Key Highlights on Insolvency and Bankruptcy Code, 2016


Insolvency can get resolved by two ways-

  1. Modifying the repayment plan to the creditors or investors.
  2. Selling off the assets of the company and paying back to the creditors or investors from the sale proceeds of the assets.


Bankruptcy is more or like insolvency but when a person declares himself as an insolvent and submits same to the juridical authorities. On being bankrupt it is the responsibility of the court to liquidate the assets and distribute the sale proceeds to the creditors.

Insolvency Resolution Process


When any corporate or business entity is not able to pay back the amount to its creditors or investors or lenders on time and this goes on for a very long period of time, this leads to the process of insolvency for which the application of insolvency is submitted to the National Company Law Tribunal (NCLT).

The insolvency resolution process can be initiated by any one of out of following three

  • Financial creditor
  • Operational creditor
  • Corporate debtor himself

Provided operational creditor has to send a prior notice of demand for 10 days to the corporate debtor before the initiation of insolvency resolution process.

Insolvency resolution process by creditor under section 7 of Insolvency and Bankruptcy Code, 2016

  1. Financial creditor himself or jointly will initiate by filing an application for the insolvency proceedings against the corporate debtor before NCLT.
  2. Along with the application, he has to submit the proof of default and the name of the proposed resolution professional to be appointed
  3. If NCLT is of the opinion that there is no default on the part of the corporate debtor or there is a proceeding pending against the proposed resolution professional NCLT may reject the application.
  4. NCLT has to entertain the application within 14 days of making the application.

Initation of Insolvency Resolution Process by Operational Creditor under Section 8 of the Code

Before initiating insolvency resolution process operational creditor will serve the corporate debtor with a prior notice of 10 days to the corporate debtor asking him to pay back the dues.

If the corporate debtor does not pay back in that time period or does not bring to the attention of the operational creditor about any dispute or any arbitration proceeding pending against the business or any record of repayment of unpaid operational debt, then the operational creditor can file an application for the insolvency resolution process.

Resolution of Insolvency by the Corporate Debtor under section 10 of the Code

Where the corporate debtor is at fault, the corporate debtor or any corporate applicant can file an application for the initiation of the insolvency resolution process along with the books of accounts and other financial documents of the business. The corporate debtor shall also file the name of the proposed resolution professional along with the application.

Time period for the completion of the Insolvency resolution process under section 12 of the code

Insolvency resolution process will have to be completed within the time period of 180 days after the admission of the application and can extend the time period to 90 days in addition to 180 days only if NCLT thinks fit that the resolution process will take more point of view.

In all the above three situations NCLT has to either admit or reject the application for initiation of insolvency resolution process within 14 days.

Within 14 days of admitting the application, NCLT will appoint the interim insolvency professional with the consent of the insolvency and bankruptcy board.

Public announcement and Moratorium under section 13 & 14 of the code

Public announcement

Once the application for the insolvency resolution process has been admitted the NCLT will make a public announcement for the submission of claims by the creditors also the adjudicating authority i.e. NCLT will appoint the interim resolution professional.


NCLT will declare the moratorium for prohibiting the following

  1. The institution of any suit or pending suit including execution of any judgment or decree against the corporate debtor.
  2. Transferring, encumbering, alienating or disposing of any property or right or beneficial interest.
  3. Any action to foreclose, recover or any security interest created by the corporate debtor in respect of its property.
  4. Recovery of any property by the owner or lessor which is in the possession of the corporate debtor.
  5. Terminate the supply of goods and services to the corporate debtor.

The moratorium shall cease to have the effect on the date on which the resolution process is approved or on the date of the liquidation order.

Appointment of  Interim Resolution Professional

Once a petition gets admitted and order of moratorium is passed then an Interim Resolution professional is appointed who accepts the claims from all the claimants to whom the Corporate Debtor owes.

Formation of Committee of Creditors

Then a committee of creditor is formed where all the financial creditors has the right to vote and is empowered to choose a resolution professional with the majority vote of 66% of total claim value.

Resolution Plan

Various resolution applicants submits different resolution plans before the resolution professional, out of which one gets approved if one of them receives 75% voting towards one plan.


If no resolution plan gets approved within the time period of 180 days including the extension of 90 days i.e. 270 days, then the order of liquidation will get passed by the adjudicating authority.

Disclaimer – Please note that the above articles is based on the interpretation of related laws and judicial pronouncement which may differ from person to person. The reader are expected to take the expert opinion on the matter. 


  1. Thank you for the high light. It would be useful and in public interest if you can throw more high lights on the resolution Is it possible to take the rout of NCLT if an application has already been made to Honble High Court Under section 9 of Arbitration and Conciliation act if there is abnormal in disposal of the case affecting the financial interest of a financial credtor?

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