Insolvency and Bankruptcy Code, 2016, is an amalgamation of various codes and hence, provides single window clearance system of different earlier codes.
- The Code is uniform and extends all over India and is applicable on:
- Any company incorporated under the Companies Act, 2013, or any previous Act.
- Any company covered under any special Act.
- LLPs incorporated under Limited Liability Partnership Act, 2008.
- Partnership Firms, registered or not, under Partnership Act, 1932.
- Any individual.
The Insolvency Resolution Process (IRP) of Partnership Firms and Individuals is adjudicated by the Debt Recovery Tribunals (DRTs). Any entity or person discontent by DRT’s order may appeal to Debt Recovery Appellate Tribunal (DRAT).
Corporates and LLPs can appeal to National Company Law Tribunal (NCLT) which has jurisdiction over Corporate Insolvency Resolution Process (CIRP). If aggrieved over NCLT order, such companies can approach National Company Law Appellate Tribunal (NCLAT) within 30 days of the order.
An appeal against the Appellate Tribunals may be filed before the Supreme Court of India.
Insolvency Resolution Process (IRP) For Corporates
According to the Code, the insolvency process may be initiated by either the creditor or the debtor.
Those entities which provide credit facilities, extend loan or financial assistance fall into this category.
- Financial Creditor can himself or jointly with other creditors, file in NCLT against the corporate debtor and initiate insolvency.
- While filing the application, the proof of default and the suggested name of the insolvency professional shall be submitted.
Corporates IRP can be initiated by-
- A financial creditor (individually or jointly) under Section 7 of IBC, 2016
- An operational creditor under Section 9 of the IBC, 2016
- The corporate debtor itself under Section 10 of the IBC, 2016.
NCLT shall take up the application within 14 days of filing it. It may reject the application if it finds that there has been no default by the corporate debtor or if any pending issues are there regarding the proposed resolution professional.
- A Notice shall be served by the operational creditor to the corporate debtor, granting him 10 days and requesting to pay the dues.
- If the result is not positive, nor does the corporate debtor intimate about any ongoing arbitration or dispute, then the operational creditor can file the application and initiate IRP.
Under the provisions of the Code, even a corporate debtor, who has defaulted on payment of dues, can file the application of Insolvency Resolution Process.
- They need to submit Books of Accounts and other relevant financial documents.
- Section 10 (3) (b) of the Code mandates that the corporate debtor shall also file the name of proposed resolution professional, with the application.
For Financial Creditor
There are certain prescribed documents that are to be furnished along with the application form.
- A record , a document as an evidence of default
- The name of the resolution professional who shall act as interim resolution professional.
- All other information as may be specified by the board.
For Operational Creditor
The list of documents that are to be submitted with the application form-
- A demand notice served by the operational creditor to the corporate debtor
- An affidavit specifying that the corporate debtor has given no notice regarding a dispute about the outstanding operational debt.
- If available, a certified copy from the financial institutions maintaining accounts of the operational creditor ascertaining the fact that there has been no payment of the unpaid operational debt by the corporate debtor.
- If available, a copy of report that confirms the information of non payment of the unpaid operational debt.
.Any other proof that confirms the non payment of the unpaid operational debt by the corporate debtor.
For Corporate Debtor
- The information regarding the name of the resolution professional that shall act as the interim resolution professional.
- Presenting its Books of account and all other documents for the specified period and as mandated by the Board.
- Proof of the special resolution given by the shareholders of the corporate debtor or the adoption of the special resolution by at least three-fourths of the total number of partners of the corporate debtor.