STATUS AS ON 30/05/2019
Passing through the time tests again and again, Insolvency and Bankruptcy code(IBC), 2016 has gained a lot of popularity amongst all the creditors. Even National Company Law Tribunal (NCLT) has made efforts to provide the justice to the creditors and promote the interests of the creditors in the best possible way.
Constitution of COC
Once a petition under IBC is admitted before NCLT, an Interim Resolution Professional (IRP) is appointed to take over the management of the corporate debtor and the IRP is bound to invite the claims from all the creditors of the corporate debtor. As per the provisions of IBC after receiving the claims, the IRP constitutes a committee of creditors (COC).
According to section 28 of IBC, before taking any major action which might affect the CIRP, the IRP is bound to get the approval from the COC. Meaning thereby the COC has to primarily approve every decision or suggestion of IRP before presenting it before the NCLT.
What is the corpus or interim fund?
Once the insolvency petition against the defaulting corporate debtor has been initiated, it is the responsibility of the IRP to keep the corporate debtor as a going concern and simultaneously perform its functions to run the CIRP smoothly for which the IRP has to arrange for some interim or corpus. Now, due to the lack of funds the corporate debtor itself could not clear the outstanding dues of the creditors which make it impossible for the IRP to arrange for the funds from the assets or property of the corporate debtor. Thus, the only option left with the IRP is to request the COC to infuse some funds through which the IRP can perform its duties and complete the CIRP within the prescribed time period i.e. 180 or maximum 270 days.
However, after observing the current situation of the corporate debtor no creditor is willing to infuse more funds as they are afraid of losing the same through the enforcement of any law or authority under law.
NCLT’s opinion- Clarification
While observing the aforementioned apprehensions in mind of COC, the NCLT, Mumbai in the matter of ICICI Bank vs. Gitanjali Gems has recently held that the corpus fund arranged by the COC towards the cost of CIRP cannot be attached by any authority as the same is being arranged upon the directions of NCLT and should not be treated as assets of the corporate debtor. Also, the NCLT has clearly laid down the limitations and procedure within which the corpus funds have to be managed by the IRP.
In the light of above mentioned decision of NCLT and need of the hour, the COC should arrange for the corpus funds to run the CIRP smoothly and to receive the the maximum valuation of the assets of the corporate debtor which is only possible if the corporate debtor is kept as a going concern. Therefore in my opinion it is best that the COC supports the efforts of the IRP and arrange for the interim funds required to