MODULE 6

WINDING
UP

ASHWATHY NAIR SURESH

JINDAL GLOBAL LAW SCHOOL
DEFINITION

¡ Prof. Gower’s definition:

“Winding up of a company is the process whereby its life is ended and its Property is administered for the benefit of
its members & creditors. An Administrator, called a liquidator is appointed and he takes control of the company,
collects its assets, pays its debts and finally distributes any surplus among the members in accordance with their
rights”.
 MODES OF WINDING UP OF A COMPANY

WINDING UP CIRP

Under CA’13 Under IBC’ 16

 SECTION 271: CIRCUMSTANCES IN WHICH COMPANY MAY
BE WOUND UP BY TRIBUNAL

A company may, on a petition under section 272, be wound up by the Tribunal,—

(a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal;

(b) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State,
friendly relations with foreign States, public order, decency or morality;

(c) if on an application made by the Registrar or any other person authorised by the Central Government by notification
under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or
the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management
of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the
company be wound up;

(d) if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately
preceding five consecutive financial years; or

(e) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up.
MADHUSUDAN GORDHANDAS & CO
VS
MADHU WOOLLEN INDUSTRIES PVT. LTD
(1972) 42 COMP. CAS. 125
FACTS

¡ The appellants filed a petition for winding up of the respondent company, on the grounds :
(1) that the company was unable to pay the debts due to the appellants,
(2) that the company showed their indebtedness in their books of account for a much smaller amount,
(3) that the company was indebted to other creditors,
(4) that the company was effecting an unauthorised sale of its machinery, and
(5) that the company had incurred losses and stopped functioning, and therefore the substratum of the company
disappeared and there was no possibility of the company doing any business at profit.
FACTS
¡ The appellants filed a petition for winding up of the respondent company, on the grounds : (1) that the company
was unable to pay the debts due to the appellants, (5) that the company had incurred losses and stopped
functioning, and therefore the substratum of the company disappeared and there was no possibility of the
company doing any business at profit.
¡ The rules for winding up on a creditor's petition are if there is a bona fide dispute about a debt and the defence is
a substantial one, the court would not' order winding up. The defence of the company should be in good faith and
one of substance. if the defence is likely to succeed on a point of law and the company adduced prima facie proof
of the facts on which the defence depends, no order of winding up would be made by the Court.
¡ In the present case the claims of the appellants are disputed in fact and in law. The company has given prima facie
evidence that the appellants are not entitled to any claim for erection work, because there was no transaction
between the company and the appellants or those persons in whose names the appellants claimed the amounts.
The company has raised the defence of lack of privity.
DECISION

¡ In determining whether or not the substratum of the company had gone, the objects of the company and the case
of the company on that question would have to be looked into. In the present case, the company alleged that with
the proceeds of sale the Company intend to enter into some other profitable business. such as export business
which was within its objects.
¡ The mere fact that it had suffered trading losses will not destroy its substratum unless there is no reasonable
prospect of it ever making a profit in the future. A court would not draw such an inference normally. One of its
largest creditors, who opposed the winding up petition would help it in the export business. The company had
not abandoned the objects of its business.
¡ Therefore, on the facts and circumstances of the present case it could not be held that the substratum of the
company had gone.
 272 - PETITION FOR WINDING UP

(1) Subject to the provisions of this section, a petition to the Tribunal for the winding up of a company shall be
presented by—
(a) the company;
(b) any contributory or contributories;
(c) all or any of the persons specified in clauses (a) and (b);
(d) the Registrar;
(e) any person authorised by the Central Government in that behalf; or
(f) in a case falling under clause (b) of section 271, by the Central Government or a State Government.
 273 – POWERS OF THE TRIBUNAL
1) The Tribunal may, on receipt of a petition for winding up under section 272 pass any of the following orders, namely:—
(a) dismiss it, with or without costs;
(b)make any interim order as it thinks fit;
(c) appoint a provisional liquidator of the company till the making of a winding up order;
(d) make an order for the winding up of the company with or without costs; or
(e) any other order as it thinks fit:
Provided that an order under this sub-section shall be made within ninety days from the date of presentation of the
petition:
Provided further that before appointing a provisional liquidator under clause (c), the Tribunal shall give notice to the
company and afford a reasonable opportunity to it to make its representations, if any, unless for special reasons to be
recorded in writing, the Tribunal thinks fit to dispense with such notice:
Provided also that the Tribunal shall not refuse to make a winding up order on the ground only that the assets of the
company have been mortgaged for an amount equal to or in excess of those assets, or that the company has no assets.
(2) Where a petition is presented on the ground that it is just and equitable that the company should be wound up, the
Tribunal may refuse to make an order of winding up, if it is of the opinion that some other remedy is available to the
petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing the other
remedy.
275 - COMPANY LIQUIDATORS AND THEIR APPOINTMENTS.
1) For the purposes of winding up of a company by the Tribunal, the Tribunal at the time of the passing of the order of winding
up, shall appoint an Official Liquidator or a liquidator from the panel maintained under sub-section (2) as the Company
Liquidator.
(2) The provisional liquidator or the Company Liquidator, as the case may, shall be appointed by the Tribunal from amongst the
insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016;"]
(3) Where a provisional liquidator is appointed by the Tribunal, the Tribunal may limit and restrict his powers by the order
appointing him or it or by a subsequent order, but otherwise he shall have the same powers as a liquidator.
(4) 2[Omitted]
(5) The terms and conditions of appointment of a provisional liquidator or Company Liquidator and the fee payable to him or
it shall be specified by the Tribunal on the basis of task required to be performed, experience, qualification of such liquidator
and size of the company.
(6) On appointment as provisional liquidator or Company Liquidator, as the case may be, such liquidator shall file a declaration
within seven days from the date of appointment in the prescribed form disclosing conflict of interest or lack of independence
in respect of his appointment, if any, with the Tribunal and such obligation shall continue throughout the term of his
appointment.
(7) While passing a winding up order, the Tribunal may appoint a provisional liquidator, if any, appointed under clause (c)of sub-
section (1)of section 273, as the Company Liquidator for the conduct of the proceedings for the winding up of the company.
278 - EFFECT OF WINDING UP ORDER

The order for the winding up of a company shall operate in favour of all the creditors and all contributories of the
company as if it had been made out on the joint petition of creditors and contributories.
RANKING OF
CLAIMS

¡ Secured creditors with a fixed

charge
¡ Preferential creditors
¡ Secured creditors with a floating
charge
¡ Unsecured creditors
¡ Shareholders
INSOLVENCY LEGISLATION IN I NDIA

• History of Insolvency Legislation • Insolvency & Bankruptcy Code,2016

§ Object & Purpose
• Problems with the Previous Insolvency § Repeals & Savings
Regime
§ Amendments to the Code
§ Insolvency Resolution under the Code
• Bankruptcy Law Reform
§ Salient Features of the Code
§ Bankruptcy Law Reform Committee
§ Principles driving the Design of the Code
§ Events leading to enactment of the
Insolvency & Bankruptcy Code, 2016

2
PROBLEMS
WITH THE
PREVIOUS
INSO LVENC Y
REGIME

5
D IFFICULTIES OF THE P REVIOUS R EGIME

Fragmented Framework

Different Judicial Fora

Being
insol
isn’t al vent Lack of clarity of Jurisdiction
lt
bad…J hat
thankf ust be
ul
not on you are
e of yo Lack of Business Expertise
credito ur
rs

Delays & Conflicting Decisions

BAN KRUPTC Y
LAW REFORM
 B ANKRUPTCY L AW REFORM COMMITTEE

• In August 2014, Finance Ministry constituted the • BLRC submitted an Interim Report in February 2015 to
Bankruptcy Law Reform Committee (BLRC) under the suggest certain immediate reforms for improving the
Chairmanship ofT.K.Viswanathan. corporate insolvency regime in India.

• Two Phase Mandate of BLRC: • BLRC submitted its Final Report in November 2015:
§ 1ST Phase - to examine the existing bankruptcy § Volume 1 – Findings & recommendations of BLRC
framework & suggest immediate reforms.
§ Volume 2 – Draft Insolvency & Bankruptcy Code
§ 2nd Phase - to create a uniform framework to cover
matters of insolvency & bankruptcy of all legal entities • BLRC Report excluded insolvency resolution of banks
& individuals, save those entities with a dominantly & other financial institutions (Financial Sector Legislative Reforms
financial function. Commission)
18
 PRINCIPLES D RIVING THE D ESIGN OF THE C ODE

• Assessment of viability of the enterprise at a very early stage

• Symmetry of information between creditors & debtors
• Time-bound process to better preserve economic value
• A collective process
• Respect for the rights of all creditors equally
• When the negotiations fail to establish viability,the outcome of bankruptcy must be binding
• Clarity of priority,and that the rights of all stakeholders are upheld in resolving bankruptcy

19
INSOLVENCY &
BANKRUPTCY
CODE, 2016
OBJECT & PURPOSE OF THE C ODE

P RE A MB L E

“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 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 order of priority of payment of Government
dues and to establish an Insolvency and Bankruptcy Board
of India, and for matters connected therewith or incidental
thereto.”
 R EPEALS & S AV I N G S
Repealed Enactments Amended Enactments

¡ The PresidencyTowns InsolvencyAct, 1909 ¡ The Indian Partnership Act,1932

¡ The Provincial Insolvency Act,1920 ¡ The Central Excise Act,1944
¡ The Sick Industrial Companies (Special Provisions) ¡ The Income – TaxAct, 1961
Act, 1985
¡ The Customs Act,1962
¡ The Recovery of Debts due to Banks & Financial
Institutions Act,1993
¡ The Finance Act,1994
¡ The SARFAESI Act,2002
¡ The Payment & Settlement Systems Act, 2007
The way ¡ The LLP Act,2008
forward
¡ The Companies Act,2013
 PREVIOUS BANKRUPTCY & INSOLVENCY REGIME

Individual Bankruptcy & Corporate Bankruptcy &

Insolvency Insolvency

The PresidencyTowns The Provincial The Recovery of Debt Due to Banks

Insolvency Act,1909 Insolvency Act,1920 & Financial Institutions Act, 1993

SARFAESI Act, 2002

The Companies Act,

1956

The Sick Industrial (Special

Provisions) Act,1985
 INSOLVENCY RESOLUTION UNDER THE C ODE
¡ Corporate Insolvency ¡ Individual Insolvency

¡ Insolvency Resolution & Liquidation for corporate ¡ Insolvency Resolution & Bankruptcy for individuals &
persons partnership firms

¡ Minimum default threshold for initiating CIRP – ¡ Minimum default threshold for initiating proceedings
INR 1 Lakh (now raised to 1 Cr)
¡ – INR 1000
¡ Persons who may initiate CIRP -
¡ Persons who may initiate proceedings -
§ Financial & Operational Creditor
§ Fresh Start Order – Debtor
§ Corporate Debtor
§ Insolvency Resolution Process – Creditor &
Debtor
¡ Adjudicating Authority – NCLT & NCLAT
¡ Adjudicating Authority – DRT & DRAT
¡ Fast Track CIRP

¡ Voluntary Liquidation
 I N S T I T U T I O N A L I N F R A S T RU C T U R E

Insolvency & Bankruptcy NCLT &NCLAT

Board of India DRT & DRAT

Insolvency Insolvency
Regulator Adjudicator

Insolvency Information
Professionals Utilities
IRP /RP National E-Governance
Liquidator Services Ltd.
 SALIENT FEATURES OF THE C O D E

Unified Code • The Preamble

Time-bound Process • Sec 12 – Time-limit forinsolvency resolution

A calm period for • Sec. 14 - Moratorium

insolvency resolution

• Liabilities of creditors who are not a part of CoC

Collective Process (operational creditors, interim financiers) are met in
priority

• Sec 21 – CoC comprisingfinancial creditors

• Sec. 22 & 27 – CoC’s power to appoint /replaceRP
Creditor-in-possession
• Sec. 28 – CoC approval required for certain actions
• Sec. 30(4) – Commercial wisdom ofCoC
 SALIENT FEATURES OF THE C O D E
Symmetry of information
• Sec. 29 – Information Memorandum
btw creditors & debtors

• Sec. 30(4) – Priority payments to certaincreditors

Clarity of priority among
• Sec. 53 – Priority in distribution of assets during
stakeholders liquidation

Supervision of a Regulator • Insolvency & Bankruptcy Board of India

Streamlined role of • Role of the Adjudicator focused on procedure

Adjudicator

Swift & efficient bankruptcy

• Transparent & supervised process
resolution

Outcome of the process • Certainty & finality of the outcome subject to

binding on all stakeholders appeal on very limited grounds
 OTHER IMPORTANT FEATURES OF THE C ODE

Bar of Jurisdiction
OverridingApplication of the Code
Civil Courts do not have jurisdiction in Provisions of the Code will prevail in
respect of matters to be decided by the
case of inconsistency with any other law
Adjudicating Authority or IBBI

Application of the Code to MSMEs

Application of the LimitationAct*
The Code applies to MSMEs with
Provisions of the Limitation Act are
certain exceptions & the Govt. is
applicable to proceedings before the
empowered to issue notifications in that
Adjudicating Authorities under the Code
regard
WHY IBC?

In India resolution of commercial insolvency has been quite cumbersome for a fairly long time.
(1) previous company law - the Companies Act, 1956
(2) SICA, 1985 and BIFR
Salient Features
In Binani Industries Ltd Vs. Bank of Baroda & Another [CA (AT) (Ins) 82/2018 & Others] “the first order objective of the
IBC is resolution, the second order objective is maximization of the value of assets of the firm, and the third order
objectives are promoting entrepreneurship, availability of credit, and balancing the interests of stakeholders. This
order of objectives is sacrosanct.
THE DEFAULT AND THE FINANCIAL CREDITOR

¡ For initiating a CIRP under the IBC, the primary condition is that:
¡ a default should have occurred(Section 4).
¡ An application for resolution can be made by any one of the following:
(i) Financial Creditor (“FC”)(Section 7),
(ii) Operational creditor (“OC”)(Section 9),
(iii) Corporate debtor(“CD”)(Section 10).
 C O R P O R AT E I N S O LV E N C Y R E S O L U T I O N P RO C E S S

NCLT rejects
Application filed Application
under Sec. 7, 9 or
10 of the Code NCLT admits • Moratorium is declared IRP CoC
Application • IRP is appointed constitutes appoints RP
• Public announcement is made CoC

ResolutionApplicants RP issues –
RP issues List of
• Information Memorandum RP issues Invitation for
submit Resolution Prospective Resolution
Plans to RP • Evaluation Matrix Expression of Interest
Applicants
• Request for Resolution Plan

Plan is implemented &

NCLT approves the Plan Corporate Debtor’s
insolvency is resolved
RP examines the CoC approves a Resolution Plan
Resolution Plans &
NCLT rejects the Plan
places them before
CoC Corporate Debtor goes
CoC rejects all Resolution Plans
into Liquidation
SECTION 4

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.
¡ 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.]
SECTION 5 (2)(7) – FINANCIAL CREDITOR

¡ (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;
SECTION 5 (2)(20) –OPERATIONAL CREDITOR

¡ “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;
SECTION 5 (2)(21) OPERATIONAL DEBT

¡ “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;
7. INITIATION OF CORPORATE INSOLVENCY RESOLUTION
PROCESS BY FINANCIAL CREDITOR.

(1) A financial creditor either by itself or jointly with other financial creditors, 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 process against a corporate
debtor before the Adjudicating Authority when a default has occurred.
Provided that for the financial creditors, referred to in clauses (a) and (b) of sub- section (6A) of section 21, an application for initiation
corporate insolvency resolution process 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:
Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency
resolution process 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:
Provided also that where an application for initiating the corporate insolvency resolution process 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.
(2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed.
(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;
(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.
(4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (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 sub-section (3):
1[Provided that if the Adjudicating Authority has not ascertained the existence of default and passed an order under sub-section (5) within such time, it
shall record its reasons in writing for the same.]
(5) Where the Adjudicating Authority is satisfied that –
(a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the
proposed resolution professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the
proposed resolution professional, it may, by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), 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.
(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).
(7) The Adjudicating Authority shall communicate-
(a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor;
(b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as
the case may be.
SECTION 8 - INSOLVENCY RESOLUTION BY OPERATIONAL
CREDITOR. -

(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.
(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 sub-
section (1) bring to the notice of the operational creditor -
(a) existence of a dispute, 1[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 2[payment] of unpaid operational debt-
(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.
Explanation. – For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor
demanding 3[payment] of the operational debt in respect of which the default has occurred.
MOBILOX INNOVATIONS PRIVATE LTD V KIRUSA
SOFTWARE PRIVATE LTD
 FACTS

¡ The interpretation of the term “dispute” was done in the ambit of section 8(2) of the Code. In this case appellant
(Mobilox) was engaged in television progamme known as “Nach Baliye” and the respondent (Kirusa) was appointed
by appellate for providing various services related to television programme. The appellate and respondent executed
non-disclosure agreement (NDA) and parties are obligated to protect the confidentiality of the services.
¡ Respondent (Kirusa), who rendered services to Mobliox raised the monthly invoices and same was denied by the
Mobilox and said that payment are on hold because of breach Non Disclosure Agreement (NDA). Kirusa sent a
demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 to Mobilox for non- payment of the
dues.
¡ Mobilox replied the demand notice, by stating that there is serious dispute between parties including breach of
obligations stated under Non- Disclosure Agreement (NDA).
¡ Kirusa filed an application before NCLT, Mumbai Bench under section 9 of the Code, for initiating Corporate
Insolvency Resolution Process (CIRP) and same was rejected by NCLT, Mumbai Bench on the ground that Mobilox
had served a notice of dispute to the Operational creditor.
¡ Then Kirusa went on appeal to NCLAT against the order of NCLT and averted that rejection of valid application
under section 9 of the Code, on the dispute of issue of demand notice by the Operational Creditor is not a valid
reason. The main question before the Appellate Authority was to throw clarity on the meaning of “dispute” and “
existence of dispute” for the purpose of application under section 9 of the Code.
¡ NCLAT allowed the appeal and stated that dispute would not be restricted to only arbitration proceedings and
pending suits, but also include proceedings initiated before any court or tribunal and also denied all the averment of
Mobilox and said defense raised by the Mobilox was vague as Non Disclosure Agreement (NDA) had not
connection with debt demanded.
¡ Therefore in this case, while Adjudicating Authority (NCLT) interpreted meaning of dispute, which include only
arbitration proceedings and pending disputes, on the other hand, Appellate Authority (NCLAT) interpreted meaning
of dispute is not only restricted to pending suits and arbitration proceedings, but also include proceedings initiated
before any court or tribunal.
¡ Mobilox filed an appeal before the Hon’ble Supreme Court of India against the order passed by NCLAT
SUPREME COURT DECISION
¡ The Supreme Court allowed the appeal by Mobilox, while interpreting the expression existence of a dispute under Section
8(2) (a) of the Insolvency and Bankruptcy Code. The Supreme Court was of the opinion that the breach of non-disclosure
agreement was sufficient to construe the existence of a dispute to invalidate the CIRP application filed by the operational
creditor.
¡ Supreme Court went on to observe that the word “and” occurring in Section 8(2) (a) must be read as “or” keeping in
mind the legislative intent. This is permissible when done in order to further the object of the statute and/or to avoid an
anomalous situation which would arise when:
¡ If read as “and”, disputes would stave off the bankruptcy process only if they are already pending in a suit or arbitration and
not otherwise. Such a scenario would lead to great hardship; in that the dispute may arise a few days prior to the triggering
of the CIRP and that parties may not have had time to approach an arbitral tribunal or a court yet.
¡ Given that limitation periods of up to 3 years are allowed until a person actually approaches a court or an arbitral tribunal
to pursue legal remedies, such persons would fall outside the purview of Section 8(2) leading to CIRP commenced against
them. Further this was not the intent of the legislation.
 9. APPLICATION FOR INITIATION OF CORPORATE INSOLVENCY
RESOLUTION PROCESS 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 sub-section
(1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-
section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate
insolvency resolution process.
(2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.
(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 1[by the corporate debtor, if available;]
2[(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.]
(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.
(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order–
(i) admit the application and communicate such decision to the operational creditor and the corporate debtor if, -
(a) the application made under sub-section (2) is complete;
(b) there is no 3[payment] of the unpaid operational debt;
(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;
(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and
(e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any.
(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if -
(a) the application made under sub-section (2) is incomplete;
(b) there has been 1[payment] of the unpaid operational debt;
(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;
(d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or
(e) any disciplinary proceeding is pending against any proposed resolution professional:
Provided that Adjudicating Authority, shall before rejecting an application under sub- clause (a) of clause (ii) give a notice to the applicant to rectify
the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section.
INNOVENTIVE INDUSTRIES LTD.V. ICICI BANK
(2018) 1 SCC 407
FACTS

¡ An application was filed before the Mumbai Bench of National Company Law Tribunal (“NCLT”) by ICICI Bank
against Innoventive Industries Ltd. (“Innoventive”) for the insolvency resolution process to be set in motion since
Innoventive was stated to be a defaulter under the IBC.
¡ Innoventive’s main contention was that no debt was legally due since all liabilities of Innoventive and remedies for
enforcement were temporarily suspended for 2 years pursuant to notifications[1] issued under the Maharashtra
Relief Undertaking (Special Provisions Act), 1958 (“Maharashtra Act”).
¡ The NCLT on 17 January 2017 held that the IBC would prevail against the Maharashtra Act in view of the non-
obstante clause in Section 238 of the IBC. It held that the Parliamentary statute would prevail over the State
statute and hence Innoventive had defaulted in making payments and accordingly the application was admitted and
a moratorium was declared.
¡ An appeal was filed before the NCLAT against the above order which met with the same fate and from there an
appeal was filed before the Supreme Court.
ISSUES

¡ Whether the appeal was maintainable as it had been filed by the erstwhile directors of Innoventive after an
insolvency professional was appointed to manage the company?
¡ Whether there was any repugnancy in fact between the IBC and the Maharashtra Act?
¡ Whether the non-obstante Clause contained in Section 238 of the IBC of the Parliamentary enactment under
IBC will prevail over the non-obstante Clause contained in Section 4 of the Maharashtra Act?
¡ Discussed the contrast between the scheme of section 7 and section 8 of the IBC.
DECISION

“29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the
occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided
in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand
notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a
dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing – i.e. before such notice or
invoice was received by the corporate debtor. The moment there is the existence of such a dispute, the operational creditor gets
out of the clutches of the Code.
30. “On the other hand, as we have seen, in the case of a corporate debtor who commits a default of financial debt, the
adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial
creditor to satisfy itself that a default has occurred. ”
 (1) Subject to sub-section (2), the corporate insolvency resolution
process shall be completed within a period of one hundred and
SECTION 12 eighty days from the date of admission of the application to initiate
such process.
(2) The resolution professional shall file an application to the
Adjudicating Authority to extend the period of the corporate
TIME-LIMIT FOR insolvency resolution process beyond one hundred and eighty days,
if instructed to do so by a resolution passed at a meeting of the
COMPLETION committee of creditors by a vote of 1 [sixty-six] per cent. of the
voting shares.
OF INSOLVENCY (3) On receipt of an application under sub-section (2), if the
Adjudicating Authority is satisfied that the subject matter of the
RESOLUTION case is such that corporate insolvency resolution process cannot
be completed within one hundred and eighty days, it may by order
PROCESS. 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 corporate insolvency resolution process 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: Provided also that where the insolvency resolution
process of a corporate debtor is pending and has not been completed within the period referred to in the second
proviso, such resolution process shall be completed within a period of ninety days from the date of commencement
of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.]
COC OF ESSAR STEEL INDIA LIMITED VS. SATISH KUMAR GUPTA

While this timeline has been held not to be mandatory the Supreme Court has said, “it is of utmost importance for all
authorities concerned to follow this model timeline as closely as possible.” Therefore, the CIRP should ordinarily be
completed within the prescribed 330-day timeline.
Corporate insolvency resolution process should “ordinarily” be completed within 330 days, including the extensions
and time taken in legal proceedings and any further extension may be granted only if it can be shown that only a
short period is left for completion of the insolvency resolution process beyond 330 days, and that it would be in the
interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation
and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to
the litigants before the NCLT and/or NCLAT, the delay or a large part thereof being attributable to the tardy process
of the NCLT and/or NCLAT itself.