IBC Notes Part 1 by CA Vivek Gaba

CS Professional
ICSI New Syllabus
CA Vivek Gaba
(FCA, B.com , CCTP)
IBC, 2016
Insolvency and Bakcruptcy code
(PART - 1)
L et’s I nsolvency
U ncovered
2024
June & dec exams
IBC, 2016
28th
Insolvency & Bankruptcy Code, 2016 May,
2016
Insolvency A "Code" is a
refers to a Not Cover only Bankruptcy but systematic and
situation/State also cover Liquidation Process organized
where an compilation of
Individuals, laws and
company, or regulations
any other related to a
organisation specific area. It
is unable to Bankruptcy Liquidation
may include
pay its multiple Acts,
debts[Two Types] A process of rules, and
It is a legal
when they selling off assets
proceedings regulations.
become due to repay debts.
involving when
and payable Liquidation is the
an individual or
firm that is process of
unable to repay winding up of a
In simpler
words, IBC outstanding Company.
provides a debts. It is a
legal formal
framework to • Jet Airways (India) Ltd.
declaration of
address debts
insolvency • Videocon Industries Ltd.
that are
overdue and through a court • Essar Steel India Limited
have become process. • Bhushan Steel Limited
payable but Bankruptcy • Reliance Communications Limited
remain unpaid. • Alok Industries Limited
provides a
It allows
structured • Jaypee Infratech Limited
creditors[Two
Types] to initiate framework for • Ruchi Soya Industries Limited
insolvency resolving debts • Dewan Housing Finance Corporation Limited
proceedings (DHFL)
and can involve
when their
bankrupt or
debtors fail to
meet their reorganization.
payment
obligations on
time.
Limitations of Old Insolvency law
1. Fragmented Processes: Different laws led to confusion and
·
inefficiency in insolvency proceedings. (Total Approx 13 Laws Related to Insolvency)
2. Time consuming Resolutions: Cases prolonged for years-

bound resolution mechanism.[Approx 4 to 5 Years Time]
3. Creditor Hierarchy Confusion: Unclear priority led to disputes

over payment sequence.
4. Persisting Non-viable Companies: Financially weak entities

continued operations, impacting the economy.
5. Cross-border Insolvency Gap: No clear method for handling

international insolvency cases.
6. High Litigation Costs: Litigious nature increased costs,

reducing creditor returns further.
7. Focus on Revival Only: The old laws primarily emphasized the

revival and rehabilitation of sick companies. sometimes led to
prolonged attempts to rescue companies that were not economically
viable, resulting in a waste of resources.
8. Limited Creditor Rights: Under the old regime, creditors,

especially unsecured creditors, had limited influence in the decision-
making process. This could lead to situations where creditors' rights
were not adequately protected, and their recovery chances were
minimized.
Difference between revival and resolution:
Revival:
A) Meaning: Revival means bringing a struggling or sick

company back to good health so it can continue running and
doing business.
B) Goal: The main goal of revival is to save the company from

closing down, protect jobs, and make it financially healthy again.
C) Focus: Revival focuses on fixing the problems that caused

the company to struggle in the first place. This could involve
changing how the company is managed, finding ways to pay off
debts, and improving its products or services.
Resolution:
A) Meaning: Resolution is about finding a solution for a company

that is in financial trouble. It might not necessarily mean making
the company healthy again.
B) Goal: The main goal of resolution is to deal with the financial

problems of the company in the best way possible, even if that
means some big changes.
C) Focus: Resolution focuses on making the best decisions for

the company's future, which might involve selling parts of the
company, closing down some parts, or even selling off the whole
company.
Difference Between Old Law & New Law
Heading Old Laws New IBC
Whether Fragmented laws, varying Comprehensive and unified

comprehensive law? for different entities such as code applicable to individuals,
Companies Act, 1956, Sick partnership firms, limited
Industrial Companies Act, liability partnerships,
1985; etc companies, and other legal
entities
Whether multiple Many laws governing Single law governing

laws or single law? insolvency insolvency
time involved in The process was often It introduced a time-bound

resolution lengthy and lacked a and structured insolvency
time-bound framework & resolution process including it
took upto 4-5 years for takes 180 days in normal cases
resolution of insolvency and +90 days if reasonable
cause is there for resolution of
insolvency & maximum it will
take 330 days.
Authorities involved many authorities like DRT, 1 admin authority : IBBI

for Insolvency Process civil court, CLB 1 corporate judicial authority:
NCLT
1 non corporate judicial
authority: DRT
Whether Single single window clearance Single window clearance

window clearance? missing system
Moratorium No automatic stay on Automatic moratorium upon

creditor actions during admission of insolvency
insolvency proceedings. application to prevent creditor
actions.
Insolvency Resolution Lacked a well-defined Clear and defined corporate

process, leading to delays insolvency resolution process
and uncertainty. (CIRP) with strict timelines.
Creditors right Creditor rights were limited, IBC established clear

and there was no mechanisms for creditors to
well-defined mechanism for initiate insolvency
insolvency resolution. proceedings, making it more
creditor-friendly.
Role of Insolvency No standardized insolvency Licensed insolvency

Professionals professionals and financial professionals manage
professionals involved proceedings
Insolvency and Bankruptcy Code, 2016
Introduction
The origin of insolvency law in India can be traced back to the

colonial era. During British rule, the Presidency Towns Insolvency
Act, 1909 was enacted to address insolvency issues in the three
presidency towns of Calcutta (now Kolkata), Madras (now
Chennai), and Bombay (now Mumbai. This legislation provided a
framework for the administration of insolvency proceedings and
the resolution of debtor-creditor disputes.
After India gained independence in 1947, the Presidency Towns

Insolvency Act, 1909 continued to be applicable in the presidency
towns, while the Provincial Insolvency Act, 1920 was enacted to
address insolvency matters in the rest of India.
However, over time, both acts were recognized to have certain
limitations and were in need of reform. Before Insolvency and
bankruptcy code, 2016 there was lot of another Act. (Listed
Below)
Evolution of Insolvency and bankeruptcy code,2016 (IBC)
The Insolvency and Bankruptcy Code (IBC) of 2016 is a landmark
legislation in India that introduced a comprehensive framework for
insolvency resolution and bankruptcy proceedings. The IBC has
significantly transformed the insolvency and bankruptcy landscape in
India by streamlining and expediting the resolution process. Here's
an overview of the evolution and key features of the IBC:
Need for Reform:
Prior to the IBC, insolvency and bankruptcy processes in India

were fragmented, time-consuming, and lacked a structured legal
framework.
The existing laws, such as
• the Presidency Towns Insolvency Act, 1909 and the Provincial
Insolvency Act, 1920.
In addition, it amends the following 11 Acts:
• The Indian Partnership Act, 1932
• The Central Excise Act, 1944
• The Income-Tax Act, 1961
• The Customs Act, 1962
• The Recovery of Debts Due to Banks and Financial Institutions
Act, 1993
• The Finance Act, 1994
• The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 [SARFAESI Act]
• The Sick Industrial Companies (Special Provisions) Repeal Act,
2003 [SICA]
• The Payment and Settlement Systems Act, 2007
• The Limited Liability Partnership Act, 2008
• The Companies Act, 2013.
The Code repeals all of the above Act Related to Insolvency &
Bankcuptcy
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 (civil

courts, debt recovery tribunals, and others) 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.
insolvency resolution in India took 4.3 years on an average,
which was way higher when compared to other countries such as
United Kingdom (1 year) and United States of America (1.5
years). These delays were caused due to time taken to resolve
cases in courts, and confusion due to a lack of clarity
Purpose of IBC Code, 2016
Insolvency law usually has a two-fold purpose—

(i) to give relief to the debtor from the harassment of creditors
whose claims he is unable to meet, and
(ii) to provide a machinery by which creditors who are not secured

in the payment their debts are to be satisfied
The word “bankruptcy” is widely believed to have originated from
an Italian phrase “
• ”banca” means bench and
• “rotta” means broken.
It is believed that the word “bankruptcy” originated from the trade
that was carried out on Ponte Vecchio, a medieval segmental arch
bridge over the Arno River, in Florence, Italy.
In medieval Italy, if a banker, who conducted his market place

transactions on a bench, was unable to meet business obligations
and was in debt, his bench was broken in a symbolic show of
failure and his inability to continue.
This act of “bancarotta” or “breaking the bench” is believed to

have evolved into the modern concept of bankruptcy.
The role of the law, in a formal bankruptcy process, is

• to lay down rules of procedure into which the conflict is
channelled, and results in a solution.
The objective of the bankruptcy process is

• to create a platform for negotiation between creditors and
external financiers which can create the possibility of such
rearrangements.
Under the Constitution of India ‘Bankruptcy and insolvency’ is
provided in Entry No 9 of the Concurrent List of the VII Schedule
(Article - 246) i.e the Both Centre and State Governments can
make Laws relating to this subject.
The Major Legislation’s governing Corporate insolvency were:
• Companied Act, 1956 relating to Winding up of Companies
• The Sick Industrial Comanies (Special Provsions) Act, 1985.

Reforms in insolvency Law for Corporates
• 1st the SICA(Sick Industrial Companies Act) came into

existence in 1985 and BIFR (Board for industrial and financial
reconstruction) started functioning from 1987
• 2nd V.B. Eradi, Committee Came into existence in 1999.
• 3rd Recommendations by N.L Mitra Advisory Group in 2001.
• 4th J J Irani Committee recommendations in 2005.
• Finally Bankruptcy law reforms committee in 2014.
BIFR stands for the Board for Industrial and Financial Reconstruction. It was a regulatory body in India
established under the Sick Industrial Companies (Special Provisions) Act, 1985. The primary purpose
of BIFR was to address the issues faced by financially distressed and sick industrial companies in the
country.
BIFR's job was to figure out if a company was really sick and in trouble financially. If it was, BIFR
would suggest ways to help the company get better. Sometimes this meant changing how the
company was run or finding ways to reduce its debts. The goal was to save jobs and keep the
company running if possible.
If the company's problems were too big and couldn't be fixed, BIFR could recommend that the
company be closed down. But that was seen as a last resort because the focus was on helping
companies recover and keep going.
Eventually, the rules changed, and BIFR was replaced by a new system called the Insolvency and
Bankruptcy Code (IBC), which has clearer and faster ways to deal with companies that are in financial
trouble.
Enactment of IBC:
• In Union Budget 14-15, The Finance Minister(Sh. Arun Jaitely ji)

announced the development of ‘Bankruptcy Code’
• The IBC was introduced in the Lok Sabha on 21st December

2015 and
• referred to the joint committee and the committee had presented

its recommendations and a modified bill based on its suggestions
subsequently passed by both houses of Parliament.
• On 5th may 2016 Lok Sabha Passed
• On 11th may 2016 Rajya Sabha Passed
• it received the President's assent on May 28, 2016, and came

into effect in stages
• Certain provisions of the Act have come into force from 5

August and 19 August 2016.
• The provisions relating to corporate insolvency were implemented

first, followed by the provisions for individual insolvency and
bankruptcy.
Insolvency and Bankruptcy code,2016
• Insolvency refers to a situation/State
• where an individual or entity (referred to as a debtor)
• is unable to pay its debts
• when they become due and payable.
• It is a condition in which the debtor's liabilities exceed its
assets,
• and it is unable to meet its financial obligations to its creditors.
Crux: insolvency is when there is a default in payment AND it's not
paid
2. In the case of individuals,

• insolvency usually occurs when their liabilities (debts) exceed
their assets (such as savings, investments, and property).
• When an individual reaches a point of insolvency, they may

seek legal protection through processes like bankruptcy,
• which involves the liquidation of assets to repay creditors or

the development of a repayment plan.
3. For companies or organizations,

• insolvency occurs when their financial obligations exceed their
available resources. This can result from various factors,
including poor financial management, economic downturns, or
unsustainable business models.
• In such cases, companies may initiate insolvency proceedings,

which can involve restructuring debts, selling assets, or ceasing
operations altogether.
4. It's important to note that
• insolvency is different from bankruptcy and liquidation.
• Insolvency is a financial condition,
• while bankruptcy and liquidation is a legal process that provides

a framework for handling insolvency.
FINAL CRUX
From the above it is evident that
• insolvency is a state and bankrupt is a conclusion.
• A bankrupt would be a conclusive insolvent
• whereas all insolvencies will not lead to bankruptcies.
• Insolvency situation can be resolved through resolution

mechanism under the Code and
• a failed resolution mechanism would lead to liquidation process

in relation to corporates and bankruptcy process in relation to
individuals under the Code
I
Crux of insolvency, Bankruptcy, Liquidation, Bankcrupt
Insolvency
Insolvency refers to the financial state of a person Like

Individuals, company, or any other organisation when they are
unable to pay their debts.
Treated ( i.e Solvency) Un Treated ( i.e Not able

to Pay Debts)
• Able to Pay dues or • Not Able to Pay dues or
• liabilities is <= Assets or • liabilities is > Assets or
• through Resolution plan • Resolution plan Not
(Only For Corporate)
Approved or Not Come.
If it is Non-Corporate debtor If it is Corporate debtor it

it will be Start Bankruptcy will be Start Liqidation
Process and Final Process Final Conclusion
Conclusion is Bankrupt. is Dissolution/Winding Up .
Relationship between Bankruptcy, Insolvency & Liquidation
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.
Insolvency: Insolvency refers to the financial state of being any

person or entity unable to pay debts to their creditors on time or as
they become due. It is a condition where liabilities exceed assets.
Insolvency can lead to various outcomes, including bankruptcy and
liquidation.
Bankruptcy: It is a legal proceedings involving an individual or

firm that is unable to repay outstanding debts. Bankruptcy is a
legal process initiated by an individual or entity when they are
unable to repay their debts. It is a formal declaration of insolvency
through a court process. Bankruptcy provides a structured
framework for resolving debts and can involve bankrupt or
reorganization.
Liquidation: Liquidation, also known as winding up or dissolution,

refers to the process of selling off assets to repay debts.
Liquidation is winding up of a corporation or incorporated entity.
In nut shell, insolvency is common to both bankruptcy and

liquidation. Not being able to pay debts as and when they became
due and payable are the leading cause of Liquidation and is the
only way that can cause a natural person to become a bankrupt.
Preamble of the Code
Objectives of the Code are given in the Preamble.
An Act to-
• Consolidate and amend the laws relating to reorganisation and
insolvency resolution of corporate persons, partnership firms
and individuals;
• In a time bound manner for maximisation of value of assets of

such persons, - to promote entrepreneurship;
• Availability of credit;
• Balance the interests of all the stakeholders including

alteration in the order of priority of payment of Government
dues;
• To establish an Insolvency and Bankruptcy Board of India;

and
• For matters connected therewith or incidental thereto.
IBC is not a recovery mechanism

As per preamble the objective of IBC is resolution of the corporate debtor
and it cannot be used as a recovery mechanism.
Case Laws
NCLAT in the Company Appeal (AT) (Insolvency) No. 540 of 2020 dt 17th Jan
2022, in the matter of M/s Amsons Communication Pvt. Ltd. Vs. M/s ATS
Estates Pvt. Ltd. has ordered that the provisions of Code cannot be allowed
as a recovery mechanism or to recover the claim of interest by Operational
Creditor.
I
Structure/Framework of the code
The code is structured into 5 Parts comprising of 255 Sections and

12 Schedules. Each part deals with a distinct aspects of the
insolvency resolution process.
MiM
gr .
HOW CODE IS ORGANISED / STRUCTURE OF THE CODE
Part I Preliminary (sections 1 to 3)
Part II Insolvency Resolution and Liquidation for Corporate

Persons
• Chapter I Preliminary (Sections 4 to 5)
• Chapter II Corporate Insolvency Resolution Process

(Sections 6 to 32)
• Chapter III Liquidation Process (Sections 33 to 54)
• Chapter IV Fast Track Corporate Insolvency Resolution Process

(Sections 55 to 58)
• Chapter V Voluntary Liquidation of Corporate Persons

(Section 59)
• Chapter VI Adjudicating Authority for Corporate Persons

(Sections 60 to 67)
• Chapter VII Offences and Penalties (Sections 68 to 77)

Part III Insolvency Resolution and Bankruptcy for Individuals
and Partnership Firms
• Chapter I Preliminary (Sections 78 to 79)
• Chapter II Fresh Start Process (Sections 80 to 93)
• Chapter III Insolvency Resolution Process (Sections 94 to 120)
• Chapter IV Bankruptcy Order for Individuals and Partnership

Firms (Sections 121 to 148)
• Chapter V Administration and Distribution of the Estate of the

Bankrupt (Sections 149 to 178)
• Chapter VI Adjudicating Authority for Individuals and

Partnership Firms (Sections 179 to 187)
Part IV Regulation of Insolvency Professionals, Agencies and

Information Utilities
• Chapter I The Insolvency and Bankruptcy Board of India
(Sections 188 to 195)
• Chapter II Powers and Functions of the Board

• Chapter III Insolvency Professional Agencies

• Chapter IV Insolvency Professionals (Sections 206 to 208)
• Chapter V Information Utilities (Sections 209 to 216)
• Chapter VI Inspection and Investigation (Sections 217 to 220)
• Chapter VII Finance, Accounts and Audit (Sections 221 to 223)
Part V Miscellaneous Not So Relevant

Salient Features of the Insolvency and Bankruptcy Code, 2016
(READ AFTER COMPLETE INSOLVENCY LAW)
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.
These agencies enrol Insolvency Professionals, provide pre-
registration educational course to its enrolled members and
enforce a code of conduct for their functioning. 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
• Insolvency Professional Agency of Institute of Cost
Accountants of India.
4. 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. 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.
5. 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.
The purpose of such collection, collation, authentication and
dissemination financial information of debtors in centralised
electronic databases is to facilitation swift decision making in the
resolution proceedings.
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.
6. 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. The members of the Board
include representatives from the central government as well as
the Reserve Bank of India. 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.
7. 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). 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.
8. To initiate an insolvency process for corporate debtors, the
default should be atleast INR 1, 00, 00,000. Central Government
may, by notification, specify such minimum amount of default of
higher value, which shall not be more than one crore rupees, for
matters relating to the prepackaged insolvency resolution process
of corporate debtors under Chapter III-A. Central government
vide Notification S.O. 1543(E) dated 9th April 2021 specified ten
lakh rupees as the minimum amount of default for the matters
relating to the pre-packaged insolvency resolution process of
corporate debtor under Chapter III-A of the Code.
9. In resolution process for corporate persons, the Code

proposes two independent stages:
(i) Insolvency Resolution Process, during which the creditors

assess the viability of debtor’s business and the options for its
rescue and revival
(ii) Liquidation, in case the insolvency resolution process fails or

financial creditors decide to wind up and distribute the assets of
the debtor.
10. The Code envisages two distinct processes in case of

Insolvency Resolution Process (IRP) for Individuals/ Unlimited
Partnerships
(i) Automatic Fresh Start

(ii) Insolvency Resolution.
11. 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 automatic 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.
12. 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.
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. 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.
Section 11 of the Code disentitles the following persons to
make an application to initiate corporate insolvency
resolution process:
(a) a corporate debtor undergoing a corporate insolvency

resolution process; or
(aa) a financial creditor or an operational creditor of a corporate

debtor undergoing a pre- packaged insolvency resolution
process; or
(b) a corporate debtor having completed CIRP twelve months

preceding the date of making of the application; or
(ba) a corporate debtor in respect of whom a resolution plan has

been approved under Chapter III-A, twelve months preceding the
date of making of the application; or
(c) 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; or
(d) a corporate debtor in respect of whom a liquidation order has

been made.
It may be noted that a corporate debtor falling under the above

clauses can initiate corporate insolvency resolution process
against another corporate debtor.
13. 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. CIRP shall mandatorily be
completed within a period of three hundred and thirty days from
the insolvency commencement date, including any extension of
the period of corporate insolvency resolution process and the
time taken in legal proceedings in relation to such resolution
process of the corporate debtor. If the resolution plan does not
get finalised or is rejected by NCLT or DRT on technical grounds,
then assets of the debtor are sold to repay his outstanding dues.
14. 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.
Before the enactment of the Insolvency and Bankruptcy
Code, the Government dues were immediately below the
claims of secured creditors and workmen in order of priority.
Now the Central and State Government’s dues stand below
the claims of secured creditors, workmen dues, employee dues
and other unsecured financial creditors.
15. 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.
16. 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.
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.
The Code repeals the Presidency Towns Insolvency Act, 1909

and the Provincial Insolvency Act, 1920.
In addition, it amends the following 11 Acts:
• The Indian Partnership Act, 1932
• The Central Excise Act, 1944
• The Income-Tax Act, 1961
• The Customs Act, 1962
• The Recovery of Debts Due to Banks and Financial Institutions
Act, 1993
• The Finance Act, 1994
• The Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
• The Sick Industrial Companies (Special Provisions) Repeal Act,
2003
• The Payment and Settlement Systems Act, 2007
• The Limited Liability Partnership Act, 2008
• The Companies Act, 2013.
IBC , 2016
Foundation/ Pillar of IBC
AA
.
IBBI IPS IVS
A key innovation of the IBC is a four-pillar institutional framework,

comprising
(a) the first pillar: the judicial Adjudicating Authority, being the
National Company Law Tribunal (NCLT or Adjudicating Authority)
where corporate insolvency matters shall be heard & and NCLAT
will be Appellate Authority;
(b) the second pillar: the regulator, being Insolvency and

Bankruptcy Board of India (IBBI) which has regulatory oversight
over insolvency professionals and insolvency professional agencies
(IPA);
An Insolvency and Bankruptcy Board of India (IBBI) is established

to administer the work of insolvency and bankruptcy of, (IPAs),(IPs),
(RVs) and (IUs).
(c) the third pillar: a class of regulated persons, being the

insolvency professionals who play a key role in the efficient
working of the insolvency and bankruptcy process under the IBC;
and,
(d) the fourth pillar: a new industry called information utilities (IU) to
electronically store facts about lenders and terms of lending.
Information Utilities (IUs) under the Insolvency and Bankruptcy
Code, 2016 (IBC) are specialized agencies or organizations that
collect and store financial and operational information about
borrowers or companies. They act like a central repository of
Bare Act and Analysis of IBC, 2016
Part I - Preliminary
Section-1 Short title, extent and commencement.
(1) This Code may be called the Insolvency and Bankruptcy Code, 2016.
(2) It extends to the whole of India including Jammu and kashmir.(Omitted by

the Jammu and Kashmir Reorganisation (Adaptation of Central Laws) Order, 2020 No.SO1123(E) dated
18th March, 2020. Before omission, it stood as “Provided that Part III of this Code shall not extend to the
state of Jammu and Kashmir.”)
(3) It shall come into force on such date as the Central Government
may, by notification in the Official Gazette, appoint:
Provided that different dates may be appointed 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.
Analysis of Section 1
This Code came into enforcement on 28th May 2016, however, the
Central Government appointed different dates for different provisions
of this Code
Significant amendments: The Code has been first amended by the

Insolvency and Bankruptcy (Amendment) Ordinance, 2017, passed
on November 23, 2017.This Ordinance became an Act on Jan 18,
2018. It was known as the Insolvency and Bankruptcy Code
(Amendment) Act, 2018. It was made applicable from November
23, 2017.
The second amendment was made vide the Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2018, on June 6,
2018. Further, the said ordinance, in the form of the Insolvency
and Bankruptcy (Second Amendment) Bill received the assent
of the President on the 17th August, 2018 and thus the
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
was enacted.
The third amendment was made vide the Insolvency and

Bankruptcy Code (Amendment) Bill, 2019 which received the
assent of the President on 5th August, 2019 and thus the
Insolvency and Bankruptcy Code (Amendment) Act, 2019 was
promulgated.
The fourth amendment was made vide the Insolvency and

Bankruptcy Code (Amendment) Ordinance, 2019, on December
28, 2019. Further, the said ordinance, in the form of the
Insolvency and Bankruptcy (Amendment) Bill, 2020 received the
assent of the President on the 13th March, 2020 and thus the
Insolvency and Bankruptcy Code (Amendment) Act, 2020 was
enacted.
Due to the advent of COVID-19 pandemic, the IBC was

amended by insertion of Section 10A to suspend the
initiation of CIRP under Sections 7, 9 and 10 of the IBC for
any default arising on or after March 25, 2020.
To achieve desired objectives of the Code, the President
promulgated the ‘Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2021 on 4th April 2021. The Ministry
of Law and Justice on 12th of August 2021 enacted the Insolvency
and Bankruptcy Code (Amendment) Act, 2021 w.r.e.f from 4th day
of April, 2021.
The amendments was made with an intent to provide an efficient

alternative insolvency resolution framework for corporate
persons classified as micro, small and medium enterprises
(MSMEs) under the Code, for ensuring quicker, cost-effective and
value maximizing outcomes for all the stakeholders, in a manner
which is least disruptive to the continuity of MSMEs businesses
and which preserves jobs. By this amendment the Provisions
related to PPIRP and MSMEs was introduced.
It provides an efficient alternative insolvency resolution

framework for corporate persons classified as MSMEs for
timely, efficient & cost-effective resolution of distress thereby
ensuring positive signal to debt market, employment preservation,
ease of doing business and preservation of enterprise capital
Other expected impact and benefits of the amendment in Code

are lesser burden on Adjudicating Authority, assured continuity of
business operations for corporate debtor (CD), less process costs &
maximum assets realization for financial creditors (FC) and
assurance of continued business relation with CD and rights
protection for operational Creditors (OC).
Section - 2 Application of IBC Code, 2016.
The provisions of this Code shall apply to —
(a) any company incorporated under the Companies Act, 2013 or
under any previous company law;
(b) any other company governed by any special Act for the time
being in force, except in so far as the said provisions are
inconsistent with the provisions of such special Act; (Here are a few examples:
Airports Authority of India (AAI), Oil and Natural Gas Corporation (ONGC), Bharat Heavy Electricals Limited (BHEL), Food Corporation of India
(FCI), Steel Authority of India Limited (SAIL),, National Thermal Power Corporation Limited (NTPC), Telecommunications companies etc.)
(c) any Limited Liability Partnership incorporated under the LLP

Act, 2008
(d) such other body incorporated under any law for the time being
in force, as the Central Government may, by notification, specify in
this behalf;
(e) personal guarantors to corporate debtors;(Amendment)

(Personal guarantors of corporate debtors have been treated as a separate class. The
application for bankruptcy of individual personal guarantor will have to be filed before NCLT as
per section 60(2) of the IBC,2016. Insolvency code has been made applicable to personal
guarantors of corporates w.e.f. 23-11-2017.)
(f) partnership firms and proprietorship firms; and
(g) individuals, other than persons referred to in clause (e).
in relation to their insolvency, liquidation, voluntary liquidation or

bankrupt
Applicability of the code:
Two Parties Involved under IBC, 2016
1. Corporate Debtors (Paisa Lene Vala)

2. Corporate Creditors (Paisa Dene Vala)
Section - 2 Talks about Corporate Debtors (Jiski Insolvency Hume resolve karni hai)
Difference between Clause (b) & clause (d)

In summary, the key differences between these two clauses are:
• Scope of Entities: Clause (b) primarily deals with companies that are governed by
special Acts, and the IBC provisions will apply to these companies unless they are
inconsistent with the provisions of the special Act. Clause (d) deals with a broader range
of bodies, not limited to companies, that can be incorporated under any law and can be
included under the IBC by notification from the Central Government.
• Authority to Include Entities: Clause (b) doesn't provide a specific authority to include
new entities under the IBC, while Clause (d) gives the Central Government the power to
specify additional bodies that should be covered under the IBC.
Non-applicability of the Code:
The Code is not applicable to corporates in finance sector. Section 3(7) of Insolvency &
Bankruptcy Code, 2016 states that "Corporate person"shall not include any financial service
provider.
"Financial service provider" means a person engaged in the business of providing financial
services in terms of authorisation issued or registration granted by a financial sector
regulator [section 3(17)].
However, section 227 of the Code, which was notified on 1-5-2018 provided that, Central
Government can notify financial service providers for purpose of insolvency and liquidation
proceedings, which may be conducted under the Insolvency & Bankruptcy Code, in
consultation with appropriate financial sector regulator.
As per notification dated 18-11-2019 it has been notified by the central government that
insolvency resolution and liquidation proceedings of non- banking finance companies (which
include housing finance companies) with asset size of Rs.500 crore or more, as per last
audited balance sheet, shall be undertaken in accordance with the provisions of the Code
and Rules made thereunder.
Section - 3 Important Definition under IBC Code, 2016.
In this Code, unless the context otherwise requires, -
Board Section 3(1)

“Board” means the Insolvency and Bankruptcy Board of India
established under sub-section (1) of section 188 of the code.
Analysis of Board Definition
The Board shall be a body corporate by the name aforesaid,

having perpetual succession and a common seal, with power,
subject to the provisions of this Code, to acquire, hold and dispose
of property, both movable and immovable, and to contract, and
shall, by the said name, sue or be sued [Section 188(2)].
The board will have powers of civil court as to the issue of

summons, discovery and production of books, inspection of books/
registers and issue of commissions for examination of witnesses
[Section 196(3) of the Code]
Charge Section 3(4)

“Charge” means an interest or lien created on the property or assets
of any person or any of its undertakings or both, as the case may
be, as security and includes a mortgage;
In simple terms, a "charge" refers to a legal right that someone has over a specific
property or asset. It's like a security interest or claim that ensures that the person who
holds the charge gets paid if the owner of the property or asset fails to fulfill a financial
obligation.
Example involving a business:
• Business (Borrower): A company needs a loan to expand.
• Bank (Lender): The bank provides the loan and takes a "charge" on the company's
building as security.
• Building (Asset): This is the property with the charge on it.
If the business is unable to repay the loan, the bank can exercise its charge over the
building, take possession of it, and sell it to recover the loan amount.
In above case, the charge acts as a form of security, allowing the lender to take control of
the asset and sell it if the borrower doesn't fulfill their financial obligations. Charges are
used to protect the interests of the person or entity providing the funds or credit.
Claim Section 3(6)
“claim” means –
(a) a right to payment, whether or not such right is reduced to
judgment, fixed, disputed, undisputed, legal, equitable, secured, or
unsecured;
(b) right to remedy for breach of contract under any law for the
time being in force, if such breach gives rise to a right to
payment, whether or not such right is reduced to judgment, fixed,
matured, unmatured, disputed, undisputed, secured or unsecured;
Claim’ gives rise to ‘debt’ only when it is due and ‘default’ occurs only when debt becomes
due and payable and is not paid by the debtor. (Swiss Ribbons Pvt. Ltd. & Anr. Vs.
Union of India & Ors.)
‘Claim’ under section 3(6) of the Code means a right to payment, even if it is disputed.
(SC judgement dated 31.08.2017)
Analysis of Clause (a)
In simpler terms, a "claim" refers to the right to receive payment. This right can exist
whether or not the exact amount to be paid has been determined, whether it's
recognized as valid or in question, and whether it's based on a legal or fair basis.
Additionally, a claim can be either secured (backed by collateral) or unsecured.
Here's a breakdown of the key points in this definition:

• Right to Payment: A claim is essentially a demand for money or something of
value that you believe you are owed.
• Reduced to Judgment: This means that even if the claim hasn't been legally
confirmed by a court's decision (judgment), it's still considered a claim.
• Fixed and Disputed/Undisputed: A claim can have a specific amount that is owed
(fixed), or it could be under dispute or agreed upon (undisputed).
• Legal and Equitable: A claim can be based on both legal rights (recognized by
law) and equitable rights (based on fairness and principles of equity).
• Secured and Unsecured: A claim can have collateral or security backing it up

(secured), or it might not have any specific assets attached to it (unsecured).
In simple terms, a "claim" encompasses various situations where you believe you have
the right to receive payment or compensation, regardless of the details and
circumstances surrounding that right.
Example 1: Fixed and Undisputed Claim

Imagine you own a small business and you've provided a service to a client. The client has received
the service and agrees that the work was done as per the contract. You send them an invoice for
$1,000, which is the agreed-upon fee. Since the amount is fixed and both parties agree on the
service and the cost, this is a fixed and undisputed claim.
Example 2: Disputed Claim

Let's say you're a tenant who rented an apartment, and you believe the landlord didn't fulfill their
obligation to repair a leaky roof. As a result, you withheld a portion of the rent. The landlord
disagrees and claims they did provide the necessary repairs. In this scenario, there is a dispute over
the claim because the two parties have different views on the situation.
Example 3: Secured Claim

Consider a scenario where you lend your friend $1,000, and in exchange, they give you their laptop
as collateral. They promise to repay the loan by a certain date. In this case, if your friend fails to
repay the loan as agreed, you have a secured claim on their laptop. You can take possession of the
laptop to recover your $1,000.
Example 4: Unsecured Claim
Suppose you lend your friend $100 to help them buy groceries, and they promise to pay
you back next week. There's no collateral involved, so if they fail to repay you as
promised, your claim to the $100 is unsecured. You don't have any specific asset to
recover your money from, making it a riskier situation for you as the lender.
Example 5: Equitable Claim

Imagine you're a shareholder in a company, and the company's management makes
decisions that hurt the value of your investment. Even though they haven't violated any
specific laws, you believe their actions are unfair and unethical. You might have an
equitable claim, where you're seeking a remedy based on principles of fairness rather
than strict legal rights.
Analysis of Clause (b)

The definition of "claim" that you've provided includes another aspect, which is a "right
to remedy for breach of contract." Let's break down this definition and provide examples
to illustrate its meaning:
In this context, a "claim" refers to a right that arises when there's a breach of a contract
under the law. If one party doesn't fulfill their obligations as per a contract, the other
party might have a claim to seek a remedy. This right to remedy can lead to a request
for payment, even if the specific payment amount is not yet determined, fixed, matured,
or undisputed.
Here are examples to help understand this aspect of the definition:
Example 1: Employment Contract Breach

Imagine you're employed by a company with a two-year contract. The contract specifies your salary
and benefits. If the company suddenly terminates your contract without valid reasons, you have a
claim for breach of contract. This claim arises from the breach of the employment contract and could
lead to a right to payment, which might include unpaid salary, benefits, and compensation for
wrongful termination.
Example 2: Construction Contract Breach

Suppose you hire a contractor to build an addition to your house. The contract outlines the project
details, costs, and timeline. If the contractor delays the project significantly without valid reasons, you
have a claim for breach of contract. This claim could result in a right to payment for the losses you
incur due to the delay, such as additional housing costs or financial penalties.
Example 3: Supplier Contract Breach
Imagine you run a business and have a contract with a supplier to provide you with a specific quantity
of goods every month at an agreed-upon price. If the supplier consistently fails to deliver the goods as
per the contract terms, you have a claim for breach of contract. This claim could lead to a right to
payment for the financial losses you incur due to the supplier's failure to meet their obligations.
In these examples, a breach of contract gives rise to a claim for a right to a remedy, which might
involve seeking payment for losses or damages suffered as a result of the breach. The claim can
involve both fixed and undisputed amounts as well as amounts that are still in dispute or not yet
determined. The definition covers both secured and unsecured claims that arise from breaches of
contractual obligations.
Corporate person Section 3(7)

(7) “Corporate person” means
• a company as defined in Section 2(20) of the Companies Act,
2013
• a limited liability partnership, as defined in Section 2(1)(n) of

the Limited Liability Partnership Act,, or
• any other person incorporated with limited liability under any

law for the time being in force(Co-operative society, non - Profit company)
• but shall not include any financial service provider;
Non-applicability of the Code:

The Code is not applicable to corporates in finance sector. Section 3(7) of Insolvency &
Bankruptcy Code, 2016 states that "Corporate person"shall not include any financial service
provider.
"Financial service provider" means a person engaged in the business of providing financial
services in terms of authorisation issued or registration granted by a financial sector regulator
[section 3(17)]. Examples of financial service providers include banks, insurance companies,
investment firms, credit unions, mutual fund companies, stock brokerage firms, payment processors,
and financial advisory firms.
However, section 227 of the Code, which was notified on 1-5-2018 provided that, Central
Government can notify financial service providers for purpose of insolvency and liquidation
proceedings, which may be conducted under the Insolvency & Bankruptcy Code, in
consultation with appropriate financial sector regulator.
As per notification dated 18-11-2019 it has been notified by the central government that
insolvency resolution and liquidation proceedings of non- banking finance companies (which
include housing finance companies) with asset size of Rs.500 crore or more, as per last
audited balance sheet, shall be undertaken in accordance with the provisions of the Code and
Rules made thereunder.
National Highway Authority of India (NHAI) is a statutory body which functions as an

extended limb of the Central Government and performs Governmental functions which
obviously cannot be taken over by an RP, or by any other corporate body nor can NHAI
ultimately be wound up under the Code. For all these reasons, it is not possible to either
read in, or read down; the definition of ‘corporate person’ in section 3(7) of the Code to
include NHAI. (Hindustan Construction Company Ltd. & Anr. Vs. Union of India & Ors.
[WP (Civil) No. 1074 of 2019 with other Civil Appeals] SC judgement dated 27.11.2019)
Corporate Debtor Section 3(8)

Corporate debtor” means a corporate person[Section 3(7)] who
owes a debt(a financial obligation to pay back money) to any person
For example, if a company took out a loan from a bank and has been unable to make the
required payments, it would be considered a "corporate debtor" under the IBC.
If a corporate person extends guarantee for the loan transaction concerning a principal
borrower not being a corporate person, it would still be covered within the meaning of
expression "corporate debtor" in section 3(8) of the Code. (Laxmi Pat Surana Vs. Union
Bank of India & Anr. [Civil Appeal No. 2734 of 2020] SC judgement dated 26.03.202)
Creditor Section 3(10)

“Creditor” means any person(including Financial Service Providers) to whom a
debt is owed(Any Person that should receive payment because of the financial obligation that exists)
and includes
• a financial creditor,
• an operational creditor,
• a secured creditor,
• an unsecured creditor and
• a decree-holder;
Analysis of Creditor Definition
1) Financial Creditor: These are organizations that lend money or provide

credit. For example, banks, credit card companies, and financial institutions.
Example: Company or Any Person took a loan from bank etc.
2) Operational Creditor: These are people or companies that provide goods or

services to another company. For instance, if a restaurant owes money to a
supplier for food ingredients, the supplier is an operational creditor.
Example: Staff Salary, Raw Material Supplier, Electricity Bill etc.
3) Secured Creditor: This type of creditor has a guarantee or collateral for the
money they lend. An example would be a car loan, where the car itself acts as
collateral. If the borrower doesn't pay, the lender can take the car.
Example: buy a house and take a mortgage loan from a lending institution.
4) Unsecured Creditor: These creditors don't have any specific collateral for the
money they're owed. Credit card companies are a common example. If you don't
pay your credit card bill, they don't have a specific item to take back.
Example: use your credit card to buy a new computer. The credit card company
becomes an unsecured creditor
5) Decree-Holder: This refers to a person or entity that has obtained a legal

judgment against someone else for money owed. For instance, if someone wins
a lawsuit for unpaid rent, they become a decree-holder.
Example: you lend money to a friend and they promise to pay you back by a certain
date. If they don't repay you, and you take them to court and win the case, you
become a decree-holder. The court's decision is a decree, and your friend owes you
money as per that legal judgment.
In the matter of Digamber Bhondwe Vs. JM Financial Asset Reconstruction [CA(AT)

(Ins) No. 1379 of 2019] it was held "......We further reject the submission that because in
Section 3(10) of I&B Code in definition of “Creditor” the “decree holder” is included it
shows that decree gives cause to initiate application under Section 7 of I&B Code.
Section 3 is in Part I of I&B Code. Part II of I&B Code deals with “Insolvency Resolution
and Liquidation for Corporate Person”, & has its own set of definitions in Section 5.
Section 3 (10) definition of “Creditor” includes “financial creditor”, “operational creditor”
“decree-holder” etc. But Section 7 or Section 9 dealing with “Financial Creditor” and
“operational creditor” do not include “decree-holder” to initiate CIRP in Part II.”
Sh. Sushil Ansal Vs. Ashok Tripathi and Ors, the National Company Law Appellate
Tribunal, Delhi (NCLAT) held that no decree holder who is covered within the definitions
of a creditor given under Section 3(10) of the Insolvency and Bankruptcy Code (IBC) can
come within the ambit of the class of a financial creditor. This implies that a decree
holder is not permitted to incorporate any corporate insolvency resolution process
(CIRP) against any corporate debtor with the soul objective of executing a decree
under it.
Section 3(11) Debt

“Debt” means a liability or obligation in respect of a claim
which is due from any person and includes a financial debt and
operational debt (Refer Section 5)
IBC applies to debts that have become due and payable but not paid, not to debts that
are not yet due. IBC comes into play when a debtor has failed to meet their obligation
to pay a debt that has matured according to the agreed-upon terms or timeline. If a
debt is not yet due, IBC's provisions wouldn't be applicable.
In simpler words, IBC provides a legal framework to address debts that are overdue
and have become payable but remain unpaid. It allows creditors to initiate insolvency
proceedings when their debtors fail to meet their payment obligations on time.
Section 3(12) Default
“Default” means
• non-payment of debt
• when whole or any part or instalment of the amount of debt
has become due and payable and
• is not paid by the debtor or the corporate debtor, as the case
may be;
Examples of above definition
Default" under the IBC with examples:
1) Non-Payment of Debt:
• Example: Imagine you took out a personal loan from a bank. The monthly installment is
due on the 5th of every month. If you fail to pay the installment on the 5th of a particular
month, you are in "default." You haven't paid the debt as required.
2) Due and Payable Amount Not Paid:

• Example: Suppose you're a supplier who delivered raw materials to a manufacturing
company. The invoice states that the payment should be made within 30 days of receiving
the materials. If the 30 days pass, and the manufacturing company hasn't made the
payment, they are in "default." The amount they owe has become due and payable but
remains unpaid.
3) Debtor Doesn't Make Payment:

• Example: Consider a real estate developer who borrowed money from an investor for a
construction project. The loan agreement specifies that the developer will make quarterly
interest payments on the borrowed amount. If the developer misses one of these interest
payments, they are in "default." They didn't fulfill their obligation to pay as scheduled.
‘Default’ is defined in section 3(12) of the Code in very wide terms as non-payment of a
‘debt’ once it becomes due and payable, which includes non-payment of even part
thereof or an instalment amount. (Innoventive Industries Ltd. Vs. ICICI Bank & Anr.
[Civil Appeal Nos. 8337-8338 of 2017] SC judgement dated 31.08.2017)
The context of section 3(12) of the Code is actual non-payment by the CD when a
‘debt’ has become due and payable. (B. K. Educational Services Pvt. Ltd. vs. Parag
Gupta and Associates [Civil Appeal No. 23988 of 2017 and other appeals] SC
judgement dated 11.10.2018)
Section 3(17) Financial Service Providers
“Financial service provider” means a person engaged in the
business of providing financial services in terms of authorisation
issued or registration granted by a financial sector regulator
Financial service providers includes banks, financial institutions,

insurance companies , mutual funds , Credit card companiesetc.
Section 3(18) Financial Sector Regulator
“Financial sector regulator” means an authority or body constituted

under any law for the time being in force to regulate services or
transactions of financial sector and includes
• the Reserve Bank of India,
• the Securities and Exchange Board of India,
• the Insurance Regulatory and Development Authority of India,
• the Pension Fund Regulatory Authority and
• such other regulatory authorities as may be notified by the
Central Government;
Section 3(19) Insolvency Professional
“Insolvency professional” means a person enrolled under section
206 with an insolvency professional agency as its member and
registered with the Board as an insolvency professional under
section 207
Insolvency Professional is required to play a key role in
implementation of the Code. The word 'person', used refers to an
individual to be IP. A LLP, partnership firm or a company can only be
recognized as 'Insolvency Professional Entity' (IPE), which is not
defined under the Code.
Section 3(20) Insolvency Professional Agency
“Insolvency professional agency” means any person registered

with the Board under section 201 as an insolvency professional
agency;
Work relating to insolvency resolution is expected to be

handled by 'Insolvency Professionals' (IP). These professionals
are required to be registered with 'Insolvency Professional
Agency' (IPA).
The Insolvency Professional Agencies (IPA) will develop
professional standards, code of ethics and be first level regulator
for insolvency professionals members. This will lead to
development of a competitive industry for such professionals.
Section 3(21) Information utility
"Information utility" means a person who is registered with the
Board as an information utility under section 210.
The Insolvency and Bankruptcy processes are expected to function

on basis of financial information available electronically.
Information Utility will collect, collate, authenticate and
disseminate financial information to be used in insolvency,
liquidation and bankruptcy proceedings.
Section 3(26) Prescribed

“ Prescribed” means prescribed by rules made by the Central
Government;
Section 3(28) Regulations

“Regulations” means the regulations made by the Board under
this Code
Section 3(32) Specified

“Specified” means specified by regulations made by the Board
under this Code and the term “specify” shall be construed
accordingly;
Part II - Insolvency Resolution & Liquidation for Corporate person
Section 4 Application of this Part
(1) This Part shall apply to

• matters relating to the insolvency and liquidation of corporate
debtors
• where the minimum amount of the default is one lakh rupees:
Provided that the Central Government may, by notification, specify

the minimum amount of default of higher value which shall not be
more than one crore rupees.
(Central Government has by notification dated 24th March 2020
raised the threshold value of minimum amount of default to
one crore rupee)
Provided further that the Central Government may, by notification,

specify such minimum amount of default of higher value, which shall
not be more than one crore rupees, for matters relating to the pre-
packaged insolvency resolution process of corporate debtors under
Chapter III-A.
(Central Government has notified the limit of INR 10 Lakhs)
Provisions related to Insolvency Resolution and Liquidation process

for Corporate Persons are covered in Part II of the Code. This part
comprises of seven chapters with section 4 to 77 of the Code.
Each chapter deals with different issues relating to Insolvency
Resolution and Liquidation of Corporate Persons.
Corporate Insolvency Resolution Process (CIRP) is a process
during which the Committee of Creditors (CoC) assess whether the
debtor's business is feasible and viable to continue, the options for
its rescue and revival, if any and endeavour is to keep it as a going
concern. If the insolvency resolution process fails or CoC decide
that the business of debtor cannot be revived then, the debtor will
undergo liquidation process and the assets of the debtor shall be
realized and distributed by the liquidator among the stakeholders as
per Sec 53. The liquidation can also be on a going concern basis
where the corporate debtor shall not be dissolved.
The Insolvency Resolution Process provides a collective

mechanism to lenders to deal with the overall distressed position of
a corporate debtor. This is a significant departure from the earlier
legal framework under which the primary onus to initiate a re-
organization process lies with the debtor, and lenders may pursue
distinct actions for recovery, security enforcement and debt
restructuring.
The Code creates time-bound processes for insolvency resolution

of companies and individuals. These processes is to be completed
within 180 days, extendable by 90 days, however the overall
process has to be completed within an outer time limit of 330
days. However, in certain exceptional cases, it may be open for
the Adjudicating Authority and/or Appellate Tribunal to extend the
time beyond 330 days.
The Code also provides for fast-track resolution of corporate
insolvency within 90 days. If insolvency cannot be resolved, the
assets of the borrowers may be sold to repay creditors.
Process Flow of CIRP
A comprehensive process that covers the gamut of insolvency

resolution framework for Corporates and includes processes
relating to:-
• Filing of application before NCLT by a financial creditor,
operational creditor or a corporate applicant;
• Adjudication: Admission or Rejection of application. If admitted
then:
• Moratorium and Public Announcement;
• Appointment of Interim Resolution Professional(IRP);
• Calling of claims ;
• Formation of the Committee of Creditors(COC)
• Appointment of Resolution Professional(RP)
• Taking control and managing the operations of the corporate
debtor by the IRP/ RP
• Appointment of Registered Valuers(RV)
• Preparation of Information memorandum & Invitation for
Expression of Interest
• Submission of Expression of Interest by prospective resolution
applicants
• Preparation of provisional and final list of resolution applicants by
the Resolution Professional.
• Issue of Request for Resolution Plan (RFRP), Information
Memorandum and Evaluation Matrix to all the prospective resolution
applicants
• Submission of Resolution Plan by resolution applicants
• Approval or rejection of the Resolution Plan by the CoC
• Approval or rejection of the Resolution Plan by the NCLT
• Implementation of Resolution Plan if approved by NCLT
Section 5 Important Definitions for PART II
In this Part, unless the context otherwise requires, –
Adjudicating Authority Section 5(1)
Adjudicating Authority”, for the purposes of this Part, means
National Company Law Tribunal (NCLT) constituted under section
408 of the Companies Act, 2013
Base Resolution Plan Section 5(2A)

“Base resolution plan” means a resolution plan provided by the
corporate debtor under Section 54A(4)(c) of this Code.
Corporate Applicant Section 5(5)

“Corporate applicant” means –
(a) corporate debtor; or
(b) a member or partner of the corporate debtors who is

authorised to make an application for the corporate insolvency
resolution process [or the pre-packaged insolvency resolution
process, as the case may be,] under the constitutional document
of the corporate debtor; or
(c) an individual who is in charge of managing the operations

and resources of the corporate debtor; or
(d) a person who has the control, and supervision over the
financial affairs of the corporate debtor;
Corporate Guarantor Section 5(5A)

“Corporate guarantor” means a corporate person who is the surety
in a contract of guarantee to a corporate debtor;
a "corporate guarantor" is a company that promises to take responsibility for paying off a
debt if another company, called the "corporate debtor," can't make the payment. Here are
examples to make this clear:
Example 1 - Corporate Guarantor:

Imagine Company A needs a loan from a bank to expand its business. The bank is
concerned about whether Company A can repay the loan. To assure the bank, Company
B, which is financially strong, agrees to be a "corporate guarantor." If Company A can't
repay the loan, Company B will step in and make the payment.
If CIRP has been initiated against the CD, the insolvency and bankruptcy process
against the personal guarantor can be filed under section 60(2) before the same NCLT
and not before the DRT. (State Bank of India Vs. D. S. Rajender Kumar [NCLAT
The principal debtor (CD) is discharged under the Code not on the instance of a creditor
but due to operation of law, i.e., approval of resolution plan. Hence, the guarantor is not
discharged of its liability merely because the creditor consented to a resolution plan of
the principal debtor. (State Bank of India Vs. Sungrowth Shares & Stocks Ltd. [CP (IB)
No. 796/KB/2018] NCLT, Kolkata judgement dated 04.09.2019)
The corporate guarantees given by the CD can be invoked only in the event of a default
on the part of the borrower. (Export Import Bank of India Vs. CHL Ltd. [CA (AT) (Ins.) 51
of 2018] NCLAT judgement dated 16.01.2019)
It makes no difference as to whether the corporate person stood as guarantor to an

individual or a corporate person, and as so long as the obligation in respect of a claim is
due from a corporate person falling within the definition of ‘financial debt’, then it is
obvious that the creditor can proceed under Section 7 of the Code against such
corporate person. (The Karur Vysya Bank Ltd. Vs. Maharaja Theme Parks and Resorts
Pvt. Ltd. [CP/1314/ IB/2018] NCLT, Chennai judgement dated 08.04.2019)
CIRP can be proceeded against the principal borrower as well as guarantor. (State Bank of
India Vs. Athena Energy Ventures Pvt. Ltd. [CA (AT) (Ins.) No. 633 of 2020] NCLAT
Dispute Section 5(6)
“Dispute” includes a suit (formal legal complaint) or arbitration
proceedings (alternative dispute resolution method) relating to–
(a) the existence of the amount of debt;
(b) the quality of goods or service; or
(c) the breach of a representation(i.e Claim) or warranty;
The dispute should not be a mere eyewash and attempt to derail the OC's entitlement to
initiate the proceedings under sections 8 and 9 of the Code. (Simplex Infrastructures Ltd.
Vs. Agrante Infra Ltd. [IB No. (IB)- 167(ND)/2017] NCLT, New Delhi judgement dated
10.08.2017)
A unilateral transfer of liability does not constitute a 'dispute' within the meaning of section
5(6) and an inter-se dispute between two groups of shareholders of the CD does not
constitute a 'dispute' in reference to OCs. The 'dispute' under section 5(6) of the Code must
be between the CD and the OCs. (Chetan Sharma Vs. Jai Lakshmi Solvents (P) Ltd. & Anr.
[CA (AT) (Ins.) No. 66 of 2017 and other appeals] NCLAT judgement dated 10.05.2018)
On the ‘existence of a dispute’, it was observed that section 5(6) is an inclusive provision
and does not confine the AA from considering the existence of a dispute from a broader
angle. Therefore, dispute in terms of section 8(2)(a) of the Code shall not be limited to
instances specified in the definition under section 5(6). (Anuj Khanna Vs. Wishwa Naveen
Traders & Anr. [CA (AT) (Ins.) No. 555 of 2020] NCLAT judgement dated 25.11.2020)
Financial Creditors Section 5(7)

“Financial creditor” means
• any person to whom a financial debt is owed and
• includes a person to whom such debt has been legally
assigned or transferred to
The allottees/home buyers were included in the main provision, i.e., section 5(8)(f) with effect
from the inception of the Code. The Explanation was added in 2018 merely to clarify doubts
that had arisen. The deeming fiction that is used by the Explanation is to put beyond doubt the
fact that allottees are to be regarded as financial creditors within section 5(8)(f) of the Code.
(Pioneer Urban Land and Infrastructure Ltd. SC judgement dated 09.08.2019)
A "person to whom such financial debt has been legally assigned or transferred" refers
to an individual or entity who was not the original lender but has obtained the right to
collect the debt from the borrower through a legal assignment or transfer. Here are
multiple examples to help illustrate this concept:
Example 1 - Debt Purchase:

Imagine you owe $10,000 to a bank as a personal loan. The bank decides to sell your
debt to a debt collection agency for a reduced amount, let's say $7,000. The debt
collection agency becomes a "person to whom such financial debt has been legally
assigned or transferred." They can now collect the $10,000 debt from you, even
though they only paid $7,000 to the bank for it.
Example 2 - Mortgage Assignment:

Suppose you have a mortgage with Bank A. Bank A decides to transfer the right to
collect payments on your mortgage to Bank B. Bank B becomes the "person to whom
such financial debt has been legally assigned or transferred." They now have the right
to receive your monthly mortgage payments.
Example 3 - Student Loan Assignment:

Suppose you took out a student loan from Bank C. Later, Bank C decides to transfer
the right to collect your student loan payments to another financial institution, Bank D.
Bank D becomes the "person to whom such financial debt has been legally assigned
or transferred." They are now entitled to collect the repayments from you.
In each of these examples, a debt has been legally assigned or transferred from the
original lender to another entity. This new entity becomes the "person to whom such
financial debt has been legally assigned or transferred" and has the right to collect the
debt from the borrower.
Financial Debt Section 5(8)
Financial Debt means a debt along with interest, if any, which
is disbursed against the consideration for the time value of
money and includes–
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any acceptance credit

facility or its de- materialised equivalent(your money is in bank
account);
(c) any amount raised pursuant to any note purchase facility or

the issue of bonds, notes, debentures, loan stock or any similar
instrument;
(d) the amount of any liability in respect of any lease or hire

purchase contract which is deemed as a finance or capital lease
under the Indian Accounting Standards (AS - 19, Ind AS - 116, IFRS - 16)
or such other accounting standards as may be prescribed;
(e) receivables sold or discounted other than any receivables

sold on non-recourse basis;
(f) any amount raised under any other transaction, including any
forward sale or purchase agreement, having the commercial effect
of a borrowing;
Explanation -For the purposes of this sub-clause -
(i) any amount raised from an allottee under a real estate project shal
be deemed to be an amount having the commercial effect of a
borrowing; and
(g) any derivative transaction entered into in connection with protectio

against or benefit from fluctuation in any rate or price and for
calculating the value of any derivative transaction, only the market
value of such transaction shall be taken into account;
(h) any counter-indemnity obligation in respect of a guarantee,

indemnity, bond, documentary letter of credit or any other
instrument issued by a bank or financial institution;
(i) the amount of any liability in respect of any of the guarantee

or indemnity for any of the items referred to in sub-clauses (a) to
(h) of this clause;
Note: Subscription Money for purchase of shares is not Financially debt - ACPC
ENTERPRISE V. AFFINITY BEAUTY SALOON (2018) (NCLT - Delhi Branch)
Advance amount paid as Security Deposit bearing interest is Financial Debt. NCLT, New
Delhi Bench vide its order dated 11th October 2021 in case of Magicon Impex Pvt. Ltd
observed that, the amount which has been released pursuant to Agreement in the form of
Security Deposit and the same is interest bearing, which means it is carrying
consideration of time value of money having commercial effect of a borrowing. Therefore,
in our view the “debt” claimed is a “Financial Debt” within the definition of Section 5(8)(f)
of IBC, 2016.
The Joint Development Agreement entered, is a contract of reciprocal rights and
obligations, both parties are admittedly Joint Development Partners, who entered into a
consortium of sorts for developing an Integrated Township and for any breach of terms
of contract, Section 7 Application is not maintainable as the amount cannot be construed
as financial debt as defined under section 5(8) of the Code. (Vipul Limited Vs. Solitaire
Buildmart Pvt. Ltd. [CA (AT) (Ins.) No. 550 of 2020] NCLAT judgement dated
18.08.2020)
The definition of “financial debt” in section 5(8) of the Code was amended vide the
insolvency and Bankruptcy code (Second Amendment) Act, 2018. The (Second
Amendment) Act of 2018 added an explanation in sub clause (f) of section 5(8).
The Explanation clarifies that for the purposes of sub-clause (f) any amount raised
from an allottee under a real estate project shall be deemed to be an amount
having the commercial effect of a borrowing. Thus, an allottee under a real estate
project (a buyer of an under-construction residential or commercial property) will
now be considered as a financial creditor, as the amount raised from allottees for
financing a real estate project has the commercial effect of a borrowing.
The explanation further clarifies that the expressions, “allottee” and “real estate
project” shall have the meanings respectively assigned to them in clauses (d) and
(zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016.
The Hon’ble Supreme Court of India has upheld the above stated legal position in
the matter of Pioneer Urban Land and Infrastructure Limited & Anr. v. Union of
India & Ors. dated 09.08.2019.
"Financial debt" is money that you borrow, and it includes extra money called "interest."
This interest is added because when you borrow money, you're using it right away
instead of waiting to save up. The interest compensates the lender for the time value of
money.
Examples to Understand:
Example 1 - Business Expansion:

Imagine a company wants to open a new branch to expand its operations. They estimate
they need $100,000 for this expansion. Instead of waiting years to save up, they decide
to borrow the money from a bank. The bank agrees to lend them $100,000 at an interest
rate of 6% per year. Here's how it works:
• The $100,000 is the "financial debt" the company borrows.
• Over time, they need to pay back the $100,000 to the bank, plus an additional
$6,000 (6% of $100,000) as interest is also Financial Debt
• The company is compensating the bank for the time value of money. They're paying
extra for using the $100,000 now instead of waiting to accumulate it.
Example 2 - Equipment Purchase:

A manufacturing company needs to buy new machinery worth $50,000 to improve
production. They decide to take out a loan from a lender. The lender agrees to provide
the $50,000 at an interest rate of 8% per year. Here's how this example fits:
• The $50,000 is the "financial debt" the company borrows.
• Along with paying back the $50,000, they also owe the lender an extra $4,000 (8%
of $50,000) as interest is also Financial debt.
• The company recognizes that using the new machinery immediately can help them
increase production and make more profit, so they agree to pay the interest for the ability
to use the funds sooner.
In these examples, the company is using "financial debt" to fund their business needs.
The interest they pay represents the consideration for the time value of money – they're
willing to pay extra for immediate access to funds that can help them grow or improve
their operations.
The concept of the time value of money (TVM) is based on the idea that money available
today is worth more than the same amount of money in the future. This is because money
can be invested to earn returns or interest over time. In other words, the value of money
changes over time due to factors like inflation, investment opportunities, and the potential to
earn interest.
Example 1 - Investing Money:

Imagine you have Rs.1,000 today. You can invest it in a savings account that offers a 5%
annual interest rate. After one year, your Rs.1,000 would grow to Rs.1,050. If you didn't have
the money now and had to wait a year, you'd miss out on that extra $50 you could have
earned through interest. This shows that the Rs.1,000 today is more valuable than the
promise of receiving Rs. 1,000 a year from now.
Example 2 - Borrowing Money:

Suppose you borrow Rs.1,000 from a friend and agree to pay them back in a year with an
additional Rs.100 as interest. If you had that Rs.1,100 today, you could invest it and earn
returns over the year. So, by repaying Rs.1,100 a year later, you're compensating your friend
for the time value of money and the potential investment opportunity they're missing out on.
Analysis of Clauses
Clause - b
An "acceptance credit facility" is like a special financial arrangement that helps companies get money
they need, especially when they have big orders to fulfill but can't wait for customers to pay them.
Here's a simpler breakdown:
Imagine a company gets a really big order from another company, but they need money to make the
products or goods for that order. Instead of waiting for the customer to pay, the company goes to a
bank for help.
The bank says, "Sure, we can give you the money you need now." But there's a catch. The company
has to promise that they'll pay back the money they borrowed along with a little extra (like a fee for
borrowing the money). This extra bit is called "interest."
In return for the bank's help, the company gives the bank something called an "acceptance credit note."
This note is like a formal IOU that says, "I promise to pay you back by a certain date."
The bank might keep this note until the promised date, or they might sell it to someone else who's
willing to wait for the company to pay back the money.
So, in simple terms, an acceptance credit facility is when a company gets money from a bank to
complete a big order. They promise to pay the bank back later with a little extra, and they give the bank
a special note that promises the payment. This helps the company get things done without waiting for
customers to pay first.
Example: International Trade and Acceptance Credit Facility
Company A, a furniture manufacturer based in India, receives a substantial order from a
retailer in Europe. The order is worth $500,000, but the retailer wants to pay in 90 days
after receiving the goods. Company A needs funds sooner to cover production costs and
to fulfill other orders.
To bridge the financial gap, Company A decides to utilize an acceptance credit facility.
They approach a bank, Bank X, for assistance. Here's how the process unfolds:
Agreement: Company A and Bank X agree on the terms of the acceptance credit facility.
Bank X agrees to provide Company A with the necessary funds, and in return, Company
A will issue an acceptance credit note.
Issuance of Acceptance Credit Note: Company A issues an acceptance credit note for
$500,000 to Bank X. This note represents Company A's promise to repay the borrowed
amount along with interest after a specified period, usually 90 days.
Funds Disbursement: Bank X provides Company A with the funds they need to cover
production costs and other expenses. This enables Company A to fulfill the order for the
European retailer.
Use of Acceptance Credit Note: Bank X holds onto the acceptance credit note, which is a
negotiable instrument. It can choose to keep the note until maturity or sell it in the market
to another investor.
Repayment: After 90 days, Company A receives payment from the European retailer for
the furniture. With the proceeds, Company A repays Bank X the $500,000 borrowed
amount along with the agreed-upon interest.
Key Takeaways:
• The acceptance credit facility allowed Company A to access funds immediately,
enabling them to fulfill the European retailer's order and cover production costs.
• Bank X benefited by receiving interest on the borrowed amount.
• The acceptance credit note issued by Company A provided Bank X with a tradeable
instrument that could potentially be sold to another investor before maturity.
In this example, the acceptance credit facility facilitated international trade by providing
Company A with timely financing. It's a practical way for businesses to manage cash flow
and meet their financial needs while offering lenders the potential to earn returns through
interest or the sale of the acceptance credit notes.
Clause - c
A note purchase facility refers to a financial arrangement where a company raises funds
by issuing certain types of debt instruments. These debt instruments can include bonds,
notes, debentures, loan stock, or similar instruments. Investors or institutions purchase
these debt instruments, effectively lending money to the issuing company. In return, the
issuing company agrees to pay back the borrowed amount along with interest at a
predetermined future date.
Examples:
Corporate Bonds:
A large corporation wants to fund a major expansion project. They issue bonds with a
face value of $10 million, offering an annual interest rate of 5%. Investors purchase
these bonds, lending the company the required funds. Over time, the company repays
the $10 million plus 5% interest to the bondholders.
Government Treasury Notes:

A government needs funds to build new infrastructure. They issue treasury notes with a
maturity period of 10 years and an interest rate of 3%. Investors buy these notes,
effectively lending money to the government. Over the 10 years, the government pays
back the borrowed amount along with the agreed-upon interest.
Convertible Debentures:
A startup company is looking for funding to develop a groundbreaking technology. They
issue convertible debentures to investors. These debentures can be converted into the
company's shares at a later date. Investors who hold these debentures can choose to
convert them into shares when the company's value increases, potentially benefiting from
the company's growth.
In each of these examples, the concept of a note purchase facility or debt instrument
involves a company or government raising funds by issuing various types of debt
instruments. These instruments represent promises to repay the borrowed amount along
with interest. Investors buy these instruments, essentially lending money to the issuers.
The issuers benefit from immediate funds, while investors gain from interest payments or
potential future benefits, depending on the type of instrument issued.
Clause - d
This point includes the amount of any liability that comes from lease or hire purchase
agreements, which are categorized as finance or capital leases as per specific accounting
standards. Finance or capital leases are leases that effectively transfer the ownership
risks and benefits to the lessee (the one leasing the asset). This type of lease is treated
as if the lessee bought the asset with borrowed money.
Example 1 - Finance Lease on Equipment:

Imagine a business needs a specialized machine that costs $50,000. Instead of
purchasing it outright, they enter into a finance lease agreement. The terms of the lease
specify that at the end of the lease period (let's say 5 years), the business can buy the
machine for a nominal amount, like $1,000.
In this case, the liability arising from the finance lease, which is considered a capital
lease, is the present value of all lease payments over the lease term, discounted using
an appropriate interest rate. This liability is part of the company's financial debt.
Example 2 - Capital Lease for Office Space:

A company needs office space and enters into a capital lease agreement for a building.
This agreement transfers substantially all the risks and rewards of ownership to the
lessee. The company is effectively financing the acquisition of the building through the
lease.
In this scenario, the amount representing the present value of future lease payments,
discounted using an appropriate interest rate, forms the liability arising from the capital
lease. This liability becomes part of the company's financial debt.
In essence, this part of the definition ensures that any liability resulting from lease or
hire purchase agreements that effectively transfer ownership benefits and risks to the
lessee is treated as financial debt. This recognizes that the company has effectively
acquired an asset with borrowed money, akin to a loan.
Clause - e
This point refers to the situation where a company sells or "discounts" its accounts
receivable to another party. Accounts receivable are amounts owed to the company by
its customers for products or services provided on credit. Selling or discounting
receivables means the company receives cash upfront for these future receivables,
usually at a slightly reduced amount to account for the time value of money and the risk
of non-payment.
The nature of these transactions are as follows

Recourse vs. Non-Recourse:
Non-Recourse: If the company had sold the receivables on a non-recourse basis, it

means that the financial institution cannot ask the company for repayment if the
customers fail to pay. In this case, the $95,000 would not be treated as financial debt,
as it's not a liability of the company. The financial institution's claim would be against the
customers.
Recourse Transactions:
If the transaction was recourse, meaning that the financial institution can ask the
company for repayment in case the customers don't pay, then the $95,000 could be
treated as a financial debt of the company. It would be included in the calculation of the
company's overall financial obligations.
The treatment varies based on whether the transaction is recourse or non-recourse.

Generally, transactions where the company retains the risk of non-payment by customers
might be considered as part of the company's financial debt.
Example - Receivables Discounting:

Imagine a manufacturing company sells products to various customers on credit, and
these customers have to pay the company after 30 days. The company may need cash
more urgently for its operations, so it decides to "discount" its receivables.
For instance, if the company has $100,000 in total receivables due in 30 days, it might
choose to discount them to a financial institution. The financial institution might pay the
company, let's say, $95,000 upfront. This means the company receives cash earlier than it
would have if it waited for the customers to pay.
In this scenario, the company is effectively "selling" its future receivables at a slightly
reduced amount to obtain immediate cash. The difference between the face value of the
receivables ($100,000) and the amount received ($95,000) accounts for the interest or
compensation for the time value of money.
Receivables sold or discounted are considered part of the company's financial debt
Clause - f
This point covers situations where a company raises funds through transactions that don't
fit the traditional definition of borrowing but still have a similar financial effect. These
transactions, although not loans, have the economic substance of borrowing money.
Example 1 - Sale and Leaseback:

A company owns a property and sells it to another entity. Simultaneously, the company
enters into a lease agreement to continue using the property by paying rent. The sale and
leaseback arrangement allows the company to receive immediate funds from the sale while
still using the property. Although not a loan, this arrangement provides the company with
funds similar to borrowing.
Example 2 - Forward Sale Agreement:

A company enters into a forward sale agreement with an investor for a specific commodity
it will produce in the future. The investor pays the company upfront, and in return, the
company commits to delivering the commodity once it's produced. This upfront payment
serves as a source of funds for the company, akin to borrowing.
Example 3 - Sale of Future Revenue Streams:

A tech company sells a portion of its future revenue from a new software product to an
investor. The investor pays the company a lump sum upfront, and in return, the investor
receives a share of the future revenue generated by the software. This arrangement
provides the company with immediate funds in exchange for future revenue, resembling
borrowing.
Example 4 - Derivative Contracts:

Derivative contracts are financial agreements that derive their value from an underlying
asset, index, rate, or event. While not loans themselves, derivative contracts can have
financial effects similar to borrowing, especially when they involve upfront payments.
Scenario:
Imagine a company that expects to need a certain amount of foreign currency in six
months to pay for imported goods. The company is concerned that the currency
exchange rate might rise, making the imports more expensive. To manage this risk, the
company enters into a currency swap derivative contract with a financial institution.
In this derivative contract, the company agrees to exchange a fixed amount of its local
currency for the foreign currency at an agreed exchange rate in six months. The financial
institution pays the company an upfront amount, let's say $10,000, for entering into this
contract.
Effect Similar to Borrowing:
Although the company isn't borrowing money in the traditional sense, it receives an
upfront payment that provides immediate funds. This upfront payment serves as
compensation for the potential risk the financial institution is taking on due to currency
fluctuations.
In all these examples, the transactions have the commercial effect of raising funds similar
to borrowing, even though they don't involve conventional loans. The IBC considers these
transactions as part of the company's financial debt because they provide immediate funds
that the company commits to repaying or compensating in some form in the future.
Explanation After Clause - f

Explanation - Amount Raised from Allottee in a Real Estate Project:
This explanation pertains to a specific context within the Insolvency and Bankruptcy Code
(IBC). It deals with situations where a real estate developer raises funds from individuals
who have been allotted properties in a real estate project. In such cases, the funds
received from these allottees are considered to have a commercial effect similar to
borrowing.
Example:
Let's say a real estate developer, Developer X, is working on a housing project. They
have sold apartments to several individuals who are potential homebuyers. As per the
sale agreement, these homebuyers have made initial payments or installments towards
the cost of the apartment they intend to purchase.
Now, according to the IBC provision you mentioned, any amount raised from these
allottees is deemed to have the commercial effect of borrowing. This means that even
though the homebuyers are not providing loans in the traditional sense, the funds they
are paying can be viewed as having a borrowing-like impact on the developer's financial
position.
Reasoning Behind the Explanation:

The rationale behind this provision is to ensure that funds collected from allottees for a
real estate project are recognized as a financial commitment similar to borrowing. Real
estate projects often involve significant amounts of money collected upfront from potential
buyers. If these projects face financial distress, the developer's financial obligations
towards these allottees need to be considered in a manner similar to financial debt.
In essence, the IBC considers funds received from allottees in a real estate project as
having the commercial effect of borrowing, even though the transaction is primarily a
property sale. This recognition helps protect the interests of homebuyers and ensures
that their claims are considered during insolvency proceedings if the developer faces
financial difficulties.
Clause - g
(g) Derivative Transactions and Their Treatment:
This point deals with transactions involving derivatives, which are contracts based on
changes in rates, prices, or other indicators. Derivative contracts can protect a company
from price changes or give it a chance to benefit. This point explains how these
transactions are considered under the Insolvency and Bankruptcy Code (IBC) in terms of
calculating their value and understanding their purpose.
Example 1 - Currency Hedge:

A company imports materials from overseas and wants to guard against currency value
fluctuations. It enters a derivative contract, agreeing to a fixed exchange rate with a bank.
If the currency's value changes unfavorably, the bank compensates the company.
Example 2 - Commodity Price Swap:

A farming company is worried about unpredictable fluctuations in grain prices. It strikes a
deal with a financial institution: the company will pay a fixed price, and the institution will
cover any losses if grain prices fall.
Example 3 - Interest Rate Protection:

A business holds a variable interest rate loan and is concerned about rate hikes. It gets
into a derivative agreement with a bank, agreeing that if the rate goes above a certain
point, the bank will cover the extra cost.
Clause - h
(h) Counter-Indemnity Obligation for Financial Instruments:
This point pertains to situations where a company provides a counter-indemnity in relation
to financial instruments issued by banks or financial institutions. A counter-indemnity is a
commitment to compensate the bank or institution if they are required to make a payment
under the original financial instrument.
Example 1 - Bank Guarantee and Counter-Indemnity:

Company A is seeking a bank guarantee to secure a contract. The bank agrees to issue
the guarantee, but they require a counter-indemnity from Company A. This means that if
the beneficiary of the guarantee makes a valid claim and the bank has to pay, Company
A agrees to reimburse the bank for that payment.
Example 2 - Export Letter of Credit and Counter-Indemnity:
Company B is exporting goods to an international buyer. The buyer requires a letter
of credit from their bank to ensure payment. Company B's bank issues the letter of
credit but asks Company B for a counter-indemnity. If the buyer defaults and the bank
has to pay, Company B is obligated to compensate the bank.
Example 3 - Indemnity for Loan:

Company C is taking a loan from a financial institution. As part of the loan agreement,
Company C provides an indemnity to the bank. If Company C defaults on the loan,
the bank might invoke the indemnity to recover the outstanding amount.
Example 4 - Supplier Guarantee and Counter-Indemnity:

Company Z needs to procure supplies from Supplier S. Supplier S demands a
supplier guarantee to secure their payment. Company Z's bank issues the guarantee,
and Company Z provides a counter-indemnity. If Company Z defaults on the payment,
their bank might have to pay Supplier S. The counter-indemnity commits Company Z
to repay the bank for any such payments.
In these examples, counter-indemnities create a secondary layer of financial

responsibility. If the primary obligor (such as a construction company or an exporter)
fails to meet their obligations under the original financial instrument, the party providing
the counter-indemnity (usually the company itself) must step in and compensate the
bank or financial institution that issued the instrument. This counter-indemnity
obligation adds to the company's financial commitments and is recognized as part of
their financial debt under the Insolvency and Bankruptcy Code (IBC).
Clause - i
(i) Liability for Guarantees or Indemnities under IBC:
This point addresses the liabilities arising from guarantees or indemnities related to the
items mentioned in sub-clauses (a) to (h) of this clause. It emphasizes that the amount of
liability stemming from these guarantees or indemnities is included in the company's
financial debt under the IBC.
Example 1 - Bank Loan Guarantee:

Company A secures a loan from Bank X. To back the loan, Company A provides a
guarantee from Company B. If Company A defaults on the loan, Bank X may call upon the
guarantee provided by Company B. If Company B is required to pay on behalf of Company
A, the amount paid by Company B becomes a liability for Company A. This liability is
treated as part of Company A's financial debt under the IBC.
Information Memorandum Section 5(10)
“Information memorandum” means a memorandum prepared by
resolution professional under section 29(1)of this code
"Information Memorandum" Definition:

An "Information Memorandum" is a document that is prepared by the resolution
professional as per Section 29(1) of the Insolvency and Bankruptcy Code (IBC). This
document provides essential information about the distressed company undergoing
insolvency proceedings. It is intended to furnish potential resolution applicants with crucial
details about the company's financial position, assets, liabilities, operations, and other
relevant information to facilitate informed decision-making during the resolution process.
Insolvency commencement date Section 5(12)

“Insolvency commencement date” means the date of admission of
an application for initiating corporate insolvency o process by the
Adjudicating Authority under sections 7, 9 or section 10, as the
case may be:
Insolvency Process Cost Section 5(13)

“Insolvency resolution process costs” means –
(a) the amount of any interim finance and the costs incurred in
raising such finance;
(b) the fees payable to any person acting as a resolution

professional;
(c) any costs incurred by the resolution professional in running

the business of the corporate debtor as a going concern;
(d) any costs incurred at the expense of the Government to
facilitate the insolvency resolution process; and
(e) any other costs as may be specified by the Board;
Insolvency Resolution Process Period Section 5(14)

“Insolvency resolution process period” means the period of one
hundred and eighty days beginning from the insolvency
commencement date and ending on one hundred and eightieth
day;
Liquidation Cost Section 5(16)
“Liquidation cost” means any cost incurred by the liquidator
during the period of liquidation subject to such regulations, as
may be specified by the Board;
Liquidation Commencement date Section 5(17)

“Liquidation commencement date” means the date on which
proceedings for liquidation commence in accordance with section
33 or section 59, as the case may be;
Liquidator Section 5(18)
“Liquidator” means an insolvency professional appointed as a

liquidator in accordance with the provisions of Chapter III or
Chapter V of this Part, as the case may be;
Operational Creditors Section 5(20)
“Operational creditor” means a person to whom an operational
debt is owed and includes any person to whom such debt has
been legally assigned or transferred;
Meaning of "Owes":
When we say someone "owes" payment for goods or services, it means that they have a
debt or obligation to pay a specific amount of money to another party. This typically
happens when someone has received goods, services, or benefits from another person or
entity, and now they are required to give something back, usually money, in return.
Example using the word "Owes":

Imagine you borrow money from your friend to buy a new phone. You now owe your friend
the money you borrowed, meaning you have a responsibility to repay that borrowed amount.
In this case, you are the person who "owes" the money, and your friend is the party to
whom you owe the payment.
"Operational Creditor" Definition:

An "Operational Creditor" is a person who is owed an operational debt. This category
includes not only the original creditor but also any person to whom the debt has been
legally assigned or transferred. it means that someone has a rightful claim to receive
payment from another party for a specific product, service, or obligation.
The term "owe" signifies the financial responsibility or obligation that one party has
towards another. An operational creditor is someone who has provided goods, services,
or assistance and is waiting to receive payment in return, forming a financial
relationship based on this obligation.
Example 1 - Original Operational Creditor:

Supplier A provides goods worth ₹100,000 to Company X. Company X is obligated to
pay Supplier A for the goods received. In this case, Supplier A is the original
operational creditor because they provided goods as part of their normal business
operations and are awaiting payment from Company X.
An "Operational Creditor" is a person who is owed an operational debt. This category

includes not only the original creditor but also any person to whom the debt has
been legally assigned or transferred.
Example 2 - Assigned Operational Creditor:

Supplier B sells its outstanding operational debt of ₹50,000 owed by Company Y to
Financial Institution Z. Financial Institution Z legally acquires the debt. Now, Financial
Institution Z becomes an operational creditor because they own the rights to the
operational debt, even though they weren't the original supplier of goods or services.
It is clear that an OC who has assigned or legally transferred any operational debt to an
FC, the assignee or transferee shall be considered as an OC to the extent of such
assignment or legal transfer. (Cooperative Rabobank U.A. Singapore Branch Vs.
Shailendra Ajmera [CA (AT) (Ins.) No. 261 of 2018] NCLAT judgement dated 29.04.2019)
The workmen of a Company come within the meaning of an OC in terms of section

5(20) r/w section 5(21) of the Code. (Suresh Narayan Singh Vs. Tayo Rolls Ltd. [CA (AT)
(Ins.) No. 112 of 2018] NCLAT judgement dated 26.09.2018)
Operational Debt Section 5(21)
“Operational debt” means

• a claim in respect of the provision of goods or services
• including employment or
• a debt in respect of the payment 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;
Operational debt would include a claim in respect of the provision of goods or services,
including employment, or a debt in respect of payment of dues arising under any law and
payable to the Government or any local authority. (Swiss Ribbons Pvt. Ltd. & Anr. Vs.
Union of India & Ors. [WP (Civil) Nos. 99, 100, 115, 459, 598, 775, 822, 849, and 1221 of
2018, SLP (Civil) No. 28623 of 2018 and WP (Civil) 37 of 2019] SC judgement dated
25.01.2019)
The property seized by Kolkata Municipal Corporation (KMC) towards recovery of

municipal tax dues from CD, can be the subject matter of the CIRP under the Code as
the claim of KMC had attained finality and fastened a liability upon the CD, thus
constituting an 'operational debt' under section 5(21) of the Code. (Kolkata Municipal
Corporation and Anr. Vs. Union of India and Ors. [WPA No.977 of 2020] HC, Calcutta,
Analysis of Section 5(21)
(1) "a claim in respect of the provision of goods or services":
This refers to any unpaid bills or dues arising from the supply of goods or services by
one party to another.
Claim : operational debt, a "claim" refers to a formal request or demand made by one
party to another for payment or compensation for goods, services, or obligations
provided.
Example: A bakery delivers bread and pastries to a café. If the café doesn't pay the
bakery for the delivered goods, the amount owed by the café becomes an operational
debt.
(2) "including employment":
Operational debt also includes pending salary payments or other financial obligations
towards employees.
Example: An IT company owes its employees their monthly salaries. These outstanding
salaries are considered operational debts of formal
the request
company.
or demand made by one party to another for payment
(3) "a debt in respect of the payment 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":
This covers debts owed due to legal requirements, such as taxes, fees, or other
payments to government bodies.
Example: A restaurant owes the State Government unpaid sales tax collected from
customers. The pending sales tax amount constitutes an operational debt.
In essence, the definition of operational debt encompasses various financial obligations

that can arise from supplying goods, providing services, paying employees, and fulfilling
legal requirements to government entities. It's a comprehensive term that encompasses
a wide range of financial responsibilities within different aspects of business operations.
Chipsan Aviation Pvt. Ltd. Vs. Punj Llyod Aviation Ltd. [Company Appeal (AT)
(Insolvency) No. 261 of 2022] On an assurance from the CD, a sum of Rs. 60 lakh was
advanced for aviation related services. The advance payment was reflected in the
balance sheet of the CD. However, there was no contract between the parties for
providing aviation services. The issue for consideration was whether such the advance
paid will fall within the definition of ‘operational debt’ under the Code. The AA rejected
the application holding that advance payment made by OC to the CD does not fall within
operational debt. On appeal, the NCLAT observed that the expression ‘in respect of’ in
section 5(21) of the Code has to be interpreted in a broad and purposive manner and
held that the advance payment of Rs. 60 lakh was clearly an operational debt.
The Supreme Court in its order dated August 09,2019 in the case of Pioneer Urban Land
and Infrastructure Ltd. v. Union of India, held that “a debt which arises out of advance
payment made to a corporate debtor for supply of goods or services would be
considered as an operational debt”.
Personal Guarantor Section 5(22)
“Personal guarantor” means an individual who is the surety in a

contract of guarantee to a corporate debtor;
Resolution Applicant Section 5(25)
“Resolution applicant" means a person, who individually or jointly

with any other person, submits a resolution plan to the resolution
professional pursuant to the invitation made under clause (h) of
sub-section (2) of section 25n or pursuant to section 54K, as the
case may be.
Resolution Plan Section 5(26)
“Resolution plan” means a plan proposed by resolution applicant

for insolvency resolution of the corporate debtor as a going
concern in accordance with Part II
Explanation.- For removal of doubts, it is hereby clarified that a

resolution plan may include provisions for the restructuring of the
corporate debtor, including by way of merger,amalgamation and
demerger.
Resolution Professional Section 5(27)
“Resolution professional”, for the purposes of this Part, means

an insolvency professional appointed to conduct the corporate
insolvency resolution process [or the pre- packaged insolvency
resolution process, as the case may be,] and includes an
interim- resolution professional;
Voting Share Section 5(28)
“Voting share” means the share of the voting rights of a single

financial creditor in the committee of creditors which is based
on the proportion of the financial debt owed to such financial
creditor in relation to the financial debt owed by the corporate
debtor.
Meaning of "Voting Share":
"Voting share" refers to the percentage of voting rights that a single financial creditor
has within the Committee of Creditors (CoC). The CoC is a group of financial creditors
that plays a crucial role in the insolvency resolution process of a corporate debtor. The
voting share is determined based on the proportion of the financial debt that the creditor
is owed in relation to the total financial debt owed by the corporate debtor.
Example with Realistic Scenario:

Consider a situation where a company, ABC Electronics, is undergoing insolvency
proceedings. The company owes a total financial debt of ₹50,00,00,000 to multiple
financial creditors, including banks and bondholders.
Financial Creditor A (Bank):

• Owed Amount: ₹15,00,00,000
• Voting Share Calculation: (₹15,00,00,000 / ₹50,00,00,000) * 100 = 30%
• Voting Share: 30%
Financial Creditor B (Bondholders):

• Owed Amount: ₹20,00,00,000
Financial Creditor C (Bank):

• Owed Amount: ₹15,00,00,000
In this scenario, the total voting rights within the Committee of Creditors sum up to
100%. Each financial creditor's voting share is calculated based on the ratio of their
owed financial debt to the total financial debt of the corporate debtor.
So, when decisions are made within the CoC regarding the insolvency resolution
process of the company, each financial creditor's voting power is proportional to their
exposure to the company's financial debt. This ensures that creditors with higher
financial stakes have a more significant say in the decisions taken during the insolvency
proceedings.
Corporate Insolvency Resolution Process
INTRODUCTION of CIRP
Part II of the IBC, 2016 deals with the insolvency resolution and
liquidation for corporate persons. Section 4 of the Insolvency and
Bankruptcy Code, 2016 provides that Part II of the Code shall
apply to matters relating to the insolvency and liquidation of
corporate debtors where the minimum amount of the default is
one crore rupees.
Proviso to Section 4 of the Insolvency and Bankruptcy Code,
2016 also provides that Central Government may prescribe
minimum amount of default of higher value, which shall not be
more than one crore rupees, for matters relating to the pre-
packaged insolvency resolution process of corporate debtors
that are Micro, Small and Medium Enterprises as provided under
Chapter III-A of Part II.
Part II of the IBC,2016 lays down the following two independent

stages:
(i) Corporate Insolvency Resolution Process [Sections 6 to 32A] and
(ii) Liquidation [Sections 33 to 54] and Voluntary Liquidation [Section 59]
Chapter II of Part II deals with corporate insolvency resolution

process. Chapter II of Part II (together with Chapter VII of Part II
which contains provisions relating to offences and penalties)
specifically deals with corporate insolvency resolution process.
Chapter III together with Chapter V of Part II governs the liquidation
process for corporate persons.
Chapter III-A of Part II that deals with Pre-Packaged Insolvency
Resolution Process for corporate debtors that are Micro, Small
and Medium Enterprises was introduced in April 2021 by way of
the Insolvency and Bankruptcy Code (Amendment) Ordinance,
2021.
The expression “corporate insolvency resolution process” is not

defined in the Insolvency and Bankruptcy Code, 2016. The
Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016 defines the expression “corporate insolvency
resolution process”. According to Rule 3(1)(b), “corporate
insolvency resolution process” means the insolvency resolution
process for corporate persons under Chapter II of Part II of
the Code.
In corporate insolvency resolution process, the financial creditors

assess the viability of debtor’s business and the options for its
revival and rehabilitation. If the corporate insolvency resolution
process fails or the financial creditors decide that the business of
the debtor cannot be carried on in a profitable manner and it
should be wound up, the debtor’s business undergoes the
liquidation process.
He Insolvency Resolution Process in Chapter IV of Part II of the

Code and is applicable to small corporates as defined in Section
55(2) of the Insolvency and Bankruptcy Code, 2016.
Section 6 Persons who initiate CIRP
Where any corporate debtor[Section 3(8)]commits a default, [Section 3(12)]
• a financial creditor(FC); [Section 5(7)]
• an operational creditor(OC) or [Section 5(20)]
• the corporate debtor(CD)itself [Section 3(8)]
may initiate corporate insolvency resolution process in respect of
such corporate debtor in the manner as provided under this
Chapter.
Financial .process Section 7
under
creditors section
Section 6
Person Operational process
Section 8 & 9
who can creditors under
section
initiate
CIRP
Corporate
applicant
process Section 10
section
The Insolvency and Bankruptcy Code, 2016 not only permits the corporate debtor
itself to initiate the insolvency resolution process once it has defaulted on a debt
but also the operational creditors to initiate the insolvency resolution process.
These provisions bring the law in line with international practices, which permit
unsecured creditors (including employees, suppliers etc. who fall under the
definition of operational creditors) to file for the initiation of insolvency resolution
proceedings.
Section 7 Initiation of CIRP by financial creditor.
Section 7(1) Who can initiate insolvency resolution process?
• A financial creditor either by itself or
• jointly with other financial creditors (two or more financial creditors jointly.),
• or any other person on behalf of the financial creditor, as may be
notified by the Central Government may
• file an application for initiating corporate insolvency resolution
• against a corporate debtor
• before the Adjudicating Authority when a default has occurred.
Vide Notification S.O.1091(E) dated 27 February, 2019, the Central government hereby notified
following persons who may file an application for initiating corporate insolvency resolution
process against a corporate debtor before the Adjudicating Authority, on behalf of the Financial
Creditor:-
(i) a guardian;
(ii) an executor or administrator of an estate of a financial creditor;
(iii) a trustee (including a debenture trustee); and
(iv) a person duly authorized by the Board of Directors of a Company.
Provided that for the financial creditors, referred to section 21(6A)

(a)/(b), an application for initiation CIRP against the corporate debtor
shall be filed jointly by not less than one hundred of such creditors
in the same class or not less than ten per cent. of the total
number of such creditors in the same class, whichever is less:
21(6A) Where a financial debt—

(a) is in the form of securities or deposits and the terms of the
financial debt provide for appointment of a trustee or agent to act
as authorised representative for all the financial creditors, such
trustee or agent shall act on behalf of such financial creditors;
Analysis of Section 21(6A)(a)
Type of Creditor: Securities
Bondholders: When a company issues bonds to raise money, the people or institutions
that buy these bonds become bondholders. They are creditors to the company, and the
company owes them money when the bonds mature.
Example: "TechCorp" issues corporate bonds to raise funds for a new project. Investors
who buy these bonds lend money to TechCorp. If the terms of the bonds state that a
trustee or agent will represent these bondholders, then these bondholders fall under
clause 21(6A)(a).
Shareholders: If a company issues shares and raises capital by selling these shares, the
individuals or entities that own these shares are shareholders. While shareholders
typically have ownership stakes, they can also be considered creditors if the company
has issued dividend-paying preferred shares.
Example: "Growth Industries" issues preferred shares that promise to pay dividends to
the shareholders. If these shares have terms that include the appointment of a trustee or
agent to represent the shareholders, then these shareholders fall under clause 21(6A)(a).
Type of Creditor: Deposits

Depositors: When individuals or entities deposit money in a company's bank account,
they become creditors. The company is now obligated to pay them back the deposited
amount along with any agreed-upon interest.
Example: "Savings Bank" accepts deposits from customers who want to earn interest on
their savings. If the deposit agreements specify the appointment of a trustee or agent to
represent these depositors' interests, then these depositors fall under clause 21(6A)(a).
Certificate of Deposit (CD) Holders: These are individuals or institutions that hold
certificates issued by a bank acknowledging a deposit with a specified interest rate and
maturity date.
Example: "Secure Bank" issues certificates of deposit to customers who want to earn
interest on their deposits. If these certificates outline the appointment of a trustee or
agent to act on behalf of the CD holders, then these CD holders fall under clause 21(6A)
(a).
In essence, clause 21(6A)(a) covers creditors who are owed money through securities
like bonds or stocks, as well as those who have deposited money with a company. If the
terms of these financial debts specify the appointment of a trustee or agent to represent
their interests, then these creditors are considered under this clause.
(b) is owed to a class of creditors exceeding the number as may
be specified, other than the creditors covered under clause (a) or
sub-section (6), the interim resolution professional shall make an
application to the Adjudicating Authority along with the list of all
financial creditors, containing the name of an insolvency
professional, other than the interim resolution professional, to act
as their authorised representative who shall be appointed by the
Adjudicating Authority prior to the first meeting of the committee
of creditors;
Type of Creditor: Class of Creditors Exceeding Specified Number

Suppliers to a Retail Chain:
Imagine a retail chain named "SuperMart" that owes money to 300 suppliers who provide
goods for its stores. If the law specifies that for a class of creditors exceeding a certain
number, creditors other than those covered in Section 21(6A)(a) or sub-section (6) can
apply, and if the specified number is, let's say, 200, then the suppliers of SuperMart
qualify. In this case, if a significant number of these suppliers (more than 200) decide to
initiate the Corporate Insolvency Resolution Process (CIRP) against SuperMart, an
application can be made to appoint an authorized representative to represent these
creditors.
Service Providers to a Telecom Company:

Consider a telecom company named "ConnectCom" that has contracts with 400 different
service providers who offer various services needed for the company's operations. If a
condition exists that a class of creditors exceeding a certain number (let's say 300) can
apply for CIRP, and if these service providers want to take action against ConnectCom
due to unpaid dues, they can initiate the process by applying for an authorized
representative.
Multiple Lenders to a Construction Firm:

Let's say a construction firm "BuildRight Constructions" has borrowed money from a mix
of 150 banks, 100 private lenders, and 50 financial institutions. If the law specifies that
creditors exceeding a certain number (let's say 200) can apply for CIRP, then all of these
lenders are part of the class. If at least 200 of these lenders, combined from different
categories, decide to initiate the CIRP process, they can do so by applying for an
authorized representative.
Provided further that for financial creditors who are allottees
under a real estate project, an application for initiating CIRP
against the corporate debtor shall be filed jointly by not less than
one hundred of such allottees under the same real estate project
or not less than ten per cent. of the total number of such allottees
under the same real estate project, whichever is less:
This provision deals specifically with situations where individuals who have purchased
properties (allottees) in a real estate project want to initiate the Corporate Insolvency
Resolution Process (CIRP) against the company responsible for the project.
Explanation with Examples:

Dream Meadows Project:
Suppose there's a real estate project called "Dream Meadows" with a total of 800 allottees
who have purchased apartments in the project. According to this provision:
• If not less than one hundred allottees (100) decide they want to initiate the CIRP
process to address issues related to the project, they can file an application together.
• Alternatively, if ten percent of the total allottees want to initiate the CIRP process, that
would be 80 allottees (800 x 0.10 = 80). In this case, since 80 is less than 100, the
application can still be filed with 80 allottees.
Essentially, the law requires that either 100 or 10% (whichever is less) of the allottees
under the same real estate project must collectively decide to start the CIRP process. In
this example, 80 is less than 100, so the application can be filed by 80 allottees.
Green Homes Project:

Consider another real estate project named "Green Homes" with a total of 250 allottees.
According to this provision:
• If not less than one hundred allottees (100) want to initiate the CIRP process, they
can file an application together.
• Alternatively, if ten percent of the total allottees want to initiate the CIRP process, that
would be 25 allottees (250 x 0.10 = 25). In this case, since 25 is less than 100, the
application can still be filed with 25 allottees.
In summary, this provision aims to ensure that a significant number of allottees under a
real estate project must come together to initiate the CIRP process against the corporate
debtor responsible for the project. It sets a condition based on the number of allottees,
where the requirement is either 100 allottees or 10% of the total allottees (whichever is
less) to file the application jointly
It was further amended by the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2019. Prior to the amendment, a single deposit holder, debenture
holder or home buyer was entitled to file an insolvency application under the Code, to
which the developers had alleged that home buyers were misusing the law as
thousands of cases were filed against real estate companies for delay in possession
and completion of projects. After the said Amendment, a single home buyer cannot
file an insolvency application against the Company.
The Government had amended the definition of Financial Debt vide Insolvency and
Bankruptcy Code (Second Amendment) Act 2018, which included that, any amount
raised from allottees under the real estate project shall be deemed to be an
amount having the commercial effect of borrowing and hence will be treated as
Financial debt and thereby allottees were granted the status of ‘Financial Creditor’
u/s 5(7). The aggrieved Real Estate Companies filed a writ petition in the Hon’ble
Supreme Court and challenged the amendment. Hon’ble Supreme Court in the
matter of ‘Pioneer Urban Land and Infrastructure Limited vs. Union of India’ upheld
the constitutional validity of the amendment and stated that the home buyers are
Financial Creditors. With this amendment, the Government has introduced the
threshold for filing insolvency application by the home buyers against the builder
companies. Aggrieved by this amendment, the aggrieved home buyers had filed a
writ petition in the Hon’ble Supreme Court, challenging the amendment. The
Supreme Court, in the matter of ‘Manish Kumar & Ors. Vs. Union of India & anr.’,
passed an interim order to maintain the status quo of the pending applications till
the matter is decided by it. Thereby, the IBC amendment shall hold hold and
continue to be in force as at present.
Provided also that where an application for initiating the CIRP
against a corporate debtor has been filed by a financial creditor
referred to in the first and second provisos and has not been
admitted by the Adjudicating Authority before the commencement
of the Insolvency and Bankruptcy Code (Amendment) Act, 2020,
such application shall be modified to comply with the requirements
of the first or second proviso within thirty days of the
commencement of the said Act, failing which the application shall
be deemed to be withdrawn before its admission.
Explanation. - For the purposes of this sub-section, a default

includes a default in respect of a financial debt owed not only to
the applicant financial creditor but to any other financial creditor of
the corporate debtor.
The explanation appended to section 7(1) makes it clear that for the purposes of section
7(1), a default includes a default in respect of a financial debt owed not only to the
applicant financial creditor but to any other financial creditor of the corporate debtor. Thus,
a financial creditor can file an application for corporate insolvency resolution process even
if the default is in respect of debt of another financial creditor.
(2) The financial creditor shall make an application under Section

7(1) in such form (Form 1) and manner and accompanied with
such fee(Rs. 25,000)as may be prescribed.
Procedure to be followed by the Financial creditor?

(3) The financial creditor shall, along with the application furnish -
(a) record of the default recorded with the information utility or

such other record or evidence of default as may be specified;
The NCLT vide Order dated 12th May, 2020 stated that default record from Information
Utility must be filed with all new petitions filed under Section 7 of the Code and no new
petition shall be entertained without record of default.
The requirement to provide proof of default aims at ensuring that financial creditors do
not file frivolous applications or applications which prematurely put the corporate debtor
into insolvency resolution proceedings for extraneous considerations.
(b) the name of the resolution professional proposed to act as an

interim resolution professional; and
(c) any other information as may be specified by the Board.

Time period for determination of default?
(4) The Adjudicating Authority shall, within fourteen days of the

receipt of the application under Section 7(2), ascertain the
existence of a default from the records of an information utility or
on the basis of other evidence furnished by the financial creditor
under Section 7(3): (Supreme Court judgment: time period of 14 days is
directory and not mandatory held in the matter of Surendra trading Company v. Juggilal
Kamlapat Jute Mills Company limited and others)
Provided that if the Adjudicating Authority has not ascertained

the existence of default and passed an order under Section 7(5)
within such time, it shall record its reasons in writing for the
same.
Order
(5) Where the Adjudicating Authority(NCLT)is satisfied that -
(a) a default has occurred and
(b) the application under sub-section (2) is complete,
(c) and there is no disciplinary proceedings pending against the
proposed resolution professional,
it may, by order, admit such application; or
(a) default has not occurred or
(b)the application under sub-section (2) is incomplete or
(c)any disciplinary proceeding is pending against the proposed
resolution professional,
it may, by order, reject such application:
Notice to rectify the defect in the application:
Provided that the NCLT shall, before rejecting the application

under section 7(5)(b), give a notice to the applicant to rectify the
defect in his application within seven days of receipt of such
notice from the Adjudicating Authority.
Commencement of corporate insolvency resolution process:

(6) The corporate insolvency resolution process shall commence
from the date of admission of the application under Section 7(5).
Communication of Order:
(7) The Adjudicating Authority shall communicate order of admission

or rejection of such application within seven days, as the case may
be —
(1) in case of admission, to the financial creditor and the corporate
debtor;
(2) In case of rejection, to the financial creditor
Withdrawal of application:
Withdrawal of application shall be pursuant to Section 12A of the
Code read with Regulation 30A of the IBBI (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016. The following
scenarios may arise for withdrawal of application:
1. Before admission of application
An application initiating CIRP may be withdrawn before its
admission, at any time with the permission of the Adjudicating
Authority. [Rule 8 of the Insolvency and Bankruptcy (Application
to Adjudicating Authority) Rules, 2016]
2. After admission of application

Once application is admitted, further three scenarios may arise:
(a) Before (b) After Constitution of (c)After issue of
Constitution of CoC CoC but before issue of invitation for EoI
• The applicant shall Invitation for Expression of • The same procedure
make an application for Interest (“EoI”) as stipulated for
withdrawal to the • An application for scenario ‘b’ above
Adjudicating Authority withdrawal shall be firstly shall apply.
through the interim considered by the CoC, • However, in this
resolution professional; within seven days of its scenario, the
receipt. applicant shall state
• Such withdrawal the reasons justifying
application shall be withdrawal after issue
approved by the CoC with of such invitation
ninety percent voting share,
• upon which the resolution
professional shall submit
such withdrawal application
along with the approval of
the committee,
• to the Adjudicating
Authority on behalf of the
applicant,
• within three days of such
approval
In all the above scenarios, the final approval of such withdrawal

shall be by way of an order passed by the NCLT
Case Laws 1:
Supreme Court in Surendra Trading Company Vs. Juggilal
Kamlapat Jute Mills Company Ltd. & Others prescribed time period
for determination of defaults. It was held that the time limit
prescribed in IBC, 2016 for admitting or rejecting a petition or
initiation of CIRP under proviso to sub-section (5) of section 7 or
sub-section (5) of section 9 or sub-section (4) of section 10 is
procedural in nature, a tool of aid in expeditious dispensation of
justice and is directory.
Various provisions of the Code would indicate that there are
three stages:
(i) First stage: Filing of the application: When the application is
filed, the Registry of the Adjudicating Authority is supposed to
scrutinize the same to find out as to whether it is complete in all
respects or there are certain defects. If it is complete, the same
shall be posted for preliminary hearing before the Adjudicating
Authority.
If there are defects, the applicant would be notified about those

defects so that these are removed. For this purpose, seven days’
time is given. Once the defects are removed then the application
would be posted before the Adjudicating Authority.
(ii) Second Stage: When the application is listed before the

Adjudicating Authority: It has to take a decision to either admit or
reject the application. For this purpose, fourteen days’ time is
granted to the Adjudicating Authority. If the application is rejected,
the matter is given a quietus(i.e. dead) at that level itself. However,
if it is admitted, we enter the third stage.
(iii) Third Stage: After admission of the application: As
application is admitted, insolvency resolution process
commences. This resolution process is to be completed within
180 days, which is extendable, in certain cases, up to 90 days.
Insofar as the first stage is concerned, it has no bearing on the
insolvency resolution process at all, inasmuch as, unless the
application is complete in every respect, the Adjudicating
Authority is not supposed to deal with the same. It is at the
second stage that the Adjudicating Authority is to apply its mind
and decide as to whether the application should be admitted or
rejected. Here adjudication process starts. However, in spite
thereof, when this period of fourteen days given by the statute
to the Adjudicating Authority to take a decision to admit or reject
the application is directory, there is no reason to make it
mandatory in respect of the first stage, which is pre- adjudication
stage.
Thus, provision of removing the defects within seven days is

directory and not mandatory in nature.
Case Laws 2:
National Company Law Tribunal, Mumbai Bench in Bank of India

v. Future Retail Ltd.in 2022, came with an issue, where a financial
creditor had provided various credit facilities and non-fund-based
limits to corporate debtor. It were restructured under a sanctioned
letter and framework agreement. Corporate debtor defaulted in
repayment and account of corporate debtor was classified as a
non-performing asset (NPA).
Meanwhile, corporate debtor issued a letter to financial creditor
and certain other lenders for one-time restructuring (OTR)
facilities under 'resolution frame work agreement for Covid 19
related stress as per RBI Circular. Financial creditor considered
corporate debtor's request allowing OTR and executed a
framework agreement for restructuring of existing outstanding
amount. However, corporate debtor again defaulted in
repayment of an outstanding amount. Financial creditor filed
petition under section 7. It was noted that corporate debtor, on
payment obligation under OTR scheme, admitted default of its
repayment and further, corporate debtor admitted outstanding
amount in its meeting with lenders that events of default
continued to subsist. It was held, in view of facts, that
existence of debt and default had been proved and, therefore,
petition filed by financial creditor to initiate CIRP against
corporate debtor was admitted.
Case Laws 3:
National Company Law Appellate Tribunal, New Delhi, in 2022

in Siti Networks Ltd. v. Assets Care and Reconstruction
Enterprises Ltd. decided on continuation of proceeding by
assignee on an application seeking substitution as financial
creditor in place of original financial creditor.
In the given case, financial creditor sanctioned a loan to

corporate debtor, however, corporate debtor failed and was
classified as non-performing asset.
Financial creditor filed an application under section 7 against
corporate debtor and same was admitted by NCLT. Later,
financial creditor vide registered assignment deed, assigned debt
of corporate debtor to respondent i.e. assignee. Corporate debtor
was informed about aforesaid assignment. Subsequently,
assignee filed an application seeking substitution as financial
creditor in place of original financial creditor and was permitted
by NCLT to pursue application filed by original financial creditor.
Challenging said order, instant appeal was filed by corporate
debtor. It was held that section 5(7) of the Code defines financial
creditor, also includes a person to whom such debt has been
legally assigned or transferred to. Therefore by virtue of
assignment, assignee became financial creditor and had stepped
in shoes of original financial creditor and assignee had every
right to continue proceeding, which was initiated by original
financial creditor.
Case Laws 4:
SC in Manish Kumar v. Union of India in 2021 came up with
a decision on section 7 by section 3 of IBC (Amendment) Act,
2020 requiring minimum threshold for initiation of proceedings
(class action) by certain categories of financial creditors
against corporate debtors such as real estate developers, are
Constitutionally Valid.
In the given case, CIRP was initiated by the Financial creditors

requiring minimum threshold for initiation of proceedings (class
action) by certain categories of financial creditors against
corporate debtors such as real estate developers.
According to Provisos of section 7, it was required that in case of
a real estate project, being conducted by a corporate debtor, an
application can be filed by either one hundred allottees or allottees
constituting one-tenth of allottees, whichever is less, if they are
able to establish a default in regard to a financial creditor and it is
not necessary that there must be default qua any of Applicants. It
was held that since default can be qua any of applicants and even
a person who is not an applicant and action is one which is
understood to be in rem, in that, procedures under Code would
bind entire set of stakeholders including whole of allottees.
Section 8 Insolvency Resolution by Operational creditor.
Serving of demand notice
(1) 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 such form and manner
as may be prescribed.
"Demand notice" means a notice served by an operational creditor to the corporate debtor
demanding payment of the operational debt in respect of which the default has occurred.
On receipt of demand notice by corporate debtor
(2) The corporate debtor shall, within a period of ten days of the
receipt of the demand notice or copy of the invoice mentioned in
Section 8(1) bring to the notice of the operational creditor -
(a) existence of a dispute,if any, or 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 payment of unpaid operational debt-It is possible that
corporate debtor might have already paid the unpaid operational
debt, there in such situation, corporate debtor will inform within 10
days -
(i) by sending an attested copy of the record of electronic transfer

of the unpaid amount from the bank account of the corporate
debtor; or
(ii) by sending an attested copy of record that the operational

creditor has encashed a cheque issued by the corporate debtor.
The rationale for a different procedure in case of operational creditor is based on the
premise that the operational debts (such as trade debts, salary or wage claims, government
dues) generally tend to be of smaller amounts (in comparison to financial debts) or are
recurring in nature. The possibility of disputed debts in relation to operational creditors is
also higher in comparison to financial creditors such as banks and financial institutions.
The procedure established in Section 8 of the Code ensures that operational creditors,
whose debt claims are usually smaller, are not prematurely putting the corporate debtor into
the insolvency resolution process or initiating the process for extraneous considerations.
The procedure laid down in section 8 also facilitates informal negotiations between such
creditors and the corporate debtor. Such negotiations may result in a restructuring of the
debt outside the formal proceedings.
Section 9 Application of Intimation
I of CIRP by Operational creditor.
Filing of application by operational creditor:
(1) After the expiry of the period of ten days
• from the date of delivery of the notice or invoice demanding

payment under section 8(1),
• if the operational creditor does not receive payment from

the corporate debtor or
• notice of the dispute under section 8(2),
• the operational creditor may file an application before the

NCLT for initiating a corporate insolvency resolution
process.
(2) The application under Section 9(1) shall be filed in
• such form (Form 5) and
• manner and
• accompanied with such fee as may be prescribed.

Providing of documents/ information:
(3) The operational creditor shall, along with the application

furnish-
(a) a copy of the invoice demanding payment or demand notice
delivered by the operational creditor to the corporate debtor;
(b) an affidavit to the effect that there is no notice given by the

corporate debtor relating to a dispute of the unpaid operational
debt;
(c) a copy of the certificate from the financial institutions

maintaining accounts of the operational creditor confirming that
there is no payment of an unpaid operational debt by the
corporate debtor, if available;
(d) a copy of any record with information utility confirming

that there is no payment of an unpaid operational debt by
the corporate debtor, if available; and
(e) any other proof confirming that there is no payment of an

unpaid operational debt by the corporate debtor or such
other information, as may be prescribed.
Section 9(3) of the Code was amended by the Insolvency and Bankruptcy Code (Second Amendment)
Act, 2018. The (Second Amendment) Act, 2018 has amended sub-clause (c) and made the condition
of filing certificate from financial institutions maintaining accounts of operational creditor to prove non-
payment of operational debt optional. The (Second Amendment) Act, 2018 has also added sub-
clauses (d) and (e) which provide other means of proving non-payment of operational debt by the
corporate debtor.
Appointment of IRP:
(4) An operational creditor initiating a corporate insolvency

resolution process under this section, may propose a resolution
professional to act as an interim resolution professional.
Order of an adjudicating authority: Sub section 5
admit the application and reject the application and communicate

communicate such decision such decision to the operational creditor
to the operational creditor and the corporate debtor, if—
and the corporate debtor if,— (a) the application made is incomplete;
(b) there has been payment of the unpaid
(a) the application made is complete;
operational debt;
(b) there is no payment of the unpaid (c) the creditor has not delivered the invoice or
operational debt; notice for payment to the corporate debtor;
(d) notice of dispute has been received by the
(c) the invoice or notice for payment operational creditor or there is a record of dispute
to the corporate debtor has been in the information utility; or
delivered by the operational creditor; (e) any disciplinary proceeding is pending against
any proposed resolution professional:
(d) no notice of dispute has been
received by the operational creditor or
Provided that Adjudicating Authority, shall before
there is no record of dispute in the
information utility; and rejecting an application which is incomplete, give
a notice to the applicant to rectify the defect in his
(e) there is no disciplinary proceeding application within seven days of the date of
pending against any resolution receipt of such notice from the adjudicating
professional proposed, if any. Authority.
Commencement of insolvency resolution process:
Communication of Order:(Not in Act but Presumed)
(7) The Adjudicating Authority shall communicate order of admission

or rejection of such application within seven days, as the case may
be —
(1) in case of admission, to the Operational creditor and the
corporate debtor;
(2) In case of rejection, to the Operational creditor
Withdrawal of application before or after admission:
The same procedure as stated under initiation of CIRP by financial

creditor shall apply here as well for withdrawl of application.
Case Laws - 1
SC in the matter of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. Civil
Appeal No. 9405 of 2017 dt 21st Sept 2017. It was decided that in sec 9 application if
there is dispute then it cannot be admitted. It should not feeble legal argument or an
assertion of facts unsupported by evidence and it need not be spurious, mere bluster,
plainly frivolous or vexatious.
Case Laws - 2
National Company Law Appellate Tribunal, Chennai in Fipola Retail (India) (P.) Ltd. v.
M2N Interiors in 2021 admitted application filed by operational creditor under section 9
against corporate debtor in name of proprietary concern. Corporate debtor alleged that
said application would not be maintainable as application had been filed in name of
proprietary concern which is not a 'person' for purpose of filing application under section
9. It was held that such an application was maintainable, as section 2(f) provides that
provisions of Code shall apply to partnership firms and proprietorship firm also.
Section 10 Intimation of CIRP by Corporate Applicant.
Commission of default:
(1) Where a corporate debtor has committed a default,

• a corporate applicant [section 5(5)] thereof may file an application
• for initiating corporate insolvency resolution process
• with the Adjudicating Authority(NCLT)
In case of a default by corporate debtor, a corporate applicant thereof may file an

application for initiating corporate insolvency resolution process with the
Adjudicating Authority. The authorisation of a corporate applicant to file the
application for initiating corporate insolvency resolution process is based on the
premise that since they are the people likely to have the best information about
the financial affairs of the corporate debtor and permitting such applicants to
initiate the corporate insolvency resolution process would ensure timely
intervention that is crucial for any corporate insolvency resolution process to
succeed.
The corporate applicant can only initiate the corporate insolvency resolution
process upon the occurrence of a default and not on mere likelihood of inability to
pay debts. Therefore, a corporate applicant cannot trigger the corporate
insolvency resolution process prematurely to abuse the provisions of the Code.
Further, as the Code envisages the displacement of the management of the
corporate debtor during the insolvency resolution process (which can also be
permanent, depending on the outcome of the resolution process), corporate
applicants would be deterred from initiating the insolvency resolution process for
extraneous considerations.
(2) The application under sub-section (1) shall be filed in

• such form (Form 6),
• containing such particulars and
• in such manner and
• accompanied with such fee as may be prescribed.
Furnishing of information:
(3) The corporate applicant shall, along with the application,
furnish-
(a) the information relating to its books of account and such other
documents for such period as may be specified;
(b) the information relating to the resolution professional proposed

to be appointed as an interim resolution professional; and
(c) the special resolution passed by shareholders of the corporate

debtor or the resolution passed by at least three-fourth of the
total number of partners of the corporate debtor, as the case may
be, approving filing of the application.
Sub-section (3) of section 10 of the Code was amended by the Insolvency and Bankruptcy
Code (Second Amendment) Act, 2018. The (Second Amendment) Act, 2018 provided for
the requirement of special resolution passed by the shareholders of the corporate debtor or
resolution passed by at least three-fourth of the total number of partners of the corporate
debtor, as the case may be, for initiation of corporate insolvency resolution process by
corporate applicant.
Admission/rejection of application:
(4) The Adjudicating Authority(NCLT) shall, within a period of
fourteen days of the receipt of the application, by an order-
(a) admit the application, if it is complete and no disciplinary

proceeding is pending against the proposed resolution professional
or
(b) reject the application, if it is incomplete or any disciplinary

proceeding is pending against the proposed resolution professional
Provided that Adjudicating Authority shall, before rejecting an
application, give a notice to the applicant to rectify the defects in
his application within seven days from the date of receipt of such
notice from the Adjudicating Authority.
The (Second Amendment) Act, 2018 has also amended sub-section (4) to provide that the
presence or absence of pending disciplinary proceedings against the proposed resolution
professional shall be a ground for acceptance or rejection of application for corporate
insolvency resolution process filed by the corporate applicant.
Case Law
NCLT Mumbai Bench in CP (IB) 918/MB/C-II/2020 dt. 10th Oct 2020 in the matter of IGOPL
Oﬀshore P Ltd has pronounced that section 10(3)(c) of the Code requires that a Special Resolution
passed by the shareholders of the Corporate Debtor needs to filed along with the Company
Petition.
Commencement of insolvency resolution process:

Section 10A Suspension of Intimation of CIRP
Notwithstanding anything contained in sections 7, 9 and 10,

• no application for initiation of CIRP of a corporate debtor
shall be filed,
• for any default arising on or after 25th March, 2020
• for a period of six months or
• such further period, not exceeding one year from such date,
as may be notified in this behalf:
Provided that no application shall ever be filed for initiation of
corporate insolvency resolution process of a corporate debtor for
the said default occurring during the said period.
Explanation. - For the removal of doubts, it is hereby clarified

that the provisions of this section shall not apply to any default
committed under the said sections before 25th March, 2020.
The provisions of section 10A was extended twice and it was
applicable for default up to 25/3/2021.
Section 11 Person Not Entitled to Make Application
The following persons shall not be entitled to make an

application to initiate corporate insolvency resolution process
under this Chapter, namely: -
(a) a corporate debtor undergoing a corporate insolvency

resolution process or a pre-packaged insolvency resolution
process; or
(aa) a financial creditor or an operational creditor of a corporate

debtor undergoing a pre-packaged insolvency resolution
process; or];
(b) a corporate debtor having completed corporate insolvency

resolution process twelve months preceding the date of making
of the application; or
(ba) a corporate debtor in respect of whom a resolution plan
has been approved under Chapter III-A, twelve months
preceding the date of making of the application; or
(c) 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; or
(d) a corporate debtor in respect of whom a liquidation order

has been made.
Thus, according to section 11, a corporate debtor which is undergoing a corporate

insolvency resolution process/ pre-packaged insolvency resolution process (at the time of
such application) or has completed a corporate insolvency resolution process or in
respect of whom a resolution plan has been approved in the preceding twelve months is
not entitled to file an application for initiating the corporate insolvency resolution process.
Clause (a) and (b) of section 11 ensure that corporate debtors do not have repeated
recourse to the corporate insolvency resolution process in order to delay payment of
debts or to keep assets out of the reach of creditors.
Similarly, a corporate debtor or a financial creditor who has violated any of the terms of
the resolution plan that was approved twelve months before making an application for
initiating the process is also not entitled to make an application for initiating the corporate
insolvency resolution process. Further, a financial creditor or an operational creditor of a
corporate debtor undergoing a pre packaged insolvency resolution process are not entitled
to make an application to initiate corporate insolvency resolution process against such
corporate debtor.
Clause (c) aims at ensuring that corporate debtors or financial creditors do not abuse the
corporate insolvency resolution process for extraneous considerations in addition to
ensuring compliance with the terms of the resolution plan. Lastly, a corporate debtor in
respect of which a liquidation order has been passed is not allowed to initiate the insolvency
resolution process again. Thus clause (d) ensures finality of the liquidation order.
Explanation I- For the purposes of this section, a corporate
debtor includes a corporate applicant in respect of such corporate
debtor.
Explanation II.- For the purposes of this section, it is hereby

clarified that nothing in this section shall prevent a corporate
debtor referred to in clauses (a) to (d) from initiating corporate
insolvency resolution process against another corporate debtor.]
Section 11A Disposal of applications under section 54C and under

section 7 or section 9 or section 10.
(1) Where an application filed under section 54C is pending, the

Adjudicating Authority shall pass an order to admit or reject such
application, before considering any application filed under section 7
or section 9 or section 10 during the pendency of such application
under section 54C, in respect of the same corporate debtor.
(2) Where an application under section 54C is filed within

fourteen days of filing of any application under section 7 or
section 9 or section 10, which is pending, in respect of the same
corporate debtor, then, notwithstanding anything contained in
sections 7, 9 and 10, the Adjudicating Authority shall first dispose
of the application under section 54C.
(3) Where an application under section 54C is filed after fourteen

days of the filing of any application under section 7 or section 9
or section 10, in respect of the same corporate debtor, the
Adjudicating Authority shall first dispose of the application under
section 7, section 9 or section 10.
(4) The provisions of this section shall not apply where an
application under section 7 or section 9 or section 10 is filed and
pending as on the date of the commencement of the Insolvency
and Bankruptcy Code (Amendment) Act, 2021.]
The above section deals with following three scenarios when an application to initiate
pre-packaged insolvency resolution process is filed under Section 54C of the
Insolvency and Bankruptcy Code, 2016:
1. When application under Section 54C is pending: NCLT shall pass an order to
admit or reject such application before considering any application filed under section
7/9/10 of the Insolvency and Bankruptcy Code, 2016 against the same corporate
debtor.
2. When application under Section 54C is filed within 14 days of filing of any
application u/s 7/9/10 Insolvency and Bankruptcy Code, 2016 against the same
corporate debtor: NCLT shall first dispose of the application filed under section 54C.
3. When application under Section 54C is filed after 14 days of filing of any
application u/s 7/9/10 Insolvency and Bankruptcy Code, 2016 against the same
corporate debtor: NCLT shall first dispose of the application filed u/s 7/9/10 of the
Insolvency and Bankruptcy Code, 2016.
Section 12 Time-limit for completion of insolvency resolution process. -
Period for completion of insolvency process:
(1) Subject to sub-section (2), the CIRP shall be completed within

a period of one hundred and eighty days from the date of
admission of the application to initiate such process.
Filing of application for extension of period:
(2) The resolution professional shall file an application to the

Adjudicating Authority to extend the period of the CIRP 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 sixty-six per cent. of the voting shares [Section 5(28)].
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 has amended sub-section (2) of
section 12 of the Code to recalibrate voting threshold from seventy-five per cent to sixty-six per cent
for extension of corporate insolvency resolution process period by committee of creditors.
Period of extension:
(3) On receipt of an application under sub-section (2), if the
Adjudicating Authority is satisfied that the subject matter of the case
is such that CIRP 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:
Provided that any extension of the period of corporate

insolvency resolution process under this section shall not be
granted more than once:
Provided further that the CIRP shall mandatorily be completed

within a period of three hundred and thirty days from the
insolvency commencement date, including any extension of the
period of corporate insolvency resolution process granted under
this section and the time taken in legal proceedings in relation to
such resolution process of the corporate debtor:
The well-defined time limit is aimed at ensuring that commercially unviable corporate
debtors are not kept in the resolution process for long periods and are liquidated basis the
decision of the financial creditors at the earliest opportunity. The time limit would not only
reduce the cost to creditors and other stakeholders (including employees and workmen) of
a long-drawn out procedure but also avoid any depletion in value of the corporate debtor’s
business/returns to creditors and other stakeholders. This would also enable promoters of
failed businesses to exit the ventures swiftly.
Section 12A Withdrawal of application admitted under section 7, 9 or 10
Before formation of Committee of Creditors
The Adjudicating Authority may allow the withdrawal of

application admitted under section 7 or section 9 or section 10,
on an application made by the applicant.
After Committee of Creditors is formed
The Adjudicating Authority may allow the withdrawal of

application admitted under section 7 or section 9 or section 10,
on an application made by the applicant with the approval of 90%
voting share of the committee of creditors, in such manner as
may be specified.
In Ashok G. Rajani Vs. Beacon Trusteeship Ltd. & Ors.(Sep 2022), Supreme Court
held that the question of approval of withdrawal of corporate insolvency resolution process
by the Committee of Creditors by the requisite percentage of votes, can only arise after the
Committee of Creditors is constituted. Before the Committee of Creditors is constituted,
there is no bar to withdrawal by the applicant of an application admitted under Section 7 of
the Code. Also, the withdrawal of an application for CIRP by the applicant would not
prevent any other financial creditor from taking recourse to a proceeding under IBC.
In Maharashtra Seamless Ltd. Vs. State Bank of India & Ors. (Dec 2020), NCLAT (New
Delhi) held that withdrawal of the application based on consideration by Committee of
Creditors and settlement are part of the same corporate insolvency resolution process but
whatever emerges, same should materialize within the prescribed timelines under the
Code.
Section 13 Declaration of moratorium and public announcement
(1) The Adjudicating Authority, after admission of the application

under section 7 or section 9 or section 10, shall, by an order –
(a) declare a moratorium for the purposes referred to in section 14;
(b) cause a public announcement of the initiation of CIRP and call

for the submission of claims under section 15; and
(c) appoint an IRP in the manner as laid down in section 16.
(2) The public announcement referred to in clause (b) of sub-

section (1) shall be made immediately after the appointment of the
IRP.
According to Section 13(2), the public announcement referred to in Section 13(1)(b)

shall be made immediately after the appointment of the interim resolution
professional. The explanation to Regulation 6(1) of Insolvency and Bankruptcy
Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016 prescribes that immediately means three days from the date of his
appointment.
The public announcement shall be made in Form A as provided under the

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 and shall be published in one English and
one regional language newspaper with wide circulation at the location:
Where registered office and principal office (if any) of the corporate debtor is
situated.
Any other location where in the opinion of the interim resolution professional, the
corporate debtor conducts material business operations.
Section 14 Moratorium
Moratorium is a delay or suspension of an activity. In a legal

context, it may refer to the temporary suspension of a law to allow
a legal challenge to be carried out.
After the commencement of CIRP a calm period, known as

moratorium period is declared, during which all suits and legal
proceedings etc. against the Corporate Debtor are held in
abeyance to allow the IRP/ RP to carry out his/ her task smoothly
and disallowing creditors and other stakeholders to take any
individual actions against the corporate debtor and disrupt the
process.
Declaration of moratorium period
(1) Subject to provisions of sub-sections (2) and (3), on the

insolvency commencement date, the Adjudicating Authority shall
by order declare moratorium for prohibiting all of the following,
namely:
(a) the institution of suits or continuation of pending suits or

proceedings against the corporate debtor including execution of
any judgment, decree or order in any court of law, tribunal,
arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the

corporate debtor any of its assets or any legal right or beneficial
interest therein;
(c) any action to foreclose, recover or enforce any security
interest created by the corporate debtor in respect of its property
including any action under the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act,
2002;
(d) the recovery of any property by an owner or lessor where

such property is occupied by or in the possession of the
corporate debtor.
Explanation: For the purposes of this sub-section, it is hereby

clarified that notwithstanding anything contained in any other law
for the time being in force, a licence, permit, registration, quota,
concession, clearance or a similar grant or right given by the
Central Government, State Government, local authority, sectoral
regulator or any other authority constituted under any other law
for the time being in force, shall not be suspended or terminated
on the grounds of insolvency, subject to the condition that there
is no default in payment of current dues arising for the use or
continuation of the license, permit, registration, quota, concession,
clearances or a similar grant or right during the moratorium
period
The supply of essential goods or services
(2) The supply of essential goods or services to the corporate

debtor as may be specified shall not be terminated or suspended
or interrupted during moratorium period.
(2A) Where the interim resolution professional or resolution
professional, as the case may be, considers the supply of goods
or services critical to protect and preserve the value of the
corporate debtor and manage the operations of such corporate
debtor as a going concern, then the supply of such goods or
services shall not be terminated, suspended or interrupted during
the period of moratorium, except where such corporate debtor
has not paid dues arising from such supply during the
moratorium period or in such circumstances as may be specified.
Prohibited Acts
(3) The provisions of sub-section (1) shall not apply to
(a) such transactions, agreements or other arrangement as may

be notified by the Central Government in consultation with any
financial sector regulator or any other authority
(b) a surety in a contract of guarantee to a corporate debtor.
The Central Government has been given the power to notify transactions (in consultation
with the appropriate financial sector regulators and other authorities), which will be
exempted from the moratorium in the interest of smooth functioning of the financial
markets.
Effect of the order of moratorium
(4) The order of moratorium shall have effect from the date of
such order till the completion of the corporate insolvency resolution
process.
The provision of section 14(1) of the Code is not applicable on a
surety in a contract of guarantee to a corporate debtor. Thus,
recovery proceedings, insolvency resolution process or
bankruptcy proceedings against surety (guarantor) can be
initiated even if moratorium is granted to corporate debtor.
It is clarified that notwithstanding anything contained in any other

law for the time being in force, a licence, permit, registration,
quota, concession, clearance or a similar grant or right given by
the Central Government, State Government, local authority,
sectoral regulator or any other authority constituted under any
other law for the time being in force, shall not be suspended or
terminated on the grounds of insolvency, subject to the condition
that there is no default in payment of current dues arising for the
use or continuation of the license or a similar grant or right
during moratorium period.
Thus, the moratorium will continue to be in effect till the completion of the corporate
insolvency resolution process or the approval of a resolution plan by the Adjudicating
Authority or passing of order by the Adjudicating Authority for liquidation of the corporate
debtor, whichever is earlier.
When Moratorium period shall cease to have effect

Provided that where at any time during the corporate insolvency
resolution process period, if the Adjudicating Authority approves the
resolution plan under sub-section (1) of section 31 or passes an
order for liquidation of corporate debtor under section 33, the
moratorium shall cease to have effect from the date of such
approval or liquidation order, as the case may be.
In Shailesh Verma, RP of Lavasa Corporation Ltd. Vs. Maharashtra State Electricity
Distribution Company Ltd, NCLAT held that the direction of Adjudicating Authority to
continue to supply electricity to corporate debtor during CIRP was subject to payment of
outstanding dues within 90 days as directed by Adjudicating Authority. Corporate Debtor
cannot enjoy the benefit of direction on one part, that is, to continue the supply of electricity
and deny the payment of electricity dues of the CIRP period on other part .Section 14(2) of
IBC provides for supply of essential goods or services to the CD during CIRP and same
shall not be terminated or suspended or interrupted during the moratorium period.
Section 14(3) of the Code was substituted by the Insolvency abe mnd Bankruptcy Code
(Second Amendment) Act, 2018 to provide that the moratorium shall not apply to a surety in
a contract of guarantee to a corporate debtor.
In Indian Overseas Bank Vs. M/s RCM Infrastructure Ltd. and Anr, Supreme Court held that
once the CIRP is initiated, there is moratorium for any action to foreclose, recover or enforce
any security interest created by CD in respect of y property including any action under the
SARFAESI Act.IBC is a complete Code in itself and in view of the provisions of Section 238 of
the IBC, the provisions of the IBC would prevail notwithstanding anything inconsistent
therewith contained in any other law for the time being in force.
Example: After commencement of Corporate Insolvency

Resolution Process, NCLT declared Moratorium against the
corporate debtor. Within a month of declaration, corporate debtor
disposed of his property. In line with section 14 of the Code, any
transaction/disposal of any assets of Corporate Debtor during the
moratorium period, is prohibited. Such an act of the Corporate
Debtor is not valid.
However, as per Regulation 29 of the IBBI (Insolvency Resolution

Process for Corporate Persons) Regulations, 2016, the
Resolution Professional may sell unencumbered asset(s) of the
corporate debtor, other than in the ordinary course of business,
not exceeding 10% of the total claims admitted.
Section 15 Public announcement of CIRP
IRP shall make the Public Announcement immediately after his

appointment. “Immediately” refers to not more than three days
from the date of appointment of the IRP.
Particulars of the Public announcement

(1) The public announcement of the corporate insolvency
resolution process under the order referred to in section 13 shall
contain the following information, namely
(a) name and address of the corporate debtor under the

corporate insolvency resolution process;
(b) name of the authority with which the corporate debtor is

incorporated or registered;
(c) the last date for submission of claims, as may be specified;
(d) details of the lRP who shall be vested with the management
of the corporate debtor and be responsible for receiving claims;
(e) penalties for false or misleading claims; and
(f) the date on which the CIRP shall close, which shall be the
180th day from the date of the admission of the application under
sections 7, 9 or section 10, as the case may be.
(2) The public announcement under this section shall be made in

such manner as may be specified.
The expenses of public announcement shall be borne by the applicant or which may be
reimbursed by the Committee of Creditors, to the extent it ratifies them.
Section 16 Appointment and tenure of IRP
Appointment of IRP
(1) The Adjudicating Authority (NCLT) shall appoint an interim
resolution professional on the insolvency commencement date.
[Prior the amendment vide the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2019, it read “within fourteen days
from the insolvency commencement date”]
[Section 16(1)] this ensures that there is no delay in the insolvency resolution process and
the corporate debtor is managed by the Interim Resolution Professional from the first day
itself, leaving no room for the promoters/directors of the corporate debtor to take any
fraudulent or wrong step with regard to the business of the corporate debtor during the
insolvency period.
(2) Where the application for CIRP is made by a financial creditor

or the corporate debtor, as the case may be, the resolution
professional, as proposed respectively in the application under
section 7 or section 10, shall be appointed as the lRP, if no
disciplinary proceedings are pending against him.
(3) Where the application for CIRP is made by an operational

creditor and-
(a) No name of an IRP is made: no proposal for an IRP is made,

the Adjudicating Authority shall make a reference to the Board for
the recommendation of an insolvency professional who may act as
an interim resolution professional;
Section 16(3)(a) provides that if the name is not proposed by the operational creditor, then
the adjudicating authority shall make a reference to the Insolvency and Bankruptcy Board
of India for recommending the name of a person to be appointed as the interim resolution
professional.
(b) A name of an IRP is made: a proposal for an IRP is made

under sub-section (4) of section 9, the resolution professional as
proposed, shall be appointed as the IRP, if no disciplinary
proceedings are pending against him.
(4) The Board shall, within ten days of the receipt of a reference
from the Adjudicating Authority under sub-section (3), recommend
the name of an insolvency professional to the Adjudicating
Authority against whom no disciplinary proceedings are pending.
The Board shall recommend the name of a resolution professional who meets the criteria
stipulated in Clause 16(3) within ten days from the receipt of the reference. [Section
16(4)]
Appointment of IRP
(5) The term of the IRP shall continue till the date of appointment
of the resolution professional under section 22.
Tenure of Interim Resolution Professional
Section 16(5) originally provides that the term of the interim resolution professional shall
not exceed thirty days from date of his appointment. But this sub-section was amended by
the insolvency and Bankruptcy Code (Second Amendment) Act, 2018. Now the term of
the interim resolution professional continues till the date of appointment of the
resolution professional under section 22 of the Code. This ensures that the business
and dealings of the corporate debtor is always under the supervision of the IRP/RP
appointed under the Code.
Section 17 Management of affairs of corporate debtor by IRP
Exercise of Power of BoD/ partners

(1) From the date of appointment of the IRP -
(a) the management of the affairs of the corporate debtor shall

vest in the IRP;
(b) the powers of the board of directors or the partners of the

corporate debtor, as the case may be, shall stand suspended and
be exercised by the IRP;
Reporting of officers/managers
(c) the officers and managers of the corporate debtor shall report
to the IRP and provide access to such documents and records of
the corporate debtor, as may be, required by the IRP
Instructions to financial institutions
(d) the financial institutions maintaining accounts of the corporate

debtor shall act on the instructions of the IRP in relation to such
accounts and furnish all information relating to the corporate
debtor available with them to the IRP.
Powers of IRP
(2) The IRP vested with the management of the corporate debtor,
shall-
(a) act and execute in the name and on behalf of the corporate
debtor all deeds, receipts, and other documents, if any;
(b) take such actions, in the manner and subject to such
restrictions, as may be specified by the Board;
(c) have the authority to access the electronic records of

corporate debtor from information utility having financial
information of the corporate debtor;
(d) have the authority to access the books of account, records

and other relevant documents of corporate debtor available with
government authorities, statutory auditors, accountants and such
other persons as may be specified; and
(e) be responsible for complying with the requirements under any

law for the time being in force on behalf of the corporate debtor.
In the case of M/s. Subasri Realty Private Limited v. Mr. N. Subramanian & Anr., the NCLAT
directed that after the appointment of the RP and declaration of moratorium, the Board of directors
stands suspended, but that does not amount to a suspension of Managing Director, or any of the
directors or officers or employees of the Corporate Debtor (‘CD’). To ensure that the CD remains a
going concern, all the directors/employees are required to function and to assist the RP who manages
the affairs of the CD during the moratorium. If one or other officer or employee had the power to sign
a cheque on behalf of the CD prior to the order of moratorium, such power does not stand suspended
on suspension of Board of directors nor can it be taken away by the RP. If the person empowered to
sign cheque refuses to function on the direction of the RP or misuse the power, it is always open to
the RP to take away such power, after issuing notice to the person concerned.
Section 17 has been inserted keeping in mind the experience of a debtor-in-possession regime under
the Sick Industrial Companies (Special Provisions) Act, 1985. Various committee reports which had
analysed the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 had
highlighted the debtor- in-possession regime as one of its fatal flaws. A debtor-in-possession regime
which allows the existing management to remain in possession during the resolution process gives
incentives to the management to propose and implement risky rescue measures, as the costs of
failure (leading to liquidation) would largely be borne by creditors.
The Sick Industrial Companies (Special Provisions) Act, 1985 now stands repealed (with effect from
1st December, 2016) as the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 has
been notified by the Government.
Section 18 Duties of interim resolution professional
Key duties to be performed by the IRP
The IRP shall perform the following duties, namely:
(a) collect all information relating to the assets, finances and

operations of the corporate debtor for determining the financial
position of the corporate debtor, including information relating to
(i) business operations for the previous two years;
(ii) financial and operational payments for the previous two years;
(iii) list of assets and liabilities as on the initiation date; and (iv)
such other matters as may be specified;
(b) receive and collate all the claims submitted by creditors to him,
pursuant to the public announcement made under sections 13 and
15;
(c) constitute a committee of creditors;
(d) monitor the assets of the corporate debtor and manage its
operations until a resolution professional is appointed by the
committee of creditors;
(e) file information collected with the information utility, if

necessary; and
(f) take control and custody of any asset over which the
corporate debtor has ownership rights as recorded in the balance
sheet of the corporate debtor, or with information utility or the
depository of securities or any other registry that records the
ownership of assets including -
(i) assets over which the corporate debtor has ownership rights
which may be located in a foreign country;
(ii) assets that may or may not be in possession of the corporate

debtor;
(iii) tangible assets, whether movable or immovable;
(iv) intangible assets including intellectual property;
(v) securities including shares held in any subsidiary of the

corporate debtor, financial instruments, insurance policies;
(vi) assets subject to the determination of ownership by a court

or authority;
(g) to perform such other duties as may be specified by the

Board.
Explanation: For the purposes of this section, the term “assets” shall not include
the following, namely:
(a) assets owned by a third party in possession of the corporate debtor held under
trust or under contractual arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the corporate debtor; and
(c) such other assets as may be notified by the Central Government in consultation
with any financial sector regulator.
The RP is not only required to give notice of the meeting to the members of CoC, but also to the
members of suspended Board of directors or partners of the corporate person, as the case may be.
The OCs or their representatives are also to be informed to attend the meeting of CoC, if the amount
of the aggregate dues is not less than ten percent of the debt.
In M/s. Innoventive Industries Ltd. Vs. ICICI Bank & Anr., Supreme Court held that once an
insolvency professional is appointed to manage the company undergoing corporate insolvency resolution
process, the erstwhile directors who are no longer in management cannot maintain an appeal on behalf
of such company.
In Canara Bank Vs. Ms. Mamta Binani, RP of Aristo Texcon Pvt. Ltd., NCLAT (New Delhi) held that
Resolution Professional is an officer of the Court and he is obligation to exercise reasonable and
responsible care for the company whose property and affairs are entrusted with him during the
corporate insolvency resolution process.
Section 19 Personnel to extend co-operation to IRP
(1) The personnel [Section 5(23)] of the corporate debtor, its

promoters or any other person associated with the management
of the corporate debtor shall extend all assistance and
cooperation to the IRP as may be required by him in managing
the affairs of the corporate debtor.
(2) Where any personnel of the corporate debtor, its promoter or

any other person required to assist or cooperate with the IRP
does not assist or cooperate, the IRP may make an application
to the Adjudicating Authority for necessary directions.
(3) The Adjudicating Authority, on receiving an application under
section 19(2), shall by an order, direct such personnel or other
person to comply with the instructions of the resolution
professional and to cooperate with him in collection of information
and management of the corporate debtor.
Section 20 Management of operations of corporate debtor as going conce
(1) The IRP shall make every endeavour to protect and preserve
the value of the property of the corporate debtor and manage the
operations of the corporate debtor as a going concern.
(2) For the purposes of sub-section (1), the IRP shall have the
authority-
(a) to appoint accountants, legal or other professionals as may be

in interim necessary;
(b) to enter into contracts on behalf of the corporate debtor or to

amend or modify the contracts or transactions which were entered
into before the commencement of corporate insolvency resolution
process;
(c) to raise interim finance provided that no security interest shall

be created over any encumbered property of the corporate debtor
without the prior consent of the creditors whose debt is secured
over such encumbered property:
Provided that no prior consent of the creditor shall be required
where the value of such property is not less than the amount
equivalent to twice the amount of the debt.
(d) to issue instructions to personnel of the corporate debtor as

may be necessary for keeping the corporate debtor as a going
concern; and
(e) to take all such actions as are necessary to keep the corporate
debtor as a going concern.
Manner of submission of proof of claims to IRP

A creditor shall submit claim with proof on or before the last date
mentioned in the public announcement. The IRP shall verify such
claims within 7 days from the last date of receipt of the claims
and within 2 days of such verification of claims, file a report to
the Adjudicating Authority, certifying constitution of the CoC.
However, a creditor, who fails to submit claim with proof within

the time stipulated in the public announcement, may submit the
claim with proof to the IRP or the RP, as the case may be, on or
before the 90th day of the insolvency commencement date. The
IRP or the RP, as the case may be, shall verify every claim and
thereupon maintain a list of creditors. Such list of creditors shall
be filed with the Adjudicating Authority and also, displayed on the
website, if any, of the Corporate Debtor.
Manage operations of corporate debtor as a going concern – The Interim Resolution

Professional shall make every endeavour to protect and preserve the value of the
property of the corporate debtor and manage the operations of the corporate debtor as
a going concern. [Section 20(1)]
Authority of Interim Resolution Professional – In order to protect and preserve the

value of the property of the corporate debtor and manage the operations of the
corporate debtor as a going concern, the interim resolution Professional shall have the
authority to undertake certain actions prescribed under the Code.
Interim Finance – The Interim Resolution Professional has the power to raise interim
finance as well as to enter into, amend or modify contracts on behalf of the corporate
debtor. Clause (c) of sub-section (2) to section 20 provides that the Interim Resolution
Professional shall have the authority to raise interim finance provided that no security
interest shall be created over any encumbered property of the corporate debtor without
the prior consent of the creditors whose debt is secured over such encumbered
property.
Thus, any interim finance raised by providing security of an encumbered property of
the corporate debtor will require prior permission of the concerned creditor.
The proviso appended to clause (c) of sub-section (2) to section 20 clarifies that no
prior consent of the creditor shall be required where the value of such property is not
less than the amount equivalent to twice the amount of the debt.
Section 20 of the Code makes provision for raising interim finance while managing the
operations of the corporate debtor as a going concern. A company which enters the
insolvency resolution proceedings finds it extremely difficult to obtain credit, as lenders
are often hesitant to lend to a troubled debtor. In order to address this issue, such
interim finance is treated as a part of the insolvency resolution costs and is repaid in
priority to other debt as part of resolution plan. Such priority also applies in distribution
of assets in case the corporate debtor goes into liquidation.
Meaning of Interim Finance

“Interim finance” means
• any financial debt raised by the resolution professional
• during the insolvency resolution process period and
• such other debt as may be notified [Section 5(15)] [The term “and such other debt as
may be notified” was included vide The Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2019 which had widened the term of interim finance by
including other debts within its ambit].
Amount of any interim finance and the costs incurred in raising such finance is included in
the “insolvency resolution process costs” [Section 5(13)].
In case the corporate debtor goes into liquidation, the insolvency resolution process costs
which includes interim finance and the costs incurred in raising such finance are paid from
the sale of the liquidation assets in priority during the distribution of assets [Section 53].
In Sunil Kumar Jain and others vs. Sundaresh Bhatt and others, the Supreme Court
ruled that in order for wages or salaries of workmen or employees for the CIRP period
to be included in CIRP costs, it must be proven that the Resolution Professional
managed the Corporate Debtor’s operations as a Going Concern during the CIRP and
that the relevant workmen or employees actually worked during the CIRP.
Section 22 Appointment of resolution professional
One of the main functions of the committee of creditors (constituted
by the IRP under section 21 of the Code) is the appointment of the
Resolution Professional.
Appointment of IRP as RP
(1) The first meeting of the committee of creditors shall be held

within seven days of the constitution of the committee of
creditors.
(2) The committee of creditors, may, in the first meeting, by a

majority vote of not less than 66% of the voting share of the
financial creditors, either resolve to appoint the IRP as a RP or to
replace the IRP by another RP.
Communication of decision
(3) Where the committee of creditors resolves under section 22(2)
(a) to continue the IRP as RP subject to a written consent from

the IRP in the specified form, it shall communicate its decision to
the IRP, the corporate debtor and the Adjudicating Authority; or
The appointment of interim resolution professional as resolution
professional will be subject to a written consent from the interim
resolution professional in the specified form
Application before Adjudicating Authority
( b) to replace the IRP, it shall file an application before the
Adjudicating Authority for the appointment of the proposed RP
along with a written consent from the proposed RP in the
specified form.
Confirmation by Insolvency and Bankruptcy Board –
(4) The Adjudicating Authority shall forward the name of the RP

proposed under section 22(3)(b) to the Board for its confirmation
and shall make such appointment after confirmation by the Board.
(5) Where the Board does not confirm the name of the proposed
RP within 10 days of the receipt of the name of the proposed RP,
the Adjudicating Authority shall, by order, direct the IRP to continue
to function as the RP until such time as the Board confirms the
appointment of the proposed RP.
Example: Mr. Z was the IRP in XY Company. The committee of creditors by

majority vote of financial creditors proposed to appoint Mr. F as Resolution
professional (RP) of the XY Company. The said proposal was confirmed by the
Board after 10 days. As per Section 22 of the Code, if Board does not confirm the
proposed name as RP within 10 days of receipt of proposal, the Adjudicating
authority shall direct IRP i.e., Mr. Z to continue as RP for such time as the Board
confirms for the appointment of proposed RP.
ELIGIBILITY FOR RESOLUTION PROFESSIONAL
Regulation 3 of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 lays down the
following eligibility criteria for a resolution professional:
1. An insolvency professional shall be eligible to be appointed as a resolution

professional for a corporate insolvency resolution process of a corporate debtor
if he, and all partners and directors of the insolvency professional entity of
which he is a partner or director, are independent of the corporate debtor.
Explanation- A person shall be considered independent of the corporate debtor, if
he:
(a) is eligible to be appointed as an independent director on the board of the

corporate debtor under section 149 of the Companies Act, 2013 (18 of 2013),
where the corporate debtor is a company;
(b) is not a related party of the corporate debtor; or
(c) is not an employee or proprietor or a partner:
(i) of a firm of auditors or 5[secretarial auditors] in practice or cost auditors of the

corporate debtor; or
(ii) of a legal or a consulting firm, that has or had any transaction with the
corporate debtor amounting to ten per cent or more of the gross turnover of such
firm,
in the last three financial years.
Section 23 Resolution professional to conduct CIRP
Role of Resolution Professional

(1) Subject to section 27, the RP shall conduct the entire
corporate insolvency resolution process and manage the
operations of the corporate debtor during the corporate insolvency
resolution process period:
Provided that the RP shall continue to manage the operations of

the corporate debtor after the expiry of the corporate insolvency
resolution process period, until an order approving the resolution
plan under section 31(1) or appointing a liquidator under section
34 is passed by the Adjudicating Authority.
(2) The resolution professional shall exercise powers and perform

duties as are vested or conferred on the IRP under this Chapter.
(3) In case of any appointment of a resolution professional under
section 22(4), the IRP shall provide all the information,
documents and records pertaining to the corporate debtor in his
possession and knowledge to the resolution professional.
Section 23 provides that the Resolution Professional shall be responsible for

carrying out the entire corporate insolvency resolution process and managing the
operations of the corporate debtor during such process. For this purpose, the
Resolution Professional shall exercise powers and perform duties as are vested or
conferred on the interim resolution professional under Chapter II of Part II of the
Code.
Section 23 also provides that where the resolution professional is appointed, under
sub-section (4) of section 22, by the Adjudicating Authority upon confirmation by
the Board, the interim resolution professional shall provide all the information,
documents and records pertaining to the corporate debtor in his possession and
knowledge to the resolution professional.
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 amended

section 23 of the Code to provide that the resolution professional shall continue to
manage the operations of the corporate debtor after the expiry of corporate
insolvency resolution process period until an order has been passed by the
Adjudicating Authority under section 31 or section 34. This amendment clarifies
that managing the affairs of the corporate debtor during the period between
conclusion of CIRP and implementation of the successful resolution plan/
commencement of liquidation shall be the responsibility of the RP.
The NCLAT (New Delhi) ruled in Ashok Kumar Tyagi vs. UCO Bank that once the
CIRP admission order under Section 7 of the IBC has been stayed by the NCLAT,
IRP is not entitled to discharge any functions, and the Corporate Debtor also
cannot be restored because it was operating prior to the admission of Section 7
application.
Section 25 Duties of resolution professional
(1) It shall be the duty of the resolution professional to preserve

and protect the assets of the corporate debtor, including the
continued business operations of the corporate debtor.
(2) For the purposes of sub-section (1), the resolution

professional shall undertake the following actions, namely:
(a) take immediate custody and control of all the assets of the
corporate debtor, including the business records of the corporate
debtor;
(b) represent and act on behalf of the corporate debtor with third
parties, exercise rights for the benefit of the corporate debtor in
judicial, quasi-judicial or arbitration proceedings;
(c) raise interim finances subject to the approval of the committee

of creditors under section 28;
(d) appoint accountants, legal or other professionals in the

manner as specified by Board;
(e) maintain an updated list of claims;
(f) convene and attend all meetings of the committee of creditors;
(g) prepare the information memorandum in accordance with

section 29;
(h) invite prospective resolution applicants, who fulfil such criteria
as may be laid down by him with the approval of committee of
creditors, having regard to the complexity and scale of operations
of the business of the corporate debtor and such other conditions
as may be specified by the Board, to submit a resolution plan or
plans.
Clause (h) of sub-section (2) of section 25 was substituted by the Insolvency and Bankruptcy Code
(Amendment) Act, 2018. Clause (h), before substitution, read as follows:
“(h) invite prospective lenders, investors, and any other persons to put forward resolution plans”.
(i) present all resolution plans at the meetings of the committee of

creditors;
(j) file application for avoidance of transactions in accordance with

Chapter III, if any; and
(k) such other actions as may be specified by the Board.

The resolution professional is also empowered to raise interim finance (whether secured or
unsecured), with the prior approval of the committee of creditors. The interim finance raised under this
section will also be covered as part of the “insolvency resolution process costs”.
Fees of Resolution Professional:
As per Section 5(13) of the Code, the fees payable to any person
acting as a resolution professional and any costs incurred by the
resolution professional in running the business of the corporate
debtor as a going concern shall be included in the insolvency
resolution process costs and shall be paid in priority before
payment to any other creditor. Recently IBBI has come out with
the Circular, mandating minimum fees to be paid to the Resolution
Professional. (Schedule II of IBBI (IRPCP) Regulations)
Section 21 Committee of creditors
Committee of Creditors is a committee typically consisting of the

financial creditors of the Corporate Debtor. It is the supreme
decision-making body in a Corporate Insolvency Resolution
Process (CIRP). Decisions regarding the administration of the
corporate debtor are taken at the meetings of the Committee,
based on a requisite vote of the members. It is responsible for
giving approval to the IRP/ RP to carry out actions that might
affect the CIRP.
Regulatory Provisions
The Supreme Court ruled in Committee of Creditors of Essar Steel India Ltd. v. Satish
Kumar Gupta & Ors. that the adjudicating authority cannot challenge the CoC’s
commercial judgement on the basis of merits. According to the limited court review that
is available, the CD must continue operating as a going concern throughout the
insolvency resolution process, maximise the value of its assets, and ensure that the
interests of all parties, including operational creditors, have been protected
Section 21 and 24 of the Insolvency and Bankruptcy Code, 2016 make provisions
relating to the committee of creditors. Section 21 deals with the constitution of
committee of creditors while section 24 prescribes the modalities for the meeting of
the committee of creditors.
Section 28 of the Code lists out certain actions that may be taken by the resolution
professional only with the prior approval of the committee of creditors by a vote of
66 per cent of the voting shares.
The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 has added a
new section 25A to provide for rights and duties of authorised representative of
financial creditors.
The Insolvency and Bankruptcy Board of India has made the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 in exercise of the powers conferred under sections 5, 7, 9, 14,
15, 17, 18, 21, 24, 25, 29, 30, 196 and 208 read with section 240 of the Insolvency
and Bankruptcy Code, 2016. These regulations make detailed provisions for
effectively regulating the Insolvency Resolution Process for Corporate Persons and
are amended from time to time by the Insolvency and Bankruptcy Board of India.
Bare Act
(1) The IRP shall after collation of all claims received against the
corporate debtor and determination of the financial position of the
corporate debtor, constitute a committee of creditors.
Section 18 of the Code which lists out the duties of Interim Resolution Professional specifically
provides that the Interim Resolution Professional shall collect all information relating to the assets,
finances and operations of the corporate debtor for determining the financial position of the
corporate debtor as well as receive and collate all the claims submitted by creditors to him,
pursuant to the public announcement made under sections 13 and 15 of the Code. It also
prescribes the constitution of Committee of Creditors as one of the duties of the Interim
Resolution Professional.
Section 21(1) further provides that the Interim Resolution Professional shall after collation of all
claims received against the corporate debtor and determination of the financial position of the
corporate debtor, constitute a committee of creditors.
(2) The committee of creditors shall comprise all financial creditors

of the corporate debtor:
Can homebuyers be considered as financial creditors?
The Supreme Court in the case of Pioneer Urban Land & Infrastructure Ltd. & Anr. vs.
Union of India & Ors. upheld the constitutional validity of the introduction of homebuyers
as “financial creditors” to the IBC, made by the Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018, enabling homebuyers to trigger IBC against the real estate
developer.
When FC/ authorized representative is not entitled to participate in the CoC
Provided that a financial creditor or the authorised representative of

the financial creditor referred to in section 24(5) or section 24(6) or
section 24(6A), if it is a related party of the corporate debtor,shall
not have any right of representation, participation or voting in a
meeting of the committee of creditors:
Exclusion of related party – First proviso to section 21(2) provides that a financial
creditor or the authorised representative of the financial creditor, if it is a related party of
the corporate debtor, shall not have any right of representation, participation or voting in a
meeting of the committee of creditors.
Provided further that the first proviso shall not apply to a financial
creditor, regulated by a financial sector regulator, if it is a related
party of the corporate debtor solely on account of conversion or
substitution of debt into equity shares or instruments convertible
into equity shares or completion of such transactions as may be
prescribed, prior to the insolvency commencement date.
Second proviso of Section 21 of the Code provides that the first proviso shall not apply to
a financial creditor that is regulated by a financial sector regulator, if it is a related party of
the corporate debtor solely on account of conversion or substitution of debt into equity
shares or instruments convertible into equity shares or completion of such transactions as
may be prescribed prior to the insolvency commencement date.
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 added the words “or
completion of such transactions as may be prescribed in the said Section, thus, widening
the condition in which a financial creditor would not be considered to be a related party.
Whether the relatedness of the related party could merely have existed in the past
or whether they must continue in praesenti i.e. at the present time?
The Supreme Court in the matter of ‘Phoenix Arc Private Limited Vs. Spade
Financial Services Limited & Ors.’, clarified that while the default rule under the first
proviso to Section 21(2) is that only those financial creditors that are related parties
in praesenti would be debarred from the Committee, those related party financial
creditors that cease to be related parties in order to circumvent the exclusion under
the first proviso to Section 21(2), should also be considered as being covered by the
exclusion thereunder.
Thus, relatedness of related parties at the present time would be considered for
exclusion from the Committee, in addition, any parties that were related in the past
and cease to be related parties at present in order to become a member of the
Committee must also be considered for exclusion from the Committee.
In the matter of ‘Phoenix Arc Private Limited Vs. Spade Financial Services Limited &
Ors.’, the Supreme Court elucidates the two way relationship in related parties that “The
definition describes a commutative relationship, meaning that X can be a related party of
Y, if either X is related to Y, or Y is related to X. The definition of ‘related party’ under
the IBC is significantly broad. The intention of the legislature in adopting such a broad
definition was to capture all kinds of inter-relationships between the financial creditor and
the corporate debtor.”
In case where debts owed to two or more FC
(3) Subject to section 21(6) or section 21(6A), where the corporate

debtor owes financial debts to two or more financial creditors as
part of a consortium or agreement, each such financial creditor
shall be part of the committee of creditors and their voting share
shall be determined on the basis of the financial debts owed to
them.
Section 21(3) provides that subject to sub-sections (6) and (6A), where the corporate
debtor owes financial debts to two or more financial creditors as part of a consortium
or agreement, each such financial creditor shall be part of the committee of creditors
and their voting share shall be determined on the basis of the financial debts owed to
them.
In case where any person is a financial creditor as well as an

operational creditor
(4) Where any person is a financial creditor as well as an OC,
(a) such person shall be a financial creditor to the extent of the

financial debt owed by the corporate debtor, and shall be included
in the committee of creditors, with voting share proportionate to the
extent of financial debts owed to such creditor;
(b) such person shall be considered to be an operational creditor
to the extent of the operational debt owed by the corporate debtor
to such creditor.
(5) Where an operational creditor has assigned or legally

transferred any operational debt to a financial creditor, the
assignee or transferee shall be considered as an operational
creditor to the extent of such assignment or legal transfer.
Sub-Section 4 read with Sub-Section 5 of Section 21 of the Code provides that where any
person is a financial creditor as well as an operational creditor:
Such person shall be a financial creditor to the extent of the financial debt owed by the
corporate debtor and shall be included in the committee of creditors, with voting share
proportionate to the extent of financial debts owed to such creditor; and
Such person shall be considered to be an operational creditor to the extent of the

operational debt owed by the corporate debtor to such creditor.
Where an operational creditor has assigned or legally transferred any operational debt to a
financial creditor, the assignee or transferee shall be considered as an operational creditor
to the extent of such assignment or legal transfer
Assignment or legal transfer of operational debt – Section 21(5) further provides that
where an operational creditor has assigned or legally transferred any operational debt to a
financial creditor, the assignee or transferee shall be considered as an operational creditor
to the extent of such assignment or legal transfer.
In case of consortium arrangement of FC

(6) Where the terms of the financial debt extended as part of a
consortium arrangement or syndicated facility provide for a single
trustee or agent to act for all financial creditors, each financial
creditor may-
(a) authorise the trustee or agent to act on his behalf in the
committee of creditors to the extent of his voting share
(b) represent himself in the committee of creditors to the extent of

his voting share;
(c) appoint an insolvency professional (other than the resolution

professional) at his own cost to represent himself in the
committee of creditors to the extent of his voting share; or
(d) exercise his right to vote to the extent of his voting share with
one or more financial creditors jointly or severally.
Voting by authorised representative of class of FC
(6A) Where a financial debt—
(a) is in the form of securities or deposits and the terms of the

financial debt provide for appointment of a trustee or agent to act as
authorised representative for all the financial creditors, such trustee or
agent shall act on behalf of such Financial Creditors
Sub-section 6A – The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
has added a new sub-section 6a to section 21 to provide for a mechanism to allow
participation of security holders, deposit holders and all other classes of financial creditors
which exceed a certain number, in meetings of committee of creditors through an
authorised representative.
A Trustee or Agent to Act as Authorised Representative

Where a financial debt is in the form of securities or deposits and the terms of the financial
debt provide for appointment of a trustee or agent to act as authorised representative for all
the financial creditors, such trustee or agent shall act on behalf of such financial creditors
[Section 21(6A)(a)]
(b) is owed to a class of creditors exceeding the number as may
be specified, other than the creditors covered under clause (a) or
sub-section (6), the interim resolution professional shall make an
application to the Adjudicating Authority along with the list of all
financial creditors, containing the name of an insolvency
professional, other than the interim resolution professional, to act
as their authorised representative who shall be appointed by the
Adjudicating Authority prior to the first meeting of the committee
of creditors;
Financial debt owed to a class of Creditors Exceeding the Specified Number
Where a financial debt is owed to a class of creditors exceeding the number as may be
specified, other than the creditors covered under clause (a) or sub-section (6), the interim
resolution professional shall make an application to the Adjudicating Authority along with
the list of all financial creditors, containing the name of an insolvency professional, other
than the interim resolution professional, to act as their authorised representative who shall
be appointed by the Adjudicating Authority prior to the first meeting of the committee of
creditors. [Section 21(6A)(b)]
Clause (aa) of Sub-Regulation (1) of Regulation 2 of IBBI (Insolvency Resolution Process

for Corporate Persons) Regulations, 2016 provides that under Clause (b) of sub-section
(6A) of Section 21 of IBC, class of creditors means a class with at least ten financial
creditors.
(c) is represented by a guardian, executor or administrator, such

person shall act as authorised representative on behalf of such
financial creditors, and such authorised representative under clause
(a) or clause (b) or clause (c) shall attend the meetings of the
committee of creditors, and vote on behalf of each financial
creditor to the extent of his voting share.
Guardian, Executor or Administrator
Where a financial debt is represented by a guardian, executor or administrator, such
person shall act as authorised representative on behalf of such financial creditors [Section
21(6A)(c)]
All such authorised representative under clause (a) or clause (b) or clause (c) of sub-
section 6a shall attend the meetings of the committee of creditors, and vote on behalf of
each financial creditor to the extent of his voting share.
Authorised Representative from the State or Union Territory

having highest number of creditors in class
The Interim Resolution Professional shall offer the names of three
insolvency professionals to be voted upon by the class of
creditors, who must be from the State or Union Territory, which
has the highest number of creditors in the class as per records of
Where such State or Union Territory does not have adequate

number of insolvency professionals, the insolvency professionals
having addresses in a nearby State or Union Territory, as the
case may be, shall be considered.
Remuneration payable to the authorised representative

(6B) The remuneration payable to the authorised representative-
(i) under section 21(6A)(a) and section 21(6A)(c), if any, shall be

as per the terms of the financial debt or the relevant
documentation; and
(ii) under section 21(6A)(b) shall be as specified which shall be

form part of the insolvency resolution process costs.
Remuneration payable to authorised representative – The Insolvency and Bankruptcy
Code (Second Amendment) Act, 2018 has also added sub-section (6B) to section 21. it
provides that the remuneration payable to the authorised representative under clauses (a)
and (c) of sub- section (6A), if any, shall be as per the terms of the financial debt or the
relevant documentation; and under clause (b) of sub-section (6A) shall be as specified
which shall be form part of the insolvency resolution process costs.
Rights of Authorised representative

(7) The Board may specify the manner of voting and the
determining of the voting share in respect of financial debts covered
under section 21(6) and section 21(6A).
Board to specify the manner of voting and the determining of the voting share – the
Board may specify the manner of voting and the determining of the voting share in respect
of financial debts covered under sub-sections (6) and (6A). [Section 21[(7)]
(8) Save as otherwise provided in this Code, all decisions of the

committee of creditors shall be taken by a vote of not less than
51% of voting share of the financial creditors:
Decisions of the committee of creditors – Sub-section (8) to section 21 of the Code
provides that except as otherwise provided in the Code, all decisions of the committee of
creditors shall be taken by a vote of not less than fifty-one per cent of voting share of the
financial creditors.
Provided that where a corporate debtor does not have any financial
creditors, the committee of creditors shall be constituted and shall
comprise of such persons to exercise such functions in such
manner as may be specified.
The proviso to this sub-section clarifies that in the event there are no financial creditors
for a corporate debtor, the committee of creditors shall be constituted consisting of such
persons and exercise such function in such manner as may be specified.
(9) The committee of creditors shall have the right to require the
resolution professional to furnish any financial information in relation
to the corporate debtor at any time during the corporate insolvency
resolution process.
(10) The resolution professional shall make available any financial

information so required by the committee of creditors under sub-
section (9) within a period of seven days of such requisition.
COMMITTEE WITH ONLY OPERATIONAL CREDITORS

Regulation 16 of the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 deals with situations where either the corporate
debtor has no financial debt or where all financial creditors are
related parties of the corporate debtor. Regulation 16 provides as
follows:
1. Where the corporate debtor has no financial debt or where all

financial creditors are related parties of the corporate debtor, the
committee shall be set up in accordance with this regulation.
2. The committee formed under this regulation shall consist of

members as under:
(a) Eighteen largest operational creditors by value, provided if the

number of operational creditors is less than eighteen, the
committee shall include all such operational creditors;
(b) One representative elected by all workmen other than those

workmen included under sub- clause (a); and
(c) One representative elected by all employees other than those
employees included under sub-clause (a).
3. A member of the committee formed under this regulation shall

have voting rights in proportion of the debt due to such creditor
or debt represented by such representative, as the case may be,
to the total debt.
Explanation – For the purposes of this sub-regulation, ‘total debt’ is the sum of-
(a) the amount of debt due to the creditors listed in sub-regulation 2(a);
(b) the amount of the aggregate debt due to workmen under sub-regulation 2(b); and
(c) the amount of the aggregate debt due to employees under sub-regulation 2(c).
4. A committee formed under this regulation and its members

shall have the same rights, powers, duties and obligations as a
committee comprising financial creditors and its members, as the
case may be.
COMMITTEE WITH ONLY CREDITORS IN A CLASS
Regulation 16B of the Insolvency and Bankruptcy Board of India

Regulations, 2016 deals with situations where the corporate debtor
has only creditors in a class and no financial creditor is eligible to
join the committee. Regulation 16B reads as follows:
“Where the corporate debtor has only creditors in a class and no

other financial creditor eligible to join the committee, the committee
shall consist of only the authorised representative(s).” [Inserted by
Notification No. IBBI/2018-19/ GN/ REG031, dated 03rd July, 2018]
Authorised representative of creditors in a class:
Regulation 16A of the Insolvency and Bankruptcy Board of India
(CIRP) Regulations, 2016 lists down the provisions with regard to
authorized representative. The main provisions of the said
regulation have been summarized below:
The interim resolution professional shall select the insolvency

professional, who is the choice of the highest number of financial
creditors to act as the authorised representative of the creditors
of the respective class and shall apply to the Adjudicating
Authority for appointment of the authorizsed representatives
within two days of the verification of claims. However, any delay
in appointment of the authorised representative for any class of
creditors shall not affect the validity of any decision taken by the
committee.
On appointment of the authorized representative, the interim

resolution professional shall:
(a) provide the list of creditors in each class to the respective

authorised representative appointed by the Adjudicating Authority.
(b) provide an updated list of creditors in each class to the

respective authorised representative as and when the list is
updated.
(c) provide electronic means of communication between the

authorised representative and the creditors in the class
Voting share of creditor in a class:
It shall be in proportion to the financial debt which includes an

interest at the rate of eight per cent per annum unless a different
rate has been agreed to between the parties.
Fee of authorized representative:

The authorised representative shall be entitled to a fee for every
meeting attended by him in the following manner
Number of creditors in the class. Fee per meeting of the committee (Rs.)
10-100 15,000
101-1000. 20,000
More than 1000. 25,000
Authorised representative to seek preliminary views:
The authorised representative shall circulate the agenda to

creditors in a class and may seek their preliminary views on any
item in the agenda to enable him to effectively participate in the
meeting of the committee. In this regard, the creditors shall be
provided with a time window of at least twelve hours to submit
their preliminary views, and the said window should open at least
twenty-four hours after the authorised representative seeks
preliminary views. However, such preliminary views shall not be
considered as voting instructions by the creditors.
Section 24 Meeting of committee of creditors
Procedure for conduct of meeting of CoC
(1) The members of the committee of creditors may meet in

person or by such electronic means as may be specified.
(2) All meetings of the committee of creditors shall be conducted

by the resolution professional.
(3) The resolution professional shall give notice of each meeting of

the committee of creditors to-
(a) members of committee of creditors, including the authorised

representatives referred to in section 21(5), section 21(6) and
section 21(6A)
(b) members of the suspended Board of Directors or the partners
of the corporate persons, as the case may be;
(c) operational creditors or their representatives if the amount of

their aggregate dues is not less than 10% of the debt.
(4) The directors, partners and one representative of operational

creditors, as referred to in sub-section (3), may attend the
meetings of committee of creditors, but shall not have any right to
vote in such meetings:
Provided that the absence of any such direct or, partner or

representative of operational creditors, as the case may be, shall
not invalidate proceedings of such meeting.
(5) Subject to section 21(6), section 21(6A) and section 21(6B),

any creditor who is a member of the committee of creditors may
appoint an insolvency professional other than the resolution
professional to represent such creditor in a meeting of the
committee of creditors:
Provided that the fees payable to such insolvency professional

representing any individual creditor will be borne by such creditor.
(6) Each creditor shall vote in accordance with the voting share
assigned to him based on the financial debts owed to such
creditor.
(7) The resolution professional shall determine the voting share to
be assigned to each creditor in the manner specified by the Board.
(8) The meetings of the committee of creditors shall be conducted

in such manner as may be specified.
As per section 5(28) “voting share” means the share of the voting rights of a single
financial creditor in the committee of creditors which is based on the proportion of the
financial debt owed to such financial creditor in relation to the financial debt owed by the
corporate debtor. Each creditor shall vote in accordance with the voting share assigned
to him based on the financial debts owed to such creditor. However voting rights of
committee with only operational creditor will be in proportion to debt due to each creditor
to “total debt”. Whereas total debt will be equal to debts due to creditors, workmen and
employees. [Regulation 16(3) of the IBBI (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016].
Filing of report certifying constitution of the committee
The interim resolution professional shall file a report certifying

constitution of the committee to the Adjudicating Authority within
two days of the verification of claims received.
First Meeting of Creditors
The interim resolution professional shall hold the first meeting of

the committee within seven days of filing the report as mentioned
above.
Where the appointment of resolution professional is delayed, the

interim resolution professional shall perform the functions of the
resolution professional from the 40th day of the insolvency
commencement date till a resolution professional is appointed
under section 22 as per regulation 17 of IBBI (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016.
Meetings of the committee
(1) A resolution professional may convene a meeting of the

committee as and when he considers necessary.
(2) On a request received from members of the committee, shall

convene a meeting if the same is made by members of the
committee repressenting 33% of the voting rights.
Explanation—For the purposes of sub-regulation (2) it is clarified

that meeting (s) may be convened under this sub-regulation till
the resolution plan is approved under section 31(1) or order for
liquidation is passed under section 33 and decide on matters
which do not affect the resolution plan submitted before the
Adjudicating Authority.
(3) A resolution professional may place a proposal received from

members of the committee in a meeting, if he considers it
necessary and shall place the proposal if the same is made by
members of the committee representing at least 33% of the
voting rights.
[Regulation 18 of the of IBBI (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016]
Notice for meetings of the committee
(1) A meeting of the committee shall be called by giving not less

than five days' notice in writing to every participant,
(2) The committee may reduce the notice period from five days
to such other period of not less than 24 hours, as it deems fit:
Provided that the committee may reduce the period to such other
period of not less than 48 hours if there is any authorised
representative.

Corporate Persons) Regulations, 2016.]
Quorum for the Meeting
A meeting of committee of creditors shall quorate if members of

the committee of creditors representing at least thirty-three
percent of the voting rights are present either in person or by
video/audio means. Provided that the committee may modify the
percentage of voting rights required for quorum in respect of any
future meetings of the committee.

Corporate Persons) Regulations, 2016]
If the requisite quorum for committee of creditors is not fulfilled
the meeting cannot be held and the meeting shall automatically
stand adjourned at the same time and place on the next day.
The adjourned meeting shall quorate with the members of the

committee attending the meeting.
Quorum at the meeting of the committee of creditors

Regulation 22 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 provides that:
1. A meeting of the committee shall be quorate if members of the committee
representing at least thirty three percent of the voting rights are present either in person
or by video conferencing or other audio and visual means:
Provided that the committee may modify the percentage of voting rights required for
quorum in respect of any future meetings of the committee.
2. Where a meeting of the committee could not be held for want of quorum, unless the
committee has previously decided otherwise, the meeting shall automatically stand
adjourned at the same time and place on the next day.
3. In the event a meeting of the committee is adjourned in accordance with sub-

regulation (2), the adjourned meeting shall be quorate with the members of the
committee attending the meeting.

Process for Corporate Persons) Regulations, 2016 provides that a resolution professional
may convene a meeting of the committee as and when he considers necessary, and shall
convene a meeting if a request to that effect is made by members of the committee
representing thirty three per cent of the voting rights.
SERVICE OF NOTICE BY ELECTRONIC MEANS
As per Regulation 20 of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016:
• A notice may be circulated electronically by sending it to the participants via email as

a text message, as an attachment, or as a notification that includes an electronic link
or Uniform Resource Locator (URL) for viewing the notice.
• The name of the corporate debtor, the location, if any, the time, and the date of the
meeting must all be stated in the subject line of emails.
• If notice is sent as a non-editable email attachment, it must be in Portable Document

Format (PDF) or another non-editable format and include a “link or instructions” for
the recipient to obtain the appropriate software version.
• The resolution professional must use a system that generates confirmation of the
total number of email recipients as well as a record of each recipient to whom the
notice has been sent and a copy of such record.
• Any notices of any failed transmissions and subsequent resending shall be retained
as “proof of sending” when notice or notifications of availability of notice are sent via
email.
• The duty of resolution professional is fulfilled when he sends the email, and he is
not liable for transmission errors that are beyond his or her control.
• The notice circulated through an electronic link or Uniform Resource Locator must
be legible, and the recipient must be able to obtain and keep copies of the notice.
NOTICE OF THE MEETING OF THE COMMITTEE OF
CREDITORS
Time period for notice:
A meeting of the committee shall be called by giving not less than five days’ notice in
writing to every participant, at the address it has provided to the resolution professional
and such notice may be sent by hand delivery, or by post but in any event, be served on
every participant by electronic means. The committee may reduce the notice period from
five days to such other period of not less than twenty-four hours, as it deems fit,
however, if there is any authorised representative, the committee may reduce the period
to not less than forty-eight hours. (Regulation 19 of the Insolvency and Bankruptcy Board
of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016)
Contents of the notice:

Resolution Process for Corporate Persons) Regulations, 2016, the notice shall inform the
participants of the venue, the time and date of the meeting and of the option available to
them to participate through video conferencing or other audio and visual means, and shall
also provide all the necessary information to enable participation through video
conferencing or other audio and visual means.
It shall also provide that a participant may attend and vote in the meeting either in person
or through an authorised representative., however, such participant shall inform the
resolution professional, in advance of the meeting, of the identity of the authorised
representative who will attend and vote at the meeting on its behalf.
The notice of the meeting shall contain the following:

• a list of the matters to be discussed at the meeting;
• a list of the issues to be voted upon at the meeting; and
• copies of all documents relevant to the matters to be discussed and the issues to be
voted upon at the meeting.
The notice of the meeting shall:
• state the process and manner for voting by electronic means and the time schedule,
including the time period during which the votes may be cast;
• provide the login ID and the details of a facility for generating password and for
keeping security and casting of vote in a secure manner; and
• provide contact details of the person who will address the queries connected with the
electronic voting.

Resolution Process for Corporate Persons) Regulations, 2016, the notice convening the
meetings of the committee shall provide the participants an option to attend the meeting
through video conferencing or other audio and visual means in accordance with this
Regulation.

Resolution Process for Corporate Persons) Regulations, 2016, the resolution professional
shall act as the chairperson of the meeting of the committee of creditor. He/She shall
ensure that minutes are made in relation to each meeting of the committee and such
minutes shall disclose the particulars of the participants who attended the meeting in
person, through video conferencing or other audio and visual means. The resolution
professional shall circulate the minutes of the meeting to all participants by electronic
means within 48 hours of the said meeting.
Section 25A Rights and duties of authorised representative of
financial creditors
(1) The authorised representative under section 21(6) or section

21(6A) or section 24(5) shall have the right to participate and
vote in meetings of the committee of creditors on behalf of
the financial creditor he represents in accordance with the prior
voting instructions of such creditors obtained through physical or
electronic means.
(2) It shall be the duty of the authorised representative to

circulate the agenda and minutes of the meeting of the
committee of creditors to the financial creditor he represents.
(3) The authorised representative shall not act against the

interest of the financial creditor he represents and shall
always act in accordance with their prior instructions:
Provided that if the authorised representative represents several

financial creditors, then he shall cast his vote in respect of
each financial creditor in accordance with instructions received
from each financial creditor, to the extent of his voting share:
Provided further that if any financial creditor does not give prior
instructions through physical or electronic means, the authorised
representative shall abstain from voting on behalf of such
creditor.
(3A) Notwithstanding anything to the contrary contained in sub-
section (3), the authorised representative under section 21(6A)
shall cast his vote on behalf of all the financial creditors he
represents in accordance with the decision taken by a vote of
more than fifty per cent. of the voting share of the financial
creditors he represents, who have cast their vote:
Provided that for a vote to be cast in respect of an application

under section 12A, the authorised representative shall cast his
vote in accordance with the provisions of sub- section (3).
Section 12A of the Code prescribes the withdrawal of application admitted under Section
7,9 or 10. As the per the Section, the Adjudicating Authority may allow the withdrawal of
application admitted under section 7 or section 9 or section 10, on an application made
by the applicant with the approval of ninety per cent. voting share of the committee of
creditors, in such manner as may be specified.
(4) The authorised representative shall file with the committee of

creditors any instructions received by way of physical or electronic
means, from the financial creditor he represents, for voting in
accordance therewith, to ensure that the appropriate voting
instructions of the financial creditor he represents is correctly
recorded by the interim resolution professional or resolution
professional, as the case may be.
Explanation.- For the purposes of this section, the “electronic

means” shall be such as may be specified.
The rights and duties of authorised representative of financial creditors are
highlighted below:
• The authorised representative under sub-section (6) or sub-section (6A) of Section

21 or sub-section (5) of Section 24 of the Code shall have the right to participate
and vote in meetings of the committee of creditors on behalf of the financial creditor
he represents in accordance with the prior voting instructions of such creditors
obtained through physical or electronic means.
• It shall be the duty of the authorised representative to circulate the agenda and
minutes of the meeting of the committee of creditors to the financial creditor he
represents.
• The authorised representative shall not act against the interest of the financial
creditor he represents and shall always act in accordance with their prior instructions.
• However, if authorised representative represents several financial creditors, then he
shall cast his vote in respect of each financial creditor in accordance with
instructions received from each financial creditor to the extent of his voting share.
• If any financial creditor does not give prior instructions through physical or electronic
means, the authorised representative shall abstain from voting on behalf of such
creditor.
• The authorised representative shall cast his vote on behalf of all the financial
creditors he represents in accordance with the decision taken by a vote of more than
50% of the voting share of the financial creditors he represents who have cast their
vote.
• The authorised representative shall file with the committee of creditors any
instructions received by way of physical or electronic means, from the financial
creditor he represents, for voting in accordance therewith, to ensure that the
appropriate voting instructions of the financial creditor he represents is correctly
recorded by the interim resolution professional or resolution professional, as the case
may be.
Voting by Authorised Representative

Voting by Authorised Representative creditor or on behalf of all
financial creditors he represents in accordance with the
provisions of section 25(3) or section 25A(3A), as the case may
be.
[Regulation 25A of the IBBI (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016.]
Section 27 Replacement of resolution professional by committee of
creditors
(1) Where, at any time during the corporate insolvency resolution

process, the committee or creditors is of the opinion that a
resolution professional appointed under section 22 is required to
be replaced, it may replace him with another resolution
professional in the manner provided under this section.
(2) The committee of creditors may, at a meeting, by a vote of

66% of voting shares, resolve to replace the resolution
professional appointed under section 22 with another resolution
professional, subject to a written consent from the proposed
resolution professional in the specified form.
(3) The committee of creditors shall forward the name of the

insolvency professional proposed by them to the Adjudicating
Authority.
(4) The Adjudicating Authority shall forward the name of the

proposed resolution professional to the Board for its confirmation
and a resolution professional shall be appointed in the same
manner as laid down in section 16.
(5) Where any disciplinary proceedings are pending against the

proposed resolution professional under section 27(3), the
resolution professional appointed under section 22 shall continue
till the appointment of another resolution professional under this
section.
The power under section 27 assumes significance particularly in a corporate insolvency
resolution process initiated by a corporate debtor where the corporate debtor has
appointed a resolution professional of its choice. The committee of creditors has the
right to replace such resolution professional if they suspect collusion between the
resolution professional and corporate debtor/ management.
Sub-section (2) of section 27 was substituted by the Insolvency and Bankruptcy

Code (Second Amendment) Act, 2018 for enabling the committee of creditors to replace
the existing resolution professional with another resolution professional by a vote of sixty-
six percent of voting share instead of seventy-five percent, subject to a written consent
from the latter.
Before its substitution, the sub-section (2), stood as follows:

“(2) The committee of creditors may, at a meeting, by a vote of seventy-five per cent of
voting shares, propose to replace the resolution professional appointed under section 22
with another resolution professional.”
Section 29 Preparation of information memorandum
Section 29 read with Regulation 36 of the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016 lays down the
preparation of an information memorandum as one of the main functions of the resolution
professional. An information memorandum is envisaged to be prepared in order for the
resolution applicants (market participants) to provide solutions for resolving the insolvency
of the corporate debtor.
(1) The resolution professional shall prepare an information

memorandum in such form and manner containing such relevant
information as may be specified by the Board for formulating a
resolution plan.
(2) The resolution professional shall provide to the resolution

applicant access to all relevant information in physical and
electronic form, provided such resolution applicant undertakes-
(a) to comply with provisions of law for the time being in force
relating to confidentiality and insider trading;
(b) to protect any intellectual property of the corporate debtor it

may have access to; and
(c) not to share relevant information with third parties unless

clauses (a) and (b) of this sub-section are complied with.
Explanation. – For the purposes of this section, “relevant information” means the
information required by the resolution applicant to make the resolution plan for the
corporate debtor, which shall include the financial position of the corporate debtor, all
information related to disputes by or against the corporate debtor and any other matter
pertaining to the corporate debtor as may be specified.
Regulation 36 of the Insolvency and Bankruptcy Board of India
Regulations, 2016 states the following:
1. Subject to sub-regulation (4), the resolution professional shall

submit the information memorandum in electronic form to each
member of the committee within two weeks of his appointment,
but not later than fifty- fourth day from the insolvency
commencement date, whichever is earlier.
2. The information memorandum shall contain the following details

of the corporate debtor-
(a) assets and liabilities with such description, as on the insolvency commencement
date, as are generally necessary for ascertaining their values. Explanation: ‘Description’
includes the details such as date of acquisition, cost of acquisition, remaining useful
life, identification number, depreciation charged, book value, and any other relevant
details.
(b) the latest annual financial statements;
(c) audited financial statements of the corporate debtor for the last two financial years
and provisional financial statements for the current financial year made up to a date
not earlier than fourteen days from the date of the application;
(d) a list of creditors containing the names of creditors, the amounts claimed by them,
the amount of their claims admitted and the security interest, if any, in respect of
such claims;
(e) particulars of a debt due from or to the corporate debtor with respect to related
parties;
(f) details of guarantees that have been given in relation to the debts of the
corporate debtor by other persons, specifying which of the guarantors is a related
party;
(g) the names and addresses of the members or partners holding at least one per
cent stake in the corporate debtor along with the size of stake;
(h) details of all material litigation and an ongoing investigation or proceeding

initiated by Government and statutory authorities;
(i) the number of workers and employees and liabilities of the corporate debtor
towards them;
(j) company overview including snapshot of business performance, key contracts,

key investment highlights and other factors which bring out the value as a going
concern over and above the assets of the corporate debtor such as brought
forward losses in the income tax returns, input credit of GST, key employees, key
customers, supply chain linkages, utility connections and other pre-existing
facilities;
(k) details of business evolution, industry overview and key growth drivers in
case of a corporate debtor having book value of total assets exceeding one
hundred crores rupees as per the last available financial statements;
(l) other information, which the resolution professional deems relevant to the
committee.
3. A member of the committee may request the resolution professional for further
information of the nature described in this regulation and the resolution professional
shall provide such information to all members within reasonable time if such
information has a bearing on the resolution plan.
3A The creditors shall provide to the resolution professional the latest financial
statements and other relevant financial information of the corporate debtor available
with them.
4. The resolution professional shall share the information memorandum after receiving
an undertaking from a member of the committee to the effect that such member or
resolution applicant shall maintain confidentiality of the information and shall not use
such information to cause an undue gain or undue loss to itself or any other person
and comply with the requirements under sub-section (2) of section 29.
Section 28 Approval of committee of creditors for certain actions
(1) Notwithstanding anything contained in any other law for the

time being in force, the resolution professional, during the
corporate insolvency resolution process, shall not take any of the
following actions without the prior approval of the committee of
creditors namely:
(a) raise any interim finance in excess of the amount as may be

decided by the committee of creditors in their meeting;
(b) create any security interest over the assets of the corporate
debtor;
(c) change the capital structure of the corporate debtor, including

by way of issuance of additional securities, creating a new class
of securities or buying back or redemption of issued securities in
case the corporate debtor is a company;
(d) record any change in the ownership interest of the corporate

debtor;
(e) give instructions to financial institutions maintaining accounts

of the corporate debtor for a debit transaction from any such
accounts in excess of the amount as may be decided by the
committee of creditors in their meeting;
(f) undertake any related party transaction;
(g) amend any constitutional documents of the corporate debtor;

(h) delegate its authority to any other person;
(i) dispose of or permit the disposal of shares of any shareholder

of the corporate debtor or their nominees to third parties;
(j) make any change in the management of the corporate debtor

or its subsidiary;
(k) transfer rights or financial debts or operational debts under

material contracts otherwise than in the ordinary course of
business;
(l) make changes in the appointment or terms of contract of such

personnel as specified by the committee of creditors; or
(m) make changes in the appointment or terms of contract of

statutory auditors or internal auditors of the corporate debtor.
(2) The resolution professional shall convene a meeting of the

committee of creditors and seek the vote of the creditors prior to
taking any of the actions under sub-section (1).
(3) No action under sub-section (1) shall be approved by the

committee of creditors unless approved by a vote of 66% of the
voting shares.
(4) Where any action under sub-section (1) is taken by the
resolution professional without seeking the approval of the
committee of creditors in the manner as required in this
section, such action shall be void.
(5) The committee of creditors may report the actions of the

resolution professional under sub-section (4) to the Board for
taking necessary actions against him under this Code.
Voting by the committee

Process for Corporate Persons) Regulations, 2016 covers the provisions of voting by the
committee. The said regulation provides the following in regard to voting by the
committee:
The actions listed in section 28(1) shall be considered in meetings of the committee. Any
action other than those listed in section 28(1) requiring approval of the committee may
be considered in meetings of the committee. The resolution professional shall take a vote
of the members of the committee present in the meeting, on any item listed for voting
after discussion on the same.
At the conclusion of a vote at the meeting, the resolution professional shall announce the
decision taken on items along with the names of the members of the committee who
voted for or against the decision or abstained from voting.
The resolution professional shall:

• circulate the minutes of the meeting by electronic means to all members of the
committee and the authorised representative, if any, within forty-eight hours of the
conclusion of the meeting; and
• seek a vote of the members who did not vote at the meeting on the matters listed
for voting, by electronic voting system in accordance with regulation 26 where the
voting shall be kept open for at least twenty-four hours from the circulation of the
minutes.
The authorised representative shall circulate the minutes of the meeting received by
the resolution professional to creditors in a class and announce the voting window at
least twenty- four hours before the window opens for voting instructions and keep the
voting window open for at least twelve hours.
Regulation 25A of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 inserted by way of
Notification No. IBBI/2019-20/GN/REG052 provides for Voting by Authorised
Representative. It implied that the authorised representative shall cast his vote in
respect of each financial creditor or on behalf of all financial creditors he represents in
accordance with the provisions of subsection (3) or sub-section (3A) of section 25A, as
the case may be.
PROCESS OF INVITING RESOLUTION PLAN BY THE

COMMITTEE
The process of inviting resolution plan by the committee of creditors is the most crucial
step in the revival and rehabilitation of the stressed corporate debtor which in turn will
decide the future of the corporate debtor. The process includes following measures to
be taken on part of the Resolution Professional:
A. Issuance of Expression of interest
B. Request for Resolution Plan
C. Strategy for marketing of assets of the corporate debtor
D. Receipt of Resolution Plan from the prospective resolution applicant.

Each of the stage is discussed below in detail.
A. Issuance of Expression of interest
Form and manner of issuing Expression of Interest
Regulation 36A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 inserted by way of the Insolvency
and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
(Third Amendment) Regulations, 2018 provides for Invitation of Expression of Interest
as follows:
• Within 60 days of the insolvency commencement date, the resolution professional
shall publicise brief details of the invitation for expressions of interest in Form G (as
provided under Schedule I) from interested and qualified potential resolution
applicants to submit resolution plans.
• Form G shall be published in:
a) in one English and one regional language newspaper with wide circulation at the
location of the registered office and principal office, if any, of the corporate debtor and
any other location where in the opinion of the resolution professional, the corporate
debtor conducts material business operations;
b) on the website, if any, of the corporate debtor;
c) on the website, if any, designated by the Board for the purpose; and
d) in any other manner as may be decided by the committee.
• The Form G shall state from where the detailed invitation for expression of interest
can be downloaded. It should also provide for the last date for submission of
expression of interest which shall not be less than fifteen days from the date of
issue of the detailed invitation.
• The detailed invitation referred above shall include:
•
a) The criteria for prospective resolution applicant as approved by the committee;
b) Ineligibility norms under Section 29A of the Code;
c) Information about the corporate debtor as may be required by a prospective

resolution applicant for expression of interest; and
d) Shall not require payment of any fee or any non-refundable deposit for submission of
expression of interest.
• Any modification for expression of interest shall not be made more than once.
• The prospective resolution applicant meeting the requirements of the invitation for
expression of interest may submit expression of interest within the time specified
in the invitation. The expression of interest received beyond the timeline specified
in the invitation shall be rejected by the Resolution Professional.
Contents of Expression of Interest
As per sub-regulation 7 of Regulation 25A of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, an
expression of interest shall be unconditional and shall be accompanied by-
a) An undertaking by the prospective resolution applicant that it meets the criteria

specified by the committee;
b) Relevant records in evidence of meeting the criteria under clause (a);
c) An undertaking by the prospective resolution applicant that it does not suffer from
any ineligibility under Section 29A;
d) Relevant information and records to enable an assessment of ineligibility under

Section 29A;
e) An undertaking by the prospective resolution applicant that it shall intimate the

resolution professional forthwith if it becomes ineligible at any time during the
corporate insolvency resolution process;
f) An undertaking by the prospective resolution applicant that every information and

records provided in expression of interest is true and correct and discovery of any
false information or record at any time will render the applicant ineligible to submit
resolution plan, forfeit any refundable deposit, and attract penal action under the
Code; and
g) An undertaking by the prospective resolution applicant to the effect that it shall

maintain confidentiality of the information and shall not use such information to cause
an undue gain or undue loss to itself or any other person.
Issuance of provisional list of eligible prospective resolution by the Resolution
Applicant
The resolution professional shall issue a provisional list of eligible prospective

resolution applicants within ten days from the last date for submission of expression of
interest to:
a) The members of the Committee of Creditors; and
b) To all prospective resolution applicants who submitted the expression of interest.
Any objection to inclusion or exclusion of a prospective resolution applicant in the

provisional list maybe made with supporting documents within five days from the date
of issue of the provisional list. On considering the objections received, if any the
resolution professional shall issue the final list of prospective resolution applicants
within ten days of the last date for receipt of objections, to the Committee of Creditors.
B. Request for Resolution Plan
Regulation 36B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016 inserted by way of the Insolvency
and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
(Third Amendment) Regulations, 2018 provides as follows:
• The resolution professional shall issue the information memorandum, evaluation

matrix and a request for resolution plans within five days of the date of issue of the
provisional list to:
a) every prospective resolution applicant in the provisional list; and
b) every prospective resolution applicant who has contested the decision of the
resolution professional against its non-inclusion in the provisional list.
• The request for resolution plans shall detail each step in the process, and the
manner and purposes of interaction between the resolution professional and the
prospective resolution applicant, along with corresponding timelines.
• The request for resolution plans shall allow prospective resolution applicants a
minimum of 30 days to submit the resolution plan(s).
• The request for resolution plans shall not require any non-refundable deposit for
submission of or along with resolution plan.
• The request for resolution plans shall require the resolution applicant, in case its
resolution plan is approved under sub-section (4) of section 30, to provide a
performance security within the time specified therein and such performance security
shall stand forfeited if the resolution applicant of such plan, after its approval by the
Adjudicating Authority, fails to implement or contributes to the failure of
implementation of that plan in accordance with the terms of the plan and its
implementation schedule.
• Performance Security shall mean security of such nature, value, duration and
source, as may be specified in the request for resolution plans with the approval of
the committee, having regard to the nature of resolution plan and business of the
corporate debtor.
• Any modification in the request for resolution plan or the evaluation matrix issued
shall be deemed to be a fresh issue, shall be subject to the above- mentioned
timeline and such modifications shall not be made more than once.
• The resolution professional may with the approval of the committee, may extend the
timeline for submission of resolution plans.
• If the resolution professional, does not receive a resolution plan in response to the
request under this regulation, he may, with the approval of the committee, issue
request for resolution plan for sale of one or more of assets of the corporate debtor.
• The resolution professional may, with the approval of the committee, re-issue request
for resolution plans, if the resolution plans received in response to an earlier request
are not satisfactory, subject to the condition that the request is made to all
prospective resolution applicants in the final list.
C. Strategy for marketing of assets of the corporate debtor
Regulation 36C inserted by way of Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons) (Fourth Amendment)
Regulations, 2022 provides as follows:
The resolution professional shall prepare a strategy for marketing of the assets of the
corporate debtor in consultation with the committee of creditors where the total assets
as per the last available financial statements exceeds INR 100 Cr and may prepare
such strategy in other cases. Decision of implementing such strategy along with its cost
shall be subject to the approval of the committee. The member(s) of committee may
also take measures for marketing of the assets of the corporate debtor
The above amendment to the Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 was introduced with an
objective to maximise the value of assets of the corporate debtor undergoing corporate
insolvency resolution process. Value of assets of the corporate debtor can only be
maximised when there are multiple resolution plans submitted by the prospective
resolution applicants and a price discovery takes place through competitive bidding
among such prospective resolution applicants. To increase interest and promote
participation of large number of propspective resolution applicant, the availability of the
asset in the market needs to be made known to a larger audience and specifically targeted
outreach to prospective resolution applicants.
D. Receipt of Resolution Plan from the prospective

resolution applicant
Regulation 37 of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016 provides that the
resolution plan shall provide for the measures for resolution of the insolvency of the
corporate debtor along with maximization of value of its assets including but not
limited to the following:
• Transfer of all or part of the assets of the corporate debtor to one or more
persons;
• Sale of all or part of the assets whether subject to any security interest or not;
• Restructuring of the corporate debtor, by way of merger, amalgamation and
demerger;
• Substantial acquisition of shares of the corporate debtor, or the merger or
consolidation of the corporate debtor with one or more persons;
• Cancellation or delisting of any shares of the corporate debtor, if applicable;] (d)
satisfaction or modification of any security interest;
• Curing or waiving of any breach of the terms of any debt due from the corporate
debtor; Reduction in the amount payable to the creditors;
• Extension of a maturity date or a change in interest rate or other terms of a debt
due from the corporate debtor; amendment of the constitutional documents of the
corporate debtor;
• Issuance of securities of the corporate debtor, for cash, property, securities, or in
exchange for claims or interests, or other appropriate purpose;
• Change in portfolio of goods or services produced or rendered by the corporate
debtor; (k) change in technology used by the corporate debtor;
• Obtaining necessary approvals from the Central and State Governments and other
authorities and
• Sale of one or more assets of corporate debtor to one or more successful resolution
applicants submitting resolution plans for such assets; and manner of dealing with
remaining assets.

Process for Corporate Persons) Regulations, 2016 provides that the mandatory content
of the resolution plan shall be as follows:
• The amount payable under a resolution plan to operational and financial creditor of
• A statement as to how it has dealt with the interests of all stakeholders, including
financial creditors and operational creditors of the corporate debtor.
• A statement giving details if the resolution applicant or any of its related parties
has failed to implement or contributed to the failure of implementation of any other
resolution plan approved by the Adjudicating Authority at any time in the past.
• The term of the plan and its implementation schedule.
• The management and control of the business of the corporate debtor during its
term.
• The adequate means for supervising its implementation.
• Manner in which proceedings with respect to the avoidance transactions of the
corporate debtor will be pursued after the approval of the resolution plan and the
manner in which the proceeds, if any, from such proceedings shall be distributed.
• A resolution plan shall demonstrate that it addresses the cause of default, is
feasible and viable and resolution applicant has capacity to implement the same.
• A resolution plan should have provision for its effective implementation; approvals
required and the timeline for the same.
In M/S Bhaskara Agro Agencies Vs. M/S Super Agri Seeds Private Limited & Ors.,
the NCLAT ruled that regardless of whether a “Resolution Plan” is viable and practicable
or not, the Appellate Tribunal or Adjudicating Authority cannot review the CoC’s decision
in an appeal. Given that the aforementioned variables are of a technical nature and can
be assessed by professionals such as “Financial Creditors,” CoC is the best place to
turn for information on the viability and feasibility of a resolution plan and the
assessment matrix
Section 29A Persons not eligible to be resolution applicant
One of the key duties of a Resolution professional as per section

25 of the Code is to invite prospective resolution applicants to
submit resolution plans for the Corporate Debtor and present all
the resolution plans before the Committee of Creditors.
Grounds of ineligibility to be a resolution applicant

A person shall not be eligible to submit a resolution plan, if such
person, or any other person acting jointly or in concert with such
person
(a) is an undischarged insolvent;
(b) is a wilful defaulter in accordance with the guidelines of the

Reserve Bank of India issued under the Banking Regulation Act,
1949;
(c) at the time of submission of the resolution plan has an

account, or an account of a corporate debtor under the
management or control of such person or of whom such
person is a promoter, classified as non-performing asset in
accordance with the guidelines of the Reserve Bank of India
issued under the Banking Regulation Act, 1949 or the guidelines
of a financial sector regulator issued under any other law for the
time being in force, and at least a period of one year has lapsed
from the date of such classification till the date of
commencement of the corporate insolvency resolution process of
the corporate debtor
Provided that the person shall be eligible to submit a resolution
plan if such person makes payment of all overdue amounts with
interest thereon and charges relating to non- performing asset
accounts before submission of resolution plan
Provided further that nothing in this clause shall apply to a

resolution applicant where such applicant is a financial entity
and is not a related party to the corporate debtor.
(d) has been convicted for any offence punishable with

imprisonment
(i) for two years or more under any Act specified under the
Twelfth Schedule; or
(ii) for seven years or more under any law for the time being in
force:
Provided that this clause shall not apply to a person after the
expiry of a period of two years from the date of his release from
imprisonment:
Provided further that this clause shall not apply in relation to a

connected person referred to in clause (iii) of Explanation I
(e) is disqualified to act as a director under the Companies Act,

2013:
(f) is prohibited by the Securities and Exchange Board of India
from trading in securities or accessing the securities markets;
(g) has been a promoter or in the management or control of a

corporate debtor in which a preferential transaction, undervalued
transaction, extortionate credit transaction or fraudulent
transaction has taken place and in respect of which an order has
been made by the Adjudicating Authority under this Code:
(h) has executed a guarantee in favour of a creditor in respect of

a corporate debtor against which an application for insolvency
resolution made by such creditor has been admitted under this
Code and such guarantee has been invoked by the creditor and
remains unpaid in full or part;
(i) is subject to any disability, corresponding to clauses (a) to (h),

under any law in a jurisdiction outside India; or
(j) has a connected person not eligible under clauses (a) to (i).
Explanation I: For the purposes of this clause, the expression

"connected person" means:
(i) any person who is the promoter or in the management or

control of the resolution applicant; or
(ii) any person who shall be the promoter or in management or

control of the business of the corporate debtor during the
implementation of the resolution plan; or
(iii) the holding company, subsidiary company, associate
company or related party of a person referred to in clauses (i)
and (ii):
Resolution Plan
A resolution plan is defined under section 5(26) “means a plan

proposed by resolution applicant for insolvency resolution of the
corporate debtor as a going concern in accordance with Part II”.
It has to be approved by the COC by a vote of not less than
66% of voting share of the COC members, before being
presented to the Adjudicating Authority. Section 30 and 31 of the
Code deal with resolution plan.
Section 30 Submission of resolution plan
(1) A resolution applicant may submit a resolution plan along

with an affidavit stating that he is eligible under section 29A to
the resolution professional prepared on the basis of the
information memorandum.
Duty of resolution professional on submission of Resolution plan
(2) The resolution professional shall examine each resolution

plan received by him to confirm that each resolution plan -
(a) provides for the payment of insolvency resolution process

costs in a manner specified by the Board in priority to the
payment of other debts of the corporate debtor;
(b) provides for the payment of debts of operational creditors

in such manner as may be specified by the Board which shall
not be less than-
(i) the amount to be paid to such creditors in the event of a

liquidation of the corporate debtor under section 53; or
(ii) the amount that would have been paid to such creditors, if
the amount to be distributed under the resolution plan had been
distributed in accordance with the order of priority in section
53(1),
whichever is higher, and provides for the payment of debts of
financial creditors, who do not vote in favour of the resolution
plan, in such manner as may be specified by the Board, which
shall not be less than the amount to be paid to such creditors in
accordance with section 53(1) in the event of a liquidation of the
corporate debtor.
Explanation 1: For removal of doubts, it is hereby clarified that

a distribution in accordance with the provisions of this clause
shall be fair and equitable to such creditors.
Explanation 2: For the purpose of this clause, it is hereby

declared that on and from the date of commencement of the
Insolvency and Bankruptcy Code (Amendment) Act, 2019, the
provisions of this clause shall also apply to the corporate
insolvency resolution process of a corporate debtor-
(i) where a resolution plan has not been approved or rejected by

the Adjudicating Authority;
(ii) where an appeal has been preferred under section 61 or

section 62 or such an appeal is not time barred under any
provision of law for the time being in force; or
(iii) where a legal proceeding has been initiated in any court

against the decision of the Adjudicating Authority in respect of a
resolution plan;
(c) provides for the management of the affairs of the Corporate
debtor after approval of the resolution plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the
time being in force
(f) conforms to such other requirements as may be specified by

the Board.
Explanation. — For the purposes of clause (e), if any approval

of shareholders is required under the Companies Act, 2013 or
any other law for the time being in force for the implementation
of actions under the resolution plan, such approval shall be
deemed to have been given
Seeking approval of CoC
(3) The resolution professional shall present to the committee of

creditors for its approval such resolution plans which confirm the
conditions referred to in sub-section (2).
(4) The committee of creditors may approve a resolution plan by

a vote of not less than 66% of voting share of the financial
creditors, after considering its feasibility and viability, the manner
of distribution proposed, which may take into account the order
of priority amongst creditors as laid down in section 53(1),
including the priority and value of the security interest of a
secured creditor and such other requirements as may be
specified by the Board:
Provided that the committee of creditors shall not approve a

resolution plan, submitted before the commencement of the
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017,
where the resolution applicant is ineligible under section 29A
and may require the resolution professional to invite a fresh
resolution plan where no other resolution plan is available with
it:
Provided further that where the resolution applicant referred to

in the first proviso is ineligible under clause (c) of section 29A,
the resolution applicant shall be allowed by the committee of
creditors such period, not exceeding 30 days, to make payment
of overdue amounts in accordance with the proviso to clause (c)
of section 29A:
Provided also that nothing in the second proviso shall be

construed as extension of period for the purposes of the proviso
to section 12(3), and the corporate insolvency resolution process
shall be completed within the period specified in that sub-section
Provided also that the eligibility criteria in section 29A as

amended by the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2018 shall apply to the resolution applicant who has
not submitted resolution plan as on the date of commencement
of the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2018.
Attending of meeting by resolution applicant
(5) The resolution applicant may attend the meeting of the

committee of creditors in which the resolution plan of the
applicant is considered:
Provided that the resolution applicant shall not have a right to

vote at the meeting of the committee of creditors unless such
resolution applicant is also a financial creditor.
Submission of the resolution plan
(6) The resolution professional shall submit the resolution plan

as approved by the committee of creditors to the Adjudicating
Authority.
Voting on resolution plan
The committee of creditors shall-
(a) evaluate the resolution plans as per evaluation matrix;
(b) record its deliberations on the feasibility and viability of each

resolution plan; and
(c) vote on all such resolution plans simultaneously.

Where only one resolution plan is put to vote, it shall be
considered approved if it receives requisite votes. Where two or
more resolution plans are put to vote simultaneously, the
resolution plan, which receives the highest votes, but not less
than requisite votes, shall be considered as approved.
Provided that where two or more resolution plans receive equal

votes, but not less than requisite votes, the committee shall
approve any one of them, as per the tie-breaker formula
announced before voting.
Provided further that where none of the resolution plans receives

requisite votes, the committee shall again vote on the resolution
plan that received the highest votes, subject to the timelines
under the Code.
[Regulation 39(3B)]
Section 31 Approval of resolution plan
Approval of resolution plan
(1) If the Adjudicating Authority is satisfied that the resolution

plan as approved by the committee of creditors under section
30(4) meets the requirements as referred to in section 30(2), it
shall by order approve the resolution plan which shall be binding
on the corporate debtor and its employees, members, creditors,
including the Central Government, any State Government or any
local authority to whom a debt in respect of the payment of
dues arising under any law for the time being in force, such as
authorities to whom statutory dues are owed, guarantors and
other stakeholders involved in the resolution plan.
Provided that the Adjudicating Authority shall, before passing an

order for approval of resolution plan under this sub-section,
satisfy that the resolution plan has provisions for its effective
implementation.
Case Law
SC in Committee of Creditors of Essar Steel India Ltd. Vs. Satish

Kumar Gupta & Ors. Civil Appeal No. 8766-67 of 2019 dated
15th November 2019 it was decided that the successful
resolution applicant does on a fresh slate, and all the liabilities
get extinguished on approval of the resolution plan beyond what
has been part of the plan.
Rejection of resolution plan
(2) Where the Adjudicating Authority is satisfied that the

resolution plan does not confirm to the requirements referred to
in sub-section (1), it may, by an order, reject the resolution plan.
Consequences of approval
(3) After the order of approval under sub-section (1), -
(a) the moratorium order passed by the Adjudicating Authority

under section 14 shall cease to have effect; and
(b) the resolution professional shall forward all records relating

to the conduct of the corporate insolvency resolution process
and the resolution plan to the Board to be recorded on its
database.
(4) The resolution applicant shall, pursuant to the resolution plan

approved under sub-section (1), obtain the necessary approval
required under any law for the time being in force within a
period of one year from the date of approval of the resolution
plan by the Adjudicating Authority under sub-section (1) or within
such period as provided for in such law, whichever is later:
Provided that where the resolution plan contains a provision for

combination, as referred to in section 5 of the Competition Act,
2002, the resolution applicant shall obtain the approval of the
Competition Commission of India under that Act prior to the
approval of such resolution plan by the committee of creditors.
Case Law
Supreme Court in the matter of K. Sashidhar Vs. Indian Overseas Bank & Ors. in Civil
Appeal No. 10673 of 2018, C.A. No.10719 of 2018,10971 of 2018 and SLP (C)
No.29181 of 2018 dt 5 Feb 2019 it was decided that No provision has been envisaged
by the legislature to empower the RP, the NCLT or NCLAT, to reverse the commercial
decision of the CoC
Section 32A Liability for prior offences, etc.
Liability of a Corporate Debtor for an offence committed prior

to the commencement of the CIRP
(1) Notwithstanding anything to the contrary contained in this

Code or any other law for the time being in force, the liability of
a corporate debtor for an offence committed prior to the
commencement of the corporate insolvency resolution process
shall cease, and the corporate debtor shall not be prosecuted
for such an offence from the date the resolution plan has been
approved by the Adjudicating Authority under section 31, if the
resolution plan results in the change in the management or
control of the corporate debtor to a person who was not-
(a) a promoter or in the management or control of the corporate

debtor or a related party of such a person; or
(b) a person with regard to whom the relevant investigating

authority has, on the basis of material in its possession, reason
to believe that he had abetted or conspired for the commission of
the offence, and has submitted or filed a report or a complaint to
the relevant statutory authority or Court:
Provided that if a prosecution had been instituted during the
corporate insolvency resolution process against such corporate
debtor, it shall stand discharged from the date of approval of the
resolution plan subject to requirements of this sub-section having
fulfilled:
Provided further that every person who was a “designated

partner” as defined in clause (j) of section 2 of the Limited
Liability Partnership Act, 2008 or an “officer who is in default”,
as defined in clause (60) of section 2 of the Companies Act,
2013, or was in any manner in-charge of, or responsible to the
corporate debtor for the conduct of its business or associated
with the corporate debtor in any manner and who was directly or
indirectly involved in the commission of such offence as per the
report submitted or complaint filed by the investigating authority,
shall continue to be liable to be prosecuted and punished for
such an offence committed by the corporate debtor
notwithstanding that the corporate debtor’s liability has ceased
under this sub-section.
When no action against the property of the corporate debtor
shall be taken
(2) No action shall be taken against the property of the

corporate debtor in relation to an offence committed prior to the
commencement of the corporate insolvency resolution process of
the corporate debtor, where such property is covered under a
resolution plan approved by the Adjudicating Authority
under section 31, which results in the change in control of the
corporate debtor to a person, or sale of liquidation assets under
the provisions of Chapter III of Part II of this Code to a person,
who was not
(i) a promoter or in the management or control of the corporate

debtor or a related party of such a person; or
(ii) a person with regard to whom the relevant investigating

authority has, on the basis of material in its possession, reason
to believe that he had abetted or conspired for the commission
of the offence, and has submitted or filed a report or a
complaint to the relevant statutory authority or Court.
Explanation.- For the purposes of this sub-section, it is hereby

clarified that,-
(i) an action against the property of the corporate debtor in

relation to an offence shall include the attachment, seizure,
retention or confiscation of such property under such law as
may be applicable to the corporate debtor;
(ii) nothing in this sub-section shall be construed to bar an
action against the property of any person, other than the
corporate debtor or a person who has acquired such property
through corporate insolvency resolution process or liquidation
process under this Code and fulfils the requirements specified in
this section, against whom such an action may be taken under
such law as may be applicable.
(3) Subject to the provisions contained in sub-sections (1) and

(2), and notwithstanding the immunity given in this section, the
corporate debtor and any person, who may be required to
provide assistance under such law as may be applicable to such
corporate debtor or person, shall extend all assistance and co-
operation to any authority investigating an offence committed
prior to the commencement of the corporate insolvency
resolution process.
Section 32 Appeal
Any appeal from an order approving the resolution plan shall be

in the manner and on the grounds laid down in section 61(3).
As per Section 61(3) of the Code, an appeal against an order of
Adjudicating Authority for approving the resolution plan may be
filed on the following grounds:-
(a) The approved resolution plan is in contravention of the

provisions of any law for the time being in force.
(b) There has been material irregularity in exercise of the powers

by the resolution professional during the corporate insolvency
resolution period.
(c) The debts owed to operational creditors of the corporate

debtor have not been provided for in the resolution plan in the
manner specified by the Board.
(d) The insolvency resolution process costs have not been

provided for repayment in priority to all other debts.
(e) The resolution plan does not comply with any other criteria
specified by the Board.
Consequences of non-submission of a Resolution Plan
When the Resolution Plan is not filed within 180 days of the
Commencement date or such other extended period the
Adjudicating Authority may pass orders for the liquidation of the
corporate debtor.
Vide Circular No. IBBI/CIRP/41/2021,DATED 18-3-2021, under

Regulation 40A of the IBBI (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 ('CIRP regulations')
provides a model timeline for carrying out various activities
envisaged in a corporate insolvency resolution process (CIRP).
Regulation 40B of the CIRP regulations require an interim

resolution professional (IRP)/ resolution professional (RP) to file
a set of forms (CIRP 1 to CIRP 6) within seven days of
completion of specific activities to enable monitoring progress of
CIRP. This implies that a Form (CIRP 1 to CIRP 6) would not
be filed until the related activity is not completed for whatever
reason. This makes monitoring of progress difficult. Regulation
40B of CIRP regulations require filing of Form CIRP 7 within
three days of due date of completion of any activity stated in
column (2) of the table below is delayed, and continue to file
Form CIRP 7 every 30 days, until the said activity remains
incomplete.
'
Part III - LIQUIDATION PROCESS
The Code concerns itself only with those corporate debtors

which have defaulted in payment of debts. The corporate debtor,
at the first stage, is put into resolution mode. The process is
called the corporate insolvency resolution process. However, if
attempts to resolve the insolvency of the corporate debtor fail,
then only the liquidation provisions of the Code are triggered.
Where no plan is received during the CIRP period or where the

plan presented is rejected by the Committee of Creditors or if
the plan is not approved by the Adjudicating Authority, the
Adjudicating Authority shall pass an order requiring the
Corporate Debtor to be liquidated in the manner as laid down in
Chapter III of the Act. CIRP always precedes Liquidation
Process. There is no provision under the Code for direct
Liquidation without undergoing CIRP.
Section 33 Initiation of liquidation
(1) Where the Adjudicating Authority,
(a) before the expiry of the insolvency resolution process

period or the maximum period permitted for completion of the
corporate insolvency resolution process under section 12 or the
fast track corporate insolvency resolution process under section
56, as the case may be, does not receive a resolution plan
under section 30(6); or
(b) rejects the resolution plan under section 31 for the non-
compliance of the requirements specified therein, it shall
(i) pass an order requiring the corporate debtor to be

liquidated in the manner as laid down in this Chapter;
(ii) issue a public announcement stating that the corporate

debtor is in liquidation; and
(iii) require such order to be sent to the authority with which

the corporate debtor is registered.
Intimation of the decision of the committee of creditors to

liquidate to Adjudicating authority
(2) Where the resolution professional, at any time during the

corporate insolvency resolution process but before confirmation
of resolution plan, intimates the Adjudicating Authority of the
decision of the committee of creditors approved by not less than
66% of the voting share to liquidate the corporate debtor, the
Adjudicating Authority shall pass a liquidation order.
Explanation. For the purpose of this sub-section, it is hereby

declared that the committee of creditors may take the decision
to liquidate the corporate debtor, any time after its constitution
under section 21(1) and before the confirmation of the resolution
plan, including at any time before the preparation of the
information memorandum.
Contravention of resolution plan as approved by the
Adjudicating Authority
(3) Where the resolution plan approved by the Adjudicating

Authority under section 31 or under section 54L(1), is
contravened by the concerned corporate debtor, any person other
than the corporate debtor, whose interests are prejudicially
affected by such contravention, may make an application to the
Adjudicating Authority for a liquidation order
Determination of contravention of the provisions of the

resolution plan

Adjudicating Authority determines that the corporate debtor has
contravened the provisions of the resolution plan, it shall pass a
liquidation order.
Bar to filing of suits and legal proceedings
(5) Subject to section 52, when a liquidation order has been

passed, no suit or other legal proceeding shall be instituted by
or against the corporate debtor
Provided that a suit or other legal proceeding may be instituted

by the liquidator, on behalf of the corporate debtor, with the prior
approval of the Adjudicating Authority.
(6) The provisions of sub-section (5) shall not apply to legal
proceedings in relation to such transactions as may be notified
by the Central Government in consultation with any financial
sector regulator.
Order to be deemed to be notice of discharge
(7) The order for liquidation under this section shall be deemed
to be a notice of discharge to the officers, employees and
workmen of the corporate debtor, except when the business of
the corporate debtor is continued during the liquidation process
by the liquidator.
So, from above it can be concluded that under the Code, a

corporate debtor may be put into liquidation in the following
scenarios:
(i) Non-receipt of resolution plan during CIRP period;
(ii) A 66% majority of the creditor's committee resolves to

liquidate the corporate debtor at any time during the insolvency
resolution process before confirmation of the resolution plan;
(iii) The creditor's committee does not approve a resolution plan

within 180 days (or within the extended 90 days);
(iv) The NCLT rejects the resolution plan submitted to it on

technical grounds; or
(v) The debtor contravenes the agreed resolution plan and an
affected person makes an application to the NCLT to liquidate the
corporate debtor.
Once the NCLT passes an order of liquidation, a moratorium is
imposed on the pending legal proceedings against the corporate
debtor, and the assets of the debtor (including the proceeds of
liquidation) vest in the liquidation estate
(v) The debtor contravenes the agreed resolution plan and an

affected person makes an application to the NCLT to liquidate the
corporate debtor.
Once the NCLT passes an order of liquidation, a moratorium is

imposed on the pending legal proceedings against the corporate
debtor, and the assets of the debtor (including the proceeds of
liquidation) vest in the liquidation estate.
Section 34 Appointment of liquidator and fee to be paid
Resolution professional to act as Liquidator
(1) Where the Adjudicating Authority passes an order for

liquidation of the corporate debtor under section 33, the
resolution professional appointed for the corporate insolvency
resolution process under Chapter II or for the pre-packaged
insolvency resolution process under Chapter III-A shall, subject
to submission of a written consent by the resolution professional
to the Adjudicatory Authority in specified form, shall act as the
liquidator for the purposes of liquidation unless replaced by the
Adjudicating Authority under sub-section (4).
Power of BOD, KMP and partners of the corporate debtor

(2) On the appointment of a liquidator under this section, all
powers of the board of directors, key managerial personnel and
the partners of the corporate debtor, as the case may be, shall
cease to have effect and shall be vested in the liquidator.
Assistance and cooperation to the Liquidator
(3) The personnel of the corporate debtor shall extend all

assistance and cooperation to the liquidator as may be required
by him in managing the affairs of the corporate debtor and
provisions of section 19 shall apply in relation to voluntary
liquidation process as they apply in relation to liquidation
process with the substitution of references to the liquidator for
references to the interim resolution professional.
AA to replace the resolution professional by order
(4) The Adjudicating Authority shall by order replace the

resolution professional, if–
(a) the resolution plan submitted by the resolution professional

under section 30 was rejected for failure to meet the
requirements mentioned in section 30(2); or
(b) the Board recommends the replacement of a resolution

professional to the Adjudicating Authority for reasons to be
recorded in writing; or
(c) the resolution professional fails to submit written consent

under sub-section (1).
(5) For the purposes of clauses (a) and (c) of sub-section (4),
the AA may direct the Board to propose the name of another
insolvency professional to be appointed as a liquidator.
(6) The Board shall propose the name of another insolvency

professional along with written consent from the insolvency
professional in the specified form within 10 days of the direction
issued by the Adjudicating Authority under sub-section (5).
(7) The Adjudicating Authority shall, on receipt of the proposal of
the Board for the appointment of an insolvency professional as
liquidator, by an order appoint such insolvency professional as
the liquidator.
(8) An insolvency professional proposed to be appointed as a

liquidator shall charge such fee for the conduct of the liquidation
proceedings and in such proportion to the value of the
liquidation estate assets, as may be specified by the Board.
(9) The fees for the conduct of the liquidation proceedings under
sub-section (8) shall be paid to the liquidator from the proceeds
of the liquidation estate under section 53.
Section 35 Powers and duties of liquidator
(1) Subject to the directions of the Adjudicating Authority, the

liquidator shall have the following powers and duties, namely:
(a) to verify claims of all the creditors;
(b) to take into his custody or control all the assets, property,
effects and actionable claims of the corporate debtor;
(c) to evaluate the assets and property of the corporate debtor

in the manner as may be specified by the Board and prepare a
report;
(d) to take such measures to protect and preserve the assets
and properties of the corporate debtor as he considers
necessary;
(e) to carry on the business of the corporate debtor for its

beneficial liquidation as he considers necessary;
(f) subject to section 52, to sell the immovable and movable

property and actionable claims of the corporate debtor in
liquidation by public auction or private contract, with power to
transfer such property to any person or body corporate, or to
sell the same in parcels in such manner as may be specified:
Provided that the liquidator shall not sell the immovable and
movable property or actionable claims of the corporate debtor in
liquidation to any person who is not eligible to be a resolution
applicant.
(g) to draw, accept, make and endorse any negotiable

instruments including bill of exchange, hundi or promissory note
in the name and on behalf of the corporate debtor, with the
same effect with respect to the liability as if such instruments
were drawn, accepted, made or endorsed by or on behalf of the
corporate debtor in the ordinary course of its business;
(h) to take out, in his official name, letter of administration to

any deceased contributory and to do in his official name any
other act necessary for obtaining payment of any money due
and payable from a contributory or his estate which cannot
be ordinarily done in the name of the corporate debtor, and in
all such cases, the money due and payable shall, for the
purpose of enabling the liquidator to take out the letter of
administration or recover the money, be deemed to be due to
the liquidator himself;
(i) to obtain any professional assistance from any person or

appoint any professional, in discharge of his duties, obligations
and responsibilities;
(j) to invite and settle claims of creditors and claimants and

distribute proceeds in accordance with the provisions of this
Code;
(k) to institute or defend any suit, prosecution or other legal

proceedings, civil or criminal, in the name of on behalf of the
corporate debtor;
(l) to investigate the financial affairs of the corporate debtor to

determine undervalued or preferential transactions;
(m) to take all such actions, steps, or to sign, execute and verify
any paper, deed, receipt document, application, petition, affidavit,
bond or instrument and for such purpose to use the common
seal, if any, as may be necessary for liquidation, distribution of
assets and in discharge of his duties and obligations and
functions as liquidator;
(n) to apply to the Adjudicating Authority for such orders or
directions as may be necessary for the liquidation of the
corporate debtor and to report the progress of the liquidation
process in a manner as may be specified by the Board; and
(o) to perform such other functions as may be specified by the

Board.
(2) The liquidator shall have the power to consult any of the
stakeholders entitled to a distribution of proceeds under section
53:
Provided that any such consultation shall not be binding on

the liquidator
Provided further that the records of any such consultation

shall be made available to all other stakeholders not so
consulted, in a manner specified by the Board.
Section 36 Liquidation estate
(1) For the purposes of liquidation, the liquidator shall form an

estate of the assets mentioned in sub-section (3), which will be
called the liquidation estate in relation to the corporate debtor.
(2) The liquidator shall hold the liquidation estate as a

fiduciary for the benefit of all the creditors.
Liquidation estate to include
(3) Subject to sub-section (4), the liquidation estate shall

comprise all liquidation estate assets which shall include the
following:
(a) any assets over which the corporate debtor has

ownership rights, including all rights and interests therein as
evidenced in the balance sheet of the corporate debtor or an
information utility or records in the registry or any depository
recording securities of the corporate debtor or by any other
means as may be specified by the Board, including shares held
in any subsidiary of the corporate debtor;
(b) assets that may or may not be in possession of the

corporate debtor including but not limited to encumbered assets;
(c) tangible assets, whether movable or immovable;
(d) intangible assets including but not limited to intellectual

property, securities (including shares held in a subsidiary of the
corporate debtor) and financial instruments, insurance policies,
contractual rights;
(e) assets subject to the determination of ownership by the court

or authority;
(f) any assets or their value recovered through proceedings for
avoidance of transactions in accordance with this Chapter;
(g) any asset of the corporate debtor in respect of which a

secured creditor has relinquished security interest;
(h) any other property belonging to or vested in the corporate

debtor at the insolvency commencement date; and
(i) all proceeds of liquidation as and when they are realised.
Liquidation estate to shall not include
(4) The following shall not be included in the liquidation estate

assets and shall not be used for recovery in the liquidation:
(a) assets owned by a third party which are in possession

of the corporate debtor, including -
(i) assets held in trust for any third party;
(ii) bailment contracts;
(iii) all sums due to any workman or employee from the

provident fund, the pension fund and the gratuity fund;
(iv) other contractual arrangements which do not stipulate

transfer of title but only use of the assets; and
(v) such other assets as may be notified by the Central
Government in consultation with any financial sector regulator;
(b) assets in security collateral held by financial services

providers and are subject to netting and set-off in multi-lateral
trading or clearing transactions;
(c) personal assets of any shareholder or partner of a corporate

debtor as the case may be provided such assets are not held
on account of avoidance transactions that may be avoided under
this Chapter;
(d) assets of any Indian or foreign subsidiary of the corporate

debtor; or
(e) any other assets as may be specified by the Board, including

assets which could be subject to set-off on account of mutual
dealings between the corporate debtor and any creditor.
Section 37 Powers of liquidator to access information
(1) Notwithstanding anything contained in any other law for the

time being in force, the liquidator shall have the power to access
any information systems for the purpose of admission and proof
of claims and identification of the liquidation estate assets
relating to the corporate debtor from the following sources,
namely:
(a) an information utility;

(b) credit information systems regulated under any law for the
time being in force;
(c) any agency of the Central, State or Local Government

including any registration authorities;
(d) information systems for financial and non-financial liabilities

regulated under any law for the time being in force;
(e) information systems for securities and assets posted as

security interest regulated under any law for the time being in
force;
(f) any database maintained by the Board; and
(g) any other source as may be specified by the Board.
Information required by creditor from liquidator
(2) The creditors may require the liquidator to provide them any
financial information relating to the corporate debtor in such
manner as may be specified.
(3) The liquidator shall provide information referred to in sub-

section (2) to such creditors who have requested for such
information within a period of seven days from the date of such
request or provide reasons for not providing such information.
Section 38 Consolidation of claims
(1) The liquidator shall receive or collect the claims of creditors

within a period of 30 days from the date of the commencement
of the liquidation process.
(2) A financial creditor may submit a claim to the liquidator by

providing a record of such claim with an information utility:
Provided that where the information relating to the claim is not

recorded in the information utility, the financial creditor may
submit the claim in the same manner as provided for the
submission of claims for the operational creditor under sub-
section (3).
(3) An operational creditor may submit a claim to the liquidator

in such form and in such manner and along with such
supporting documents required to prove the claim as may be
(4) A creditor who is partly a financial creditor and partly an

operational creditor shall submit claims to the liquidator to the
extent of his financial debt in the manner as provided in sub-
section (2) and to the extent of his operational debt under sub-
section (3).
(5) A creditor may withdraw or vary his claim under this

section within 14 days of its submission.
Section 39 Verification of claims
(1) The liquidator shall verify the claims submitted under section
38 within such time as specified by the Board.
(2) The liquidator may require any creditor or the corporate

debtor or any other person to produce any other document or
evidence which he thinks necessary for the purpose of verifying
the whole or any part of the claim.
Section 40 Admission or rejection of claims
(1) The liquidator may, after verification of claims under section

39, either admit or reject the claim, in whole or in part, as the
case may be:
Provided that where the liquidator rejects a claim, he shall

record in writing the reasons for such rejection.
(2) The liquidator shall communicate his decision of admission

or rejection of claims to the creditor and corporate debtor within
seven days of such admission or rejection of claims.
Section 41 Determination of valuation of claims
The liquidator shall determine the value of claims admitted under

section 40 in such manner as may be specified by the Board.
Section 42 Appeal against the decision of liquidator
A creditor may appeal to the Adjudicating Authority against the
decision of the liquidator accepting or rejecting the claims within
14 days of the receipt of such decision.
Section 43 Preferential transactions and relevant time
Preferential transactions
(1) Where the liquidator or the resolution professional, as the
case may be, is of the opinion that the corporate debtor has at
a relevant time given a preference in such transactions and in
such manner as laid down in sub-section (2) to any persons as
referred to in sub-section (4), he shall apply to the Adjudicating
Authority for avoidance of preferential transactions and for, one
or more of the orders referred to in section 44.
(2) A corporate debtor shall be deemed to have given a

preference, if–
(a) there is a transfer of property or an interest thereof of the

corporate debtor for the benefit of a creditor or a surety or a
guarantor for or on account of an antecedent financial debt or
operational debt or other liabilities owed by the corporate debtor;
and
(b) the transfer under clause (a) has the effect of putting such
creditor or a surety or a guarantor in a beneficial position than it
would have been in the event of a distribution of assets being
made in accordance with section 53.
Following are not preferential transfers
(3) For the purposes of sub-section (2), a preference shall not

include the following transfers–
(a) transfer made in the ordinary course of the business or

financial affairs of the corporate debtor or the transferee;
(b) any transfer creating a security interest in property acquired

by the corporate debtor to the extent that –
(i) such security interest secures new value and was given at
the time of or after the signing of a security agreement that
contains a description of such property as security interest, and
was used by corporate debtor to acquire such property; and
(ii) such transfer was registered with an information utility on or

before 30 days after the corporate debtor receives
possession of such property:
Provided that any transfer made in pursuance of the order of a

court shall not, preclude such transfer to be deemed as giving of
preference by the corporate debtor.
Explanation. For the purpose of sub-section (3) of this section,

“new value” means money or its worth in goods, services, or
new credit, or release by the transferee of property previously
transferred to such transferee in a transaction that is neither
void nor voidable by the liquidator or the resolution professional
under this Code, including proceeds of such property, but does
not include a financial debt or operational debt substituted for
existing financial debt or operational debt.
Relevant time of preference
(4) A preference shall be deemed to be given at a relevant time,

if
(a) it is given to a related party (other than by reason only of

being an employee), during the period of two years preceding the
insolvency commencement date; or
(b) a preference is given to a person other than a related party

during the period of one year preceding the insolvency
commencement date.
Section 44 Orders in case of preferential transactions
(1) The Adjudicating Authority, may, on an application made by

the resolution professional or liquidator under section 43(1), by
an order:
(a) require any property transferred in connection with the giving

of the preference to be vested in the corporate debtor;
(b) require any property to be so vested if it represents the
application either of the proceeds of sale of property so
transferred or of money so transferred;
(c) release or discharge (in whole or in part) of any security

interest created by the corporate debtor;
(d) require any person to pay such sums in respect of benefits

received by him from the corporate debtor, such sums to the
liquidator or the resolution professional, as the Adjudicating
Authority may direct;
(e) direct any guarantor, whose financial debts or operational

debts owed to any person were released or discharged (in
whole or in part) by the giving of the preference, to be under
such new or revived financial debts or operational debts to that
person as the Adjudicating Authority deems appropriate;
(f) direct for providing security or charge on any property for the
discharge of any financial debt or operational debt under the
order, and such security or charge to have the same priority as
a security or charge released or discharged wholly or in part by
the giving of the preference; and
(g) direct for providing the extent to which any person whose
property is so vested in the corporate debtor, or on whom
financial debts or operational debts are imposed by the order,
are to be proved in the liquidation or the corporate insolvency
resolution process for financial debts or operational debts which
arose from, or were released or discharged wholly or in part by
the giving of the preference:
Provided that an order under this section shall not -
(a) affect any interest in property which was acquired from a

person other than the corporate debtor or any interest derived
from such interest and was acquired in good faith and for value;
(b) require a person, who received a benefit from the

preferential transaction in good faith and for value to pay a sum
to the liquidator or the resolution professional.
Explanation-I: For the purpose of this section, it is clarified that

where a person, who has acquired an interest in property from
another person other than the corporate debtor, or who has
received a benefit from the preference or such another person
to whom the corporate debtor gave the preference,
(i) had sufficient information of the initiation or commencement

of insolvency resolution process of the corporate debtor;
(ii) is a related party,
it shall be presumed that the interest was acquired, or the

benefit was received otherwise than in good faith unless the
contrary is shown.
Explanation-II. A person shall be deemed to have sufficient
information or opportunity to avail such information if a public
announcement regarding the corporate insolvency resolution
process has been made under section 13.
Section 45 Avoidance of undervalued transactions
(1) If the liquidator or the resolution professional, as the case

may be, on an examination of the transactions of the corporate
debtor referred to in sub-section (2) determines that certain
transactions were made during the relevant period under section
46, which were undervalued, he shall make an application to the
Adjudicating Authority to declare such transactions as void and
reverse the effect of such transaction in accordance with this
Chapter.
(2) A transaction shall be considered undervalued where the

corporate debtor–
(a) makes a gift to a person; or
(b) enters into a transaction with a person which involves the

transfer of one or more assets by the corporate debtor for a
consideration the value of which is significantly less than the
value of the consideration provided by the corporate debtor,
and such transaction has not taken place in the ordinary course
of business of the corporate debtor.
Section 46 Relevant period for avoidable transactions
(1) In an application for avoiding a transaction at undervalue, the

liquidator or the resolution professional, as the case may be,
shall demonstrate that –
(i) such transaction was made with any person within the period
of one year preceding the insolvency commencement date; or
(ii) such transaction was made with a related party within the
period of two years preceding the insolvency commencement
date.
(2) The Adjudicating Authority may require an independent

expert to assess evidence relating to the value of the
transactions mentioned in this section.
Section 47 Application by creditor in cases of undervalued

transactions
(1) Where an undervalued transaction has taken place and the

liquidator or the resolution professional as the case may be, has
not reported it to the Adjudicating Authority, a creditor, member
or a partner of a corporate debtor, as the case may be, may
make an application to the Adjudicating Authority to declare
such transactions void and reverse their effect in accordance
with this Chapter.
(2) Where the Adjudicating Authority, after examination of the
application made under sub-section (1), is satisfied that -
(a) undervalued transactions had occurred; and
(b) liquidator or the resolution professional, as the case may be,

after having sufficient information or opportunity to avail
information of such transactions did not report such transaction
to the Adjudicating Authority,
it shall pass an order-

(a) restoring the position as it existed before such transactions
and reversing the effects thereof in the manner as laid down in
section 45 and section 48;
(b) requiring the Board to initiate disciplinary proceedings against

the liquidator or the resolution professional as the case may be.
Section 48 Order in cases of undervalued transactions
(1) The order of the Adjudicating Authority under section 45(1)

may provide for the following:
(a) require any property transferred as part of the transaction, to

be vested in the corporate debtor;
(b) release or discharge (in whole or in part) any security

interest granted by the corporate debtor;
(c) require any person to pay such sums, in respect of benefits
received by such person, to the liquidator or the resolution
professional as the case may be, as the Adjudicating Authority
may direct; or
(d) require the payment of such consideration for the transaction

as may be determined by an independent expert.
Section 49 Transactions defrauding creditors
(1) Where the corporate debtor has entered into an undervalued

transaction as referred to in section 45(2) and the Adjudicating
Authority is satisfied that such transaction was deliberately
entered into by such corporate debtor
(a) for keeping assets of the corporate debtor beyond the reach
of any person who is entitled to make a claim against the
(b) in order to adversely affect the interests of such a person in

relation to the claim, the Adjudicating Authority shall make an
order-
(i) restoring the position as it existed before such transaction as

if the transaction had not been entered into; and
(ii) protecting the interests of persons who are victims of such

transactions:
Provided that an order under this section -
(a) shall not affect any interest in property which was acquired
from a person other than the corporate debtor and was acquired
in good faith, for value and without notice of the relevant
circumstances, or affect any interest deriving from such an
interest, and
(b) shall not require a person who received a benefit from the
transaction in good faith, for value and without notice of the
relevant circumstances to pay any sum unless he was a party to
the transaction.
Section 50 Extortionate credit transactions
(1) Where the corporate debtor has been a party to an

extortionate credit transaction involving the receipt of financial or
operational debt during the period within two years preceding the
insolvency commencement date, the liquidator or the resolution
professional as the case may be, may make an application for
avoidance of such transaction to the Adjudicating Authority if the
terms of such transaction required exorbitant payments to be
made by the corporate debtor.
(2) The Board may specify the circumstances in which a

transactions which shall be covered under sub-section (1).
Explanation. - For the purpose of this section, it is clarified that
any debt extended by any person providing financial services
which is in compliance with any law for the time being in force
in relation to such debt shall in no event be considered as an
extortionate credit transaction.
Section 51 Orders of Adjudicating Authority in respect of

extortionate credit transactions
Where the Adjudicating Authority after examining the application

made under section 50(1) is satisfied that the terms of a credit
transaction required exorbitant payments to be made by the
corporate debtor, it shall, by an order –
(a) restore the position as it existed prior to such transaction;
(b) set aside the whole or part of the debt created on account of
the extortionate credit transaction;
(c) modify the terms of the transaction;
(d) require any person who is, or was, a party to the transaction
to repay any amount received by such person; or
(e) require any security interest that was created as part of the
extortionate credit transaction to be relinquished in favour of the
liquidator or the resolution professional, as the case may be.
Section 52 Secured creditor in liquidation proceedings
(1) A secured creditor in the liquidation proceedings may-
(a) relinquish its security interest to the liquidation estate and

receive proceeds from the sale of assets by the liquidator in the
manner specified in section 53; or
(b) realise its security interest in the manner specified in this

section.
(2) Where the secured creditor realises security interest under

clause (b) of sub- section (1), he shall inform the liquidator of
such security interest and identify the asset subject to such
security interest to be realised.
(3) Before any security interest is realised by the secured

creditor under this section, the liquidator shall verify such
security interest and permit the secured creditor to realise only
such security interest, the existence of which may be proved
either –
(a) by the records of such security interest maintained by an

information utility; or
(b) by such other means as may be specified by the Board.

(4) A secured creditor may enforce, realise, settle, compromise
or deal with the secured assets in accordance with such law as
applicable to the security interest being realised and to the
secured creditor and apply the proceeds to recover the debts
due to it.
(5) If in the course of realising a secured asset, any secured

creditor faces resistance from the corporate debtor or any
person connected therewith in taking possession of, selling or
otherwise disposing off the security, the secured creditor may
make an application to the Adjudicating Authority to facilitate the
secured creditor to realise such security interest in accordance
with law for the time being in force.
(6) The Adjudicating Authority, on the receipt of an application

from a secured creditor under sub-section (5) may pass such
order as may be necessary to permit a secured creditor to
realise security interest in accordance with law for the time
being in force.
(7) Where the enforcement of the security interest under sub-

section (4) yields an amount by way of proceeds which is in
excess of the debts due to the secured creditor, the secured
creditor shall-
(a) account to the liquidator for such surplus; and

(b) tender to the liquidator any surplus funds received from the
enforcement of such secured assets.
(8) The amount of insolvency resolution process costs, due from

secured creditors who realise their security interests in the
manner provided in this section, shall be deducted from the
proceeds of any realisation by such secured creditors, and they
shall transfer such amounts to the liquidator to be included in
the liquidation estate.
(9) Where the proceeds of the realisation of the secured assets

are not adequate to repay debts owed to the secured creditor,
the unpaid debts of such secured creditor shall be paid by the
liquidator in the manner specified in section 53(1)(e)
Section 53 Distribution of assets
(1) Notwithstanding anything to the contrary contained in any

law enacted by the Parliament or any State Legislature for the
time being in force, the proceeds from the sale of the liquidation
assets shall be distributed in the following order of priority and
within such period and in such manner as may be specified,
namely: -
(a) the insolvency resolution process costs and the liquidation

costs paid in full;
(b) the following debts which shall rank equally between and
among the following:
(i) workmen’s dues for the period of 24 months preceding the
liquidation commencement date; and
(ii) debts owed to a secured creditor in the event such secured

creditor has relinquished security in the manner set out in
section 52;
(c) wages and any unpaid dues owed to employees other than
workmen for the period of 12 months preceding the liquidation
commencement date;
(d) financial debts owed to unsecured creditors;
(e) the following dues shall rank equally between and among the
following:
(i) any amount due to the Central Government and the State
Government including the amount to be received on account of
the Consolidated Fund of India and the Consolidated Fund of a
State, if any, in respect of the whole or any part of the period of
two years preceding the liquidation commencement date;
(ii) debts owed to a secured creditor for any amount unpaid

following the enforcement of security interest;
(f) any remaining debts and dues;
(g) preference shareholders, if any; and

(h) equity shareholders or partners, as ' the case may be.
(2) Any contractual arrangements between the recipients under

sub-section (1) with equal ranking, if disrupting the order of
priority under that sub-section shall be disregarded by the
liquidator.
(3) The fees payable to the liquidator shall be deducted

proportionately from the proceeds payable to each class of
recipients under sub-section (1), and the proceeds to the
relevant recipient shall be distributed after such deduction.
Explanation. – For the purpose of this section-
(i) it is hereby clarified that at each stage of the distribution of

proceeds in respect of a class of recipients that rank equally,
each of the debts will either be paid in full, or will be paid in
equal proportion within the same class of recipients, if the
proceeds are insufficient to meet the debts in full; and
(ii) the term “workmen’s dues” shall have the same meaning as
assigned to it in section 326 of the Companies Act, 2013.
Section 54 Dissolution of corporate debtor
(1) Where the assets of the corporate debtor have been

completely liquidated, the liquidator shall make an application to
the Adjudicating Authority for the dissolution of such corporate
debtor.
(2) The Adjudicating Authority shall on application filed by the

liquidator under sub-section (1) order that the corporate debtor
shall be dissolved from the date of that order and the corporate
debtor shall be dissolved accordingly.
(3) A copy of an order under sub-section (2) shall within seven

days from the date of such order, be forwarded to the authority
with which the corporate debtor is registered.
Part IV - PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS
Section 54A Corporate debtors eligible for pre-packaged insolvency

resolution process
(1) An application for initiating pre-packaged insolvency

resolution process may be made in respect of a corporate
debtor classified as a micro, small or medium enterprise under
section 7(1) of the Micro, Small and Medium Enterprises
Development Act, 2006.
(2) Without prejudice to sub-section (1), an application for

initiating pre-packaged insolvency resolution process may be
made in respect of a corporate debtor, who commits a default
referred to in section 4, subject to the following conditions, that–
(a) it has not undergone pre-packaged insolvency resolution

process or completed corporate insolvency resolution process,
as the case may be, during the period of three years preceding
the initiation date;
(b) it is not undergoing a corporate insolvency resolution

process;
(c) no order requiring it to be liquidated is passed under section

33;
(d) it is eligible to submit a resolution plan under section 29A;

(e) the financial creditors of the corporate debtor, not being its
related parties, representing such number and in such manner
as may be specified, have proposed the name of the insolvency
professional to be appointed as resolution professional for
conducting the pre-packaged insolvency resolution process of
the corporate debtor, and the financial creditors of the corporate
debtor, not being its related parties, representing not less than
66% in value of the financial debt due to such creditors, have
approved such proposal in such form as may be specified:
Provided that where a corporate debtor does not have any

financial creditors, not being its related parties, the proposal and
approval under this clause shall be provided by such persons as
may be specified;
(f) the majority of the directors or partners of the corporate

debtor, as the case may be, have made a declaration, in such
form as may be specified, stating, inter alia, that—
(i) the corporate debtor shall file an application for initiating pre-
packaged insolvency resolution process within a definite time
period not exceeding 90 days;
(ii) the pre-packaged insolvency resolution process is not being

initiated to defraud any person; and
(iii) the name of the insolvency professional proposed and
approved to be appointed as resolution professional under
clause (e);
(g) the members of the corporate debtor have passed a special

resolution, or at least 3/4th of the total number of partners, as
the case may be, of the corporate debtor have passed a
resolution, approving the filing of an application for initiating pre-
packaged insolvency resolution process.
(3) The corporate debtor shall obtain an approval from its

financial creditors, not being its related parties, representing not
less than 66% in value of the financial debt due to such
creditors, for the filing of an application for initiating pre-
packaged insolvency resolution process, in such form as may be
specified:
Provided that where a corporate debtor does not have any

financial creditors, not being its related parties, the approval
under this sub-section shall be provided by such persons as
may be specified.
(4) Prior to seeking approval from financial creditors under sub-

section (3), the corporate debtor shall provide such financial
creditors with
(a) the declaration referred to in clause (f) of sub-section (2);

(b) the special resolution or resolution referred to in clause (g) of
sub- section (2);
(c) a base resolution plan which conforms to the requirements

referred to in section 54K, and such other conditions as may be
specified; and
(d) such other information and documents as may be specified.
Section 54B Duties of insolvency professional before

initiation of pre-packaged insolvency resolution process
(1) The insolvency professional, proposed to be appointed as

the resolution professional, shall have the following duties
commencing from the date of the approval under section 54A(2)
(e), namely:
(a) prepare a report in such form as may be specified,

confirming whether the corporate debtor meets the requirements
of section 54A, and the base resolution plan conforms to the
requirements referred to in section 54A(4)(c);
(b) file such reports and other documents, with the Board, as
may be specified; and
(c) perform such other duties as may be specified.

(2) The duties of the insolvency professional under sub-section
(1) shall cease, if,
(a) the corporate debtor fails to file an application for initiating

pre-packaged insolvency resolution process within the time
period as stated under the declaration referred to in section
54A(2)(f); or
(b) the application for initiating pre-packaged insolvency

resolution process is admitted or rejected by the Adjudicating
Authority, as the case may be.
(3) The fees payable to the insolvency professional in relation to

the duties performed under sub-section (1) shall be determined
and borne in such manner as may be specified and such fees
shall form part of the pre-packaged insolvency resolution
process costs, if the application for initiation of pre-packaged
insolvency resolution process is admitted.
Section 54C Application to initiate pre-packaged insolvency
resolution process
(1) Where a corporate debtor meets the requirements of section

54A, a corporate applicant thereof may file an application with
the Adjudicating Authority for initiating pre- packaged insolvency
resolution process.
(2) The application under sub-section (1) shall be filed in such

form, containing such particulars, in such manner and
accompanied with such fee as may be prescribed.
(3) The corporate applicant shall, along with the application,

furnish—
(a) the declaration, special resolution or resolution, as the case

may be, and the approval of financial creditors for initiating pre-
packaged insolvency resolution process in terms of section 54A;
(b) the name and written consent, in such form as may be

specified, of the insolvency professional proposed to be
appointed as resolution professional, as approved under section
54A(2)(e), and his report as referred to in section 54B(1)(a);
(c) a declaration regarding the existence of any transactions of
the corporate debtor that may be within the scope of provisions
in respect of avoidance of transactions under Chapter III or
fraudulent or wrongful trading under Chapter VI, in such form as
may be specified;
(d) information relating to books of account of the corporate

debtor and such other documents relating to such period as may
be specified.
(4) The Adjudicating Authority shall, within a period of 14 days

of the receipt of the application, by an order,–
(a) admit the application, if it is complete; or
(b) reject the application, if it is incomplete:
Provided that the Adjudicating Authority shall, before rejecting an

application, give notice to the applicant to rectify the defect in
the application within seven days from the date of receipt of
such notice from the Adjudicating Authority.
(5) The pre-packaged insolvency resolution process shall

commence from the date of admission of the application under
clause (a) of sub-section (4).
Section 54D Time-limit for completion of pre-packaged
insolvency resolution process
(1) The pre-packaged insolvency resolution process shall be

completed within a period of 120 days from the pre-packaged
insolvency commencement date.
(2) Without prejudice to sub-section (1), the resolution

professional shall submit the resolution plan, as approved by the
committee of creditors, to the Adjudicating Authority under sub-
section (4) or sub-section (12), as the case may be, of section
54K, within a period of 90 days from the pre-packaged
insolvency commencement date.
(3) Where no resolution plan is approved by the committee of

creditors within the time period referred to in sub-section (2), the
resolution professional shall, on the day after the expiry of such
time period, file an application with the Adjudicating Authority for
termination of the pre-packaged insolvency resolution process in
such form and manner as may be specified.
Section 54E Declaration of moratorium and public
announcement during pre-packaged insolvency resolution
process
(1) The Adjudicating Authority shall, on the pre-packaged

insolvency commencement date, along with the order of
admission under section 54C
(a) declare a moratorium for the purposes referred to in sub-

section (1) read with section 14(3), which shall, mutatis mutandis
apply, to the proceedings under this Chapter;
(b) appoint a resolution professional
(i) as named in the application, if no disciplinary proceeding is

pending against him; or
(ii) based on the recommendation made by the Board, if any

disciplinary proceeding is pending against the insolvency
professional named in the application;
(c) cause a public announcement of the initiation of the pre-

packaged insolvency resolution process to be made by the
resolution professional, in such form and manner as may be
specified, immediately after his appointment.
Section 54F Duties and powers of resolution professional
during pre-packaged insolvency resolution process
(1) The resolution professional shall conduct the pre-packaged

insolvency resolution process of a corporate debtor during the
pre-packaged insolvency resolution process period.
(2) The resolution professional shall perform the following duties,

namely:—
(a) confirm the list of claims submitted by the corporate debtor

under section 54G, in such manner as may be specified;
(b) inform creditors regarding their claims as confirmed under

clause (a), in such manner as may be specified;
(c) maintain an updated list of claims, in such manner as may

be specified;
(d) monitor management of the affairs of the corporate debtor;
(e) inform the committee of creditors in the event of breach of

any of the obligations of the Board of Directors or partners, as
the case may be, of the corporate debtor, under the provisions
of this Chapter and the rules and regulations made thereunder;
(f) constitute the committee of creditors and convene and attend

all its meetings;
(g) prepare the information memorandum on the basis of the
preliminary information memorandum submitted under section
54G and any other relevant information, in such form and
manner as may be specified;
(h) file applications for avoidance of transactions under Chapter

III or fraudulent or wrongful trading under Chapter VI, if any; and
(i) such other duties as may be specified.
(3) The resolution professional shall exercise the following

powers, namely:
(a) access all books of account, records and information

available with the corporate debtor;
(b) access the electronic records of the corporate debtor from an

information utility having financial information of the corporate
debtor;
(c) access the books of account, records and other relevant

documents of the corporate debtor available with Government
authorities, statutory auditors, accountants and such other
persons as may be specified;
(d) attend meetings of members, Board of Directors and

committee of directors, or partners, as the case may be, of the
corporate debtor;
(e) appoint accountants, legal or other professionals in such
manner as may be specified;
(f) collect all information relating to the assets, finances and

operations of the corporate debtor for determining the financial
position of the corporate debtor and the existence of any
transactions that may be within the scope of provisions relating
to avoidance of transactions under Chapter III or fraudulent or
wrongful trading under Chapter VI, including information relating
to
(i) business operations for the previous two years from the date
of pre- packaged insolvency commencement date;
(ii) financial and operational payments for the previous two years
from the date of pre-packaged insolvency commencement date;
(iii) list of assets and liabilities as on the initiation date; and
(iv) such other matters as may be specified;
(g) take such other actions in such manner as may be specified.
(4) From the date of appointment of the resolution professional,

the financial institutions maintaining accounts of the corporate
debtor shall furnish all information relating to the corporate
debtor available with them to the resolution professional, as and
when required by him.
(5) The personnel of the corporate debtor, its promoters and any
other person associated with the management of the corporate
debtor shall extend all assistance and cooperation to the
resolution professional as may be required by him to perform his
duties and exercise his powers, and for such purposes, the
provisions of sub-sections (2) and (3) of section 19 shall, mutatis
mutandis apply, in relation to the proceedings under this
Chapter.
(6) The fees of the resolution professional and any expenses

incurred by him for conducting the pre-packaged insolvency
resolution process shall be determined in such manner as may
be specified:
Provided that the committee of creditors may impose limits and

conditions on such fees and expenses:
Provided further that the fees and expenses for the period
prior to the constitution of the committee of creditors shall be
subject to ratification by it.
(7) The fees and expenses referred to in sub-section (6) shall

be borne in such manner as may be specified.
Section 54G List of claims and preliminary information
memorandum
(1) The corporate debtor shall, within two days of the pre-
packaged insolvency commencement date, submit to the
resolution professional the following information, updated as on
that date, in such form and manner as may be specified,
namely:
(a) a list of claims, along with details of the respective creditors,

their security interests and guarantees, if any; and
(b) a preliminary information memorandum containing information

relevant for formulating a resolution plan.
(2) Where any person has sustained any loss or damage as a

consequence of the omission of any material information or
inclusion of any misleading information in the list of claims or
the preliminary information memorandum submitted by the
corporate debtor, every person who
(a) is a promoter or director or partner of the corporate debtor,

as the case may be, at the time of submission of the list of
claims or the preliminary information memorandum by the
(b) has authorised the submission of the list of claims or the

preliminary information memorandum by the corporate debtor,
shall, without prejudice to section 77A, be liable to pay
compensation to every person who has sustained such loss or
damage.
(3) No person shall be liable under sub-section (2), if the list of
claims or the preliminary information memorandum was
submitted by the corporate debtor without his knowledge or
consent.
(4) Subject to section 54E, any person, who sustained any loss
or damage as a consequence of omission of material
information or inclusion of any misleading information in the list
of claims or the preliminary information memorandum shall be
entitled to move a court having jurisdiction for seeking
compensation for such loss or damage.
Section 54H Management of affairs of corporate debtor
During the pre-packaged insolvency resolution process period,—
(a) the management of the affairs of the corporate debtor shall

continue to vest in the Board of Directors or the partners, as the
case may be, of the corporate debtor, subject to such conditions
as may be specified;
(b) the Board of Directors or the partners, as the case may be,
of the corporate debtor, shall make every endeavour to protect
and preserve the value of the property of the corporate debtor,
and manage its operations as a going concern; and
(c) the promoters, members, personnel and partners, as the

case may be, of the corporate debtor, shall exercise and
discharge their contractual or statutory rights and obligations in
relation to the corporate debtor, subject to the provisions of this
Chapter and such other conditions and restrictions as may be
prescribed.
Section 54I Committee of creditors
(1) The resolution professional shall, within seven days of the

pre-packaged insolvency commencement date, constitute a
committee of creditors, based on the list of claims confirmed
under section 54F(2)(a):
Provided that the composition of the committee of creditors shall

be altered on the basis of the updated list of claims, in such
manner as may be specified, and any such alteration shall not
affect the validity of any past decision of the committee of
creditors.
(2) The first meeting of the committee of creditors shall be held

within seven days of the constitution of the committee of
creditors.
(3) The provisions of section 21, except sub-section (1) thereof,

shall, mutatis mutandis apply, in relation to the committee of
creditors under this Chapter:
Provided that for the purposes of this sub-section, references to

“resolution professional” under sub-sections (9) and (10) of
section 21, shall be construed as references to “corporate debtor
or the resolution professional”.
Section 54J Vesting management of corporate debtor with
resolution professional
(1) Where the committee of creditors, at any time during the

pre-packaged insolvency resolution process period, by a vote of
not less than 66% of the voting shares, resolves to vest the
management of the corporate debtor with the resolution
professional, the resolution professional shall make an
application for this purpose to the Adjudicating Authority, in such
form and manner as may be specified.
(2) On an application made under sub-section (1), if the

Adjudicating Authority is of the opinion that during the pre-
packaged insolvency resolution process—
(a) the affairs of the corporate debtor have been conducted in a

fraudulent manner; or
(b) there has been gross mismanagement of the affairs of the

corporate debtor,
it shall pass an order vesting the management of the corporate

debtor with the resolution professional.
Chapter, the provisions of
(a) sub-sections (2) and (2A) of section 14; (b) section 17;
(c) clauses (e) to (g) of section 18;
(d) sections 19 and 20;
(e) sub-section (1) of section 25;
(f) clauses (a) to (c) and clause (k) of section 25(2); and
(g) section 28,
shall, mutatis mutandis apply, to the proceedings under this

Chapter, from the date of the order under sub-section (2), until
the pre-packaged insolvency resolution process period comes to
an end.
Section 54K Consideration and approval of resolution plan
(1) The corporate debtor shall submit the base resolution plan,
referred to in section 54A(4)(c), to the resolution professional
within two days of the pre- packaged insolvency commencement
date, and the resolution professional shall present it to the
committee of creditors.
(2) The committee of creditors may provide the corporate debtor

an opportunity to revise the base resolution plan prior to its
approval under sub-section (4) or invitation of prospective
resolution applicants under sub-section (5), as the case may be.
(3) The resolution plans and the base resolution plan, submitted
under this section shall conform to the requirements referred to
in sub-sections (1) and (2) of section 30, and the provisions of
sub-sections (1), (2) and (5) of section 30 shall, mutatis
mutandis apply, to the proceedings under this Chapter.
(4) The committee of creditors may approve the base resolution

plan for submission to the Adjudicating Authority if it does not
impair any claims owed by the corporate debtor to the
operational creditors.
(5) Where —
(a) the committee of creditors does not approve the base

resolution plan under sub- section (4); or
(b) the base resolution plan impairs any claims owed by the
corporate debtor to the operational creditors,
the resolution professional shall invite prospective resolution

applicants to submit a resolution plan or plans, to compete with
the base resolution plan, in such manner as may be specified.
(6) The resolution applicants submitting resolution plans

pursuant to invitation under sub-section (5), shall fulfil such
criteria as may be laid down by the resolution professional with
the approval of the committee of creditors, having regard to the
complexity and scale of operations of the business of the
corporate debtor and such other conditions as may be specified.
(7) The resolution professional shall provide to the resolution

applicants, —
(a) the basis for evaluation of resolution plans for the purposes
of sub-section (9), as approved by the committee of creditors
subject to such conditions as may be specified; and
(b) the relevant information referred to in section 29, which shall,

mutatis mutandis apply, to the proceedings under this Chapter,
in such manner as may be specified.
(8) The resolution professional shall present to the committee of

creditors, for its evaluation, resolution plans which conform to
the requirements referred to in sub-section (2) of section 30.
(9) The committee of creditors shall evaluate the resolution
plans presented by the resolution professional and select a
resolution plan from amongst them.
(10) Where, on the basis of such criteria as may be laid down

by it, the committee of creditors decides that the resolution plan
selected under sub-section (9) is significantly better than the
base resolution plan, such resolution plan may be selected for
approval under sub- section (12):
Provided that the criteria laid down by the committee of

creditors under this sub-section shall be subject to such
conditions as may be specified.
(11) Where the resolution plan selected under subsection (9) is

not considered for approval or does not fulfil the requirements of
sub-section (10), it shall compete with the base resolution plan,
in such manner and subject to such conditions as may be
specified, and one of them shall be selected for approval under
sub-section (12).
(12) The resolution plan selected for approval under sub-section

(10) or sub-section
Section 54L Approval of resolution plan
(1) If the Adjudicating Authority is satisfied that the resolution

plan as approved by the committee of creditors under sub-
section (4) or sub-section (12), as the case may be of section
54K, subject to the conditions provided therein, meets the
requirements as referred to in section 30(2), it shall, within 30
days of the receipt of such resolution plan, by order, approve
the resolution plan:
Provided that the Adjudicating Authority shall, before passing

an order for approval of a resolution plan under this sub-section,
satisfy itself that the resolution plan has provisions for its
effective implementation.
(2) The order of approval under sub-section (1) shall have such
effect as provided under sub-sections (1), (3) and (4) of section
31, which shall, mutatis mutandis apply, to the proceedings
under this Chapter.
(3) Where the Adjudicating Authority is satisfied that the

resolution plan does not conform to the requirements referred to
in sub-section (1), it may, within thirty days of the receipt of
such resolution plan, by an order, reject the resolution plan and
pass an order under section 54N.
section, where the Adjudicating Authority has passed an order
under sub-section (2) of section 54J and the resolution plan
approved by the committee of creditors under sub-section (4) or
sub-section (12), as the case may be of section 54K, does not
result in the change in the management or control of the
corporate debtor to a person who was not a promoter or in the
management or control of the corporate debtor, the Adjudicating
Authority shall pass an order —
(a) rejecting such resolution plan;
(b) terminating the pre-packaged insolvency resolution process

and passing a liquidation order in respect of the corporate
debtor as referred to in sub-clauses (i), (ii) and (iii) of clause (b)
of section 33(1); and
(c) declaring that the pre-packaged insolvency resolution process

costs, if any, shall be included as part of the liquidation costs for
the purposes of liquidation of the corporate debtor.
Section 54M Appeal against order under section 54L
Any appeal against an order approving the resolution plan under

section 54L(1), shall be on the grounds laid down in of section
61(3).
Section 54N Appeal against order under section 54L
(1) Where the resolution professional files an application with the

Adjudicating Authority,
(a) under the proviso to section 54K(12); or
(b) under section 54D(3),
the Adjudicating Authority shall, within 30 days of the date of

such application, by an order, —
(i) terminate the pre-packaged insolvency resolution process;

and
(ii) provide for the manner of continuation of proceedings

initiated for avoidance of transactions under Chapter III or
proceedings initiated under section 66 and section 67A, if any.
(2) Where the resolution professional, at any time after the pre-
packaged insolvency commencement date, but before the
approval of resolution plan under sub-section (4) or sub- section
(12), as the case may be of section 54K, intimates the
Adjudicating Authority of the decision of the committee of
creditors, approved by a vote of not less than sixty-six per cent.
of the voting shares, to terminate the pre-packaged insolvency
resolution process, the Adjudicating Authority shall pass an order
under sub-section (1).
(3) Where the Adjudicating Authority passes an order under sub-

section (1), the corporate debtor shall bear the pre-packaged
insolvency resolution process costs, if any.

section, where the Adjudicating Authority has passed an order
under section 54J(2) and the pre- packaged insolvency
resolution process is required to be terminated under sub-
section (1), the Adjudicating Authority shall pass an order —
(a) of liquidation in respect of the corporate debtor as referred to

in sub-clauses (i), (ii) and (iii) of clause (b) of section 33(1); and
(b) declare that the pre-packaged insolvency resolution process

costs, if any, shall be included as part of the liquidation costs for
the purposes of liquidation of the corporate debtor.
Section 54O Initiation of corporate insolvency resolution
process
(1) The committee of creditors, at any time after the pre-
packaged insolvency commencement date but before the
approval of resolution plan under sub-section (4) or sub- section
(12), as the case may be of section 54K, by a vote of not less
than 66% of the voting shares, may resolve to initiate a
corporate insolvency resolution process in respect of the
corporate debtor, if such corporate debtor is eligible for
corporate insolvency resolution process under Chapter II.
(2) Notwithstanding anything to the contrary contained in

Chapter II, where the resolution professional intimates the
Adjudicating Authority of the decision of the committee of
creditors under sub-section (1), the Adjudicating Authority shall,
within 30 days of the date of such intimation, pass an order to
—
(a) terminate the pre-packaged insolvency resolution process

and initiate corporate insolvency resolution process under
Chapter II in respect of the corporate debtor;
(b) appoint the resolution professional referred to in section

54E(1)(b) as the interim resolution professional, subject to
submission of written consent by such resolution professional to
the Adjudicating Authority in such form as may be specified; and
(c) declare that the pre-packaged insolvency resolution process
costs, if any, shall be included as part of insolvency resolution
process costs for the purposes of the corporate insolvency
resolution process of the corporate debtor.
(3) Where the resolution professional fails to submit written

consent under clause (b) of sub-section (2), the Adjudicating
Authority shall appoint an interim resolution professional by
making a reference to the Board for recommendation, in the
manner as provided under section 16.
(4) Where the Adjudicating Authority passes an order under sub-

section (2) —
(a) such order shall be deemed to be an order of admission of

an application under section 7 and shall have the same effect;
(b) the corporate insolvency resolution process shall commence

from the date of such order;
(c) the proceedings initiated for avoidance of transactions under

Chapter III or proceedings initiated under section 66 and section
67A, if any, shall continue during the corporate insolvency
resolution process;
(d) for the purposes of sections 43, 46 and 50, references to
“insolvency commencement date” shall mean “pre-packaged
insolvency commencement date”; and
(e) in computing the relevant time or the period for avoidable

transactions, the time- period for the duration of the pre-
packaged insolvency resolution process shall also be included,
notwithstanding anything to the contrary contained in sections
43, 46 and 50.
Section 54P Application of provisions of Chapters II, III, VI,
and VII to this Chapter
(1) Save as provided under this Chapter, the provisions of

sections 24, 25A, 26, 27, 28, 29A, 32A, 43 to 51, and the
provisions of Chapters VI and VII of this Part shall, mutatis
mutandis apply, to the pre-packaged insolvency resolution
process, subject to the following, namely:
(a) reference to “members of the suspended Board of Directors

or the partners” under section 24(3)(b) shall be construed as
reference to “members of the Board of Directors or the partners,
unless an order has been passed by the Adjudicating Authority
under section 54J”;
(b) reference to “section 25(2)(j)” under section 26 shall be

construed as reference to “section 54F(2)(h)”;
(c) reference to “section 16” under section 27 shall be construed

as reference to “section 54E”;
(d) reference to “resolution professional” in sub-sections (1) and

(4) of section 28 shall be construed as “corporate debtor”;
(e) reference to “section 31” under section 61(3) shall be

construed as reference to “section 54L(1)”;
(f) reference to “section 14” in sub-sections (1) & (2) of section
74 shall be construed as reference to “section 54E(2)(a)”;
(g) reference to “section 31” in section 74(3) shall be construed

as reference to “section 54L(1)”.
(2) Without prejudice to the provisions of this Chapter and

unless the context otherwise requires, where the provisions of
Chapters II, III, VI and VII are applied to the proceedings under
this Chapter, references to —
(a) “insolvency commencement date” shall be construed as

references to “pre- packaged insolvency commencement date”;
(b) “resolution professional” or “interim resolution professional”,

as the case may be, shall be construed as references to the
resolution professional appointed under this Chapter;
(c) “corporate insolvency resolution process” shall be construed

as references to “pre-packaged insolvency resolution process”;
and
(d) “insolvency resolution process period” shall be construed as

references to “pre- packaged insolvency resolution process
period.”
Part V - FAST TRACK CORPORATE INSOLVENCY RESOLUTION
PROCESS
Section 55 Fast track corporation insolvency resolution process
(1) A corporate insolvency resolution process carried out in

accordance with this Chapter shall be called as fast track
corporate insolvency resolution process.
(2) An application for fast track corporate insolvency resolution

process may be made in respect of the following corporate
debtors, namely:
(a) a corporate debtor with assets and income below a level as

may be notified by the Central Government; or
(b) a corporate debtor with such class of creditors or such

amount of debt as may be notified by the Central Government;
or
(c) such other category of corporate persons as may be notified

by the Central Government.
Section 56 Time period for completion of fast track
corporation insolvency resolution process
(1) Subject to the provisions of sub-section (3), the fast track

corporate insolvency resolution process shall be completed
within a period of 90 days from the insolvency commencement
date.
(2) The resolution professional shall file an application to the

Adjudicating Authority to extend the period of the fast track
corporate insolvency resolution process beyond 90 days if
instructed to do so by a resolution passed at a meeting of the
committee of creditors and supported by a vote of 75% of the
voting share.

Adjudicating Authority is satisfied that the subject matter of the
case is such that fast track corporate insolvency resolution
process cannot be completed within a period of 90 days, it may,
by order, extend the duration of such process beyond the said
period of 90 days by such further period, as it thinks fit, but not
exceeding forty-five days:
Provided that any extension of the fast track corporate

insolvency resolution process under this section shall not be
granted more than once.
Section 57 Manner of initiating fast track corporate
insolvency resolution process
An application for fast track corporate insolvency resolution

process may be filed by a creditor or corporate debtor as the
case may be, alongwith-
(a) the proof of the existence of default as evidenced by records

available with an information utility or such other means as may
be specified by the Board; and
(b) such other information as may be specified by the Board to

establish that the corporate debtor is eligible for fast track
corporate insolvency resolution process. Manner of initiating fast
track corporate insolvency resolution process.
Section 58 Applicability of Chapter II to this Chapter
The process for conducting a corporate insolvency resolution

process under Chapter II and the provisions relating to offences
and penalties under Chapter VII shall apply to this Chapter as
the context may require.
Part VI - VOLUNTARY LIQUIDATION OF CORPORATE PERSONS
Section 59 Voluntary liquidation of corporate persons
(1) A corporate person who intends to liquidate itself voluntarily

and has not committed any default may initiate voluntary
liquidation proceedings under the provisions of this Chapter.
(2) The voluntary liquidation of a corporate person under sub-

section (1) shall meet such conditions and procedural
requirements as may be specified by the Board.
(3) Without prejudice to sub-section (2), voluntary liquidation

proceedings of a corporate person registered as a company
shall meet the following conditions, namely:
(a) a declaration from majority of the directors of the

company verified by an affidavit stating that
(i) they have made a full inquiry into the affairs of the company
and they have formed an opinion that either the company has
no debt or that it will be able to pay its debts in full from the
proceeds of assets to be sold in the voluntary liquidation; and
(ii) the company is not being liquidated to defraud any person;

(b) the declaration under sub-clause (a) shall be
accompanied with the following documents, namely:
(i) audited financial statements and record of business

operations of the company for the previous two years or for
the period since its incorporation, whichever is later;
(ii) a report of the valuation of the assets of the company, if

any prepared by a registered valuer;
(c) within four weeks of a declaration under sub-clause (a),

there shall be -
(i) a special resolution of the members of the company in a

general meeting requiring the company to be liquidated
voluntarily and appointing an insolvency professional to act as
the liquidator; or
(ii) a resolution of the members of the company in a general

meeting requiring the company to be liquidated voluntarily as a
result of expiry of the period of its duration, if any, fixed by its
articles or on the occurrence of any event in respect of which
the articles provide that the company shall be dissolved, as the
case may be and appointing an insolvency professional to act
as the liquidator:
Provided that the company owes any debt to any person,
creditors representing two- thirds in value of the debt of the
company shall approve the resolution passed under sub- clause
(c) within seven days of such resolution.
(4) The company shall notify the Registrar of Companies and

the Board about the resolution under sub-section (3) to liquidate
the company within seven days of such resolution or the
subsequent approval by the creditors, as the case may be.
(5) Subject to approval of the creditors under sub-section (3),

the voluntary liquidation proceedings in respect of a company
shall be deemed to have commenced from the date of passing
of the resolution under sub-clause (c) of sub-section (3).
(6) The provisions of sections 35 to 53 of Chapter III and

Chapter VII shall apply to voluntary liquidation proceedings for
corporate persons with such modifications as may be necessary.
(7) Where the affairs of the corporate person have been

completely wound up, and its assets completely liquidated, the
liquidator shall make an application to the Adjudicating Authority
for the dissolution of such corporate person.
(8) The Adjudicating Authority shall on an application filed by the

liquidator under sub-section (7), pass an order that the corporate
debtor shall be dissolved from the date of that order and the
corporate debtor shall be dissolved accordingly.
(9) A copy of an order under sub-section (8) shall within 14
days from the date of such order, be forwarded to the authority
with which the corporate person is registered.
Part VII - ADJUDICATING AUTHORITY FOR CORPORATE PERSONS
Section 60 Adjudicating Authority for corporate persons
(1) The Adjudicating Authority, in relation to insolvency resolution

and liquidation for corporate persons including corporate debtors
and personal guarantors thereof shall be the NCLT having
territorial jurisdiction over the place where the registered office of
the corporate person is located.
(2) Without prejudice to sub-section (1) and notwithstanding

anything to the contrary contained in this Code, where a
corporate insolvency resolution process or liquidation proceeding
of a corporate debtor is pending before a NCLT, an application
relating to the insolvency resolution or liquidation or bankruptcy
of a corporate guarantor or personal guarantor, as the case may
be, of such corporate debtor shall be filed before such NCLT.
(3) An insolvency resolution process or liquidation or bankruptcy

proceeding of a corporate guarantor or personal guarantor, as
the case may be, of the corporate debtor pending in any court
or tribunal shall stand transferred to the Adjudicating Authority
dealing with insolvency resolution process or liquidation
proceeding of such corporate debtor.
(4) The NCLT shall be vested with all the powers of the Debt
Recovery Tribunal as contemplated under Part III of this Code
for the purpose of sub- section (2).
(5) Notwithstanding anything to the contrary contained in any
other law for the time being in force, the NCLT shall have
jurisdiction to entertain or dispose of -
(a) any application or proceeding by or against the corporate

debtor or corporate person;
(b) any claim made by or against the corporate debtor or

corporate person, including claims by or against any of its
subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts,

arising out of or in relation to the insolvency resolution or
liquidation proceedings of the corporate debtor or corporate
person under this Code.
(6) Notwithstanding anything contained in the Limitation Act,

1963 or in any other law for the time being in force, in
computing the period of limitation specified for any suit or
application by or against a corporate debtor for which an order
of moratorium has been made under this Part, the period during
which such moratorium is in place shall be excluded.
Section 61 Appeals and Appellate Authority
(1) Notwithstanding anything to the contrary contained under the

Companies Act 2013, any person aggrieved by the order of the
Adjudicating Authority under this part may prefer an appeal to
the National Company Law Appellate Tribunal (NCLAT).
(2) Every appeal under sub-section (1) shall be filed within 30

days before the NCLAT:
Provided that the NCLAT may allow an appeal to be filed after

the expiry of the said period of 30 days if it is satisfied that
there was sufficient cause for not filing the appeal but such
period shall not exceed 15 days.
(3) An appeal against an order approving a resolution plan

under section 31 may be filed on the following grounds, namely:
(i) the approved resolution plan is in contravention of the

provisions of any law for the time being in force;
(ii) there has been material irregularity in exercise of the powers

by the resolution professional during the corporate insolvency
resolution period;
(iii) the debts owed to operational creditors of the corporate

debtor have not been provided for in the resolution plan in the
manner specified by the Board;
(iv) the insolvency resolution process costs have not been
provided for repayment in priority to all other debts; or
(v) the resolution plan does not comply with any other criteria
(4) An appeal against a liquidation order passed under section

33, or section 54L(3), or section 54N(4), may be filed on
grounds of material irregularity or fraud committed in relation to
such a liquidation order.
(5) An appeal against an order for initiation of corporate

insolvency resolution process passed under section 54-O(2),
may be filed on grounds of material irregularity or fraud
committed in relation to such an order.
Section 62 Appeal to Supreme Court
(1) Any person aggrieved by an order of the NCLAT may file an

appeal to the Supreme Court on a question of law arising out of
such order under this Code within 45 days from the date of
receipt of such order.
(2) The Supreme Court may, if it is satisfied that a person was

prevented by sufficient cause from filing an appeal within 45
days, allow the appeal to be filed within a further period not
exceeding 15 days.
Section 63 Civil court not to have jurisdiction
No civil court or authority shall have jurisdiction to entertain any

suit or proceedings in respect of any matter on which NCLT or
the NCLAT has jurisdiction under this Code. Civil court not to
have jurisdiction.
Section 64 Expeditious disposal of applications
(1) Where an application is not disposed of or an order is not

passed within the period specified in this Code, the NCLT or the
NCLAT, as the case may be, shall record the reasons for not
doing so within the period so specified; and the President of the
NCLT or the Chairperson of the NCLAT, as the case may be,
may, after taking into account the reasons so recorded, extend
the period specified in the Act but not exceeding 10 days.
(2) No injunction shall be granted by any court, tribunal or

authority in respect of any action taken, or to be taken, in
pursuance of any power conferred on the NCLT or the N under
this Code.
Section 65 Fraudulent or malicious initiation of proceedings
(1) If, any person initiates the insolvency resolution process or

liquidation proceedings fraudulently or with malicious intent for
any purpose other than for the resolution of insolvency, or
liquidation, as the case may be, the Adjudicating Authority may
impose upon such person a penalty which shall not be less than
one lakh rupees, but may extend to one crore rupees.
(2) If, any person initiates voluntary liquidation proceedings with

the intent to defraud any person, the Adjudicating Authority may
impose upon such person a penalty which shall not be less than
one lakh rupees but may extend to one crore rupees.
(3) If any person initiates the pre-packaged insolvency resolution
process
(a) fraudulently or with malicious intent for any purpose other

than for the resolution of insolvency; or
(b) with the intent to defraud any person,
the Adjudicating Authority may impose upon such person a

penalty which shall not be less than one lakh rupees, but may
extend to one crore rupees.
Section 66 Fraudulent trading or wrongful trading
(1) If during the corporate insolvency resolution process or a

liquidation process, it is found that any business of the corporate
debtor has been carried on with intent to defraud creditors of the
corporate debtor or for any fraudulent purpose, the Adjudicating
Authority may on the application of the resolution professional
pass an order that any persons who were knowingly parties to
the carrying on of the business in such manner shall be liable to
make such contributions to the assets of the corporate debtor as
it may deem fit.
(2) On an application made by a resolution professional during
the corporate insolvency resolution process, the Adjudicating
Authority may by an order direct that a director or partner of the
corporate debtor, as the case may be, shall be liable to make
such contribution to the assets of the corporate debtor as it may
deem fit, if-
(a) before the insolvency commencement date, such director or

partner knew or ought to have known that the there was no
reasonable prospect of avoiding the commencement of a
corporate insolvency resolution process in respect of such
corporate debtor; and
(b) such director or partner did not exercise due diligence in

minimising the potential loss to the creditors of the corporate
debtor.
(3) Notwithstanding anything contained in this section, no

application shall be filed by a resolution professional under sub-
section (2), in respect of such default against which initiation of
corporate insolvency resolution process is suspended as per
section 10A.
Explanation. – For the purposes of this section a director or

partner of the corporate debtor, as the case may be, shall be
deemed to have exercised due diligence if such diligence
Section 67 Proceedings under section 66
(1) Where the Adjudicating Authority has passed an order under

sub-section (1) or sub-section (2) of section 66, as the case
may be, it may give such further directions as it may deem
appropriate for giving effect to the order, and in particular, the
Adjudicating Authority may—
(a) provide for the liability of any person under the order to be a
charge on any debt or obligation due from the corporate debtor
to him, or on any mortgage or charge or any interest in a
mortgage or charge on assets of the corporate debtor held by or
vested in him, or any person on his behalf, or any person
claiming as assignee from or through the person liable or any
person acting on his behalf; and
(b) from time to time, make such further directions as may be

necessary for enforcing any charge imposed under this section.
Explanation. – For the purposes of this section, “assignee”

includes a person to whom or in whose favour, by the directions
of the person held liable under clause (a) the debt, obligation,
mortgage or charge was created, issued or transferred or the
interest created, but does not include an assignee for valuable
consideration given in good faith and without notice of any of
the grounds on which the directions have been made.
(2) Where the Adjudicating Authority has passed an order under
sub-section (1) or sub-section (2) of section 66, as the case
may be, in relation to a person who is a creditor of the
corporate debtor, it may, by an order, direct that the whole or
any part of any debt owed by the corporate debtor to that
person and any interest thereon shall rank in the order of priority
of payment under section 53 after all other debts owed by the
corporate debtor.
Section 67A Fraudulent management of corporate debtor

during pre-packaged insolvency resolution process
On and after the pre-packaged insolvency commencement date,

where an officer of the corporate debtor manages its affairs with
the intent to defraud creditors of the corporate debtor or for any
fraudulent purpose, the Adjudicating Authority may, on an
application by the resolution professional, pass an order
imposing upon any such officer, a penalty which shall not be less
than one lakh rupees, but may extend to one crore rupees.
Part VIII - OFFENCES AND PENALTIES
Section 68 Punishment for concealment of property
Where any officer of the corporate debtor has, –
(i) within the twelve months immediately preceding the insolvency

commencement date, –
(a) wilfully concealed any property or part of such property of the

corporate debtor or concealed any debt due to, or from, the
corporate debtor, of the value of ten thousand rupees or more;
or
(b) fraudulently removed any part of the property of the corporate

debtor of the value of ten thousand rupees or more; or
(c) wilfully concealed, destroyed, mutilated or falsified any book

or paper affecting or relating to the property of the corporate
debtor or its affairs, or
(d) wilfully made any false entry in any book or paper affecting
or relating to the property of the corporate debtor or its affairs, or
(e) fraudulently parted with, altered or made any omission in any

document affecting or relating to the property of the corporate
debtor or its affairs, or
(f) wilfully created any security interest over, transferred or
disposed of any property of the corporate debtor which has been
obtained on credit and has not been paid for unless such
creation, transfer or disposal was in the ordinary course of the
business of the corporate debtor, or
(g) wilfully concealed the knowledge of the doing by others of

any of the acts mentioned in clauses (c), (d) or clause (e); or
(ii) at any time after the insolvency commencement date,

committed any of the acts mentioned in sub-clause (a) to (f) of
clause (i) or has the knowledge of the doing by others of any of
the things mentioned in sub-clauses (c) to (e) of clause (i); or
(iii) at any time after the insolvency commencement date, taken

in pawn or pledge, or otherwise received the property knowing it
to be so secured, transferred or disposed,
such officer shall be punishable with imprisonment for a term

which shall not be less than three years but which may extend
to five years, or with fine, which shall not be less than one lakh
rupees, but may extend to one crore rupees, or with both:
Provided that nothing in this section shall render a person liable

to any punishment under this section if he proves that he had no
intent to defraud or to conceal the state of affairs of the
corporate debtor.
Section 69 Punishment for transactions defrauding creditors
If an officer of the corporate debtor or the corporate debtor-
(a) has made or caused to be made any gift or transfer of, or

charge on, or has caused or connived in the execution of a
decree or order against, the property of the corporate debtor;
(b) has concealed or removed any part of the property of the

corporate debtor within two months before the date of any
unsatisfied judgment, decree or order for payment of money
obtained against the corporate debtor,
such officer of the corporate debtor or the corporate debtor, as

the case may be, shall be punishable with imprisonment for a
term which shall not be less than one year, but which may
extend to five years, or with fine which shall not be less than
one lakh rupees, but may extend to one crore rupees, or with
both:
Provided that a person shall not be punishable under this

section if the acts mentioned in clause (a) were committed more
than five years before the insolvency commencement date; or if
he proves that, at the time of commission of those acts, he had
no intent to defraud the creditors of the corporate debtor.
Section 70 Punishment for misconduct in course of
corporate insolvency resolution process
(1) On or after the insolvency commencement date, where an

officer of the corporate debtor
(a) does not disclose to the resolution professional all the details
of property of the corporate debtor, and details of transactions
thereof, or any such other information as the resolution
professional may require; or
(b) does not deliver to the resolution professional all or part of

the property of the corporate debtor in his control or custody and
which he is required to deliver; or
(c) does not deliver to the resolution professional all books and
papers in his control or custody belonging to the corporate
debtor and which he is required to deliver; or
(d) fails to inform there solution professional the information in

his knowledge that a debt has been falsely proved by any
person during the corporate insolvency resolution process; or
(e) prevents the production of any book or paper affecting or

relating to the property or affairs of the corporate debtor; or
(f) accounts for any part of the property of the corporate debtor
by fictitious losses or expenses, or if he has so attempted at any
meeting of the creditors of the corporate debtor within the twelve
months immediately preceding the insolvency commencement
(f) accounts for any part of the property of the corporate debtor
by fictitious losses or expenses, or if he has so attempted at any
meeting of the creditors of the corporate debtor within the twelve
months immediately preceding the insolvency commencement
date,
he shall be punishable with imprisonment for a term which shall

not be less than three years, but which may extend to five
years, or with fine, which shall not be less than one lakh rupees,
but may extend to one crore rupees, or with both:
Provided that nothing in this section shall render a person liable

to any punishment under this section if he proves that he had no
intent to do so in relation to the state of affairs of the corporate
debtor.
(2) If an insolvency professional deliberately contravenes the

provisions of this Part the shall be punishable with imprisonment
for a term which may extend to six months, or with fine which
shall not be less than one lakh rupees, but may extend to five
lakhs rupees, or with both.
Section 71 Punishment for falsification of books of corporate debtor
On and after the insolvency commencement date, where any

person destroys, mutilates, alters or falsifies any books, papers
or securities, or makes or is in the knowledge of making of any
false or fraudulent entry in any register, books of account or
document belonging to the corporate debtor with intent to
defraud or deceive any person, he shall be punishable with
imprisonment for a term which shall not be less than three years,
but which may extend to five years, or with fine which shall not
be less than one lakh rupees, but may extend to one crore
rupees, or with both.
Section 72 Punishment for wilful and material omissions from

statements relating to affairs of corporate debtor
Where an officer of the corporate debtor makes any material and

wilful omission in any statement relating to the affairs of the
corporate debtor, he shall be punishable with imprisonment for a
term which shall not be less than three years but which may
extend to five years, or with fine which shall not be less than
one lakh rupees, but may extend to one crore rupees, or with
both.
Section 73 Punishment for false representations to creditors
Where any officer of the corporate debtor —
(a) on or after the insolvency commencement date, makes a

false representation or commits any fraud for the purpose of
obtaining the consent of the creditors of the corporate debtor or
any of them to an agreement with reference to the affairs of the
corporate debtor, during the corporate insolvency resolution
process, or the liquidation process;
(b) prior to the insolvency commencement date, has made any

false representation, or committed any fraud, for that purpose,
he shall be punishable with imprisonment for a term which shall
not be less than three years but may extend to five years or with
fine which shall not be less than one lakh rupees, but may
extend to one crore rupees, or with both.
Section 74 Punishment for contravention of moratorium or the
resolution plan
(1) Where the corporate debtor or any of its officer violates the
provisions of section 14, any such officer who knowingly or
wilfully committed or authorised or permitted such contravention
shall be punishable with imprisonment for a term which shall not
be less than three years, but may extend to five years or with
fine which shall not be less than one lakh rupees, but may
extend to three lakh rupees, or with both.
(2) Where any creditor violates the provisions of section 14, any
person who knowingly and wilfully authorised or permitted such
contravention by a creditor shall be punishable with imprisonment
for a term which shall not be less than one year, but may extend
to five years, or with fine which shall not be less than one lakh
rupees, but may extend to one crore rupees, or with both.
(3) Where the corporate debtor, any of its officers or creditors or

any person on whom the approved resolution plan is binding
under section 31, knowingly and wilfully contravenes any of the
terms of such resolution plan or abets such contravention, such
corporate debtor, officer, creditor or person shall be punishable
with imprisonment of not less than one year, but may extend to
five years, or with fine which shall not be less than one lakh
rupees, but may extend to one crore rupees, or with both.
Section 75 Punishment for false information furnished in application
Where any person furnishes information in the application made
under section 7, which is false in material particulars, knowing it
to be false or omits any material fact, knowing it to be material,
such person shall be punishable with fine which shall not be less
than one lakh rupees, but may extend to one crore rupees.
Section 76 Punishment for non-disclosure of dispute or

1[payment] of debt by operational creditor
Where-
(a) an operational creditor has wilfully or knowingly concealed in

an application under section 9 the fact that the corporate debtor
had notified him of a dispute in respect of the unpaid operational
debt or the full and final payment of the unpaid operational debt;
or
(b) any person who knowingly and wilfully authorised or

permitted such concealment under clause (a)
such operational creditor or person, as the case may be, shall

be punishable with imprisonment for a term which shall not be
less than one year but may extend to five years or with fine
which shall not be less than one lakh rupees but may extend to
one crore rupees, or with both.
Section 77 Punishment for providing false information in
application made by corporate debtor
Where-
(a) a corporate debtor provides information in the application

under section 10 which is false in material particulars, knowing it
to be false and omits any material fact, knowing it to be material;
or
(b) any person who knowingly and wilfully authorised or

permitted the furnishing of such information under sub-clause (a)
such corporate debtor or person, as the case may be, shall be
punishable with imprisonment for a term which shall not be less
than three years, but which may extend to five years or with fine
which shall not be less than one lakh rupees, but which may
Section 77A Punishment for offences related to pre-

packaged insolvency resolution process
(1) Where—
(a) a corporate debtor provides any information in the application

under section 54C which is false in material particulars, knowing
it to be false or omits any material fact, knowing it to be
material; or
(b) a corporate debtor provides any information in the list of
claims or the preliminary information memorandum submitted
under sub-section (1) of section 54G which is false in material
particulars, knowing it to be false or omits any material fact,
knowing it to be material; or
(c) any person who knowingly and wilfully authorised or

permitted the furnishing of such information under sub-clauses
(a) and (b),
such corporate debtor or person, as the case may be, shall be
punishable with imprisonment for a term which shall not be less
than three years, but which may extend to five years or with fine
which shall not be less than one lakh rupees, but which may
(2) If a director or partner of the corporate debtor, as the case

may be, deliberately contravenes the provisions of Chapter III-A,
such person shall be punishable with imprisonment for not less
than three years, but which may extend to five years, or with
fine which shall not be less than one lakh rupees, but which may
Explanation. For the purposes of this section and sections 75,

76 and 77, an application shall be deemed to be false in
material particulars in case the facts mentioned or omitted in the
application, if true, or not omitted from the application as the
case may be, would have been sufficient to determine the
existence of a default under this Code.]

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CS Professional

ICSI New Syllabus

1. Fragmented Processes: Different laws led to confusion and

2. Time consuming Resolutions: Cases prolonged for years-

3. Creditor Hierarchy Confusion: Unclear priority led to disputes

4. Persisting Non-viable Companies: Financially weak entities

5. Cross-border Insolvency Gap: No clear method for handling

6. High Litigation Costs: Litigious nature increased costs,

7. Focus on Revival Only: The old laws primarily emphasized the

8. Limited Creditor Rights: Under the old regime, creditors,

A) Meaning: Revival means bringing a struggling or sick

B) Goal: The main goal of revival is to save the company from

C) Focus: Revival focuses on fixing the problems that caused

A) Meaning: Resolution is about finding a solution for a company

B) Goal: The main goal of resolution is to deal with the financial

C) Focus: Resolution focuses on making the best decisions for

Heading Old Laws New IBC

Whether Fragmented laws, varying Comprehensive and unified

Whether multiple Many laws governing Single law governing

time involved in The process was often It introduced a time-bound

Authorities involved many authorities like DRT, 1 admin authority : IBBI

Whether Single single window clearance Single window clearance

Moratorium No automatic stay on Automatic moratorium upon

Insolvency Resolution Lacked a well-defined Clear and defined corporate

Creditors right Creditor rights were limited, IBC established clear

Role of Insolvency No standardized insolvency Licensed insolvency

The origin of insolvency law in India can be traced back to the

After India gained independence in 1947, the Presidency Towns

Prior to the IBC, insolvency and bankruptcy processes in India

Before the enactment of the Insolvency and Bankruptcy Code,

There were multiple overlapping laws and adjudicating forums (civil

companies and individuals in India.

The framework for insolvency and bankruptcy was inadequate,

Insolvency law usually has a two-fold purpose—

(ii) to provide a machinery by which creditors who are not secured

In medieval Italy, if a banker, who conducted his market place

This act of “bancarotta” or “breaking the bench” is believed to

The role of the law, in a formal bankruptcy process, is

The objective of the bankruptcy process is

The Major Legislation’s governing Corporate insolvency were:

• Companied Act, 1956 relating to Winding up of Companies

• The Sick Industrial Comanies (Special Provsions) Act, 1985.

• 1st the SICA(Sick Industrial Companies Act) came into

• 2nd V.B. Eradi, Committee Came into existence in 1999.

• 3rd Recommendations by N.L Mitra Advisory Group in 2001.

• 4th J J Irani Committee recommendations in 2005.

• Finally Bankruptcy law reforms committee in 2014.

• In Union Budget 14-15, The Finance Minister(Sh. Arun Jaitely ji)

• The IBC was introduced in the Lok Sabha on 21st December

• referred to the joint committee and the committee had presented

• On 5th may 2016 Lok Sabha Passed

• On 11th may 2016 Rajya Sabha Passed

• it received the President's assent on May 28, 2016, and came

• Certain provisions of the Act have come into force from 5

• The provisions relating to corporate insolvency were implemented

2. In the case of individuals,

• When an individual reaches a point of insolvency, they may

• which involves the liquidation of assets to repay creditors or

3. For companies or organizations,

• In such cases, companies may initiate insolvency proceedings,