In recent weeks, there has been an intense debate, including on this Blog, about whether promoters (particularly those broadly considered wilful defaulters) must be allowed to bid for assets being sold as part of the resolution plan for a debtor company under the Insolvency and Bankruptcy Code, 2016 (the “Code”). This debate was sparked partly by certain transparency norms introduced by the Insolvency and Bankruptcy Board of India (“IBBI”) stipulating details to be provided by persons bidding for assets of an insolvent company. More recently, news reports had indicated that the Government was in the process of coming up with an Ordinance to address the issue.
In a further development, the President of India today promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (which can be accessed through the Gazette of India). The Ordinance sets out criteria that persons need to satisfy before they can submit a resolution plan to the resolution professional. In particular, the Ordinance creates a list of persons who are ineligible to present a resolution plan. These include persons who are undischarged insolvents, those who are wilful defaulters (as stipulated by the Reserve Bank of India), persons convicted for offences punishable with imprisonment of at least two years, persons prohibited by the Securities and Exchange Board of India from trading in securities or accessing the capital markets, and certain others as indicated in the Ordinance. In respect of companies where a resolution plan has already been submitted prior to the effectiveness of the Ordinance, the onus is imposed on the committee of creditors not to approve any resolution plan submitted by an ineligible person.
While several issues have emanated in the functioning of the Code, most of them have been dealt with by the adjudicatory bodies such as the National Company Law Tribunal, the National Company Law Appellate Tribunal and even the Supreme Court. However, it appears that this issue had garnered the attention of the Government to necessitate a legislative amendment, albeit in the form of the Ordinance. Given that the amendment comes within the first year of implementation of the Code, it is clear that the legislation is likely to be reviewed even further, and perhaps on an ongoing basis, a matter that is evident from the constitution of a new committee to review the Code.