Bankruptcy Law / Insolvency Law
Bankruptcy refers to a legal position where a Company, Individual, or a Partnership Firm is unable to repay their outstanding debts to the Creditors. Once a Company, Partnership Firm or an Individual is in such a situation, wherein he is unable to pay his dues and/or his liabilities have multiplied much more than his assets; an Insolvency Proceedings are Initiated. Failure to pay debts creates a sickness that needs to be rectified as early as possible for the proper future working of a company and for the rights of such those who provide debt.
The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on 5 May 2016 and by Rajya Sabha on 11 May 2016.[1] The Code received the assent of the President of India on 28 May 2016.[2] Certain provisions of the Act have come into force from 5 August and 19 August 2016.[3] The bankruptcy code is a one stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement. The code aims to protect the interests of small investors and make the process of doing business less cumbersome.
Process under Insolvency and Bankruptcy Code, 2016 ( IBC 2016): Under the IBC, 2016, the resolution process can be initiated by any financial or operational creditor, as well as the Debtor itself. The Debtor while filing an application has to file the consent of the Board of Directors. There are two processes provided under this code which are Corporate Insolvency Resolution Process and Liquidation. In CIRP, the Creditors are required to assess the worthiness of the business as to whether a business can be revived or not. When the resolution process fails, then the creditors decide on selling the assets of the company to recover their share of dues. The value of default should be more than 1Lakh rupees.
Insolvency Resolution Process: Financial Creditors: When there is a default in payment of dues by the Corporate Debtor, the Financial Creditors can initiate a Corporate Insolvency Resolution Process u/s 7 of IBC. The initiation can be by a way of filling of an application by the Financial Creditor itself or jointly with other Financial Creditors. It shall be the duty of the Financial Creditor that along with the application to submit a record of the default recorded with the information utility or such other record or evidence of default and the name of the resolution professional proposed to act as an interim resolution professional.
The Adjudicating Authority shall, within 14 days of the receipt of the application ascertain the existence of a default from the records of an IU or based on other evidence furnished by the financial creditor. On satisfaction of the NCLT that the default has occurred, it shall admit the application and the CIRP shall commence of such admission. On admission when an IRP is appointed he takes over the place of the management and the Directors are suspended. The IP has to administer the business of the Corporate Debtor and come to a solution of reviving it. The IP is immune from any criminal proceedings for any acts done in good faith for the benefit of such.
Operational Creditors (OC): On the occurrence of a default, OC may deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved in the default to the corporate debtor. It shall be the duty of the Corporate Debtor that within 10 days of such demand notice to inform the OC about any pending dispute, litigation, arbitration proceedings in regards to such dispute.13 After 10 days if the OC does not receive the amount pending, then he can file Application for CIR process before the NCLT.
Moratorium: After the admission of an application for CIRP a moratorium shall be declared by the Adjudicating Authority. During this process, no judicial proceedings can be initiated against the debtor. During this period no transfer of Assets can be made and recovery can be claimed from the debtor. The moratorium shall continue till completion of CIRP.
COC: It shall be the duty of the IP to identify the Creditors and form a committee of them known as ‘Committee of Creditors or COC’. The Financial creditors are part of this COC. OC who have a claim beyond the threshold shall be allowed to take part in the meetings with no voting rights. The COC has to consider the proposal/ Plan of the revival of debtors business and if not feasible then move to the liquidation of Assets within 180 days +90 days. The decision of revival requires a 66% majority vote.
Liquidation: If 66% of the Creditors do not approve the plan, or if, there is no adherence to the provision of IBC, if the resolution is disregarded by the debtor then the liquidation is ordered. The IP may be appointed as an official liquidator. His duty shall be to verify, admit the claims of the creditors, and distribute the recovery for payment of a debt.
Key: NCL Lawyers in Delhi, Bankruptcy Law Firms in Delhi, Lawyers for nclt in Delhi, Insolvency Cases Lawyers in NCL in Delhi.