,2016

The Act came into force on 1st May 2016. The Act had the intention of providing protection to the home buyers along with boosting investment in real estate sector. The Act seeks to protect the home buyers by having in place provisions that prohibit unaccounted money from being pumped into the real estate sector and now 70 % of the money has to be compulsorily deposited in the bank account via cheque.

The Act has made it mandatory for all commercial and residential real estate projects where land is over 500 square meters or eight apartments to register with Real Estate Regulatory Authority (RERA) for launching a project.

The Act has established Real Estate Regulatory Authority in each state for the monitoring of real estate sector and also for acting as the adjudicating authority for speedy dispute redressal. The Regulatory Authority shall regulate transaction related to both residential and commercial projects thereby ensuring their timely completion and handover. These authorities shall not only promote the interest of home buyers but also deal and resolve their grievances.

The Act grants the option to appeal against the order of the concerned Real Estate Regulatory Authority and thereafter to the high court or the Supreme Court all in a time-bound manner.

The Act entitles the aggrieved homebuyer to claim the refund of the amount he had paid as consideration for the home along with interest as may be prescribed where the builder /developer defaults in the delivery of the possession in accordance with the terms of the agreement.

3. Insolvency and Bankruptcy Code, 2016

The Act came into force from December 2016. The Act is a successful piece of legislation promulgated to provide uniform code for insolvency resolution of all persons whether individual, partnership firm and corporate persons. The Act contains various chapters for dealing with the insolvency of different types of persons.

As per the initially coined Insolvency Code, home buyers were considered under a definite class of creditors and were clubbed with unsecured creditors. The home buyers approached the National Company Law Tribunal (NCLT) for being allowed to participate as creditors in the insolvency process. The legislature took the plea into account and has now provided recognition to home buyers as financial creditors by amending the code vide Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.

Now the home buyers are recognized as home buyers under the Insolvency and Bankruptcy Code, 2016 and are therefore entitled to receipt of a share in the sale of assets under the liquidation process. Being financial creditors home buyers are now permitted to initiate the Corporate Insolvency Resolution Process under Section 7. The home buyers shall now have the opportunity to be a part of the Committee of Creditors.

The protection provided under the IBC is limited in nature and is only relevant when a company becomes insolvent or bankrupt. Therefore it is not a suitable forum to claim relief in most cases and can only be used by the home buyers as and when the concerned real estate company is in a bad financial condition and is unable to continue and/or finish the concerned real estate project. Till the adjudicating mechanism under RERA is being established by each state government, home buyers and the potential home buyers are being best served by being granted relief from agencies under CPA.

The IBC amendment was brought to grant recognition to the home buyers with the motive to protect and acknowledge the rights of home buyers when the insolvency petition is filed against the developer company. RERA is a more specific act which should be adopted when the construction of the project is at the verge of completion or when it is possible to seek refund or possession from developers. Both the RERA and IBC provide subjective approach based on the facts of the case and the situation of the developer.

Comparing remedy under CPA v/s RERA v/s IBC on various parameters from Home Buyers perspective:

Legal Insolvency and Bankruptcy Code remedies available to Home Buyers

If the builder/developer has committed a delay in giving possession then in such a situation the home buyers can seek recourse to any of the following below listed remedies to claim a refund of money or possession of the home.

1. Approach Consumer Forum

This is the most common forum for bringing an action against the builder/developer regarding deficiency in service as was agreed between the home buyer and builder. The home buyer is covered under the definition of “Consumer “as is defined under the Consumer Protection Act, 1986 only if the house is purchased for his own use and not for commercial purpose. Approaching the Consumer Forum is easy because of the fact that the court fee charged is very nominal.

2. File a case before Regulatory Forum 

Home buyers can file a complaint with Real Estate Regulatory Authority under Section 31 of the Real Estate (Regulation and Development) Act, 2016. The Regulatory Forum is specifically constructed to provide speedy and effective adjudication of disputes between buyers and builders. Under RERA if the builders fail to grant possession at the promised time frame then home buyers have the autonomy to withdraw the amount invested in the project so far along with interest. However, if the home buyers still want to continue the project then in such a situation he is entitled to receive interest for every month of delay over and above the promised time.

3. File Civil Suit

Where the builder fails to deliver the possession of the property on the promised date then in such a situation the home buyers can file a civil suit on the grounds of the breach in the obligation which was promised at the time of the agreement. The home buyers can approach the civil courts and file suit for injunction/ damages or claim refund of the amount paid to the buyer till date along with interest. On approaching the civil court, the home buyers can get an immediate order for the injunction under Order 39 Rule 1 and Rule 2 of CPC. It is important to mention that there are no fixed stringent timelines for adjudication of the suit and so it may take longer time as compared to other alternatives. A civil suit can be filed by the persons who are not covered under the ambit of the consumer.

4. Initiate out of court Settlement

To avoid court formalities home buyers can opt and go for arbitration if there is enshrined an arbitration clause in the agreement between the buyer and builder .for resolving the matter via arbitration it takes around 3 to 6 months. Therefore for initiating out of court settlement, there is a mandate for the arbitration clause to be in place.

5. File Criminal Complaint

If the home buyer is cheated or defrauded by the builder/developer then in such a scenario the home buyer can file a criminal complaint based on the provisions of the Indian Penal Code on the grounds of being cheated, defrauded, etc. As soon as a criminal complaint is filed against the builder/developer, a bailable warrant may be issued against such builder/developer

6. Recourse under IBC

The Insolvency and Bankruptcy Code has completed 2 years as of now. In these two years, IBC has done great wonders. The home buyers were initially ranked at par with other creditors but after the amendment in August 2018, the home buyers have been upscaled by lining them in the position of financial creditors. Being Financial Creditors these home buyers can invoke Section 7 to seek remedy.

It is significant to highlight that the home buyers while claiming compensation through above-mentioned manner can claim interest along with the compensation on the amount paid by them to the developer/builder till date. Also if the home buyer was staying in rented accommodation till obtaining possession of home then he can claim money paid as rent.

The post Recovery Weapons for Home Buyers appeared first on MUDS.

“Every professional after obtaining the membership MUST register himself with the Board within a specified time in a particular manner and on payment of the fee in the manner specified”
Isha Malik (Company Secretary, MUDS Management Pvt Ltd)

How to apply for a Certificate of Registration?

1. An individual shall make an application in Form A of the Second Schedule along with a non-refundable fee of 10000.
2. The board shall acknowledge the same within 7 days of the receipt.
3. Board may ask for additional information or clarification in a prescribed manner.

Board may also ask an applicant to appear before it in person or through his authorized representative if any clarification is required.

“ After satisfaction of the Board, it may grant a certificate to the applicant in Form B of the Second Schedule to these Regulations within 60 days of receipt of application”                                                    Divya Gupta (Market Analyst, MUDS Management Pvt Ltd)

How to get a Temporary Registration?

Following 3 points should be considered while considering for temporary registration for the initial period of 6-months from 01-01-2017

Point #1: Notwithstanding any of the provisions of Regulation 5, an individual shall be eligible if:

• Has continuous practice for 15 years
• Has submitted an application for registration in Form A of the second schedule on or before 31/12/2016 with a non-refundable application fee of 5000.

Point #2: Agency shall submit the fee and the details of the applications received to the Board under sub-regulation(1 (b).
Point #3: Any professional registered shall not undertake any assignment after the expiry of the registration

Recognition of Insolvency Professional Entities

1. An LLP, a registered partnership firm or a company can only be recognized as Insolvency Professional Entity if:
   Majority of them are registered as Insolvency Professionals; or
   Majority of the whole-time Directors are registered as Insolvency Professionals
2. A person who is eligible under sub-regulation (1) can make an application to get recognized to the Board in Form C of the Second Schedule to these Regulations

“Post necessary enquiry, if the Board is satisfied about the eligibility of applicant, it may grant a certificate of Recognition in Form D of the Second Schedule of these Regulations”
Divya Gupta (Market Analyst, MUDS Management Pvt Ltd)

Code of Conduct for Insolvency Professional

• Code of Conduct #1: Must maintain integrity by being honest, straightforward and forthright in all professional relationships.
• Code of Conduct #2: Must maintain complete independence in his professional relationships and should conduct the insolvency resolution liquidation process, as the case may be, independent of external influences.
• Code of Conduct #3: Must maintain and upgrade his professional knowledge and skills to render competent professional service.
• Code of Conduct #4: Must inform such persons under the Code as may be required, of a misapprehension or wrongful consideration of a fact of which he becomes aware, as soon as may be applicable.
• Code of Conduct #5: Must adhere to the time limits prescribed in the Code and the rules, regulations, and guidelines thereunder for insolvency regulation, liquidation or bankruptcy process.
• Code of Conduct #6: Must make efforts to ensure that all communication to the stakeholders is made well in advance and in a manner that is simple, clear, and easily understood by the recipients
• Code of Conduct #7: Must ensure the confidentiality of the information relating to the insolvency resolution process, liquidation or bankruptcy process
• Code of Conduct #8: Must refrain from taking too many assignments
• Code of Conduct #9: Must provide services for remuneration, which is charged in a transparent manner
• Code of Conduct #10: Must not accept gifts or hospitality which undermines or affects his independence as an insolvency professional

“If the Board, on receipt of complaint under section 217 or has proof that any of the provisions of the Code has been contravened issued thereunder can direct authority to carry out investigation within such time and manner as specified by regulations.”
Isha Malik (Company Secretary, MUDS Management Pvt Ltd)

Procedure for Inspection, Investigation, and Disciplinary Action

• Step #1: The authority shall serve notice at least 10 days before the commencement of the inspection.
• Step #2: The authority may ask to submit records or proofs before commencement.
• Step #3: If required, the authority may visit the office of the accused.
• Step #4: The accused need to provide access to all the occupied premises

“The authority may submit an interim inspection report if required and copy of draft inspection report to the accused requiring comments within 15 days from receipt of the draft inspection report.”
Divya Gupta (Market Analyst, MUDS Management Pvt Ltd)

“Insolvency Professionals are now under scanner”
Shweta Gupta(Founder and CEO, MUDS Management Pvt Ltd)

The post Insolvency Professional- 5 Answers to Know ! appeared first on MUDS.

While registering insolvency professional agency, the Board must remember that professionals are there to promote:

1. Professional development and regulation of insolvency professionals.
2. Services of competent insolvency professionals.
3. Good professional and ethical conduct among insolvency professionals.
4. Interests of debtors, creditors and other persons as specified.
5. The growth of insolvency professionals agency.

“Every person needs to have a certificate of registration issued on behalf by the Board in order to carry its business as insolvency professional agency under the code”
Divya Gupta (Market Analyst, MUDS Management Pvt Ltd)

Who is Eligible to be Insolvency Professional Agency?

Only if a company registered under section 8 of the Companies Act, 2013 and satisfies conditions, it is eligible to be Insolvency Professional Agency –

1. The sole objective is to carry the functions of an insolvency professional agency.
2. Has bye-laws and governance structure in accordance with IBBI.
3. Has a minimum net worth of 10 crore rupees.
4. Has paid-up share capital of 5 crore rupees.
5. Is not under control of person(s) resident outside India.
6. Not more than 49% of its share capital is held by persons outside India.
7. NBFCIs not a subsidiary of a body corporate through more than one layer.
8. Itself, its promoters, its directors, and persons holding more than 10% of its share capital are fit and proper persons.

“Every insolvency professional agency needs to make bye-laws in line with the model bye-laws as specified by the Board under sub-section (2) or section 196 subjected to the specifications made in the Code and any rules or regulations made within it and after necessary approvals of the Board”
Isha Malik (Company Secretary, MUDS Management Pvt Ltd)

Top 4 Points about Model Bye-Laws:

1. The bye-laws along with the application for the registration need to be submitted to the Board.
2. The bye-laws will be applicable for all matters specified in the model bye-laws.
3. The bye-laws will hold at all times as the model bye-laws.
4. The agency needs to publish its bye-laws, the composition of all committees formed, and all political created under the bye-laws on its website.

Whose over IBBI?

The Board has made regulations in order to ensure that every insolvency professional agency follows the objectives mentioned under the code:

1. The setting up of a governing board.
2. The minimum number of independent members to be on the governing board.
3. The number of insolvency professionals being its members who shall be on the governing board.

“ Modi government has no doubt introduced a very robust insolvency resolution system that will highly benefit the nation”
Shweta Gupta (Founder & CEO, MUDS Management Pvt Ltd)

The post Insolvency Professional Agencies appeared first on MUDS.

The Insolvency and Bankruptcy Code is a masterpiece legislation crafted keeping into account the needs and requirements of the present time. The Insolvency and Bankruptcy code catered to serve the specified persons enshrines within its ambit various processes which are applicable to the target section based on their eligibility norms.

On this note, the Insolvency and Bankruptcy Code 2016 imbibes within its horizon Fast Track Corporate Insolvency Resolution Process (FTCIRP). The detailed provisions of the fast-track corporate resolution process are stated in section 55 to 58 under chapter IV of Part II of the code.

An application for initiating the fast track corporate insolvency resolution process can be made only by a specified category of corporate debtors. As the name highlights, the timeline for the conclusion of fast-track insolvency process is 90 days to be counted from the insolvency commencement date. The time lag can be extended be extended by the concerned Adjudicating Authority only once for a maximum duration of 45 days.

Why Fast Track Corporate Resolution Process?

It is shocking to note that even after sincere endeavors India still has a low ranking in ease of doing business. India holds 136 ranks in the insolvency ranking list. This is an alarming statistics for our economy. A few other alarming statistics because of which FTCIRP is required are as follows:

1. As per World Bank estimate, India ranks at 136 out of 189 BRICS nation. Our ranking is comparatively low as compared to Singapore, Australia, UK, and the USA.
2. It has been estimated by World Bank that it takes more than 4 years to wind up a company in India which is twice the time it takes in China where only 1.5 years is required.
3. India recovers only 25.7 cents per dollar in a year. On this rate, a debt is recovered under IBC in 4.3 years in India.
4. Regulations on land and labor prevent selling of property and laying of workmen.
5. In insolvency cases which are presented before Board for Industrial and Financial Restructuring (BIFR), Creditors cannot take action against defaulter until restructuring plan of the sick company is approved and is in place.

After having glanced at such alarming facts we get to see that the situation of India in insolvency cases is below standards and required a device of suitable measures to overcome the deficiencies. Also, there was a need for a need for having a shorter process for less complex cases because majority cases related to insolvency were not much complex and for which the existing process for not appropriate. Therefore, keeping into account all of the above the Fast track Corporate Insolvency Resolution Process was drafted.

Against whom application can be made?

An application for FTCIRP can be made only against the following corporate debtor under section 55 of the code:

1. Small company – as defined under the companies act 2013.
2. Startup – as defined in the government of India notification dated 23rd may 2017 as issued by the ministry of commerce & Industry.
3. Unlisted company – whose total assets as reported in the financial statement of immediately preceding financial year, not exceeding one crore Rupees.

Who can initiate FTCIRP?

An application for FTCIRP can be filed by a Creditor or Corporate Debtor, as the case may be. The Creditor or Corporate Debtor while filing an application for FTCIRP shall attach the following information along with the application:

1. Proof of the existence of default evident from the records available with Information Utility
2. Such other information as may be specified by the IBBI.

Time Frame for completion of FTCIRP

As the name suggests the cases falling under this zone are not much complicated and therefore the process can be completed in a short span of time. Keeping into account the above, the code prescribes the duration of 90 days within which The FTCIRP shall be completed. The duration of 90 days shall commence from Fast track insolvency commencement date.

The Resolution Professional can file an application to the concerned adjudicating authority for seeking an extension of the duration of FTCIRP beyond 90 days only after obtaining the vote of seventy-five percent of voting share in the meeting of Committee of Creditors.

If the adjudicating authority on receipt of the application for extension is satisfied that the FTCIRP cannot be completed within 90 days, the in such a case it may by order extend the duration of FTCIRP by a further duration which shall not exceed 45 days.
It is evident to note that the extension of duration beyond 90 days shall be granted by adjudicating authority only once.

FTCIRP – Process Flow

1. Appointment of Resolution Professional

An Insolvency Professional (IP) shall be entitled to be appointed as resolution professional only if he does not possess any relational with the corporate debtor. The insolvency professional should be an independent person for being appointed as resolution professional. The insolvency professional shall make a disclosure of his independence at the time of his appointment.

2. Public Announcement

The insolvency professional on being appointed as an interim resolution professional shall make a public announcement not later than three days from the date of his appointment.
The public announcement shall be published in one English and one regional language newspaper which is in widely circulated at the location of the registered office and principal office of the corporate debtor. The same public announcement shall be hosted on the website of a corporate debtor and on the website of the board.

3. Submission and Verification of claims

The interim resolution professional shall provide 10 day’s time for submission of proof of claim. The operational creditors, financial creditors, workmen, employees, and other creditors shall submit proof of their claims in the prescribed forms along with supplementary documents and clarifications.
On receipt of claims, the resolution professional shall verify the claims received within seven days from the end date for receipts of claims. Thereafter a list of creditors shall be drafted by the resolution professional.

4. Formation of a committee of Creditors

The resolution professional shall form a committee of creditors consisting of financial creditors and operation creditors of the corporate debtor. Where the corporate debtor does not have any financial debt or the financial creditors are a related party of the corporate debtor then the committee of creditors shall consist of only operational creditors.

5. Meeting of the committee of creditors

The resolution professional shall convene the first meeting of the newly constituted committee of creditors within seven days of filing the report. Thereafter the meeting of the committee can be convened at any time as an when required. The resolution professional may convene a meeting of the committee on the request of members of the committee after obtaining a vote of thirty-three percent voting share.

The notice for the meeting shall be served at least seven days in advance prior to the date of the meeting. The notice for the meeting shall be in writing and delivered to the members either by hand delivery, speed post, or electronically.

6. Appointment of Registered Valuer

The Resolution Professional shall appoint one registered valuer within seven days of his appointment to ascertain the liquidation value of corporate debtor.
The registered valuer so appointed shall submit an estimated liquidation value after personally verifying the inventory and fixed assets of corporate debtors.

7. Drafting of information memorandum

The Resolution Professional shall draft and submit an information memorandum in electronic form to the members of the committee of creditors.

8. Formation of the Resolution Plan

The resolution plan shall provide shall provide the measure required for implementing it. The resolution plan shall be drafted keeping into account the required mandatory content.

9. Approval of the resolution plan

The resolution applicant shall submit the drafted resolution plan to the resolution professional within the prescribed time limit.
The resolution professional shall, in turn, submit the shortlisted resolution plans to the committee of creditors for seeking their approval. The committee may approve any resolution plan with or without modification as it finds suitable.

10. Submission of resolution plan with adjudicating authority

The resolution professional shall submit the approved resolution plan to the adjudicating authority with required certifications. The adjudicating authority on receipt of the resolution plan shall pass order accepting or rejecting the submitted resolution plan.

Challenges and way forward in FTCIRP

1. The biggest challenge is whether 90 days are sufficient for the conclusion of FTCIRP.
2. In Indian Insolvency and Bankruptcy Code, any creditor can propose a resolution proposal. The IBBI is likely to be flooded with numerous resolution plans in just one insolvency matter only.
3. The Resolution professional would need time to understand the company, its cash flows, essential operational creditors before he can prepare information memorandum which is required for the drafting of a final Resolution plan.
4. The robust conclusion of FTCIRP cases will depend on the quality and quantity of insolvency professionals in the market practicing in his domain.
5. Failure to conclude the FTCIRP process within 90 days would ultimately lead to the commencement of the liquidation process.

The Fast Track Corporate Insolvency Resolution Process is a very well-crafted process designed to target a specific section of corporate debtors against whom insolvency proceedings can be initiated by the creditors or corporate debtor himself. The time limit is also prescribed in such manner that less complex cases can be completed within a limited time to provide speedy disposal of matters which will provide adjudicating authorities more time to focus their attention on complex matters.

Hope this article was helpful in providing an insight into the Fast Track insolvency Process. Stay connected with MUDS for updates.

The post The Complete Procedure for Fast Track Insolvency Resolution appeared first on MUDS.