The Ministry of Corporate Affairs has issued a notification granting exemptions to specific transactions, arrangements, and agreements from the provisions of section 14(1) of the Insolvency and Bankruptcy Code, 2016. The notification, numbered S.O. 2660(E), was released on June 14, 2023.
According to the notification, the exemptions will be applicable to corporate debtors involved in certain transactions and agreements related to the oil and mining sectors. Specifically, the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016, will not apply to the following:
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.
Any transactions, arrangements, or agreements, including the Joint Operating Agreement, connected or ancillary to the transactions, arrangements, or agreements mentioned in clause(I).
The exemption implies that corporate debtors engaged in the aforementioned transactions and agreements will not be subject to the restrictions imposed by section 14(1) of the Insolvency and Bankruptcy Code, which typically prohibits the debtor from transferring, encumbering, or disposing of its assets without the approval of the insolvency resolution professional.
This move by the Ministry of Corporate Affairs aims to provide specific exemptions to corporate debtors operating in the oil and mining sectors, acknowledging the unique nature of their contractual obligations and agreements. By granting these exemptions, the government intends to ensure the smooth functioning and continuity of operations in these sectors, while still adhering to the broader framework of the Insolvency and Bankruptcy Code.
The notification comes as a significant development for companies operating in the oil and mining industries, as it provides them with greater flexibility in managing their assets and obligations during insolvency proceedings. However, it should be noted that the exemptions granted are limited to the transactions and agreements specified in the notification.
The Ministry of Corporate Affairs is committed to promoting a conducive business environment and implementing reforms that address industry-specific challenges. The government will continue to monitor and assess the impact of these exemptions on the insolvency and bankruptcy landscape while safeguarding the interests of all stakeholders.
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