The panel of experts constituted by the government to review the Insolvency and Bankruptcy Code (IBC) has recommended that the National Company Law Tribunal (NCLT) should have the power to direct the Insolvency Board to propose another liquidator where the resolution professional (RP) does not consent to continue as the liquidator, according to Devidas Banerji, Partner, Khaitan & Co.
Khaitan & Co is a law firm and is involved in some of the major insolvency cases.
“Currently, the NCLT has the power to replace the RP on the recommendation of the Insolvency Board,” Banerji told
Transaction period
Questions have been raised about the need for conducting a forensic audit of routine transactions conducted in the course of business, as old as 10 years or more, as they are not seen to serve any specific value.
According to Banerji, in the erstwhile regime under the Companies Act as well as the IBC, it clearly specifies that in case of vulnerable transactions such as preferential transactions or transactions conducted at an undervalue, if it is a related party transaction, one can look back for two years; for non- related party transactions, the lookback period is one year. Further, except for cases involving fraud, if irregularities are noted after the commencement of the insolvency resolution process, the lookback period is a maximum of five years under the IBC.
But in certain instances, even where no fraud is alleged, liquidators have gone beyond the prescribed lookback periods to a time when people may not clearly recall the transaction, the directors or officers have changed, or people have moved on.
“In such cases, it needs to be seen if it makes sense to conduct a forensic audit on routine transactions done in the ordinary course of business, which the law doesn’t really prescribe,” he said.