REVIVAL & REHABILITATION, AND WINDING UP - Proposed Amendments in the Companies Act, 2013

29.1 As part of its mandate, the CLC also considered the recommendations made in the Interim Report of the Bankruptcy Law Reforms Committee (BLRC) that had suggested amendments to Chapters XIX (Revival and Rehabilitation of Sick Companies) and XX (Winding up) of the Companies Act, 2013 in February, 2015. Although the CLC reviewed and deliberated on those recommendations in detail, the BLRC came out with its final report very recently, in November, 2015, recommending a Bankruptcy Code for India. Based on the recommendations of the BLRC, the Government has recently introduced a Bill in the Lok Sabha, titled as the Insolvency and Bankruptcy Code, 2015. The Code proposes to repeal all provisions of Chapter XIX of the Act and those relating to winding up on the ground of insolvency in Chapter XX. It also proposes certain consequential amendments to the Act. After the Code is enacted, all insolvency related matters for companies will be covered under the Code. Consequently, the CLC does not recommend any other changes in the Act for this purpose.

29.2 The Committee noted that the provisions relating to winding of a company on grounds other than insolvency have been retained in the Companies Act, 2013, and the winding up proceedings relating to such grounds are to be carried out in accordance with the provisions of the Act. Given that the adjudicating authority for liquidation under the Bankruptcy Code and winding up under the Act is the same (i.e., the NCLT), winding of companies on non-insolvency related grounds should also be carried out in accordance with the procedure prescribed in the Bankruptcy Code (the winding up will not involve the Insolvency Resolution Process). The Committee recommended appropriate amendments to the Act to facilitate this, which could be carried out at the time of enactment of the Bankruptcy Code or soon thereafter.