COVID-19 Impact On IBC.

COVID-19 (coronavirus) is significantly impacting businesses and the economy worldwide. In the middle of the ongoing crisis, every regulator authority, be it the Reserve Bank of India, the Securities and Exchange Board of India, the Ministry of Corporate Affairs or the courts, has made efforts to ease the burden on businesses,creditors and general public,by recalibrating their existing regulatory frameworks to addressing the emerging scenario, same has been done in IBC.

Major Changes brought in IBC due to COVID-19:

a.       Regulation 47A introduced in IBBI (Liquidation Process) Regulations, 2016 &  Regulation 40C introduced in IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

b.      Revised IBC threshold limit, from Rs. 1 lakh to Rs. 1 crore.

c.       Three month moratorium on repayment of term loans.

d.      Govt to suspend insolvency provisions from IBC for up to 1year.

e.       Govt plans pre-packaged IBC deals to ease the burden on bankruptcy courts. where a restructuring plan has been agreed in advance between the company and its creditors.

f.       The National Company Law Tribunal has cancelled the Summer Vacation, 2020 for all its benches, in view of loss of work due to the lockdown.

Positive & Negative Impact of Recent Changes on Businesses & Creditors:

·         Introduction of Regulation 47A & 40A.

The Insolvency and Bankruptcy Board of India (IBBI) by introducing regulation 47A & 40C; ensuring that the national lockdown period will not be counted for the purpose of timeline of completion of any activity under their respective regulations. It will ensure that unnecessary defaults do not occur in the future. This move would also ensure that the NCLT is not flooded with procedural applications seeking extensions and or condonation of delay in meeting timelines.It is a major relief provided to corporates.

·         Revised IBC threshold limit from Rs.1 lakh to Rs.1 crore.

Aiming protection to the Micro, Small & Medium Enterprises (‘MSMEs’) from being pushed into insolvency, the MCA vide its notification dated 28.03.2020 has tried to relieve these entities by increasing the threshold limit for claim from Rs 1 lakh to Rs 1 crore. Now, the companies can focus on stabilizing the business operations rather than being under the constant fear of inevitable insolvency.

A few months ago, the government made another amendment under IBC introducing a minimum threshold of 100 or 10% of the homebuyers, whichever is lower. Now these recent two amendments will surely impact homebuyer rights. They limit the avenues for redress available to aggrieved consumers.

·         Three month moratorium on repayment of term loans.

 RBI in a press conference dated March 27, 2020 announced that all banks and NBFCs have been permitted to allow a moratorium of 3 months on repayment of term loans. Availing such a moratorium would also not lead to a down grading of the borrower's credit rating or affect the risk classification of the loan.The rescheduling of payments will not qualify as a default for the purposes of supervisory reporting.

·         Govt to suspend insolvency provisions from IBC for up to 1 year.

In a bid to avoid companies at large from being forced into insolvency proceedings as businesses get impacted due to COVID-19, government is preparing to introduce a new clause10A, under section 10 of the code. An ordinance would be promulgated to suspend Section 7, 9 and 10 of the IBC  for 6 months and the suspension time can be extended up to 1 year.

But, IBC suspension will hurt debt restructuring process. IBC provides the most viable option for debt restructuring of stressed firms. Instead of suspending the Code, the government should amend it suitably. Debt restructuring would be particularly necessary after Covid-19 crisis.

Indian law presently provides 3 routes to debt restructuring. First, the RBI’s June 7 Circular, which provides an out-of-court restructuring option. Second, the IBC, that could be used for restructuring under the aegis of the NCLT. Third, a scheme of arrangement under the Companies Act, 2013, which is hardly used in practice. And now with the IBC due to be suspended, the only option practically left is the RBI Circular.

 The Circular applies only to RBI-regulated lenders.The IBC does not suffer from any such limitations. It applies to all claimants of the corporate debtor, including lenders, whether regulated by the RBI or not. This provides a much more holistic restructuring framework compared to the Circular. Moreover, IBC provides a statutory moratorium on recovery actions by all claimants. This assures every creditor that no other creditor can engage in an asset grab race during the restructuring.

·         Some Winning Bidders look to wriggle out.

Resolutions under IBC may  become tough to get, after the onset of Covid-19 crisis as bankers fear winning bidders will review their interest in bankrupt companies and renegotiate bids or pull out altogether. As Currently tight cash flow condition is going on in the country, this tight liquidity condition will impact stressed firms’ value maximisation, leading to a decline in number of interested bidders for these assets.

Bankers now fear that many winning bidders will invoke the material adverse effect clauses to lower the price they are paying to buy companies.

·         Difficult to disburse interim funds to IBC firms.

Resolution professionals (RPs) are facing tight liquidity conditions to keep firms as going concerns. They are then left with one option to get interim finance from lenders. During this current tight cash flow condition, It is very difficult for any lender to disburse interim finance to the stressed firms which are undergoing insolvency resolution process since recovery will be a major concern.

Recognizing the need of the hour, the writer has provided some additional measures that can be taken by the government, which are as follows:

1.      Government to increase the number of NCLT benches to tackle the the growing no. of cases.

2.      Allow resolution plan to be amended after its submission: Given the current situation, The resolution plan submitted to the adjudicating authority  may not meet the haircut amount due to the effect of Covid-19. Therefore, the CoC should be allowed to reconsider its views on a previous plan, and submit a revised plan.

3.      Revised IBC threshold limit from Rs.1 lakh to Rs.1 crore, to be a temporary measure only: If it is made perpetual, it would be causing a lot of unrest among small operational creditors, MSMEs etc, as they would not be in position to drag the corporate debtors into insolvency due to the higher threshold of more than 1,00,00,000.

4.      Changing the locus of the promoter of the corporate debtor under section 29A(c) of the IBC: The short window of 1year has prevented even genuine promoters from being given a second chance, even though such promoters are often in the best position to revive their businesses. In view of the current situation the period of 1year be extended to 2 years for the time being.

5.      The requirement of 90% of the CoC agrees under section 12A of the code, to exit the insolvency process thus bringing the promoter back in control of, be reduced to 75% of the committee.

6.      Amend section 30(4) of the code, and requirment of 66% to approve a resolution plan by financial creditors, be increased to 75%.

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AUTHOR: - GARGI JAIN

 (Company Secretary (Aspirant),

Disclaimer: 

No reader should act on the basis of any statement contained herein without seeking professional advice. The results & the interpretation has been done on the basis of my understanding of the Act & Rules, where applicable and with reference to the general articles and analysis. The author explicitly disclaims any financial or other liability of any kind arising on account of any action taken pursuant to the results or interpretation of this document. With respect to information available herein before, the author doesn’t make any warranty, express/implied or assume any liability or responsibility for the accuracy, completeness, or usefulness of such information.

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Coronavirus and Copyright laws….. The future of digital libraries and online scanned material….

It would be hard for me to overestimate the importance of reading. Nothing can expand the mind and heart like the magic al world of books. .... Our libraries are an essential resource for our children, our communities, and our future.-

Danielle Steel

The Corona virus pandemic and the subsequent lockdown across the globe have changed the lifestyle pattern of each and every individual. Work from home and online classes which were once considered as a privilege have now become a necessity. With chances of a vaccine in the near future looking quite bleak, this trend is likely to continue for a reasonable period of time. Like the entire population, the student community too is experiencing this uncertain time. There is no clarity about the mode and calendar of examinations. Most of the students are unable to access the online classes due to many reasons one of those being weak network connectivity issues. Educational institutions are coming with some or the other way but all of them prove to be futile. With very little access to course books in  hard copy one of the solutions could be providing these online through emails and applications like Whatsapp.

At a time when the country is engulfed in a dystopian spirit and a fear of death has taken the front-seat, is it right to penalize students for not finishing a certain reading or mailing an assignment on time? Do all students have the economic privilege to buy the readings online (as not all materials are available free of charge), or the socio-political privilege of living in a region with a good internet connectivity?  These types of questions might sound silly to someone living in a metropolitan city  but are still very prevalent to a majority of the population. And what does the copyright act say about the material which is being provided through emails and whatsapp.  Is there any specific provision in the act dealing with photocopied and scanned online study materials? Is there any violation of the copyright act if books are scanned or photocopied? And what is the scope of the copyright act?

In this Article we’ll cover each of these aspects.

What is Copyright?

Copyright is a form of intellectual property protection granted under Indian law to the creators of original works of authorship such as literary works (including computer programs, tables and compilations including computer databases which may be expressed in words, codes, schemes or in any other form, including a machine readable medium), dramatic, musical and artistic works, cinematographic films and sound recordings.

Copyright law protects expressions of ideas rather than the ideas themselves. Under section 13 of the Copyright Act 1957, copyright protection is conferred on literary works, dramatic works, musical works, artistic works, cinematograph films and sound recording. For example, books, computer programs are protected under the Act as literary works.  Section 14 defines the word copyright and the exclusive rights which are available to the copyright holder.[1]  Similarly section 51 of the act describes Infringement of a copyright and situations which would constitute infringement.[2] We are concerned here with Section 51{b}{ii}. It says that if any person distributes either for the purpose of trade or to such an extent as to affect prejudicially the owner of the copyright. The sending of online material and course books through emails and online platforms would definitely affect prejudicially the owner of the copyright as this would lead to a loss of revenue for the copyright holders. The exceptions to copyright infringement are enshrined in Section 52 of the Act.  Section 52(1) of the Copyright Act lists out acts that do not constitute copyright infringement. Sections 52(1)(h) to 52(1)(j) contain exceptions for use of copyrighted material for educational purposes. Whether a particular use of a copyrighted work falls within the scope of these provisions is determined by whether it is made for the purpose and in the manner as specified therein. However, the problem posed by Covid 19 is extraordinary and with educational institutions, faculties and libraries closed it becomes even more pertinent to discuss some of the landmark judgments delivered in which such factors were discussed.  Education in India is still quite expensive and in reality is accessible to only a privileged few.

The observations of the Supreme Court in the landmark judgment of Francis Coralie Mullin vs The Administrator, Union..[3] has laid down the foundation for the fundamental rights of education. One of the challenges India faces in its educational sectors is the cost of reading materials and the Indian copyright law which has a very pertinent role in overcoming this challenge. Contrary to popular perception, the cost of books in India is not comparatively cheaper than other countries. Keeping this background in mind, educational photocopying has a very important role to play.  One of the modes of promoting access in the area of education is by ensuring that copyright act has strong exceptions and limitations that enable the fair dealing of material for educational purposes. With education moving towards online mode it is quite relevant for us to have a discussion regarding online mode, material circulated and the copyright laws.  

The doctrine of Fair Dealing

Fair dealing is a limitation and exception to the exclusive right granted by copyright law to the author of a creative work. It permits reproduction or use of copyrighted work in a manner, which, but for the exception carved out would have amounted to infringement of copyright. It has thus been kept out of the mischief of copyright law.[4]  This doctrine is one of the aspects of copyright laws which tries to strike a balance between the individual right of the copyright holders and the rights of public at large. The doctrine of Fair Use is quite rigid in cases of Indian and United Kingdom legislations while it is quite fair in the U.S legislation.

The laws relating to fair dealing have been incorporated in Section 52 of The Copyrights Act, 1957. As the Indian Copyright Act does not defines the term "fair dealing" ,and due to this, the courts have on various occasions referred to the authority English case Hubbard v Vosper[5] on the subject matter. The words of Lord Denning in this case lay down a much descriptive outline of fair dealing.

  "It is impossible to define what is "fair dealing". It must be a question of degree. You must first consider the number and extent of the quotations and extracts.... then you must consider the use made of them....Next, you must consider the proportions...other considerations may come into mind also. But, after all is said and done, it is a matter of impression."

One of the most interesting observations regarding the doctrine of fair use was rendered by Judge Pierre Leval in the recent judgment of the U.S. Supreme Court involving Google and the Authors Guild.[6]  Judge Pierre Leval wrote the longstanding interpretation of copyright law had for 300 years been that authors do not have "absolute control" over their works, and that there are important exemptions for "fair use," including news reporting, historical analysis, parody and other "transformative" purposes.

Sections 52(1)(h) to 52(1)(j) of the Indian Copyright Act contain exceptions for use of copyrighted material for educational purposes. Whether a particular use of a copyrighted work falls within the scope of these provisions is determined by whether it is made for the purpose and in the manner as specified therein. The fair dealing in case of copyright matters related to educational institutions has been elaborately dealt in the landmark judgment of Delhi High court in the Landmark judgment of Chancellor, Masters & Scholars of the University of Oxford and Ors. vs Rameshwari Photocopy Services and Ors[7]., where the Delhi High Court ("the Court") upheld the supremacy of public welfare over the interests of publishers/authors, by laying down that:

 "Copyright, especially in literary works, is thus not an inevitable, divine, or natural right that confers on authors the absolute ownership of their creations. It is designed rather to stimulate activity and progress in the arts for the intellectual enrichment of the public. Copyright is intended to increase and not to impede the harvest of knowledge. It is intended to motivate the creative activity of authors and inventors in order to benefit the public." 

Section 52(1)(i) permits reproduction of any work by a teacher or pupil in the course of instruction (among other purposes). In determining the permissibility of use of copyrighted work under this exception, the Court held that the extent or quantity of the material used does not matter as long as it is reasonably necessary to use the same for the purpose of educational instruction. And the scope of words ‘in the course of instruction’ as per the expansive interpretation of the Court, isn’t merely limited to classroom lectures but includes any activity that falls within the ambit of providing educational instruction, both prior and post the actual act of lecturing.

This judgment is perhaps one of the most critical judgments as it addressed the issue of the most marginalized group of people i.e. the student community and their basic right to access to books and coursepacks.

The court’s reasoning in the judgments was based on the socio-economic context of India, the realities of the education system, and the progress afforded by modern technology. These are developments that will enable the law to adapt to new situations and current needs of Indian society. The judgment gains more significance in these times and could open gates for new online libraries and big authors whose books cost a bomb can tie up with these platforms and it could be a win -win situation for both the students and publishers.

While the language of the exception under the Indian Copyright Act does not expressly contemplate online education, as clarified by the DU Photocopying case, the scope of section 52(1)(i) is not limited to classroom teaching but the entire process or programme of education in a semester, which would include online education as well. In any case, online classes would be covered under classroom education because the change in the medium has been forced onto us due to the pandemic and is currently the only substitute left for traditional physical classes.

 The US Laws, Circular 21: Reproduction of Copyrighted Works by Educators and Librarians (SectionC,2B,ii, Page 7)[8] gives guidelines for classroom copying with respect to books and periodicals copying of books and periodicals shall not be

a)  substitute for the purchase of books, publishers’ reprints or periodicals;

b)  be directed by higher authority;

c) be repeated with respect to the same item by the same teacher from term to term.

d)  No charge shall be made to the student beyond the actual cost of the photocopying.

Are there special rules for scanning copyright protected material?

No, scanning is allowed within the same parameters as any other method of copying.  

If we want to scan something, we may do so only if the use falls within one of the exceptions in the Copyright Act, such as fair dealing, or where no permission is required, such as scanning a public domain work (one in which copyright has expired). 

If we want to scan a work that is still in copyright and add it to a website under fair dealing, you need to be sure that the website is password protected (e.g., SFU’s learning management system) and restricted to students enrolled in your course, and follow the fair dealing limits. 

If what we want to do falls outside the exceptions and is not in the public domain, we would need to get the copyright owner’s permission.

However seeing the conditions which are prevailing due to the lockdown where the libraries are shut, there is no access to institutions and deliveries of books is at a halt and the weak connectivity issues the only solution left for the students is to get the pdfs of material and books online .  However not everyone can buy the the e-Books as the population is divided into different income groups. Some can afford and some can’t. So it shouldn’t be a disadvantage to the group who is unable to get their hands on these materials. Eg : This is particularly likely as education in India and especially in the State run educational institutions is heavily subsidized, thereby enabling students from low-income families to also attend the university. With the extension of lockdowns even though the exams have been postponed still the student have to study and the only solution is to get the scanned copy of books online or if it’s made available to them by the institution on their websites.

Section (§) 108 of Title 17 of the United States Code[9] outlines the exceptions by which libraries and archives may make copies of copyrighted materials without seeking permission of the copyright holders. When Countries like US can have such laws why can’t India make such laws and help its citizens to deal with the current situation instead of making students feel helpless..

CONCLUSION

With right to education enshrined as a fundamental right under Article 21-A and with opening of regular schools and colleges looking a distinct reality it becomes quite pertinent to devise new methods of online education. With some of the universities already planning to take exams through online mode the issue becomes even more important. Exams and studies without access to course books would be a futile exercise. Union HRD Minister Ramesh Pokhriyal had urged the students to read books in the free time available to them due to Coronavirus lockdown in the country. The minister used the micro blogging site Twitter, to make students aware about the importance of books in one’s life.

In his tweet, the minister wrote, “Dear students, I know all of you at the time of #Lockdown21, must be missing your friends while sitting at your homes. No one can take the place of friends, but you can befriend books while sitting in your homes.” [10]

   

But the question is where are the books available for everyone to read them freely and utilize this time?  This pandemic has only accelerated our need to think of a copyright law that is more cognizant of digitization and is more anticipative of extraordinary situations. The move to online education shows the dire need for planning within the Indian copyright law framework for a situation that is here to stay at least for the immediate future so that education can be provided without any other major hurdles.  

Where the mind is without fear and the head is held high Where knowledge is free.-

Rabindranath Tagore

---

[1] 1[14. Meaning of copyright.—For the purposes of this Act, “copyright” means the exclusive right subject to the provisions of this Act, to do or authorise the doing of any of the following acts in respect of a work or any substantial part thereof, namely:—

(a) in the case of a literary, dramatic or musical work, not being a computer programme,—

(i) to reproduce the work in any material form including the storing of it in any medium by electronic means;

(ii) to issue copies of the work to the public not being copies already in circulation;

(iii) to perform the work in public, or communicate it to the public;

(iv) to make any cinematograph film or sound recording in respect of the work;

(v) to make any translation of the work;

(vi) to make any adaptation of the work;

 to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in sub-clauses (i) to (vi);

(b) in the case of a computer programme,—

(i) to do any of the acts specified in clause (a); 2[(ii) to sell or give on commercial rental or offer for sale or for commercial rental any copy of the computer programme: 2[(ii) to sell or give on commercial rental or offer for sale or for commercial rental any copy of the computer programme\:" Provided that such commercial rental does not apply in respect of computer programmes where the programme itself is not the essential object of the rental.]

(c) in the case of an artistic work,—

 to reproduce the work in any material form including depiction in three dimensions of a two dimensional work or in two dimensions of a three dimensional work;  

(ii) to communicate the work to the public;

(iii) to issue copies of the work to the public not being copies already in circulation;

(iv) to include the work in any cinematograph film;

(v) to make any adaptation of the work;

(vi) to do in relation to an adaptation of the work any of the acts specified in relation to the work in sub-clauses (i) to (iv);

(d) in the case of a cinematograph film,—

(i) to make a copy of the film including a photograph of any image forming part thereof;

(ii) to sell or give on hire or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions;

(iii) to communicate the film to the public;

(e) in the case of a sound recording,—

(i) to make any other sound recording embodying it;

(ii) to sell or give on hire, or offer for sale or hire, any copy of the sound recording, regardless of whether such copy has been sold or given on hire on earlier occasions;

(iii) to communicate the sound recording to the public. Explanation.— For the purposes of this section, a copy which has been sold once shall be deemed to be a copy already in circulation.]

[2] 51. When copyright infringed.—Copyright in a work shall be deemed to be infringed—

(a) when any person, without a licence granted by the owner of the copyright or the Registrar of Copyrights under this Act or in contravention of the conditions of a licence so granted or of any condition imposed by a competent authority under this Act—

(i) does anything, the exclusive right to do which is by this Act conferred upon the owner of the copyright, or 1[(ii) permits for profit any place to be used for the communication of the work to the public where such communication constitutes an infringement of the copyright in the work, unless he was not aware and had no reasonable ground for believing that such communication to the public would be an infringement of copyright; or] 1[(ii) permits for profit any place to be used for the communication of the work to the public where such communication constitutes an infringement of the copyright in the work, unless he was not aware and had no reasonable ground for believing that such communication to the public would be an infringement of copyright; or]"

(b) when any person—

(i) makes for sale or hire, or sells or lets for hire, or by way of trade displays or offers for sale or hire, or

(ii) distributes either for the purpose of trade or to such an extent as to affect prejudicially the owner of the copyright, or

(iii) by way of trade exhibits in public, or

(iv) imports 2[***] into India, 2[***] into India," any infringing copies of the work: 3[Provided that nothing in sub-clause (iv) shall apply to the import of one copy of any work, for the private and domestic use of the importer.] Explanation.—For the purposes of this section, the reproduction of a literary, dramatic, musical or artistic work in the form of a cinematograph film shall be deemed to be an “infringing copy”.

[3] AIR 1981 SC 746

[4]  SK DUTT v. LAW BOOK CO. & Ors. AIR 1954 ALL 750

[5] (1972) 1 All ER 1023 p. 1027.

[6] (2d Cir. 2015/10/16

[7] (2016) 160 DRJ (SN) 678.

[8]  http://tacomacc.libguides.com/c.php?g=373181&p=2524120

[9] https://www.researchgate.net/publication/298669285_Copying_by_libraries_in_the_United_States_Reviewing_section_108_of_the_US_copyright_laws;

[10] https://www.hindustantimes.com/education/hrd-minister-ramesh-pokhriyal-urges-students-to-read-books-during-lockdown/story-k6lcL4Bb43GaI96Hn1S3YO.html

IF A GOOD WRITER LIVES INSIDE YOU, THEN MAIL YOUR BIO, PICTURE WITH YOUR BLOG.... WE WILL SHORTLY PUBLISH IT

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AUTHOR: JASLEEN KAUR

 Currently in the Final Year of 3 Year LLB in Law Centre-2, Faculty of Law, University of Delhi

B.Com (DU), Company Secretary (CS) Aspirant,

Technical Content  Writer for the portal Cscartindia.com which caters to Company Secretary Students

.AUTHOR: GURKARAN SINGH

From a CA aspirant, to pursuing bcom hnrs,from someone working at Pwc to someone pursuing law from Faculty of Law Delhi University, life has been a roller coaster ride for Gurkaran Singh. Presently he is pursuing Law from Law centre 2 Delhi University. He has authored a policy document for ministry of law and justice. He has also worked as a research assistant on a book on mediation

Disclaimer: 

No reader should act on the basis of any statement contained herein without seeking professional advice. The results & the interpretation has been done on the basis of my understanding of the Act & Rules, where applicable and with reference to the general articles and analysis. The author explicitly disclaims any financial or other liability of any kind arising on account of any action taken pursuant to the results or interpretation of this document. With respect to information available herein before, the author doesn’t make any warranty, express/implied or assume any liability or responsibility for the accuracy, completeness, or usefulness of such information.

For any help/assistance write us on abizchancellor@gmail.com