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;
- 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
- There has been a default in discharging of the above liability, and
- 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;
- 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.
- There has been a default in discharging of the above liability, and
- Amount of such default should be Rs. 100,000/- or more, and
- Notice of demand u/s 8 has been served to the corporate debtor and
- 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;
- The corporate debtor has committed a default, be it operational debt or financial debt, or any other and
- 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.
