HOW TO INITIATE IBC PROCEDINGS

As per Insolvency and Bankruptcy Code, 2016 (IBC), the IBC proceedings can be initiated by the following person, against the corporate debtors if such corporate debtors has committed a default;

a) Financial Creditors

b) Operational Creditors

c) Corporate debtor (itself)

Let’s brief the process for initiation ;

A) ‘Financial Creditor’ – In order to file IBC application u/s 7 of IBC Act, the following three conditions are required to be fulfilled;

  1. the related debt or liability should be covered under financial debt as defined u/s 5(8) of IBC which means any debt which is disbursed against the consideration for the time value of money i.e. interest and includes other as described in above section, and
  2. There has been a default in discharging of the above liability, and
  3. Amount of such default should be Rs. 100,000/- or more

Example: – Mr. A has given loan of Rs. 4 Lacs to B Pvt. Ltd. against the interest of 6% p.a.. B Pvt. Ltd., failed to give 3 EMIs worth Rs. 1.2 lacs then, Mr. A may file application u/s 7 of IBC before NCLT to initiate Corporate Insolvency Resolution process.

B) ‘Operational Creditor’ – The process for the operational creditor is bit different. An operational creditor has to fulfill the following conditions, to initiate the IBC proceedings;

  1. The related debt or liability should be covered under ‘Operation Debt’ which is defined u/s 5(21) of IBC means any claim relating to the provision of goods/service/employment or payable to Government.
  2. There has been a default in discharging of the above liability, and
  3. Amount of such default should be Rs. 100,000/- or more, and
  4. Notice of demand u/s 8 has been served to the corporate debtor and
  5. Neither the payment nor notice of dispute has been received within 10 days of delivery of above notice.

Example: – If Mr. A has an outstanding amount of Rs. 2 lacs, out of sale proceeds to be recovered from B Pvt. Ltd. And B Pvt. Ltd is not making the payment. Now Mr. A shall issue a notice of demand u/s 8 to B Pvt. Ltd. If B Pvt. Ltd does not pay the default amount or raise any dispute within 10 days of delivery of such notice. Then Mr. A may initiate CIRP against B Pvt. Ltd.

C) ‘Corporate Debtor’ – As per section 10 of IBC, a corporate debtor may also start insolvency proceedings against itself if the following conditions are fulfilled;

  1. The corporate debtor has committed a default, be it operational debt or financial debt, or any other and
  2. Amount of such default should be Rs. 100,000/- or more

Example: – If B Pvt. Ltd. has defaulted in repayment of its debt worth Rs. 2 Lacs, then B Pvt. Ltd may initiate CIRP against B Pvt. Ltd u/s 10 of IBC.

FORMS, FEES, AND DOCUMENTS FOR FILING IBC APPLICATION

We have briefed the requirement for a different kind of IBC application as under:

Particulars Financial Creditor Operational Creditor Corporate Debtor
Form for filing application Form 1 Form 5 Form 6
Fees to be paid Rs. 25,000/- Rs. 2000/- Rs. 25,000/-
Adjudicating Authority or court NCLT having jurisdiction of the State where registered office of corporate debtors is situated. NCLT having jurisdiction of the State where registered office of corporate debtors is situated. NCLT having jurisdiction of the State where registered office of corporate debtors is situated.
Notice of Demand Not Applicable Form 3 or 4 Not Applicable
Consent of Insolvency professional Form 2 (compulsory) Form 2 (optional) Form 2 (compulsory)
Documents for application :

Form – 1;

Part 1 – Particular of applicant

Part 2  – Particulars of Corporate debtors

Part 3 – Particulars of proposed IRP

Part – 4 Particulars of financial debt

Part – 5 Documents/records/ evidence of default Annexures – (i) Proof of fees paid, (ii) Proof  of dispatch of application to corporate debtor

 

Form – 5;

Part 1 – Particular of applicant

Part 2  – Particulars of Corporate debtors

Part 3 – Particulars of proposed IRP

Part – 4 Particulars of operational debt

Part – 5 Documents/records/ evidence of default

Annexures – (i) Proof of fees paid, (ii) copy of demand notice (iii) copy certificate or bank statement, (iv) affidavit of no- dispute

Form – 6;

Part 1 – Particular of corporate applicant

Part 2  – Particulars of proposed IRP

Part – 3 Particulars of financial/operational debt

Documents/records/ default as prescribed

 

WHY CENTRIK?

Our IBC team is well equipped with the in-depth knowledge and experience in preliminary research, preparing and filing of IBC application. We provide the committed and result-oriented solutions for every situation. Even we have the highly qualified Insolvency Professionals who are well proficient in Insolvency Laws and have a good amount of experience dealing in such cases. For more information, please get in touch with us at ibc@centrik.in or call our expert at 8383011629.

 

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