IBC practice is the part of commercial litigation practice of our firm. Aegis Legal is the one of the best Commercial litigation firm in Delhi India which has very extensive practice of IBC laws before NCLT & NCLAT New Delhi.
The Insolvency and Bankruptcy Code (IBC), enacted in 2016 was passed by the parliament and the assent of President of India has been obtained on 28.05.2016. IBC provides a framework for resolving the insolvency of companies, partnership firms, and individuals in India. It aims to streamline insolvency proceedings, protect creditors, and ensure an efficient resolution of debt.
Insolvency refers to a situation where a person or company is unable to repay their debts when they are due. Bankruptcy is a legal status that follows insolvency, where a court formally declares a person or entity unable to repay their debts and initiates a process to resolve the insolvency, typically involving a restructuring of debts or assets.
Provisions relating to definition (Part-I of the Code) and regulation of insolvency professional (Part-IV of the Code) and miscellaneous provisions (Part-V of the Code) were made effective. Provisions relating to Insolvency Resolution and Liquidation of Corporate Persons (Part-II of the Code) were made effective in December, 2016.
The objective of the Insolvency and Bankruptcy Code is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or incidental thereto. An effective legal framework for timely resolution of insolvency and bankruptcy would support development of credit markets and encourage entrepreneurship. It would also improve Ease of Doing Business, and facilitate more investments leading to higher economic growth and development.
An insolvency resolution process can be initiated by either a financial creditor or by operational creditor or the corporate applicant (corporate debtor) upon an event of default. A revival plan is resolved within 180 days from the admission of the application. Making this process time bound is very essential as the value of the assets can erode substantially with the passage of time.
Here's a more detailed look at the procedure:
1. Initiation of CIRP:
• By Financial Creditor (Section 7):
A financial creditor can initiate the CIRP against a corporate debtor by filing an application with the NCLT.
• By Operational Creditor (Section 9):
An operational creditor must first send a demand notice to the corporate debtor for the unpaid amount. If the debtor fails to pay within 10 days, the operational creditor can file an application with the NCLT.
• By Corporate Debtor (Section 10):
The corporate debtor itself can also initiate the CIRP by filing an application with the NCLT.
2. Filing the Application:
- The application must be filed with the relevant NCLT bench in the prescribed format.
- The application should include necessary documents and records as required by the Insolvency and Bankruptcy Board of India (IBBI) regulations.
- The application must demonstrate a default of a minimum amount of INR 1 crore.
3. NCLT's Action:
- The NCLT has 14 days to either admit or reject the application.
- If the application is complete and no disciplinary actions are pending against the proposed resolution professional, the NCLT will admit the application and initiate the CIRP.
- If the application is incomplete, the NCLT will give the applicant 7 days to rectify the deficiency.
4. Commencement of CIRP:
- The CIRP commences from the date of the NCLT's order admitting the application.
- A moratorium is imposed, preventing further actions against the corporate debtor, such as the commencement of new suits or recovery of debt.
5. Key Documents:
- Application under Section 7, 9, or 10 of the IBC: This is the formal application initiating the CIRP.
- Proof of Default: Evidence of the corporate debtor's failure to repay the debt.
- List of Financial Creditors (if applicable): This list is required when multiple financial creditors are involved in the application.
- Other Supporting Documents: As specified in the IBBI regulations.
