valid as on 04/06/2020

IBC Section 227-Power of Central Government to notify financial service providers, etc.
Effective from 01.05.2018

Notwithstanding anything to the contrary examined in this Code or any other law for the time being in force, the Central Government may, if it considers necessary, in consultation with the appropriate financial sector regulators, financial service providers or categories of financial service providers for the purpose of their insolvency and liquidation proceedings, which may be conducted under this Code, in such manner

 

For the removal of doubts, it is hereby clarified that the insolvency and liquidation proceedings for financial service providers or categories of financial service may be conducted with such modifications and in such manner as may be prescribed.

  1. Proviso omitted vide Insolvency and Bankruptcy Code (Amendment) Act, 2020 dated 13.03.2020 w.e.f. 28.12.2019. To view the amendment act, Click Here. With this, the ordinance dated 28.12.2019 stands repealed.
  2. Substituted vide the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 dated 28.12.2019. To view the Ordinance. Click Here
Refer the Notification notifying the insolvency resolution and liquidation proceedings for categories of financial service providers dated 18.11.2019. To view the Notification. Click Here.
Refer the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 dated 15.11.2019. To view the rule,Click Here
  1. Proviso omitted vide Insolvency and Bankruptcy Code (Amendment) Act, 2020 dated 13.03.2020 w.e.f. 28.12.2019. To view the amendment act, Click Here. With this, the ordinance dated 28.12.2019 stands repealed.
  2. Inserted vide the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 dated 28.12.2019. To view the Ordinance. Click Here

1.6.1. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

1. Short title and commencement.-

(1) These rules may be called the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019.

(2) These rules shall come into force on the date of their publication in the Official Gazette.


1.6.10. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

10.

(1) For removal of doubts, it is clarified that the provisions of clause (b) of rule 5 and section 14 shall not apply to any third-party assets or properties in custody or possession of the financial service provider, including any funds, securities and other assets required to be held in trust for the benefit of third parties.

(2) The Administrator shall take control and custody of third-party assets or properties in custody or possession of the financial service provider, including any funds, securities and other assets required to be held in trust for the benefit of third parties only for the purpose of dealing with them in the manner, as may be notified by the Central Government under section 227.

Notification on “manner of dealing with the third party assets in custody or possession of such financial service providers” dated 30.01.2020. To view the notification Click Here

1.6.2. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

2. Application. –

These rules shall apply to such financial service providers or categories of financial service providers, as may be notified by the Central Government under section 227, from time to time, for the purpose of their insolvency and liquidation proceedings under these rules.


1.6.3. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

3. Definitions. –

(1) In these rules, unless the context otherwise requires,-

(a) “Administrator” means an individual appointed by the Adjudicating Authority under sub-clause (iii) of clause (a) of rule 5, to exercise the powers and functions of the insolvency professional, interim resolution professional, resolution professional or the liquidator for the purpose of insolvency and liquidation proceedings of a financial service provider;

(b) “Advisory Committee” means the Committee constituted by the appropriate regulator in accordance with clause (c) of rule 5 of these rules;

(c) “appropriate regulator” means the financial sector regulator, as may be notified by the Central Government under section 227, for a category of financial service providers;

(d) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016);

(e) “Form” means a Form appended to these rules; and

(f) “identification number” means the corporate identity number or the limited liability partnership identification number, as the case may be, of a financial service provider.

(2) The words and expressions used and not defined in these rules but defined in the Code shall have the meanings respectively assigned to them in the Code.


1.6.4. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

4. General modifications. –

For the purposes of these rules, in all the provisions relating to insolvency and liquidation proceedings under the Code,-

(i) for the expression “corporate debtor” wherever they occur, shall mean “financial service provider”; and

(ii) for the expressions “insolvency professional”, “interim resolution professional”, “resolution professional” or “liquidator”, wherever they occur, shall mean “administrator”.


1.6.5. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

5. Corporate Insolvency Resolution Process of financial service providers.-

The provisions of the Code relating to the Corporate Insolvency Resolution Process of the corporate debtor shall, mutatis mutandis apply, to the insolvency resolution process of a financial service provider subject to the following modifications, namely:-

(a) Initiation of Corporate Insolvency Resolution Process.-

(i) no corporate insolvency resolution process shall be initiated against a financial service provider which has committed a default under section 4, except upon an

 in accordance with rule 6;

(ii) the application under sub-clause (i) shall be dealt with in the same manner as an application by a financial creditor under section 7, subject to clause (iii); and

(iii) on the admission of the application, the Adjudicating Authority shall appoint the individual proposed by the appropriate regulator in the application filed under sub-clause (i) of clause (a) of rule 5, as the Administrator.

(b) Moratorium.- Save as provided in section 14,-

(i) an interim moratorium shall commence on and from the date of filing of the application under clause (a) till its admission or rejection; and

(ii) the license or registration which authorises the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled during the interim-moratorium and the corporate insolvency resolution process.

Explanation.- For the purposes of this clause, “interim moratorium” shall have the effect of the provisions of
sub-sections (1), (2) and (3) of section 14.

(c) Advisory Committee.-

(i) the appropriate regulator may, where deemed necessary, constitute an Advisory Committee, within 45 days of the insolvency commencement date, to advise the Administrator in the operations of the financial service provider during the corporate insolvency resolution process;

(ii) the Advisory Committee shall consist of three or more Members, who shall be persons of ability, integrity and standing, and who have expertise or experience in finance, economics, accountancy, law, public policy or any other profession in the area of financial services or risk management, administration, supervision or resolution of a financial service provider;

(iii) the terms and conditions of the Members of the Advisory Committee and the manner of conducting meetings and observance of rules of procedure shall be such as may be determined by the appropriate regulator;

(iv) the compensation paid to the Members of the Advisory Committee shall be part of the insolvency resolution process costs;

(v) the Administrator shall chair the meetings of the Advisory Committee.

(d) Resolution plan.-

(i) the resolution plan shall include a statement explaining how the resolution applicant satisfies or intends to satisfy the requirements of engaging in the business of the financial service provider, as per laws for the time being in force;

(ii) upon approval of the resolution plan by the committee of creditors under sub section (4) of section 30, the Administrator shall seek ‘no objection’ of the appropriate regulator to the effect that it has no objection to the persons, who would be in control or management of the financial service provider after approval of the resolution plan under section 31;

(iii) the appropriate regulator shall without prejudice to the provisions contained in section 29A, issue ‘no objection’ on the basis of the ‘fit and proper’ criteria applicable to the business of the financial service provider;

(iv) where an appropriate regulator does not refuse ‘no objection’ on an application made under clause (ii) within forty-five working days of receipt of such application, it shall be deemed that ‘no objection’ has been granted.

Application to be made in Form 1. To view the form,Click Here

1.6.6. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

6. Filing of application and application fee.—
(1) Till such time the rules of procedure for conduct of proceedings under the Code are notified, the application made under clause (a) of rule 5 shall be filed before the Adjudicating Authority in accordance with rules 20, 21, 22, 23, 24 and 26 of Part III of the National Company Law Tribunal Rules, 2016 made under the provisions of the Companies Act, 2013.

(2) An applicant under these rules shall immediately after becoming aware, notify the Adjudicating Authority of any winding-up petition presented against the financial service provider.

(3) The application under sub-clause (i) of clause (a) of rule 5 shall be made in and accompanied by-

(a) a fee of twenty-five thousand rupees;

(b) a written consent and declaration in accordance with from the proposed Administrator; and

(c) other documents and records as specified in .

(4) The application and accompanying documents shall be filed in electronic form, as and when such facility is made available by the Adjudicating Authority:

Provided that till such facility is made available, the applicant may submit the accompanying documents, and wherever they are bulky, in electronic form, in scanned, legible portable document format in a data storage device such as a compact disc or a USB flash drive acceptable to the Adjudicating Authority.

(5) The applicant shall dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by registered post or speed post to the registered office of the financial service provider.

(6) The Adjudicating Authority may permit withdrawal of an application filed under sub clause (i) of clause (a) of rule 5 before its admission on a request made by the applicant.

To view the form,Click Here
To view the form,Click Here
To view the form,Click Here

1.6.7. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

7. Liquidation Process.-

The provisions of the Code relating to the liquidation process of the corporate debtor shall, mutatis mutandis apply, to the liquidation process of a financial service provider subject to the following modifications, namely: –

(a) the license or registration that authorises the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled during the liquidation process, unless an opportunity of being heard has been provided to the liquidator;

(b) the Adjudicating Authority shall provide the appropriate regulator an opportunity of being heard before passing an order for –

(i) liquidation of the financial service provider under section 33, and

(ii) dissolution of the financial service provider under section 54.


1.6.8. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

8. Voluntary Liquidation Process.-

The provisions of the Code relating to voluntary liquidation process of the corporate debtor shall, mutatis mutandis apply, to the voluntary liquidation process of a financial service provider subject to the following modifications, namely :-

(a) the financial service provider shall obtain prior permission of the appropriate regulator for initiating voluntary liquidation proceedings under section 59 of the Code;

(b) the affidavit referred to in clause (a) of sub-section (3) of section 59 shall include a declaration that the permission under clause (a) has been obtained;

(c) the Adjudicating Authority shall provide the appropriate regulator an opportunity of being heard before passing an order for dissolution of the financial service provider under section 59.


1.6.9. Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019

9. Insolvency Professional.-

(1) For the purpose of these rules, only an Administrator proposed by the appropriate regulator and appointed as such by the Adjudicating Authority shall act as an insolvency professional, interim resolution professional, resolution professional or liquidator, as the case may be.

(2) An Administrator shall have the same duties, functions, obligations, responsibilities, rights, and powers of an insolvency professional, interim resolution professional, resolution professional or liquidator, as the case may be, while acting as such in an insolvency resolution and liquidation proceeding of a financial service provider.

(3) The appointment or replacement of the Administrator may be made by the Adjudicating Authority on an application made by the appropriate regulator in this behalf.


Commencement Notification for Section 227 to 229 dated 01.05.2018


Notification notifying the insolvency resolution and liquidation proceedings for categories of financial service providers dated 18.11.2019


The Insolvency and Bankruptcy Code (Amendment) Act, 2020 dated 13.03.2020 w.e.f. 28.12.2019


The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 dated 28.12.2019


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