BANKRUPTCY
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Manisha GBANKRUPTCY
Uploaded by
Manisha GBANKRUPTCY
ONE LINERS
1. Onerous Property: What is an 'Onerous Property'? (Asked 4
times)
n onerous property refers to a property which is burdened with covenants or conditions
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that make it unprofitable or a liability for the company. The liquidator can disclaim such
property under Section 333 of Companies Act, 2013.
2.Objectives of IBC: Mention any four objectives of the IBC,
2016. (Asked 3 times)
( i) To promote entrepreneurship.
(ii) To maximize the value of assets of interested persons.
(iii) To promote availability of credit.
(iv) To balance the interests of all stakeholders.
3.Definition: Indigent Person: Define an 'Indigent' person.
(Asked 3 times)
n indigent person is one who does not have sufficient means to pay the
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prescribed court fee when filing a suit. As per the Code of Civil Procedure, a
person is considered indigent if they are not possessed of property worth ₹1000
or more (excluding necessary wearing apparel).
4.Moratorium: What do you understand by 'Moratorium' in
Bankruptcy? (Asked 3 times)
oratorium is a period during which no legal action can be initiated or continued against
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the corporate debtor. It starts from the insolvency commencement date and ends upon
approval of the resolution plan or liquidation.
5.Information Memorandum: What is an Information
Memorandum? (Asked 2 times)
n Information Memorandum is a document prepared by the resolution professional
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containing relevant details of the corporate debtor’s financial position, assets, liabilities,
etc., to help potential resolution applicants.
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6.Going Concern: What is a going concern? (Asked 2 times)
oing concern is an accounting principle that assumes an entity will continue to operate
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for the foreseeable future and not go bankrupt or be liquidated.
7.Eligibility to Submit Resolution Plan: Who is not eligible to
submit a Resolution Plan? (Asked 2 times)
person is not eligible if they are undischarged insolvent, willful defaulters, convicted for
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an offense punishable with imprisonment for two years or more, disqualified to act as a
director, etc. (Refer to Section 29A of IBC).
8. Reorganization under IRP: What do you understand by
Reorganization in IRP? (Asked 2 times)
eorganization refers to restructuring the financial and operational structure of the
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corporate debtor through an Insolvency Resolution Process, aiming to revive it as a
going concern.
9.Preservation by Liquidator: Period for which Liquidator must
preserve books. (Asked 2 times)
s per Regulation 10 of IBBI (Liquidation Process) Regulations, the liquidator shall
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preserve the records relating to liquidation for at least 8 years after dissolution.
10. Information Utility Net Worth: Minimum net worth for an
Information Utility? (Asked 2 times)
he minimum net worth for an Information Utility must be ₹50 crore as per IBBI
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(Information Utilities) Regulations, 2017.
11. Committee of Creditors: Who gets notice of the CoC
meeting? (Asked 2 times)
otice of the CoC meeting is sent to all financial creditors forming the committee. The
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resolution professional is responsible for issuing the notice.
12. NCLT Bench Locations: City with NCLT bench? (Asked 2
times)
xamples of cities with NCLT benches include Mumbai, Delhi, Kolkata, Chennai,
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Hyderabad, Ahmedabad, etc.
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13. Appeal Timelines to SC: Max period to file appeal to SC
under IBC? (Asked 2 times)
he maximum period to file an appeal to the Supreme Court under IBC is 45 days from
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the date of the NCLAT order (Section 62 of IBC).
14. Presidency Towns Insolvency Act: Year of passing of Act?
(Asked 2 times)
he Act was passed in 1909 and dealt with insolvency procedures in Calcutta, Bombay,
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and Madras.
15. Applicant under Section 7 IBC: Who is an applicant under
Section 7 of IBC? (Asked 1 times)
financial creditor can file an application under Section 7 of the IBC for initiating CIRP
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against a corporate debtor.
16. Bankruptcy Vesting Date: When does the estate vest in
trustee? (Asked 1 times)
he bankruptcy estate vests with the bankruptcy trustee from the date of the bankruptcy
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commencement order.
17. Who Determines Claims?: Who determines amount of
claim due? (Asked 1 times)
he Insolvency Resolution Professional (IRP) or Resolution Professional (RP) verifies
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and determines the amount of claims.
18. Eligibility for IRP: When is a debtor eligible to apply?
(Asked 1 times)
debtor can apply for insolvency under Part III of IBC if the default amount is not less
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than ₹1,000 (for individuals & partnerships).
19. Chairperson Tenure IBBI: Tenure of IBBI Chairperson?
(Asked 1 times)
s per the IBBI (Amendment) Act, 2021, the tenure of the IBBI Chairperson is 5 years or
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till 65 years of age, whichever is earlier.
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20. Who Can't Initiate CIRP?: Entities barred from initiating
CIRP? (Asked 1 times)
perational creditors of corporate debtors having less than ₹1 crore in default cannot
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initiate CIRP.
21. Info Source for Security: Who provides info to IU about
secured assets? (Asked 1 times)
inancial creditors provide information to Information Utilities (IU) about secured assets,
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including charge and hypothecation details.
22. Appeal Against IBBI Order: Forum for appeal against IBBI
suspension? (Asked 1 times)
ppeal against IBBI orders can be filed before the National Company Law Appellate
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Tribunal (NCLAT).
23. Functions of IPA: What is *not* a function of an IPA?
(Asked 1 times)
roviding insolvency professional services directly is not a function of an IPA. IPAs are
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responsible for enrolling and regulating insolvency professionals.
24. Constitutionality of IBC: Case where SC upheld IBC
constitutionality? (Asked 1 times)
In the case of Swiss Ribbons Pvt. Ltd. v. Union of India (2019), the Supreme Court
upheld the constitutional validity of IBC, 2016.
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SHORT NOTES
)Committee of Creditors (CoC): Write a short note on the
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Committee of Creditors. (Asked 3 times)
Introduction:
The Committee of Creditors (CoC) is a core component of the Corporate
Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy
Code (IBC), 2016 in India.
It plays a pivotal role in the decision-making process once a corporate debtor is
admitted into insolvency proceedings. The CoC consists of financial creditors and
is empowered to decide the fate of the defaulting company.
eaning:
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The CoC is a group of financial creditors of the corporate debtor who are tasked
with evaluating and approving the resolution plan submitted by resolution
applicants. It is formed by the Interim Resolution Professional (IRP) and later
managed by the Resolution Professional (RP).
nder Section 21 of the IBC, 2016, the CoC is constituted after admission of the
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insolvency petition by the Adjudicating Authority (NCLT), and comprises all the
financial creditors of the corporate debtor.
Composition of CoC:
● Only financial creditors are part of the CoC.
● Operational creditors do not have voting rights in the CoC but may attend
meetings if their dues are more than 10% of the debt.
● In case there are no financial creditors (e.g., in MSMEs), the CoC may
consist of operational creditors.
unctions and Powers of CoC:
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1. Approve or reject resolution plans:
● A resolution plan must be approved by at least 66% voting share of the
CoC.
● The CoC can also decide to liquidate the company if no viable resolution
plan is found.
. Appoint or replace the Resolution Professional (RP):
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The CoC may continue with the Interim Resolution Professional (IRP) as RP or
appoint a new one by a majority vote.
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3. Make key decisions in CIRP:
● Approving the expenses of CIRP.
● Approving sale of assets during CIRP.
● Evaluating and negotiating resolution plans from applicants.
4. Monitoring and supervising the CIRP:
● The CoC oversees the conduct of the RP and ensures the process is
transparent and fair.
5. Approving extension of CIRP period:
● With 66% vote, CoC can approve an extension beyond 180 days (up to a
maximum of 330 days including litigation).
Features of CoC:
. Voting share based on financial exposure:
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Each member’s vote is proportional to the amount of financial debt owed to them.
. Commercial Wisdom:
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The decisions of the CoC are considered final and binding, and courts generally
do not interfere, recognizing the CoC’s "commercial wisdom."
. Confidentiality:
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The deliberations and information shared in CoC meetings are confidential and
privileged.
. Dynamic body:
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The composition of the CoC may change during CIRP if financial creditors assign
or transfer their debts.
. Non-judicial body:
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Though powerful, the CoC is not a judicial authority. It works within the framework
of IBC under the oversight of NCLT.
onclusion:
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The Committee of Creditors is the backbone of the resolution process under the
IBC, 2016. It represents the interests of the financial creditors and has the final
say on the revival or liquidation of the corporate debtor.
With the principle of “creditor in control,” the CoC ensures that decisions are
commercially viable, time-bound, and in alignment with maximizing the value of
assets.
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)Resolution Plan: What is a Resolution Plan under IBC?
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(Asked 3 times)
Introduction:
A Resolution Plan is a critical component of the Corporate Insolvency Resolution
Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016.
he main objective of a resolution plan is to revive the corporate debtor (insolvent
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company) by restructuring its debt or operations to ensure its survival as a going
concern.
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A Resolution Plan is a proposal submitted by a Resolution Applicant (which could
be any person, including creditors, investors, or promoters) to the Committee of
Creditors (CoC) during CIRP.
The plan provides details on how the corporate debtor’s debts will be paid off,
restructured, or settled in order to rescue the company from liquidation.
hedefinition of a Resolution Plan is given underSection 5(26) of the IBC,
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which states:
“Resolution Plan" means a plan proposed by any person for insolvency
resolution of the corporate debtor as a going concern in accordance with Part II.”
ey Contents of a Resolution Plan (Section 30):
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As per Section 30(2) of IBC, a resolution plan must include:
1. Payment of insolvency resolution process costs in a priority manner.
2. Repayment to operational creditors, not less than the liquidation value.
3. Management of the corporate debtor after approval.
4. Implementation and supervision of the resolution plan.
5. Feasibility and viability of the plan.
6. Declaration of future obligations and compliance with the law.
The plan must comply with rules laid down by the Insolvency and Bankruptcy
Board of India (IBBI).
rocess of Resolution Plan Approval:
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1. Invitation for Resolution Plans:
The Resolution Professional (RP) invites resolution applicants to submit their
plans.
. Submission of Resolution Plan:
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Resolution Applicants submit their plans within the prescribed deadline.
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. Examination by Resolution Professional:
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The RP examines whether the plan meets all the requirements under Section
30(2).
4. Evaluation by CoC:
● The CoC evaluates and votes on the plan.
● A plan needs 66% voting share of the CoC to be approved.
5. Approval by NCLT:
● Once approved by the CoC, the plan is submitted to the National Company
Law Tribunal (NCLT).
● If the NCLT finds the plan compliant, it approves it, making it binding on all
stakeholders.
Objectives of a Resolution Plan:
● Ensure revival and continuation of the corporate debtor as a going concern.
● Maximize the value of assets of the corporate debtor.
● Balance the interests of all stakeholders, including creditors, employees,
and shareholders.
● Avoid liquidation and destruction of asset value.
eatures of a Good Resolution Plan:
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1. Legally compliant with IBC provisions.
2. Financially viable and feasible for long-term revival.
3. Time-bound and practical implementation strategy.
4. Offers maximum recovery to creditors compared to liquidation value.
5. Ensures transparency and fairness.
onclusion:
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The Resolution Plan under IBC is the heart of the CIRP. It represents a structured
attempt to resolve insolvency and protect the interests of creditors while giving
the corporate debtor a chance to survive.
When successfully implemented, it helps preserve jobs, maintain business
continuity, and restore economic value to the system—fulfilling the spirit and
purpose of the IBC
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)Voluntary Liquidation: Write a note on voluntary liquidation
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of corporate persons
Introduction:
oluntary liquidation refers to the process by which a solvent company is wound
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up voluntarily by its members or stakeholders when it no longer wishes to
continue its business operations, even though it is capable of paying its debts.
nder the Insolvency and Bankruptcy Code (IBC), 2016, this process is codified
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in Section 59 of Chapter V of Part II.
eaning:
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Voluntary liquidation is a self-initiated winding-up process undertaken by a
company that has no debt or can pay its debts in full, and chooses to close down
its operations in an orderly manner.
It is not triggered due to insolvency, but by a strategic business decision, such as
restructuring, change in business plans, or non-viability.
Eligibility for Voluntary Liquidation (As per Section 59 of IBC):
A corporate person (company, LLP, etc.) can opt for voluntary liquidation if:
1. It has not committed any default.
2. It is solvent (able to pay off its debts).
3. A declaration of solvency is made by a majority of directors/partners.
4. The decision to liquidate is approved by:
● Shareholders (Special Resolution), or
● Creditors (if there are debts), with two-thirds in value supporting the
resolution.
Steps Involved in Voluntary Liquidation Process:
. Declaration of Solvency:
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Majority of directors file a declaration that:
● Company has no debt or will pay debts in full from proceeds of assets.
● The company is not being liquidated to defraud anyone.
2. Approval by Members:
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● A special resolution is passed within 4 weeks of the declaration to approve
voluntary liquidation.
● If the company owes any debt, approval of creditors (representing 2/3rd in
value) is required.
. Appointment of Liquidator:
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A liquidator is appointed to manage the liquidation process, sell assets, and settle
liabilities.
. Public Announcement:
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The liquidator makes a public announcement inviting claims from creditors.
. Verification of Claims & Distribution:
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The liquidator verifies claims, prepares a list of stakeholders, and distributes
proceeds accordingly.
. Final Report and Application to NCLT:
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After liquidation, the liquidator prepares a final report and submits it to the
National Company Law Tribunal (NCLT) for dissolution.
. Dissolution Order:
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Upon satisfaction, NCLT passes a dissolution order, and the company ceases to
exist.
Conclusion:
oluntary liquidation under IBC, 2016 provides a structured and efficient exit route
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for solvent companies that wish to discontinue their operations.
It encourages companies to close down in a legally compliant and
creditor-friendly manner, thereby strengthening ease of doing business and
corporate governance standards in India.
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)Fast Track CIRP: What do you understand by Fast Track
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CIRP? (Asked 2 times)
Introduction:
The Fast Track Corporate Insolvency Resolution Process (Fast Track CIRP) is a
simplified and time-bound process introduced under the Insolvency and
Bankruptcy Code (IBC), 2016 to resolve insolvency of small or less complex
corporate entities in a quicker manner compared to the regular CIRP.
eaning:
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Fast Track CIRP is a special resolution process under Section 55 to 58 of the
IBC, aimed at completing the entire insolvency resolution within 90 days,
extendable by a maximum of 45 days, making the total duration not more than
135 days.
It is designed to reduce the cost and time involved in insolvency resolution for
companies with simpler operations, lower debt levels, or limited stakeholders.
ligible Entities (As per Section 55(2) and IBBI (Fast Track Process)
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Regulations, 2017):
The Fast Track CIRP applies to corporate debtors:
1. With assets and income below a notified threshold.
2. With class of creditors or amount of debt below a specified limit.
3. Other categories as notified by the Central Government.
As per current IBBI notification, Fast Track CIRP is available for:
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● mall companies (as defined under Companies Act, 2013).
● Start-ups (other than partnership firms).
● Unlisted companies with total assets not exceeding Rs. 1 crore in the
financial year preceding insolvency filing.
Procedure of Fast Track CIRP:
. Initiation:
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The application can be filed by a financial creditor, operational creditor, or the
corporate debtor itself before the Adjudicating Authority (NCLT).
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. Admission and Appointment of IRP:
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If the application is complete, NCLT admits it and appoints an Interim Resolution
Professional (IRP).
. Public Announcement:
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IRP makes a public announcement and calls for claims from creditors.
. Constitution of CoC:
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The Committee of Creditors (CoC) is formed by the IRP.
. Preparation of Information Memorandum:
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IRP prepares an information memorandum and invites resolution plans.
6. Approval of Resolution Plan:
● CoC approves the best resolution plan by a 66% majority.
● The approved plan is submitted to the NCLT for final approval.
. Time Limit:
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The entire process is to be completed within 90 days, with a one-time extension
of 45 days, only if necessary and approved by the NCLT.
Salient Features:
● horter timelines compared to regular CIRP (90 days vs. 180 days).
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● Lower procedural burden.
● Efficient resolution mechanism for smaller corporate entities.
● Designed for early-stage intervention and smoother recovery.
onclusion:
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Fast Track CIRP is an innovative feature of the IBC designed to provide speedy
insolvency resolution for small companies and start-ups. It promotes business
efficiency, creditor satisfaction, and economic stability, thereby strengthening the
overall insolvency ecosystem in India.
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)Registered Valuers: Write a short note on Registered
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Valuers. (Asked 2 times)
Introduction:
Registered Valuers play a crucial role in the insolvency resolution and liquidation
processes under the IBC, 2016.
hey are responsible for assessing and estimating the fair value and liquidation
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value of the assets of the corporate debtor, which forms the basis for informed
decision-making by the Committee of Creditors (CoC) and Resolution
Professionals (RPs).
heir functioning is regulated by the Companies (Registered Valuers and
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Valuation) Rules, 2017 and supervised by the Insolvency and Bankruptcy Board
of India (IBBI).
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A Registered Valuer is a professional who is registered with the IBBI and is
qualified to value assets such as land, buildings, plant and machinery, securities,
and financial assets for insolvency proceedings, mergers, acquisitions, and other
corporate actions.
hey provide independent, impartial, and credible valuations essential for
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decision-making during corporate insolvency resolution and liquidation.
Legal Provisions:
● S ection 247 of the Companies Act, 2013 provides for the regulation of
valuers.
● Section 35(1)(c) and Section 46(2) of IBC deal with the requirement of
valuation by Registered Valuers during liquidation and CIRP.
● Companies (Registered Valuers and Valuation) Rules, 2017 set the
eligibility criteria, qualifications, and conduct norms.
ole of Registered Valuers in CIRP:
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1. Appointment:
The Resolution Professional (RP) appoints two registered valuers within 7 days of
appointment (as per IBBI (CIRP) Regulations, 2016).
. Determination of Values:
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They estimate:
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● F air Value – The estimated realizable value of the corporate debtor’s
assets if sold in a normal course of business.
● Liquidation Value – The estimated realizable value if the debtor were to be
liquidated on the insolvency commencement date.
. Submission of Report:
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Valuers submit their valuation reports to the RP, who averages the two values and
uses them for preparing the Information Memorandum and inviting resolution
plans.
. Support in Decision-making:
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These valuations help the CoC to:
● Evaluate resolution plans.
● Decide on continuing CIRP or liquidating the company.
● Compare plan value with liquidation value.
Eligibility and Qualifications:
To become a Registered Valuer:
● The individual must be a member of a Registered Valuer Organisation
(RVO).
● Should possess specific qualifications and experience in the chosen asset
class.
● Must clear the Valuation Examination conducted by IBBI.
● Must register with the IBBI as a valuer.
Functions and Responsibilities:
. Conduct valuations in accordance with internationally accepted valuation
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standards.
2. Maintain integrity, objectivity, and independence.
3. Submit unbiased and reasoned reports.
4. Ensure confidentiality and transparency.
5. Avoid conflict of interest or misrepresentation
onclusion:
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Registered Valuers are essential stakeholders in the insolvency ecosystem. Their
professional and credible valuation reports help ensure transparency, objectivity,
and efficiency in the insolvency resolution and liquidation processes under the
IBC.
Their role becomes even more significant in maximizing the value of assets and
protecting the interests of creditors and other stakeholders.
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6)Fresh Start Insolvency Resolution Process.
Introduction
The Fresh Start Process is a part of the Insolvency and Bankruptcy Code (IBC),
2016, specifically dealt with under Part III of the Code, which focuses on the
insolvency and bankruptcy of individuals and partnership firms.
his process is a welfare-oriented mechanism designed to offer an opportunity for
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debt-ridden individuals with negligible assets and income to obtain a complete
waiver of eligible debts and make a fresh financial start.
eaning of Fresh Start Process
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The Fresh Start Process is a one-time insolvency resolution mechanism available
to eligible individuals who are unable to pay their debts due to low income and
minimal assets.
It allows such individuals to discharge their qualifying debts without facing long
and complex legal proceedings or liquidation of assets. The objective is to ensure
financial inclusion and give the poor a second chance.
ligibility Criteria
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As per Section 80 of the IBC, 2016, an individual is eligible for a fresh start if they
meet the following conditions:
1. Annual Income: Not exceeding Rs. 60,000
2. Total Assets: Not exceeding Rs. 20,000
3. Total Debt: Not exceeding Rs. 35,000
4. Not an Undischarged Bankrupt
5. No Ongoing Fresh Start Process in the last 12 months
6. No Prior Fresh Start Discharge within the last 12 months
Procedure of Fresh Start Process
The process involves the following steps:
1. Application (Section 81)
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● T he debtor or a Resolution Professional (RP) on behalf of the debtor may
file an application to the Debt Recovery Tribunal (DRT) for initiating the
fresh start process.
● The application must contain personal, financial, and debt-related details
along with supporting documents.
2. Appointment of Resolution Professional (Section 82)
● Within 7 days, the DRT either accepts or rejects the application.
● If accepted, a Resolution Professional is appointed to oversee the process.
3. Objections by Creditors (Section 84)
● The RP invites claims from creditors and prepares a list of qualifying debts.
● Creditors may raise objections to the inclusion or exclusion of their debts.
4. Evaluation and Recommendation
● The RP evaluates all claims, considers objections, and submits a report
with recommendations to the DRT within 14 days of the public notice.
5. Order by the DRT (Section 85)
● The DRT passes a final discharge order for the qualifying debts if it is
satisfied with the RP’s report.
● Once the order is passed, the debtor is discharged from liability for those
debts.
Features of the Fresh Start Process
. Time-bound process: Generally completed within 180 days.
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2. Debtor-friendly: No complex litigation or asset seizure.
3. Limited scope: Only for economically weaker individuals.
4. One-time relief: Debtor cannot apply again for the process within 12 months of
discharge.
5. Non-applicability to secured debts: Only unsecured qualifying debts are
covered.
Conclusion
he Fresh Start Insolvency Resolution Process reflects the humanitarian aspect
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of the IBC by recognizing the challenges faced by individuals in poverty.
It enables them to come out of the debt trap and contribute productively to the
economy. However, the process is still underutilized in India due to lack of
awareness and procedural complexities.
Greater public awareness and simplified access can make this beneficial tool
more impactful.
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)Functions of IBBI: Write a short note on the functions of the
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IBBI. (Asked 2 times)
Introduction
he Insolvency and Bankruptcy Board of India (IBBI) is the regulatory body
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established under the Insolvency and Bankruptcy Code (IBC), 2016.
It plays a central role in regulating and overseeing the insolvency and bankruptcy
proceedings in India, covering corporate entities, individuals, and partnership
firms.
eaning of IBBI
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The IBBI is a statutory body constituted on 1st October 2016 under Section
188 of the IBC, 2016. It functions under the administrative control of the
Ministry of Corporate Affairs (MCA).
The Board ensures transparency,
accountability, and efficiency in the insolvency resolution process through
its regulatory powers and policy-making functions.
Functions of IBBI (Section 196)
The IBBI performs several regulatory and developmental functions:
1. Regulation and Registration
● Registers and regulates Insolvency Professionals (IPs), Insolvency
Professional Agencies (IPAs), and Information Utilities (IUs).
● Specifies eligibility, code of conduct, and performance standards for these
entities.
2. Framing Regulations
● Frames and enforces regulations, rules, and guidelines related to
insolvency resolution, liquidation, and bankruptcy processes.
● Ensures consistency with the IBC.
3. Oversight and Supervision
Monitors the performance of:
● Insolvency professionals
● Insolvency professional agencies
● Information utilities
Conducts inspections and investigations to ensure compliance.
4. Data and Information Management
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● C ollects, maintains, and disseminates data related to insolvency and
bankruptcy.
● Ensures transparency in the insolvency ecosystem through regular
publications and reports.
5. Promoting Professional Development
Promotes the development of the insolvency profession through:
● Training and capacity building
● Continuing education for professionals
6. Laying down Standards
● Specifies standards of performance for service providers.
● Ensures ethical conduct and accountability.
7. Grievance Redressal
● Addresses complaints and grievances against insolvency professionals and
agencies.
● Take disciplinary action where necessary.
8. Advising Government
Advises the Central Government on policy matters related to insolvency,
liquidation, and bankruptcy.
. Conducting Research
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Undertakes and encourages research and public awareness programs in the field
of insolvency and bankruptcy.
onclusion
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The IBBI is the pillar of the insolvency framework in India, ensuring effective
implementation of the IBC. By regulating professionals and maintaining ethical
standards, the Board plays a vital role in achieving the objectives of creditor
protection, business revival, and economic stability. Its continuous evolution is
crucial for a robust and transparent insolvency resolution ecosystem.
)Order of Priority in Liquidation: Write a note on the priority
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of liquidation proceeds under IBC. (Asked 2 times)
Introduction
The order of priority in liquidation refers to the manner in which the proceeds from
the sale of a company's assets are distributed among its stakeholders during the
liquidation process.
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his is governed by Section 53 of the Insolvency and Bankruptcy Code (IBC),
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2016. It ensures a fair, transparent, and legally structured distribution based on
the nature and seniority of claims.
eaning of Liquidation
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Liquidation is the process of winding up a company’s affairs by selling its assets
to pay off liabilities and distribute the surplus (if any) among stakeholders.
When a corporate insolvency resolution process (CIRP) fails, the adjudicating
authority (NCLT) may pass an order for liquidation.
Order of Priority (Waterfall Mechanism) – Section 53 of IBC, 2016
The proceeds from the liquidation estate are distributed in the following order:
1. Insolvency Resolution Process Costs and Liquidation Costs
● These are paid in full first before any other claims.
● Includes fees of insolvency professionals, cost of running the business
during CIRP, and legal expenses.
. Secured Creditors (who relinquish security) and Workmen’s Dues (for the
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preceding 24 months)
● S ecured creditors who choose to relinquish their security interest fall in this
category.
● Workmen’s dues for the 24 months preceding liquidation commencement
date are also paid here.
. Wages and Unpaid Dues to Employees (other than workmen)
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Salaries and wages owed to employees (excluding workmen) for the 12 months
preceding the liquidation.
. Financial Debts owed to Unsecured Creditors
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Includes all unsecured financial creditors, such as those who have provided loans
without collateral.
5. Dues to Government and Remaining Secured Creditors
● Any unpaid government dues (taxes, penalties, etc.) for the two years
preceding liquidation.
● Also includes secured creditors who enforce their security outside
liquidation and have a shortfall.
. Any Remaining Debts and Dues
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Covers all residual claims not addressed in the above categories.
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. Preference Shareholders
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Holders of preference shares are paid from the remaining proceeds after all
liabilities are cleared.
. Equity Shareholders and Partner
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Lastly, equity shareholders or partners of the corporate debtor receive whatever
remains.
Important Points to Note
● T he liquidator is responsible for distributing assets as per the waterfall
mechanism.
● Secured creditors have the option to enforce their security interest outside
the liquidation process under Section 52.
● Any contractual arrangements that disrupt this order are overridden by
Section 53.
Conclusion
he order of priority under Section 53 of IBC, 2016 reflects the principle of
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equitable and just distribution. It safeguards the interests of workmen and
employees, ensures repayment of secured and unsecured creditors, and
maintains the sanctity of public dues.
This waterfall mechanism provides clarity and consistency in the liquidation
process and enhances investor confidence in the insolvency regime.
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) IRP vs RP: Difference between Interim Resolution
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Professional and Resolution Professional. (Asked 1 times)
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ANSWER IN DETAILS
)Corporate Insolvency Resolution Process (CIRP): Write a
1
detailed note on CIRP as described under IBC. (Asked 4
times)
Introduction
The Corporate Insolvency Resolution Process (CIRP) is a legal mechanism
introduced under the Insolvency and Bankruptcy Code (IBC), 2016.
It provides a structured, time-bound framework for the revival or liquidation of
financially distressed companies. The primary aim is to maximize the value of
assets, ensure creditor protection, and promote entrepreneurship and availability
of credit.
eaning of CIRP
M
CIRP is the process through which the financial health of a corporate debtor (i.e.,
a company) is assessed to determine whether it can be revived through a
resolution plan or needs to be liquidated.
It involves creditors, insolvency professionals, and the adjudicating authority
(NCLT) and must be completed within a strict time frame.
Initiation of CIRP (Section 6 to 11 of IBC)
CIRP can be initiated by:
1. Financial Creditors – under Section 7
2. Operational Creditors – under Section 9
3. Corporate Debtor itself – under Section 10
A
● pplication is filed with the National Company Law Tribunal (NCLT).
● Once admitted, a moratorium is declared and an Insolvency Resolution
Professional (IRP) is appointed.
Time Frame
● The process must be completed within 180 days (can be extended by 90
days).
● In no case shall CIRP exceed 330 days (including litigation time), as per
Section 12(3).
Key Steps of CIRP
22
1. Admission and Moratorium (Section 13 & 14)
● NCLT admits the application.
● A moratorium is imposed: no suits, recovery, or enforcement actions
against the debtor during CIRP.
2. Appointment of IRP (Section 16)
● IRP takes control of the management of the corporate debtor.
● Collects information, forms the Committee of Creditors (CoC).
. Public Announcement (Section 15)
3
IRP makes a public announcement to invite claims from creditors.
4. Verification and Constitution of CoC (Section 18 & 21)
● IRP verifies claims.
● Forms the Committee of Creditors, consisting of financial creditors.
5. Meetings of CoC (Section 22)
● CoC may replace IRP with a Resolution Professional (RP).
● All major decisions require 66% voting share of CoC.
6. Preparation and Approval of Resolution Plan (Section 30–31)
● RP invites and evaluates resolution plans from potential investors.
● The approved plan is submitted to NCLT for final approval.
7. Role of NCLT
● NCLT may approve or reject the resolution plan.
● On approval, the plan becomes binding on all stakeholders.
Outcomes of CIRP
. Successful Resolution:Business is revived as per approved resolution plan.
1
2. Liquidation:If no plan is approved within the time limit or the plan is rejected,
liquidation proceedings are initiated under Chapter III of IBC.
Key Features of CIRP
● ime-bound process ensures speedy resolution.
T
● Ensures creditor-in-control rather than debtor-in-possession.
● Promotes maximization of asset value and revival over liquidation.
● Protects the rights of operational and financial creditors.
onclusion
C
The Corporate Insolvency Resolution Process (CIRP) under IBC, 2016 is a
revolutionary step in India’s insolvency framework.
23
It strengthens the financial system by providing a clear and efficient method to
resolve insolvency, recover dues, and preserve business value.
Though challenges remain in implementation, CIRP has significantly improved
the recovery and restructuring environment in India.
)Resolution Plan: Critically analyze provisions related to
2
nature and contents of a Resolution Plan. (Asked 3 times)
Introduction
A Resolution Plan is the most crucial part of the Corporate Insolvency Resolution
Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016.
It is a proposal submitted by a resolution applicant to revive the corporate debtor
by restructuring its liabilities and ensuring value maximization of assets.
he nature and contents of the resolution plan are governed primarily by Section
T
30 of IBC and Regulation 37 of the IBBI (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016.
ature of Resolution Plan
N
1. Commercial Proposal for Revival
A resolution plan is a strategic proposal to revive a financially stressed corporate
debtor, either by restructuring debt, changing management, or selling assets.
. Binding Document
2
Once approved by the Committee of Creditors (CoC) and NCLT, the plan
becomes binding on all stakeholders, including creditors, employees, government
authorities, etc.
. Confidentiality and Integrity
3
The process ensures confidentiality and must maintain fairness and transparency.
. Subject to Approval
4
The plan has no legal force until approved by CoC (with 66% vote) and the
Adjudicating Authority (NCLT).
Contents of a Resolution Plan – Section 30(2)
The plan must mandatorily include the following provisions:
24
. Payment of Insolvency Resolution Process Costs
1
These costs are to be paid in priority before any other payments.
. Payment to Operational Creditors
2
Operational creditors must be paid an amount not less than what they would
receive in liquidation.
. Payment to Dissenting Financial Creditors
3
Dissenting creditors must be paid at least the liquidation value of their claims.
. Management of Affairs
4
The plan should contain details about how the affairs of the corporate debtor will
be managed after approval.
. Implementation and Supervision
5
The plan must provide for the implementation and supervision mechanism.
. Compliance with Laws
6
The plan must comply with provisions of the law, including tax, labor,
environmental, and company laws.
dditional Contents under Regulation 37 of CIRP Regulations
A
A resolution plan may include, among other things:
● Transfer of all or part of the assets to another person
● Sale of all or part of the business
● Change in capital structure
● Merger or amalgamation
● Reduction of liabilities, debt to equity conversion
● Fresh issue of shares or securities
Approval Process
● valuated by the Resolution Professional (RP).
E
● Approved by 66% of CoC members.
● Then submitted to the NCLT for final approval.
● Once approved, the plan becomes binding on all parties involved.
Critical Analysis
Strengths:
● Ensures structured revival of distressed businesses.
● Prioritizes interests of operational creditors and workmen.
● Encourages competitive bidding through transparent evaluation.
25
● Ensures judicial oversight through NCLT.
Weaknesses:
● Subject to delays due to litigation, despite time-bound provisions.
● Some resolution applicants misuse provisions for acquiring assets at a
discount.
● Liquidation value floor for operational creditors sometimes leads to minimal
recovery.
● Risk of conflict of interest in CoC decisions, especially when major creditors
dominate.
onclusion
C
The provisions related to the nature and contents of a resolution plan are detailed
and comprehensive under the IBC framework. They aim to ensure revival over
liquidation while protecting the rights of all stakeholders.
owever, there is a need for stricter compliance and improved oversight to avoid
H
misuse and ensure genuine resolution. With continual amendments and judicial
interpretation, the effectiveness of resolution plans is evolving to meet the IBC’s
core objectives of value maximization, time-bound recovery, and credit discipline.
)Adjudicating and Appellate Authorities (NCLT, NCLAT, SC):
3
Detailed note on their roles, powers, and functions under IBC.
(Asked 3 times)
Introduction:
The Insolvency and Bankruptcy Code (IBC), 2016 provides a time-bound
framework for insolvency resolution of corporate persons, partnerships, and
individuals. To ensure effective implementation, the Code designates specific
authorities to adjudicate and hear appeals on insolvency matters — primarily the
NCLT, NCLAT, and the Supreme Court.
. National Company Law Tribunal (NCLT)
1
[Section 60 of IBC]
Role:
● NCLT is the adjudicating authority for insolvency resolution and liquidation
of corporate persons, including LLPs.
Key Powers and Functions:
26
● Initiation of CIRP: Under Sections 7, 9, and 10, NCLT admits or rejects
applications filed by financial creditors, operational creditors, or corporate
debtors.
● Moratorium Order: NCLT declares a moratorium under Section 14 to halt
all legal proceedings and actions against the corporate debtor.
● Appointment of IRP/RP: Appoints interim resolution professional (IRP)
and later confirms or replaces him as resolution professional (RP).
● Approval of Resolution Plan: Examines and approves/rejects the plan
submitted by CoC under Section 31.
● Liquidation Orders: Orders liquidation if no resolution plan is approved
within the prescribed period.
● Fraudulent Transactions:Has jurisdiction to look into preferential,
undervalued, extortionate, or fraudulent transactions (Sections 43–51).
● Fast Track Insolvency:Adjudicates cases under fast track process for
certain categories of debtors.
. National Company Law Appellate Tribunal (NCLAT)
2
[Section 61 of IBC]
Role:
● NCLAT is the appellate authority to hear appeals against orders passed by
the NCLT under the Code.
Key Powers and Functions:
● Appeals from NCLT: Can be filed by any aggrieved party within 30 days
(extendable by 15 days) from the date of NCLT’s order.
● Appealable Matters: Includes rejection or admission of CIRP,
approval/rejection of resolution plan, liquidation orders, etc.
● Powers of Civil Court: Has powers of a civil court and can regulate its own
procedure.
● Binding Precedents: NCLAT decisions are binding on all NCLTs unless
overturned by the Supreme Court.
. Supreme Court of India
3
[Section 62 of IBC]
ole:
R
The apex judicial body to hear appeals from the NCLAT on questions of law.
Key Powers and Functions:
● Appeals against NCLAT orders: Appeal must be filed within 45 days
(extendable by 15 days).
27
● F inal Interpreter of Law: Supreme Court’s interpretation is binding on all
lower authorities under the Code.
● Ensures Constitutionality: Deals with cases questioning constitutional
validity of IBC provisions.
● Writ Jurisdiction: Under Article 32 (for fundamental rights) and appellate
jurisdiction under Article 136.
onclusion:
C
The tripartite hierarchy of NCLT → NCLAT → Supreme Court ensures a
streamlined and efficient adjudicatory mechanism under the IBC.
Each authority plays a pivotal role in ensuring justice, transparency, and speedy
resolution of insolvency matters, contributing to the Code’s objective of
maximizing asset value and promoting entrepreneurship.
)Insolvency Resolution Professional (IRP/RP):
4
Qualifications, roles, powers, and responsibilities of an IRP.
(Asked 2 times)
Introduction:
The Insolvency and Bankruptcy Code (IBC), 2016 provides for the appointment of
a Resolution Professional (initially as IRP, and later as RP) to manage the affairs
of the corporate debtor during the Corporate Insolvency Resolution Process
(CIRP).
The IRP/RP plays a central role in steering the resolution process in a time-bound
and fair manner.
1. Qualifications of IRP/RP:
● M ust be a qualified Insolvency Professional (IP) registered with the
Insolvency and Bankruptcy Board of India (IBBI).
● Should not be a relative or related party of the corporate debtor.
● Must not have disciplinary proceedings pending against them.
● Should not be disqualified under any provision of the IBC or by IBBI
regulations.
● Should possess adequate experience and expertise in managing financial
and legal aspects of insolvency.
2. Appointment Process:
● IRP is appointed by NCLT within 14 days of admission of the insolvency
application.
28
F
● inancial creditors propose the IRP; NCLT confirms the appointment.
● Within 30 days, the Committee of Creditors (CoC) may either confirm IRP
as the RP or replace him.
3. Roles and Responsibilities of IRP:
● P ublic Announcement:Make a public announcement of the CIRP within 3
days of appointment.
● Management of Affairs:Take over control and custody of the corporate
debtor’s assets, records, and operations.
● Collection of Claims:Receive and verify claims from creditors.
● Formation of CoC:Constitute the Committee of Creditors based on
verified claims.
● Interim Management: Manage operations of the corporate debtor as a
going concern.
● Report to NCLT:Submit reports, application for extension, or any
non-cooperation by debtor.
. Powers and Duties of Resolution Professional (RP):
4
[After IRP is confirmed or replaced by RP]
A. Powers:
● Exercise control over the assets, records, and operations of the corporate
debtor.
● Appoint professionals like valuers, legal consultants, accountants.
● Access books of accounts and financial information of the debtor and
related parties.
● File applications for avoidance of transactions (preferential, undervalued,
fraudulent, etc.).
● Convene and conduct meetings of the Committee of Creditors (CoC).
● Represent the debtor in legal proceedings.
B. Duties:
● Prepare Information Memorandum (IM): To enable resolution applicants
to submit resolution plans.
● Invite Resolution Plans:From eligible applicants as per Section 25(2)(h).
● Examine Resolution Plans:For compliance under Section 30(2).
● Present Plan to CoC:Only compliant plans are placed for CoC’s approval.
● Ensure CIRP Completes in Time:Within 180 days (extendable up to 330
days including litigation delays).
onclusion:
C
The IRP/RP serves as the backbone of the CIRP under IBC. Their neutrality,
professionalism, and commitment to time-bound resolution are crucial to
29
alancing the interests of all stakeholders and ensuring effective insolvency
b
resolution.
)Pioneer Urban Land case: SC judgment upholding
5
constitutional validity of IBC amendments. (Asked 2 times)
Introduction:
The Supreme Court judgment in Pioneer Urban Land and Infrastructure Ltd. v.
Union of India (2019) is a landmark case where the Court upheld the
constitutional validity of the 2018 amendment to the IBC which recognized
homebuyers as financial creditors.
This decision played a critical role in protecting the interests of real estate
allottees under insolvency proceedings.
Brief Facts:
● Several real estate companies, including Pioneer Urban, challenged the
constitutional validity of the IBC (Second Amendment) Act, 2018.
● The amendment classified homebuyers (allottees) as financial creditors
under Section 5(8)(f) of the IBC.
● This allowed homebuyers to initiate Corporate Insolvency Resolution
Process (CIRP) against builders for delayed possession or refund.
● Builders argued that this would lead to misuse of IBC by homebuyers and
hamper real estate businesses.
● They also claimed the amendment was arbitrary, excessive, and
unconstitutional.
Background:
● Prior to the 2018 amendment, homebuyers were not expressly treated as
financial creditors under IBC.
● Many real estate developers challenged the Insolvency and Bankruptcy
Code (Second Amendment) Act, 2018, arguing that:
● It was arbitrary.
● It violated Article 14 (Right to Equality) and Article 19(1)(g) (Right
to practice any profession or business).
● It allowed homebuyers to misuse the Code as a recovery tool.
ey Issues Before the Court:
K
1. Whether homebuyers can be treated as ‘financial creditors’.
2. Whether the amendment violates Articles 14 and 19(1)(g) of the Constitution.
30
3. Whether real estate developers are being unfairly targeted under IBC.
Supreme Court's Observations and Findings:
1. Homebuyers as Financial Creditors (Section 5(8)(f))
● The Court held that amounts raised from allottees under real estate
projects are in the nature of “borrowing”.
● Since allottees pay in advance, they are creditors who expect the delivery
of property, just as lenders expect repayment.
● Therefore, they are financial creditors under the extended scope of Section
5(8)(f) of IBC.
2. Legislative Competence and Non-Arbitrariness
● The amendment was held to be within the legislative competence of
Parliament.
● It was neither arbitrary nor discriminatory, as homebuyers are a distinct
class of creditors with legitimate financial claims.
3. Safeguards Against Misuse
● The Court upheld the Regulations by IBBI, stating that the RP and CoC act
as filters.
● Just because a few allottees file an application does not mean the
developer will automatically go into insolvency.
● NCLT has the power to reject applications filed with malicious intent.
4. No Violation of Article 19(1)(g)
● The amendment does not prevent real estate developers from carrying on
their business.
● It only regulates the business in case of default, in public interest.
Significance of the Judgment:
1. Constitutional Validity Upheld: Gave legitimacy to the inclusion of
homebuyers as financial creditors.
2. Protection to Allottees: Empowered homebuyers to initiate CIRP against
errant builders.
3. Boost to Consumer Confidence: Ensured better accountability in the real
estate sector.
4. Strengthened IBC: Upheld the Code’s objective of balancing interests of all
stakeholders.
onclusion:
C
The Pioneer Urban judgment reinforced the constitutional strength of the IBC and
protected the rights of homebuyers without disrupting the business environment.
31
It upheld the principle that real estate allottees are not mere consumers, but
financial participants who deserve protection under insolvency law.
)Withdrawal of Applications under Section 9: Can an
6
operational creditor withdraw an application under section 9
post compromise? (Asked 2 times)
Introduction:
Section 9 of the IBC allows an operational creditor to initiate the Corporate
Insolvency Resolution Process (CIRP) against a corporate debtor. However, if the
parties reach a compromise or settlement after filing, the operational creditor may
wish to withdraw the application.
Legal Provision: Section 12A – Withdrawal of Application
● Introduced by the Insolvency and Bankruptcy (Second Amendment) Act,
2018.
● Provides that after admission of CIRP, the application can be withdrawn
only with 90% approval of the Committee of Creditors (CoC).
● However, before admission, the applicant can approach NCLT for
withdrawal.
rocedure Based on Stage:
P
1. Before Admission:
● The operational creditor can file a simple withdrawal application before
NCLT.
● NCLT usually allows withdrawal in light of the amicable settlement.
. After Admission:
2
Must follow the process under Section 12A.
Requires:
● Filing a withdrawal application by the applicant.
● Approval by 90% voting share of the CoC.
● Application filed through the Resolution Professional.
● NCLT must approve the withdrawal.
Key Judicial Precedents:
32
1. Lokhandwala Kataria Construction v. Nisus Finance (SC, 2017):
● The Supreme Court used its powers under Article 142 to allow withdrawal
post-admission due to settlement.
● Led to the introduction of Section 12A for similar relief in future cases.
2. Brilliant Alloys Pvt. Ltd. v. Mr. S. Rajagopal (SC, 2018):
● SC clarified that Regulation 30A (which allows withdrawal before
admission) is directory, not mandatory.
● NCLT can permit withdrawal post-admission in exceptional circumstances.
onclusion:
C
Yes, an operational creditor can withdraw an application under Section 9 after a
compromise or settlement. However, if the application is already admitted,
withdrawal is only allowed through Section 12A, with CoC approval and NCLT’s
permission. This ensures the insolvency process is not misused and promotes
genuine settlements.
)Jurisdiction and Powers of NCLT/NCLAT: Explain powers,
7
scope, and jurisdiction under IBC with SC judgments. (Asked
2 times)
Introduction:
The National Company Law Tribunal (NCLT) and the National Company Law
Appellate Tribunal (NCLAT) are the adjudicating and appellate authorities under
the Insolvency and Bankruptcy Code, 2016.
hey have been entrusted with significant powers to ensure a time-bound and
T
effective insolvency resolution process.
1. Powers and Jurisdiction of NCLT:
. Statutory Basis:
A
Section 60 of IBC: NCLT is the Adjudicating Authority for:
● Corporate Insolvency Resolution Process (CIRP)
● Liquidation of corporate persons
● Fast-track insolvency
● Voluntary liquidation
● Insolvency of personal guarantors (as notified)
B. Key Powers of NCLT:
33
. Admission/Rejection of Insolvency Applications under Sections 7, 9, and 10.
1
2. Appointment of IRP/RP and oversight of CIRP.
3. Approval or rejection of Resolution Plans (Section 31).
4. Orders for liquidation (Section 33).
5. Jurisdiction over fraudulent, preferential, undervalued, or extortionate
transactions (Sections 43–51, 66).
6. Approval of withdrawal applications (Section 12A).
7. Jurisdiction over the insolvency of personal guarantors (as per SC judgment in
Lalit Kumar Jain v. Union of India, 2021).
. Exclusive Jurisdiction:
C
Civil courts have no jurisdiction over matters where NCLT/NCLAT is empowered
under the Code (Section 63).
. Powers and Jurisdiction of NCLAT:
2
A. Statutory Basis:
Section 61 of IBC: Appeals can be filed with NCLAT against NCLT orders.
. Scope of Appeals:
B
Appeals lie against:
● Admission or rejection of insolvency application.
● Approval or rejection of resolution plans.
● Liquidation orders.
● Orders relating to avoidance transactions.
. Time-bound Process:
C
Appeal must be filed within 30 days, extendable by 15 days with sufficient cause.
3. Role of the Supreme Court:
● The Supreme Court is the final appellate authority under Section 62 of IBC
on questions of law.
● The SC has played a vital role in defining and refining the powers of
NCLT/NCLAT.
4. Key Supreme Court Judgments:
A. Swiss Ribbons v. Union of India (2019):
● Upheld constitutional validity of IBC.
● Clarified that NCLT’s role is judicial, not administrative.
● Highlighted NCLT’s role in ensuring maximization of value of assets and
balancing interests.
B. Essar Steel India Ltd. v. Satish Kumar Gupta (2019):
34
● H eld that NCLT can only check if a resolution plan meets requirements
under Section 30(2).
● Commercial wisdom of the CoC is non-justiciable beyond these
parameters.
● NCLAT cannot modify the plan based on fairness; only legality is
reviewable.
. ArcelorMittal v. Satish Kumar Gupta (2018):
C
Clarified NCLT's power to assess ineligibility under Section 29A of resolution
applicants.
. Lalit Kumar Jain v. Union of India (2021):
D
Held that NCLT has jurisdiction over personal guarantors to corporate debtors.
5. Limitations on Powers:
● NCLT cannot adjudicate contractual disputes unless they directly relate to
insolvency proceedings.
● Commercial decisions of CoC are not subject to judicial review, except for
violation of law.
onclusion:
C
NCLT and NCLAT are pivotal in India’s insolvency regime. They possess
wide-ranging powers to ensure speedy resolution and protect the interests of all
stakeholders.
The Supreme Court has reinforced their role while setting boundaries to prevent
overreach, thereby ensuring that the objectives of IBC – resolution, maximization
of value, and balancing of interests – are met efficiently.
)Moratorium and its Implications: Explain moratorium under
8
IBC and its implications on legal proceedings. (Asked 2
times)
Introduction:
The concept of moratorium is central to the Corporate Insolvency Resolution
Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016. It acts
as a legal shield to protect the assets of the corporate debtor during resolution by
pausing legal actions and enforcement proceedings.
Legal Provision:
35
T
● he moratorium is imposed under Section 14 of the IBC, 2016.
● It is declared by the Adjudicating Authority (NCLT) from the date of
admission of an insolvency application under Section 7, 9, or 10.
● The Interim Resolution Professional (IRP) or Resolution Professional (RP)
manages the debtor during this period.
Purpose of Moratorium:
● To maintain the status quo of the corporate debtor’s assets.
● To protect the corporate debtor from multiple litigations.
● To allow the CIRP to proceed in an orderly manner without disruption from
external recovery or enforcement actions.
Activities Prohibited During Moratorium:
Section 14(1) bars the following actions:
.Institution or continuation of suits or legal proceedingsagainst the
1
corporate debtor, including arbitration proceedings.
2. Transfer, encumbrance, or disposalof any assets of the corporate debtor.
3. Foreclosure, recovery, or enforcementof any security interest by secured
creditors.
4. Recovery of any propertythat is in possession of the corporate debtor,
whether owned by the debtor or not.
Implications on Legal Proceedings:
A
● ll civil suits and enforcement actions are stayed.
● Creditors, including secured creditors, cannot initiate or continue recovery
actions.
● No new proceedings can be initiated without the approval of NCLT.
● The debtor is protected from dismemberment of its assets, ensuring it
remains a going concern.
xceptions to Moratorium:
E
1. Criminal proceedings are not covered under moratorium.
P. Mohanraj v. Shah Brothers Finance Pvt. Ltd. (2021): Supreme Court held that
Section 138 NI Act proceedings (cheque bounce cases) are civil in nature and
hence covered, but not other criminal prosecutions.
. Personal guarantors are not protected by moratorium.
2
Lalit Kumar Jain v. Union of India (2021): SC held that proceedings against
personal guarantors of corporate debtors can continue.
36
. Essential services and goodsmust continue to be supplied to the corporate
3
debtor to keep it operational.
. Third-party assetsin possession of the corporate debtor are also protected
4
during moratorium.
onclusion:
C
The moratorium is a critical feature of the IBC that ensures a stable environment
for resolution by halting all coercive actions.
It balances the interests of the debtor and creditors while aiming for maximization
of asset value and successful resolution.
Judicial pronouncements have further clarified its scope, boundaries, and
exceptions, reinforcing its importance in the insolvency framework.
37
2023-2024
Q1)ONE LINERS
. Mention any Four Objectives of the Insolvency and Bankruptcy Code,
a
2016
1. To consolidate and amend the laws relating to insolvency and bankruptcy.
2. To ensure time-bound resolution of insolvency and maximize value of assets.
3. To promote entrepreneurship and availability of credit.
4. To balance the interests of all stakeholders, including creditors and debtors.
. What do you understand about the term 'going concern'?
b
"Going concern" means that the corporate debtor is capable of continuing its
operations and business during the insolvency resolution process, without being
liquidated or shut down.
. What is an Information Memorandum?
c
An Information Memorandum is a document prepared by the Resolution
Professional that contains detailed financial, operational, and legal information
about the corporate debtor. It helps potential resolution applicants in formulating
resolution plans.
. What is the time limit within which the first meeting of the Committee of
d
Creditors needs to be conducted as per the provisions of the IBC?
The first meeting of the Committee of Creditors (CoC) must be conducted within 7
days from the constitution of the CoC, which itself must happen within 30 days
from the insolvency commencement date.
. Mention any Four duties that need to be undertaken by an Interim
e
Resolution Professional (IRP)
1. Collect and verify claims of creditors.
2. Manage the affairs of the corporate debtor as a going concern.
3. Constitute the Committee of Creditors.
4. Take control of the assets and records of the corporate debtor.
f . What is the Bankruptcy Commencement Date?
The Bankruptcy Commencement Date is the date on which the Adjudicating
Authority admits a bankruptcy application under Part III of the IBC, leading to
initiation of the bankruptcy process.
38
. Mention any Four types of persons who can be called as the associate of
g
the debtor as per the provisions of the Part III of the Insolvency and
Bankruptcy Code of India
1. A relative of the debtor.
2. A partner in the debtor’s firm.
3. A company where the debtor has significant control.
4. A trustee of a trust in which the debtor has a beneficial interest.
. Who can make the application for bankruptcy of a debtor as per the
h
provisions of the Insolvency and Bankruptcy Code of India?
The application can be made by:
1. The debtor himself,
2. A creditor, or
3. A bankruptcy trustee representing a deceased debtor’s estate.
i. What is the minimum period for which the Liquidator is supposed to
preserve the registers and books of accounts in relation to the liquidation
of the Corporate Debtor?
The Liquidator must preserve the registers and books of accounts for a minimum
period of 8 years from the date of dissolution of the corporate debtor.
j. Define Operational Debt.
According to Section 5(21) of the IBC, Operational Debt means a claim in respect
of:
● Provision of goods or services,
● Employment, or
● A debt in respect of statutory dues payable to the government.
39
Q2)SITUATIONAL BASE
. What important provisions with respect to the powers of Creditors and
a
the validity of the IBC were provided by the Supreme Court in the landmark
judgment of the Swiss Ribbons Private Limited Vs. Union of India?
nswer:
A
In the landmark case Swiss Ribbons Pvt. Ltd. v. Union of India (2019), the
Supreme Court upheld the constitutional validity of the IBC and clarified important
aspects:
. Creditors' Powers:The Court recognized the primacy of the Committee of
1
Creditors (CoC) in making commercial decisions during the resolution process.
These decisions, once taken by the CoC, cannot be interfered with by the
NCLT/NCLAT unless found to be perverse or contrary to law.
. Differentiation Between Financial and Operational Creditors:The Court
2
held that the classification between financial and operational creditors is valid, as
their nature and functions are different.
. Objective of IBC:The IBC aims not only at recovery but at resolution,
3
ensuring revival and continuation of the corporate debtor as a going concern.
. Speedy Process:The Court emphasized the time-bound resolution process
4
as crucial to preserving asset value and preventing deterioration of the debtor's
business.
. A Public Announcement with respect to Corporate Insolvency
b
Resolution Process needs to be made.
i. What do you understand by the term Public Announcement and who is
responsible for making it?
nswer:
A
A Public Announcement is a formal declaration made to inform stakeholders that
a corporate insolvency resolution process (CIRP) has been initiated. It invites
creditors to submit their claims.
It is the duty of the Interim Resolution Professional (IRP) to make this
announcement immediately after his appointment, as per IBC and CIRP
regulations.
40
ii. Describe the essential contents of a Public Announcement, where it
needs to be published and within what time limit?
nswer:
A
Essential Contents:
1. Name of the corporate debtor.
2. Insolvency commencement date.
3. Last date for submission of claims.
4. Details of the Interim Resolution Professional.
5. Classes of creditors (if any) and their representatives.
Where to Publish:
● In two newspapers (one English and one regional language) with wide
circulation at the place of the corporate debtor’s registered office.
● On the website of the corporate debtor (if any).
● On the website of IBBI.
ime Limit:
T
The public announcement must be made within 3 days from the appointment of
the IRP.
. A group of Creditors come together and wish to initiate the
c
Corporate Insolvency Resolution Process.
i. What is the threshold of minimum default for initiating Corporate
Insolvency Resolution Process?
nswer:
A
The minimum threshold of default for initiating CIRP is Rs. 1 crore as per the
notification issued by the Ministry of Corporate Affairs dated 24th March 2020
(increased from the earlier limit of Rs. 1 lakh).
ii. Who can initiate Corporate Insolvency Resolution Process as per the
provisions of the Insolvency and Bankruptcy Code?
nswer:
A
CIRP can be initiated by:
1. A Financial Creditor under Section 7.
2. An Operational Creditor under Section 9.
3. The Corporate Debtor itself under Section 10.
41
iii. The process of Corporate Insolvency Resolution needs to be completed
within what time period as per the provisions of the Insolvency and
Bankruptcy Code?
nswer:
A
As per Section 12 of the IBC:
● The CIRP must be completed within 180 days from the insolvency
commencement date.
● It can be extended by a maximum of 90 days, subject to approval by the
adjudicating authority.
● In total, the resolution process must be completed within 330 days,
including any litigation period.
. M/s. Underground Limited wants to apply to act as an Insolvency
d
Professional Agency in India. Specify the following:
i. What is the Application fee that shall be needed to be paid by
Underground Limited for being allowed to act as an Insolvency Professional
Agency?
nswer:
A
As per IBBI (Insolvency Professional Agencies) Regulations, the application fee
for registration as an Insolvency Professional Agency is Rs. 10 lakh, payable to
the Insolvency and Bankruptcy Board of India (IBBI).
ii. Within how many days of application the certificate of registration may be
received by the applicant Organisation?
nswer:
A
The IBBI may grant the certificate of registration to the applicant within 60 days
from the date of receipt of the complete application.
iii. The certificate of Registration thus received shall be valid for what
period from the date of its issue?
nswer:
A
The certificate of registration issued to an Insolvency Professional Agency is valid
for a period of 5 years from the date of issue, unless suspended or cancelled
earlier.
42
Q3)SHORT NOTES
1)Fast track process
Introduction
The Insolvency and Bankruptcy Code (IBC), 2016 was enacted to consolidate
and amend the laws relating to the reorganization and insolvency resolution of
corporate persons, partnership firms, and individuals in a time-bound manner.
ne of the important mechanisms introduced under IBC is the Fast Track
O
Insolvency Resolution Process (Fast Track Process), which aims to expedite the
insolvency proceedings for certain categories of corporate debtors.
Meaning of Fast Track Process
he Fast Track Corporate Insolvency Resolution Process (CIRP) is a simplified
T
and time-bound insolvency resolution procedure designed for small companies
with relatively less complex financial structures. It ensures quicker resolution and
lesser burden on the Adjudicating Authority (NCLT) and insolvency professionals.
It is governed by Section 55 to 58 of the IBC, 2016, and the Insolvency and
Bankruptcy (Fast Track Insolvency Resolution Process for Corporate Persons)
Regulations, 2017.
Eligible Entities
ccording to Section 55(2) and the related regulations, the Fast Track Process
A
can be initiated against the following corporate debtors:
1. Small Companies as defined under the Companies Act, 2013.
2. Start-ups (other than partnership firms).
. Unlisted companies with:
3
Total assets not exceeding Rs. 1 crore as per the financial statement of the
previous financial year.
he Central Government may also notify other categories of corporate debtors as
T
eligible for fast track resolution.
rocess of Fast Track CIRP
P
1. Initiation:
43
financial creditor, operational creditor, or the corporate debtor itself can file an
A
application for fast track CIRP under Section 57.
. Admission by Adjudicating Authority:
2
Upon satisfaction, the NCLT admits the application and declares a moratorium.
. Appointment of IRP:
3
An Interim Resolution Professional (IRP) is appointed within 14 days.
. Public Announcement and Claims:
4
IRP makes a public announcement and invites claims from creditors.
. Constitution of Committee of Creditors (CoC):
5
IRP verifies claims and constitutes the CoC.
6. Resolution Plan:
● Resolution applicants submit their plans.
● CoC evaluates and votes on the plan.
7. Approval by NCLT:
If CoC approves the plan with the required majority (66%), it is submitted to NCLT
for final approval.
Time Limit
● T he Fast Track CIRP must be completed within 90 days from the
insolvency commencement date.
● However, a one-time extension of 45 days may be granted by the NCLT if it
is satisfied that the resolution cannot be completed within 90 days and the
CoC has approved the extension with a 75% majority.
hus, the maximum time limit is 135 days.
T
Key Features of Fast Track Process
1. Simplified Procedure: Reduced documentation and faster adjudication.
2. Time-bound Resolution:Focused on completion within 90-135 days.
3. Cost-effective:Less expensive due to shorter duration and lesser complexity.
4. Targeted Debtors:Meant for small companies/startups with limited operations.
Conclusion
44
he Fast Track Insolvency Resolution Process under the IBC is a progressive
T
step toward ensuring swift and efficient resolution of insolvency for less complex
and smaller entities.
It upholds the key objective of the IBC—time-bound resolution—and helps in
reducing the burden on the judiciary while promoting ease of doing business in
India.
2)Debt Recovery appellate Tribunal
Introduction
The Debt Recovery Appellate Tribunal (DRAT) is a quasi-judicial body established
under the Recovery of Debts and Bankruptcy Act (RDB Act), 1993 (earlier known
as the Recovery of Debts Due to Banks and Financial Institutions Act).
It hears appeals against the decisions of the Debt Recovery Tribunals (DRTs),
which adjudicate cases related to the recovery of debts due to banks and
financial institutions.
eaning of DRAT
M
The DRAT serves as the appellate authority under the RDB Act. It ensures that
justice is served in cases where parties are not satisfied with the orders passed
by the DRT. The tribunal is empowered to confirm, modify, or reverse the
decisions of DRTs.
Establishment and Jurisdiction
● Established by the Central Government under Section 8 of the RDB Act,
1993.
● DRATs are located in major cities, such as Delhi, Mumbai, Kolkata,
Chennai, etc.
● Each DRAT has jurisdiction over one or more DRTs within a specific
territorial area.
Composition
● Chairperson: A DRAT is headed by a Chairperson.
● The Chairperson must be:
1)A person who is or has been a judge of a High Court, or
2)Has held the post of Presiding Officer of a DRT for at least 3 years.
● Appointed by: The Central Government in consultation with the Chief
Justice of India.
45
unctions and Powers of DRAT
F
1. Appellate Authority:
● H ears appeals against the orders passed by DRTs under Section 20 of the
RDB Act.
● Also hears appeals under the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest (SARFAESI) Act,
2002.
. Review Powers:
2
Can confirm, reverse, or modify the decisions of DRT.
. Binding Nature of Decisions:
3
The decisions of DRAT are binding on DRTs.
4. Procedure:
● Not bound by the Code of Civil Procedure.
● Guided by the principles of natural justice.
● Can regulate its own procedures.
Appeals to DRAT
● Any person aggrieved by an order of DRT may appeal to DRAT within 30
days of the order.
● The appellant is required to deposit 50% of the debt amount determined by
the DRT.
● The DRAT may reduce this amount to 25%, but not less than that.
ignificance of DRAT
S
1. Ensures Fairness:
Acts as a check on DRT decisions to prevent misuse or errors in justice.
. Faster Disposal:
2
A Specialized forum ensures quicker resolution than regular civil courts.
. Reduces Burden on Civil Courts:
3
Focuses solely on debt recovery matters, helping reduce the pendency in civil
courts.
. Support for Banking Sector:
4
Aids in timely recovery of bad debts, thereby improving financial health of banks
and NBFCs.
Conclusion
46
he Debt Recovery Appellate Tribunal plays a critical role in India's financial and
T
legal system by providing a platform for appeals in debt recovery matters.
It upholds the principles of justice, ensures speedy resolution of disputes, and
supports the credit system by facilitating effective debt recovery mechanisms. Its
existence is vital to protect the interests of financial institutions while also
ensuring the right to appeal for borrowers.
3)information Utility
Introduction
The Insolvency and Bankruptcy Code (IBC), 2016 introduced the concept of
Information Utilities (IUs) to provide accurate and readily accessible financial
information to all stakeholders in the insolvency process.
IUs are a crucial pillar of the IBC ecosystem, intended to enhance transparency,
reduce disputes, and speed up insolvency resolution.
Meaning of Information Utility
n Information Utility (IU) is an organization that collects, stores, authenticates,
A
and provides financial information related to debt and defaults to facilitate
insolvency and bankruptcy proceedings.
It is defined under Section 3(21) of the IBC, 2016, and governed by the
Information Utilities Regulations, 2017, issued by the Insolvency and Bankruptcy
Board of India (IBBI).
unctions of an Information Utility
F
1. Collection of Financial Information:
IUs collect data from creditors and debtors regarding debts, liabilities, defaults,
security interests, and other credit-related information.
. Storage and Maintenance:
2
Secure electronic storage of financial data for long-term use.
. Authentication and Verification:
3
Creditors and debtors authenticate the information submitted to ensure accuracy.
4. Access to Information:
47
rovides access to information to stakeholders such as insolvency professionals,
P
adjudicating authorities, creditors, and debtors.
. Evidence in Proceedings:
5
Authenticated records with an IU serve as prima facie evidence of default in
insolvency proceedings.
Registration and Regulation
● An IU must be registered with the IBBI under Section 210 of the IBC.
● It must comply with technical standards, security protocols, and
confidentiality norms.
● The first and only registered IU in India (as of now) is National
E-Governance Services Ltd (NeSL).
ey Features of Information Utility
K
1. Electronic Platform:
Operates digitally to enable seamless submission and retrieval of data.
. Data Security and Confidentiality:
2
Uses high-level encryption and follows strict privacy norms.
. Non-discriminatory Access:
3
All stakeholders have access to the same data on equal terms.
. Time-Stamping:
4
All information submitted is time-stamped, establishing a reliable timeline of credit
events.
. Legal Validity:
5
Authenticated financial information is accepted as evidence in NCLT and other
legal forums.
Importance in IBC
1. Reduces Litigation:
Reduces disputes by maintaining verified records of debts and defaults.
. Speeds Up Insolvency Proceedings:
2
Facilitates swift admission of cases under Section 7 and 9 of the IBC by providing
proof of default.
. Enhances Transparency and Trust:
3
Reliable data promotes confidence among creditors and debtors.
48
. Strengthens the Credit Market:
4
Improves credit discipline and reduces information asymmetry.
onclusion
C
Information Utilities are a foundational component of the IBC framework, ensuring
efficiency, transparency, and integrity in insolvency and debt recovery processes.
y providing authenticated financial information, they help stakeholders make
B
informed decisions and enable faster resolution of insolvency cases. As the IBC
ecosystem matures, the role of IUs is expected to become even more significant.
4)Composition of IBBI
Introduction
The Insolvency and Bankruptcy Board of India (IBBI) was established under the
Insolvency and Bankruptcy Code, 2016. It is the regulator responsible for
overseeing insolvency proceedings and entities like insolvency professionals
(IPs), insolvency professional agencies (IPAs), and information utilities (IUs).
well-balanced and competent composition ensures the Board performs its
A
functions impartially and effectively.
eaning of Composition
M
The composition of IBBI refers to the structure and makeup of its governing body,
including the Chairperson and other members representing different sectors such
as law, finance, and administration.
These members are either appointed by the Central Government or nominated
from specific institutions.
omposition of IBBI (Section 189 of the Code)
C
As per Section 189 of the Insolvency and Bankruptcy Code, 2016, the IBBI
consists of:
1. Chairperson
● Appointed by the Central Government.
● Should be a person of ability and integrity with special knowledge and
professional experience in finance, law, management, or insolvency.
. Three members from the Central Government:
2
One member each to represent:
● Ministry of Finance
49
M
● inistry of Corporate Affairs
● Ministry of Law
3. One member nominated by the Reserve Bank of India (RBI)
4. Five other members appointed by the Central Government
● Must be persons of ability and integrity.
● Should have special knowledge and experience in areas like law, finance,
economics, accountancy, or insolvency.
● Out of these five, at least three must be full-time members.
Additional Points
● The total number of members (including Chairperson) is not more than 10.
● The appointments ensure representation of diverse fields.
● The members work under a framework of checks and balances to promote
transparency.
● The term of office and other conditions are laid down by the Central
Government.
● Members are required to function independently and avoid any conflict of
interest.
onclusion
C
The IBBI’s composition reflects a balance of administrative, legal, and financial
expertise.
y incorporating members from multiple sectors and ensuring proper government
B
oversight, the Board functions as an independent and efficient regulator,
upholding the objectives of the Insolvency and Bankruptcy Code.
his diversified composition strengthens its capacity to handle complex
T
insolvency issues and protect stakeholders’ interests.
50
Q4)Long answer
)Critically analyse the various provisions related to nature
1
and contents of the Resolution Plan under the I.B.C.
Introduction
The Insolvency and Bankruptcy Code, 2016 (IBC) aims to maximize the value of
a corporate debtor's assets through a time-bound resolution process.
Resolution Plan is central to this process, providing a framework for the revival
A
of a distressed company while balancing the interests of stakeholders. The nature
and contents of such a plan are governed by specific provisions in the Code,
primarily under Section 30.
eaning of Resolution Plan
M
A Resolution Plan is a proposal submitted by a Resolution Applicant to revive the
corporate debtor. It includes strategies such as restructuring debt, altering the
capital structure, or changing management, with an aim to keep the business as a
going concern.
Statutory Provisions: Section 30 of IBC
1. Submission of Resolution Plan (Section 30(1))
● A resolution applicant submits the plan to the Resolution Professional (RP).
● It must be submitted within the prescribed time (currently 330 days
including extensions and litigation period).
. Examination by Resolution Professional (Section 30(2))
2
The RP must ensure that the resolution plan:
a) Provides for payment of insolvency resolution process costs in full
b) Provides payment to operational creditors not less than the amount they would
receive in liquidation
c) Provides for management of the affairs of the corporate debtor
d) Provides the implementation and supervision of the plan
e) Confirms to all other requirements as specified by the Board (IBBI)
3. Approval by Committee of Creditors (CoC) (Section 30(4))
● Requires 66% voting share of CoC for approval.
● CoC considers feasibility and viability of the plan.
● The Supreme Court in the Essar Steel case upheld CoC’s commercial
wisdom as non-justiciable in most cases.
51
4. Submission to Adjudicating Authority (Section 31)
● Once approved, the RP submits the plan to the National Company Law
Tribunal (NCLT).
● On approval, the plan becomes binding on all stakeholders (debtors,
creditors, employees, government, etc.).
Contents of Resolution Plan (Regulation 38 of CIRP Regulations)
● A resolution plan should include:
● Term of the plan and its implementation schedule
● Manner of dealing with remaining debts
● Provisions for effective implementation
● Details of resolution applicant and their financial capability
● Measures like merger, demerger, acquisition, sale of assets, etc.
Critical Analysis
trengths:
S
1. Balance of Interests:
Provisions ensure fair treatment of all stakeholders — secured creditors,
operational creditors, and employees.
. Flexibility:
2
Resolution applicants can propose innovative solutions like debt-to-equity
conversion, sale of assets, or change in management.
. Time-bound Process:
3
Promotes swift resolution, preventing erosion of asset value.
. Binding Nature:
4
Once approved by NCLT, the plan is binding on all — enhancing certainty and
enforceability.
imitations and Criticisms:
L
1. Operational Creditors’ Interests Often Undermined:
Despite minimum liquidation value protection, operational creditors often receive
very little compared to financial creditors.
. Commercial Wisdom Beyond Review:
2
Courts rarely interfere with CoC decisions, even if plans are inequitable — risking
injustice in some cases.
3. Lack of Specific Guidelines for Content Quality:
52
he Code doesn’t mandate detailed disclosures on long-term viability or financial
T
projections.
. Possibility of Haircuts for Creditors:
4
Plans sometimes involve massive haircuts (e.g., over 90%), raising concerns
about fairness and accountability.
. Delays Despite Timelines:
5
Litigation and appeals often stretch beyond 330 days, diluting the “time-bound”
nature of the Code.
onclusion
C
The provisions regarding the nature and contents of the resolution plan under the
IBC are well-structured and progressive, promoting business revival and
economic stability.
However, challenges remain in ensuring equitable treatment of all creditors,
avoiding excessive haircuts, and preventing delays.
A more detailed regulatory framework and greater oversight over CoC decisions
can help improve transparency, fairness, and effectiveness of resolution plans.
)Provide a detailed analysis of the priority of payment of
2
debts mechanism as given under the relevant provisions of
the I.B.C.
Introduction
The Insolvency and Bankruptcy Code, 2016 ensures fair distribution of assets
during liquidation. Section 53 defines the "priority of payment" or waterfall
mechanism, which is the order in which debts are paid from the liquidation estate
of the corporate debtor.
Meaning
Priority of payment of debts means deciding who gets paid first and who later
when the assets of the insolvent company are distributed. This order protects the
interests of key stakeholders like employees, secured creditors, etc.
ection 53 – Waterfall Mechanism (Explained Briefly)
S
1. Insolvency Resolution and Liquidation Costs
These are paid first. Includes fees of professionals, legal costs, and running
expenses of the process.
53
. Workmen’s Dues (Last 24 Months) + Secured Creditors (who give up
2
security)
Both are treated equally. Workmen’s unpaid wages and secured creditors who
surrender their security.
. Employees' Dues (Other than Workmen, for 12 Months)
3
Wages of other employees like staff and officers. Paid after workmen's dues.
. Unsecured Financial Creditors
4
Lenders without collateral. They are paid only after employee dues.
. Government Dues (2 Years) + Secured Creditors (who enforce security
5
separately)
Taxes and other dues owed to the government. Secured creditors here recover
from their own collateral.
. Remaining Debts and Dues
6
Other unpaid dues like penalties, fines, and trade payables not covered above.
. Preference Shareholders
7
Get paid only if anything is left after all creditors are paid.
. Equity Shareholders
8
Paid last. Usually get nothing unless the company has surplus assets.
ritical Analysis
C
Advantages:
● Protects workmen and employees.
● Gives clarity and fairness in asset distribution.
● Encourages financial creditors to trust the process.
Drawbacks:
● Operational creditors often recover very little.
● Government dues get higher priority than some private creditors.
● Shareholders are usually left out completely.
onclusion
C
The waterfall mechanism under Section 53 ensures an organized and fair
repayment system in liquidation.
Though effective, it needs better protection for operational creditors and a relook
at the treatment of government dues.
54
)Give a detailed note on the role, powers and functions of
3
the various Adjudicating Authorities as mentioned under the
I.B.C.
Introduction
The Insolvency and Bankruptcy Code (IBC), 2016, establishes specific
adjudicating authorities to resolve insolvency and bankruptcy matters quickly and
efficiently.
eaning
M
Adjudicating Authorities are the legal bodies or forums designated under the IBC
to hear, decide, and oversee insolvency and bankruptcy cases. They ensure that
the process is carried out as per the Code, protect stakeholder rights, and
maintain judicial discipline.
ypes, Roles, and Powers of Adjudicating Authorities
T
1. National Company Law Tribunal (NCLT)
Deals with:Corporate debtors (companies & LLPs)
Powers & Functions:
● Admit/reject insolvency applications (u/s 7, 9, 10)
● Appoint IRP/RP
● Approve or reject resolution plans
● Order liquidation
● Hear avoidance transaction cases
● Freeze or attach assets if needed
. Debt Recovery Tribunal (DRT)
2
Deals with:Individuals and partnership firms
Powers & Functions:
● Admit insolvency and bankruptcy applications (under Part III)
● Handle repayment plans and personal insolvency
● Recover, release, or distribute assets
● Protect rights of personal guarantors
. National Company Law Appellate Tribunal (NCLAT)
3
Powers & Functions:
Hears appeals against NCLT orders
Can modify, confirm, or reverse NCLT decisions
4. Debt Recovery Appellate Tribunal (DRAT)
55
owers & Functions:
P
Hears appeals from DRT orders related to individuals
. Supreme Court of India
5
Final authority:
Hears appeals from NCLAT or DRAT on questions of law (Section 62)
Critical Analysis
● Ensures fast-track resolution of insolvency cases
● Specialized, reducing dependency on civil courts
● But NCLT is often overburdened, causing delays
● More benches and trained professionals needed
onclusion
C
Adjudicating Authorities like NCLT, DRT, and their appellate bodies play a central
role in the IBC framework. A strong and well-resourced judicial setup is key to the
Code’s success.
)Describe and distinguish the various powers and duties of
4
Interim Resolution Professional and Insolvency Resolution
Professional. Also, enlist the circumstances under which
they can be replaced.
Introduction
The Insolvency and Bankruptcy Code, 2016 appoints licensed professionals to
manage insolvency resolution.
These are the Interim Resolution Professional (IRP) and the Insolvency
Resolution Professional (RP), each with specific powers and duties.
Meaning
IRP:A temporary professional appointed by NCLT to take over the management
of the debtor after admission of CIRP.
P:The professional confirmed or replaced by the CoC to carry out the entire
R
resolution process.
owers and Duties of IRP
P
1. Take Control of the Corporate Debtor
56
he IRP takes over the management and operations of the company and
T
suspends the powers of the board of directors.
. Collect Information on Financial Position
2
The IRP gathers data related to assets, liabilities, operations, and finances of the
debtor from various sources.
. Make Public Announcement
3
He/she publishes a notice in newspapers to inform all creditors to submit their
claims within a specified time.
. Verify and Collate Claims
4
The IRP checks and compiles claims received from financial, operational, and
other creditors.
. Constitute the Committee of Creditors (CoC)
5
After verifying claims, IRP forms the CoC with financial creditors to take key
decisions in CIRP.
. Act as a Temporary RP
6
Until CoC confirms or replaces him/her, the IRP performs the duties of an RP.
. Manage Corporate Debtor as Going Concern
7
Ensures that the business continues running during the CIRP without disruption.
Powers and Duties of RP
. Conduct the CIRP
1
The RP runs the insolvency resolution process as per the timelines and
provisions of the Code.
. Prepare Information Memorandum (IM)
2
A document containing all financial and operational details, shared with resolution
applicants.
3. Invite and Evaluate Resolution Plans
The RP invites plans from potential applicants, verifies them, and presents them
to the CoC.
. Manage Corporate Debtor During CIRP
4
Like IRP, the RP manages day-to-day operations and ensures compliance with
laws and contracts.
5. Convene and Conduct CoC Meetings
57
P schedules meetings, prepares agendas, and records minutes, keeping the
R
CoC updated.
. File Applications for Avoidance Transactions
6
If there are transactions like preferential or fraudulent ones, the RP files
applications before NCLT to reverse them.
. Ensure Implementation of CoC Decisions
7
All decisions taken by the CoC are implemented by the RP on behalf of the
stakeholders.
. Take Legal Action When Required
8
The RP can initiate legal proceedings or defend cases in the name of the
corporate debtor.
ircumstances for Replacement
C
IRP:
● Replaced within 30 days by CoC with 66% vote.
● NCLT appoints the proposed RP.
RP:
● C an be removed at any stage if CoC (66%) is dissatisfied.
● Grounds may include bias, negligence, or inefficiency.
● Final approval from NCLT is needed.
onclusion
C
IRP and RP are key to the corporate insolvency resolution process. While IRP
initiates and stabilizes, RP carries the process to conclusion. Their powers ensure
proper management, transparency, and revival of the debtor company.
58
)"The role of a bankruptcy trustee is to administer
5
bankruptcy matters and act as a liaison between the debtor
and the creditors".
Introduction
A bankruptcy trustee is a key figure in the insolvency and bankruptcy process for
individuals and partnership firms. They ensure smooth administration of the
bankruptcy estate and act as a bridge between debtors and creditors.
eaning
M
A bankruptcy trustee is an insolvency professional appointed to manage the
bankruptcy estate of an individual or partnership. They take custody of the
debtor’s assets and handle their distribution to creditors as per the law.
ole and Functions of Bankruptcy Trustee
R
1. Taking Custody of Assets
The trustee takes control of all assets, properties, and financial affairs of the
bankrupt individual to prevent disposal or misuse.
. Assessment and Valuation
2
They assess and evaluate the value of the bankrupt’s assets to prepare for
liquidation or repayment.
. Communication Link
3
Acts as the liaison between the debtor and creditors, facilitating communication
and coordination throughout the bankruptcy process.
. Verification of Claims
4
Examines claims submitted by creditors to ensure their legitimacy and accuracy
before payments.
. Distribution of Assets
5
Responsible for distributing the proceeds from the sale of assets fairly and in
priority order as per IBC provisions.
. Filing Reports
6
Submits regular reports to the adjudicating authority about the progress of
bankruptcy proceedings and asset management.
7. Ensuring Compliance
59
nsures that the debtor complies with all legal requirements and the bankruptcy
E
process is carried out transparently.
Importance of Bankruptcy Trustee
● Ensures fair and orderly resolution of debts
● Protects interests of both creditors and debtors
● Prevents fraud and asset dissipation
● Helps rebuild trust in the insolvency framework
onclusion
C
The bankruptcy trustee plays a crucial role in managing bankruptcy cases by
administering assets and facilitating effective communication between parties.
Their actions ensure transparency, fairness, and efficiency in the bankruptcy
process.
60
2022-2023
1)ONE LINERS
. What is an Onerous Property?
a
An onerous property is a property under which the obligations exceed the
benefits, meaning the costs or liabilities attached to it are greater than its value.
. Mention any Four Objectives of the Insolvency and Bankruptcy Code,
b
2016?
1. To consolidate insolvency laws.
2. To ensure time-bound resolution of insolvency.
3. To maximize the value of assets for creditors.
4. To promote entrepreneurship and credit availability.
. Define an ‘Indigent’ person.
c
An indigent person is someone who lacks sufficient financial resources to meet
the costs of legal proceedings.
. What do you understand by the term Information Memorandum?
d
A document prepared by the Resolution Professional containing all relevant
financial, operational, and legal information of the corporate debtor for
prospective resolution applicants.
. What is a going concern?
e
A going concern refers to a business that is operating and has the potential to
continue its operations into the foreseeable future without the threat of liquidation.
f . Who is not eligible to submit a Resolution Plan as per the provisions of
the IBC?
Persons such as willful defaulters, connected persons of the corporate debtor,
and promoters disqualified under the IBC are not eligible.
. What is the minimum period for which the Liquidator is supposed to
g
preserve the registers and books of accounts in relation to liquidation?
The Liquidator must preserve such documents for a minimum period of 8 years
from the completion of liquidation.
61
. What do you understand by the term Reorganisation with respect to the
h
Insolvency Resolution Process?
Reorganisation refers to restructuring the corporate debtor’s assets and liabilities
to revive the company and enable it to continue as a going concern.
i. What do you understand by the term Moratorium in context of Bankruptcy
Laws?
Moratorium is a legal period during which no legal action, enforcement, or
recovery can be initiated against the corporate debtor.
j. In Rupees terms, what is the minimum net worth prescribed for an
Organisation to be allowed to function as an Information Utility as per the
provisions of the IBC?
The minimum net worth prescribed is ₹100 crore.
Q2. SHORT NOTES
)Write a note on the Fresh Start Insolvency Resolution
1
Process.(P.15)
2)Write a note on the composition of the IBBI.(P.49)
3)Write a short note on Registered Valuers.(13)
)Write a short note on 'Concealment of Property' as per the
4
provisions of the Insolvency and Bankruptcy Code of India.
Introduction
The Insolvency and Bankruptcy Code, 2016 lays down strict provisions against
fraudulent conduct during insolvency and bankruptcy proceedings. One such
offence is the concealment of property by a debtor, which undermines the
insolvency process and affects creditors' interests.
eaning
M
Concealment of property refers to an act where the debtor deliberately hides or
fails to disclose assets or relevant information with the intent to defraud creditors
during insolvency or bankruptcy proceedings.
Provisions under IBC: Section 68
62
s per Section 68 of the IBC, if the corporate debtor (or its officers) fraudulently
A
conceals property or financial records, they are liable for punishment with
imprisonment and/or fine.
ey Offences under Section 68
K
1.Fraudulent Removal or Concealment of Property
If, within one year before the insolvency commencement date or after it, the
debtor removes, conceals, or transfers property to defraud creditors.
.Failure to Disclose Property or Deliver Records
2
Willful non-disclosure of property or documents, or failing to hand over books and
papers to the Resolution Professional, Liquidator, or Bankruptcy Trustee.
.Falsification of Books and Accounts
3
If the debtor falsifies, hides, or alters records to mislead authorities or prevent
proper assessment of assets.
.Non-disclosure of False Claims
4
Hiding the fact that certain claims are false or exaggerated and not reporting them
during proceedings.
Punishment under Section 68
● Imprisonment: Up to 5 years
● Fine: Up to ₹1 crore
● Or both, depending on the severity of the act.
Objective of the Provision
● To ensure transparency in insolvency proceedings.
● To protect creditors’ interests.
● To prevent fraudulent and dishonest conduct.
● To uphold the integrity of the insolvency framework.
onclusion
C
The IBC, through Section 68, penalizes concealment of property to deter
dishonest behaviour. These provisions ensure that the insolvency process
remains fair, transparent, and creditor-friendly, thereby reinforcing faith in the
system.
63
Q3)SITUATIONALS
. What important provisions with respect to the validity of the Amendment
a
made to the IBC were provided by the Supreme Court in the landmark
judgment of Pioneer Urban Land and Infrastructure Limited vs. Union of
India?
nswer:
A
In the Pioneer Urban Land case (2019), the Supreme Court upheld the
constitutional validity of the IBC (Amendment) Ordinance, 2018, which classified
homebuyers as financial creditors under Section 5(8)(f) of the IBC.
Key Provisions Highlighted:
● Homebuyers can now initiate CIRP under Section 7.
● The amendment was not arbitrary or violative of Article 14 or 19(1)(g).
● Allottees in real estate projects were rightly included as financial creditors
as they financed the construction.
● It empowered homebuyers to protect their interest in insolvency
proceedings and held that the amendment was in public interest.
. M/s. Rudra Private Limited has defaulted to make the payment of Rs. 2
b
crores to M/s. Anand Private Limited. Discuss whether a Demand Notice
under section 8 of IBC, 2016 to M/s. Rudra Private Limited can be issued by
an Advocate, before filing an application under section 9 of the IBC, 2016?
nswer:
A
Yes, a Demand Notice under Section 8 of the IBC can be issued by an advocate.
s per Form 3 of the Insolvency and Bankruptcy (Application to Adjudicating
A
Authority) Rules, 2016, an authorized representative, including an advocate, can
issue the demand notice on behalf of the operational creditor.
udgment Support:
J
In Macquarie Bank Ltd. v. Shilpi Cable Technologies Ltd., the Supreme Court held
that an advocate authorized by the operational creditor can issue a demand
notice under Section 8.
. The Operational Creditor wants to withdraw an application made under
c
section 9 of the IBC 2016. Advise whether an application under section 9
64
IBC 2016 can be withdrawn on the basis of compromise between the
parties?
nswer:
A
Yes, an application under Section 9 can be withdrawn if the parties arrive at a
compromise, but only with the permission of the Adjudicating Authority.
elevant Provision:
R
Section 12A of the IBC allows withdrawal of the application with the approval of
90% of the Committee of Creditors (CoC) after admission.
efore admission, the application can be withdrawn with permission of the
B
Adjudicating Authority (NCLT).
udgment Support:
J
In Swiss Ribbons Pvt. Ltd. v. Union of India, the Supreme Court upheld the
constitutional validity of Section 12A and clarified that compromise or settlement
is allowed even after admission, subject to proper procedure.
. Your junior comes to you to seek clarifications regarding the powers,
d
scope and extent of jurisdiction of the NCLT and NCLAT under the IBC.
Please clarify the same mentioning the respective provisions of the IBC.
Also mention the relevant judgment of the Supreme Court.
nswer:
A
The National Company Law Tribunal (NCLT) is the Adjudicating Authority under
IBC for corporate persons, and NCLAT hears appeals from orders of NCLT.
Relevant Provisions:
● Section 60(1): NCLT is the Adjudicating Authority for corporate insolvency
resolution and liquidation.
● Section 61: NCLAT hears appeals against orders of NCLT.
● Section 62: Appeal from NCLAT goes to the Supreme Court on questions
of law.
Scope of Powers:
● NCLT can admit or reject applications under Sections 7, 9, or 10.
● It supervises the resolution process and approves resolution plans.
● NCLAT has appellate jurisdiction over NCLT’s decisions.
Judgment Support:
65
In Innoventive Industries Ltd. v. ICICI Bank, the Supreme Court held that NCLT’s
jurisdiction is limited to examining existence of default and it cannot go into
disputed questions of law or fact unrelated to the IBC.
Q4)ANSWER IN DETAILS
. Give a detailed note on the role, powers and functions of the
a
various Adjudicating and Appellate Authorities as mentioned
under the IBC. (P.26)
. Write a detailed note on the qualifications, roles, functions,
b
powers and responsibilities of an Insolvency Resolution
Professional. (P.28)
. Critically analyse the various provisions related to nature and
c
contents of the Resolution Plan under the IBC.(P.24)
. Write a detailed note on the Corporate Insolvency Resolution
d
Process as described under the IBC.(P.22)
66
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