CS Professional Programme Module - I (New Syllabus) (Solution of December ) Paper - 3 : Corporate Restructuring, Valuation & Insolvency

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1 ISBN: Solved Scanner Appendix CS Professional Programme Module - I (New Syllabus) (Solution of December ) Paper - 3 : Corporate Restructuring, Valuation & Insolvency Chapter - 1 : Corporate Restructuring - Introduction and Concepts Dec [1] (a), (b) (a) Corporate Restructuring is the process of significantly changing a company's business model, management team or financial structure to address challenges and increase shareholder value. Restructuring may involve major layoffs or bankruptcy, though restructuring is usually designed to minimize the impact on employees, if possible. Restructuring may involve the company's sale or a merger with another company. Companies use restructuring as a business strategy to ensure their long-term viability. Shareholders or creditors might force a restructuring if they observe the company's current business strategies as insufficient to prevent a loss on their investments. The nature of these threats can vary, but common catalysts for restructuring involve a loss of market share, the reduction of profit margins or declines in the power of their corporate brand. (b) Certain instances that have happened in India setting examples of benefits in Corporate Restructuring are as follows: 1. Demerger - Larsen & Toubro Limited 2. Overseas Acquisition Tata - Corus Deal 3. Merger of ICICI with ICICI BANK 1

2 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 2 4. Slump Sale (Business Transfer) by Piramal to Abbott 5. Multiple Corporate Restructuring Reddy Laboratories Limited 6. Leveraged buy-out Bharti - Zain Deal 7. Overseas Acquisition Daiichi Ranbaxy 8. Acquisition of Patni by Igate Chapter - 2 : Mergers and Amalgamations - Legal and Procedural Aspects Dec [1] (d) Various Compliance required by Company Secretary are: Check Memorandum whether it authorises Merger. Convene a preliminary Board Meeting. Prepare Valuation Report and Swap Ratio. Preparation of Scheme of Amalgamation. Convene Board Meeting to approve the scheme, valuation report, swap ratio. Application to the Tribunal seeking direction to call general meeting/creditors meeting. Convene general meeting. Reporting results of the meeting to the concerned Tribunal. Obtaining Tribunal order sanctioning scheme. Filing copy of Tribunal order with ROC. Transfer of assets and liabilities. Allotment of shares to shareholders of transferor company. Listing of shares at Stock Exchange Dec [2] (c) The first step in carrying out amalgamation is approval of scheme of amalgamation by the Board of both the companies. Board resolution should, besides approving the scheme, authorise a Director/Company Secretary/other officer to make application to Tribunal, to sign the application and other documents and to do everything necessary or expedient in connection therewith, including changes in the scheme.

3 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 3 Chapter - 3 : Economic and Competition Law Aspects of Mergers and Amalgamations Dec [2] (a) Section 32 extends the jurisdiction of Competition Commission of India to inquire and pass orders in accordance with the provisions of the Act into an agreement or dominant position or combination, which is likely to have, an appreciable adverse effect on competition in relevant market in India, notwithstanding that, (a) an agreement referred to in Section 3 has been entered into outside India; or (b) any party to such agreement is outside India; or (c) any enterprise abusing the dominant position is outside India; or (d) a combination has taken place outside India; or (e) any party to combination is outside India; or (f) any other matter or practice or action arising out of such agreement or dominant position or combination is outside India. The above clearly demonstrate that acts taking place outside India but having an effect on competition in India will be subject to the jurisdiction of Commission. The Competition Commission of India will have jurisdiction even if both the parties to an agreement are outside India but only if the agreement, dominant position or combination entered into by them has an appreciable adverse effect on competition in the relevant market of India. Chapter - 4 : Mergers and Amalgamations - Accounting Aspects of Amalgamations Dec [2] (b) (i) Ind AS 103 defines business combination which has a wider scope whereas the existing AS 14 deals only with amalgamation. (ii) Under the existing AS 14 there are two methods of accounting for amalgamation. The pooling of interest method and the purchase method. Ind AS 103 prescribes only the acquisition method for each business combination.

4 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 4 (iii) Under the existing AS 14, the acquired assets and liabilities are recognised at their existing book values or at fair values under the purchase method. Ind AS 103 requires the acquired identifiable assets liabilities and non-controlling interest to be recognised at fair value under acquisition method. (iv) Ind AS 103 requires that for each business combination, the acquirer shall measure any non controlling interest in the acquire either at fair value or at the non-controlling interest s proportionate share of the acquiree s identifiable net assets. On other hand, the existing AS 14 states that the minority interest is the amount of equity attributable to minorities at the date on which investment in a subsidiary is made and it is shown outside shareholders equity. (v) Under Ind AS 103, the goodwill is not amortised but tested for impairment on annual basis in accordance with Ind AS 36.The existing AS 14 requires that the goodwill arising on amalgamation in the nature of purchase is amortised over a period not exceeding five years. (vi) Ind AS 103 deals with reverse acquisitions whereas the existing AS 14 does not deal with the same. (vii) Under Ind AS 103, the consideration the acquirer transfers in exchange for the acquiree includes any asset or liability resulting from a contingent consideration arrangement. The existing AS 14 does not provide specific guidance on this aspect. (viii) Ind AS 103 requires bargain purchase gain arising on business combination to be recognised in other comprehensive income and accumulated in equity as capital reserve, unless there is no clear evidence for the underlying reason for classification of the business combination as a bargain purchase, in which case, it shall be recognised directly in equity as capital reserve. Under existing AS 14 the excess amount is treated as capital reserve. (ix) Appendix C of Ind AS 103, deals with accounting for common control transactions, which prescribes a method of accounting different from Ind AS 103. Existing AS 14 does not prescribe accounting for such transactions different from other amalgamations.

5 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 5 Chapter - 6 : Interest of the Small Investors in Mergers Dec [2A] (Or) (i) Any scheme which is fair and reasonable and made in good faith will be sanctioned if it could reasonably be supported by sensible people to be for the benefit to each class of the members or creditors concerned. In Sussex Brick Co. Ltd., Re, (1960) 1 All ER 772 : (1960) 30. Com Cases 536 (Ch D) it was held, inter alia, that although it might be possible to find faults in a scheme that would not be sufficient ground to reject it. It was further held that in order to merit rejection, a scheme must be obviously unfair, patently unfair, unfair to the meanest intelligence. It is the consistent view of the Courts that no scheme can be said to be fool-proof and it is possible to find faults in a particular scheme but that by itself is not enough to warrant a dismissal of the petition for sanction of the scheme. If the court is satisfied that the scheme is fair and reasonable and in the interests of the general body of shareholders, the court will not make any provision in favour of the dissentients. The Courts have gone further to say that a scheme must be held to be unfair to the meanest intelligence before it can be rejected. It must be affirmatively proved to the satisfaction of the Court that the scheme is unfair before the scheme can be rejected by the Court. English, Scottish & Australian Chartered Bank, Re, (1893) 3 Chancery 385. Chapter - 7 : Amalgamation of Banking and Government Companies Dec [2A] (Or) (ii) Amalgamation of one banking company with another banking company is governed by the provisions of Banking Regulation Act, The provisions of the Companies Act, 2013 are not applicable in this case. Section 44A of the Banking Regulation Act, 1949 requires that the draft scheme of amalgamation has to be approved by the shareholders of each banking company by a resolution passed by a majority in number representing two-third in value of the shareholders, present in person or by proxy at a meeting called for the purpose. Further the approval of the Reserve Bank of India is needed. Such companies do not need to go to the National Company Law Tribunal (NCLT).

6 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 6 Where the NBFC is proposed to be amalgamated into a banking company, the banking company should obtain the approval of the Reserve Bank of India after the scheme of amalgamation is approved by its Board but before it is submitted to the National Company Law Board (earlier it was the jurisdictional High Court) for approval. Chapter - 8 : Corporate Demergers and Reverse Mergers Dec [2A] (Or) (iii) Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc. Section 72A. Where there has been an amalgamation of: (a) a company owning an industrial undertaking or a ship or a hotel with another company; or (b) a banking company referred to in clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a specified bank; or (c) one or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly Dec [3] (d) Demerger 1. Meaning Demerger, pursuant to a scheme of arrangement Under section 230 to 240 of Companies Act, 2013, means: Reconstruction (a) A n e w c o m p a n y (Transferee Company) is incorporated and the e x i s t i n g c o m p a n y (Transferor Company) is

7 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 7 2. Consideration (a) a transfer dissolved through special (b) where by a company resolution under members c a l l e d d e m e r g e d voluntary winding up. company (b) Thereafter, the liquidator (c) transfers its one or more transfers all the assets under-takings including and liabilities of the all the liabilities and the transferor company to the properties of the said transferee company. undertaking (d) at values appearing in its books o f a ccount immediately before demerger (e) to a newly incorporated company called resulting company The resulting company for The transferee company consideration of the above issues and allots its shares to demerger, issues its shares to the shareholders of the the shareholders of the transferor company in demerged company on a accordance with the predetermined shares exchange proportionate basis. ratio. Chapter - 9 : Takeovers Dec [1] (c) Regulation 10(1)(d)(ii) of SEBI (SAST) Regulations, 2011 states that Acquisition Pursuant to a scheme of arrangement involving the target company as a transferor company or as a transferee company, or reconstruction of the target company, including amalgamation, merger or demerger, pursuant to an order of a court or a competent authority under any law or regulation, Indian or foreign does not trigger open offer as required under Regulation 3 or Regulation 4 of SEBI (SAST) Regulations, 2011 even if the acquisition crosses the specified threshold limit for open offer.

8 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 8 Regulation 10(6) SEBI (SAST) Regulations, 2011 provides that in respect of any acquisition made pursuant to exemption provided for in SEBI (SAST) Regulations, 2011, the acquirer should file a report with the stock exchanges where the shares of the company are listed, in prescribed form not later than 4 working days from the acquisition and the stock exchange shall forthwith disseminate such information to the public Dec [3] (e) Voluntary offer: A voluntary open offer under Regulation 6, is an offer made by a person who himself or through or along with Persons acting in concert with him if any, holds 25% or more shares or voting rights in the target company, but less than the maximum permissible non-public shareholding limit, for such number of shares such that the aggregate of the shareholding of the acquirer after the offer shall not exceed the maximum permissible non public shareholding. Restrictions on voluntary open offer: A voluntary offer cannot be made if the acquirer or PACs with him has acquired any shares of the target company in the 52 weeks prior to the voluntary offer without attracting the provisions of the regulations, to make a public announcement. The acquirer is prohibited from acquiring any shares during the offer period other than through the acquisitions in the open offer. The acquirer is also not entitled to acquire any shares for a period of 6 months, after completion of open offer except pursuant to another voluntary open offer. Chapter - 11 : Financial Restructuring Dec [3] (a), (b) (a) A company is said to be over-capitalized, if its earnings are not sufficient to justify a fair return on the amount of share capital and debentures that have been issued. Otherwise, it is said to be over capitalized when total of owned and borrowed capital exceeds its fixed and current assets i.e. when it shows accumulated losses on the assets side of the balance sheet.

9 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 9 If the owned capital of the business is much less than the total borrowed capital than it is said to be under capitalization. In other words the owned capital of the company is disproportionate to the scale of its operation and the business is dependent more upon borrowed capital. Under capitalization may be the result of excess volume of trading and over capitalization may be due to insufficient volume of trading. (b) A company limited by shares or a company limited by guarantee and having a share capital may, if authorised by its articles, by special resolution and subject to its confirmation by the tribunal on petition, reduce its share capital. The following are cases which amount to reduction of share capital but where no confirmation by the Tribunal is necessary: Surrender of shares Forfeiture of shares Diminution of capital Redemption of redeemable preference shares Buy-back of its own shares. Chapter - 12 : Post Merger Re-organisation Dec [3] (c) The main purpose of a merger or acquisition is to deliver the expected financial results namely earnings and cash flow. However, there are certain other measures that serve as key indicators and they also need to be measured. The indicators may be grouped as: (i) (ii) Financial outcomes. Component measures of these outcomes namely revenues, costs, net working capital and capital investments. (iii) Organisational indicators such as customers, employees and operations. Chapter - 14 : Valuation Introduction and Techniques Dec [4] (a), (b) (a) Valuation can be done on the basis of fair value also. However, resort to valuation by fair value is appropriate when market value of a company is independent of its profitability.

10 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 10 The fair value of shares is arrived at after consideration of different modes of valuation and diverse factors. There is no mathematically accurate formula of valuation. An element of guesswork or arbitrariness is involved in valuation. The following four factors have to be kept in mind in the valuation of shares. These are: 1. Capital cover, 2. Yield, 3. Earning capacity, and 4. Marketability. (b) Calculation of Net Assets Land & Buildings = 30,00,000 Furniture / fixture = 2,50,000 Inventory = 9,11,000 Debtors (4,10,000 90%) = 3,69,000 Cash/Bank = 1,20,000 Total Assets 46,50,000 Less: Trade payables 6,50,000 Secured Loans 14,00,000 Net Assets for 26,00,000 Shareholders Preference Dividend for 5 years = 5 {12% 6,00,000} = 5 72,000 = 3,60,000 Net Assets available for equity holders = 26,00,000 3,60,000 = ` 22,40,000 Book value of Equity shareholders = 27,00,000 Value of share of ` 10 fully paid up = ` = ` 8.29 or ` 8.30

11 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 11 Value of share of ` 6 fully paid up = ` = ` Dec [5] (a), (b), (c) (a) Capitalization of Average Profit Method: Year Profit (`) 1 42,00, ,00, ,00, ,00, ,00,000 2,20,00,000 Average future profit = = 44,00,000 Capital Employed = 44,00,000 = ` 4,40,00,000 Goodwill = 4,40,00,000 4,00,00,000 = ` 40,00,000 Capitalization of Super Profit Method: Normal Profit = Super profits Goodwill = 4,00,00,000 10% = 40,00,000 = Actual profits Normal profit = 44,00,000 40,00,000 = ` 4,00,000 = Super profits No. of years of purchase = 4,00,000 5 = ` 20,00,000.

12 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 12 (b) The preliminary study to valuation involves the following aspects: 1. Analysis of Business History 2. Profit trends 3. Goodwill/Brand name in the market 4. Identifying economic factors directly affecting business 5. Study of Exchange risk involved 6. Study of Employee morale 7. Study of market capitalization aspects 8. Identification of hidden liabilities through analysis of material contracts. (c) Strategies Requiring Valuation Examples: Determining the consideration for Acquisition. Determining the swap ratio for Merger/Demerger. Sale/Purchase of Intangible assets including brands, patents, copyrights, trademarks, rights. Determining the fair value of shares for issuing ESOP. Disinvestment of PSU stocks by the Government. Liquidation /insolvency of company. Chapter - 15 : Regulatory Aspects of Valuation with Reference to Corporate Strategies Dec [4] (c) In Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp. Cas 792 (SC), the Hon ble Supreme Court held: If Share Exchange Ratio is fixed by Chartered Accountant upon consideration of various factors and approved by majority of shareholders in meeting, the Court will not disturb ratio. In Re. Maknom Investments Ltd. [1995] (4) Comp. LJ page 330, the Calcutta High Court observed: Court does not go into the matter of fixing of exchange ratios in great detail or to sit in appeal over the expert decision of concerned chartered accountant of repute. Court only sees whether there is any manifest unreasonableness or manifest fraud involved in the matter.

13 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 13 Chapter - 17 : Corporate Insolvency and Resolution Process Dec [6] (b), (c) (b) Filing of an Application before the Adjudicating Authority: Any of the following can file an application before the Adjudicating authorities: Financial Creditors are the creditors to whom corporate debtor owes financial debt. Operational Creditors are the creditors to whom corporate debtor owes operational debts such as claims for goods and services, employees, etc. Corporate Applicant means corporate debtor or its shareholders, partner, management personnel or Employees. The following persons shall not be entitled to make application to NCLT for initiation of corporate insolvency resolution process: (a) a corporate debtor undergoing a corporate insolvency resolution process; or (b) a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or (c) a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months preceding the date of making application; or (d) a corporate debtor in respect of whom a liquidation order has been passed so that finality of the liquidation order is ensured. (c) The Government of India set up in 1981, a Committee of Experts under the Chairmanship of Shri T.Tiwari to examine the matter and recommend suitable remedies therefore. Based on the recommendations of the Committee, the Government of India enacted a special legislation namely, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) commonly known as the SICA. The major constraint of the SICA was that it was applicable only to sick industrial companies keeping away other companies which are in trading, service or other activities.

14 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 14 However, the overall experience was not satisfactory because of various factors including non-applicability of SICA to non industrial companies and small/ancillary companies, misuse of immunity provided under section 22 of SICA etc. In view of this, the Insolvency and Bankruptcy Code, 2016 was notified on the May 28, The Ministry of Finance (MoF), vide notification nos. S.O. 3568(E) and 3569(E), has notified 1 st December, 2016 (appointed date) as the date on which the provisions of Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (Repeal Act) shall come into force. The Repeal Act provides for repeal of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and related matters. Therefore, the SICA is repealed with effect from 1 st December, In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Eradi, Judge of Supreme Court of India to examine and make recommendations with regard to the desirability of changes in existing law relating to winding up of companies so as to achieve more transparency and avoid delays in the final liquidation of the companies. The committee recommended that the jurisdiction, power and authority relating to winding up of companies should be vested in a National Company Law Tribunal instead of the High Court. In December 2002, Indian Parliament passed the Companies (Second Amendment) Act, 2002 to restructure the Companies Act, 1956 including the setting up of NCLT and NCLAT. Dr. J JIrani committee was set up to deal with of the Second Amendment Act. On 31 st May, 2005, Dr. J JIrani committee handed over its report to Government of India. Key recommendations of the committee were time bound proceedings, applicability and accessibilities, moratorium and suspension of proceedings, operating agencies, appointment of Administrators and their duties, Creditor s committee and liquidators, increased role of professionals, insolvency practitioners, cross border insolvency etc.

15 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 15 Considering the abovementioned recommendations, the Government set in motion a plan to overhaul the existing bankruptcy laws and replace them with one that will facilitate easy and time-bound closure of businesses. It was passed on 5 th May, 2016 by the Parliament as the Insolvency and Bankruptcy Code, 2016 and came into force vide notification dated 28 th May, Dec [6A] (Or) (ii) The Government of India set up in 1981, a Committee of Experts under the Chairmanship of Shri T.Tiwari to examine the matter and recommend suitable remedies therefore. Based on the recommendations of the Committee, the Government of India enacted a special legislation namely, the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) commonly known as the SICA. The major constraint of the SICA was that it was applicable only to sick industrial companies keeping away other companies which are in trading, service or other activities. However, the overall experience was not satisfactory because of various factors including non-applicability of SICA to non - industrial companies and small/ancillary companies, misuse of immunity provided under section 22 of SICA etc. In view of this, the Insolvency and Bankruptcy Code, 2016 was notified on the May 28, The Ministry of Finance (MoF), vide notification nos. S.O. 3568(E) and 3569(E), has notified 1 st December, 2016 (appointed date) as the date on which the provisions of Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (Repeal Act) shall come into force. The Repeal Act provides for repeal of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and related matters. Therefore, the SICA is repealed with effect from 1 st December, In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Eradi, Judge of Supreme Court of India to examine and make recommendations with regard to the desirability of changes in existing law relating to winding up of companies so as to achieve more transparency and avoid delays in the final liquidation of the companies.

16 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 16 The committee recommended that the jurisdiction, power and authority relating to winding up of companies should be vested in a National Company Law Tribunal instead of the High Court. In December 2002, Indian Parliament passed the Companies (Second Amendment) Act, 2002 to restructure the Companies Act, 1956 including the setting up of NCLT and NCLAT. Dr. J JIrani committee was set up to deal with of the Second Amendment Act. On 31 st May, 2005, Dr. J JIrani committee handed over its report to Government of India. Key recommendations of the committee were time bound proceedings, applicability and accessibilities, moratorium and suspension of proceedings, operating agencies, appointment of Administrators and their duties, Creditor s committee and liquidators, increased role of professionals, insolvency practitioners, cross border insolvency etc Considering the abovementioned recommendations, the Government set in motion a plan to overhaul the existing bankruptcy laws and replace them with one that will facilitate easy and time-bound closure of businesses. It was passed on 5 th May, 2016 by the Parliament as the Insolvency and Bankruptcy Code, 2016 and came into force vide notification dated 28 th May, Chapter - 18 : Securitisation Dec [6] (d) Securitisation: Securitisation is a method of raising funds by way of selling receivables for money. Securitisation under section 2(1)(z) means acquisition of financial assets by any asset reconstruction company from any originator, whether by raising of funds by such securitisation company or reconstruction company from qualified buyers by issue of security receipts representing undivided interest in such financial assets or otherwise. Steps involved in Securitisation Acquisition of Financial Assets by Asset Reconstruction Company (i.e. SPVs) from the originator. SPV, with the help of an investment banker, issues security receipts which are distributed to investors. SPV pays the originator for the financial assets purchased with the proceeds from the sale of securities.

17 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 17 6 th Parties involved in Securitisation: 1. The Originator (Banks / FIs who has lent loan against properties). 2. SPVs (Asset Reconstruction Company). 3. Investors (To whom securities are issued). 4. The obligator (i.e. original borrower of the loan). 5. Rating agency. 6. Administrator, etc. Chapter - 19 : Debt Recovery Dec [6A] (Or) (iv) Any person aggrieved by an order of the Recovery Officer made under this Act may, within thirty days from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal. On receipt of an appeal, the Tribunal may, after giving an opportunity to the appellant to be heard, and after making such inquiry as it deems fit, confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers under sections 25 to 28 (both inclusive). In the cases of Pravin Gada v. Central Bank of India [2013] 176 Comp. Cas. 101(SC), Allahabad Bank v. Canara Bank [2000] 101 Comp. Cas. 64(SC) and Rajasthan Financial Corporation v. Official Liquidator [2005] Com. Cas. 387(SC), Supreme Court held that anyone who is aggrieved by any act done by the Recovery Officer can prefer an appeal. Chapter - 20 : Winding-Up Dec [6A] (Or) (i) In case where the reasonable cause being shown and for reasons to be recorded in writing, the tribunal may remove the provisional liquidator or the Company Liquidator, on any of the following grounds: (a) misconduct; (b) fraud or misfeasance; (c) professional incompetence or failure to exercise due care and diligence in performance of the powers and functions; (d) inability to act as provisional liquidator or as the case may be, Company Liquidator;

18 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 18 (e) conflict of interest or lack of independence during the term of his appointment that would justify removal. Further, In the event of death, resignation or removal of the liquidator the Tribunal may transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing. Chapter - 21 : Cross Border Insolvency Dec [6] (a) Principle of Supremacy of International Obligations (Article 3) Article 3 provides that to the extent the Model Law conflicts with an obligation of the State enacting the Model Law arising out of any treaty or other form of agreement to which it is a party with one or more other States, the requirements of the treaty or agreement prevail Dec [6A] (Or) (iii) Notification to foreign creditors of a proceeding (Article 14) Article 14 of the Model Law provides that whenever under laws of the enacting State relating to insolvency, a notification is to be given to creditors, such notification shall also be given to the known creditors that do not have addresses in the State. The court may order that appropriate steps be taken with a view to notifying any creditor whose address is not yet known. The main purpose of notifying foreign creditors is to inform them of the commencement of the insolvency proceeding and of the timelimit to file their claims. Such notification shall be made to the foreign creditors individually, unless the court considers that, under the circumstances, some other form of notification would be more appropriate. No letters rogatory or other, similar formality is required. When a notification of commencement of a proceeding is to be given to foreign creditors, the notification shall: (a) Indicate a reasonable time period for filing claims and specify the place for their filing;

19 Solved Scanner Appendix CS Prof. Prog. M-I Paper-3 (New Syllabus) 19 (b) Indicate whether secured creditors need to file their secured claims; and (c) Contain any other information required to be included in such a notification to creditors pursuant to the law of this State and the orders of the court. Shuchita Prakashan (P) Ltd. 25/19, L.I.C. Colony, Tagore Town, Allahabad Visit us :