The Central Government notified exceptions for Corporate Debtor under Section 14(1) of Insolvency and Bankruptcy Code, 2016 (IBC).
A corporate debtor under the Insolvency and Bankruptcy Code 2016 (IBC) is a corporate person who owes a debt to any person. Corporate person is specified as under Section 3(7) of IBC, which shall include Companies defined under Companies Act, Limited Liability Partnership (LLP) defined under Limited Liability Partnership and any other person incorporated with limited liability and does not include financial services providers, i.e. banks or NBFCs.
As per Sections 7 and 9 of the IBC, it is not mandatory to offer the chance to be heard by the corporate debtor until the IBC application is admitted by Adjudicating Authority and as per section 14, when an IBC application has been admitted, the key managerial personnel of the corporate debtor will report to the IRP proposed by the applicant. As a result, there is a high chance that even a small default could trigger the Insolvency proceeding of the corporate debtor.
The notification stated that the Central Government in exercise of the powers conferred by clause (a) of sub-section (3) of section 14 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government notified that the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), shall not apply where the corporate debtor has entered into any of the following transactions, arrangements or agreements, namely: –
(i) The Production Sharing Contracts, Revenue Sharing Contracts, Exploration Licenses and Mining Leases made under the Oilfields (Regulation and Development) Act, 1948 (53 of 1948) and rules made thereunder; and
(ii) Any transactions, arrangements or agreements, including Joint Operating Agreement, connected or ancillary to the transactions, arrangements or agreements referred to in clause (i).
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