UNIVERSITY OF PETROLEUM AND ENERGY

STUDIES
SCHOOL OF LAW

B.A.LL.B (HONS.) CRIMINAL LAW

SEMESTER - 6
PROJECT FOR COMPANY LAW- 2
TOPIC- INSOLVENCY RESOLUTION PROCESS AND
LIQUIDATION
Under the supervision of Prof. Priyanka choudhary
NAME: SAKET SHARMA (72)
500060543
BATCH -2
INTRODUCTION:

The 2016 insolvency and Bankruptcy code (IBC) is India’s bankruptcy law, which aims to merge
and modify existing and related to the reorganization and bankruptcy resolution of legal entities,
partnerships and individuals in a time-limited manner through the enactment of a single law
Legal framework. Bankruptcy and bankruptcy. The code aims to incorporate provisions related
to bankruptcy contained in the 2013 Company Law; the Indian Partnership Act of 1932; the
Limited Liability Partnership Act of 2008; the SARFAESI Act of 2002; and the Sick and
Disabled Industries of 2003 Company (Special Provisions) Abolition Law and 1993 Restoration
Law, etc. In addition, with the introduction of this regulation, the 1909 "Presidential Bankruptcy
Law" and the "Provincial Bankruptcy Law" of 1920 were repealed.

Corporate insolvency Resolution Procedure (CIRP)

The Insolvency Resolution Process (IRP) is the procedure stipulated in the Bankruptcy and
Bankruptcy Law of 2016. When the company defaults and pays creditors, the National company
law tribunal (NCLT) initiates the Corporate insolvency Resolution Procedure (CIRP). Financial
creditors, operating creditors, or the company itself can apply to initiate IRP before NCLT in the
event of a default. If it is a housing project, after the modification in the code, if the developer
fails to provide ownership or refund of the house, the buyer can also initiate an IRP to NCLT.

According to the IRP, an interim settlement expert will be appointed to be responsible for the
company that has breached the contract. The task of professionals is to take the necessary steps
to revitalize the company. The appointed professionals also have the right to raise new funds to
continue operations.

IRP was granted 180 days to find a solution, which can be extended by 90 days. If the IRP fails
to find a solution at the time, the company will be liquidated to repay creditors.

When discussing the process of bankruptcy settlement, many terms are used, such as company
debtors, temporary settlement experts, settlement experts, settlement plans, etc. In order to
understand the process of bankruptcy settlement, it is important to understand these terms. These
terms have been discussed in detail in the following paragraphs.

At this point, it must be reiterated that the use of the word "solve" throughout the bankruptcy
proceedings is to emphasize the fact that IBC is focused on reviving corporate entities by solving
corporate debt problems.
IBC's bankruptcy and settlement procedures can be discussed in two chapters. Chapter one deals
with the bankruptcy and liquidation of the company's debtors. The minimum amount of default is
Rs 100,000. The premise is that the central government can specify a higher default minimum
amount of no more than 10 million rupees by notification. The second involves the bankruptcy
and liquidation of the company ’s debtors, with a minimum default of 100,000 rupees. The
premise is that the central government can specify a higher default minimum amount of default
by notification, which must not exceed Rs 10 crore.

Financial Creditor : It can be anyone owed to the company, or it can be someone who legally
transfers or transfers the money. For example: bank or other financial institution.

Operational Creditor : It can be anyone who owes its operating debts, including anyone who
legally transfers or transfers the amount due to the goods or services it provides. For example:
suppliers and suppliers, employees, government, etc.

The Insolvency and Bankruptcy Law of 2016 provides for insolvency or bankruptcy applications
for startups, individuals, partnerships, limited liability partnerships and companies. The Code
provides capital letters for the default amount in each category, but the final amount should be
notified by the government as the trigger point for starting the process, taking into account
economic fluctuations. It is important to understand that the amount is not the minimum or
maximum fixed amount of default, but a "range".

After application, CIRP will start. CIRP is the process of determining whether a defaulter has the
ability to repay. If someone is unable to repay the debt, the company will be restructured or
liquidated. The following are the steps that the resolution company or liquidation company
should follow:

1.  Application to NCLT: The company or the company ’s own financial or operating

creditors may apply to the National Company Law Tribunal (NCLT). The application is
made to recognize that the company (according to IBC's corporate debtor) has entered the
company's bankruptcy settlement process. To this end, creditors are required to present a
default payment of more than INR 1,00,000, and NCLT must pass an order to accept or
reject the application within 14 days. Before NCLT makes an application, financial
creditors and operating creditors must comply with different obligations. Financial
creditors need to submit default records, while operating creditors need to first demand
their outstanding debts. Based on the ongoing dispute, the company ’s debtor can defend
the claim.
2. Interim Resolution Professional & Moratorium: When the company's debtor is
accepted as a CIRP, it will suspend the board of directors. In addition, managers are
employed by independent “provisional settlement experts”. In addition, from then on,
before the end of CIRP, the management will no longer have any control over the
company's affairs. At the same time, the suspension takes effect and prohibits:
 a. Continuation or initiation of any legal proceedings against the corporate debtor
b. Transfer of its assets
c. Enforcement of any security interest
d. Recovery of any property from it by an owner
e. Suspension or termination of the supply of essential goods and services, the
moratorium lasts till the corporate debtor is in CIRP

3. Verification and Analysis of Claims: At this stage, the interim settlement expert will
convene and verify the creditor's claims and classify them. Thereafter, within 30 days of
accepting the CIRP, a creditor committee (COC) will be formed, which includes all
financial creditors of the company's debtors.
4. Appointment of Resolution Professional: Within 7 days after the establishment of the
committee, the COC must decide to appoint a temporary resolution professional as a
resolution professional or replace the temporary resolution professional with another
resolution professional.
5. Approval of the “Resolution Plan”: The solution plan for the company ’s renaissance
must be approved by creditors within 180 days of the CIRP becoming effective. NCLT
can extend the period by another 90 days. Anyone, manager, creditor or third party can
propose such a plan. Solutions professionals are responsible for ensuring that the plan
meets the standards set out in the Insolvency and Bankruptcy Law 2016.

If a plan is approved within this period and sanctioned by NCLT: The approved solution
plan is binding on the company ’s debtors and their employees, members, creditors, guarantors
and other stakeholders involved in the solution plan. The resolution expert is responsible for
obtaining all necessary approvals required by any valid law within one year from the date of
approval by the adjudication body.

If no resolution plan is approved within the said period: If the solution is not approved,
NCLT is obliged to order the liquidation of the company ’s debtors. After the liquidation is
approved, the COC appoints a liquidator to sell the company ’s debtor ’s assets and share it with
stakeholders. Distribution according to Section 53 of the Insolvency and Bankruptcy Code of
2016.

Liquidation

i. Initiation of liquidation: In the following cases, the court shall pass a liquidation order:
1. Failure to submit a settlement plan to the court within the prescribed time limit, or
2. -Reject the resolution plan due to non-compliance with the requirements of the Code,
or
3. -The decision of the creditor committee based on a majority vote, or
 4. -The company violated the plan of the solution.

During the liquidation period, the company may not bring a lawsuit or other lawsuits against the
company without the permission of the court. The liquidation order shall be regarded as a notice
of cancellation of the company's debtor's officers, employees and workers, unless the liquidator
continues the company's debtor's business during the liquidation process.

ii. Appointment of liquidator: Unless replaced by an arbitral tribunal, the settlement expert
will act as the liquidator. After the appointment of a liquidator, all powers of the
company's board of directors and key management personnel should no longer be
effective and should be vested in the liquidator. Company personnel must provide all
assistance and cooperation to the liquidator in accordance with the requirements of the
liquidator in the management of company affairs.

iii. Powers and Duties of the Liquidator: The liquidator shall follow the instructions of the
court and have the following powers and duties:

a. Verify the claims of all creditors;

b. Custody or control of all assets, property, property and claims of the company;
c. Assess the company's assets and property in accordance with the method prescribed
by the board of directors, and prepare a report;
d. Take measures that he deems necessary to protect and preserve the company’s assets
and property;
e. Conduct the liquidation business of the company that it deems necessary;
f. The sale of the company’s real and movable property and suable claims;
g. Inviting and resolving the claims of creditors and creditors, and distributing proceeds
in accordance with the provisions of this Code;
h. Take all such actions, steps, or any bills, deeds, contract documents, receipt
documents, applications, petitions, affidavits, bonds or instrument liquidator duties
necessary to sign, execute and verify liquidation, asset allocation and liquidation ,
Obligations and functions; and
i. Perform other functions prescribed by the board of directors

iv. Dissolution of company: If the company’s assets have been fully liquidated, the
liquidator shall apply to the court to dissolve the company. The court shall dissolve the
company as requested by the liquidator's order and dissolve the company accordingly.

Voluntary Liquidation of Company

A company that intends to voluntarily liquidate and has not defaulted and can fully repay its
debts from its assets liquidation proceeds can initiate voluntary liquidation procedures in
accordance with the provisions of Chapter V of the 2016 Insolvency and Bankruptcy Law.
Voluntary liquidation needs to meet the following conditions:

1. Director's statement: The statement of the majority of the company’s directors was verified
by an affidavit, stating that-(i) they had conducted a full investigation of the company’s
affairs and believed that the company had no debt or would assume debt. Ability to fully
repay debt from the proceeds of assets sold in voluntary liquidation; (ii) The Company has
not been liquidated to deceive anyone.
The statement must be accompanied by the following documents: (i) the audited financial
statements of the company for the first two years or the period after the establishment of the
company (whichever is later) and the company’s operating records; (ii) prepared by a
registered valuer Company's asset valuation report.

2. Passing of Special Resolution: Within four weeks after the declaration, the company must
pass:
a. The special resolution of the company's members at the shareholders' meeting
requires the company to voluntarily liquidate and appoint a bankruptcy
professional as liquidator;
b. The resolution of the company’s members at the general meeting of shareholders
requires the company to voluntarily liquidate the terms and conditions of the
company in accordance with the time limit (if any) specified in its articles of
association or the occurrence of the event, as the case may be However, the
company should be dissolved and a bankruptcy professional designated as the
liquidator.

3. Creditors' resolution:When the company owes debts to anyone, creditors, which account
for two-thirds of the company ’s debt value, shall approve the resolution passed by the
company within 7 days of the resolution.

4. Inform the Registrar and the Board of Directors:The company must notify the company
registry and the board of directors of the resolution or liquidation of the company's resolution
within 7 days of the resolution or the creditors' subsequent decision as the case may be.

5. Voluntary liquidation begins: The voluntary liquidation procedures related to the company
shall be calculated from the day when the resolution is passed. The provisions of voluntary
liquidation shall apply.
6. Dissolution: If the affairs of the company's legal person have been completely cleared and its
assets have been liquidated, the liquidator shall apply to the court to dissolve the company.
The court shall pass an order in the application filed by the liquidator, requiring the company
to be dissolved from the date of the order.

IMPORTANT CASES

 Trade Links Corporation v. Nalanda Tobacco Co. Pvt. Ltd

 Praneet Enviroquips Pvt. Ltd. v. Vishal Papertech (India) Ltd
 Re. Yenidje Tobacco Ltd
 Re. Steam Navigation Co.
 Re. German Date Coffee Co