INDIA Law and Practice Contributed by: Shardul Shroff, Misha, Kritika Poddar and Aishwarya Satija, Shardul Amarchand Mangaldas & Co
4.4 The Position of the Debtor in Restructuring, Rehabilitation and Reorganisation
plan often does not provide for payments in lieu of contingent claims. Possibility of Opting for Arbitration Any arbitration proceedings against the CD are stayed on account of the moratorium imposed on initiation of CIRP. See 1.2 Types of Insolvency . The IRP or RP may however file or continue arbitration proceedings on behalf of the CD if they are against a third party. Thus, arbitration proceedings where the CD is a claimant may continue during the moratorium period. Any claims against the CD that are extinguished under an approved resolution plan cannot be pursued through arbitration proceedings. Such extinguishment does not occur automatically but by virtue of the reso - lution plan itself. 4.3 The End of the Restructuring, Rehabilitation and Reorganisation Procedure See 1.2 Types of Insolvency (Liquidation upon failure of the CIRP or PPIRP) and 4.2 Statutory Restructur- ing, Rehabilitation and Reorganisation Procedure . The process of approving a resolution plan is largely driven by the CoC but must gain the final approval of the NCLT to bind all stakeholders of the CD. The scope of judicial review is limited to ensuring that the resolution plan conforms to the Mandatory Require - ments under the Code. A resolution plan approved by the NCLT can be chal - lenged on grounds of non-compliance with the Man - datory Requirements and material irregularity in the exercise of powers by the RP during the CIRP. When a resolution plan is contravened by the CD, then any person whose interests are prejudicially affected by such contravention may apply to the NCLT to liq - uidate the CD. Furthermore, if the CD or any person on whom the resolution plan is binding wilfully contra - venes the resolution plan or abets such contravention, then the person is punishable with imprisonment of not less than one year (which may be extended to five years) and/or a fine of at least INR1 lakh rupees which may be increased to INR1 crore.
From the date of appointment of the IRP, the powers of the board of directors of the CD are suspended and the management of the affairs of the CD vests in the IRP. The IRP is duty-bound to make every endeav - our to protect and preserve the value of the CD and manage the operations of the CD as a going concern. The moratorium imposed during a CIRP prohibits the CD from transferring, encumbering, alienating or dis - posing of any of its assets or legal right or beneficial interest therein. The IRP or RP is authorised to raise new money or interim finance provided that no security interest is created over encumbered properties of the CD with - out the prior consent of creditors who hold security over such property. The requirement of prior approval of the creditor can be dispensed with if the value of property is at least twice the amount of the debt. The CA 2013 does not prohibit new money invest - ments during the implementation of a Scheme. See 1.2 Types of Insolvency . During a CIRP, the RP is endowed with a wide range of responsibilities, which include: • taking custody of the CD’s assets; • representing and acting on behalf of the CD; • appointing accountants, legal or other profession - als; • maintaining an updated list of claims; and • convening and attending all CoC meetings. During liquidation, the liquidator is empowered to: • verify claims of all of the creditors; • take into custody all the assets of the CD to evalu - ate the assets and property of the CD; • carry on the business of the CD for its beneficial liquidation; and • obtain professional assistance in discharging their duties, obligations and responsibilities. 4.5 The Position of Office Holders in Restructuring, Rehabilitation and Reorganisation
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