Insolvency and Bankruptcy Code, 2016, is an amalgamation of various codes and hence, provides single window clearance system of different earlier codes.
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.
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.
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.
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.
There are certain prescribed documents that are to be furnished along with the application form.
The list of documents that are to be submitted with the application form-
Along with the appointment of resolution professional, NCLT shall make public announcement to attract submission of claims by creditors.
The Moratorium may be granted by NCLT under the provisions of Section 14 of IBC up to 180 days and all recovery proceedings against the corporate debtor shall be stayed.
The appointed insolvency professional shall form a creditors committee as per the rules under Section 21 (2) of the Code. Any resolution plan shall be viable only if 75% creditors approve of it.
A corporate debtor may face liquidity if
Once the liquidation order is passed a moratorium shall be imposed on the corporate debtor and its assets.
There is a ‘waterfall mechanism’ as to the priority of claimants specified by the Code, and the debt shall be returned accordingly
The provisions of the Code applies in all cases of minimum default amount of Rs 1000 and above.
The Code specifies two procedures for insolvency:
According to Section 3 (11) of IBC, debt refers to any amount or obligation which is due from anyone; it includes financial as well as operational debt.
If the employees or workmen have their past payments as due, they fall under the category of Operational Creditor.
An Interim Resolution Professional is an insolvency professional who has been proposed in the application by the resolution applicant. He is appointed by the Adjudicating authority to manage the corporate till a Resolution Professional is appointed by the Committee of Creditors.
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