The Insolvency and Bankruptcy code defines the complete procedure to be followed during the conduct of insolvency process by different kinds of creditors and the corporate debtor itself. Since the law is fresh and new, a lot of interpretation is going on from every aspect to make the best use of this legislation and maximize the cash flow in the market.
In this article we will discuss about the insolvency process by an Operational Creditor and extensively cover the entire topic in the most precise manner.
Pecuniary Jurisdiction– This part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees.
*Provided the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.
Insolvency process by Operational Creditor u/s 8 and 9 of IBC, 2016
- Operational Creditor to serve notice of default upon the corporate debtor.
- Corporate debtor to reply for the notice within 10 days of receipt of notice informing about any dispute or the repayment of unpaid operational debt.
- If the corporate debtor proposes to resolve then they can settle the matter outside the court or if refuses then operational creditor can approach the tribunal to initiate insolvency proceedings.
- To initiate proceedings, Operational creditor to file application before NCLT.
- NCLT to accept or reject the matter within 14 days.
- If NCLT rejects the matter, then must inform the operational creditor and debtor about the same within 7 days and give another opportunity to file fresh application within next 7 days.
- After accepting the application, Adjudicating Authority to appoint an Interim Resolution Professional proposed by operational creditor.
- IRP to collate claims and form committee of creditors.
- IRP’s maximum duration will be of 30 days within which he will manage all the works of the corporate debtor as his own company.
- The committee of creditors ( CoC ) will then decide to appoint the IRP as the Resolution Professional with 75% of vote or to propose for another RP before the Adjudicating Authority within 7 days.
- The Adjudicating Authority may recommend the Board for proposed RP or the IRP will continue as the RP.
- Once the RP is decided, he will conduct the insolvency process within the stipulated time period of 180 days which can be extended for not more than 90 days on filing a petition by RP before NCLT.
- RP will invite resolution plans from the resolution applicants.
- RP will submit the resolution plans before the CoC for their approval. If they approve of the plans then it can be submitted before the NCLT and if they disapprove of then RP may invite for fresh resolution plans from resolution applicants u/s 30 of IBC, 2016.
- After submitting the approved resolution plan before NCLT, NCLT will pass orders directing the Corporate debtor to pay the creditors within 30 days as the resolution plan.
- If the corporate debtor feels aggrieved of the decision made then he can approach the National Company Law Appellate Tribunal (NCLAT) to file his appeal.
- NCLAT will pass orders accepting or rejecting application within 30 days.
- If the Corporate Debtor still feels aggrieved then he can approach the Supreme Court. The SC will decide upon the matter within 45 days of approving or rejecting the appeal.
The operational creditor has to abide by the Code to initiate the insolvency process to recover his dues from the corporate debtor. Insolvency process will be quicker and decisive and help them recover their money and free themselves of the stressed assets. This article has focused on the procedure to be followed by operation creditor and the resolution professional’s role play in conducting the whole process.
Disclaimer – The above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.