ASSIGNMENT ON FRESH START PROCESS

ASSIGNMENT SUBMITTED IN FULFILLMENT OF THE

REQUIREMENTS OF
ASSIGNMENT FOR INSOLVENCY AND BANKRUPTCY CODE, 2016
FOR THE DEGREE OF
S.Y.LL.B
(THROUGH THE UNIVERSITY OF MUMBAI)

_______________
SUBMITTED BY
MS. KRUTI SHAH
(ROLL NO. 2122248)
_______________

SUBJECT TEACHER:
PROF. DIPAK CHATTERJEE SIR

LALA LAJPATRAI COLLEGE OF LAW (LLC)

MUMBAI
APRIL 2022

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |1

 INDEX

Sr. No TOPIC PAGE

NO.
1. INTRODUCTION 3

2. HISTORICAL BACKGROUND 5

3. NEED FOR A NEW LAW 7

4. KEY OBJECTIVES OF THE CODE 9

5. SALIENT FEATURES OF THE CODE 11

6. FRESH START PROCESS 15

7. APPLICATION FOR FRESH START ORDER 16

8. APPOINTMENT OF RESOLUTION PROFESSIONAL AND EXAMINATION 17

OF APPLICATION BY RESOLUTION PROFESSIONAL
9. ADMISSION OR REJECTION OF APPLICATION BY ADJUDICATING 19
AUTHORITY AND EFFECT OF ADMISSION OF APPLICATION
10. OBJECTIONS BY CREDITOR AND THEIR EXAMINATION BY RESOLUTION 20
PROFESSIONAL
11. APPLICATION AGAINST DECISION OF RESOLUTION PROFESSIONAL 21
AND GENERAL DUTIES OF DEBTOR
12. REPLACEMENT OF RESOLUTION PROFESSIONAL 22

13. DIRECTIONS FOR COMPLIANCES OF RESTRICTIONS AND REVOCATION 23

OF ORDER ADMITTING APPLICATION
14. DISCHARGE ORDER AND STANDARD OF CONDUCT 24

15. CONCLUSION 25

16. BIBLIOGRAPHY 26

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |2

 INTROUDUCTION

 The Insolvency and Bankruptcy Code, 2016 (IBC) is an Indian law which creates a consolidated
framework that governs insolvency and bankruptcy proceedings for companies, parnership firms,
and individuals.

 Prior to the IBC, the legislative framework for insolvency and restructuring was fragmented across
multiple legislations, such as the Companies Act 2013, the Sick Industrial Companies (Special
Provisions) Act, 1985, Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002, the Recovery of Debts due to Banks and Financial Institutions Act
(RDDBFI Act), 1993, and others.

 After the introduction of the Insolvency and Bankruptcy Code, 2015 in the Lok Sabha on 21st
December 2015, it was referred to the Joint Committee. On such a referral the Committee had
presented its recommendations and a modified Bill based on its suggestions. In May 2016 both
the Houses of Parliament passed the Insolvency and Bankruptcy Code, 2016. The major objective
of this economic reforms is to focus on creditor drove insolvency resolution.

 In India, the Insolvency and Bankruptcy Code, 2016 is one matured step towards settling the legal
position with respect to financial failures and insolvency. To provide easy exit with a painless
mechanism in cases of insolvency of individuals as well as companies, the code has significant
value for all stakeholders including various Government Regulators.

 Before the enactment of this Code, there were multiple agencies dealing with the matters relating
to debt, defaults, and insolvency which generally leads to delays, complexities and higher costs in
the process of Insolvency resolution. The ‘Board for Industrial and Financial Reconstruction (BIFR)’,
one of the Insolvency Regulators, has been a phantasm for sick industrial companies. It is expected
that the Insolvency and Bankruptcy Code, 2016 will expedite the cases pending for a long time
and resolve them within 180 days with a further period of 90 days.

 The Code offers a uniform, comprehensive insolvency legislation encompassing all companies,
partnerships and individuals (other than financial firms). The Government is proposing a separate
framework for bankruptcy resolution in failing banks and financial sector entities.

 One of the fundamental features of the Code is that it allows creditors to assess the viability of a
debtor as a business decision, and agree upon a plan for its revival or a speedy liquidation. The
Code creates a new institutional framework, consisting of a regulator, insolvency professionals,
information utilities and adjudicatory mechanisms, that will facilitate a formal and time bound
insolvency resolution process and liquidation.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |3

 The words “Insolvency” and “Bankruptcy” are generally used interchangeably in common
parlance but there is a marked distinction between the two. Insolvency and bankruptcy are not
synonymous.

 The term “insolvency” denotes the state of one whose assets are insufficient to pay his debts; or
his general inability to pay his debts. The term “insolvency” is used in a restricted sense to express
the inability of a party to pay his debts as they become due in the ordinary course of business.

 The word “bankruptcy” denotes a legal status of a person or an entity who cannot repay debts to
creditors. The bankruptcy process begins with filing of a petition in a court or before an
appropriate authority designated for this purpose. The debtor’s assets are then evaluated and
used to pay the creditors in accordance with law.

 Insolvency is a state when an individual, corporation, or other organization cannot meet its
financial obligations for paying debts as they become due. Bankruptcy is not exactly the same as
insolvency. Technically, bankruptcy occurs when a court has determined insolvency, and given
legal orders for it to be resolved. Bankruptcy is a determination of insolvency made by a court of
law with resulting legal orders intended to resolve the insolvency.

 Insolvency describes a situation where the debtor is unable to meet his/her obligations.
Bankruptcy is a legal scheme in which an insolvent debtor seeks relief. In case of insolvency, one
cannot pay off the debts, whereas in the case of bankruptcy, a court order states as how an
insolvent person or business has to pay off their debts – by way of selling their assets or erasing
the debt that cannot be paid.

 Therefore, while insolvency is the inability of debtors to repay their debts, the bankruptcy, on the
other hand, is a formal declaration of insolvency in accordance with law of the land. Insolvency
describes a situation where the debtor is unable to meet his/her obligations and bankruptcy
occurs when a court determines insolvency, and gives legal orders for it to be resolved. Thus
insolvency is a state and bankruptcy is the conclusion.

 The term insolvency is used for individuals as well as organisations/corporates. If insolvency is not
resolved, it leads to bankruptcy in case of individuals and liquidation in case of corporates.

 The Code (IBC) was implemented through an act of Parliament. It got Presidential assent in May
2016. Centre introduced the IBC in 2016 to resolve claims involving insolvent companies.

 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. The IBC has
255 sections and 11 Schedules.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |4

 HISTORICAL BACKGROUND

 In India, there were multiple laws like Sick Industrial Companies (Special Provisions) Act, 1985
(SICA), the Recovery of Debt Due to Banks and Financial Institutions Act, 1993, the Securitization
and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)
and the Companies Act, 2013 dealing with insolvency and bankruptcy of companies, limited
liability partnerships, partnerships firms, individuals and other legal entities in India.

 As a result High Courts, District Courts, the Company Law Board, the Board for Industrial and
Financial Reconstruction (BIFR) and the Debt Recovery Tribunals (DRTs), have jurisdiction at
various stages, giving rise to the potential systemic delays and complexities in the process whereas
liquidation of companies is handled by the high courts, individual cases are dealt with under the
Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920. The present legal
framework does not aid lenders in effective and timely recovery of defaulted assets and causes
undue strain on the Indian credit system.

 In the wake of sickness in the country’s industrial climate prevailing in the eighties, the
Government of India set-up in 1981, a Committee of experts under the Chairmanship of Shri T.
Tiwari to examine the matter and recommend suitable remedies therefore. Based on the
recommendations of the Committee, the Government of India enacted a special legislation
namely, the Sick Industrial Companies (Special Provisions) Act, 1985 commonly known as the SICA.

 The main objective of SICA was to determine sickness and expedite the revival of potentially viable
units or closure of unviable units (unit herein refers to a Sick industrial Company). It was expected
that by revival, idle investments in sick units will become productive and by closure, the locked up
investments in unviable units would get released for productive use elsewhere.

 The Board of experts named as the Board for Industrial and Financial Reconstruction (BIFR) was
set up in January, 1987 and got functional with effect from 15th May 1987. The Appellate
Authority for Industrial and Financial Reconstruction (AAIFR) was constituted in April 1987.
Government companies were brought under the purview of SICA in 1991 when extensive changes
were made in the Act including, inter-alia, changes in the criteria for determining industrial
sickness.

 The major constraint of SICA was that it was applicable only to sick industrial companies keeping
away other companies which were in trading, service or other activities. The Act was modified in
1991 to include within its purview the Government companies by Industrial Companies (Special
Provisions) Amendment Act, 1991 which came into force w.e.f. 28.12.91.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |5

 However, the overall experience was not satisfactory because of various factors including non-
applicability of SICA to non-industrial companies and small/ancillary companies, misuse of
immunity provided under Section 22 of SICA, etc.

 In view of this, the Insolvency and Bankruptcy Code, 2016 was notified on the May 28, 2016. At
present, the SICA Act, 1985 is repealed and BIFR and AAIFR were dissolved. Moreover, the
company in respect of which such appeal or reference or inquiry stood abated in BIFR and AAIFR
could make reference to NCLT under the Insolvency and Bankruptcy Code, 2016.

 Before the enactment of the Insolvency and Bankruptcy Code, 2016, the provisions relating to
insolvency and bankruptcy were fragmented and there was no single law to deal with insolvency
and bankruptcy in India. The following Acts dealt with insolvency and bankruptcy in India:

 The Presidency Towns Insolvency Act, 1909

 Indian Partnership Act, 1932
 The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)
 The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities
Interest Act, 2002 (SARFAESI Act)
 Provisional Insolvency Act, 1920
 The Companies Act, 1956
 The Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDDBFI Act)
 The Companies Act, 2013

 At present, there are multiple overlapping laws and adjudicating forums dealing with financial
failure and insolvency of companies and individuals in India. The current legal and institutional
framework does not aid lenders in effective and timely recovery or restructuring of defaulted
assets and causes undue strain on the Indian credit system. Recognising that reforms in the
bankruptcy and insolvency regime are critical for improving the business environment and
alleviating distressed credit markets, the Government introduced the Insolvency and Bankruptcy
Code Bill in November 2015, drafted by a specially constituted 'Bankruptcy Law Reforms
Committee' (BLRC) under the Ministry of Finance.

 In November 2016, the highly anticipated Insolvency and Bankruptcy Code, 2016 (“IBC”) was
enacted by the Indian Parliament with the intention of bringing uniformity to India’s scattered
bankruptcy laws. The IBC is an all-encompassing law that deals with the bankruptcy of not only
corporations, but partnerships and individuals as well. To this effect, the IBC has also established
the Insolvency and Bankruptcy Board of India (“IBBI”) as the nodal agency to regulate all matters
relating to insolvency and bankruptcy with an intent to complete insolvency resolution process in
a fast and transparent manner.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |6

 NEED FOR A NEW LAW

 Before the enactment of the Insolvency and Bankruptcy Code, there was no single law in the
country to deal with insolvency and bankruptcy. There were multiple overlapping laws and
adjudicating forums dealing with financial failure and insolvency of companies and individuals in
India. The framework for insolvency and bankruptcy was inadequate, ineffective and resulted in
undue delays in resolution. The legal and institutional framework did not aid lenders in effective
and timely recovery or restructuring of defaulted assets and causes undue strain on the Indian
credit system.

 Prior to the enactment of the Insolvency and Bankruptcy Code, the provisions relating to
insolvency and bankruptcy for companies were made in the Sick Industrial Companies (Special
Provisions) Act, 1985, the Recovery of Debt due to Banks and Financial Institutions Act, 1993, the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 and the Companies Act, 2013.

 These statutes provided for creation of multiple for such a Board of Industrial and Financial
Reconstruction (BIFR), Debt Recovery Tribunal (DRT) and their respective Appellate Tribunals.
Liquidation of companies was handled by the High Courts. Individual bankruptcy and insolvency
was dealt with under the Presidency Towns Insolvency Act, 1909, and the Provincial Insolvency
Act, 1920.

 Before the enactment of this Code, there were multiple agencies dealing with the matters relating
to debt, defaults, and insolvency which generally leads to delays, complexities and higher costs in
the process of Insolvency resolution. The ‘Board for Industrial and Financial Reconstruction (BIFR)’,
one of the Insolvency Regulators, has been a phantasm for sick industrial companies. It is expected
that the Insolvency and Bankruptcy Code, 2016 will expedite the cases pending for a long time
and resolve them within 180 days with a further period of 90 days.

 The liquidation of companies was handled under various laws and different authorities such as
High Court, and Debt Recovery Tribunal had overlapping jurisdiction which was adversely affecting
the debt recovery process.

 The objective of the Insolvency and Bankruptcy Code is to consolidate and amend the laws relating
to reorganization and insolvency resolution of corporate persons, partnership firms and
individuals in a time bound manner.

 An effective legal framework for timely resolution of insolvency and bankruptcy will not only
encourage entrepreneurship but will also improve ease of doing business, and facilitate more
investments leading to higher economic growth and development.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |7

 The Insolvency and Bankruptcy Code, 2016 extends to the whole of India. Section 1 of the Code
provides that the Central Government may appoint different dates for different provisions of this
Code and any reference in any such provision to the commencement of this Code shall be
construed as a reference to the commencement of that provision.

 The Insolvency and Bankruptcy Code Bill was drafted by a specially constituted “Bankruptcy Law
Reform Committee” (BLRC) under the Ministry of Finance. The Insolvency and Bankruptcy Code
was introduced in the Lok Sabha on 21 December 2015 and was subsequently referred to a Joint
Committee of Parliament. The Committee submitted its recommendations and the modified Code
was passed by Lok Sabha on 5 May 2016. The Code was passed by Rajya Sabha on 11 May 2016
and it received the Presidential assent on 28 May 2016.

 The Insolvency and Bankruptcy Code, 2016 consolidates the existing framework by creating a
single law for insolvency and bankruptcy. The Code applies to companies, partnerships, limited
liability partnerships, individuals and any other body which the central government may specify.

 Section 2 of the Insolvency and Bankruptcy Code, 2016 as amended vide the Insolvency and
Bankruptcy Code (Amendment) Act, 2018 provides that the provisions of the Code shall apply to
–
 any company incorporated under the Companies act, 2013 or under any previous company
law,
 any other company governed by any special act for the time being in force,
 any Limited Liability Partnership incorporated under the Limited Liability Partnership Act,
2008,
 personal guarantors to corporate debtors,
 such other body incorporated under any law for the time being in force, as the
 Central Government may, by notification, specify in this behalf,
 partnership firms and proprietorship firms; and
 individuals, other than persons referred to in clause (e)

 The Insolvency and Bankruptcy Code, 2016 is one of the biggest economic reforms which provides
a uniform and comprehensive insolvency legislation covering corporates, partnerships and
individuals (other than financial firms). The Code gives both the creditors and debtors the power
to initiate proceeding. It has helped India achieve a historic jump in the ease of doing business
rankings by consolidating the law and providing for resolution of insolvencies in a time-bound
manner.

 The vision of law (as given in the press release of the Government of India) is to encourage
entrepreneurship and innovation. Some business ventures will always fail, but they will be
handled rapidly and swiftly. Entrepreneurs and lenders will be able to move on instead of being
bogged down with decisions taken in the past.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |8

 KEY OBJECTIVES OF THE CODE

OBJECT OF INSOLVENCY AND BANKRUPTCY LAW:

The law of insolvency is a social legislation which has been enacted to provide relief to the honest
debtors who due to any unfortunate or unforeseen circumstances become incapable of paying back
their debts. Its object is also of securing distribution of a debtor’s estate among his creditors equitably
and thereafter to release him under certain conditions from liability in respect of his debts and
obligations.

A sound legal framework of bankruptcy law is required for achieving the following objectives:-

a) Improved handling of conflicts between creditors and the debtor

It can provide procedural certainty about the process of negotiation, in such a way as to reduce
problems of common property and reduce information asymmetry for all economic participants.

b) Set a limit between malfeasance and business failure

It can also provide flexibility for parties to arrive at the most efficient solution to maximize value
during negotiations. The bankruptcy law will create a platform for negotiation between creditors
and external financiers which can create the possibility of such rearrangements.

c) Macroeconomic downturns losses to be allocated

An infirm insolvency regime leads to the stereotype of “rich promoters of defaulting entities”
generating theories such as:

 misconduct is the reason for all the defaults made;

 ultimately it is the promoters who should personally and financially be held responsible for
defaults of the firms which are under their control.

Clear allocation of these losses is a result of a well-defined bankruptcy framework. Taxes, inflation,
currency depreciation, expropriation, or wage or consumption suppression are the common
practices of loss allocation. These could affect foreign creditors, small business owners, savers,
workers, owners of financial and non-financial assets, importers, exporters.

The sole intention of the Insolvency and Bankruptcy Code, 2016 is to provide a justified balance
between:

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 Page |9

 an interest of all the stakeholders of the company, so that they enjoy the availability of credit;
 the loss that a creditor might have to bear on account of default.

The objective behind Insolvency and Bankruptcy Code, 2016 are listed below:

a. To consolidate and amend the laws relating to re-organization and insolvency resolution of
corporate persons, partnership firms, and individuals.
b. To fix time periods for execution of the law in a time-bound settlement of insolvency (i.e. 180
days).

c. To maximize the value of assets of interested persons.

d. To promote entrepreneurship

e. To increase the availability of credit.

f. To balance all stakeholder’s interest (including alteration). Balance to be done in the order of
priority of payment of Government dues.

g. To establish an Insolvency and Bankruptcy Board of India as a regulatory body for insolvency
and bankruptcy law.

h. To establish higher levels of debt financing across a wide variety of debt instruments.

i. To provide painless revival mechanism for entities.

j. To deal with cross-border insolvency.

k. To resolve India’s bad debt problem by creating a database of defaulters.

The objective of the Insolvency and Bankruptcy Code is to consolidate and amend the laws relating to
reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time
bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability
of credit and balance the interests of all the stakeholders including alteration in the priority of payment of
government dues and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or
incidental thereto. An effective legal framework for timely resolution of insolvency and bankruptcy would
support development of credit markets and encourage entrepreneurship. It would also improve Ease of Doing
Business, and facilitate more investments leading to higher economic growth and development

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 10

 SALIENT FEATURES OF THE CODE

1) The Insolvency and Bankruptcy Code, 2016 offers a uniform, comprehensive insolvency
legislation covering all companies, partnerships and individuals. Financial service providers are
not included in the ambit of the insolvency and Bankruptcy Code, 2016.

2) To ensure a formal and time bound insolvency resolution process, the Code creates a new
institutional framework consisting of the Insolvency and Bankruptcy Board of India (IBBI),
Adjudicating Authorities (AAs), Insolvency Professionals (IPs), Insolvency Professional Agencies
(IPAs) and Information Utilities (IUs).

3) The Code provides for Insolvency Professionals (IPs), a class of regulated but private
professionals having minimum standards of professional and ethical conduct, to act as
intermediary in the insolvency resolution process. Insolvency Professional agencies are
designated to regulate insolvency Professionals.

4) These agencies enroll insolvency Professionals, provide pre-registration educational course to

its enrolled members and enforce a code of conduct for their functioning. They also issue
‘authorization for assignment’ to the IPs enrolled with them. Following are the designated
Insolvency Professional Agencies (IPAs) established under the Code:

• The Indian Institute of Insolvency Professionals of ICAI,

• ICSI Institute of Insolvency Professionals and
• Insolvency Professional Agency of Institute of Cost Accountants of India

5) The Insolvency Professionals control the assets of the debtor during the insolvency resolution
process. The insolvency professional verifies the claims of the creditors, constitutes a committee
of creditors, runs the debtor’s business as a going concern during the moratorium period and
assists the creditors in finalising the revival plan. He also ensures that the debtor is in compliance
with all laws applicable to it during the revival process.

6) In liquidation, the insolvency professional acts as a liquidator and bankruptcy trustee. The
Insolvency and Bankruptcy Board of India has framed the IBBI (Insolvency Professional)
Regulations, 2016 to regulate the working of Insolvency Professionals. These regulations are
amended from time to time by the Insolvency and Bankruptcy Board of India.

7) While the insolvency professionals assist in the insolvency resolution proceedings envisaged in
the Code, the information utilities, on the other hand, collect, collate, authenticate and
disseminate financial information.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 11

8) The purpose of such collection, collation, authentication and dissemination of financial
information of debtors in centralised electronic databases is to facilitation swift decision making
in the resolution proceedings.

9) The Insolvency and Bankruptcy Board of India has framed the IBBI (Information Utilities)
Regulations, 2017. These regulations are amended from time to time by the Insolvency and
Bankruptcy Board of India.

10) The Code provides for the constitution of a new insolvency regulator i.e., the Insolvency and
Bankruptcy Board of India (IBBI). Its role includes overseeing the functioning of insolvency
intermediaries i.e., insolvency professionals, insolvency professional agencies and information
utilities as well as regulating the insolvency process.

11) The members of the Board include representatives from the central government as well as the
reserve Bank of India. The Board is empowered to frame and implement regulations to regulate
the profession as well as processes envisaged in the Code.

12) The Bankruptcy Board of India has also been designated as the ‘authority’ under the Companies
(Registered Valuers and Valuation Rules), 2017 for regulation and development of the
profession of valuers in the country.

13) The Code proposes two tribunals to adjudicate insolvency resolution cases. In the case of
insolvency of companies and Limited Liability Partnerships (LLPs), the Adjudication Authority is
the National Company Law Tribunal (NCLT), while the cases involving individuals and partnership
firms are handled by the Debts Recovery Tribunals (DRTs).

14) The insolvency proceeding will be initiated by NCLT or DRT, as the case may be, after verification
of the claims of the initiator. Appeals from NCLT orders lie to the National Company Law
Appellate Tribunal (NCLAT) and thereafter to the Supreme Court of India. For individuals and
other persons, the Adjudicating Authority is the DRT. Appeals from DRT orders lie to the Debt
Recovery Appellate Tribunal (DRAT) and thereafter to the Supreme Court.

15) To initiate an insolvency process for corporate debtors, the default should be at least INR
1,00,00,000. This limit was increased from INR 1,00,000 to INR 1,00,00,000 vide MCA
notification dated 24th March, 2020.

16) In resolution process for corporate persons, the Code proposes two independent stages:

 insolvency resolution Process, during which the creditors assess the viability of debtor’s
business and the options for its rescue and revival.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 12

  liquidation, in case the insolvency resolution process fails or financial creditors decide to
wind up and distribute the assets of the debtor.

17) The Code envisages two distinct processes in case of Insolvency Resolution Process (IRP) for
individuals/unlimited partnerships:

 Fresh Start Process

 Insolvency Resolution

18) The Code provides a Fresh Start Process for individuals under which they will be eligible for a
debt waiver of up to INR 35,000. The individual will be eligible for the waiver subject to certain
limits prescribed under the Code. Under the fresh start process, eligible debtors can apply to the
Debt Recovery Tribunal (DRT) for discharge from certain debts not exceeding a specified
threshold, allowing them to start afresh.

19) A financial creditor (for a defaulted financial debt) or an operational creditor (for an unpaid
operational debt) can initiate an Insolvency Resolution Process (IRP) against a corporate debtor.
The defaulting corporate debtor, its shareholders or employees, may also initiate voluntary
insolvency proceedings.

20) The National Company Law Tribunal (NCLT) is the designated adjudicating authority in case of
corporate debtors. In case of individuals and unlimited partnerships, the insolvency resolution
process consists of preparation of a repayment plan by the debtor.

21) If approved by creditors, the DRT passes an order binding the debtor and creditors to the
repayment plan. If the plan is rejected or fails, the debtor or creditors may apply for a bankruptcy
order.

22) The Code provides for a time bound insolvency resolution process for companies and
individuals, which is required to be completed within 180 days (subject to a one-time extension
by 90 days) and mandatorily be completed within 330 days from the insolvency commencement
date. If the resolution plan does not get finalized or is rejected by NCLT or DRT on technical
grounds, then assets of the debtor are sold to repay his outstanding dues.

23) The Code makes significant changes in the priority of claims for distribution of liquidation
proceeds. In case of liquidation, the assets will be distributed in the following order: (i) fees of
insolvency professional and costs related to the resolution process, (ii) workmen’s dues for the
preceding 24 months and secured creditors, (iii) employee wages, (iv) unsecured creditors, (v)
government dues and remaining secured creditors (any remaining debt if they enforce their
collateral), (vi) any remaining debt, and (vii) shareholders.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 13

24) The Code provides for the creation of Insolvency and Bankruptcy Fund. Section 224 of the Code
provides that the following amounts shall be credited to the fund:

 the grants made by the Central Government for the purposes of the Fund;
 the amount deposited by persons as contribution to the Fund;
 the amount received in the Fund from any other source; and
 the interest or other income received out of the investment made from the Fund.

Section 224(3) further provides that a person who has contributed any amount to the Fund may,
in the event of proceedings initiated in respect of such person under the Code before an
Adjudicating Authority, make an application to such Adjudicating Authority for withdrawal of
funds not exceeding the amount contributed by it, for making payments to workmen, protecting
the assets of such persons, meeting the incidental costs during the proceedings or such other
purposes as may be prescribed.

25) The Code specifies stringent penalties for certain offences such as concealing property in case
of corporate insolvency. The imprisonment in such cases may extend up to five years, or a fine
of up to one crore rupees, or both.

26) In case of cross-border insolvency proceedings, the central government may enter into bilateral
agreements and reciprocal arrangements with other countries to enforce provisions of the
Code.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 14

 FRESH START PROCESS

The fresh start process is enshrined under Chapter II of Part III of the Code. The fresh start process is
an opportunity to a debtor who is unable to pay his debts to clear off his debts in a time-bound manner
on fulfilling the prescribed conditions for the fresh start of his qualifying debts. The intent of fresh
start process is to provide debtors with comparatively small debts, a chance to discharge off their
debts and restart afresh without any liability. The fresh start process is an alternative to the insolvency
and bankruptcy processes. To prevent and curb the abuse of this debtor centric process, the Code has
aligned certain restrictions on the applicability and validity of fresh start process.

SECTION 80 ELIGIBILITY FOR MAKING AN APPLICATION:

1. Section 80 of the Insolvency and Bankruptcy Code, 2016 provides that a debtor who is unable to
pay his debt and fulfils the below mentioned conditions shall be entitled to make an application
for a fresh start process for discharge of his qualifying debt.

Qualifying Debt means amount due, which includes interest or any other sum due in respect of the
amounts owed under any contract, by the debtor for a liquidated sum either immediately or at certain
future time but does not include an excluded debt, a debt to the extent it is secured and any debt
which has been incurred three months prior to the date of the application for fresh start process.

Excluded debt means:

• liability to pay fine imposed by a Court or Tribunal;
• liability to pay damages for negligence, nuisance or breach of a statutory, contractual or other
legal obligation;
• liability to pay maintenance to any person under any law for the time being in force;
• liability in relation to a student loan; and
• any other debt as may be prescribed.

2. A debtor may apply, either personally or through a resolution professional, for a fresh start under this
Chapter in respect of his qualifying debts to the Adjudicating Authority if:

a) the gross annual income of the debtor does not exceed sixty thousand rupees;
b) the aggregate value of the assets of the debtor does not exceed twenty thousand rupees;
c) the aggregate value of the qualifying debts does not exceed thirty-five thousand rupees;
d) he is not an undischarged bankrupt;
e) he does not own a dwelling unit, irrespective of whether it is encumbered or not;
f) a fresh start process, insolvency resolution process or bankruptcy process is not subsisting
against him; and
g) no previous fresh start order under this Chapter has been made in relation to him in the
preceding twelve months of the date of the application for fresh start.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 15

 APPLICATION FOR FRESH START ORDER

SECTION 81 FILING OF APPLICATIONS FOR FRESH START PROCESS AND ITS EFFECT
THEREOF:

1) When an application is filed under section 80 by a debtor, an interim-moratorium shall commence

on the date of filing of said application in relation to all the debts and shall cease to have effect
on the date of admission or rejection of such application, as the case may be.

2) During the interim-moratorium period,—

i. any legal action or legal proceeding pending in respect of any of his debts shall be deemed
to have been stayed; and
ii. no creditor shall initiate any legal action or proceedings in respect of such debt.

3) The application under section 80 shall be in such form and manner and accompanied by such fee,
as may be prescribed.

4) The application under sub-section (3) shall contain the following information supported by an
affidavit, namely:—

a) a list of all debts owed by the debtor as on the date of the said application along with details
relating to the amount of each debt, interest payable thereon and the names of the creditors
to whom each debt is owed;

b) the interest payable on the debts and the rate thereof stipulated in the contract;

c) a list of security held in respect of any of the debts;

d) the financial information of the debtor and his immediate family up to two years prior to the
date of the application;

e) the particulars of the debtor's personal details, as may be prescribed;

f) the reasons for making the application;

g) the particulars of any legal proceedings which, to the debtor's knowledge has been
commenced against him;

h) the confirmation that no previous fresh start order under this Chapter has been made in
respect of the qualifying debts of the debtor in the preceding twelve months of the date of
the application.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 16

 APPOINTMENT OF RESOLUTION PROFESSIONAL AND EXAMINATION
OF APPLICATION BY RESOLUTION PROFESSIONAL

SECTION 82 APPOINTMENT OF RESOLUTION PROFESSIONAL:

1) Where an application under section 80 is filed by the debtor through a resolution professional,
the Adjudicating Authority shall direct the Board within seven days of the date of receipt of the
application and shall seek confirmation from the Board that there are no disciplinary proceedings
against the resolution professional who has submitted such application.

2) The Board shall communicate to the Adjudicating Authority in writing either—

a) confirmation of the appointment of the resolution professional who filed an application under
sub-section (1); or

b) rejection of the appointment of the resolution professional who filed an application under
sub-section (1) and nominate a resolution professional suitable for the fresh start process.

3) Where an application under section 80 is filed by the debtor himself and not through the
resolution professional, the Adjudicating Authority shall direct the Board within seven days of the
date of the receipt of an application to nominate a resolution professional for the fresh start
process.

4) The Board shall nominate a resolution professional within ten days of receiving the direction
issued by the Adjudicating Authority under sub-section (3).

5) The Adjudicating Authority shall by order appoint the resolution professional recommended or
nominated by the Board under sub-section (2) or sub-section (4), as the case may be.

6) A resolution professional appointed by the Adjudicating Authority under sub-section (5) shall be
provided a copy of the application for fresh start.

SECTION 83 EXAMINATION OF APPLICATION BY RESOLUTION PROFESSIONAL:

1. The resolution professional shall examine the application made under section 80 within ten days
of his appointment, and submit a report to the Adjudicating Authority, either recommending
acceptance or rejection of the application.

2. The report referred to in sub-section (1) shall contain the details of the amounts mentioned in the
application which in the opinion of the resolution professional are—

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 17

 a) qualifying debts; and
b) Liabilities eligible for discharge under sub-section (3) of section 92.

3. The resolution professional may call for such further information or explanation in connection
with the application as may be required from the debtor or any other person who, in the opinion
of the resolution professional, may provide such information.

4. The debtor or any other person, as the case may be, shall furnish such information or explanation
within seven days of receipt of the request under sub-section (3).

5. The resolution professional shall presume that the debtor is unable to pay his debts at the date of
the application if—

 in his opinion the information supplied in the application indicates that the debtor is unable
to pay his debts and he has no reason to believe that the information supplied is incorrect or
incomplete; and

 he has reason to believe that there is no change in the financial circumstances of the debtor
since the date of the application enabling the debtor to pay his debts.

6. The resolution professional shall reject the application, if in his opinion—

a) the debtor does not satisfy the conditions specified under section 80; or

b) the debts disclosed in the application by the debtor are not qualifying debts; or

c) the debtor has deliberately made a false representation or omission in the application or
with respect to the documents or information submitted.

7. The resolution professional shall record the reasons for recommending the acceptance or
rejection of the application in the report to the Adjudicating Authority under sub-section (1) and
shall give a copy of the report to the debtor.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 18

ADMISSION OR REJECTION OF APPLICATION BY ADJUDICATING AUTHORITY
AND EFFECT OF ADMISSION OF APPLICATION

SECTION 84 ADMISSION OR REJECTION OF APPLICATION BY ADJUDICATING

AUTHORITY:

1. The Adjudicating Authority may within fourteen days from the date of submission of the report
by the resolution professional, pass an order either admitting or rejecting the application made
under sub-section (1) of section 81.

2. The order passed under sub-section (1) accepting the application shall state the amount which
has been accepted as qualifying debts by the resolution professional and other amounts eligible
for discharge under section 92 for the purposes of the fresh start order.

3. A copy of the order passed by the Adjudicating Authority under sub-section (1) along with a copy
of the application shall be provided to the creditors mentioned in the application within seven
days of the passing of the order.

SECTION 85 EFFECT OF ADMISSION OF APPLICATION:

(1) On the date of admission of the application, the moratorium period shall commence in respect of
all the debts.

(2) During the moratorium period—

a) any pending legal action or legal proceeding in respect of any debt shall be deemed to have
been stayed; and

b) subject to the provisions of section 86, the creditors shall not initiate any legal action or
proceedings in respect of any debt.

(3) During the moratorium period, the debtor shall—

a) not act as a director of any company, or directly or indirectly take part in or be concerned in
the promotion, formation or management of a company;
b) not dispose of or alienate any of his assets;
c) inform his business partners that he is undergoing a fresh start process;
d) be required to inform prior to entering into any financial or commercial transaction of such
value as may be notified by the Central Government, either individually or jointly, that he is
undergoing a fresh start process;

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 19

 e) disclose the name under which he enters into business transactions, if it is different from
the name in the application admitted under section 84;
f) not travel outside India except with the permission of the Adjudicating Authority.

(4) The moratorium ceases to have effect at the end of the period of one hundred and eighty days
beginning with the date of admission unless the order admitting the application is revoked under
sub-section (2) of section 91.

SECTION 86 OBJECTIONS BY CREDITOR AND THEIR EXAMINATION BY RESOLUTION

PROFESSIONAL:

1) Any creditor mentioned in the order of the Adjudicating Authority under section 84 to whom a
qualifying debt is owed may, within a period of ten days from the date of receipt of the order
under section 84, object only on the following grounds, namely:—

a) inclusion of a debt as a qualifying debt; or

b) incorrectness of the details of the qualifying debt specified in the order under section 84.

2) A creditor may file an objection under sub-section (1) by way of an application to the resolution
professional.

3) The application under sub-section (2) shall be supported by such information and documents as
may be prescribed.

4) The resolution professional shall consider every objection made under this section.

5) The resolution professional shall examine the objections under sub-section (2) and either accept
or reject the objections, within ten days of the date of the application.

6) The resolution professional may examine any matter that appears to him to be relevant to the
making of a final list of qualifying debts for the purposes of section 92.

7) On the basis of the examination under sub-section (5) or sub-section (6), the resolution
professional shall—

a) prepare an amended list of qualifying debts for the purpose of the discharge order;

b) make an application to the Adjudicating Authority for directions under section 90; or

c) take such other steps as he considers necessary in relation to the debtor.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 20

 APPLICATION AGAINST DECISION OF RESOLUTION PROFESSIONAL AND
GENERAL DUTIES OF DEBTOR

SECTION 87 APPLICATION AGAINST DECISION OF RESOLUTION PROFESSIONAL

1) The debtor or the creditor who is aggrieved by the action taken by the resolution professional
under section 86 may, within ten days of such decision, make an application to the Adjudicating
Authority challenging such action on any of the following grounds, namely:—

a) that the resolution professional has not given an opportunity to the debtor or the creditor to
make a representation; or

b) that the resolution professional colluded with the other party in arriving at the decision; or

c) that the resolution professional has not complied with the requirements of section 86.

2) The Adjudicating Authority shall decide the application referred to in sub-section (1) within
fourteen days of such application, and make an order as it deems fit.

3) Where the application under sub-section (1) has been allowed by the Adjudicating Authority, it
shall forward its order to the Board and the Board may take such action as may be required under
Chapter VI of Part IV against the resolution professional.

SECTION 88 GENERAL DUTIES OF DEBTOR

The debtor shall—

a) make available to the resolution professional all information relating to his affairs, attend
meetings and comply with the requests of the resolution professional in relation to the fresh start
process.

b) inform the resolution professional as soon as reasonably possible of—

i. any material error or omission in relation to the information or document supplied to the
resolution professional; or

ii. any change in financial circumstances after the date of application, where such change has
an impact on the fresh start process.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 21

 REPLACEMENT OF RESOLUTION PROFESSIONAL

SECTION 89 REPLACEMENT OF RESOLUTION PROFESSIONAL:

1) Where the debtor or the creditor is of the opinion that the resolution professional appointed
under section 82 is required to be replaced, he may apply to the Adjudicating Authority for the
replacement of such resolution professional.

2) The Adjudicating Authority shall within seven days of the receipt of the application under sub-
section (1) make a reference to the Board for replacement of the resolution professional.

3) The Board shall, within ten days of the receipt of a reference from the Adjudicating Authority
under sub-section (2), recommend the name of an insolvency professional to the Adjudicating
Authority against whom no disciplinary proceedings are pending.

4) The Adjudicating Authority shall appoint another resolution professional for the purposes of the
fresh start process on the basis of the recommendation by the Board.

5) The Adjudicating Authority may give directions to the resolution professional replaced under sub-
section (4)—

a) to share all information with the new resolution professional in respect of the fresh start
process; and
b)
(b) to co-operate with the new resolution professional as may be required.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 22

 DIRECTIONS FOR COMPLIANCES OF RESTRICTIONS AND REVOCATION OF
ORDER ADMITTING APPLICATION

SECTION 90 DIRECTIONS FOR COMPLIANCES OF RESTRICTIONS:

1) The resolution professional may apply to the Adjudicating Authority for any of the following
directions, namely:—

a) compliance of any restrictions referred to in sub-section (3) of section 85, in case of non-
compliance by the debtor; or

b) compliance of the duties of the debtor referred to in section 88, in case of non-compliance by
the debtor.

2) The resolution professional may apply to the Adjudicating Authority for directions in relation to
any other matter under this Chapter for which no specific provisions have been made.

SECTION 91 REVOCATION OF ORDER ADMITTING APPLICATION:

1. The resolution professional may submit an application to the Adjudicating Authority seeking
revocation of its order made under section 84 on the following grounds, namely :—

a) if due to any change in the financial circumstances of the debtor, the debtor is ineligible for a
fresh start process; or

b) non-compliance by the debtor of the restrictions imposed under sub-section (3) of section 85;
or

c) if the debtor has acted in a mala fide manner and has wilfully failed to comply with the
provisions of this Chapter.

2. The Adjudicating Authority shall, within fourteen days of the receipt of the application under
subsection (1), may by order admit or reject the application.

3. On passing of the order admitting the application referred to in sub-section (1) , the moratorium
and the fresh start process shall cease to have effect.

4. A copy of the order passed by the Adjudicating Authority under this section shall be provided to
the Board for the purpose of recording an entry in the register referred to in section 196.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 23

 DISCHARGE ORDER AND STANDARD OF CONDUCT

SECTION 92 DISCHARGE ORDER:

1. The resolution professional shall prepare a final list of qualifying debts and submit such list to the
Adjudicating Authority at least seven days before the moratorium period comes to an end.

2. The Adjudicating Authority shall pass a discharge order at the end of the moratorium period for
discharge of the debtor from the qualifying debts mentioned in the list under sub-section (1).

3. Without prejudice to the provisions of sub-section (2), the Adjudicating Authority shall discharge
the debtor from the following liabilities, namely:

a) penalties in respect of the qualifying debts from the date of application till the date of the
discharge order;

b) interest including penal interest in respect of the qualifying debts from the date of application
till the date of the discharge order; and

c) any other sums owed under any contract in respect of the qualifying debts from the date of
application till the date of the discharge order.

4. The discharge order shall not discharge the debtor from any debt not included in sub-
section (2) and from any liability not included under sub-section (3).

5. The discharge order shall be forwarded to the Board for the purpose of recording an entry in the
register referred to in section 196.

6. A discharge order under sub-section (2) shall not discharge any other person from any liability in
respect of the qualifying debts.

SECTION 93 STANDARD OF CONDUCT:

The resolution professional shall perform his functions and duties in compliance with the code of
conduct provided under section 208.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 24

 CONCLUSION

 India currently ranks 136 out of 189 countries in the World Bank's index on the ease of resolving
insolvencies. India's weak insolvency regime, its significant inefficiencies and systematic abuse are
some of the reasons for the distressed state of credit markets in India today. The Code promises
to bring about far-reaching reforms with a thrust on creditor driven insolvency resolution. It aims
at early identification of financial failure and maximising the asset value of insolvent firms. The
Code also has provisions to address cross border insolvency through bilateral agreements and
reciprocal arrangements with other countries.

 The unified regime envisages a structured and time-bound process for insolvency resolution and
liquidation, which should significantly improve debt recovery rates and revitalise the ailing Indian
corporate bond markets.

 Insolvency and Bankruptcy Code is umbrella legislation that is critical for the development of
insolvency laws in India. It promises time-bound and efficient mechanisms for debt recovery. The
Corporate Insolvency Resolution Process is a creditor controlled model for the resolution of
insolvency. The creditors have been given the power to take important decisions concerning the
resolution process. There have been amendments and landmark judicial pronouncements in order
to make the Insolvency and Bankruptcy Code more efficient and effective.

 As outlined earlier in this article, the Code not only repeals 2 statutes, but also amends 11 other
statutes such as Companies Act, SICA, SARFAESI etc. for effectuating the provisions relating to
insolvency and bankruptcy of all legal and natural persons under the Code. However, the interplay
of provisions of the Code, the amended statutes and several other statutes (such as Negotiable
Instruments Act, 1881) will be an important factor in determination of insolvency proceedings. It
is of utmost importance that provisions of key recovery laws be synchronised in order to ensure
that there are no discrepancies or overlap of jurisdictions so that multiplicity of remedies is not
taken recourse to.

 Perhaps, the Code has brought far too many changes at the same time, which has caused
apprehensions. In India, where any change in the legal system are hard to enforce, this Code has
proposed a massive overhaul of laws, procedures and infrastructure, whichis bound to be
subjected to hangovers of previous regimen, resistance to rapid enforcement from the fraternity
and ultimately dilution in its effectiveness. But, all this on one side, there is no doubt that once
the Code is fully implemented, it is going to be one of the best initiatives by the legislatures and a
boon to the economy in the broader sense.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 25

 BIBLIOGRAPHY

WEBSITES:

 https://en.wikipedia.org/wiki/Insolvency_and_Bankruptcy_Code,_2016#:~:text=The%20Insolven
cy%20and%20Bankruptcy%20Code%2C%202016%20(IBC)%20is%20an,%2C%20parnership%20fir
ms%2C%20and%20individuals.

 https://www.business-standard.com/about/what-is-ibc#collapse

 https://www.mondaq.com/india/insolvencybankruptcy/492318/the-insolvency-and-bankruptcy-
code-2016--key-highlights

 https://www.ibbi.gov.in/uploads/publication/190609_UnderstandingtheIBC_Final.pdf

 https://cleartax.in/s/insolvency-and-bankruptcy-code-2016

 https://www.mca.gov.in/Ministry/pdf/TheInsolvencyandBankruptcyofIndia.pdf

 https://gamechangerlaw.com/ibc-2016-overview-of-the-insolvency-and-bankruptcy-code-2016/

 https://muds.co.in/insolvancy/

 https://www.taxmann.com/post/blog/background-of-the-insolvency-and-bankruptcy-code

 https://www.indialaw.in/blog/blog/commercialcorporate/summarising-insolvency-bankruptcy-
code-2016/

 https://blog.ipleaders.in/challenges-interpretation-insolvency-bankruptcy-code-
2016/#:~:text=of%20the%20Code.-,Conclusion,for%20the%20resolution%20of%20insolvency.

IBC, 2016| KRUTI SHAH S.Y.LL.B | ROLL NO. 2122248 P a g e | 26