LIQUIDATION UNDER IBC VIS-À-VIS SCHEME OF ARRANGEMENT UNDER COMPANIES ACT
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Abstract
The Insolvency and Bankruptcy Code, 2016 is a self-contained bankruptcy legislation which was much needed. This comprehensive code is a huge step towards cleaning up the mess that bankruptcy and resolution laws in India are in. The IBC was passed mainly with the view to consolidate and amend the existing legal framework of reorganization and resolution of insolvent and bankrupt persons. It was brought about with the objective to ensure that ease of doing business improves in India. The IBC has always functioned on the principle “Revival, not Liquidation”. However, once the company goes into liquidation, is there a hope for revival? Interestingly, recent rulings appellate judicial and quasi-judicial authorities suggest that revival schemes can be filed even after liquidation proceedings have commenced. While such revival schemes have not yet been imbibed in the Code, however, the Companies Act has always enabled schemes of arrangement to be filed during winding up. The Draft Regulations on IBBI (Liquidation Process)(Amendment) Regulations, 2019 have provided the timeline which shall be applicable in cases where a revival scheme is proposed after commencement of liquidation of the corporate debtor. Since section 29A of the Insolvency and Bankruptcy Code, 2016 was enacted, which disqualifies a promoter from submitting resolution plans or acquiring the assets of the entity in liquidation. Hence, in this paper the issue “how does the possibility of a scheme of arrangement co-exist with the principle of promoter disqualification?” will be discussed.
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