Ibc Assignment-aayushi, Vinayak And Kullu.pdf
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Business Law and Corporate Governance: IBC Assignment
Insolvency and Bankruptcy Code The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India made by consolidating the earlier present single laws for insolvency and bankruptcy. The code’s bill, was introduced in Lok Sabha in December 2015 and was passed by the lower council on 5 May 2016. It was given the final signal on 28 May 2016; however certain provisions of the Act came into force from 5th and 19th August 2016. Being a one-stop solution for addressing all insolvencies economically and time bound, it has become one of the biggest economic reforms adopted by India. Moreover, the code will be able to protect the interests of small investors and make the process of doing business less cumbersome. As a result, India has had a historic jump of 30 spots on the ease of doing business ranking.
Process 1. When a company makes a payment default of at least Rs. 1 lakh, an insolvency application can be made either by the company's creditors or debtors to the NCLT. 2. The NCLT then appoints an interim insolvency resolution professional (IRP), placing the company under a moratorium. 3. Upon the appointment of IRP, the board of the company gets suspended till the completion of the resolution process. 4. IRP then creates a committee of creditors of the company, which appoints the final insolvency resolution professional (IP). 5. IP drafts a resolution plan which requires the approval of the committee of creditors within 180 days, with a grace period of another 90 days, and the final approval of the NCLT. 6. If the plan doesn't get approved in 270 days, the company goes into liquidation.
Case Study: Alok industries (2017-18) Alok Industries is a Mumbai based Indian textile manufacturing company. It was in the business of spinning, weaving, knitting and processing of home textiles, readymade garments and polyester yarns that it exported to over 90 countries, as well as sold in India. In the period of 2003-13, the company undertook debt-fed expansion projects that totalled to more than ₹10,000 crores. But due to the unfavourable market, and bad management By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
decisions, the company kept on magnifying their liabilities, which eventually pushed them into bankruptcy in 2017, thus being a part of ‘the dirty dozen’ under IBC. The company owed the following amount to following lenders
Lenders Exposure (₹ crores) State Bank of India 10380 Axis Bank 1690 Central Bank of India 1320 IDBI 1270 Canara Bank 1020 Punjab National Bank 950 Bank of Baroda 880 Life Insurance Corporation 800 Others 11190 Total 29500 State Bank of India has filed a case with NCLT in July 2018 and is leading the consortium of lenders in the proceedings against the company.
Case timeline The timeline of events is as provided on the next page.
By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
Business Law and Corporate Governance: IBC Assignment
•SBI led consortium files for liquidation movement against Alok industries for ₹3772 crore •NCLT appoints Ajay Joshi as interim resolution professional (IRP) •Ajay Joshi takes over company's operations and constitutes Committee of Creditors 18 July 2017 (CoC)
•Bidding Process part 1: RIL and JM Financial jointly present the highest bid at ₹ 4050 crores March 2018 •CoC rejects the appeal
April 11, 2018
April 13, 2018
•Bidding Process part 2: RIL and JM Financial jointly bid at ₹ 5050 crores. •CoC rejects the appeal
•Bidding Process part 3: RIL and JM Financial jointly bid again at ₹ 5050 crores •CoC rejects the appeal; 70% majority votes recieved which was 5% less than required.
•270 days period ends; liquidation process to follow April 14, 2018
April 19 2018
•Alok industries’ employees move to NCLT against CoC’s decision. •Request prevention of liquidation.
•NCLT new rule; Voting threshold for creditors’ approval dropped to 66% from 75% May 2018
11 June 2018
22 June 2018
•NCLT asks the resolution professional to plead to CoC to re-look the sole applicant’s proposal, based on the latest changes.
•Three-day marathon meeting of the CoC came out with a 72% voting majority in favour of Reliance-JM financial’s joint offer; thus, saving the company from liquidation, however By: Aayushi Jain – S173F0001 accepting more than 86% haircut on debt. Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
Current Position of the case •
The CoC has approved the Reliance-JM offer of buying out Alok Industries, however, in the interest of right to equality, all individual cases are being heard before giving a green signal on the deal.
•
The case is further being individually proceeded by those lenders and parties who feel that such a massive haircut isn’t justified. (such as Dena bank etc.)
•
However, a positive note struck when SBI withdrew their director appointed in the Alok industries, as it tells that the case is near its closure.
•
The next hearing is scheduled for 4 October 2018.
By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
Insolvency and Bankruptcy Code The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India made by consolidating the earlier present single laws for insolvency and bankruptcy. The code’s bill, was introduced in Lok Sabha in December 2015 and was passed by the lower council on 5 May 2016. It was given the final signal on 28 May 2016; however certain provisions of the Act came into force from 5th and 19th August 2016. Being a one-stop solution for addressing all insolvencies economically and time bound, it has become one of the biggest economic reforms adopted by India. Moreover, the code will be able to protect the interests of small investors and make the process of doing business less cumbersome. As a result, India has had a historic jump of 30 spots on the ease of doing business ranking.
Process 1. When a company makes a payment default of at least Rs. 1 lakh, an insolvency application can be made either by the company's creditors or debtors to the NCLT. 2. The NCLT then appoints an interim insolvency resolution professional (IRP), placing the company under a moratorium. 3. Upon the appointment of IRP, the board of the company gets suspended till the completion of the resolution process. 4. IRP then creates a committee of creditors of the company, which appoints the final insolvency resolution professional (IP). 5. IP drafts a resolution plan which requires the approval of the committee of creditors within 180 days, with a grace period of another 90 days, and the final approval of the NCLT. 6. If the plan doesn't get approved in 270 days, the company goes into liquidation.
Case Study: Alok industries (2017-18) Alok Industries is a Mumbai based Indian textile manufacturing company. It was in the business of spinning, weaving, knitting and processing of home textiles, readymade garments and polyester yarns that it exported to over 90 countries, as well as sold in India. In the period of 2003-13, the company undertook debt-fed expansion projects that totalled to more than ₹10,000 crores. But due to the unfavourable market, and bad management By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
decisions, the company kept on magnifying their liabilities, which eventually pushed them into bankruptcy in 2017, thus being a part of ‘the dirty dozen’ under IBC. The company owed the following amount to following lenders
Lenders Exposure (₹ crores) State Bank of India 10380 Axis Bank 1690 Central Bank of India 1320 IDBI 1270 Canara Bank 1020 Punjab National Bank 950 Bank of Baroda 880 Life Insurance Corporation 800 Others 11190 Total 29500 State Bank of India has filed a case with NCLT in July 2018 and is leading the consortium of lenders in the proceedings against the company.
Case timeline The timeline of events is as provided on the next page.
By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
Business Law and Corporate Governance: IBC Assignment
•SBI led consortium files for liquidation movement against Alok industries for ₹3772 crore •NCLT appoints Ajay Joshi as interim resolution professional (IRP) •Ajay Joshi takes over company's operations and constitutes Committee of Creditors 18 July 2017 (CoC)
•Bidding Process part 1: RIL and JM Financial jointly present the highest bid at ₹ 4050 crores March 2018 •CoC rejects the appeal
April 11, 2018
April 13, 2018
•Bidding Process part 2: RIL and JM Financial jointly bid at ₹ 5050 crores. •CoC rejects the appeal
•Bidding Process part 3: RIL and JM Financial jointly bid again at ₹ 5050 crores •CoC rejects the appeal; 70% majority votes recieved which was 5% less than required.
•270 days period ends; liquidation process to follow April 14, 2018
April 19 2018
•Alok industries’ employees move to NCLT against CoC’s decision. •Request prevention of liquidation.
•NCLT new rule; Voting threshold for creditors’ approval dropped to 66% from 75% May 2018
11 June 2018
22 June 2018
•NCLT asks the resolution professional to plead to CoC to re-look the sole applicant’s proposal, based on the latest changes.
•Three-day marathon meeting of the CoC came out with a 72% voting majority in favour of Reliance-JM financial’s joint offer; thus, saving the company from liquidation, however By: Aayushi Jain – S173F0001 accepting more than 86% haircut on debt. Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
Current Position of the case •
The CoC has approved the Reliance-JM offer of buying out Alok Industries, however, in the interest of right to equality, all individual cases are being heard before giving a green signal on the deal.
•
The case is further being individually proceeded by those lenders and parties who feel that such a massive haircut isn’t justified. (such as Dena bank etc.)
•
However, a positive note struck when SBI withdrew their director appointed in the Alok industries, as it tells that the case is near its closure.
•
The next hearing is scheduled for 4 October 2018.
By: Aayushi Jain – S173F0001 Kuldeep Singh – S173F0024 Vinayak Sharma-S173F0044
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