Insolvency and Bankruptcy Code, a unified code came into force in 2016. The Insolvency and bankruptcy law is a form of social legislation encompassing all companies, partnership and individuals. It aims at proving relief to all of them. It undertakes to maximize the value of the assets of the debtors and also tries to balance interest of all the shareholders. The Code guarantees to achieve far-reaching reforms with a push on creditor driven insolvency resolution. It aims at prior identification of financial failure and increasing the asset value of insolvent firms/companies. It is a statutory procedure caused by insolvency through which a person is relieved of most of its debts and undergoes judiciary supervision or liquidator for the benefit of that person’s creditor.
PERSONS WHO MAY INITIATE CORPORATE INSOLVENCY RESOLUTION PROCESS:
The following person could initiate the Recovery Process on the admission of a default by the Corporate Person: (i) Financial Creditor & (ii) Operational Creditor. A Financial Creditor is a person to whom a financial debt is owed. An Operational Creditor is a person to whom an operational debt is owed.
“Operational Debt” means a claim in respect of the provision of Goods or Services, Employment or A debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority.
PROCESS OF INITIATION OF CORPORATE INSOLVENCY RESOLUTION PROCESS:
An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in terms of section 8 of the Insolvency & Bankruptcy Code, 2016.
The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor (a) existence of a dispute, if any, and record of the pendency of the suit or Arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute; (b) the repayment of unpaid operational debt—by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or by sending an attested copy of record that the operational creditor has enchased a cheque issued by the corporate debtor.
After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the NCLT for initiating a corporate insolvency resolution process, in terms of section 9 of Insolvency & Bankruptcy Code 2016.
An operational creditor initiating a corporate insolvency resolution process under this section may propose a resolution professional to act as an interim resolution professional.
The Adjudicating Authority (NCLT) shall, within fourteen days of the receipt of the application under sub-section (2), by an order –
- admit the application and communicate such decision to the operational creditor and the corporate debtor if,
- the application made under sub-section (2) is complete;
- there is no repayment of the unpaid operational debt
- the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;
- no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and
- there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any.
- reject the application and communicate such decision to the operational creditor and the corporate debtor, if
- the application made under sub-section (2) is incomplete;
- there has been repayment of the unpaid operational debt;
- the creditor has not delivered the invoice or notice for payment to the corporate debtor;
- notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or
- any disciplinary proceeding is pending against any proposed resolution professional:
The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under Insolvency and Bankcrupcy Code, 2016:-
- a corporate debtor undergoing a corporate insolvency resolution process;
- a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application;
- a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter;
- a corporate debtor in respect of whom a liquidation order has been made.
TIME DURATION TO COMPLETE INSOLVENCY PROCESS:
As per the mandate of section 12 of IBC, the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such process.
The resolution professional may file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of seventy-five per cent. of the voting shares. On receipt of an application if the Adjudicating Authority is satisfied that the subject matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days.
The Adjudicating Authority or NCLT after admission of the application under section 7 or section 9 or section 10, shall, by an order –
- declare a moratorium for the purposes referred to in section 14;
- cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under section 15; and
- appoint an interim resolution professional in the manner as laid down in section 16 of IBC.
The public announcement referred to in clause (b) of sub-section (1) is made immediately after the appointment of the interim resolution professional.
We have a very efficient team who use to practice Insolvency and Bankruptcy law before NCLT and Insolvency and Bankruptcy board of India. We assist to our client at every stage of the procedure, beginning from sending notice under section 8 of the IBC, filing application under section 9 before NCLT seeking initiation of corporate insolvency process