The Insolvency and Bankruptcy Codes 2016 have helped in the recovery of a huge amount of debts through insolvency procedures. However, its norms were leading to various contradictions. Once a company enters CIRP (Company Insolvency Resolution Process) then all the rights of administration of the company come under the Resolution professional heading the resolution committee.
However, since the introduction of IBC, Corporate Debtor and Resolution professionals were facing several issues. This involved meeting various statutory compliance requirements that the management of the debtor firm was responsible for before the commencement of the Insolvency Process. Even the insolvency proceedings required these compliances to be met.
Filings concerning the NCLT orders were also hampered due to unavailability of Digital Signatures of the debtor company’s administrators and non-cooperation from the management of debtor firm. Even IRP/RPs weren't allowed to file e-forms with their Digital Signatures and there was no norm from the Ministry of Corporate Affairs MCA to file such orders with the concerned RoC office.
Amendments to Make Filing Possible
MCA through its Circular No. 4/2020 on 17 February 2020 issued a clarification regarding the procedure for filing of e-forms on its portal by the Insolvency Professional (Interim Resolution Professional, Liquidator, or Resolution Professional) appointed under IBC, 2016.
In the Circular, the Ministry of Corporate Affairs (MCA) has given clarification on statutory compliances concerning the debtor companies going through the Corporate Insolvency Resolution Process (CIRP).
Through these circulars, the MCA mandated that filing of NCLT order is a must during CIRP or Liquidation process as per the IBC, 2016. This circular states that the filing of INC-28 for NCLT order to RoC is the part of responsibility of IRP (Interim Resolution Professional) or Liquidator appointed under IBC, 2016). This process is valid with respect to:
Admission in CIRP
Withdrawal of CIRP
Replacement of IRP/RP
Approval of Resolution plan
After Order of Liquidation
After Order of Dissolution
Major Points as Per the Amendment
The IRP/RP/Liquidator will have to file the NCLT order approving him to be appointed as the IRP/ RP/ Liquidator by submitting Form INC-28 under the valid norms of IBC 2016. After filing within the form, the IRP/RP/Liquidator, while providing his DSC, will choose his designation as the 'CEO’ within the declaration box for the filing purpose only and choose “Others” in the drop-down menu.
Post-approval of the appointment, the IRP/RP/Liquidator will be liable to file all the e-forms on the MCA’s portal and sign the form as the designated CEO to satisfy the need for e-form filing protocol as per the existing norms of law. However, this in no way should affect his status as IRP/RP/Liquidator for debtor firm. All filings of e-forms including AOC-4 and MGT-7 should be filed through e-form GNL-2 as attachments with the corporation until it is under CIRP. The field no. 3 of form GNL-2, IRP/ RP/ Liquidator will choose the field marked “Filings under IBC”.
In the date of the event and Board Resolution part of the form INC-28 and GNL-2, the date of order of NCLT/NCLAT/Court should be mentioned.
Companies marked under CIRP should file Annual Return form (e-form No.MGT-7) and budget form (e-form AOC-4) and other related documents under the provisions of the Companies Act, 2013 and as per the directions issued by the NCLT/ NCLAT/Courts, as attachments with the e-form GNL-2. It will accompany payment of a nominal fees till the time the corporate remains under CIRP. Separate GNL-2 forms should be filed for each such document with the IRP/RP.
The circular also mandated filing of earlier NCLT orders for the debtors which were under CIRP before the release of this circular. This will also be done by the IRP/RP/Liquidator as per the circular.
The concerned IRP/RP of each debtor firm under CIRP before the release of this circular, must file e-form INC-28 for such companies and thereafter proceed to file other documents or information as needed under the Companies Act and Rules mentioned under the Act.
ISSUES FACED BY INSOLVENCY PROFESSIONALS (IP)
Since it was mandated that IRP/RP/Liquidator must file NCLT orders in e-form INC 28 with the respective RoCs which was also mandated in the circulars mentioned above, the concerned companies who have applied to ROCs for condonation of delay in 2018 were becoming a serious problem for IRPs. This was because the companies who were already in debt and have filed petitions for condonation for the delay scheme will have to go through the costly and time-consuming process of the CoDS. Also, if the Ministry has come up with the circular at a later stage then the concerned RoCs needed resubmission on grounds of late filing of the orders.
The IRP/RP/Liquidator also faced resubmission orders on grounds that only a certified true copy of the order was needed to be filed but due to Covid-19 pandemic, the NCLTs were performing on virtual mode, and thus, the professionals were not able to get the Certified True copies of the orders on time.
Another issue they faced is that post the approval of the e-form INC 28, the name of the IRP/RP/Liquidator was not reflected on the signatory details of the corporate. Consequently, they were unable to file further forms concerning the change in management of the debtor company. The Ministry of Corporate Affairs was then suggested to come up with a resolution concerning these issues that still existed in the system.
Now, after the release of these amendments, one can easily observe the relief on the faces of Insolvency professionals as well as the promoters of the debtor firms. With these amendments, the promoters and IPs can easily meet all the compliance norms set by NCLT and file the required documents in the Registrar of Companies. This will help the promoters in keeping a clean record as far as compliance is concerned. The amendments have also helped the government in achieving its goal to streamline the important corporate laws like IBC, to ensure regulation and streamline processing of documents. The finance ministry has been planning to bring more such amendments in future to ease the insolvency procedure and related compliances.