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Ineolvency

INSOLVENCYAND
BANKRUPTCY CODE,2OI6

YACHIKA MENDIRATTA
REG. NO. 240s37243/07 12016

TRAINED UNDER:
MR. R,S. BHATIA
PRACTICI NG COM PANY SECRETARY
c.P. NO.2514
R.. S. Bhatia j"17 [BasementJ, Lajpat Nagar ] ,
Ne\,1' Delhi-110024.
M..4.. F.C.S.
ac,npany Secretary in Practice Ph.011 41078605 Mr 09811113545
PAN. AAFPB5l3OM
CP No - 251,1
CST I'Jo.- 07AAFPB5130M1ZX
Eilaii: bhatia r s@hotmail.com

CERTIFICAI4 JQR PIRQTECT REPOET

Cefiilled that this project report on..Insolvency and Bankruptcy Code, 2016,' is
the bonafide work of Ms. Yachika Mendiratta (Reg. No. 24Afi72$/A7/2016)
'"r&o carried out the project work under my superwision.

D€ t.l-11 l

Practicing Company Secretary

CP No.: F2514

Place: New Delhi

Date 31/1212019
 ACKNOWLEDGEMENT
I, Yachika Mendiratta, a student of the INSTITUTE OF COMPAI{Y
SECRETARIES OF INDIA, am grateful to Mr. R, S. Bhatia, practicing
Company Secretaxy (CP No. 2514) for the confdence bestowed in me
and
enrrusting my project entitled ,,INSOLYENCY AND BANLRUPTCY CODE,
2016".

At this juncture, I feel deeply honored in expressing my sincere tha*s to Mr.

R.S. Bhatia, for making the resources available at the right tirne and providing
valuable insights leading to the successfi..rl completion ofmy project.
I would also like to thank all the team members ofthe Secretaxial Department for
their critical advice and guidance without which this project would not have been
possible
-\{q,.
\"i!JZ
tv\\|z
\
BY YACIIIKA MENDIRATTA
Registration No. 2 40537243107 12016
 INTRODUCTION
t. The Insolvency and Bankruptcy Cod.e, 20!6 is one of the mal.or economic
retorm Code
initiated by the Government in the year 2015.

There were multiple overlapping laws and adjudicating forurns dealing with
financial
failure and insolvency ofcompanies arld individuals in India.

The existinglaws also were notalignedwith the marketrealties, had several

Droblems and
were lnaoequate.

As per that legal framework, provisions relating to insolvency and bankruptcy for
companies could be found in the Sick Industrial Companies (special provisionsl Act, 1985,
the Recovery of Debt Due to Banks and Financial Institutions Act, 1993, the Securitisation
and Reconstruction
of FinancialAssets and Enforcement ofSecu ty Interest Act, 2O0Z and the Companies Act,

201,3.

5. Resolution and jurisdiction vesting with multiple agencies with overlapping powers was
leading to delays and complexities in the process.

To facilitate easy and time bound closure of business in India and to overcome these
challenges, a strong bankruptcy law was required.

7. The Insolvency and Bankruptcy Code, 2015 was introduced in the Lok Sabah on 21st
December, 2015 and referred to the Joint Committee on the Insolvency and Bankruptcy
Code,2016. The Committee had presented its recommendations in the modified Bill
based on its suggestions.
Further, the Insolvency and Bankruptcy Code, 2016 was passed by both the Houses of
Parliament and notified in May 2016. Being one ofthe major economic reforms it paves the
way focusing on creditor driven insolvency resolution.
WHAT IS INSOLVENCYAND BANKRUPTCY?
lnsojv.enq/
lnsolvency: the value of th6 nrryr.s ats€r,ls
ttrG waluq of tlt€ <retrt.
. lalait:V.(;trt firrr!

-
llors {rr: aesrrtiwc cqtrity

The term insolyencyis used forboth individuals and organizatioN, For individuals, it is known
as bankruptcyand for corporate it is called corporate insolvency, Both refer to a situation when
aII individual or companyare not able to pay tlle debtin present or near future and the valueof

assets held by them are less than liability.

Insolvenry in this Code is regarded as a "state" where assets are insufficient to meet the
Iiabilities, Ifuntreated, insolvency will lead to bankruptcy for non-corporates and liquidation
ofcorporates.

While illsolvencyis a situation which arises dueto inabilityto payoffthe debts due to insufficient
assets, bankruptcy is a situation wherein application is made to an authority declaring
insolvency and seeking to be declared as bankrupt, which will continue until discharge.

From the above, it is evident that insolvency is a state and bankuptcy is a conclusion. A
bankruptwouldbea conclusive insolventwhereas all insolvencieswillnotlead tobankruptcies.
Typically insolvency situatioN have two options resolution and recoveryE:lisddation.

9l DELHT J>
1- "Bankruptcy'' is a legal proceeding involving a person or business that is

unable to repay outstanding debts.

The_bankruptcy process begins with a petition filed by the debtor, or by the

creditors.

All ofthe debtorJs assets are measured and evaluated, and thenthese assets

may be used to repay a portion ofoutstandi[g debt.

In lucid language, if any person or entity is unable to pay off the debts, it
owes to its creditors, ontime oras and when they became due and payable,

tien such person or entity is regarded as "insolvent''.

"Liquidation" is the winding up of a corporation or incorporated entity.

There are many enti- ties that can initiate proceedings that will lead to

Liquidatior! those beingr

The Regulatory Bodies;

The Directors ofa Company;

The Shareholders ofa Company; and

An Unpaid Creditor ofa Company

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 is the

leading cause for Liquidation and is the only way that can cause a natural

person to become a bankrupt.

 HISTORY
The Insolvency and Bankruptcy Code, 2015 was introduced
in the Lok
Sabha on 21-December 2015 by Finance Minister, Arun
Jaitley. The Code
was referred to a Joint Committee of parliament on 23 December
2015.
and recommended by the Committee on 2g April 2016. The Code
was
passed by the Lok Sabha on 5 May 2016 and by the Raiya
Sabha on 11May
2016. The Code received assent from president pranab Mukheriee on
ZB
May, and was notified in The cazene of India on 2g May 2016.

The Code was passed by parliament in May 2016 and became effective in
December 2016.[8] It aimed to repeal the presidency Towns Insolvency
Act, 1909 and Sick Industrial Companies fspecia] provisions) Repeal Ac;
2003, among otiers.

The first insolvency resolution order under this code was Dassed bv
National Company Law Tribunal (NCLT) in the case of Synergils-Oooray
Automotive Ltd on 14 August 201.7 and the second resolution plan was
submitted in the case ofProwess International private Limited. The plea
for insolvency was submitted by company on 23 lanuary 2077, The
resoluUon plan was submitted to NCLT within a period of 180 days as
required by the code, and the approval for the same was received on 2
August 2017 from the tribunal. The final order was uDloaded on 1.4
August 2017 on the NCLT website.

The current lndian bankruptcy regime is highly ftagmented, borne out of

multiple judicial forums resulting in a lack of clarity and certainty in
jurisdiction. Decisions are often appealed, stayed or overturned by
judicial forums having a concurrent or overlapping iurisdiction.
The pro-revival approach of the judicial systems leads to delays in the
closure of unviable businesses since the standstill mechanism has been
misused by corporate debtors.
Secured and unsecured creditors, employees, regulatory authorities have
different and often competing rights with no common regulatory process
to determine the priority ofclaims.
Lackofadequate and credible data regarding the assets, indebtedness and
security situation ofcompanies further accentuates tJle problems.
As a result the average time to resolve insolvency in tndia is 4.5 years, as
compared to 0.B years for Singapore and one year in London; India has
the lowest recoveryrate in the world at about 20 per cent ofdebtvalue as
perWorld Bank report (20141.
Large amounts ofstressed assets at 12 per centofthe total
December 20L5 as per RBI repoft are either restructured or (;':
DELHI
 low recovery rates due to a lack ofenabling environment for enforcement
ofcreditors rights.

The 2016 Codeapplies to companies and individuals. It provides for a

time-bound process to resolye insolvency. When a default in repaymenr
occurs, creditors gain control over debtor,s assets and must take
decisions to resolve insolvency within a 180-day period. To ensure an
uninterrupted resolution process, the .Code also provides immunity to
debtors from resolution claims of creditors during this period. The
Code also consolidates provisions ofthe current legislative ftamework ro
form a common forum for debtors and creditors of all classes to resolve
insolvency.

1. The Insolvency and Bankruptcy Code, 2016 is intended to strike the right
balance of interests of all stakeholders ofthe business enterprise so that
tlle corporates and otherbusiness entities
enjoy availability ofcredit and at t}le same time the creditor do not have
to bear the losses on account of default.

Z As per the Preamble to the Code, the purpose ofthis Act is as under:-

. To consolidate,and amend the laws relating to reorganization and

insolvency resolution of corporate persons, partnership firms and
individuals.

To fix time periods for execution of tJle law in a time bound manner.
To maximize the value of assets ofinterested Dersons.

To promote entrepreneurship

To increase availability of credit.

To balance the interests ofall the stakeholders including alteration in the

order ofpriority of payment of Government dues.

To establish an Insolvency and Banlauptcy Board of lndia as a

regulatory body for insolvency and bankruptcy law.
The Code has the following obiectives:
Consolidate and amend laws relating to reorganisation and
insolvenry resolution;
Time bound process for resolution and enforcement ofdebts
against the Corporate Debtor;
Maximize the value ofassets:
Promote entrepreneurship and availability of credit;
Balance the interests ofall stakeholders, including alteration in the
order ofpriority ofpayment of Government dues;
Establish an Insolvency and Bankruptcy Board oflndia
IIBBIJ

BANKRUPTCY CODE. 2016

. Insolvency and Banlauptcy Code, 2016 (Code) provides for a
specialised forum to oversee all insolvericy and liquidaUon proceedings for
individuals, SMEs and corporates.
. It empowers all classes of creditors (secured and unsecured lenders,
employees, trade creditors, regulatory autiorities) to trigger a resolution
process in case of non-payment ofa valid claim.
. It provides for immediate suspension of the Board of Directors and
promoters' powers.
I It provides for an insolvenry professional to take control of the
Corporate debtor.
. It enables a'stand-still period'which provides stakeholders time to
facilitate discussions and arrive at a common resolution rather than runnins
independent processes.
. It offers a finite time limit within which the debtor's viability can be
assessed and a resolution process agreed, The power ofcommercial decision
to revive or liquidate the Company is on the creditors rather than the courts.
. [t provides for a balanced approach between rehabilitation and
recovery and provides for compulsory liquidation ofcorporate debtors in the
event the resolution has not been agreed within 180 days of the resolution
process.
' It aims to develop a detailed and accessible information system to
reduce information asfnmetry between the various participants of the
insolvency process.
. It provides for a clearly-defined waterfall mechanism for
debt in the event ofa liouidation.
1. The Code has been divided in to five parts
comprising of 255 sections and 11 Schedules.
Out of these some sections have been notified bv
the Ministry of CorporateAffairs.

:. In order to bring clarity and a better

understanding, certain Regulations have also
been notified by the Government.
 REGULATORY MECHANISM
t The Insolvency and Bankruptcy Code, 2016 provides a new
regulatory
mechanism with an institutional set-up comprising of five pillarsr

1. Insolvency Professionals-

(a) The Code provides for insolvency professionals as intermediaries who

would play a key role in the efficient working ofthe bankruptcy process.

(b) The role of the IP encompasses a wide range of functions, which include
adheringto procedure of t]le law, as well as accounting and finance related
functions.

(cl In tJIe resolution process, the insolvency professional verifies the claims of
the creditors, constitutes a creditors committee. runs the debtofs business
during the moratorium pe od and helps the creditors in reaching a

consensus for a revival plan.

(d) In liquidation, the insolvency professional acts as liquidator and bankruptcy

Irustee.

(el The Code provides for insolvency professionals as intermediaries who

would play a key role in the efficient working of the bankruptcy process.

(f) The role of the IP encompasses a wide range of functions,

adheringto procedure ofthe law as well as accounting and
functions. OELHI
(s) In the resolution process, the insolvency professional verifies
the claims of
the creditors, constitutes a creditors committee, runs thedebtor,s business
during the moratorium period and helps the creditors in reachins a
consensus for a revival plan,

(h) In liquidatiorL the insolvency professional acts as liquidator and banlcuprcy

trustee.

2. Insolvency Professional Agencies-

The Code provides for establishmentof insolvencyprofessionals agencies to

enroll and regulate insolvency professionals as its members in accordance
with the lnsolvencyand Banlauptcy Code 2016 and read with regulations.
3. Information Utilities -
G) A notable feature ofthe Code is tie creation ofinformation utilities to
collect, collate, authenticate and disseminate financial information of
debtors in centralized electronic database.

(b) The Code requires creditors to provide financial information ofdebtors to

multiple utilities on an ongoing basis,

(c) Such information would be availableto creditors, resolution professionalg

liquidators and other stakeholders in insolvencyand bankruptcy
proceedings.

(d) The purpose of tJle same is to remove information asJrmmetry and

dependencyon the debto/s management for critical information that is

needed to swiftly resolve the state ofinsolvency.

4. lnsolvency and Bankruptcy Board of India-

(a) The Code provides for establishment ofa Regulator who will oversee these
enuties and to per- form legislative, executive and quasi- judicial functions
witl respect to the Insolvency Professionals, Insolvenry Professional
Agencies and Information Utilities.

(b) The Insolvency and Bankruptcy Board of lndia was established on october
1. 2016. The head office of the Board is located at New Delhi.

10
 5. AdiudicatingAuthority-

(a) The adiudicating authority for corporate insolvency and liquidation is t]le
NCLT. Appeals arising out ofNCLT orders lie to the National Company Law

Appellate Tribunal and, thereafter, to tie Supreme Court oflndia.

(b) The Code hils created one chain of authority for adjudication under t}e Code.

(c) Civil Courts have been prohibited to interfere in the matters related witll
application pending before the adiudicating authority.

(d) No injunction shall be granted by any Court, Tribunal or Authority in

respect of any action taken by the NCLT.

(e) For individuals and otler persons, tie adjudicating autlority is tie DRT.
Appeals arising out of DRT orders ]ie to the Debt Recovery Appellate
Tribunal and thereafter. to the SuDremeCourt.

7L
I The Code shall apply for insolvency,liquidatio[ voluntary liquidation
or bankruptcy ofthe following entities:

@) Any company incorporated under the Companies Act, 2013 or under any
previous iaw.

(b) Any otier company governed by any special act for tlle dme being in force,
except in so far as the said provision is inconsistent with the provisions ofsuch
Special AcL

(d Any Limited Liability Partnership under the LLp ActZO0g_

(d) Any otler body incorporated under any law for the time
being in force, as the Centml covernment may by notification specit' in this
behalf.

(e) Partnership firms and individuals.

L2
 UNDERTHE CODE?
Insolvency Resolution:
The Code outlines separate insolvency resolution processes for individuals.
companies and partnership firms. The process may be iniuated by either
the
debtor or the creditors. A maximum time limit, for completion of the insolvenry
resolution process, has been set for corporates and individuals. For companiei,
the process will have to be completed in 180 days, which may be extended by
90
days, if a majority of the creditors agree. For start-ups
[ot]er than partnership
firmsJ, small companiels and other compairies (with asset less than Rs. 1 croreJ,
resolution process would be completed within 90 days of initiation of request
which may be extended by 45 days.

Insolvenclr regulator:
The Code establishes the Insolvenry and Bankruptry Board of India, to oversee
the insolvency proceedings in the country and regulate the entities registered
under it. The Board will have 10 rnembers, including representatives from the
Ministries of Finance and Law, and the Reserve Bank of India.

The insolvency process will be managed by licensed professionals. These

professionals will also control the assets of the debtor during the insolvency
process.

Bankruptcy and Insolvency Adiudicator:

The Code proposes two separate tribunals to oversee the process of insolvency
resolution, for individuals and companies:

tD the National Company Law Tribunal for Companies and Limited

Liability Partnership firms; and
tiil the Debt Recovery Tribunal for individuals and partnerships.

13
National Company Law Tribunal (NCLT):
National Company Law Tribunal (NCLTJ would deal with matters relating to
corporate insolvenry, Limited Liability partnership and enforcement ofpersonal
guarantees related to eorporate debtors.

Debt Recovery Tribunal (DRT):

Debt Recovery Tribunal (DRT) would deal with individual insolvencv and
partnership.
Adiudication authority ('AA') :

Adjudication authority ('AA'J would have exclusive iurisdiction to deal with

insolvency related matters, 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/ DRT.

Financial and Operational creditors

It means debt incurred in exchange for the provision of goods or services (including
employment] or debt in respect of the payment of dues arising under any law for the time
being in force payable to the Central Covernment, any State Government or any regulator;

Creditors:
Creditors includes secured, unsecured creditors including foreign creditors.

Default and 'Proof of default'

. Default is defined as the state
when debt exceeding INR 1 lakh is due and is not repaid
by the Corporate debtor. Such cash flow-based assessment ofinsolvency can lead to an
early detection ofinsolvency trends compared to the net worth or balance sheet based
assessments prescribed in the existinglaws,
. Proof of default for Financial creditors is the default recorded witJr t}le information
utility or such other proofofdefault as may be specified by the Code.
. Proofofdefault for Operational creditors will be the expiry ofthe period often days
from the date of delivery of the notice demanding payment, ifthe operational creditor
does not receive payment from the corporate debtor or notice of dispute from
corporate debtor.

T4
 Financial Creditor (Section 7): Person to whom 'Financial debt, is owed
and includes a person to whom such debt may have been legally assigned
or transferred in accordance with law (including a person residing outside
Indial. Default may be in respect of Financial debt owed to any Financial
creditor of the corporate debtor and not only the applicant Financial
creditor.
Operational Creditor (Section 9): Person to whom 'Operational debt' is
owed and includes any person to whom such debt may have been legally
assigned or transferred;
Corporate Debtor (Section 10): Shareholder ofthe entity, an individual
who is in charge ofmanaging the overall operations, a person who has the
control, supervision or oversight of the financial affairs of the corporate
debtor
The Code prescribes penalties for false and frivolous petitions.
Default amount for initiatins CIRP
1. Minimum amount of default- Rs. l Lakh
2. Central Government may notiff a higher minimum-default amount not
exceeding Rs. 1 crore

'Creditor in ossession' a
Post the acceptance of the petition by the AA, the board of the
Corporate debtor is suspended and the court appoints an interim
resolution professional. The committee of creditors needs to be
formed and needs to approve the appointment of the interim
resolution professional within 30 days of its appointment by the
AA.
The interim re!olution professional must make every endeavour
to protect and preserve the value ofthe property ofthe corporate
debtor and manage the operations of the corporate debtor as a
going concern
This process is likely to prevent mismanagement of the
Corporate debtor which could be detrimental to the interests of
the creditors, and misappropriation of funds by debtors during
the IRP period.
r,i-:':..
 For IsdiYiduals
For CoEpanY/LLP /?roprietorship
cotrc.d/PadnerEhiP
fur (Rdes not Yet
iotifi?d)

NoG: Mjudicating AutboritY C'AA) to as AA under Secdon 5 ofrhc Code

408 ofcompaDres AcL 20t3) is refen€d
- NCLT (established ',s oIRDDBFI Acr' l9e3; referr€d to as AAulrder sectiod 7e of rhe code'
- fi;i.:;;*;;;1 's

E.Eu@*E

16
The Code proposes the following steps to resolve insolvenry:
Initiation:
When a default occurs, the resolution process may be initiated by the
debtor or creditor' The insolvency professional administers the
process. The professional provides financial information ofthe debtor
from the information utilities to the creditor and manage the debtor's
assets. This process lasts for 180 days and any legal action against
the
debtor is prohibited during this period'
Decision to resolve insolvency:
to
A committee consisting of the financial creditors who lent money
The creditors
the debtor will be formed bythe insolvency professional'
committee will take a decision regarding the future ofthe
outstanding
owed to them
debt owed to them. They may choose to revive the debt
the assets of
by, changing the repayment schedule, or sell fliquidate)
taken
ttr" aeUir Io repay the debts owed to them' If a decision is not
in 180 days, the debtor's assets go into liquidation'
Liquidationr
professional
If the debtor goes into liquidation, an insolvency
the sale of the
administers the liquidation ptotttt' Proceeds from
of precedence:
debtor's assets are distributed in the following order
i) insolvenry resolution costs, including the remuneration to the
insolvencY Professional,
collateral, dues
i0 secured creditors, whose loans are backed bY
to workers, other emPIoYees,
iiiJ unsecuredcreditors,
iv) dues to government,
vJ prioritY shareholders and
vi) equitYshareholders.

T7
Conseouence of application under IBC:
1. AA shall either accept or reject the application.
2, If accepted, CIRP commences and the date of admission of application is
called the "Insolvency Commencement Date" ' 180/270 days shall be
counted from this date. (The maximum timeline of 270 days has been
extended to 330 days, inclusive of any litigation, by way oflBC Amendment
Bill,2019)
3, Appointment oflRP. (lRP wiube replaced with/confirmed as RP in the first
meeting ofthe CoC by a majority of 660lo votes.J
4, Moratorium & Public Announcement The AA, by order, declares a
moratorium and causes public announcement of initiation of CIRP and
calls for submission of claims.

Note: AA may allow withdrawal of CIRP application postadmission with

the approval of9Oyo voting share of CoC (Section 12A)

Financial creditors filing the petition should propose the name of

interim resolution professional in the petition.
The interim resolution professional's appointment will be
subsequently approved by 7 5o/o of the creditors by value in the
first creditors committee meeting' Fees of RP to be decided by
creditors committee.
The creditors committee may appoint a new RP subiect to the
approval of the IB Board. The replacement of existing RP cannot
be without cause and needs to be approved by the IB Board'
It is optional for Operational creditors to propose the name ofRP
in the petition. If no RP is proposed, the AA may recommend the
n"*. of interim RP which needs to be approved by 7 5o/o of
creditors in the creditors meeting.

Powers of RP
shall be
The management of the affairs of the corporate debtor
vested on the interim resolution professional'
and be
The powers of the board of directors shall be suspended
exercised by the interim resolution professional'

18
 The officers and managers ofthe corporate debtor shall report to
the interim resolution professional and provide access to such
documents and records of the corporate debtor as may be
demanded by the interim resolution professional.
Management of the company needs to support the RP in
performing his/her duties.
The interim resolution professional shall have immunity from
criminal prosecution and any other liability for anything done or
omitted to be done in good faith in the discharge ofhis/her duties
as an insolvency resolution professional under the Code.

To collect all information relating to the assets, finances and

operations of the corporate debtor for determining its financial
position
To receive and collate all the claims submitted by creditors to
him/her
. To constitute a committee of creditors
. Take custody of assets and monitor the assets.

Moratorium
' The Code provides for an automatic moratorium of 180 days
against any debt recovery actions by the creditors. The
moratorium can only be extended by a further period of 90 days
in exceptional circumstances.
. The oeriod of moratorium would be excluded for computation of
period of limitation.
. The moratorium can give stakeholders time to facilitate
discussions and arrive at a common resolution mechanism
rather than running independent processes.

6i*\;,,
j(oer-nt ): l

PX=-/,j
sty).1

19
Restrictions during Moratorium:
. Institution / continuation of any suits or proceedings against
Corporate Debtor;
. Transferring/encumbering any assets, legal rights or beneficial
interests by Corporate Debtor;
. Any action to recover, foreclose or enforce security interest
against Corporate Debtor;
. Recovery by the owner or lessor of any property occupied or in
possession of CorPorate Debtor.

Recourse for a Lender during Moratorium:

o Invocation of personal guarantee/corporate guarantee - Section
14(3). NCLAT held in Ferro Alloys Corporation Ltd' vs' Rural
Electrification Corporation Ltd. that lenders can initiate
corporate insolvency resolution process against corporate
guarantors without invoking CIRP for the principal borrowers'
On 11th February, 2019, SC upheld the NCLAT ruling in Ferro
Alloys CorPoration Ltd.
o Invocation of third party security - On the premise of same
analogy as stated above.
o Enforcement of guarantee/third party security can be initiated
by relevant financial appropriate forum such as DRT or underthe
nrovisions of SARFAESI.

20
 CIRP BROAD TIMELINES

Filing ofApplication with NCLT

Admission ofApplication / Declaration of Moratorium 0 days (TJ

NCLT to appoint lnterim Resolution Professional

Public Announcement T + 16 days

Appoint registered valuer to calculate lidfidation value

Creditors to submit claims T + 37 days

IRP to constitute Committee of Creditors and submit report

l', Committee of Creditors meeting I i Jt days

Preparation of lnformation Memorandum

Submission of Plan T + 150 days

Committee of Creditors approval of resolution plan

Application to NCLT for aPProval T + 170 days

Initiation of liquidation
Application can be made to NCLT for an extension ofg0days T + 270 days
days
(now 330)

Debtor
IRP shall manage the affairs of the Corporate Debtor'
namely:
in lRP. [section 17t1] [a]l
1. Management of affairs of corporate Debtor shall vest

2.PowersoftheBoardofDirectorsofCorporateDebtorstandsuspendedand
vest in IRP. lsection 17(1)(bJ]
Debtor shall report to and cooperate
3. The officers and managers of Corporate
and records' [Section
with the IRP and provide access to all necessary documents
17[1) (c) and Section 19]
of Corporate
4. The financial institutions maintaining accounts
on the instructions of IRP in relation to such accounts [Sectio

2L
5. The IRP shall act and execute in the name and on behalf of the Corporate
Debtor, all deeds, receipts, and other documents. [Section 17(2J(aJ]
6. The IRP shall be responsible for complying with the applicable laws with
respect to the CorPorate Debtor.

7. Protect and preserve the value of assets and manage the operation of
Corporate Debtor as going concern' (Section 20J'

Insolvengv Resolution Professional: Duties

1. Collect all information relating to the assets, finances and operations of
the CorPorate Debtor.

2. Receive and collate all claims submitted by creditors to the IRP'

3. Formation ofthe CoC by IRP after collation of claims'

4. Take control & custody of all assets over which Corporate Debtor has
ownershiP rights.

5. lnvestigation / forensic audit of the financial affairs of Corporate Debtor'

6. Prepare lnformation Memorandum'
7. lssue Expression oflnterest,
8. Invite prospective Resolution Applicants'
9. Present Resolution Plans to CoC'

10. Submit approved Resolution Plan to AA (section 30)'

11. To raise interim finance, with the approval

of 66%o votes in CoC

TI
to be completed within
t, Compliance to the timeline of CIRP: Difficult
LaD / 270 daYs.
2.Todealwiththedirectors,promoters'management/KeyManagerial
Person of the Corporate Debtor'
credito
3. To deal with employees, trade unions' operation K7*,,:,
government authorities like ED etc' I( oer-Ht )-l
t7 P}'-,-,1c);
 Sector specific issues to the Corporate Debtor and unknown to RP.
). Handling and pursuing the litigations on behalf of Corporate Debtor.
6. Verification of claims, preparing.lM and evaluation matrix for all the
submitted proposals can be very time consuming.
Review ofthe Resolution Plan and approval thereofby CoC and AA.

Committceoflredttor
. IRP shall constitute CoC (Section 21).
. CoC consists of all financial creditors (whether secured or
unsecuredJ, excluding those which are related party of the
Corporate Debtor.
. CoC appoints the RP in its 1st meeting post its formation'
. Meetings of CoC are to be conducted by the IRP and later the RP'
. The voting threshold has been reduced from 7So/oto 5lo/0, except
for certain key decisions requiring 660/o votes, such as:
/ Extension of CIRP period from 180 upto 270 days;
Appointment/substitution of RP;
/ To raise interim finance for Corporate Debtor;
/ To create security interest over the assets of Corporate Debtor;
/ To undertake any related party transaction;
/ To dispose or permit disposal of shares of any shareholder of
Corporate Debtor;
/ To make changes in management of Corporate Debtor or its
subsidiarY.
The resolution professional, after evaluating all claims received
position
against the corporate debtor shall review the financial
oithe corporate debtor and constitute a committee of creditors'
The committee of creditors would consist of Financial creditors
of the Corporate debtor but exclude related party creditors'
The Operational creditors and Corporate debtor will be non-
voting members on the creditors committee and will be invited
to all meetings.
 When a corporate debtor does not have any Financial creditors,
the committee of creditors shall be constituted and comprise
such persons to exercise such functions in such a manner as may
be specified by the IB Board.
All material decisions taken by the RP such as the sale of assets,
raising interim funding, creation of security interes! settlement
of legal disputes etc. need to be approved by the creditors
committee. All decisions taken by the creditors committee will be
by way of a maj ority of 75o/o of the Financial creditors by value'

. The RP will prepare an information memorandum of all

information about the Corporate debtor. Creditors [or through a
resolution agency) or RP will propose a resolution plan'
The creditors will decide the manner in which the entity would
be operated as a going concern or liquidated and such a plan is to
be approved by way of a maiority of 75o/o of the creditors by
value.
There is no guidance on what the resolution plan should consist
of, however ihe resolution plan should at minimum provide
for
o Payment of costs oflRP and liquidation
o Repayments to Operational creditors, which should notbe
lesser than the amount to be received by them in case of
liquidation of the corporate debtor
o Provide for managemen! implementation and supervision
of the resolution plan after its approval
laws and
o The resolution plan must comply with applicable
IB
regulations and other criteria as may be specified by the
Board.
plan
' If the Adjudicating Authority is satisfied that the-resolution
approve the
conformi to these requirements, it shall by order
resolution plan which shall be binding on

24
r the corporate debtor and its employees, shareholders, creditors
and guarantors and other stakeholders involved in the resolution
olan.

/ Paradigm shift from the concept of 'debtor in possession' to

'creditor in control'.
Has largely become a recovery mechanism, instead of
revival/resolution mechanism'
Lender may choose not to invoke IBC but initiate proceedings in
DRT/ under SARFAESI' However, once CIRP is initiated,
proceedings in DRT/ SARFAESI, enforcement of any foreign
decree/ award against the Corporate Debtor cannot be
continued.
y' Irrespective of CIRP, criminal proceedings would continue
against the Corporate Debtor such as proceedings under Section
138 Negotiable Instruments Act, 1881 and would not fall within
the purview of moratorium as held by NCLAT in Shah Brothers
Ispat Pvt. Ltd. Vs P. Mohanraj & Ors.
r' CIRP cannot be initiated against a Corporate Debtor who is a
financial service provider (including NBFC) as held by NCLAT in
Randhirai Thakur, Director, Mayfair Capital Pvt' Ltd' Vs Jindal
being
Saxena Financial Services and Anr' It was held that Mayfair
a financial service provider having been excluded from the
definition of'corporate person' under Sub-section [7) of Section
3 of IBC, the application under Section 7 was not maintainable
against MaYfair.
/ oltion to initiate the process even if the defautt is in respect of
the debt of another lender'
/ Rs. 1 Lac.) maY
Operational Creditors (having dues of more than
maY be
trigger IBC, while the loans of the Financial Creditors
standard.
 / A PE Fund needs to be aware that RBI's Restructuring Circular
dated February 72,2018 may force the Banks to initiate CIRP.

In a liquidation scenario, a secured creditor may either relinquish or

enforce/realize its security interest (as per applicable law). A clear
priority of disffibution (waterfall) is discussed below-
r' Payment of Insolvency Resolution Process costs in priority to the
payment of other debts of the Corporate Debtor [Section
30(2)(a)l;
Payment to operational creditors is to be made on priority over
the financial creditors [Regulation3B(1), Insolvenry and
Bankruptcy Board of India (lnsolvency Resolution Process for
Corporate Persons) Regulations, 2016];
Value maximization is the key factor for acceptance of a

resolution plan bY the CoC;

/ CoC also needs to examine the viability of each plan from the
financial, technical, legal and regulatory perspective;
/ CoC needs to ensure resolution applicant must be a person
eligible to submit the resolution plan and is not a person
disqualified under Section 294 ofthe Code'
Liquidation is triggered in case the following circumstances
arise:
o Resolution plan does not meet the minimum required
guidelines prescribed under the Code (discussed earlier)
o Creditors' committee does not reach an agreement during
the stipulated period of 180 days or any extended period
thereof
o Creditors' committee decides to proceed with liquidation
o Corporate debtor fails to adhere to the terms of the
approved resolution Plan.
Where the Adiudicating .Authority passes an order for
liquidation ofthe corporate debtor the resolution professional
process
appointed for the corporate insolvency resolution
shall act as the liquidator.
assets of
The liquidator must try to maximise the value of the
create
the entity in the most efficient manner of disposal and
a liquidation trust for distribution' Distribution to the
out in the
creditors would be as per the priority ofpayment set
Code.
expiry of
The liquidation process cannot be appealed after the
the prescribed period after passing of the order
ofliquidation'
by the AA
An appeal to stay the liquidation may be considered
only on very limited grounds'
. The proceeds from the sale of the liquidation assets
shall be
distributed in the following order of priority:
o the insolvenry resolution process costs and the
liquidation costs to be paid in full
o claims of secured creditors and worlanen dues fcapped
pari
up to 24 months prior to liquidation) would rank
passu
(capp-ed. up to
o- e*ploy"us' salaries other than workmen
1Z months prior to the commencement
uu
offfi$Kon)
X{ orttt' 1;
QX=l+"
 o financial debt owed to unsecured creditors
o any amount due to the relevant State Government or the
Government of India (capped at 2 years before
commencement of liquidation) and unpaid dues to
secured creditors after enforcement of security interest
would rank pari passu
o any remaining debts and dues'
. The fees payable to the 'liquidator shall be deducted
proportionately from the proceeds payable to each class of
recipientt and the proceeds to the relevant recipient shall be
distributed after such a deduction.

Liquidator has the rights to cancel certain transactions of preferential

nature entered into in order to benefit a creditor or a set of creditors'
Such transactions entered into within one year before the
commencement of liquidation with third parties and before two years
with related parties can we cancelled by the liquidator'
Voluntary liquidation
The directors of the Company can initiate the voluntary
liquidation of the Company upon filing a petition for the
voluntary winding up along with affidavit of solvency of the
CompanY.
The petition needs to be approved by a special resolution in a
geneial meeting of members along with two - thirds majority of
ireditors in value ofthe debt held by such creditors'

which
' Since it is envisaged that there would be multiple IPAs'
may lead to lack of uniformity in the bye-laws to be
followed by
provides for
different insolvenry professional agencies' the code
model bye- law which wouldbe adopted bv the
" ^ffif
 . The model bye law will provides for manner of conducting
examination and minimum standards of professional
competence for members, standards for professional and ethical
conduct, setup of governing board for internal governance and
management of IPA mechanism for redressal of grievances
against members amongst others.

Cross border insolvency

While the Code has not adopted the UNCITRAL model of cross
border insolvency, it provides for an enabling provision for
Central government to enter into agreements and treaties with
the governments of foreign countries for enforcing the Code.
In case of enforcing the Code on an assets situated outside India,
the AA may issue a'Letter ofRequest'to a competent court ofthe
foreign country where the asset is located.

Passage ofthe Code

The code was approved in the Lok Sabha on 5 May 2016 and Rajya
Sabha on lt May 2016. Once the President signs the legislation, India
will have a new bankruptcy law. However, before the notification date'
the Central Government will need to create the infrastructure and
ecosystem proposed under the Code to make it effective'

The Central government will need to focus on building an insolvency

ecosystem including:
. Appointing of members of the Board
. Appointing judges for the Adjudication Authority
. Setting up ofbenches for the Adjudication Authority
. Identif,ring and licensing insolvency agencies
. Licensing information utilities

30
 Grandfathering ofinsolvency professionals to create capacities in
the interim period
Constituting an examination board to conduct exams for the
licensing of insolvenry professionals.

The Board will also have to set up rules and bye-laws for the orderly
functioning and conduct of the Code. Rules will need to be framed
around:
. Functioning ofthe Adjudication Authority
. Model bye-laws for the conduct of Insolvency Professional
. Guidance notes around the conduct of IRP such as the
presentation and reporting of financial statements, management
of the Company during IRP, summoning a meeting of creditors,
etc.
. Training of IPs
. Creating awareness amongstthe iudicial community' lenders and
other stake holders.

31
 1. Constitutional Validity of the IBC
Sw'ss Ribbons Pvt Ltd & Anr. ltnion Of India [(Civil) No'99 of 2018] [Decided
Vs
on lanuary 25, 20191

. The Supreme Court, in its judgement upheld the constitutional validity of

the Insolvency and Bankruptry Code 2016 in its "entirety".
. The Court however held that to attract the bar under Section 29A from
participating in resolution process, "related person" should be a person
connected to the business ofthe defaulting entity or promoters thereof'

2. Prevailine Nature ofIBC

i) Over PMLA,2002
SREI Infrastructure Finance Ltd, Vs. Sterling SEZ and lnfrastructure
Ltd' IMA
7280/2018 in C.P. 405/ 2018, NCLT, Mumbai Benchl as decided on
February 12, 2019'

The non-obstante clause contained in lBC, which is a later statute shall

nrevail over the non-obstante clause contained in Section 71 of PMLA and
the proceedings before the Adjudicating Authority under PMLA
is civil in
of IBC
nature and hence, in view of Section 14 of IBC, and over-riding effect
and non-est
under Section 238, the attachment order under PMLA is a nullity
in law and hence it will not have any binding force'

ii) Over IT Act' 1961

No'
Pr. Commissioner of lncome Tax Vs. Monnet lspat and Energy Ltd' [SLP
6483 of 20181 as decideil by Supreme Court on 10 August
2078

Supreme Court held

Upholding an order ofthe Delhi High Court, the Hon'ble
that in view of Section 238 of IBC, the provisions therein
will override
including lncome
anything inconsistent contained in any other enactmen!
Tax Act.

32
3, Prevailing Nature of IBC
Perusal ofPending Proceeding before High Courts after Declaration of
Moratorium under IBC
Steamline Industries Ltd. Vs. Tecpro Estems Ltd. & Anr.
@299 of 20171 as decided
on December 4. 2017

. The Hon'ble NCLAT stated that the submission ofthe Appellate could not
be accepted in view of section 238 of the IBC which read as: "The
provisions of this Code shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time being
in force or any instrument having effect by virtue ofany such law
Therefore, no relief was granted to the Appellant.

. The Hon'ble Court relied on the landmark judgement of ICICI Bank Ltd.
vs. Innoventive lndustries Ltd. in which, the Court had held that the
non-obstante clause in Section 238, which thus overrides all other
Acts.

4.
the IBC
Naveen Luthra & Ors. Vs. BelI Finvest (India) Ltd' & Ors' [Company
AnPeaI (AT) (lnsolvencY) No'

The NCLAT held that:

Provision of Section 3 and 4 ofthe Usurious Loans Act, 1918 are not
applicable to the proceedings under Section 7 or 9 ofthe IBC'
Thus the petition filed by the Financial Creditor cannot be dismissed
on the aliegation of charging of usurious and extortionate penal
interest

62)
w
(AT)(lnsolvencv) No..623 of 20181 as decided on November 13' 2078

The NCLAT held that:

. Pendency ofa case under Section 138 ofthe Negotiable

Instrument Act, even if taken as recovery proceedings, cannot
be held to be a dispute pending before a court of law.

. Pendency ofthe case under Secti ot 138 / 447 ofNegotiable -

Instrumints Act, 1881 actually amounts to admission ofdebt and not
an existence of disPute.

. Therefore the pendenry ofcase under section 138 of NI Act will not
prevent an operationtl creditor from instituting proceedings under the
Code.

an agreement through an Arbitration clause' can the

as decided on August 27.2078'

The NCLAT held that :

The Tribunal observed that due to non-supply of transferables and
specifications by the respondent, the sudden abrupt change in the
the
market value oi iron and steel and due to extra cost burden by
The
enforcement ofGST there arose a dispute in t}te amount claimed
counter filed by the respondent states that on 25'02'2018 reply
notice was given which specifically states about the commencement
of arbitratiJn whereas the petition before the Tribunal was filed
in
March, 2018 from which the Tribunal observed that there
is a
pre-existing dispute which was sought to be resolved through
parties'
arbitration as per the agreed terms of contract by both the
a dispute'
The tribunal was ofthe opinion that there was in existence
the
U"fo." ttt" petition was filed in the Tribunal and hence under
provisions ofIBC the petition stood dismissed'

i( oernt 1;

34
7. Whether Adiudicating Authoriw has iurisdiction to
decide the legality of a foreign decree
Holdings L.L.C &Ors. Vs' Francorp Advisors PvL Ltd. [Company
IJsha
Appeal (AT) (lnsolvency) No. 44 of 20181 as decided on November 30,
2018.

The NCLAT held that :

. ln view ofthe decision in "Binani lndustries Limited", the Tribunal
held that the Adjudicating Authority not being a 'Court' or 'Tribunal',
and 'lnsolvency Resolution Process' not being a litigation,
Adjudicating Authority has no jurisdiction to decide whether a
foieign decree is legal or illegal. \{tiatever findings the Adjudicating
Authority has given with regard to legality and propriety of foreign
decree in quesiion being without jurisdiction is nullity in the eye of
law.

proceedings
B.K. Educational Services Privatg Limited Vs' Parag Gupta &
Associqtes [Civil Appeal No.23988 of2017] as decided
on October 17'
2018
. Hon'ble Supreme Court of lndia has held that the Limitation Act'
9 of
1963will apply to applications that are made under S' 7 and S'
the lnsolvenry and Bankruptry Code, 20L6, on and from the
.o..n"n."-unt of IBC on 01.12.2016, having retrospective effect'
. Hon'ble Supreme Courthas through this judgment cl'rifiedthat IBC
proceedings cannot be initiated based on time barred claims'
. Sinc" tt e Limitation Act is applicable to applications
filed under
the
SJons z and 9 of IBC from the inception of IBC' Article 137 of
Act
iimitation Act gets attracted. Article 137 of the Limitation
for
provia"s tt e pe.iod of limitation in case of "any other application
years
iihi.h no puiiod of limitation is provided elsewhere" as three
f.o- ,ft" iime when the right to apply accrues' "The right to sue"'
therefore, accrues when a default occurs'
. Ifthe defaulthas occurred overthree years priorto the dateoffiling
under
oi^"ppfn"r"n under lBC, the application would be barred the
eiriit" rgz of rlt" Limitation Act, except in those cases where'.in to
f;;;; ,lt" case, Section 5 of the Limitation Act may be applied
"f
condone the delay in filing such application' B
 9, Whether the time limit for initiation and comDletion of
lnsolvencv resolution nrocess under section 7(5). section 9(51
or section 1o[4] of the Code is mandatory?
Surendra Trading Company Vs. luggilal Kqmalpat lute Mills Co' Ltd. &
Ors, [Civil Appeal No. 8400 of 2017] as decided on September 79, 2017

The Hon'ble Supreme Court observed that the iudgments relied upon
by NCLAT and the principle contained therein applied while deciding
that period of 14 days within which the AA has to pass the order is not
mandatory but directory in nature and would equally apply while
interpreting proviso to sub- section (5J of Section 7, Section 9 or
sub-section (4J ofSection 10 as well and therefore held that the time of
7 days prescribed in the Code for removal ofdefects by the applicant as
directory.

10. Calculation OfNumber of Days ofProceedings

Tata Steel Ltd. Vs. Liberty House Group PTE Ltd & Ors''
[Company Appeal (AT) (lnsolvency) No. 198 of
2078] as decided on
February 4, 2019
. Liberty House Group PTE Ltd. had filed an application under
Section 60(51 ofthe Code challenging the decision ofthe Committee
of Creditors refusing to entertain the resolution plan on the ground
ofdelay.
. fne NCLAT, Principal Bench allowed the application and directed
that the number of days spent on litigation will not be counted as
part of the corporate insolvenry resolution process, and will be
gets to
deducted ftom the 270 days that the resolution professional
decide on the fate of a stressed asset'

11. Difference between Section 7 &9 ofthe Code

lnnoventive lndustries Ltd. Vs' lClCl Bank & Ors'
(Civil Appeal No. 8337-5338 of2017) as decided on August 37' 2017'
The Hon'ble SuPreme Court held that:
. the ,.h"m" oisection 7 stands in contrast with the scheme under
of a
Section 8 where an operational creditor is, on the occurrence
to the
default, to first delivei a demand notice of the unpaid debt
of the
operational debtor in the manner provided in Section-8(1)
Code. Under Section 8(2J, the corporate debtor
can' within a period
invoice
of 10 days of receipt of the demand notice or copy of the
mentioned in subsection (f), nring to the notice of the
oper9i@
//+ft
//sl-.(\
*/ \Y l
DELHI/?
AE \\9\
\3X-1'
i.r'Sl
 creditor the existence ofa dispute or the record ofthe pendency ofa
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 existence of such a dispute, the operational creditor
gets out of the clutches of the Code On the other hand, as we have
seen, in the case of a corporate debtor who commits a default of a
financial debt, the adtudicating authority has merely to see the
records ofthe information utility or other evidence produced by the
financial creditor to satisff itself that a default has occurred. It is of
no matter that the debt is disputed so long as the debt is "due" i.e.
payable unless interdicted by some law or has not yet become due
in the sense that it is payable at some future date. It is only when this
is proved to the satisfaction of the adiudicating authority that the
adjudicating authority may reject an application and not otherwise.

!2. Definition of Financial Creditor

Nikhil Mehta and Sons (HUF) & Ors. Vs. AMR Infrastructure Ltd
[Appeal [AT) (lnsolvenryJ No. 07 l2D77l as decided onluly 2L, 2077

. The Appellant (purchasersJ and Respondent (developer) had

entered into a MOU. In return for a substantial portion of the total
money paid upfront, the Respondent promised to pay monthly
"assured returns" from the time of signing of the MOU till the time
the possession was delivered to the Appellant. Respondent
defaulted on these payments following which an application under
section 7 ofthe Code was filed by the Appellant. The NCLT observed
tlat the instant case is not 'financial debt' as essential element for a
debt to qualif,/ as a 'financial debt' is that it is 'disbursed against the
consideration of time value of money'.
. However, in the appeal against the said order, NCLAT reversed
above order and observed that in the MoU signed between the
Appellant and the Respondent the Appellant were referred to as
"Iniestors": NCLAT on perusal of the financial returns of the
Respondent further observed tlut the assured returns payable by
them were shown under "commitment charges", at par with
"Interest on Loans" under the heading of "Financial Costs"' It was
also observed that this transaction had the commercial effect of
borrowing and the Appellant had disbursed the amount against the
"time con;ideration of money'" It was thus held to come un#ffi
meaningof 'financialdebt" (:Krfi
37 v\.-l
13.
of 'Financial Creditor'
Andhra Bank Vs. M/s F.M. Hammerle Textile Ltd
[Company Appeal (AT) (lnsolvency) No' 61 of2018] as decided on
luIY 13, 2018.

The NCI,AT held that:

. It is to be ascertained whether the person who claims to be

'financial creditor', has debt owed to him within the meaning of
'financial debd as defined under Section 5(8) of the Code' If it is
shown that the debt has been disbuised against "consideration for
time value of money'' then it is treated to be a'financial debt', which
may include debt as mentioned in Clause (aJ to (iJ of Section 5[8]'
Any indemnity obligation in respect of a guarantee also comes
within the meaning of'financial debt as defined under the said
provision.
. Corporate Debtor has counter-indemnity obligation in respect ot
guarantee given by itto the Appellant- 'Andhra Bank, and
accordingly Andhra Bank comes within the definition of 'financial
Creditor'as defined under Sections 5(71 r/w 5[8] ofthe Code'

14. Guarantors Under the Code .

. In Lalit Mishra & Ors. Vs. Sharon Bio Medicine Ltd' &Ors''
NCLAT ruled that the liabilities of guarantors is co-extensive
with
the borrower and it was not the intention of the legislature
to
benefit the 'Personal Guarantors' by excluding exercise of legal
remedies available in lawby the creditors, to recover
legitimate
dues by enforcing the personal guarantees, which are
independent
contract.

. In Axis Bank Ltd Vs. Edusmart Services Pvt" Ltd '

NCLAT ruled that any person who has a right to
claim payment
under the Code is supposed to file the claim, whether
*"tu2$-.
or
immature. The question as to wherher there is default

38 Kffif
Kr\-1'
$r= is
relevant. Accordingly, RP is obliged to accept the claim under
corporate guarantee, whether invoked or not.

. In Ferro Alloys Corporation Ltd' Vs. Rural ElectriJication Corporation

Ltd,
NCLAT held that without initiating corporate insolvency resolution
process against the principal borrower, the financial creditor
may initiate corporate insolvenry resolution process under section
7 against the corporate guarantors, as the creditor is also the
financial creditor qua the corporate guarantor.
The NCLAT ruling was later upheld by Supreme Court by its order
dated 1 1th February, 2019'

expression of Interest'
Briltiant Alloys Private Limited Vs. Mr. S' Raiagopal & ors'
(Petitions for Special Leave to Appeal (Q Nos' 31557/2078) as
decided on December 74, 2018'
Hon'ble Supreme Court held that:
. The withdrawal of CIRP was not allowed, though agreed to by the
operational
corporate debtor as well as the financial creditor andthe
.r.di o., Regulation 30A, Insolvency and Bankruptry Board of
",
India (lnsolvenry Resolution Process for Corporate Persons)
be permitted after
Regulaiions, 2016 states that withdrawal cannot
Regulation has to
issue of invitation for expression of interest' This
be read along with Section 12A which contains
no such stipulation'
. However, this stipulation can only be construed
as directory
depending on the facts of each case'

39
16.
expression of Interest.

2078.

Hon'ble Supreme Court held that:

. The withdrawal of CIRP was not allowed, though agleed to by

the corporate debtor as well as the financial creditor and the
operational creditor, as Regulation 30A" Insolvency and
Bankruptcy Board of India [lnsolvenry Resolution Process for
Corporate Persons) Regulations, 2016 states that withdrawal
cannot be permitted after issue of invitation for expression of
interest. This Regulation has to be read along with Section 124
which contains no such stipulation.
. However, this stipulation can only be construed as directory
depending on the facts of each case.

40
 . 42olo of firms taken to the bankruptcy tribunals belonged to the
manufacturing sector:

. Companies in the services segment. including hotels, restaurants,

transportation and communication businesses, too, face acute
financial distress, accounting for 150/o ofthe 2,162 cases before the
bankruptry tribunals.

. Banks and vendors [operational creditors) have dragged 90oln of

the 2.162 bankrupt companies:

. Resolution of 120 companies achieved

. Enabled financial creditors to recover aboutitl trillion or 430lo

ofthcrr-ad.lnjttC

. As of fune, 2079" 1293

tribunals, and out of this, 445 have exceeded the maximum 270-
davs window

Conclusion
Overall this legislation is a huge step towards the ease ofdoing
business in India and has the potential to bring business
practices in India closer to more developed markets over the
long term.

4T