In this article we have tried to discuss the initiation process of Insolvency Resolution by a financial creditor in the easiest possible manner along with the time line that is required to be followed.
As per the case law Surendra Trading Company vs. Juggilal Kamlapat Jute Mills Company Limited & others, SC 2017, timelines in IBC are recommendatory and mandatory but the time period of 180-270 days for conducting the insolvency process is mandatory.
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.
Procedure to be followed by Financial Creditor for initiating Insolvency Process
→ File application for initiation of CIRP under section 7 of IBC, 2016.
- Before NCLT within 14 days
- NCLT either accepts or rejects application and informs within 7 days
- If rejects then application to be re-filed within 7 days
- If accepts then appoint an Interim Resolution Professional
- IRP will make collation of claims and form committee of creditors within 30 days
- RP to conduct meeting of committee of creditors.
- CoC either accepts or rejects IRP to continue as Resolution Professional within 7 days by 75% voting
- If rejects, then file application before NCLT for proposed RP, then Board will confirm or reject the proposed RP.
- If Board doesn’t confirm within 10 days, IRP to continue as RP and conduct the Insolvency process within 180 days.
- If CoC accepts the IRP as RP, then inform the corporate debtor, AA and the IRP.
- RP to commence Insolvency process and conduct it within 180 days.
- Resolution applicant to submit resolution plan/s to RP
- RP to submit resolution plan to CoC and seek their approval.
- If they reject the plan, fresh plan to be invited.
- If they accept the plan, then approved plan to be submitted before NCLT by RP.
- NCLT to pass order on corporate debtor to resolve, repay within 30 days.
- If they fail to pay within 30 days then they can be punished.
- If the Corporate debtor is aggrieved and doesn’t approve of the order passed, then it can appeal before NCLAT.
- NCLAT to decide within 30 days.
- If CD still aggrieved then it can approach the Supreme Court, and SC to decide upon the matter within 45 days.
**All the information regarding the corporate debtor can be gathered from the Information Utilities before initiating the corporate insolvency resolution process.
What is an Information Utility and how is it beneficial in the process?
Information utility is an information network which would store financial data like borrowings, default and security interests among others of firms. The utility would specialise in procuring, maintaining and providing/supplying financial information to businesses, financial institutions, adjudicating authority, insolvency professionals and other relevant stakeholders.
In this article we have discussed about the insolvency procedure by a financial creditor, mentioning his rights, the adjudicating authority and their powers, all about the role play of the Insolvency Professional and the time period required to initiate and conduct the whole process. This article aims to help the readers understand the IBC and its procedures in the best possible manner.
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.