The IBC has ensured to specifically clarify every aspect that is going to impact any business and is still under construction to incorporate sections that can ease the insolvency process.
As we have discussed about the procedure of initiation of corporate insolvency resolution process in our previous articles, we now move ahead to explain about moratorium period and public announcement. After admission of application, Adjudicating Authority shall pass following orders (section 15(1) of Insolvency Code, 2016)
- Declare a moratorium for the purposes referred to in section 14 of Insolvency Code, 2016.
- Cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under section 15 of Insolvency Code, 2016.
- Appoint an interim resolution professional in the manner as laid down in section 16 of Insolvency Code, 2016.
Meaning of moratorium
A ‘moratorium’ is a delay or suspension of an activity or a law. In a legal context, it may refer to the temporary suspension of a law to allow a legal challenge to be carried out. It is legal authorization to debtors to delay payments due.
No recovery proceedings after moratorium granted under Insolvency Code
Once NCLT has issued moratorium under section 14 of Insolvency Code in respect of Company in liquidation, Bank cannot pursue proceedings under section 19 of RDDBFI Act for recovery of loan- Sanjeev Shriya v. State Bank of India (2017) 144 SCL 545=87 taxmann.com 309 (All HC).
Financial creditor cannot recover any amount from account of Corporate Debtor after moratorium is declared- Indian Overseas Bank v. Dinkar T Venkatsubramaniam for Amtek Auto Ltd. (2018) 145 SCL 138=88 taxmann.com 132 (NCLAT).
No arbitration proceedings after moratorium-
Once petition under Insolvency Code is admitted by NCLT, moratorium comes into effect and arbitration proceedings cannot continue- Alchemist Asset Reconstruction Co Ltd. v. Hotel Gaudavan (p) Ltd. (2017) 88 taxmann.com 202 (SC)
Electricity connection cannot be cut after moratorium-
Section 14(2) of Insolvency Code prevails over section 56 of Electricity Act, since electricity is; ‘essential goods’ to corporate debtor. Hence power supply to corporate debtor cannot be cut during moratorium period- ABG Shipyard v. ICICI bank (2018) 145 SCL 430=88 taxmann.com 196 (NCLT).
Writ powers of High Court and Supreme Court not affected by moratorium-
A person can approach High Court or Supreme Court under Articles 32 and 226 as writ powers of High Court or Supreme Court not affected by moratorium – Power Grid Corporation v. Jyoti Structures (2018) 145 SCL 449=88 taxmann.com 124 (Del HC).
Public announcement of corporate insolvency resolution
The public announcement of the corporate insolvency resolution process shall contain information as specified in section 15(1) OF Insolvency Code, 2016 and will be made in manner prescribed.
The requirements of public announcement are specified in Regulation 6 of Insolvency and bankruptcy board of India (Insolvency resolution Process for Corporate Persons) Regulations, 2016. The public announcement shall be in form A as specified in Insolvency and Bankruptcy Board of India (Insolvency resolution Process for Corporate Persons) Regulations, 2016.
It should be published in one English and one regional language newspaper. It should also be put on website of Corporate Debtor and Board (IBBI).
IBBI has designated the website www.ibbi.gov.in for this purpose. The details of the manner of publishing the public announcement on the designated website are described in IBBI circular No. IP (CIRP)/006/2018 dated 23-2-2018.
The information about public announcement shall be sent in pdf form to IBBI on firstname.lastname@example.org by the Resolution Professional. This will be published by IBBI on designated website.
For further queries contact us at- email@example.com
Disclaimer – the above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.