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Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 was issued on 28-12-2019. This has been converted into Insolvency and Bankruptcy (Amendment) Act, 2020 w.r.e.f. 28-12-2019.

The purpose is to give the highest priority in repayment to last mile funding to corporate debtors to prevent insolvency, in case the company goes into corporate insolvency resolution process or liquidation, to prevent potential abuse of the Code by certain classes of financial creditors, to provide immunity against prosecution of the corporate debtor and action against the property of the corporate debtor and the successful resolution applicant subject to fulfilment of certain conditions, and in order to fill the critical gaps in the corporate insolvency framework.

As per preamble to the Insolvency Code, the purpose of this Act is as follows:

• Consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals
• In a time, bound manner
• For maximisation of value of assets of such persons
• To promote entrepreneurship
• Availability of credit
• Balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues
• Establish an Insolvency and Bankruptcy Board of India (IBBI)

Introduction of this Code has done away with overlapping provisions contained in various laws:

• Sick Industrial Companies (Special Provisions) Act, 1985
• The Recovery of Debts Due to Banks and Financial Institutions Act, 1993
• The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
• The Companies Act, 2013.

The provisions of the Code shall apply for insolvency, liquidation, voluntary liquidation or bankruptcy of the following entities:

• Any company incorporated under the Companies Act, 2013 or under any previous law.
• Any other company governed by any special act for the time being in force, except in so far as the said provision is inconsistent with the provisions of such Special Act.
• Any Limited Liability Partnership under the LLP Act 2008.
• Any other body being incorporated under any other law for the time being in force, as specified by the Central Government in this regard
• Partnership firms and individuals

The major amendments are as follows:

• Immunity from prosecution of corporate debtor for offence committed prior to CIRP, if there is change of management [section 32A(1)]
• Protection to property of corporate debtor in relation to offence committed prior to CIRP, if there is change of management [section 32A(2)]
• Scope of ‘interim finance’ enhanced to provide for last mile funding to prevent insolvency [section 5(15)]
• Minimum number of applicants under section 7(1) in case of numerous small financial creditors (like holders of public deposits or debentures or home buyers).
• Licenses, quotas, essential supplies cannot be cut during period of moratorium, so long as current dues are paid [section 14]
• Corporate debtor can file CIRP against another corporate debtor [section 11]
• Insolvency Professional must be appointed on the insolvency commencement date itself [section 16(1)]

Social Perspectives

From a social efficiency point of view bankruptcy proceedings cannot be mingled with other legal cases, as illustrated by the arguments above. The following section focusses on some of the salient features of the Code which explicitly or implicitly address the issues raised in the preceding section.

• To consolidate and amend the laws relating to re-organization and insolvency resolution of corporate persons, partnership firms, and individuals.
• To fix time periods for execution of the law in a time-bound settlement of insolvency (i.e. 180 days).
• To maximize the value of assets of interested persons.
• To promote entrepreneurship
• To increase the availability of credit.
• To balance all stakeholder’s interest (including alteration). Balance to be done in the order of priority of payment of Government dues.
• To establish an Insolvency and Bankruptcy Board of India as a regulatory body for insolvency and bankruptcy law.
• To establish higher levels of debt financing across a wide variety of debt instruments.
• To provide painless revival mechanism for entities.
• To deal with cross-border insolvency.

Legal Perspectives

Legal framework: complex, fragmented. No concept of time value of money.

• Insufficient institutional capacity: courts, professional services, information systems. No capacity to deal with the demands of a growing economy. Laws such as RDDBFI and SARFAESI did not improve recovery.
• Unclear priority between laws and between fora. Conflicts are decided by litigation. Lack of clarity causes delays.
• Arbitrage: differential access, varied procedures. Forum shopping. Stacked in favour of banks and FIs.
• Economic Perspectives.

Concern

• Low predictability of resolution
• High pendency
• High cost, poor recovery.

In failure, limited liability should be respected.

• Limited liability company is a contract between equity and debt.
• As long as debt obligations are met, equity owners have complete control, and creditors have no say in how the business is run.
• When default takes place, control is supposed to transfer to the creditors; equity owners have no say.
• Speed of resolution is important so that capital and labour can be put back to work quickly.
• Insolvency and bankruptcy resolution should be an economic decision; not a judicial decision

A combination of limited liability and strong insolvency process allows firms to undertake risky ventures while protecting creditors’ rights. The bargain:

• Firms’ shareholders accept disclosure
• They agree to work with lenders in insolvency
• In return their liability gets capped

Financial Perspectives

The rise of limited liability needs to be accompanied by:

(a) Strong recovery laws

(b) Strong insolvency law

Where lenders can enforce repayment, there is:

(1) Higher credit access

(2) At lower price

(3) With longer maturity

(4) Lower collateral requirement

(5) From a greater number and variety of lenders

The Insolvency and Bankruptcy recognized the NCLT as constituted under section 408 of the Companies Act 2013 to be the adjudicating authority for the purpose of insolvency and liquidation of corporate persons. The proposal for constituting the NCLT was made by the Eradi Committee.

• Once the resolution plan which is approved by the COC and placed before the Adjudicating authority for approval, it will have to ensure that whether the resolution plan has met the following requirements as per Section 30(2) of the Code.
• Approval of the COC with 66% Voting share the resolution plan
• Whether the resolution plan is fulfilled the requirements of Section 30(2) of the Code Section 30(2) of the Code says that the resolution plan should meet the following requirements
• It should provide for payment of insolvency and resolution Process costs
• It must provide for the payment of debts of Operational Creditors which should not be less than the amount to be paid as per Section 53 in case of liquidation of the corporate debtor or amount to be paid in the case of resolution of the corporate debtor.
• It must provide for management of the affairs of the Corporate Debtor after approval of the resolution plan.
• Implementation and supervision of the resolution plan.
• It must not contravene any of the provisions of the law.
• It should confirm to the such other requirements as may be specified by the Board.

NCLT

The adjudicating authority for corporate person as mentioned above shall be the NCLT having territorial jurisdiction over the place where the registered office of the corporate person is located. It is important to note that incase where a corporate insolvency resolution process or liquidation proceedings of a corporate debtor is pending before NCLT, then the application for insolvency resolution or bankruptcy of personal guarantor of such corporate debtor shall also be filed before the same NCLT as that of the corporate debtor.

If the insolvency process or bankruptcy proceedings of personal guarantor of the corporate debtor is appending before any court or tribunal then it shall in such a situation shall transferred to the same adjudicating authority which is dealing with the insolvency resolution process or liquidation proceedings of the corporate debtor.

NCLAT

Once the application under IBC is admitted by the NCLT from the corporate person then any person aggrieved by the order of NCLT may prefer an appeal before the NCLAT. Every appeal shall be filed before NCLAT within thirty days. An appeal can be filed beyond thirty days if NCLAT is satisfied that there was a sufficient cause for not being able to file within the thirty days duration , but then within fifteen days period after thirty days only.

Supreme Court

If a person is not satisfied and is aggrieved by the order of NCLAT then in such a case he can file an appeal to the Supreme Court. The application to be filed shall be based only on question of law that arouse out of the order only.

The application before Supreme Court shall be filed within forty-five days from the date of receipt of order of NCLAT. However, the Supreme Court may allow extension beyond forty-five days if it is satisfied that person was prevented by sufficient clause. The extension allowed shall be only fifteen days beyond the forty-five days duration.

Offences and penalties in relation to corporate insolvency

The Insolvency and Bankruptcy Code, 2016 makes stringent provisions for punishments to fraudulent persons. These include imprisonment. Such offences have to be tried in criminal courts only.

Offences under of this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013.

Court shall not take cognizance of any offence punishable under this Act, except on a complaint made by the Board (IBBI) or the Central Government or any person authorised by the Central Government in this behalf section 236(2) of Insolvency Code, 2016.

The provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting a prosecution before a Special Court shall be deemed to be a Public Prosecutor.

The Consumer Protection Bill, 2019 was introduced in Lok Sabha by the Minister of Consumer Affairs, Food and Public Distribution, Mr. Ram Vilas Paswan on July 8, 2019. The Bill replaces the Consumer Protection Act, 1986.

Empowered to:

• Conduct investigations into violations of consumer rights and institute complaints/prosecution.
• Order recall of unsafe goods and services.
• Order discontinuance of unfair trade practices and misleading advertisements.
• Impose penalties on manufacturers/endorsers/publishers of misleading advertisements.

Consumer: A consumer is defined as a person who buys any good or avails a service for a consideration.  It does not include a person who obtains a good for resale or a good or service for commercial purpose.  It covers transactions through all modes including offline, and online through electronic means, teleshopping, multi-level marketing or direct selling.

Rights of consumers: Six consumer rights have been defined in the Bill, including the right to:

• Be protected against marketing of goods and services which are hazardous to life and property.
• Be informed of the quality, quantity, potency, purity, standard and price of goods or services.
• Be assured of access to a variety of goods or services at competitive prices.
• Seek redressal against unfair or restrictive trade practices.

Central Consumer Protection Authority: The central government will set up a Central Consumer Protection Authority (CCPA) to promote, protect and enforce the rights of consumers.  It will regulate matters related to violation of consumer rights, unfair trade practices, and misleading advertisements.  The CCPA will have an investigation wing, headed by a Director-General, which may conduct inquiry or investigation into such violations.

CCPA will carry out the following functions, including:

• Inquiring into violations of consumer rights, investigating and launching prosecution at the appropriate forum.
• Passing orders to recall goods or withdraw services that are hazardous, reimbursement of the price paid, and discontinuation of the unfair trade practices, as defined in the bill.
• Issuing directions to the concerned trader/ manufacturer/ endorser/ advertiser/ publisher to either discontinue a false or misleading advertisement, or modify it.
• Imposing penalties.
• Issuing safety notices to consumers against unsafe goods and services.

Penalties for misleading advertisement: The CCPA may impose a penalty on a manufacturer or an endorser of up to Rs 10 lakh and imprisonment for up to two years for a false or misleading advertisement.  In case of a subsequent offence, the fine may extend to Rs 50 lakh and imprisonment of up to five years.

CCPA can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to one year. For every subsequent offence, the period of prohibition may extend to three years.  However, there are certain exceptions when an endorser will not be held liable for such a penalty.

Consumer Disputes Redressal Commission: Consumer Disputes Redressal Commissions (CDRCs) will be set up at the district, state, and national levels.  A consumer can file a complaint with CDRCs in relation to:

• Unfair or restrictive trade practices.
• Defective goods or services.
• Overcharging or deceptive charging.
• The offering of goods or services for sale which may be hazardous to life and safety.

Complaints against an unfair contract can be filed with only the State and National   Appeals from a District CDRC will be heard by the State CDRC.  Appeals from the State CDRC will be heard by the National CDRC. Final appeal will lie before the Supreme Court.

Jurisdiction of CDRCs: The District CDRC will entertain complaints where value of goods and services does not exceed Rs one crore.  The State CDRC will entertain complaints when the value is more than Rs one crore but does not exceed Rs 10 crore. Complaints with value of goods and services over Rs 10 crore will be entertained by the National CDRC.

Product liability: Product liability means the liability of a product manufacturer, service provider or seller to compensate a consumer for any harm or injury caused by a defective good or deficient service. To claim compensation, a consumer has to prove any one of the conditions for defect or deficiency, as given in the Bill.

Punishment for Manufacture or Sale of Adulterated/Spurious Goods:

• In case of the first conviction, a competent court may suspend any licence issued to the person for a period of up to two years and in case of second or subsequent conviction, may cancel the licence permanently.

Simplification of the Consumer Dispute Adjudication Process:

• Empowering the State and District Commissions to review their own orders.
• Enabling a consumer to file complaints electronically and in consumer commissions that have jurisdiction over the place of his residence.
• Video-conferencing for hearing and deemed admissibility of complaints if the question of admissibility is not decided within the specified period of 21 days.

Alternate Dispute Resolution Mechanism of Mediation:

• A complaint will be referred by a Consumer Commission for mediation, wherever scope for early settlement exists and parties agree for it.
• The mediation will be held in the Mediation Cells which will be established under the aegis of the Consumer Commissions.
• There will be no appeal against settlement through mediation.

Civil Cases

In these cases, a person or an organization asks a judge to settle a civil problem, such as

• A problem concerning an inheritance,
• A problem involving a contract, or
• A family problem, such as divorce or custody of children.

Criminal Cases

The reason these cases come to court is always the same: a person is taken to court because she is accused of a crime. The judge, and sometimes a jury, must consider the evidence presented during a trial to decide whether the accused is guilty or innocent.

Most crimes and their punishments are described in the Criminal Code of Canada. Some crimes involve other people, including

• Assault
• Murder
• Sexual assault
• Identity theft

Law

The law is described as the set of rules and regulation, created by the government to govern the whole society. The law is universally accepted, recognized and enforced. It is created with the purpose of maintaining social order, peace, justice in the society and to provide protection to the general public and safeguard their interest. It is made after considering ethical principles and moral values.

The law is made by the judicial system of the country. Every person in the country is bound to follow the law. It clearly defines what a person must or must not do. So, in the case of the breach of law may result in the punishment or penalty or sometimes both.

Ethics

Ethics are moral values and principles that govern the behaviour of an individual. Ethics help to choose what is right and wrong. It is a collection of fundamental concepts and principles of an ideal human character. The principles help us in making decisions regarding, what is right or wrong. It informs us about how to act in a particular situation and make a judgment to make better choices for ourselves. Ethics are the code of conduct agreed and adopted by the people. It sets a standard of how a person should live and interact with other people.

Types:

• Normative ethics
• Personal ethics
• Social ethics
• Professional ethics

General Principles of Precedents:

The High Courts in India are bound by the law declared by the Supreme Court. Decisions of the Supreme Court are binding only so long as they have not been overruled by the Supreme Court. The decisions of a High Court are binding on all the courts below it within its jurisdiction. The judgment of a particular High Court, is not binding on other High Courts. The High Courts are the courts of co-ordinate jurisdiction. Therefore, the decision of one High Court is only of persuasive value for other High Courts. In High Courts generally appeals are heard by a Single Judge, some appeals such as murder, specials appeals etc. are heard by two judges. Different High Courts have their different rules in this respect. When an appeal involves some important and complicated point of law, it is referred to a Larger Bench. A Bench of two judges is called the Division Bench. Three or more judges constitute a Full Bench. The decisions of a larger bench are binding on a smaller bench. A bench is not bound by the decisions of another bench of equal authority.

Plaintiff

A plaintiff (Π in legal shorthand) is the party who initiates a lawsuit (also known as an action) before a court. By doing so, the plaintiff seeks a legal remedy. If this search is successful, the court will issue judgment in favor of the plaintiff and make the appropriate court order (e.g., an order for damages). “Plaintiff” is the term used in civil cases in most English-speaking jurisdictions, the notable exception being England and Wales, where a plaintiff has, since the introduction of the Civil Procedure Rules in 1999, been known as a “claimant”, but that term also has other meanings. In criminal cases, the prosecutor brings the case against the defendant, but the key complaining party is often called the “complainant”.

In some jurisdictions, a lawsuit is commenced by filing a summons, claim form or a complaint. These documents are known as pleadings, that set forth the alleged wrongs committed by the defendant or defendants with a demand for relief. In other jurisdictions, the action is commenced by service of legal process by delivery of these documents on the defendant by a process server; they are only filed with the court subsequently with an affidavit from the process server that they had been given to the defendant according to the rules of civil procedure.

Defendant

A defendant is a person who is the party either accused of committing a crime in criminal prosecution or against whom some type of civil relief is being sought in a civil case.

Terminology varies from one jurisdiction to another. In Scots law, the terms “accused” or “panel” are used instead in criminal proceedings and “defender” in civil proceedings. Another term in use is “respondent”.

Petitioner

A petitioner is a person who pleads with governmental institution for a legal remedy or a redress of grievances, through use of a petition. The petitioner may seek a legal remedy if the state or another private person has acted unlawfully. In this case, the petitioner, often called a plaintiff, will submit a plea to a court to resolve the dispute. On the other hand, the petitioner may be complaining against the law it to “… make no law… abridging… the right of the people peaceably to assemble, and to petition the government for redress of grievances”.

A petitioner need not seek a change to an existing law. Often, petitioners speak against (or in support of) legislative proposals as this progress.

Respondents

A respondent is a person who is called upon to issue a response to a communication made by another. The term is used in legal contexts, in survey methodology, and in psychological conditioning. In legal usage, this specifically refers to the defendant in a legal proceeding commenced by a petition, or to an appellate, or the opposing party, in an appeal of a decision by an initial fact-finder.

Public prosecutors

A Public Prosecutor is considered as the agent of the state to represent the interest of common people in the criminal justice system. The prosecution of the accused is the duty of the state but not individually the duty of the aggrieved party. They are appointed in almost all countries. The Public Prosecutor is defined in Section 24 of Cr.P.C. They serve as the basic principle of Rule of Law i.e. auld alteram partem (no person shall be condemned unheard).

Reasons for the Appointment of Public Prosecutor

Whenever any crime is committed against a group or individual, it is assumed that it has been committed against society. It is the duty of the state to provide justice to any group of society or person who is affected by the crime. In India, it is necessary that the criminal justice system should function within the limits of the Indian Constitution, which means that it is necessary for the Public Prosecutor to act in accordance with the principles of:

• Equality before law
• Protection against double jeopardy
• Protection against self-incrimination
• Protection against ex-post law
• Right to life and personal liberty except procedure established by law
• Presumption of innocence until proven guilty
• Arrest and detention must be in accordance with the provisions of Cr.P.C.
• Equal protection of laws
• Speedy trial
• Prohibition of discrimination
• Right of accused to remain silent

Advocate General

In India, an advocate general is a legal advisor to a state government. The post is created by the Constitution of India and corresponds to that of Attorney General for India at the union government level. The Governor of each state shall appoint a person who is qualified to be appointed as judge of High Court as the Advocate General.

Solicitor general of India

The Solicitor General of India is subordinate to the Attorney General for India. They are the second law officer of the country, assists the Attorney General, and is assisted by Additional Solicitors General for India. Currently, the Solicitor General of India is Tushar Mehta. Like the Attorney General for India, the Solicitor General and the Additional Solicitors General advise the Government and appear on behalf of the Union of India in terms of the Law Officers (Terms and Conditions) Rules, 1972. However, unlike the post of Attorney General for India, which is a Constitutional post under Article 76 of the Constitution of India, the posts of the Solicitor General and the Additional Solicitors General are merely statutory. Appointments Committee of the Cabinet(ACC) recommends the appointment and president officially appoints the Solicitor General. The proposal for appointment of Solicitor General, Additional Solicitor General is generally moved at the level of Joint secretary/Law Secretary in the Department of Legal Affairs and after obtaining the approval of the Minister of Law & Justice, the proposal goes to the ACC and then to the president.

Judicial Magistrate of First class

Courts of Judicial Magistrate of First Class are at the second lowest level of the Criminal Court structure in India. According to the Section 11 of the Criminal Procedure Code, 1973 (CrPc), a Court of Judicial Magistrate of First Class may be established by the State Government in consultation with the High Court of the respective state at such places in the district and in any number by a notification.

According to Section 15 of the CrPc, a judicial magistrate is under the general control of the Sessions Judge and is subordinate to the Chief Judicial Magistrate.

According to Section 29 of the CrPc., a Judicial Magistrate of First Class may pass a sentence of imprisonment for a term not exceeding three years, or of fine not exceeding ten thousand rupees or of both.

Civil Judge

The may by general or special order invest any Civil Judge within such local limits and subject to such pecuniary limitation as may be prescribed in such order, with all or any of the powers of a District Judge or a District Court as the case may be under any special law.

Every order of the District Judge passed on appeal under subsection (2) from the order of a Civil Judge shall be subject to an appeal to the High Court under the rules contained in the Code of Civil Procedure applicable to appeals from appellate decrees.

The Judges of such Subordinate Courts shall be appointed by the Government and shall be called Civil Judges.

Sessions (criminal court judge)

Sessions court has the power to impose the full range of penalties for criminal acts, including the death penalty.

Originally, the Sessions Courts heard each case continuously in sessions and delivered judgements immediately on completion of arguments. Hence the name ‘Sessions Court’ meant that the cases would be disposed off expeditiously. One of the important reasons for delays in the Indian and Pakistani Judicial System, is that the concept of ‘Sessions’ is observed only in breach due to repeated adjournments, loop holes in the case papers and backlog of cases. The Government of India has not found a solution to this endemic problem.

Sections 225 to 237 of The Code of Criminal Procedure deal with the procedure in trials before a Court of Sessions. In case the office of the Sessions Judge is vacant, the High Court can make necessary arrangements for any urgent matter or application that is pending before the court mentioned above to be dealt with by an Additional or an Assistant Sessions Judge or in their absence, by a Chief Judicial Magistrate (CJM).

Metropolitan magistrate

The High court appoints Chief Metropolitan Magistrate for every metropolitan court. The High court may also appoint Additional Chief Metropolitan Magistrate for an area, with all or any of the powers of a Chief Metropolitan Magistrate, as may be directed by the High Court. Other than Chief Metropolitan Magistrate and Additional Chief Metropolitan Magistrate, there are also Metropolitan Magistrates also known as Magistrate of the first class who work as subordinates of Chief Metropolitan Magistrate. Any two or more metropolitan magistrates may, subject to the rules made by the CMM, sit together as a bench. All metropolitan magistrates including the ACMMs and benches of general magistrates are subordinate to the CMM.

Economic offences

The term economic offences define those crimes which are of an economic nature. These offences are committed while in the course of some kind of economic or business activity. Although in some parts of the world, like the United States, the term economic offences have been defined, a rigorous definition of this term is still lacking in India. This is the reason why it is difficult to pinpoint the kinds of crimes that come under the term of economic offences in India.

The National Crimes Report Bureau of India still classifies only specified acts under the term economic offences. Activities like company frauds, counterfeiting of coins, and some of the terrorist activities even come under the term Economic offences in the Indian context provided by the NCRB. While certain explanations are provided for this term it still lacks a proper definition which is not vague or ambiguous in nature.

Types of Economic Crimes

Economic offences in India can be classified into three categories. These categories of economic offences are:

• Emerging technological economic crimes that include credit card frauds, counterfeiting, cyber crimes etc.
• Traditional economic crime which includes corruption, smuggling, bogus imports etc.
• Crimes through which proceeds of transnational organized crime are transmitted abroad like money laundering.