INDIA Law and Practice Contributed by: Shardul Shroff, Misha, Kritika Poddar and Aishwarya Satija, Shardul Amarchand Mangaldas & Co
CoC is placed before the NCLT for its final approval, after which it binds all stakeholders of the CD. PPIRP The PPIRP was introduced in 2021 for companies that qualify as micro, small or medium enterprises under Indian law. A micro, small or medium enterprise that has committed a default of approximately USD12,158 may, with the approval of 66% of its unrelated FCs in value and subject to certain other prerequisites, file an application for initiation of the PPIRP. Prior to seeking approval of the FCs, the CD presents the FCs with a base resolution plan. Upon admission of the application, the PPIRP oper - ates for a period of 120 days during which time a lim - ited moratorium prevails, which prevents (inter alia) enforcement of security interest by creditors. After commencement of the PPIRP, the CoC may either approve the base plan proposed by the CD (if the plan does not impair the claims of the OC) or approve a resolution plan invited from the market. Liquidation upon failure of the CIRP or PPIRP The liquidation process can be triggered if: • the NCLT did not receive a plan or rejected the plan received during the CIRP; • the CD contravenes the terms of an approved resolution plan after the CIRP; and • the CoC by 66% majority in worth resolves to liqui - date the CD during the CIRP. In case of failure of the PPIRP, liquidation may be ordered in exceptional circumstances. Upon the passing of a liquidation order, the NCLT appoints the RP as the liquidator of the company and all the powers of the board of directors, key manage - rial persons and partners of the CD vest in the liquida - tor. In some cases, the RP may be replaced by another insolvency professional to act as the liquidator. The liquidation order is deemed to be a notice of dis - charge to the officers, employees and workmen of the CD, except when the business of the CD is continued during the liquidation process by the liquidator. Fur - thermore, no legal proceeding can be instituted by or
against the CD. The liquidator may, however, institute a legal proceeding on behalf of the CD with the prior approval of the NCLT. Secured creditors are given the right to either realise their security interest outside liquidation proceedings or relinquish their security to the liquidation estate and partake in the distribution of proceedings from the sale of assets as per the order of priority men - tioned under the Code. A Stakeholders Consultation Committee (SCC) is constituted by the liquidator and is composed of all of the creditors of the CD. The liquidator is required to consult the SCC on sev - eral matters during the liquidation process, such as the sale of assets in liquidation and the appointment and fee of professionals appointed in liquidation, etc. The liquidator may consider the SCC’s advice when making decisions in relation to such matters regard - ing the CD. The liquidator issues a public announcement stating the CD is in liquidation. The personnel of the CD are required to co-operate with and assist the liquidator in the discharge of their functions. All creditors of the CD are required to submit their claims to the liquida - tor along with supporting documents, which are then verified by the liquidator. The liquidator is empowered to require the creditors to submit additional documents for the purposes of veri - fying the claims in whole or any part thereof. Where any amount claimed is not precise due to any con - tingency or another reason, the liquidator is required to make the best estimate of the amount based on the available information. In addition, the liquidator also has the power to disclaim onerous properties or contracts (within six months from the liquidation com - mencement date) by applying to the NCLT for such relief. The liquidator has various duties and powers includ - ing, but not limited to: • taking custody and control of the assets of the CD; • protecting and preserving the assets of the CD; and
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