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3
INSOLVENCY AND
BANKRUPTCY CODE, 2016
LEARNING OUTCOMES
After reading this Chapter, you will be able to understand:
 Relationship between bankruptcy, insolvency and liquidation
 Important terminologies used in the Code.
 Structure and applicability of the Code.
 Process of initiation of Corporate Insolvency Resolution Process (CIRP) by the Financial
Creditor, Operational Creditor or the Corporate Debtors itself
 Liquidation Process of the Corporate Debtor
 Pre-Packaged Insolvency Resolution Process (PPIRP)
 Fast Track Corporate Insolvency Resolution Process.
 Process of Voluntary Liquidation of Corporate Persons.
 Adjudicating Authority for Corporate Persons
 Offences and Penalties
 Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms covering the
aspects of Fresh Start Process, Insolvency Resolution Process, Bankruptcy Order for
Individuals and Partnership Firms, Administration and Distribution of the Estate of the
Bankrupt, Adjudicating Authority for Individuals and Partnership Firms & Offence and
Penalties relating to this Part
 Regulation of Insolvency Professionals, Insolvency Professional Agencies and information Utilities
covering the aspects relating to Insolvency and Bankruptcy Board of India (IBBI), its Powers
Functions, Insolvency Professional Agencies (IPAs), Insolvency Professionals (IPs), Information
Utilities, Inspection and Investigation by IBBI, Finance, Accounts and Audit of IBBI.
 Knowledge of miscellaneous provisions regarding the management of the Insolvency and
Bankruptcy Fund, Delegation of powers, Bar of jurisdiction, Enabling provisions under the
Code for cross border transactions, Trial of Offences, and the Regulation of Powers to make
Rules and Regulations under the Code.
© The Institute of Chartered Accountants of India

3.2 ECONOMIC LAWS
1. INTRODUCTION
Concept of Insolvency and Bankruptcy
• The term insolvency is used for both individuals and organizations. Insolvency is state of not
being able to pay off debts due to insufficient cash flow, and bankruptcy is a legal declaration
of one’s inability to pay off debt. Insolvency in this Code is regarded as a “state” where assets
are insufficient to meet the liabilities. Untreated insolvency will lead to bankruptcy for non-
corporates and liquidation of corporates. Creditors put money into debt investments today in
return for the promise of fixed future cash flows. But the returns expected on these
investments are still uncertain because at the time of repayment, the corporate or individual
(debtor) may make repayments as promised, or he may default and does not make the
payment. When this happens, the debtor is considered insolvent. Other than cases of outright
fraud, the debtor may be insolvent because of:
- Financial Failure: a persistent mismatch between payments by the enterprise and
receivables into the enterprise, even though the business model is generating
revenues, or
- Business Failure: which is a breakdown in the business model of the enterprise, and
it is unable to generate sufficient revenues to meet payments 1
Term 'Insolvency' can be used for-
Individuals Organization/Corporates
Known as Corporate
known as Bankruptcy
insolvency
State when an individual or company are not able to pay the debt
and the value of assets held by them are less than liability
If, untreated insolvency, it will lead to-
For non-corporates Corporates
Bankruptcy Liquidation
1 The Report of the Bankruptcy Law Reforms Committee Volume I: Rationale and Design, November 2015

INSOLVENCY AND BANKRUPTCY CODE, 2016 3.3
• From the above it is evident that insolvency is a state and bankruptcy is a conclusion. A
bankrupt would be a conclusive insolvent whereas all insolvencies will not lead to
bankruptcies. Insolvency situation can be resolved through resolution mechanism under the
Code and a failed resolution mechanism would lead to liquidation process in relation to
corporates and bankruptcy process in relation to individuals under the Code.
Relationship between Bankruptcy, Insolvency & Liquidation
Bankruptcy is a legal proceeding involving a person or business that is unable to repay
outstanding debts. The bankruptcy process begins with a petition filed by the debtor, or by
the creditors. All of the debtor's assets are measured and evaluated, and the assets may be used
to repay a portion of outstanding debt.
In lucid language, if any person or entity is unable to pay off the debts, it owes, to their creditor,
on time or as and when they became due and payable, then such person or entity is regarded as
“insolvent”.
Liquidation is the winding up of a corporation or incorporated entity. There are many persons
that can initiate proceedings to cause the Liquidation, those being:-
• The Regulatory Bodies;
• The Directors of a Company;
• The Shareholders of a Company; and
• An Unpaid Creditor of a Company
In nut shell, insolvency is common to both bankruptcy and liquidation. Not being able to pay debts
as and when they became due and payable are the leading cause of Liquidations and is the only
way that can cause a natural person to become a bankrupt.
Objectives: A sound legal framework of bankruptcy law was required for achieving the following
objectives:-
• Improved handling of conflicts between creditors and the debtor: It can provide
procedural certainty about the process of negotiation, in such a way as to reduce problems
of common property and reduce information asymmetry for all economic participants.
• Avoid destruction of value: It can also provide flexibility for parties to arrive at the most
efficient solution to maximise value during negotiations. The bankruptcy law will create a
platform for negotiation between creditors and external financiers which can create the
possibility of such rearrangements.
• Drawing the line between malfeasance and business failure: Under a weak insolvency
regime, the stereotype of “rich promoters of defaulting entities” generates two strands of thinking:
(a) the idea that all default involves malfeasance and

3.4 ECONOMIC LAWS
(b) the idea that promoters should be held personally responsible for defaults of the firms
that they control.
• Clearly allocate losses in macroeconomic downturns: With a sound bankruptcy
framework, these losses are clearly allocated to some people. Loss allocation could take
place through taxes, inflation, currency depreciation, expropriation, or wage or consumption
suppression. These could fall upon foreign creditors, small business owners, savers, workers,
owners of financial and non-financial assets, importers, exporters.
The recommendations of the Bankruptcy Law Reforms Committee (BLRC) led to the enactment
of the Insolvency and Bankruptcy Code, 2016 (“IBC or code”) on May 28, 2016.
The IBC, consolidating all existing insolvency-related laws, has brought about a revolutionary
change in the form of a robust, modern and sophisticated insolvency framework. This framework
seeks to achieve a resolution for corporate debtors in distress and failing that, their liquidation in
a time bound manner.
The Supreme Court in the case of Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil
Appeal No. 8337-8338 of 2017, dated 31.08.2017] stated that one of the important objectives of
the Code is to bring the insolvency law in India under a single unified umbrella with the objective
of speeding up the insolvency process.
The Code seeks to provide an effective legal framework for timely resolution of insolvency and
bankruptcy which would support development of credit markets and encourage entrepreneurship,
and facilitate more investments leading to higher economic growth and development.
In the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) No. 99,
100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and WP
(Civil) 37 of 2019, dated 25.01.2019], the Supreme Court stated that the Code is a beneficial
legislation which puts the CD back on its feet and is not a mere recovery legislation for creditors.
The interests of the CD have, therefore, been bifurcated and separated from that of its
promoters/those who are in management. The defaulter’s paradise is lost. In its place, the
economy’s rightful position has been regained.
Structure of the Code
The Code is structured into 5 parts comprising of 255 sections and 12 Schedules 2. Each part deals
with a distinct aspect of the insolvency resolution process.
Part Part Content Chapters Chapter / Contents
and Sections
I Preliminary (1-3) 1. Short title, extent & Commencement
2. Application
2 Twelfth Schedule inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018

3. Definitions
II Insolvency I–VII I. Preliminary (Application & Definitions)
Resolutions (4–77) II. Corporate Insolvency Resolution Process
and Liquidation
III. Liquidation Process
for Corporate
Persons IIIA. Pre-packaged Insolvency Resolution
Process
IV. Fast Track Corporate Insolvency
Resolution Process
V. Voluntary Liquidation of Corporate Persons
VI. Adjudicating Authority for Corporate
Persons
VII. Offences & Penalties
III Insolvency I – VII I. Preliminary (Application & Definitions)
Resolution and (78-187) II. Fresh Start Process
Bankruptcy for
III. Insolvency Resolution Process
Individuals and
Partnership IV. Bankruptcy Order for Individuals &
Firms Partnership Firms
V. Administration & Distribution of the Estate
of the Bankrupt
VI. Adjudicating Authority
VII. Offences & Penalties
IV Regulation of I – VII I. The Insolvency and Bankruptcy Board of
Insolvency (188–223) India
Professionals, II. Powers & Functions of the Board
Agencies and
III. Insolvency Professional Agencies
Information
Utilities IV. Insolvency Professionals
V. Information Utilities
VI. Inspection & Investigation
VII. Finance, Accounts & Audit
V Miscellaneous (224 – 255) Miscellaneous
Schedules
I Amendment to the Indian Partnership Act, 1932
II Amendment to the Central Excise Act, 1944
III Amendment to the Income-tax Act, 1961
IV Amendment to the Customs Act, 1962

3.6 ECONOMIC LAWS
V Amendment to Recovery of Debts due to Banks and Financial Institutions Act, 1993
VI Amendment to the Finance Act, 1994
VII Amendment to the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest, Ct, 2002
VIII Amendment to Sick Industrial Companies (Special Provisions) Repeal Act, 2003
IX Amendment to Payment and Settlement Act, 2007
X Amendment to the Limited Liability Partnership Act, 2008
XI Amendment to the Companies Act, 2013
XI Acts for the purposes of Clause (d) of Section 29A
An Insolvency and Bankruptcy Board of India (IBBI) is established to administer the work of
insolvency and bankruptcy of corporate persons, firms and individuals.
Foundation of Code:
A key innovation of the IBC is a four-pillar institutional framework, comprising:
(a) the first pillar of the judicial adjudicating authority, being the National Company Law Tribunal
(NCLT or Adjudicating Authority) where corporate insolvency matters shall be heard & and
NCLAT will be Appellate Authority;
(b) the second pillar of the regulator, being Insolvency and Bankruptcy Board of India (IBBI)
which has regulatory oversight over insolvency professionals and insolvency professional
agencies (IPA);
(c) the third pillar of a class of regulated persons, being the insolvency professionals who play a
key role in the efficient working of the insolvency and bankruptcy process under the IBC; and,
(d) the fourth pillar of a new industry called information utilities (IU) to electronically store facts
about lenders and terms of lending.
Initiation of Corporate Insolvency Resolution Process (“CIRP”)
CIRP proceedings may be initiated against a corporate debtor by the corporate debtor itself or any
of its financial creditor or operational creditor. When the Code was enacted, the minimum amount of
default to initiate CIRP against a corporate debtor was INR One Lakh. However, the Central
Government has by notification dated 24th March 2020 raised the threshold value of minimum
amount of default to one crore rupees.

The detailed procedure for initiation of CIRP by stakeholders is described as follows:
Control of Assess the

when an Committee
Defaults enterprise proposals
enterprise of Creditors
shifts to either to
• individual, • revive the

• firm, or enterprise or
• corporate • take for
person liquidation.
Decisions are required to be taken in a time bound manner so that there are greater chances that
the enterprise is saved as a going concern and productive resources of economy can be put to best
use. The CIRP commences from the date of admission of an application for its initiation. The process
entails a moratorium where creditors stay their claims to give the debtor a better chance to survive
as a going concern. The moratorium period is 180 days and in limited circumstances, if the CoC,
with a 66% majority, decides that the complexity of the case requires more time for a resolution plan
to be finalized, a one-time extension of up to 90 days may be granted with prior approval of the
NCLT.
The CIRP shall mandatorily be completed within a period of 330 days from the insolvency
commencement date, including any extension and the time taken in legal proceedings in relation to
the resolution process of the corporate debtor. The said amendment has been undertaken to ensure
a timely resolution in view of the fact that the 270 day deadline was being breached on account of
legal proceedings against the corporate debtor 3.
Provisions relating to Corporate Insolvency Resolution Process (section 4 to section 32 of the
Code) will be applicable.
Provisions relating to Liquidation Process of Corporates (section 33 to section 54 of the Code)
will be effective in case where the enterprise is taken for liquidation.
Provisions relating to Fast Track Corporate Insolvency Resolution Process of Small
Corporate Persons (section 55 to section 58 of Insolvency Code) will be effective in case where
the enterprise is a small company as per Companies Act, 2013 or a start-up or an unlisted company
with total assets not exceeding rupees one crore.
Provisions relating to Voluntary Liquidation (section 59 of the Code) will be applicable to
corporate person who intends to liquidate itself voluntarily and has not committed any default.
3 Inserted by the Insolvency and Bankruptcy Code (Amendment) Act, 2019, w.e.f. 16.08.2019

3.8 ECONOMIC LAWS
Winding up of companies - In most of the cases, winding up of companies will be through the
Insolvency Resolution Process only.
Bankruptcy of individuals and firms - Part III of Insolvency Code 2016 (containing sections 78-
187) deals with insolvency resolution and bankruptcy for individuals and partnership firms. This Part
shall apply to matters relating to fresh start, insolvency and bankruptcy of individuals and partnership
firms. Debt Recovery Tribunal (DRT) will be the Adjudicating Authority and Debt Recovery Appellate
Tribunal (DRAT) will be the Appellate Authority for individuals and firms. These provisions are not
yet effective as not notified except for the provisions pertaining to personal guarantors to corporate
debtors 4 in which case the NCLT will be the Adjudicating Authority and NCLAT will be Appellate
Authority.
Flow of insolvency resolution process for individuals-
• The process will be managed by 'resolution professional' under the direction of 'Adjudicating
Authority'.
• Insolvency Resolution Process will be initiated.
• Finalise 'repayment plan' with concurrence of debtor and committee of creditors.
• Upon consensus on repayment plan the individual or firm will get a discharge order.
• On failure to finalize the repayment plan, the creditors/debtor can file an application for
'bankruptcy' and the Adjudicating Authority may pass the bankruptcy order.
• The resolution professional who is a bankruptcy trustee will take over estate of the bankrupt.
He will sell or dispose it off and satisfy payments of creditors to the extent possible.
• After that, the bankrupt will get a 'discharge order'.
• The discharge order will be registered with Board (IBBI) in a register referred to in section
196 of the Code.
Provisions of this Code to override other laws: Section 238 of the Code states that the Code
shall have overriding effect over other laws.
For example, sections 53 and 178 of Insolvency Code, 2016 provide that distribution from sale of
assets will be as specified in that section, notwithstanding anything to the contrary contained in any
law enacted by the Parliament or any State Legislature for the time being in force.
Many tax laws (including GST) also provide for first charge on assets of the taxable person.
These are examples of overriding provisions.
4 Notification dated November 15, 2019

Extent and Commencement of the Code:

As per section 1 of the Insolvency and Bankruptcy Code, it extends to the whole of India.
This Code came into an enforcement on 28th May 2016, however, the Central Government appointed
different dates for different provisions of this Code and any reference in any such provision to the
commencement of this Code shall be construed as a reference to the commencement of that
provision.
Journey of Insolvency Legislation from Bill to Latest Amendment
• The Insolvency and Bankruptcy Code, 2015 ( Bill No. 349 of 2015), dated 21 st December,
2015
• The Insolvency and Bankruptcy Code, 2016 ( Act No. 31 of 2016), 28 th May, 2016
• The Insolvency and Bankruptcy Code (Removal of Difficulties) Order, 2017.(S.O. 1683(E)
dated 24th May, 2017
• Insolvency and Bankruptcy Code (Amendment) Act, 2018: The Code has been first
amended by the Insolvency and Bankruptcy (Amendment) Ordinance, 2017, passed on
November 23, 2017.This Ordinance became an Act on January 18, 2018. It was known as the
Insolvency and Bankruptcy Code (Amendment) Act, 2018. It was made applicable from
November 23, 2017.
• The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018: The second
amendment was made vide the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2018, on June 6, 2018. Further, the said ordinance, in the form of the Insolvency
and Bankruptcy (Second Amendment) Bill received the assent of the President on the 17th
August, 2018 and thus the Insolvency and Bankruptcy Code (Second Amendment) Act,
2018 was enacted.
• The Insolvency and Bankruptcy Code (Amendment) Act, 2019: The third amendment was
made vide the Insolvency and Bankruptcy Code (Amendment) Bill, 2019 which received
the assent of the President on 5th August, 2019 and thus the Insolvency and Bankruptcy
Code (Amendment) Act, 2019 was promulgated.
• Insolvency and Bankruptcy Code (Amendment) Act, 2020: The fourth amendment was
made vide the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, on
December 28, 2019. Further, the said ordinance, in the form of the Insolvency and Bankruptcy
(Amendment) Bill, 2020 received the assent of the President on the 13th March, 2020 and
thus the Insolvency and Bankruptcy Code (Amendment) Act, 2020 was enacted.
• The Insolvency and Bankruptcy Code (Second Amendment) Act, 2020 (17 of 2020) dated
23rd September, 2020: Due to the advent of COVID-19 pandemic, the IBC was amended by

3.10 ECONOMIC LAWS
insertion of Section 10A to suspend the initiation of CIRP under Sections 7, 9 and 10 of the
IBC for any default arising on or after March 25, 2020.
• The Insolvency and Bankruptcy Code (Amendment) Act, 2021 (26 of 2021) dated 11 th August,
2021: Amendment of Section 5, 11, 33, 34, and Insertion of new section 11A, Chapter IIIA,
Section 67A, 77A.
• The Code has undergone significant amendments since its enactment to keep up with the
developments and demands of the economy.
Object behind the enactment of the Code
The object behind the enactment of the Code lies in its Preamble, which provides that it is-
An Act -
• To Consolidate and Amend the laws relating to Reorganisation and Insolvency Resolution
of -
 Corporate persons,
 Partnership firms; and
 Individuals
• In a time bound manner for maximization of value of assets of such persons to
 Promote entrepreneurship,
 Availability of credit and
 Balance the interests of all the stakeholders including
 Alteration in the order of priority of payment of Government dues; and
• To establish an Insolvency and Bankruptcy Board of India, and
• for matters connected therewith or incidental thereto.
2. PRELIMINARY – PART I
Short Title, Extent and Commencement [Section 1]
(1) This Code may be called the Insolvency and Bankruptcy Code, 2016.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the
Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Code and any
reference in any such provision to the commencement of this Code shall be construed as a
reference to the commencement of that provision.
The Central Government vide its Gazette Notification No. S.O. 2618(E) dated 5 th August, 2016
appointed the 5th day of August, 2016 as the date on which the provisions of sections 188 to 194
(both inclusive) of the Code came into force.
Further the Central Government vide its Gazette Notification No. S.O. 2746(E) dated 19 th August,
2016 appointed the 19th day of August, 2016 as the date on which the provisions of following
sections of the Code came into force:—
1. section 3 – Clauses (1),(5),(22),(26), (28), (37)
2. section 221;
3. section 222;
4. section 225;
5. section 226;
6. section 230;
7. section 232;
8. section 233;
9. sub-section (1) and clause (zd) of sub-section (2) of section 239;
10. sub-section (1) and clause (zt) of sub-section (2) of section 240;
11. section 241; and
12. section 242.
Applicability of the Code [Section 2]
The provisions of the Code shall apply for insolvency, liquidation, voluntary liquidation or
bankruptcy of the following entities:-
(a) Any company incorporated under the Companies Act, 2013 or under any previous law.
(b) Any other company governed by any special act for the time being in force, except in so far
as the said provision is inconsistent with the provisions of such Special Act.
(c) Any Limited Liability Partnership under the LLP Act 2008.
(d) Any other body incorporated under any law for the time being in force, as the Central
Government may by notification specify in this behalf.

3.12 ECONOMIC LAWS
(e) 5Personal guarantors to corporate debtors (CD);

(f) Partnership firms and proprietorship firms; and
(g) Individuals, other than persons referred to in clause (e)
in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.
In the matter of State Bank of India Vs. V. Ramakrishnan & Anr. [Civil Appeal No. 3595 of
2018 with 4553 of 2018, dated 14.08.2018] the Supreme Court stated that Section 2(e) of the
Code, which was brought into force on 23.11.2017 would, when it refers to the application of
the Code to a personal guarantor of a CD applies only for limited purpose contained in
section 60(2) and (3). This is what is meant by strengthening the CIRP in the Statement of
Objects and Reasons of the Insolvency and Bankruptcy Code (Amendment) Act, 2018.
Companies
Personal
(Governed by Partnership individuals,
guarantor
Companies Act, Notified Firms & other than
LLP s to
2013/under any entity proprietorship personal
Corporate
previous law/by firms guarantors
Debtor
any sepcial act)
Non-applicability of the Code: The Code is not applicable to corporates in finance sector.
Section 3(7) of Insolvency & Bankruptcy Code, 2016 states that "Corporate person" shall not
include any financial service provider.
Thus, the Code does not cover Bank, Financial Institutions, Insurance Company, Asset
Reconstruction Company, Mutual Funds, Collective Investment Schemes or Pension Funds.
"Financial service provider" means a person engaged in the business of providing financial
services in terms of authorisation issued or registration granted by a financial sector regulator
[section 3(17)].
However, section 227 of the Code, which was notified on 1-5-2018 provided that, Central
Government can notify financial service providers for purpose of insolvency and liquidation
proceedings, which may be conducted under the Insolvency & Bankruptcy Code, in consultation
with appropriate financial sector regulator. As per notification dated 18-11-2019 it has been
notified by the Central Government that insolvency resolution and liquidation proceedings of non-
banking finance companies (which include housing finance companies) with asset size of Rs.500
5Personal guarantors of corporate debtors have been treated as a separate class. The application for
bankruptcy of individual personal guarantor will have to be filed before NCLT as per section 60(2) of the IBC,
2016. Insolvency Code has been made applicable to personal guarantors of corporates w.e.f. 23-11-2017

crore or more, as per last audited balance sheet, shall be undertaken in accordance with the
provisions of the Code and Rules made thereunder.
3. IMPORTANT DEFINITIONS [SECTIONS 3 AND 5]

(1) Board means the Insolvency and Bankruptcy Board of India (IBBI) established under section
188(1) of the Code [Section 3(1)].
The Board shall be a body corporate by the name aforesaid, having perpetual succession
and a common seal, with power, subject to the provisions of this Code, to acquire, hold and
dispose of property, both movable and immovable, and to contract, and shall, by the said
name, sue or be sued [Section 188(2)].
The Board will have powers of civil court as to the issue of summons, discovery and
production of books, inspection of books/registers and issue of commissions for examination
of witnesses [Section 196(3) of the Code].
(2) Charge means an interest or lien created on the property or assets of any person or any of
its undertakings or both, as the case may be, as security and includes a mortgage;[ Section
3(4)]
(3) Claim means
(a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed,
undisputed, legal, equitable, secured, or unsecured;
(b) right to remedy for breach of contract under any law for the time being in force, if
such breach gives rise to a right to payment, whether or not such right is reduced to
judgment, fixed, matured, unmatured, disputed, undisputed, secured or
unsecured;[Section 3(6)]
♦ In the case of Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil Appeal
Nos. 8337-8338 of 2017, dated 31.08.2017], the Supreme Court opined that
‘Claim’ under section 3(6) of the Code means a right to payment, even if it is
disputed.
♦ In another case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP
(Civil) Nos. 99, 100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil)
No. 28623 of 2018 and WP (Civil) 37 of 2019, dated 25.01.2019], the Supreme
Court clarified that ‘Claim’ gives rise to ‘debt’ only when it is due and ‘default’
occurs only when debt becomes due and payable and is not paid by the debtor.
(4) Corporate Person means
(a) a company as defined under section 2(20) of the Companies Act, 2013;
(b) a Limited Liability Partnership as defined in 2(1)(n) of Limited Liability Act, 2008; or,

3.14 ECONOMIC LAWS
(c) any other person incorporated with limited liability under any law for the time being in
force but shall not include any financial service provider. [Section 3(7)]
While deciding the case of Hindustan Construction Company Ltd. & Anr. Vs. Union of India &
Ors. [WP (Civil) No. 1074 of 2019 with other Civil Appeals, dated 27.11.2019], the Supreme
Court opined that National Highway Authority of India (NHAI) is a statutory body which
functions as an extended limb of the Central Government and performs Governmental
functions which obviously cannot be taken over by an RP, or by any other corporate body nor
can NHAI ultimately be wound up under the Code. For all these reasons, it is not possible to
either read in, or read down; the definition of ‘corporate person’ in section 3(7) of the Code
to include NHAI.
(5) Corporate Debtor means a corporate person who owes a debt to any person. [ Section 3(8)]
The Supreme Court in the case of Laxmi Pat Surana Vs. Union Bank of India & Anr. [Civil
Appeal No. 2734 of 2020, dated 26.03.2021] held that if a corporate person extends
guarantee for the loan transaction concerning a principal borrower not being a corporate
person, it would still be covered within the meaning of expression "corporate debtor" in
section 3(8) of the Code.
(6) Core services means services rendered by an information utility for—
(a) accepting electronic submission of financial information
(b) safe and accurate recording of financial information;
(c) authenticating and verifying the financial information submitted by a person; and
(d) providing access to information stored with the information utility to persons as may
be specified [Section 3(9)]
(7) Creditor means any person to whom a debt is owed and includes –
 a financial creditor,
 an operational creditor,
 a secured creditor,
 an unsecured creditor, and
 a decree holder. [Section 3(10)]
 In the case of Nikhil Mehta and Sons Vs. AMR Infrastructure Ltd. [CA (AT) (Ins.) No.
7 of 2017, dated 21.07.2017] the NCLAT held that the parties who have entered into
agreement, for purchase of flat or shop or any immovable property, which contains a
clause of assured or committed returns are ‘financial creditors’ under the Code.
(8) Debt means a liability or obligation in respect of a claim which is due from any person and
includes a financial debt and operational debt. [Section 3(11)]

(9) Financial Debt - "Financial debt" means a debt along with interest, if any, which is disbursed
against the consideration for the time value of money and includes—
(a) money borrowed against the payment of interest.
(b) any amount raised by acceptance under any acceptance credit facility or its de-
materialised equivalent.
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument.
(d) the amount of any liability in respect of any lease or hire purchase contract which is
deemed as a finance or capital lease under the Indian Accounting Standards or such
other accounting standards as may be prescribed.
(e) receivables sold or discounted other than any receivables sold on non-recourse basis.
(f) any amount raised under any other transaction, including any forward sale or purchase
agreement, having the commercial effect of a borrowing.
Explanation.— For the purposes of this sub-clause - (i) any amount raised from an
allottee under a real estate project shall be deemed to be an amount having the
commercial effect of a borrowing; and (ii) the expressions, "allottee" and "real estate
project" shall have the meanings respectively assigned to them in section 2(d)and
2(zn)of the Real Estate (Regulation and Development) Act, 2016 .
(g) any derivative transaction entered into in connection with protection against or benefit
from fluctuation in any rate or price and for calculating the value of any derivative
transaction, only the market value of such transaction shall be taken into account.
(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond,
documentary letter of credit or any other instrument issued by a bank or financial
institution.
(i) the amount of any liability in respect of any of the guarantee or indemnity for any of
the items referred to in sub-clauses (a) to (h) of this clause [Section 5(8) of
Code, 2016]
Subscription money for purchase of shares is not financial debt - Subscription money
for purchase of shares is not financial debt - ACPC Enterprises v. Affinity Beauty
Saloon (2018)(NCLT – Delhi Bench)
(10) Operational debt as per section 5(21) of the Code means a claim in respect of the provision
of goods or services including employment or a debt in respect of the payment of dues arising
under any law for the time being in force and payable to the Central Government, any State
Government or any local authority;

3.16 ECONOMIC LAWS
(11) Default means non-payment of debt when whole or any part or instalment of the amount of
debt has become due and payable and is not paid by the debtor or the corporate debtor, as
the case may be. [Section 3(12)]
 In the case of Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil Appeal Nos.
8337-8338 of 2017, dated 31.08.2017], the Supreme Court held that the ‘debt’ is
disputed so long as the ‘debt’ is ‘due’ i.e. payable unless interdicted by some law
or has not yet become due in the sense that it is payable at some future date. It is
only when this is proved to the satisfaction of the AA, that it may reject an application
and not otherwise. Default’ is defined in section 3(12) of the Code in very wide
terms as non-payment of a ‘debt’ once it becomes due and payable, which
includes non-payment of even part thereof or an instalment amount.
 In the case of Transmission Corporation of Andhra Pradesh Ltd. Vs. Equipment
Conductors and Cables Ltd. [Civil Appeal No. 9597 of 2018, dated 23.10.2018], the
Supreme Court held that Existence of an undisputed ‘debt’ is sine qua non of
initiating CIRP.
 In the case of B. K. Educational Services Pvt. Ltd. Vs. Parag Gupta and
Associates [Civil Appeal No. 23988 of 2017 and other appeals, dated 11.10.2018],
the Supreme Court opine that the context of section 3(12) of the Code is actual non-
payment by the CD when a ‘debt’ has become due and payable.
(12) Financial information, in relation to a person, means one or more of the following categories
of information, namely:—
(a) records of the debt of the person;
(b) records of liabilities when the person is solvent;
(c) records of assets of person over which security interest has been created;
(d) records, if any, of instances of default by the person against any debt;
(e) records of the balance sheet and cash-flow statements of the person; and
(f) such other information as may be specified. [Section 3(13)]
(13) Financial Product means securities, contracts of insurance, deposits, credit arrangements
including loans and advances by banks and financial institutions, retirement benefit plans,
small savings instruments, foreign currency contracts other than contracts to exchange one
currency (whether Indian or not) for another which are to be settled immediately, or any other
instrument. [Section 3(15)]
(14) Financial service includes any of the following services, namely:—
(a) accepting of deposits;

(b) safeguarding and administering assets consisting of financial products, belonging to

another person, or agreeing to do so;
(c) effecting contracts of insurance;
(d) offering, managing or agreeing to manage assets consisting of financial products
belonging to another person;
(e) rendering or agreeing, for consideration, to render advice on or soliciting for the
purposes of—
(i) buying, selling, or subscribing to, a financial product;
(ii) availing a financial service; or
(iii) exercising any right associated with a financial product or financial service;
(f) establishing or operating an investment scheme;
(g) maintaining or transferring records of ownership of a financial product;
(h) underwriting the issuance or subscription of a financial product; or
(i) selling, providing, or issuing stored value or payment instruments or providing payment
services; [Section 3(16)]
(15) Financial Service Provider means a person engaged in the business of providing financial
services in terms of authorisation issued or registration granted by a financial sector regulator
[Section 3(17)]
Financial Service Providers include banks, financial institutions, insurance companies,
mutual funds etc.
(16) Financial Sector Regulator means an authority or body constituted under any law for the
time being in force to regulate services or transactions of financial sector and includes-
• the Reserve Bank of India,
• the Securities and Exchange Board of India,
• the Insurance Regulatory and Development Authority of India,
• the Pension Fund Regulatory Authority, and
• such other regulatory authorities as may be notified by the Central Government;
[Section 3(18)]
(17) Insolvency professional (IP) means a person enrolled under section 206 with an insolvency
professional agency as its member and registered with the Board as an insolvency
professional under section 207; [Section 3(19)]
Insolvency Professional is required to play a key role in implementation of the Code.

3.18 ECONOMIC LAWS
The word 'person', used refers to an individual to be IP. A LLP, partnership firm or a company
can only be recognized as 'Insolvency Professional Entity' (IPE), which is not defined under
the Code.
The Insolvency Professional should follow code of conduct as specified in section 208(2) of
Insolvency Code and in First Schedule to Insolvency and Bankruptcy Board of India
(Insolvency Professionals) Regulations, 2016.
(18) "Insolvency professional agency" means any person registered with the Board under
section 201 as an insolvency professional agency; [Section 3(20)]
Work relating to insolvency resolution is expected to be handled by 'Insolvency Professionals'
(IP). These professionals are required to be registered with 'Insolvency Professional Agency'
(IPA).
The Insolvency Professional Agencies (IPA) will develop professional standards, code of
ethics and be first level regulator for insolvency professionals members. This will lead to
development of a competitive industry for such professionals.
(19) "Information utility" means a person who is registered with the Board as an information
utility under section 210; [Section 3(21)]
The Insolvency and Bankruptcy processes are expected to function on basis of financial
information available electronically.
Information Utility will collect, collate, authenticate and disseminate financial information to
be used in insolvency, liquidation and bankruptcy proceedings.
(20) A person includes:-
• an individual
• a Hindu Undivided Family
• a company
• a trust
• a partnership
• A limited liability partnership, and
• any other entity established under a Statute.
And includes a person resident outside India [Section 3(23)]
Trade Union is a ‘Person’
In the case of JK Jute Mill Mazdoor Morcha Vs. Juggilal Kamlapat Jute Mills Company
Ltd. & Ors. [Civil Appeal No. 20978 of 2017, dated 30.04.2019] the Supreme Court held that

a ‘trade union’ is an entity established under a statute i.e. the Trade Unions Act, 1926 and is
therefore, a ‘person’ under section 3(23) of the Code.
(21) "Person resident outside India" means a person other than a person resident in India
[section 3(25)].
(22) "Person resident in India" shall have the meaning as assigned to such term in section 2(v)
of FEMA [ Section 3(24)]
(23) Property includes money, goods, actionable claims, land and every description of property
situated in India or outside India and every description of interest including present or future
or vested or contingent interest arising out of, or incidental to, property; [Section 3(27)]
(24) Secured creditor means a creditor in favour of whom security interest is created;
[Section 3(30)]
(25) Security Interest means right, title or interest or a claim to property, created in favour of, or
provided for a secured creditor by a transaction which secures payment or performance of
an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance
or any other agreement or arrangement securing payment or performance of any obligation
of any person. [Section 3(31)]
(26) A transaction includes an agreement or arrangement in writing for transfer of assets, or
funds, goods or services, from or to the corporate debtor. [Section 3(33)]
(27) Transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form
of transfer of right, title, possession or lien. [Section 3(34)]
(28) Transfer of property means transfer of any property and includes a transfer of any interest
in the property and creation of any charge upon such property; [Section 3(35)]
(29) Adjudicating Authority- National Company Law Tribunal (NCLT) constituted under section
408 of Companies Act, 2013 is the Adjudicating Authority (AA) for purpose of insolvency
resolution and liquidation for corporate persons and personal guarantors thereof [section 5(1)
read with section 60(1) of the Code]
NCLT is also AA for the insolvency resolution or liquidation or bankruptcy of the corporate
guarantor or personal guarantor of such CD when insolvency resolution or liquidation of such
CD is pending before AA. [Section 60(2) of the Code]
National Company Law Appellate Tribunal (NCLAT) is the appellate authority over decisions
of NCLT [section 61 of the Code]
Appeal against order of NCLAT can be filed to Supreme Court on question of law arising out
of such order, within 45 days [section 62 of the Code]
Debt Recovery Tribunal (DRT) will be adjudicating authority for individuals and firms subject
to section 60(2) – [section 179(1) of the Code]

3.20 ECONOMIC LAWS
(30) Corporate applicant means—

(a) corporate debtor; or
(b) a member or partner of the corporate debtor who is authorised to make an
application for the corporate insolvency resolution process under the constitutional
document of the corporate debtor; or
(c) an individual who is in charge of managing the operations and resources of the
corporate debtor; or
(d) a person who has the control and supervision over the financial affairs of the
corporate debtor; [Section 5(5)]
(31) Corporate Guarantor means a corporate person who is the surety in a contract of guarantee
to a corporate debtors. [Section 5(5A)]
In the case of Rai Bahadur Shree Ram and Company Pvt. Ltd. Vs. Rural Electrification
Corporation Ltd. & Ors. [Civil Appeal No. 1484 of 2019, dated 11.02.2019] the Supreme Court
held that without initiating CIRP against the principal borrower, it is open to the FC to initiate
CIRP under section 7 against corporate guarantors as the creditor is also the FC qua
corporate guarantor.
(32) Dispute includes a suit or arbitration proceedings relating to—
(a) the existence of the amount of debt;
(b) the quality of goods or service; or
(c) the breach of a representation or warranty; [ Section 5(6)]
Test of existence of Dispute
In the case of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. [Civil Appeal
No.9405 of 2017, dated 21.09.2017] the Supreme Court opined that the test of existence of
a dispute is:
(a) whether the corporate debtor has raised a plausible contention requiring further
investigation which is not a patently feeble legal argument or an assertion of facts
unsupported by evidence;
(b) whether the defence is not spurious, mere bluster, plainly frivolous or vexatious;
(c) a dispute, if it truly exists in fact between the parties, which may or may not ultimately
succeed.
(33) Financial creditor means any person to whom a financial debt is owed and includes a person
to whom such debt has been legally assigned or transferred to;[ section 5(7)]

In the case of Phoenix ARC Pvt. Ltd. Vs. Ketulbhai Ramubhai Patel [Civil Appeal No. 5146 of
2019, dated 03.02.2021], the Supreme Court reiterated that a person having only security
interest over the assets of CD, even if falling within the description of 'secured creditor' by
virtue of collateral security extended by the CD, would not be covered by the definition of
‘financial creditor’ under the Code. It held that the CD in the matter has only extended security
through pledge of shares and there was no liability to repay the loan taken by the borrower
on the CD. Therefore, the creditor in such a case will at best be secured creditor qua CD and
not the FC qua CD.
(34) Financial debt means a debt alongwith interest, if any, which is disbursed against the
consideration for the time value of money and includes–
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any acceptance credit facility or its
dematerialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;
(d) the amount of any liability in respect of any lease or hire purchase contract which is
deemed as a finance or capital lease under the Indian Accounting Standards or such
other accounting standards as may be prescribed;
(e) receivables sold or discounted other than any receivables sold on non-recourse basis;
(f) any amount raised under any other transaction, including any forward sale or purchase
agreement, having the commercial effect of a borrowing;
Explanation. -For the purposes of this sub-clause, -
(i) any amount raised from an allottee under a real estate project shall be deemed
to be an amount having the commercial effect of a borrowing; and
(ii) the expressions, “allottee” and “real estate project” shall have the meanings
respectively assigned to them in clauses (d) and (zn) of section 2 of the Real
Estate (Regulation and Development) Act, 2016;
(g) any derivative transaction entered into in connection with protection against or benefit
from fluctuation in any rate or price and for calculating the value of any derivative
transaction, only the market value of such transaction shall be taken into account;
(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond,
documentary letter of credit or any other instrument issued by a bank or financial
institution;
(i) the amount of any liability in respect of any of the guarantee or indemnity for any of
the items referred to in sub-clause (a) to (h) of this clause. [Section 5(8)]

3.22 ECONOMIC LAWS
Home buyers / allottees are Financial Creditors

 The Supreme Court in the Chitra Sharma and Ors. Vs. Union of India and Ors case of.
[WP (Civil) 744 of 2017 and other appeals, dated 09.08.2018] held that Home buyers
are brought within the purview of the financial creditors under the Code.
 In another case of Pioneer Urban Land and Infrastructure Ltd. & Anr. Vs. Union of
India & Ors. [WP (C) No. 43 of 2019 with other appeals, dated 09.08.2019], the
Supreme Court re-affirmed that the allottees/home buyers were included in the main
provision, i.e., section 5(8)(f) with effect from the inception of the Code. The
Explanation was added in 2018 merely to clarify doubts that had arisen. The deeming
fiction that is used by the Explanation is to put beyond doubt the fact that allottees are
to be regarded as financial creditors within section 5(8)(f) of the Code.
In real estate projects, money is raised from the allottee, against consideration for the time
value of money. Thus, allottees are to be regarded as FCs.
(35) Financial position, in relation to any person, means the financial information of a person as
on a certain date; [Section 5(9)]
(36) Information Memorandum means a memorandum prepared by resolution professional
under section 29(1). [Section 5(10)]
(37) Initiation date means the date on which a financial creditor, corporate applicant or
operational creditor, as the case may be, makes an application to the Adjudicating Authority
for initiating corporate insolvency resolution process or pre-packaged insolvency resolution
process, as the case may be; [ Section 5(11)]
(38) Insolvency commencement date means the date of admission of an application for initiating
corporate insolvency resolution process by the Adjudicating Authority under sections 7, 9 or
section 10, as the case may be;[ Section 5(12)]
(39) Insolvency resolution process costs means –
(a) the amount of any interim finance and the costs incurred in raising such finance;
(b) the fees payable to any person acting as a resolution professional;
(c) any costs incurred by the resolution professional in running the business of the
(d) corporate debtor as a going concern;
(e) any costs incurred at the expense of the Government to facilitate the insolvency
(f) resolution process; and
(g) any other costs as may be specified by the Board;[Section 5(13)]
In the case of S3 Electricals and Electronics Pvt. Ltd. Vs. Brian Lau & Anr. [Civil Appeal
No.103 of 2018, dated 05.08.2019] the Supreme Court held that where a CoC has not been

appointed as a result of non-initiation of the interim resolution process, it is clear that,

whatever the AA fixes as expenses will be borne by the creditor who moved the application.
(40) Insolvency resolution process period means the period of one hundred and eighty days
beginning from the insolvency commencement date and ending on one hundred and eightieth
day;[ Section 5(14)]
(41) Interim Finance means any financial debt raised by the resolution professional during the
insolvency resolution process period or by the corporate debtor during the pre-packaged
insolvency resolution process period, as the case may be and such other debt as may be
notified; [Section 5(15)]
(42) Liquidation commencement date means the date on which proceedings for liquidation
commence in accordance with section 33 (Initiation of Liquidation) or section 59 (Voluntary
Liquidation of corporate persons), as the case may be; [Section 5(17)]
(43) Liquidator means an insolvency professional appointed as a liquidator in accordance with
the provisions of Chapter III or Chapter V of this Part, as the case may be;[Section 5(18)]
(44) Operational creditor means a person to whom an operational debt is owed and includes any
person to whom such debt has been legally assigned or transferred;[ Section 5(20)]
(45) Operational debt means a claim in respect of the provision of goods or services including
employment or a debt in respect of the payment of dues arising under any law for the time
being in force and payable to the Central Government, any State Government or any local
authority. [Section 5(21]
In the matter of Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil Appeal Nos. 8337-
8338 of 2017, dated 31.08.2017] the Supreme Court held that an Operational Creditor
means a person to whom an operational debt is owed, and an operational debt under section
5(21) means a claim in respect of provision of goods or services.
In the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) Nos.
99, 100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and
WP (Civil) 37 of 2019, dated 25.01.2019], the Supreme Court opined that operational debt
would include a claim in respect of the provision of goods or services, including
employment, or a debt in respect of payment of dues arising under any law and payable to
the Government or any local authority.
(46) Personal guarantor means an individual who is the surety in a contract of guarantee to a
corporate debtor;[Section 5(22)]
(47) Personnel includes the directors, managers, key managerial personnel, designated partners
and employees, if any, of the corporate debtor. [Section 5(23)]
(48) Related party, in relation to a corporate debtor, means—
(a) a director or partner or a relative of a director or partner of the corporate debtor

3.24 ECONOMIC LAWS
(b) a key managerial personnel or a relative of a key managerial personnel of the

corporate debtor;
(c) a limited liability partnership or a partnership firm in which a director, partner, or
manager of the corporate debtor or his relative is a partner;
(d) a private company in which a director, partner or manager of the corporate debtor is
a director and holds along with his relatives, more than two per cent. of its share
capital;
(e) a public company in which a director, partner or manager of the corporate debtor is
a director and holds along with relatives, more than two per cent. of its paid-up share
capital;
(f) any body corporate whose board of directors, managing director or manager, in the
ordinary course of business, acts on the advice, directions or instructions of a director,
partner or manager of the corporate debtor;
(g) any limited liability partnership or a partnership firm whose partners or employees
in the ordinary course of business, acts on the advice, directions or instructions of a
director, partner or manager of the corporate debtor;
(h) any person on whose advice, directions or instructions, a director, partner or manager
of the corporate debtor is accustomed to act;
(i) a body corporate which is a holding, subsidiary or an associate company of the
corporate debtor, or a subsidiary of a holding company to which the corporate debtor
is a subsidiary;
(j) any person who controls more than twenty per cent. of voting rights in the corporate
debtor on account of ownership or a voting agreement;
(k) any person in whom the corporate debtor controls more than twenty per cent. of
voting rights on account of ownership or a voting agreement;
(l) any person who can control the composition of the board of directors or
corresponding governing body of the corporate debtor;
(m) any person who is associated with the corporate debtor on account of—
(i) participation in policy making processes of the corporate debtor; or
(ii) having more than two directors in common between the corporate debtor and
such person; or
(iii) interchange of managerial personnel between the corporate debtor and such
person;

(iv) provision of essential technical information to, or from, the corporate debtor; [
Section 5(24)]
6(49) "related party", in relation to an individual, means—
(a) a person who is a relative of the individual or a relative of the spouse of the individual;
(b) a partner of a limited liability partnership, or a limited liability partnership or a
partnership firm, in which the individual is a partner;
(c) a person who is a trustee of a trust in which the beneficiary of the trust includes the
individual, or the terms of the trust confers a power on the trustee which may be
exercised for the benefit of the individual;
(d) a private company in which the individual is a director and holds along with his
relatives, more than two per cent of its share capital;
(e) a public company in which the individual is a director and holds along with relatives,
more than two per cent of its paid-up share capital;
(f) a body corporate whose board of directors, managing director or manager, in the
ordinary course of business, acts on the advice, directions or instructions of the
individual;
(g) a limited liability partnership or a partnership firm whose partners or employees
in the ordinary course of business, act on the advice, directions or instructions of the
individual;
(h) a person on whose advice, directions or instructions, the individual is accustomed to
act;
(i) a company, where the individual or the individual along with its related party, own
more than fifty per cent of the share capital of the company or controls the appointment
of the board of directors of the company.
Explanation.—For the purposes of this clause,—
(a) "relative", with reference to any person, means anyone who is related to
another, in the following manner, namely:—
(i) members of a Hindu Undivided Family,
(ii) husband,
(iii) wife,
(iv) father,
6 Inserted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.r.e.f. 6-6-2018.

3.26 ECONOMIC LAWS
(v) mother,
(vi) son,
(vii) daughter,
(viii) son's daughter and son,
(ix) daughter's daughter and son,
(x) grandson's daughter and son,
(xi) granddaughter's daughter and son,
(xii) brother,
(xiii) sister,
(xiv) brother's son and daughter,
(xv) sister's son and daughter,
(xvi) father's father and mother,
(xvii) mother's father and mother,
(xviii) father's brother and sister,
(xix) mother's brother and sister, and
(b) wherever the relation is that of a son, daughter, sister or brother, their spouses
shall also be included; [Section 5(24A)]
(50) "Resolution applicant" means a person, who individually or jointly with any other person,
submits a resolution plan to the resolution professional pursuant to the invitation made under
section 25(2)(h) or pursuant to section 54K, as the case may be. [Section 5(25)]
(51) "Resolution plan" means a plan proposed by 7resolution applicant for insolvency resolution
of the corporate debtor as a going concern in accordance with Part II; [Section 5(26)]
Explanation.- For removal of doubts, it is hereby clarified that a resolution plan may include
provisions for the restructuring of the corporate debtor, including by way of merger,
amalgamation and demerger
(52) Resolution professional, for the purposes of this Part, means an insolvency professional
appointed to conduct the corporate insolvency resolution process or the pre-packaged
insolvency resolution process, as the case may be, and includes an interim resolution
professional; [Section 5(27)]
7Substituted for "any person" by the Insolvency and Bankruptcy Code (Amendment) Act, 2018, w.r.e.f. 23-
11-2017.

(53) Voting share means the share of the voting rights of a single financial creditor in the
committee of creditors which is based on the proportion of the financial debt owed to such
financial creditor in relation to the financial debt owed by the corporate debtor. [Section 5(28)]
4. CORPORATE INSOLVENCY RESOLUTION PROCESS

[SECTION 4 AND SECTION 6-32 ]
Application of Part II of the Code – Section 4
(1) 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 that the Central Government may, by notification, specify the minimum amount of default
of higher value which shall not be more than one crore rupees.
Provided further that the Central Government may, by notification, specify such minimum amount
of default of higher value, which shall not be more than one crore rupees, for matters relating to
the pre-packaged insolvency resolution process of corporate debtors under Chapter III-A.
Gazette Notification: The Central Governement vide its Gazette Notification No. 2020 S.O. 1205(E)
24th March, 2020 specified one crore rupees as the minimum amount of default for the purposes
of the said section.
Provisions related to Insolvency Resolution and Liquidation process for Corporate Persons are
covered in Part II of the Code. This part comprises of seven chapters with section 4 to 77 of the
Code. Each chapter deals with different issues relating to Insolvency Resolution and liquidation of
corporate persons.
Corporate Insolvency Resolution is a process during which financial creditors assess whether the
debtor's business is viable to continue and the options for its rescue and revival, if any. If the
insolvency resolution process fails or financial creditors decide that the business of debtor cannot
be carried on in a profitable manner and it should be wound up, the debtor will undergo liquidation
process and the assets of the debtor shall be realized and distributed by the liquidator.
The Insolvency Resolution Process provides a collective mechanism to lenders to deal with the
overall distressed position of a corporate debtor. This is a significant departure from the existing
legal framework under which the primary onus to initiate a re-organization process lies with the
debtor, and lenders may pursue distinct actions for recovery, security enforcement and debt
restructuring.
The Code creates time-bound processes for insolvency resolution of companies and
individuals. These processes will be completed within 180 days, extendable by 90 days, however
the overall process has to be completed within an outer time limit of 330 days. However, in certain

3.28 ECONOMIC LAWS
exceptional cases, it may be open for the Adjudicating Authority and/or Appellate Tribunal to
extend the time beyond 330 days 8.
The Code also provides for fast-track resolution of corporate insolvency within 90 days. If
insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors.
Process Flow
A comprehensive process that covers the gamut of insolvency resolution framework for
Corporates and includes processes relating to:-
• Filing of application before NCLT by a financial creditor, operational creditor or a corporate
applicant
• Adjudication: Admission or Rejection of application
• Moratorium and Public Announcement
• Appointment of Interim Resolution Professional
• Formation of the Committee of Creditors
• Appointment of Resolution Professional
• Taking control and managing the operations of the corporate debtor by the resolution
professional
• Appointment of Registered Valuers
• Preparation of Information memorandum & Invitation for Expression of Interest
• Submission of Expression of Interest by prospective resolution applicants
• Preparation of provisional and final list of resolution applicants by the Resolution
Professional.
• Issue of Request for Resolution Plan (RFRP), Information Memorandum and Evaluation
Matrix to all the prospective resolution applicants
• Submission of Resolution Plan by resolution applicants in the final list
• Approval or rejection of the Resolution Plan by the CoC
• Approval or rejection of the Resolution Plan by the NCLT (Adjudicating Authority)
8 CoC of Essar Steel India Limited vs. Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67 of 2019)

CIRP - OVERVIEW
Commitment of Default
Filing of Application with Appointment of Interim Formation of Committee

the Adjudicating Authority Resolution Professional of Creditors (CoC)
(AA) (IRP)
Invitation of Expression of Preparation of Information Appointment of Resolution

Interest (EoI) Memorandum by RP Professional (RP)
Submission of Resolution Evaluation of Resolution Plans

Plans by Resolution by CoC
Resolution Plan Resolution Plan

Approved by CoC Rejected by CoC
Resolution Plan Approved Resolution Plan Rejected

by AA by AA
Liquidation

3.30 ECONOMIC LAWS
Application to National Company Law Tribunal

The process of insolvency is triggered by occurrence of default. As per Section 3 (12) of the Code,
default means non-payment of debt when whole or any part or installment of the amount of debt
has become due and payable and is not paid by the debtor or the corporate debtor.
The provisions relating to the insolvency and liquidation of corporate debtors shall be applicable
only when the amount of the default is one lakh rupees or more. However, the Central Government
has by notification dated 24th March 2020 raised the threshold value of minimum amount of default
to one crore rupees as per section 4 of the Code.
Filing of application before NCLT
The corporate insolvency process may be initiated against any defaulting corporate debtor by
making an application for corporate insolvency resolution before NCLT.
Persons who may initiate corporate insolvency resolution process [Section 6]
Where any corporate debtor commits a default, a financial creditor, an operational creditor or the
corporate debtor itself may initiate corporate insolvency resolution process in respect of such
corporate debtor in the manner as provided under this Chapter
Provisions and procedures relating to each initiator are different.
Accordingly, the application may be made by:-
Financial creditor any person to whom a financial debt is owed &
• Includes a person to whom such debt is legally assigned or transferrred to
Operational creditor any person to whom a operational debt is owed &

• Includes a person to whom such debt is legally assigned or transferrred
Corporate debtor A corporate person who owes a debt to any person
Initiation of corporate insolvency resolution process (CIRP) by financial

creditor [Section 7]
(1) Filing of application before adjudicating authority (AA) [Section 7(1)]
A financial creditor either by itself or jointly with other financial creditors, or 9any other person on
behalf of the financial creditor, as may be notified by the Central Government, may file an
9Substituted for "other financial creditors" by the Insolvency and Bankruptcy Code (Second Amendment) Act,
2018, w.r.e.f. 6-6-2018.

application for initiating corporate insolvency resolution process against a corporate debtor before
the Adjudicating Authority when a default has occurred.
Vide Notification S.O.1091(E) dated 27th February, 2019, the Central government had
notified following persons, who may file an application for initiating CIRP against a
corporate debtor before the Adjudicating Authority, on behalf of the Financial Creditor:-
(i) a guardian;
(ii) an executor or administrator of an estate of a financial creditor;
(iii) a trustee (including a debenture trustee); and
(iv) a person duly authorized by the Board of Directors of a Company.
The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
Application by financial creditor – Rule 4.
(1) A financial creditor, either by itself or jointly, shall make an application for initiating the
CIRP against a corporate debtor under section 7 of the Code in Form 1, accompanied
with documents and records required therein and as specified in the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016.
(2) Where the applicant is an assignee or transferee of a financial contract, the application
shall be accompanied with a copy of the assignment or transfer agreement and other
relevant documentation to demonstrate the assignment or transfer.
(3) The applicant shall serve a copy of the application to the registered office of the
corporate debtor and to the Board, by registered post or speed post or by hand or by
electronic means, before filing with the Adjudicating Authority.
(4) In case the application is made jointly by financial creditors, they may nominate one
amongst them to act on their behalf.
Fee for filing CIRP by Financial Creditor – Rule 10(3) Read with Schedule
The fee for filing CIRP by the Financial Creditor is Rs. 25000/- only.
(2) Where the financial debt is in the form of securitis or deposits [First Proviso to
section 7(1)]-
The first proviso provides that for the financial creditors, referred to in section 21(6A) (a) and
(b) , an application for initiation CIRP against the corporate debtor shall be filed
• Jointly by not less than 100 of such creditors in the same class; or
• not less than 10% of the total number of such creditors in the same class,
whichever is less.

3.32 ECONOMIC LAWS
Allottees under a real estate project – [Second Proviso to section 7(1)]

The second provision provides further that for financial creditors who are allottees under a real
estate project, an application for initiating CIRP against the corporate debtor shall be filed
• jointly by not less than 100 of such allottees under the same real estate project; or
• not less than 10% of the total number of such allottees under the same real estate project,
whichever is less.
In the case of Manish Kumar Vs. Union of India & Anr. [Writ Petition (C) No.26 of 2020 with
other writ petitions, dated 19.01. 2021], the Supreme Court held that-
i. The term ‘allotment’ under second proviso to section 7 means allotment in the sense of
documented booking as mentioned in section 11(1)(b) of the Real Estate (Regulation and
Development) Act, 2016. A person to whom allotment of a plot, apartment, or a building has
been made is an allottee. The allottee would also include a person who acquires the allotment
either through sale, transfer or otherwise. What is required is allotment qua apartments, and
not promised flats as per a brochure.
ii. The default under section 7 need not be qua the applicant or applicants. Any number of
applicants, without any amount being due to them, could move an application under section
7, if they are financial creditors (FCs) and there is a default, even if such default is owed to
none of the applicants but to any other FC.
iii. It does not matter whether a person has one or more allotments in his name or in the name
of his family members. As long as there are independent allotments made to him or his family
members, all of them would qualify as separate allottees.
(3) Application not admitted by the AA before the Insolvency and Bankruptcy Code
(Amendment) Act, 2020 – [Third Proviso to section 7(1)]
The third proviso states that where an application for initiating the CIRP against a corporate
debtor has been filed by a financial creditor referred to in the first or second provisos and has not
been admitted by the Adjudicating Authority before the commencement of the Insolvency and
Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the
requirements of the first or second provisos as the case may be within thirty days of the
commencement of the said Act, failing which the application shall be deemed to be withdrawn
before its admission.
Explanation - For the purposes of this sub-section, a default includes a default in respect of a
financial debt owed not only to the applicant financial creditor but to any other financial creditor of
the corporate debtor.

(4) Filing of application [Section 7(2)]

The financial creditor shall make an application under sub-section (1) in such form and manner
and accompanied with such fee as may be prescribed.
(5) Enclosures required to be attached with the Application [Section 7(3)]
The financial creditor shall, along with the application furnish –
(a) record of the default recorded with the information utility or such other record or evidence
of default as may be specified;
(b) the name of the resolution professional proposed to act as an interim resolution
professional; and
(c) any other information as may be specified by the Board.
The IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
Record or evidence of default by financial creditor – Regulation 2A
For the purposes of section 7(3)(a) of the Code, the financial creditor may furnish any of the following
record or evidence of default, namely:-
(a) certified copy of entries in the relevant account in the bankers’ book as defined in
of section 2(3) of the Bankers’ Books Evidence Act, 1891;
(b) an order of a court or tribunal that has adjudicated upon the non-payment of a debt,
where the period of appeal against such order has expired.
In the matter of Sunrise 14 A/S Denmark Vs. Ravi Mahajan [Civil Appeal Nos. 21794- 21795 of
2017, dated 03.08.2018], the Supreme Court held that the order of admission by NCLT, which
was set-aside by the NCLAT, was restored stating that FC being a foreign company need not
observe the requirement of section 7(3)(a) for filing of statutory form and that the
application can be filed by an advocate.
(6) Time period for ascertainment of default by the Adjudicating Authority
[Section 7(4)]
The Adjudicating Authority shall, within 14 days of the receipt of the application under sub-section
(2), ascertain the existence of a default from the records of :
• an information utility or
• on the basis of other evidence furnished by the financial creditor under sub-section (3):
Provided that if the Adjudicating Authority has not ascertained the existence of default and passed
an order under sub-section (5) within such time, it shall record its reasons in writing for the same.

3.34 ECONOMIC LAWS
(7) Admission / Rejection of Application by the Adjudicating Authority –

Section 7(5)
Where the Adjudicating Authority is satisfied that –
(a) a default has occurred and the application under sub-section (2) is complete, and there is no
disciplinary proceedings pending against the proposed resolution professional, it may, by
order, admit such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete or any
disciplinary proceeding is pending against the proposed resolution professional, it may, by
order, reject such application:
Notice to rectify defect -Proviso
The proviso to this sub-section states that the Adjudicating Authority shall, before rejecting the
application under sub-section (5)(b), give a notice to the applicant to rectify the defect in his
application within seven days of receipt of such notice from the Adjudicating Authority.
In the matter of Surendra Trading Company Vs. Juggilal Kamlapat Jute Mills Company Ltd.
& Ors. [Civil Appeal No. 8400 of 2017and other appeals, dated 19.09.2017], the Supreme Court
held that the time limit of 7 days for removal of defects in the application as provided in proviso to
section 7(5), is directory and not mandatory in nature.
Admission/Rejection of application by the Adjudicating Authority
• A default has occurred and
Admission of • The Application is complete
application when • No Disciplinary action is pending against proposed
Resolution Professional
• Default has not occurred or
Rejection of • Application is incomplete
application when • Any disciplinary action is pending against the
proposed Resolution Professional
(8) Acceptance date is the date of commencement of CIRP [[Section 7(6)]

The corporate insolvency resolution process shall commence from the date of admission of the
application under sub-section (5).
(9) Communication by the Adjudicating Authority [Section 7(7)]
The Adjudicating Authority shall communicate-
(a) the order under sub-section (5)(a) to the financial creditor and the corporate debtor;

(b) the order under sub-section (5)(b) to the financial creditor, within 7 days of admission or
rejection of such application, as the case may be
 In the case of Forech India Ltd. Vs. Edelweiss Assets Reconstruction Co. Ltd. [Civil
Appeal No. 818 of 2018, dated 22.01.2019], the Supreme Court held that under
Section 7 application filed under the Code is an independent proceeding and must run
its entire course, which has nothing to do with the pendency of winding up proceedings
before the HC.
 In the case of Indus Biotech Pvt. Ltd. Vs. Kotak India Venture (Offshore) Fund (earlier
known as Kotak India Venture Ltd.) & Ors. [Arbitration Petition (Civil) No. 48/2019 with
another appeal, dated 26.03.2021], the Supreme Court held that any proceeding which
is pending before the AA under section 7 of Code and if the petition is admitted by the
AA recording the satisfaction with regard to the default and the debt being due from
the CD, any application under section 8 of the Arbitration and Conciliation Act, 1996
made thereafter will not be maintainable.
Insolvency resolution process by operational creditor – Section 8
(1) Issue of Demand Notice on occurrence of default [Section 8(1)]
An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid
operational debtor copy of an invoice demanding payment of the amount involved in the default
to the corporate debtor in such form and manner as prescribed under Rule 5 of the Insolvency
and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
In the case of Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil Appeal Nos. 8337-8338
of 2017, dated 31.08.2017], the Supreme Court held that the scheme of section 7 stands in
contrast with the scheme under section 8 where an OC is, on the occurrence of a default, to
first deliver a demand notice of the unpaid debt to the operational debtor in the manner
provided in section 8(1) of the Code.
(2) Time Period to revert by the Corporate Debtor [Section 8(2)]
The corporate debtor shall, within a period of 10 days of the receipt of the demand notice or
copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor-
(a) existence of a dispute, if any, or record of the pendency of the suit or arbitration proceedings
filed before the receipt of such notice or invoice in relation to such dispute;
(b) the payment of unpaid operational debt- (i) by sending an attested copy of the record of
electronic transfer of the unpaid amount from the bank account of the corporate debtor; or (ii)
by sending an attested copy of record that the operational creditor has encashed a cheque
issued by the corporate debtor.

3.36 ECONOMIC LAWS
Meaning of Demand Notice

Explanation – For the purposes of this section, a “demand notice” means a notice served by an
operational creditor to the corporate debtor demanding payment of the operational debt in respect
of which the default has occurred.
The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
Demand notice by operational creditor – Rule 5
(1) An operational creditor shall deliver to the corporate debtor, the following documents,
namely.-
(a) a demand notice in Form 3; or
(b) a copy of an invoice attached with a notice in Form 4
(2) The demand notice or the copy of the invoice demanding payment referred to in sub-
section of section 8(2)of the Code, may be delivered to the corporate debtor,
(a) at the registered office by hand, registered post or speed post with
acknowledgement due; or
(b) by electronic mail service to a whole time director or designated partner or key
managerial personnel, if any, of the corporate debtor.
(3) A copy of demand notice or invoice demanding payment served under this rule by an
operational creditor shall also be filed with an information utility, if any.
Some Judicial Interpretation of Section 8 by Supreme Court / NCLAT

• A dispute must truly exist in facts and should not be spurious, hypothetical and illusory.
[Vishal Vijay Kalantri Vs. DBM Geotechnics & Constructions Pvt. Ltd. & Anr. [Civil
Appeal No. 2730 of 2020, Supreme Court, dated 20.07.2020].
• The moment there is pre-existence of a dispute, the OC gets out of the clutches of the
Code. [Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil Appeal Nos. 8337-8338
of 2017, Supreme Court, dated 31.08.2017]
• The expression ‘an operational creditor may on the occurrence of a default deliver a
demand notice’ under section 8 of the Code must be read as including an OCs authorised
agent and lawyer, as has been fleshed out in Forms 3 and 5 appended to the AA Rules.
[Macquarie Bank Limited Vs. Shilpi Cable Technologies Ltd. [Civil Appeal No. 15135 of
2017 and other appeals, Supreme Court, dated 15.12.2017].
• So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the AA
has to reject the application. [Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt.
Ltd. [Civil Appeal No.9405 of 2017, Supreme Court, dated 21.09.2017]

• OCs cannot use the Code either prematurely or for extraneous considerations or as a
substitute for debt enforcement procedures. [K. Kishan Vs. Vijay Nirman Company Pvt.
Ltd. [Civil Appeal Nos.21824 & 21825 of 2017, Supreme Court, dated 14.08.2018].
• The expression ‘existence of a dispute, if any’, infers that a dispute shall not only be limited
to instances specified in the definition as provided under section 5(6) of the Code, as it has
far arms, apart from pending Suit or Arbitration. [Kuntal Construction Pvt. Ltd. Vs. Bharat
Hotels Ltd. [CA (AT) (Ins.) No. 542 of 2020, NCLAT, dated 04.09.2020].
• A prior notice under section 8 of the Code is mandatory before initiation of interim resolution
process, in the absence of which, the AA was right in rejecting the application. [Seema
Gupta Vs. Supreme Infrastructure India Ltd. & Ors. [CA (AT) (Ins.) No. 53 of 2017,
NCLAT, dated 25.05.2017].
• Pendency of the case under section 138/141 of the Negotiable Instruments Act, 1881, even
if accepted as recovery proceeding, cannot be held to be a dispute pending before a court
of law. Such pendency actually amounts to admission of debt and not an existence of
dispute. [Sudhi Sachdev Vs. APPL Industries Ltd. [CA (AT) (Ins.) No. 623 of 2018,
• The legislative intent of issuance of demand notice under section 8(1) is not a mere
formality but a mandatory provision. [Prajna Prakash Nayak Vs. ASAP Info Systems Pvt.
Ltd. &Anr. [CA (AT) (Ins.) No. 196 of 2018, NCLAT, dated11.07.2018].
• The CD can show and satisfy the AA that a default has not occurred in the sense that the
debt, which may also include a disputed claim, is not due or payable in law or in fact. [Neha
Himatsingka & Anr. Vs. Himatsingka Resorts Pvt. Ltd. & Anr. [CA (AT) (Ins.) No. 201
and another appeal, NCLAT, dated 30.11.2018].
• The OC had a relief open under the MSME Act and utilising the same does not mean that
there is a preexisting dispute. The context of the word ‘dispute’ in section 18 of the MSME
Act takes colour from section 17 thereof and is different from the context of section 5(6)
read with section 8 of the Code. [ iValue Advisors Pvt. Ltd. Vs. Srinagar Banihal
Expressway Ltd. [CA (AT) (Ins.) No. 1142 of 2019, NCLAT, dated 13.01.2020].
• In case of a CD who refuses to accept the delivery of notice under section 8 of the Code,
it would not be justified to say that the notice has not been served on the CD.[ D. Srinivasa
Rao Vs. Vaishnovi Infratech Ltd. [CA (AT) (Ins.) No. 880 of 2020, NCLAT, dated
05.01.2021].

3.38 ECONOMIC LAWS
Application for initiation of corporate insolvency resolution process by

operational creditor [Section 9]
(1) When Operation Creditor can initiate CIRP [Section 9(1)]
After the expiry of the period of 10 days from the date of delivery of the notice or invoice
demanding payment under section 8(1), if the operational creditor does not receive payment from
the corporate debtor or notice of the dispute under section 8(2), the operational creditor may file
an application before the Adjudicating Authority for initiating a CIRP.
(2) Prescribed form and Fee [Section 9(2)]
The application under sub-section (1) shall be filed in such form and manner and accompanied
with such fee as may be prescribed.
Application by operational creditor – Rule 6
(1) An operational creditor, shall make an application for initiating the corporate insolvency
resolution process against a corporate debtor under section 9 of the Code in Form 5,
accompanied with documents and records required therein and as specified in the IBBI
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
(2) The applicant under sub-rule (1) shall serve a copy of the application to the registered
office of the corporate debtor and to the Board, by registered post or speed post or by
hand or by electronic means, before filing with the Adjudicating Authority.
Fee for filing CIRP by Operational Creditor – Rule 10(3) Read with Schedule
The fee for filing CIRP by the Operational Creditor is Rs. 2000/- only.
(3) Documents to be attached with the application [Section 9(3)]

The operational creditor shall, along with the application furnish-
(a) a copy of the invoice demanding payment or demand notice delivered by the operational
creditor to the corporate debtor;
(b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a
dispute of the unpaid operational debt;
(c) a copy of the certificate from the financial institutions maintaining accounts of the
operational creditor confirming that there is no payment of an unpaid operational debt by the
corporate debtor, if available;
(d) a copy of any record with information utility confirming that there is no payment of an
unpaid operational debt by the corporate debtor, if available; and

(e) any other proof confirming that there is no payment of any unpaid operational debt by the
corporate debtor or such other information, as may be prescribed.
(4) Propose name of Resolution Professional [Section 9(4)]
An operational creditor initiating a CIRP under this section, may propose a resolution professional
to act as an interim resolution professional.
(5) Admission / Rejection by the Adjudicating Authority [Section 9(5)]
The Adjudicating Authority shall, within 14 days of the receipt of the application under sub-section
(2), by an order–
(i) admit the application and communicate such decision to the operational creditor and the
corporate debtor if, -
(a) the application made under sub-section (2) is complete;
(b) there is no payment of the unpaid operational debt;
(c) the invoice or notice for payment to the corporate debtor has been delivered by the
operational creditor;
(d) no notice of dispute has been received by the operational creditor or there is no record
of dispute in the information utility; and
(e) there is no disciplinary proceeding pending against any resolution professional
proposed under sub-section (4), if any.
(ii) reject the application and communicate such decision to the operational creditor and the
corporate debtor, if –
(a) the application made under sub-section (2) is incomplete;
(b) there has been payment of the unpaid operational debt;
(c) the creditor has not delivered the invoice or notice for payment to the corporate debtor;
(d) notice of dispute has been received by the operational creditor or there is a record of
dispute in the information utility; or
(e) any disciplinary proceeding is pending against any proposed resolution professional:
(6) Time to rectify the defect in the Applicant
The proviso to this sub-section provides that Adjudicating Authority, shall before rejecting an
application under sub clause (a) of clause (ii) give a notice to the applicant to rectify the defect in
his application within seven days of the date of receipt of such notice from the Adjudicating
Authority.

3.40 ECONOMIC LAWS
(7) Commencement of CIRP [Section 9(6)]

The CIRP shall commence from the date of admission of the application under sub-section (5) of
this section.
Some Judicial Interpretation of Section 9 by Supreme Court / NCLAT
• A copy of the certificate required under section 9(3)(c) of the Code from the financial
institution maintaining accounts of the OC confirming that there is no payment of an unpaid
operational debt by the CD is certainly not a condition precedent to triggering the
insolvency process under the Code. [Macquarie Bank Ltd. Vs. Shilpi Cable
Technologies Ltd. [Civil Appeal No. 15135 of 2017 and other appeals, Supreme Court,
dated 15.12.2017].
• The SC upheld the direction of NCLAT which ordered OC to pay the CIRP costs and fees
of the IRP/RP, after the dismissal of its section 9 application by NCLAT. [Rajkumar
Brothers and Production Pvt. Ltd. Vs. Harish Amilineni Shareholder and erstwhile
Director of Amilionn Technologies Pvt. Ltd. & Anr. [Civil Appeal No. 4044 of 2020,
Supreme Court, dated 22.01.2021].
• Starting of CIRP against a functional company is a serious matter and parties cannot be
allowed to play hide and seek. A cost of Rs. 5 lakh was imposed on the OC. [Vinod Mittal
Vs. Rays Power Experts & Anr. [CA (AT) (Ins.) No. 851 of 2019, NCLAT, dated
18.11.2019].
• CIRP is not a ‘suit’, a ‘litigation’ or a ‘money claim’ for any litigation and no one is selling
or buying the CD a ‘resolution plan’. It is not an auction or a recovery or liquidation. It is a
resolution process so that the CD does not default on dues. [Excel Metal Processors Ltd.
Vs. Benteler Trading International GMBH and Anr. [CA (AT) (Ins.) No. 782 of 2019,
• Once an application under sections 7 or 9 is filed, it is not necessary for the AA to await
hearing of the parties for passing order of moratorium under section 14 of the Code. To
ensure that one or other party may not abuse the process or for meeting the ends of justice,
it is always open to the AA to pass appropriate interim order. [NUI Pulp and Paper
Industries Pvt. Ltd. Vs. Roxcel Trading GMBH [CA (AT) (Ins.) No. 664 of 2019, NCLAT,
dated17.07.2019].
• The applicability of Form 3 or Form 4 under of the AA Rules depends on whether invoices
were generated during the course of transaction or not. Further, a copy of invoice is not
mandatory if the demand notice is issued in Form 3 provided the documents to prove the
existence of operational debt and the amount in default is attached with the application.
Also, submission of a copy of the invoice along with the application in Form 5 is not a
mandatory requirement, if demand notice is delivered in Form 3 and documents to prove
the existence of operational debt and the amount in default is attached with the application.

[Neeraj Jain Vs. Cloudwalker Streaming Technologies Pvt. Ltd. & Anr. [CA (AT) (Ins.)
No. 1354 of 2019, NCLAT, dated 24.02.2020]
• Unless the decree of a foreign court and decretal amount is adjudicated upon by a Civil
Court as a legally payable claim, the same would not constitute a debt in the hands of OC
and unless the debt is crystallized and payable in law, the issue of default would not be
attracted [Peter Johnson John (Employee) Vs. KEC International Ltd. [CA (AT) (Ins.)
No. 188 of 2019, NCLAT, dated 03.07.2019].
• In view of Rule 8 of AA Rules, it was open to the OC to withdraw the application under
section 9 before its admission but once it was admitted, it cannot be withdrawn even by the
OC, as other creditors are entitled to raise claim pursuant to public announcement under
section 15 read with section 18 of the Code. [Mother Pride Dairy India Pvt. Ltd. Vs. Portrait
Advertising & Marketing Pvt. Ltd. [CA (AT) (Ins.) No. 94 of 2017, NCLAT, dated
13.07.2017].
• Section 16G (1)(c) of the Tea Act, 1953, relates to winding up, while section 9 of the Code
is for initiation of CIRP to ensure revival and continuation of the CD. Therefore, these
provisions occupy different fields. Accordingly, no permission of the Central Government is
required for initiation of CIRP of the CD in terms of section 16G (1) of the Tea Act, 1953.
[A.J. Agrochem Vs. Duncans Industries Ltd. [CA (AT) (Ins.) No. 710 of 2018, NCLAT,
dated 20.06.2019]
• As the amount is due from the partnership firm, application under section 9 is not
maintainable against one of the members of the partnership firm. [Gammon India Ltd. Vs.
Neelkanth Mansions & Infrastructure Pvt. Ltd. [CA (AT) (Ins.) No. 698 of 2018, NCLAT,
dated 19.12.2018]
• Since money was paid as advance for supply of goods but the goods were not supplied,
the payment cannot be considered to be an ‘operational debt’ and hence, application under
section 9 was not maintainable.[Roma Infrastructures India Pvt. Ltd. Vs. A.S. Iron &
Steel (I) Pvt. Ltd. [CA (AT) (Ins.) No. 223 of 2019, NCLAT, dated 22.04.2019].
• ‘Proceedings’ under section 138 of the Negotiable Instruments Act, 1881 as well as Order
37 of the Code of Civil Procedure, 1908, will not prohibit an application under section 9 of
the Code. [Shailendra Sharma Vs. Ercon Composites & Ors. [CA (AT) (Ins.) No. 159 of
2020, NCLAT, dated 13.01.2021].
Initiation of corporate insolvency resolution process by corporate applicant
[Section 10]
(1) Default by Corporate Debtor [Section 10(1)]
Where a corporate debtor has committed a default, a corporate applicant thereof may file an
application for initiating corporate insolvency resolution process with the Adjudicating Authority.

3.42 ECONOMIC LAWS
(2) Filing of Application form [Section 10(2)]

The application under sub-section (1) shall be filed in such form, containing such particulars and
in such manner and accompanied with such fee as may be prescribed.
Application by corporate applicant – Rule 7
(1) A corporate applicant, shall make an application for initiating the corporate
insolvency resolution process against a corporate debtor under section 10 of the
Code in Form 6, accompanied with documents and records required therein and as
specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.
(2) The applicant under sub-rule (1) shall serve a copy of the application to the Board
by registered post or speed post or by hand or by electronic means, before filing
with the Adjudicating Authority.
Fee for filing CIRP by Corporate Debtor – Rule 10(3) Read with Schedule
The fee for filing CIRP by the Corporate Debtor is Rs. 25000/- only.
(3) Documents to be annexed with the application [Section 10(3)]

The corporate applicant shall, along with the application, furnish-
(a) the information relating to its books of account and such other documents for such period
as may be specified;
(b) the information relating to the resolution proposed to be appointed as an interim
resolution professional; and
(c) the special resolution passed by shareholders of the corporate debtor or the resolution
passed by at least three-fourth of the total number of partners of the corporate debtor,
as the case may be, approving filing of the application.
(4) Admission / Rejection of Application by AA [ Section 10(4)]
The Adjudicating Authority shall, within a period of 14 days of the receipt of the application, by
an order-
(a) admit the application, if it is complete and no disciplinary proceeding is pending against the
proposed resolution professional; or
(b) reject the application, if it is incomplete or any disciplinary proceeding is pending against
the proposed resolution professional:

Time limit to rectify the defects

The proviso to this sub-section provides that Adjudicating Authority shall, before rejecting an
application, give a notice to the applicant to rectify the defects in his application within 7 days
from the date of receipt of such notice from the Adjudicating Authority.
(5) Date of Commencement of CIRP [ Section (5) ]
The corporate insolvency resolution process shall commence from the date of admission of the
application under sub-section (4) of this section.
In the case of Export-Import Bank of India & Anr. Vs. Astonfield Solar (Gujarat) Pvt. Ltd. & Anr.
[CA (AT) (Ins.) No. 754 of 2018, dated 04.12.2018], the NCLAT held that the shareholder has a
right to decide whether approving or disapproving the decision be proceeded with the CIRP under
section 10 of the Code.
Suspension of initiation of corporate insolvency resolution process [Section 10A]
Notwithstanding anything contained in sections 7, 9 and 10, no application for initiation of CIRP
of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period
of six months or such further period, not exceeding one year from such date, as may be notified
in this behalf:
Provided that no application shall ever be filed for initiation of corporate insolvency resolution
process of a corporate debtor for the said default occurring during the said period.
Explanation - For the removal of doubts, it is hereby clarified that the provisions of this section
shall not apply to any default committed under the said sections before 25th March, 2020.
Vide Notification No. S.O. 4638(E), dated 22nd December, 2020 the Central Government had
notified further period of three months from the 25th December, 2020, for the purposes of the said
section.
This Section was inserted on account of pandemic situation on account of COVID-19 all over India.
The Notification also extended the period form 25 th December, 2020 i.e. 25th March, 2021 which
has now gone, so the applicability of it has become redundant.
In the matter of Ramesh Kymal Vs. Siemens Gamesa Renewable Power Pvt. Ltd. [Civil Appeal
No. 4050 of 2020, dated 09.02.2021], the Supreme Court held that the substantive part of section
10A is to be construed harmoniously with the first proviso and the explanation. Reading the
provisions together, it is evident that Parliament intended to impose a bar on the filing of
applications for the commencement of CIRP in respect of a CD for a default occurring on or after
March 25, 2020. The retrospective bar on the filing of applications for the commencement of CIRP
during the stipulated period does not extinguish the debt owed by the CD or the right of creditors
to recover it. The decision of the NCLAT was upheld that the bar on filing application for initiation
of CIRP applies to defaults committed after March 25, 2020 though such application was filed after
March 25, 2020 but before June 5, 2020.

3.44 ECONOMIC LAWS
Persons not entitled to initiate insolvency process [Section 11]

Following persons shall not be entitled to initiate the corporate insolvency process:-
(a) A corporate debtor undergoing an insolvency resolution process; or
(aa) A financial creditor or an operational creditor of a corporate debtor undergoing a pre-
packaged insolvency resolution process; or
(b) A corporate debtor having completed corporate insolvency resolution process 12 (twelve)
months preceding the date of making of the application; or
(ba) A Corporate Debtor in respect of whom a resolution plan has been approved under Chapter
III-A, twelve month preceding the date of making of the application; or
(c) A corporate debtor or a financial creditor who has violated any of the terms of resolution plan
which was approved 12 (twelve) months before the date of making of an application;
(d) A corporate debtor in respect of whom a liquidation order has been made.
Explanation 1 - For the purposes of this section, a corporate debtor includes a corporate applicant
in respect of such corporate debtor.
Explanation 2- For the purposes of this section, it is hereby clarified that nothing in this section
shall prevent a corporate debtor referred to in clauses (a) to (d) from initiating corporate insolvency
resolution process against another corporate debtor.
Following categories of Corporate debtors not entitled to file an application under section 11
CD in respect of
Corporate debtor whom a
FC/ OC of a CD having resolution plan
Corporate debtor
undergoing a completed CIRP has been
Corporate debtor Corporate debtor in respect of
pre-packaged approved under
undergoing the twelve months violating the term whom a
insolvency Chapter III-A, 12
CIRP before the date of resolution plan liquidation order
resolution month preceding
of making of the has been made
process the date of
application making of the
application
Example: Suppose ABC LLP (“Corporate Debtor”), committed a default. Mr. X and Mr.Y, partners
of the Corporate Debtor, were contributing to the capital and sharing profits/losses in the ratio of
49% and 51% respectively. However, Mr. Y under the constitutional document of the Company, is
being authorized to make an application for the corporate insolvency resolution process. Being a
partner of the Corporate Debtor, Mr. Y filed an application on behalf of the Corporate Debtor for
initiation of corporate insolvency resolution process.

In the given case, as per section 10 of the Code, initiation of CIRP by a Corporate Debtor shall be
made by filing an application along with information relating to books of accounts, interim
resolution professional and resolution passed by at least three-fourths of total number of partners.
In the given scenario, even though Mr. Y is authorized to file an application for initiation of CIRP,
such act shall not stand valid if the resolution authorizing such filing has not been passed by at
least three-fourths of total number of partners.
Judicial Interpretation of Section 11 by Supreme Court
• In the case of Forech India Ltd. Vs. Edelweiss Assets Reconstruction Co. Ltd. [Civil Appeal
No. 818 of 2018, dated 22.01.20190, the Supreme Court opined that Section 11 is of limited
application and only bars a CD from initiating an application under section 10 of the Code in
respect of whom a liquidation order has been made. From a reading of the section, it does
not follow that until a liquidation order has been made against the CD, an insolvency
application may be filed under section 7 or 9 of the Code.
• In the case of Manish Kumar Vs. Union of India & Anr. [Writ Petition (C) No.26 of 2020 with
other writ petitions, dated 19.01.2021], the Supreme Court held that the intention of the
legislature was always to target the CD only insofar as it purported to prohibit application by
the CD against itself, to prevent abuse of the provisions of the Code. It could never had been
the intention to create an obstacle in the path of the CD, in any of the circumstances contained
in section 11, from maximizing its assets by trying to recover the liabilities due to it from
others.
10Disposal of applications under section 54C and under section 7 or section 9 or
section 10 [Section 11A]
(1) AA to decide admission or rejection of application pending under PPIRP filed under
section 54C [Section 11A(1)]
Where an application filed under section 54C is pending, the Adjudicating Authority shall pass an
order to admit or reject such application, before considering any application filed under section 7
or section 9 or section 10 during the pendency of such application under section 54C, in respect
of the same corporate debtor.
(2) PPIRP filed within 14 days of filing CIRP [Section 11A(2) ]
Where an application under section 54C is filed within 14 days of filing of any application under
section 7 or section 9 or section 10, which is pending, in respect of the same corporate debtor,
then, notwithstanding anything contained in sections 7, 9 and 10, the Adjudicating Authority shall
first dispose of the application under section 54C.
10 Inserted by Insolvency and Bankruptcy Code (Amendment) Act, 2021, w.e.f. 4-4-2021.

3.46 ECONOMIC LAWS
(3) PPIRP filed after 14 days of filing CIRP [ Section 11A(3) ]

Where an application under section 54C is filed after 14 days of the filing of any application under
section 7 or section 9 or section 10, in respect of the same corporate debtor, the Adjudicating
Authority shall first dispose of the application under section 7, section 9 or section 10.
(4) Initiation of PPIRP not to apply where CIRP is pending [Section 11A(4)]
The provisions of this section shall not apply where an application under section 7 or section 9 or
section 10 is filed and pending as on the date of the commencement of the Insolvency and
Bankruptcy Code (Amendment) Act, 2021.
Time-limit for completion of insolvency resolution process [Section 12]
(1) Time-limit to complete CIRP [Section 12(1)]
Subject to sub-section (2), the corporate insolvency resolution process shall be completed within
a period of 180 days from the date of admission of the application to initiate such process.
(2) Voting shares required to extend the time-limit beyond 180 days [Section 12(2)]
The resolution professional shall file an application to the Adjudicating Authority to extend the
period of the corporate insolvency resolution process beyond 180 days, if instructed to do so by
a resolution passed at a meeting of the committee of creditors by a vote of 66% of the voting
shares.
(3) Extension of time of not exceeding 90 days [Section 12 (3) ]
On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that
the subject matter of the case is such that corporate insolvency resolution process cannot be
completed within 180 days, it may by order extend the duration of such process beyond 180 days
by such further period as it thinks fit, but not exceeding 90 days:
Extension for once only -First Proviso
The first proviso provides that that any extension of the period of CIRP under this section shall
not be granted more than once.
Mandatory completion of CIRP within 330 days – Second Proviso
The second proviso provides further that the CIRP shall mandatorily be completed within a
period of 330 days from the insolvency commencement date, including any extension of the
period of CIRP granted under this section and the time taken in legal proceedings in relation to
such resolution process of the corporate debtor.
Mandatory completion of CIRP within 90 days from the date of commencement of
Amendment Act of 2019 – Third Proviso
The third proviso provides that where the insolvency resolution process of a corporate debtor is
pending and has not been completed within the period referred to in the second proviso, such

resolution process shall be completed within a period of 90 days from the date of
commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019.
Time-limit for completion of CIRP
CIRP shall be
completed within 180
days from date of
commencement
The CoC with a vote of 66% of voting

Mandatory completion
shares may pass resolution for extension
of CIRP within 90 days
of time limit and Resolution Profession
after the Amendment
may file application for extension to the
Act of 2019
AA
The CIRP shall mandatorily be

completed within 330 days The AA may grant (for once
including the extension/time only) extension not exceeding
taken legal proceedings 90 days beyonnd the initial
period of 180 days

• Time is of essence in seeing whether the corporate body can be put back on its feet, so as to
stave off liquidation.[Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil Appeal Nos.
8337-8338 of 2017, Supreme Court, dated 31.08.2017].
• The statutory scheme laying down time limits sends a clear message that time is the essence
of the Code [Surendra Trading Company Vs. Juggilal Kamlapat Jute Mills Company Ltd.
& Ors. [Civil Appeal No. 8400 of 2017 and other appeals, Supreme Court, dated 19.09.2017].
• Section 12, construed in the light of the object sought to be achieved by the Code, and in the
light of the consequence provided by section 33, makes it clear that the periods mentioned
are mandatory and cannot be extended. Regulation 40A of the CIRP Regulations presents a
model timeline of the CIRP, and it is of utmost importance for all authorities concerned to
follow this model timeline as closely as possible. [Arcelormittal India Pvt. Ltd. Vs. Satish
Kumar Gupta & Ors. [Civil Appeal Nos. 9402-9405 of 2018 and other appeals, Supreme
Court, dated 04.10.2018].
Withdrawal of application admitted under section 7, 9 or 10 [Section 12A]
The Adjudicating Authority may allow the withdrawal of application admitted under
• section 7 (Initiation of CIRP by Financial Creditor); or
• section 9 (Initiation of CIRP by Operational Creditor); or

3.48 ECONOMIC LAWS
• section 10 (Initiation of CIRP by Corporate Debtor,

on an application made by the applicant with the approval of 90% voting share of the
committee of creditors, in such manner as may be specified.
The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016.
Withdrawal of application - Regulation 30 A
(1) An application for withdrawal under section 12A may be made to the Adjudicating
Authority –
(a) before the constitution of the committee, by the applicant through the interim
resolution professional;
(b) after the constitution of the committee, by the applicant through the interim
resolution professional or the resolution professional, as the case may be:
Provided that where the application is made under clause (b) after the issue of invitation
for expression of interest under regulation 36A, the applicant shall state the reasons
justifying withdrawal after issue of such invitation.
(2) The application under sub-regulation (1) shall be made in Form FA of the Schedule
accompanied by a bank guarantee-
(a) towards estimated expenses incurred on or by the interim resolution professional
for purposes of regulation 33, till the date of filing of the application under clause
(a) of sub regulation (1); or
(b) towards estimated expenses incurred for purposes of clauses (aa), (ab), (c) and
(d) of regulation 31, till the date of filing of the application under clause (b) of sub-
regulation (1).
(3) Where an application for withdrawal is under clause (a) of sub-regulation (1), the interim
resolution professional shall submit the application to the Adjudicating Authority on behalf
of the applicant, within 3 days of its receipt.
(4) Where an application for withdrawal is under clause (b) of sub-regulation (1), the
committee shall consider the application, within 7 days of its receipt.
(5) Where the application referred to in sub-regulation (4) is approved by the committee with
90% voting share, the resolution professional shall submit such application along with the
approval of the committee, to the Adjudicating Authority on behalf of the applicant, within
three days of such approval.
(6) The Adjudicating Authority may, by order, approve the application submitted under sub-
regulation (3) or (5).

(7) Where the application is approved under sub-regulation (6), the applicant shall deposit
an amount, towards the actual expenses incurred for the purposes referred to in clause
(a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority,
as determined by the interim resolution professional or resolution professional, as the
case may be, within three days of such approval, in the bank account of the corporate
debtor, failing which the bank guarantee received under sub-regulation (2) shall be
invoked, without prejudice to any other action permissible against the applicant under the
Code.
Withdrawal of Application of CIRP – Section 12A read with Regulation 30A
• Before the consitution of CoC: IRP to apply with 3 days of its receipt from the
applicant
• After the constitution of CoC with 90% voting share the CoC shall consider within 7
Application for days of its receipt from the applicant: IRP/RP to apply within 3 days of its approval
withdrawal by the CoC.
before AA
Application for • The applicant shall state the reasons for Eol
withdrawal before
AA after issued of
Eol under
Regulation 36A
• In Form FA+Bank Guarantee towards estimated expenses.

Application for
withdrawal
before AA
Judicial Interpretation of section 12A by Supreme Court

• Section 12A, of the Code enacted with effect from 06.06.2018 will not come into the picture
since the admission of the petition was on 01.06.2018. [Shipra Hotels Ltd. Vs. Value
Lines Interiors Pvt. Ltd. [Civil Appeal No. 7405 of 2018, Supreme Court, dated
03.08.2018].
• At any stage where the CoC is not yet constituted, a party can approach the NCLT directly,
which Tribunal may, in exercise of its inherent powers under Rule 11 of the NCLT Rules,
allow or disallow an application for withdrawal or settlement. This will be decided after
hearing all the concerned parties and considering all relevant factors on the facts of each
case. [Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) Nos. 99,

3.50 ECONOMIC LAWS
100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and
WP (Civil) 37 of 2019, Supreme Court, dated 25.01.2019].
• Regulation 30A of the CIRP Regulations must be read along with section 12A of the Code.
Accordingly, the stipulation in regulation 30A can only be construed as directory depending
on the facts of each case.[Brilliant Alloys Pvt. Ltd. Vs. S. Rajagopal & Ors. [Petition(s)
for Special Leave to Appeal (C) No(s). 31557/2018, Supreme Court, dated 14.12.2018].
• The exit route prescribed in section 12A is not applicable to a Resolution Applicant. The
procedure envisaged in the said provision only applies to applicants invoking sections 7, 9
and 10 of the Code. [Maharashtra Seamless Ltd. Vs. Padmanabhan Venkatesh & Ors.
[Civil Appeal No. 4242 of 2019 and other appeals, Supreme Court, dated 22.01.2020].
Declaration of moratorium and public announcement [Section 13]
(1) AA to order for moratorium and public announcement [Section 13(1)]
The Adjudicating Authority, after r admission of application under section 7 or section 9 or section
10, shall by an order—
(a) declare a moratorium under section 14;
(b) cause a public announcement of the initiation of corporate insolvency resolution process and
call for the submission of claims under section 15, and
(c) appoint an interim resolution professional in the manner as laid down in section 16.
(2) Public Announcement – Section 13(2)
The public announcement referred to in sub-section (1)(b) shall be made immediately after the
appointment of the interim resolution professional.
Public announcement – Regulation 6
Regulation 6(1) provides that an insolvency professional shall make a public announcement
immediately on his appointment as an interim resolution professional (IRP).
Further explanation to Regulation 6(1) clarified that the word ‘Immediately’ as used in section
13(2) shall mean not later than 3 days from the date of his appointment.
In terms of Regulation 6(2) the public announcement shall be in:
• be in Form A of the Schedule;
• be published-
 in one English and one regional language newspaper with wide circulation at the
location of the registered office and principal office, if any, of the corporate debtor

and any other location where in the opinion of the interim resolution professional,
the corporate debtor conducts material business operations;
 on the website, if any,
 of the corporate debtor; and
 designated by the Board (IBBI) for the purpose,
 state where claim forms can be downloaded or obtained from, as the case may be;
• offer choice of three insolvency professionals identified under regulation 4A to act as
the authorised representative of creditors in each class; and
• provide the last date for submission of proofs of claim, which shall be fourteen days
from the date of appointment of the interim resolution professional.
Who shall bear the cose of public announcement – Regulation 6(3)
The applicant shall bear the expenses of the public announcement which may be reimbursed
by the committee to the extent it ratifies them.
Moratorium [Section 14]

Moratorium is a delay or suspension of an activity. In a legal context, it may refer to the temporary
suspension of a law to allow a legal challenge to be carried out.
After the commencement of corporate insolvency resolution process a calm period, known as
moratorium period is declared, during which all suits and legal proceedings etc. against the
Corporate Debtor are held in abeyance to allow the resolution professional to carry out his/her
task smoothly and disallowing creditors and other stakeholders to take any individual actions
against the corporate debtor and disrupt the process.
(1) Declaration of moratorium period [Section 14(1)]
Subject to provisions of sub-sections (2) and (3), the, on the insolvency commencement date, the
Adjudicating Authority shall by order, declare moratorium prohibiting all of the following, acts—
(a) the institution of suits or continuation of pending suits or proceedings against the
corporate debtor including execution of any judgment, decree or order in any court of law,
tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its
assets or any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security interest created by the corporate
debtor in respect of its property including any action under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002;

3.52 ECONOMIC LAWS
(d) the recovery of any property by an owner or lessor where such property is occupied by or
in the possession of the corporate debtor.
Explanation-For the purposes of this sub-section, it is hereby clarified that notwithstanding
anything contained in any other law for the time being in force, a licence, permit, registration,
quota, concession, clearance or a similar grant or right given by the Central Government,
State Government, local authority, sectoral regulator or any other authority constituted under
any other law for the time being in force, shall not be suspended or terminated on the grounds
of insolvency, subject to the condition that there is no default in payment of current dues
arising for the use or continuation of the license or a similar grant or right during moratorium
period.
(2) Supply of essential Goods or Service [Section 14(2)]
The supply of essential goods or services to the corporate debtor as may be specified shall
not be terminated or suspended or interrupted during moratorium period.
(3) Status of Corporate Debtor to be maintained as ‘Going Concern”[ Section
14(2A)]
Where the interim resolution professional or resolution professional, as the case may be,
considers the supply of goods or services critical to protect and preserve the value of the corporate
debtor and manage the operations of such corporate debtor as a going concern, then the supply
of such goods or services shall not be terminated, suspended or interrupted during the period of
moratorium, except where such corporate debtor has not paid dues arising from such supply
during the moratorium period or in such circumstances as may be specified.
(4) Prohibited Acts [Section 14(3)]
Acts prohibited during Moratorium period, shall not apply to-
(a) Such transactions, agreements or other arrangement as may be notified by the Central
Government in consultation with any financial sector regulator;
(b) A surety in a contract of guarantee to a corporate debtor.
(5) Effect of the order of moratorium [Section 14(4)]
The order of moratorium shall have effect from the date of such order till the completion of the
corporate insolvency resolution process.
Notes: The provision of section 14(1) of the Code is not applicable on a surety in a contract of
guarantee to a corporate debtor. Thus, recovery proceedings, insolvency resolution process or
bankruptcy proceedings against surety (guarantor) can be initiated even if moratorium is granted
to corporate debtor.
It is clarified that notwithstanding anything contained in any other law for the time being in force,
a licence, permit, registration, quota, concession, clearance or a similar grant or right given by

the Central Government, State Government, local authority, sectoral regulator or any other
authority constituted under any other law for the time being in force, shall not be suspended or
terminated on the grounds of insolvency, subject to the condition that there is no default in
payment of current dues arising for the use or continuation of the license or a similar grant or right
during moratorium period.
(6) When Moratorium period shall cease to have effect [Proviso to Section 14(4)]
Provided that where at any time during the corporate insolvency resolution process period, if the
Adjudicating Authority approves the resolution plan or passes an order for liquidation of corporate
debtor under section 33, the moratorium shall cease to have effect from the date of such approval
or liquidation order, as the case may be.
Example: After commencement of Corporate Insolvency Resolution, NCLT declared Moratorium
against the corporate debtor. Within a month of declaration, corporate debtor disposed of his
property. In the given instance, as per section 14 of the Code, any transaction/disposal/ of any
assets of Corporate Debtor during the moratorium period which is 180 days from date of
commencement of corporate insolvency resolution, is prohibited. So here the act of disposal of
the corporate debtor, is not valid.
However, as per Regulation 29 of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016, the Resolution Professional may sell unencumbered asset(s) of the corporate
debtor, other than in the ordinary course of business, not exceeding 10% of the total claims
admitted.
Judicial Interpretation of Section 14 by the Supreme Court
• Once the proceedings under the Code had commenced and an order declaring moratorium
has been passed by the AA, then if the assets of the CD are alienated during the pendency
of the proceedings under the Code, it will seriously jeopardise the interest of all the
stakeholders.[Anand Rao Korada Vs. Varsha Fabrics (P) Ltd. & Ors. [Civil Appeal Nos.
8800-8801 of 2019, Supreme Court, dated 18.11.2019].
• The mandate of the Code is that the moment an insolvency application is admitted, the
moratorium that comes into effect under section 14(1)(a) expressly interdicts institution or
continuation of pending suits or proceedings against CD. [Alchemist Asset Reconstruction
Company Ltd. Vs. Hotel Gaudavan Pvt. Ltd. & Ors. [Civil Appeal No. 16929 of 2017,
Supreme Court, dated 23.10.2017].
• Moratorium imposed by section 14 is in the interest of the CD itself, thereby preserving its
assets during the CIRP.[ Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP
(Civil) Nos. 99, 100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623
of 2018 and WP (Civil) 37 of 2019, Supreme Court, 25.01.2019].

3.54 ECONOMIC LAWS
• Sections 96 and 101, when contrasted with section 14, would show that section 14 cannot
possibly apply to a personal guarantor.[State Bank of India Vs. V. Ramakrishnan & Anr.
[Civil Appeal No. 3595, 4533 of 2018, Supreme Court, dated 14.08.2018].
• On the issue as to whether institution or continuation of a proceeding under section 138 of
the Negotiable Instruments Act, 1881 (NI Act) can be said to be covered under moratorium,
the SC held as under:
(i) A quasi-criminal proceeding which would result in the assets of the CD being depleted
as a result of having to pay compensation which can amount to twice the amount of
the cheque that has bounced would directly impact the CIRP in the same manner as
the institution, continuation, or execution of a decree in such suit in a civil court for the
amount of debt or other liability. Judged from the point of view of this objective, it is
impossible to discern any difference between the impact of a suit and a section 138
proceeding, insofar as the CD is concerned, on it getting the necessary breathing
space to get back on its feet during the CIRP.
(ii) Section 14(1)(a) refers to monetary liabilities of the CD and section 14(1)(b) refers to
the CD’s assets, and together, these two clauses form a scheme which shields the CD
from pecuniary attacks against it during the moratorium period so that the CD gets
breathing space to continue as a going concern in order to ultimately rehabilitate itself.
Any crack in this shield is bound to have adverse consequences.
(iii) A moratorium does not extinguish any liability, civil or criminal, but only casts a shadow
on proceedings already initiated and on proceedings to be initiated, and such shadow
is lifted when the moratorium period comes to an end.
(iv) A section 138 proceeding can be said to be a “civil sheep” in a “criminal wolf’s”
clothing, as it is the interest of the victim that is sought to be protected, the larger
interest of the State being subsumed in the victim alone moving a court in cheque
bouncing cases.
(v) A quasi -criminal proceeding contained in Chapter XVII of the NI Act would, given the
object and context of section 14 of the Code, amount to a “proceeding” within the
meaning of section 14(1)(a) and therefore, the moratorium attaches to such
proceeding.
(vi) Moratorium would apply only to the CD, and the natural persons mentioned in section
141 of the NI Act shall continue to be statutorily liable under Chapter XVII of the NI
Act. [P. Mohanraj & Ors. Vs. Shah Brothers Ispat Pvt. Ltd. [Civil Appeal No. 10355
of 2018 with other appeals, Supreme Court, dated 01.03.2021]
• On deferment of payment of loan as per the notification of RBI dated 27.03.2020, the SC
held, that there shall not be any charge of interest on interest/compound interest/ penal
interest for the period during the loan moratorium and any amount already recovered under

the same head, shall be refunded to the concerned borrowers and to be given
credit/adjusted in the next instalment of the loan account. [Small Scale Industrial
Manufactures Association (Regd.) Vs. Union of India and Ors. [Writ Petition (C) No.
476 of 2020, Supreme Court, dated 23.03.2021].
Public announcement of CIRP – Section 15
(1) Particulars of Public Announcement [Section 15(1)]
The public announcement of the CIRP under the order referred to in section 13 shall contain the
following information, namely: Name & Address of Corporate Debtor under the Corporate
Insolvency Resolution Process.
a) Name of the authority with which the corporate debtor is incorporated or registered.
b) the last date for submission of claims, as may be specified;
c) Details of IRP who shall be vested with the management of the Corporate Debtor and be
responsible for receiving claims.
d) Penalties for false or misleading Claims.
e) The date on which the CIRP shall close, which shall be the 180th day from the date of the
admission of the application under sections 7, 9 or section10, as the case may be.
(2) Public Announcement [Section 15(2)]
The public announcement under this section shall be made as prescribed under Regulation 6 of
the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, as mentioned
above. .
Appointment and tenure of Interim Resolution Professional (IRP)
(1) Appointment of IRP [Section 16(1)]
Adjudicating authority shall appoint an Interim Resolution Professional on the 11insolvency
commencement date.
(2) Initiation of CIRP by Financial Creditor [Section 16(2)]
Where the application for corporate insolvency resolution process is made by a financial creditor
or the corporate debtor, as the case may be, the resolution professional, as proposed in the
application shall be appointed as the interim resolution professional, if no disciplinary proceedings
are pending against him.
Substituted for "within fourteen days from the insolvency commencement date" by Insolvency and
11
Bankruptcy Code (Amendment) Act, 2020, w.e.f. 28-12-2019.

3.56 ECONOMIC LAWS
(3) Initiation of CIRP by Operational Creditor [Section 16(3)]

Where the application for CIRP is made by an operational creditor and
(a) No proposal for an interim resolution professional is made. The Adjudicating Authority
shall make a reference to the Board for the recommendation of an insolvency professional
who may act as an interim resolution professional.
(b) A proposal for an interim resolution professional is made the proposed resolution
professional shall be appointed as the interim resolution professional, if no disciplinary
proceedings are pending against him.
(4) Recommendation of Name of IRP Section 16(4)
The Board shall recommend the name of an insolvency professional to the Adjudicating Authority
against whom no disciplinary proceedings are pending, within 10 days of the receipt of a
reference from the Adjudicating Authority.
(5) 12Period of appointment of IRP – Section 16(5)
The term of Interim Resolution Professional shall continue till the date of appointment of the
resolution professional under section 22.
In the case of Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [Civil Appeal Nos. 8337-8338 of
2017, dated 31.08.2017], the Supreme Court held that once an IP is appointed to manage the
company, the erstwhile directors who are no longer in management, obviously cannot maintain an
appeal on behalf of the CD.
Eligibility for Resolution Professional - Regulation 3(1) of the IBBI (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.
An insolvency professional shall be eligible to be appointed as an IRP or a RP, as the case may
be, for a CIRP of a corporate debtor if he, and all partners and directors of the insolvency
professional entity of which he is a partner or director, are independent of the corporate debtor.
Explanation– A person shall be considered independent of the corporate debtor, if he:
(a) is eligible to be appointed as an independent director on the board of the corporate debtor
under section 149 of the Companies Act, 2013, where the corporate debtor is a company;
(b) is not a related party of the corporate debtor; or
(c) is not an employee or proprietor or a partner:
(i) of a firm of auditors or secretarial auditors in practice or cost auditors of the corporate
debtor; or
Substituted for "shall not exceed thirty days from date of his appointment" by the Insolvency and Bankruptcy
12
Code (Second Amendment) Act, 2018, w.r.e.f. 6-6-2018.

(ii) of a legal or a consulting firm, that has or had any transaction with the corporate debtor
amounting to 5% or more of the gross turnover of such firm,
in the last 3 financial years.
Management of affairs of Corporate Debtor by IRP [ Section 17]
(1) Suspension of the powers of Board of Directors of Corporate Debtor [ Section
17(1)]
From the date of appointment of the interim resolution professional, -
(a) the management of the affairs of the corporate debtor shall vest in the interim resolution
professional;
(b) the powers of the board of directors or the partners of the corporate debtor, as the case may
be, shall stand suspended and be exercised by the interim resolution professional;
(c) the officers and managers of the corporate debtor shall report to the interim resolution
professional and provide access to such documents and records of the corporate debtor as
may be required by the interim resolution professional;
(d) the financial institutions maintaining accounts of the corporate debtor shall act on the
instructions of the interim resolution professional in relation to such accounts and furnish all
information relating to the corporate debtor available with them to the interim resolution
professional.
Access to books - Regulation 4 of the IBBI (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016.
Without prejudice to section 17(2)(d), the IRP or the RP, as the case may be, may access
the books of account, records and other relevant documents and information, to the
extent relevant for discharging his duties under the Code, of the corporate debtor held
with-
(a) depositories of securities;
(b) professional advisors of the corporate debtor;
(c) information utilities;
(d) other registries that records the ownership of assets;
(e) members, promoters, partners, board of directors and joint venture partners of the
corporate debtor; and
(f) contractual counterparties of the corporate debtor.

3.58 ECONOMIC LAWS
(2) IRP to run the Corporate Debtor as Going Concern [ Section 17(2) ]
The IRP vested with the management of the corporate debtor, shall-
(a) act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and
other documents, if any;
(b) take such actions, in the manner and subject to such restrictions, as may be specified by
the Board;
(c) have the authority to access the electronic records of corporate debtor from information
utility having financial information of the corporate debtor;
(d) have the authority to access the books of accounts, records and other relevant documents
of corporate debtor available with government authorities, statutory auditors, accountants and
such other persons as may be specified; and
(e) be responsible for complying with the requirements under any law for the time being in
force on behalf of the corporate debtor.
Duties of IRP [Section 18]
The key duties to be performed by the Interim Resolution Professional are:-
(a) collect all information relating to the assets, finances and operations of the corporate
debtor for determining the financial position of the corporate debtor, including information
relating to
(i) business operations for the previous two years;
(ii) financial and operational payments for the previous two years;
(iii) list of assets and liabilities as on the initiation date; and
(iv) such other matters as may be specified.
(b) Receive and collate all claims submitted by creditors to him, pursuant to the public
announcement made under section 13 and 15;
(c) Constitute a Committee of Creditors
(d) monitor the assets of the corporate debtor and manage its operations until a resolution
professional is appointed by the committee of creditors
(e) File information collected with the information utility, if necessary; and
(f) Take control and custody of any assets over which corporate debtor has ownership rights
as recorded in the balance sheet of the corporate debtor,or with information utility or the
depository of securities or any other registry that records the ownership of assets including-

(i) assets over which the corporate debtor has ownership rights which may be located in
a foreign country;
(ii) assets that may or may not be in possession of the corporate debtor;
(iii) tangible assets, whether movable or immovable;
(iv) intangible assets including intellectual property;
(v) securities including shares held in any subsidiary of the corporate debtor, financial
instruments, insurance policies;
(vi) assets subject to the determination of ownership by a court or authority;
(g) Perform other duties as specified by the Board.
Following shall not be included in the meaning of “Assets” [Explanation to Section 18]
The explanation to this sub-section provides that the term “Assets” shall not include the following,
namely-
(a) assets owned by a third party in possession of the corporate debtor held under trust or
under contractual arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the corporate debtor; and
(c) such other assets as may be notified by the Central Government in consultation with any
financial sector regulator
Personnel to extend co-operation to interim resolution professional
[Section 19]
(1) Officials of Corporate Debtor to Cooperatie IRP [Section 19(1)]
The personnel of the corporate debtor, its promoters or any other person associated with the
management of the corporate debtor shall extend all assistance and cooperation to the interim
resolution professional as may be required by him in managing the affairs of the corporate debtor.
(2) IRP to seek directions to AA if officials of Corporate Debtor do not cooperate
[Section 19(2)]
Where any personnel of the corporate debtor, its promoter or any other person required to assist
or cooperate with the interim resolution professional does not assist or cooperate, the interim
resolution professional may make an application to the Adjudicating Authority for necessary
directions.
(3) AA to direct officials of CD [Section 19(3)]
The Adjudicating Authority, on receiving an application under sub-section (2), shall by an order,
direct such personnel or other person to comply with the instructions of the resolution professional
and to cooperate with him in collection of information and management of the corporate debtor.

3.60 ECONOMIC LAWS
Management of operations of corporate debtor as going concern

[Section 20]
(1) Preserve the value of CD as Going Concern [Section 20(1)]
The interim resolution professional shall make every endeavour to protect and preserve the value
of the property of the corporate debtor and manage the operations of the corporate debtor as a
going concern.
(2) Authority of IRP [Section 20(2)]
For the purposes of sub-section (1), the interim resolution professional shall have the authority-
(a) to appoint accountants, legal or other professionals as may be necessary;
(b) to enter into contracts on behalf of the corporate debtor or to amend or modify the contracts
or transactions which were entered into before the commencement of corporate insolvency
resolution process;
(c) to raise interim finance provided that no security interest shall be created over any
encumbered property of the corporate debtor without the prior consent of the creditors whose
debt is secured over such encumbered property:
Provided that no prior consent of the creditor shall be required where the value of such
property is not less than the amount equivalent to twice the amount of the debt.
(d) to issue instructions to personnel of the corporate debtor as may be necessary for keeping
the corporate debtor as a going concern; and
(e) to take all such actions as are necessary to keep the corporate debtor as a going concern.
Manner of submission of proof of claims to IRP: Proofs of claim shall be committed to IRP as
follows:
Operational creditor Workmen and

Financial Creditor shall
shall employees shall
Submits proof of Submits proof of Submits proof of

claims in form C claims in form B claims in form D
Details specified in Details specified in Details specified in

Regulation 8 under the Regulation 7 under the Regulation 9 under the
IBBI(Insolvency IBBI(Insolvency IBBI(Insolvency
Resolution Process for Resolution Process for Resolution Process for
Corporate Persons) Corporate Persons) Corporate Persons)
Regulations, 2016 Regulations, 2016 Regulations, 2016

A creditor shall submit claim with proof on or before the last date mentioned in the public
announcement. The IRP shall verify such claims within 7 days from the last date of receipt of the
claims and within two days of such verification of claims, file a report to the Adjudicating Authority,
certifying constitution of the CoC.
However, a creditor, who fails to submit claim with proof within the time stipulated in the public
announcement, may submit the claim with proof to the interim resolution professional or the
resolution professional, as the case may be, on or before the ninetieth day of the insolvency
commencement date IRP or the RP, as the case may be, shall verify every claim and thereupon
maintain a list of creditors. Such list of creditors shall be filed with the Adjudicating Authority and
also, displayed on the website, if any, of the Corporate Debtor.
Appointment of Resolution Professional (RP) [Section 22]
(1) Conduct of first meeting of CoC [Section 22(1)]
The first meeting of the committee of creditors shall be held within 7 days of the constitution of
the committee of creditors.
(2) Appointment of IRP as RP / Replacement of IRP [Section 22(2)]
The Committee of Creditors in the first meeting by majority vote of not less than 1366% of the
Voting Share of the Financial Creditors either-
• resolve to appoint the interim resolution professional as a Resolution Professional, or
• to replace the interim resolution professional by another Resolution Professional.
(3) Continuation of same IRP as RP / Replacement of IRP [Section 22(3)]
Where the committee of creditors resolves—
(a) to continue the interim resolution professional as resolution professional subject to a written
consent from the interim resolution professional in the specified form, it shall communicate
its decision to the interim resolution professional, the corporate debtor and the Adjudicating
Authority; or
(b) to replace the interim resolution professional, it shall file an application before the
Adjudicating Authority for the appointment of the proposed resolution professional along with
a written consent from the proposed resolution professional in the specified form.
(4) AA to send name of RP to IBBI [ Section 22(4)]
The Adjudicating Authority shall forward the name of the resolution professional proposed to the
Board for its confirmation and shall make such appointment after confirmation by the Board.
13Substituted for "seventy-five" by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018,
w.r.e.f. 6-6-2018

3.62 ECONOMIC LAWS
(5) How long the existing IRP can continue to function [Section 22(5)]
Where the Board does not confirm the name of the proposed resolution professional within 10
days of the receipt of the name of the proposed resolution professional, the Adjudicating Authority
shall, by order, direct the interim resolution professional to continue to function as the resolution
professional until such time as the Board confirms the appointment of the proposed resolution
professional.
Example: Mr. Z was the Interim Resolution Professional (IRP) in XY Company. The committee of
creditors by majority vote of financial creditors proposed to appoint Mr. Final as Resolution
professional (RP) of the XY Company. The said proposal was confirmed by the Board after the 10
days. As per Section 22 of the Code, if Board does not confirm the proposed name as RP within
10 days of receipt of proposal, the Adjudicating authority shall direct IRP to continue as RP for
such time as the Board would have confirmed for the appointment of Proposed RP.
Resolution Professional to conduct CIRP [Section 23]
The primary role and duty of RP is to conduct corporate insolvency resolution process and to
preserve and protect the assets of the corporate debtor, including the continued business
operations of the corporate debtor.
(1) RP to conduct entire CIRP [Section 23(1)]
Subject to section 27, the RP shall conduct the entire CIRP and manage the operations of the
corporate debtor during the corporate insolvency resolution process period.
The proviso to this sub-section provides that the resolution professional shall continue to manage
the operations of the corporate debtor after the expiry of the CIRP period,
• until an order approving the resolution plan under section 31(1) or
• appointing a liquidator under section 34
is passed by the Adjudicating Authority.
(2) Powers and duties of the RP [Section 23(2)]
RP shall exercise powers and perform duties as are vested or conferred on the interim resolution
professional under this Chapter.
(3) Appointment of new RP [Section 23(3)]
In case of any appointment of a resolution professional, the interim resolution professional shall
provide all the information, documents and records pertaining to the corporate debtor in his
possession and knowledge to the resolution professional.

Duties of Resolution Professional [Section 25]

(1) Protection of the assets of the CD [Section 25(1)]
It shall be the duty of the resolution professional to preserve and protect the assets of the
corporate debtor, including the continued business operations of the corporate debtor.
(2) Duties of IRP [Section 25(2)]
The resolution professional shall undertake the following actions to protect the assets of the
corporate debtor, namely:—
(a) take immediate custody and control of all the assets of the corporate debtor, including the
business records of the corporate debtor;
(b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the
benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings;
(c) raise interim finances subject to the approval of the committee of creditors;
(d) appoint accountants, legal or other professionals in the manner as specified by Board;
(e) maintain an updated list of claims;
(f) convene and attend all meetings of the committee of creditors;
(g) prepare the information memorandum;
(h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by
him with the approval of committee of creditors, having regard to the complexity and scale of
operations of the business of the corporate debtor and such other conditions as may be
specified by the Board, to submit a resolution plan or plans;
(i) present all resolution plans at the meetings of the committee of creditors;
(j) file application for avoidance of transactions in accordance with Chapter III, if any; and
(k) such other actions as may be specified by the Board.
In the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) Nos.
99, 100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and
WP (Civil) 37 of 2019, dated 25.01.2019], the Supreme Court opined that-
(i) The RP has administrative powers as opposed to quasi-judicial powers.
(ii) The RP is really a facilitator of the resolution process, whose administrative
functions are overseen by the CoC and by the AA.
(iii) Under the CIRP Regulations, the RP has to vet and verify claims made, and
ultimately, determine the amount of each claim.

3.64 ECONOMIC LAWS
Application for avoidance of transactions not to affect proceedings

[Section 26]
The filing of an avoidance application under section 25(2)(j) by the resolution professional shall
not affect the proceedings of the corporate insolvency resolution process.
Rights and duties of Authorised Representative (AR) of financial creditors
[Section 25A]
(1) Right of participation of financial creditors in CoC meeting [Section 25A((1)]
The authorised representative under section 21(6) or (6A) or section 24(5) shall have the right to
participate and vote in meetings of the committee of creditors on behalf of the financial creditor
he represents in accordance with the prior voting instructions of such creditors obtained through
physical or electronic means.
(2) AR to circulate agenda [section 25A(2) ]
It shall be the duty of the authorised representative to circulate the agenda and minutes of the
meeting of the committee of creditors to the financial creditor he represents.
(3) AR not to act against the interest of the FC [Section 25A(3)]
The authorised representative shall not act against the interest of the financial creditor he
represents and shall always act in accordance with their prior instructions:
(4) AR representing several FC [First Proviso]
The first proviso to this sub-section provides that if the authorized representative represents
several financial creditors, then he shall cast his vote in respect of each financial creditor in
accordance with instructions received from each financial creditor, to the extent of his voting
share:
(5) AR not to vote in CoC Meeting if no instructions is received from FC [Second
Proviso]
The second proviso provides that if any financial creditor does not give prior instructions through
physical or electronic means, the authorised representative shall abstain from voting on behalf of
such creditor.
(6) Vote by AR [Section 25A(3A)]
Notwithstanding anything to the contrary contained in sub-section (3), the authorised
representative under section 21(6) shall cast his vote on behalf of all the financial creditors he
represents in accordance with the decision taken by a vote of more than fifty per cent. of the
voting share of the financial creditors he represents, who have cast their vote:
Provided that for a vote to be cast in respect of an application under section 12A, the authorised
representative shall cast his vote in accordance with the provisions of subsection (3).

(7) Voting by electronic means [Section 25A(4)]

The authorised representative shall file with the committee of creditors any instructions received
by way of physical or electronic means, from the financial creditor he represents, for voting in
accordance therewith, to ensure that the appropriate voting instructions of the financial creditor
he represents is correctly recorded by the interim resolution professional or resolution
professional, as the case may be.
Explanation.- For the purposes of this section, the “electronic means” shall be such as may be
specified.
Fees of Resolution Professional: As per Section 5(13)(b) & (c) of the Code, the fees payable to
any person acting as a resolution professional and any costs incurred by the resolution
professional in running the business of the corporate debtor as a going concern shall be included
in the insolvency resolution process costs and shall be paid in priority before payment to any other
creditor.
Replacement of Resolution Professional by CoC [Section 27]
(1) Replacement of resolution professional [Section 27(1)]
If at any time during the Corporate Insolvency Resolution Process the Committee of creditors is
of the opinion that the resolution professional appointed under section 22 is required to be
replaced, it may replace, him with another resolution professional in the manner provided under
this section..
(2) Requirement of voting share to replace resolution professional [ Section 27(2)]
14The committee of creditors may, at a meeting, by a vote of 66% of voting shares, resolve to
replace the resolution professional appointed under section 22 with another resolution
professional, subject to a written consent from the proposed resolution professional in the
specified form.
(3) CoC to forward the name of the proposed Insolvency Profession [Section 27(3)]
The Committee of Creditors shall forward the name of the Insolvency Professional proposed by
them to the Adjudicating Authority.
(4) AA to forward the name of IP proposed by CoC [Section 27(4)]
The Adjudicating Authority shall forward the name of the proposed resolution professional to the
Board for its confirmation and a resolution professional shall be appointed in the same manner as
laid down in section 16.
14 Substituted by the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018, w.r.e.f. 6-6-2018

3.66 ECONOMIC LAWS
(5) Continuation of existing RP if disciplinary proceedings are pending against the

proposed RP [Section 27(5)]
Where any disciplinary proceedings are pending against the proposed resolution professional
under sub-section (3), the resolution professional appointed under section 22 shall continue till
the appointment of another resolution professional.
Preparation of information memorandum (IM) [Section 29]
(1) RP to prepare IM – Section 29(1)
The resolution professional shall prepare an information memorandum containing such relevant
information as may be specified by the Board for formulating a resolution plan.
Regulation 36(2) provides that the information shall contain the following details of the
corporate debtor:
• assets and liabilities with such description, as on the insolvency commencement date,
as are generally necessary for ascertaining their values.
• Explanation: ‘Description’ includes the details such as date of acquisition, cost of
acquisition, remaining useful life, identification number, depreciation charged, book
value, and any other relevant details.
• the latest annual financial statements;
• audited financial statements of the corporate debtor for the last two financial years and
provisional financial statements for the current financial year made up to a date not
earlier than fourteen days from the date of the application;
• a list of creditors containing the names of creditors, the amounts claimed by them, the
amount of their claims admitted and the security interest, if any, in respect of such
claims;
• particulars of a debt due from or to the corporate debtor with respect to related parties;
• details of guarantees that have been given in relation to the debts of the corporate
debtor by other persons, specifying which of the guarantors is a related party;
• the names and addresses of the members or partners holding at least one per cent
stake in the corporate debtor along with the size of stake;
• details of all material litigation and an ongoing investigation or proceeding initiated by
Government and statutory authorities;
• the number of workers and employees and liabilities of the corporate debtor towards
them;

• other information, which the resolution professional deems relevant to the committee.
In terms of Regulation 36(1) the RP shall submit the information memorandum in
electronic forms to each member of the CoC:
• within 2 weeks of his appointment,
• but not later than 45 days from the insolvency commencement date,
whichever is earlier.
(2) RP to provide access to Resolution Applicant [Section 29(2)]

The resolution professional shall provide to the resolution applicant access to all relevant
information in physical and electronic form, provided such resolution applicant undertakes—
(a) to comply with provisions of law for the time being in force relating to confidentiality and
insider trading;
(b) to protect any intellectual property of the corporate debtor it may have access to; and
(c) not to share relevant information with third parties unless clauses (a) and (b) above are
complied with.
"Relevant information" - means the information required by the resolution applicant to make the
resolution plan for the corporate debtor, which shall include the financial position of the corporate
debtor, all information related to disputes by or against the corporate debtor and any other matter
pertaining to the corporate debtor as may be specified.
Committee of Creditors [Section 21]
(1) Constitution of CoC [ Section 21(1)]
The interim resolution professional shall after collation of all claims received against the corporate
debtor and determination of the financial position of the corporate debtor, constitute a committee
of creditors (CoC).
Constitution of committee – Regulation 17
(1) The IRP shall file a report certifying constitution of the committee to the Adjudicating
Authority within two days of the verification of claims received under sub-regulation (1)
of regulation 12.
(1A) The committee and members of the committee shall discharge functions and exercise
powers under the Code and these regulations in respect of CIRP in compliance with
the guidelines as may be issued by the Board.

3.68 ECONOMIC LAWS
(2) The IRP shall hold the first meeting of the committee within seven days of filing the
report under this regulation.
(3) Where the appointment of RP is delayed, the IRP shall perform the functions of the
resolution professional from the 40 th day of the insolvency commencement date till a
resolution professional is appointed under section 22
(2) Composition of CoC [Section 21(2)]

The committee of creditors shall comprise of all the financial creditors of the corporate debtor.
When FC/authorized representative is not entitled to participate in the CoC [First Proviso]
The first proviso to this sub-section provides that a Financial creditor or the authorised
representative of the financial creditor referred to in section 24(6), 24(6A), or 24(5), if it is a related
party of the corporate debtor, shall not have any right of representation, participation or voting in
a meeting of the committee of creditors:
Where FC is a Financial Sector Regulator [Second Proviso]
The second proviso to this sub-section provides that the first proviso shall not apply to a financial
creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor
solely on account of conversion or substitution of debt into equity shares or instruments
convertible into equity shares, prior to the insolvency commencement date.
(3) In case where debts owed to two or more FC [Section 21(2)]
Subject to sub-sections (6) and (6A) the corporate debtor owes financial debts to two or more
financial creditors as part of a consortium or agreement, each such financial creditor shall be part
of the committee of creditors and their voting share shall be determined on the basis of the
financial debts owed to them.
(4) Where the creditor is a Financial as well as an Operational Creditor [Section 21(3)]
Where any person is a financial creditor as well as an operational creditor,—
(a) such person shall be a financial creditor to the extent of the financial debt owed by the
corporate debtor, and shall be included in the committee of creditors, with voting share
proportionate to the extent of financial debts owed to such creditor;
(b) such person shall be considered to be an operational creditor to the extent of the operational
debt owed by the corporate debtor to such creditor.
(5) Assignment of debt by Operational Creditor to Financial Creditor [ Section 21(5)]
Where an operational creditor has assigned or legally transferred any operational debt to a
financial creditor, the assignee or transferee shall be considered as an operational creditor to the
extent of such assignment or legal transfer.

(6) In case of consortium arrangement of FC [Section 21(6)]

Where the terms of the financial debt extended as part of a consortium arrangement or syndicated
facility provide for a single trustee or agent to act for all financial creditors, each financial creditor may—
(a) authorise the trustee or agent to act on his behalf in the committee of creditors to the extent
of his voting share;
(b) represent himself in the committee of creditors to the extent of his voting share;
(c) appoint an insolvency professional (other than the resolution professional) at his own cost to
represent himself in the committee of creditors to the extent of his voting share; or
(d) exercise his right to vote to the extent of his voting share with one or more financial creditors
jointly or severally.
(7) Voting by authorised representative of class of FC [Section 21(6A)]
Where a financial debt –
(a) is in the form of securities or deposits and the terms of the financial debt provide for
appointment of a trustee or agent to act as authorised representative for all the financial
creditors, such trustee or agent shall act on behalf of such financial creditors;
(b) is owed to a class of creditors exceeding the number as may be specified, other than the
creditors covered under clause (a) or sub-section (6), the interim resolution professional shall
make an application to the Adjudicating Authority along with the list of all financial creditors,
containing the name of an insolvency professional, other than the interim resolution
professional, to act as their authorised representative who shall be appointed by the
Adjudicating Authority prior to the first meeting of the committee of creditors;
(c) is represented by a guardian, executor or administrator, such person shall act as authorised
representative on behalf of such financial creditors, and such authorised representative under
clause (a) or clause (b) or clause (c) shall attend the meetings of the committee of creditors,
and vote on behalf of each financial creditor to the extent of his voting share.
Who can act as an authorised representative?
Where a financial debt is in the form of securities or
deposits and the terms of the financial debt provide for • such trustee or agent shall act on behalf of such
appointment of a trustee or agent to act as authorised financial creditors;
representative for all the financial creditors—
Where a financial debt is owed to a class of creditors
other than the creditors covered above, the IRP shall • to act as their authorised representative
make an application to the AA along with the list of all appointed by the Adjudicating Authority prior to
financial creditors, with the name of an insolvency the first meeting of the committee of creditors;
professional
Where a financial debt is represented by a guardian, • such person shall act as authorised
executor or administrator, representative on behalf of such financial
creditors

3.70 ECONOMIC LAWS
(8) Remuneration payable to ARs [Section 21(6B)]

The remuneration payable to the authorised representative-
(i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the financial
debt or the relevant documentation; and
(ii) under clause (b) of sub-section (6A) shall be as specified which shall form part of the
insolvency resolution process costs.
(9) IBBI to specify the manner of voting [Section 21(7)]
The Board may specify the manner of voting and the determining of the voting share in respect of
financial debts covered under sub-sections (6) and (6A).
(10) Decision of CoC [Section 21(8)]
Save as otherwise provided in this Code, all decisions of the committee of creditors shall be taken
by a vote of not less than 51% of voting share of the financial creditors.
Provided that where a corporate debtor does not have any financial creditors, the committee of
creditors shall be constituted and shall comprise of such persons to exercise such functions in
such manner as may be specified.
Right of members of CoC [Section 21(9)]
The committee of creditors shall have the right to require the resolution professional to furnish
any financial information in relation to the corporate debtor at any time during the corporate
insolvency resolution process.
RP to make available financial information to CoC [Section 21(10)]
The resolution professional shall make available any financial information so required by the
committee of creditors under sub-section (9) within a period of 7 days of such requisition.
Judicial Interpretation of Section 21 by the Supreme Court
• In the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) Nos. 99,
100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and
WP (Civil) 37 of 2019, dated 25.01.2019], the Supreme Court opined that the CoC is
required to evaluate the resolution plan on the basis of feasibility and viability.
• In the case of Phoenix Arc Pvt. Ltd. Vs. Spade Financial Services Ltd. & Ors. [Civil Appeal
No. 2842 of 2020 with 3063 of 2020, dated 01.02.2021], the Supreme Court held that:
(a) The collusive commercial arrangements between FCs and the CD would not constitute
a ‘financial debt’;
(b) The objects and purposes of the Code are best served when the CIRP is driven by
external creditors, so as to ensure that the CoC is not sabotaged by related parties of

the CD. The purpose of excluding a related party of a CD from the CoC is to obviate
conflicts of interest;
(c) Exclusion under the first proviso to section 21(2) is related not to the debt itself but to
the relationship existing between a related party FC and the CD.; and
(d) The FC, who in praesenti is not a related party, would not be debarred from being a
member of the CoC. However, in case where the related party FC divests itself of its
shareholding or ceases to become a related party in a business capacity with the sole
intention of participating in the CoC and sabotage the CIRP, it would be in keeping
with the object and purpose of the first proviso to section 21(2), to debar the former
related party creditor.
Committee with only operational creditors – Regulation 16
(1) Where the corporate debtor has no financial debt or where all financial creditors are
related parties of the corporate debtor, the committee shall be set up in accordance
with this Regulation.
(2) The committee formed under this Regulation shall consist of members as under –
(a) 18 largest operational creditors by value:
Provided that if the number of operational creditors is less than 18, the committee
shall include all such operational creditors;
(b) one representative elected by all workmen other than those workmen included
under sub-clause (a); and
(c) one representative elected by all employees other than those employees included
under sub-clause (a).
(3) A member of the committee formed under this Regulation shall have voting rights in
proportion of the debt due to such creditor or debt represented by such representative,
as the case may be, to the total debt.
Meaning of total debt
Explanation to this sub-regulation provides the meaning of ‘total debt’ which means the
sum of-
(a) the amount of debt due to the creditors listed in sub-regulation 2(a);
(b) the amount of the aggregate debt due to workmen under sub-regulation 2(b); and
(c) the amount of the aggregate debt due to employees under sub-regulation 2(c).

3.72 ECONOMIC LAWS
(4) A committee formed under this Regulation and its members shall have the same rights,
powers, duties and obligations as a committee comprising financial creditors and its
members, as the case may be.
Committee of creditors
Where Financial
Where Financial Creditors don’t exist
Creditors exist
The CoC shall

comprise of all where all financial creditors are related parties of the corporate debtor,
financial where the
creditors of a corporate
corporate debtor has
debtor no financial
debt, or the committee shall be formed comprising of following members
The resolution
professional 18 largest operational creditors 1 1
shall conduct by value. representative representative
the meetings elected by all elected by all
of the CoC workmen employees.
Where the number of operational
creditors is less than 18, the
committee shall include all such
operational creditors.
Meeting of committee of creditors [Section 24]

The provisions related to the meeting of committee of creditors are being dealt under the section
24 of the Code.
(1) Meeting of CoC in person or through electronic means [Section 24(1)]
The members of the committee of creditors may meet:
• in person; or
• by such other electronic means
as prescribed under Regulation 20 of the IBBI (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016.
(2) Who will conduct the meetings of CoC [Section 24(2)]
All meetings of the committee of creditors shall be conducted by the resolution professional.

(3) Notice for meeting of CoC [Section 24(3)]

The resolution professional shall give notice of each meeting of the committee of creditors to-
(a) members of committee of creditors, including the authorized representatives referred to in
section 21(6)(6A) and sub-section (5);
(b) members of the suspended Board of Directors or the partners of the corporate persons, as
the case may be;
(c) operational creditors or their representatives if the amount of their aggregate dues is not less
than 10% of the debt.
(4) Who can attend the meetings of CoC and Vote [Section 24 (4)]
The directors, partners and one representative of operational creditors, as referred to in sub-
section (3), may attend the meetings of committee of creditors, but shall not have any right to vote
in such meetings:
Provided that the absence of any such director, partner or representative of operational creditors,
as the case may be, shall not invalidate proceedings of such meeting.
(5) Who can appoint Insolvency Professional other than Resolution Professional
[Section 24 (5)]
Subject to sub-sections (6), (6A) and (6B) of section 21, any creditor who is a member of the
committee of creditors may appoint an insolvency professional other than the resolution
professional to represent such creditor in a meeting of the committee of creditors.
Provided that the fees payable to such insolvency professional representing any individual creditor
will be borne by such creditor.
(6) Voting by the creditors in CoC Meetings [Section 24 (6)]
Each creditor shall vote in accordance with the voting share assigned to him based on the financial
debts owed to such creditor.
(7) Who shall determine the voting share assigned to each creditor [Section 24 (7)]
The resolution professional shall determine the voting share to be assigned to each creditor in the
manner specified by the Board.
(8) Manner of conducting the meetings of CoC [Section 24(8)]
The meetings of the committee of creditors shall be conducted in such manner as prescribed
under Chapter VI of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,
2016.

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Meetings of the CoC – Regulation 18
A resolution professional may convene a meeting of the committee as and when he considers
necessary, and shall convene a meeting if a request to that effect is made by members of the
committee representing 33% of the voting rights.
Notice of meeting - Regulation 19
(1) Subject to this Regulation, a meeting of the committee shall be called by giving not less
than 5 days’ notice in writing to every participant, at the address it has provided to the
IRP or the RP, as the case may be, and such notice may be sent by hand delivery, or
by post but in any event, be served on every participant by electronic means in
accordance with Regulation 20.
(2) The committee may reduce the notice period from five days to such other period of not
less than 24 hours, as it deems fit:
Provided that the committee may reduce the period to such other period of not less than 48
hours, if there is any authorised representative.
Service of notice by electronic means – Regulation 20
• A notice by electronic means may be sent to the participants through e-mail.
• The subject line in e-mail shall state the name of the corporate debtor, the place, if any,
the time and the date on which the meeting is scheduled.
• The notice may be send in Portable Document Format or in a non-editable format
together with a ‘link.
• The resolution professional shall ensure that it uses a system which produces
confirmation of the total number of recipients e-mailed and a record of each recipient
and any notices of any failed transmissions and subsequent re-sending shall be
retained as ‘‘proof of sending’’.
• The obligation of the resolution professional shall be satisfied when he transmits the
email and he shall not be held responsible for a failure in transmission beyond its
control.
• The notice made available on the electronic link or Uniform Resource Locator shall be
readable, and the recipient should be able to obtain and retain copies.
• If a participant, other than a member of the committee, fails to provide or update the
relevant e-mail address to the resolution professional, the non-receipt of such notice
by such participant of any meeting shall not invalidate the decisions taken at such
meeting.

Contents of the meeting – Regulation 21

(1) The notice shall inform the participants of the venue, the time and date of the meeting
and of the option available to them to participate through video conferencing or other
audio and visual means, and shall also provide all the necessary information to enable
participation through video conferencing or other audio and visual means.
(2) The notice of the meeting shall provide that a participant may attend and vote in the
meeting either in person or through an authorised representative:
Provided that such participant shall inform the resolution professional, in advance of the
meeting, of the identity of the authorised representative who will attend and vote at the
meeting on its behalf.
(3) The notice of the meeting shall contain the following-
(i) a list of the matters to be discussed at the meeting;
(ii) a list of the issues to be voted upon at the meeting; and
(iii) copies of all documents relevant to the matters to be discussed and the issues to
be voted upon at the meeting.
(4) The notice of the meeting shall-
(a) state the process and manner for voting by electronic means and the time
schedule, including the time period during which the votes may be cast:
(b) provide the login ID and the details of a facility for generating password and for
keeping security and casting of vote in a secure manner; and
(c) provide contact details of the person who will address the queries connected with
the electronic voting.
Quorum at the meeting – Regulation 22
(1) A meeting of the committee shall be quorate if members of the committee representing
at least 33% of the voting rights are present either in person or by video conferencing
or other audio and visual means:
Provided that the committee may modify the percentage of voting rights required for
quorum in respect of any future meetings of the committee.
(2) Where a meeting of the committee could not be held for want of quorum, unless the
committee has previously decided otherwise, the meeting shall automatically stand
adjourned at the same time and place on the next day.

3.76 ECONOMIC LAWS
(3) In the event a meeting of the committee is adjourned in accordance with sub-regulation
(2), the adjourned meeting shall be quorate with the members of the committee
attending the meeting.
Participation through video conferencing – Regulation 23
(1) The notice convening the meetings of the committee shall provide the participants an
option to attend the meeting through video conferencing or other audio and visual
means in accordance with this Regulation.
(2) The resolution professional shall make necessary arrangements to ensure
uninterrupted and clear video or audio and visual connection.
(3) The resolution professional shall take due and reasonable care-
(a) to safeguard the integrity of the meeting by ensuring sufficient security and
identification procedures;
(b) to ensure availability of proper video conferencing or other audio and visual
equipment or facilities for providing transmission of the communications for
effective participation of the participants at the meeting;
(c) to record proceedings and prepare the minutes of the meeting;
(d) to store for safekeeping and marking the physical recording(s) or other electronic
recording mechanism as part of the records of the corporate debtor;
(e) to ensure that no person other than the intended participants attends or has access
to the proceedings of the meeting through video conferencing or other audio and
visual means; and (f) to ensure that participants attending the meeting through
audio and visual means are able to hear and see, if applicable, the other
participants clearly during the course of the meeting: Provided that the persons,
who are differently abled, may make request to the resolution professional to allow
a person to accompany him at the meeting.
(4) Where a meeting is conducted through video conferencing or other audio and visual
means, the scheduled venue of the meeting as set forth in the notice convening the
meeting, which shall be in India, shall be deemed to be the place of the said meeting
and all recordings of the proceedings at the meeting shall be deemed to be made at
such place.
Conduct of meeting – Regulation 24
(1) The resolution professional shall act as the chairperson of the meeting of the committee.
(2) At the commencement of a meeting, the resolution professional shall take a roll call
when every participant attending through video conferencing or other audio and visual
means shall state, for the record, the following,-

(a) his name;

(b) whether he is attending in the capacity of a member of the committee or any other
participant;
(c) whether he is representing a member or group of members;
(d) the location from where he is participating;
(e) that he has received the agenda and all the relevant material for the meeting; and
(f) that no one other than him is attending or has access to the proceedings of the
meeting at the location of that person.
(3) After the roll call, the resolution professional shall inform the participants of the names of
all persons who are present for the meeting and confirm if the required quorum is
complete. (4) The resolution professional shall ensure that the required quorum is present
throughout the meeting.
(5) From the commencement of the meeting till its conclusion, no person other than the
participants and any other person whose presence is required by the resolution
professional shall be allowed access to the place where meeting is held or to the video
conferencing or other audio and visual facility, without the permission of the resolution
professional.
(6) The resolution professional shall ensure that minutes are made in relation to each
meeting of the committee and such minutes shall disclose the particulars of the
participants who attended the meeting in person, through video conferencing, or other
audio and visual means. (7) The resolution professional shall circulate the minutes of the
meeting to all participants by electronic means within forty eight hours of the said meeting.
In the case of Vijay Kumar Jain Vs. Standard Chartered Bank & Ors. [Civil Appeal No. 8430
of 2018, dated31.01.2019], the Supreme Court held that a combined reading of the Code as well
as the Regulations leads to the conclusion that members of the erstwhile Board of Directors of the
CD being vitally interested in resolution plans that may be discussed at meetings of the CoC, must
be given a copy of such plans as part of documents that have to be furnished along with the notice
of such meetings.
Approval of committee of creditors for certain actions [Section 28]
(1) Prior approval of CoC [Section 28(1)]
Notwithstanding anything contained in any other law for the time being in force, the RP, during
the CIRP, shall not take any of the following actions without the prior approval of the committee
of creditors namely:—

3.78 ECONOMIC LAWS
(a) raise any interim finance in excess of the amount as may be decided by the committee of
creditors in their meeting;
(b) create any security interest over the assets of the corporate debtor;
(c) change the capital structure of the corporate debtor, including by way of issuance of
additional securities, creating a new class of securities or buying back or redemption of issued
securities in case the corporate debtor is a company;
(d) record any change in the ownership interest of the corporate debtor;
(e) give instructions to financial institutions maintaining accounts of the corporate debtor for a
debit transaction from any such accounts in excess of the amount as may be decided by the
committee of creditors in their meeting;
(f) undertake any related party transaction;
(g) amend any constitutional documents of the corporate debtor;
(h) delegate its authority to any other person;
(i) dispose of or permit the disposal of shares of any shareholder of the corporate debtor or
their nominees to third parties;
(j) make any change in the management of the corporate debtor or its subsidiary;
(k) transfer rights or financial debts or operational debts under material contracts otherwise
than in the ordinary course of business;
(l) make changes in the appointment or terms of contract of such personnel as specified
by the committee of creditors; or
(m) make changes in the appointment or terms of contract of statutory auditors or internal
auditors of the corporate debtor.
(2) RP to convene meeting of CoC [Section 28(2)]
The resolution professional shall convene a meeting of the committee of creditors and seek the
vote of the creditors prior to taking any of the above actions under sub-section (1).
(3) Requirement of vote of 66% of voting shares [Section 28(3)]
No action shall be approved by the committee of creditors unless approved by a vote of sixty-six
per cent of the voting shares.
(4) Effect of action taken by RP without approval of the CoC [Section 28(4)]
Where any action is taken by the resolution professional without seeking the approval of the
committee of creditors in the manner as required in this section, such action shall be void.

(5) CoC may report action of RP to the IBBI for not taking approval on certain
matters – Section 28(5)
Persons not eligible to be resolution applicant [Section 29A]
Grounds of ineligibility to be a resolution applicant: A person shall not be eligible to submit a
resolution plan, if such person, or any other person acting jointly or in concert with such person—
(a) is an undischarged insolvent;
(b) is a wilful defaulter in accordance with the guidelines of the Reserve Bank of India issued
under the Banking Regulation Act, 1949;
(c) at the time of submission of the resolution plan has an account, or an account of a corporate
debtor under the management or control of such person or of whom such person is a
promoter, classified as non-performing asset in accordance with the guidelines of the
Reserve Bank of India issued under the Banking Regulation Act, 1949 or the guidelines of a
financial sector regulator issued under any other law for the time being in force, and at least
a period of one year has lapsed from the date of such classification till the date of
commencement of the corporate insolvency resolution process of the corporate debtor:
Exception : Provided that the person shall be eligible to submit a resolution plan if such
person makes payment of all overdue amounts with interest thereon and charges relating to
non-performing asset accounts before submission of resolution plan:
Provided further that nothing in this clause shall apply to a resolution applicant where such
applicant is a financial entity and is not a related party to the corporate debtor.
Explanation I.—For the purposes of this proviso, the expression "related party" shall not
include a financial entity, regulated by a financial sector regulator, if it is a financial creditor
of the corporate debtor and is a related party of the corporate debtor solely on account of
conversion or substitution of debt into equity shares or instruments convertible into equity
shares or completion of such transactions as may be presecribed, prior to the insolvency
commencement date.
Explanation II.—For the purposes of this clause, where a resolution applicant has an
account, or an account of a corporate debtor under the management or control of such person
or of whom such person is a promoter, classified as non-performing asset and such account
was acquired pursuant to a prior resolution plan approved under this Code, then, the
provisions of this clause shall not apply to such resolution applicant for a period of three years
from the date of approval of such resolution plan by the Adjudicating Authority under this
Code;
(d) has been convicted for any offence punishable with imprisonment—
(i) for two years or more under any Act specified under the Twelfth Schedule; or

3.80 ECONOMIC LAWS
(ii) for seven years or more under any other law for the time being in force:
Provided that this clause shall not apply to a person after the expiry of a period of two years
from the date of his release from imprisonment:
Provided further that this clause shall not apply in relation to a connected person referred to
in clause (iii) of Explanation I;]
(e) is disqualified to act as a director under the Companies Act, 2013 (18 of 2013):
Provided that this clause shall not apply in relation to a connected person referred to in
clause (iii) of Explanation I;
(f) is prohibited by the Securities and Exchange Board of India from trading in securities or
accessing the securities markets;
(g) has been a promoter or in the management or control of a corporate debtor in which a
preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent
transaction has taken place and in respect of which an order has been made by the
Adjudicating Authority under this Code:
Provided that this clause shall not apply if a preferential transaction, undervalued
transaction, extortionate credit transaction or fraudulent transaction has taken place prior to
the acquisition of the corporate debtor by the resolution applicant pursuant to a resolution
plan approved under this Code or pursuant to a scheme or plan approved by a financial sector
regulator or a court, and such resolution applicant has not otherwise contributed to the
preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent
transaction;
(h) has executed a guarantee in favour of a creditor in respect of a corporate debtor against
which an application for insolvency resolution made by such creditor has been admitted under
this Code and such guarantee has been invoked by the creditor and remains unpaid in full or
part ;
(i) is subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction
outside India; or
(j) has a connected person not eligible under clauses (a) to (i).
Explanation I—For the purposes of this clause, the expression "connected person" means—
(i) any person who is the promoter or in the management or control of the resolution
applicant; or
(ii) any person who shall be the promoter or in management or control of the business of
the corporate debtor during the implementation of the resolution plan; or
(iii) the holding company, subsidiary company, associate company or related party of a
person referred to in clauses (i) and (ii):

Provided that nothing in clause (iii) of Explanation I shall apply to a resolution applicant
where such applicant is a financial entity and is not a related party of the corporate debtor:
Provided further that the expression "related party" shall not include a financial entity,
regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor and
is a related party of the corporate debtor solely on account of conversion or substitution of
debt into equity shares or instruments convertible into equity shares or completion of such
transactions as may be precribed, prior to the insolvency commencement date;
Explanation II.—For the purposes of this section, "financial entity" shall mean the following
entities which meet such criteria or conditions as the Central Government may, in consultation
with the financial sector regulator, notify in this behalf, namely:—
(a) a scheduled bank;
(b) any entity regulated by a foreign central bank or a securities market regulator or other
financial sector regulator of a jurisdiction outside India which jurisdiction is compliant
with the Financial Action Task Force Standards and is a signatory to the International
Organisation of Securities Commissions Multilateral Memorandum of Understanding;
(c) any investment vehicle, registered foreign institutional investor, registered foreign
portfolio investor or a foreign venture capital investor, where the terms shall have the
meaning assigned to them in regulation 2 of the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017
made under the Foreign Exchange Management Act, 1999;
(d) an asset reconstruction company registered with the Reserve Bank of India under
section 3 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (54 of 2002);
(e) an Alternate Investment Fund registered with the Securities and Exchange Board of
India;
(f) such categories of persons as may be notified by the Central Government.
Judicial Interpretation of Section 29A by Supreme Court
• In the case of Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. [Civil Appeal
Nos. 9402-9405 of 2018 and other appeals, dated 04.10.2018], the Supreme Court held
that Section 29A is a de facto as opposed to a de jure position of persons mentioned
therein. This is a typical see through provision so that one can see persons who are actually
in control, whether jointly or in concert. A purposeful and contextual interpretation of section
29A is imperative to pierce the corporate veil to find out as to who are the real individuals
or entities who are acting jointly or in concert for submission of a resolution plan .
• The Constitutional validity of section 29A was upheld by the Supreme Court in the case of
Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) Nos. 99, 100, 115,

3.82 ECONOMIC LAWS
459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and WP (Civil)
37 of 2019, dated 25.01.2019.
• In the case titled as Arun Kumar Jagatramka Vs. Jindal Steel and Power Ltd. & Anr. [Civil
Appeal No. 9664 of 2019 with other appeals, dated 15.03.2021], the Supreme Court
upholding the constitutional validity of regulation 2B of the Liquidation Process Regulations,
held that prohibition in section 29A and section 35(1)(f) of the Code must also attach to a
scheme of compromise or arrangement under section 230 of the Companies Act, 2013
(scheme), where a company is undergoing liquidation under the Code. Even in the absence
of said regulation, a person ineligible under section 29A read with section 35(1)(f) is not
permitted to propose a scheme for revival of a company undergoing liquidation under the
Code. In case of a company undergoing liquidation pursuant to the provisions of Chapter
III of the Code, a scheme is a facet of the liquidation process. It would lead to a manifest
absurdity if the very persons who are ineligible for submitting a resolution plan, participating
in the sale of assets of the company in liquidation or participating in the sale of the corporate
debtor as a ‘going concern’, are somehow permitted to propose a scheme. The same
rationale which permeates the resolution process under Chapter II (by virtue of the
provisions of section 29A) permeates the liquidation process under Chapter III (by virtue of
the provisions of section 35(1)(f)).
Resolution Plan
A resolution plan means a plan proposed by a resolution applicant for resolution/restoration of the
Corporate Debtor as a going concern. It has to be approved by the CoC by a vote of not less than
sixty-six per cent of voting share of the financial creditors, before being presented to the
Adjudicating Authority. The sections 30 and 31 of the Code deal with resolution plan.
Submission of Resolution Plan [Section 30]
(1) Resolution Applicant to submit Resolution Plan to RP [Section 30(1)]
A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible
under section 29A, to the resolution professional prepared on the basis of the information
memorandum.

Formulation and submission of Resolution Plan
Rejection of Resolution Plan Approval of Resolution Plan
Liquidation process Moratorium ceases
Appointment of liquidator Implementation of Resolution Plan
Formation of liquidation Trust
Consolidation and valuation of claims
Distribution of Assets
(2) Duty of resolution professional on submission of Resolution plan [Section 30(2)]

The resolution professional shall examine each resolution plan received by him to confirm that
each resolution plan—
(a) Provides the manner for the payment of insolvency resolution process costs in priority to the
payment of other debts of the corporate debtor;
(b) provides for the payment of the debts of operational creditors as may be specified by the
Board which shall not be less than
(i) the amount to be paid to the operational creditors in the event of a liquidation of the
corporate debtor under section 53;or
(ii) the amount that would have been paid to such creditors, if the amount to be distributed
under the resolution plan had been distributed in accordance with the order of priority
in sub-section (1) of section 53(1),
whichever is higher, and provides for the payment of debts of financial creditors, who do
not vote in favour of the resolution plan, in such manner as may be specified by the Board,
which shall not be less than the amount to be paid to such creditors in accordance with
section 53(1) in the event of a liquidation of the corporate debtor.
Explanation 1 — For removal of doubts, it is hereby clarified that a distribution in accordance
with the provisions of this clause shall be fair and equitable to such creditors.

3.84 ECONOMIC LAWS
Explanation 2 — For the purpose of this clause, it is hereby declared that on and from the
date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the
provisions of this clause shall also apply to the corporate insolvency resolution process of a
corporate debtor-
i. where a resolution plan has not been approved or rejected by the Adjudicating
Authority;
ii. where an appeal has been preferred under section 61 or section 62 or such an appeal
is not time barred under any provision of law for the time being in force; or
iii. where a legal proceeding has been initiated in any court against the decision of the
Adjudicating Authority in respect of a resolution plan;
(c) provides for the management of the affairs of the Corporate debtor after approval of the
resolution plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the time being in force.
(f) Conforms to such other requirements as may be specified by the Board.
Explanation — For the purposes of clause (e), if any approval of shareholders is required under
the Companies Act, 2013 or any other law for the time being in force for the implementation of
actions under the resolution plan, such approval shall be deemed to have been given and it shall
not be a contravention of that Act or law.
(3) Present of resolution plans by Resolution professional for approval [Section 30(3)]
The resolution professional shall present to the committee of creditors for its approval such
resolution plans which confirm the conditions referred to in sub-section (2).
(4) Approval by CoC [Section 30(4)]
The committee of creditors may approve a resolution plan by a vote of not less than 66% of voting
share of the financial creditors, after considering its feasibility and viability, the manner of
distribution proposed, which may take into account the order of priority amongst creditors as laid
down in sub-section (1) of section 53, including the priority and value of the security interest of a
secured creditor and such other requirements as may be specified by the Board.
Provided that the committee of creditors shall not approve a resolution plan, submitted before the
commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where
the resolution applicant is ineligible under section 29A and may require the resolution professional
to invite a fresh resolution plan where no other resolution plan is available with it:
Provided further that where the resolution applicant referred to in the first proviso is ineligible
under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of
creditors such period, not exceeding thirty days, to make payment of overdue amounts in

accordance with the proviso to clause (c) of section 29A: Provided also that nothing in the second
proviso shall be construed as extension of period for the purposes of the proviso to sub-section
(3) of section 12, and the corporate insolvency resolution process shall be completed within the
period specified in that subsection.
Provided also that the eligibility criteria in section 29A as amended by the Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution applicant who has
not submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy
Code (Amendment) Ordinance, 2018.
(5) Attending of meeting by resolution applicant [Section 30(5)]
The resolution applicant may attend the meeting of the committee of creditors in which the
resolution plan of the applicant is considered: Provided that the resolution applicant shall not have
a right to vote at the meeting of the committee of creditors unless such resolution applicant is also
a financial creditor.
(6) Submission of Resolution Plan [Section 30(6)]
The resolution professional shall submit the resolution plan as approved by the committee of
creditors to the Adjudicating Authority.
• In the case of The Karad Urban Cooperative Bank Ltd. Vs. Swwapnil Bhingardevay &
Ors. [Civil Appeal Nos. 2955 of 2020 and 2902 of 2020, dated 04.09.2020], the Supreme
Court observed that the RP, CoC and successful resolution applicant already took note of
the facts and yet took a conscious decision to go ahead with the resolution plan, as such it
cannot be stated that the question of viability and feasibility was not examined in the
proper perspective.
• In the case of Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. [Civil
Appeal Nos. 9402 -9405 of 2018 and other appeals, dated 04.10.2018], the Supreme Court
held that Section 30(2)(e) does not empower the RP to decide whether the resolution
plan does or does not contravene the provisions of law. It is the CoC which will
approve or disapprove a resolution plan, given the statutory parameters of section 30.
• In the case of Chitra Sharma and Ors. Vs. Union of India and Ors. [WP (Civil) 744 of
2017 and other appeals, dated 09.08.2018], the Supreme Court held that primacy is given
in the process to commercial decisions. The success of the process is contingent
upon the competence of the IRP and the CoC.
• In the case of Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) Nos.
99, 100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018
and WP (Civil) 37 of 2019, dated 25.01.2019], the Supreme Court held that the CoC has
the primary responsibility of financial restructuring. They are required to assess the

3.86 ECONOMIC LAWS
viability of a CD by taking into account all available information as well as to evaluate all
alternative investment opportunities that are available. The CoC is required to evaluate
the resolution plan on the basis of feasibility and viability.
• In the case of K. Sashidhar Vs. Indian Overseas Bank & Ors. [Civil Appeal No. 10673 of
2018 and other appeals, dated 05.02.2019], the Supreme Court held that the word ‘may’
in section 30(4) is ascribable to the discretion of the CoC to approve the resolution plan
or not to approve the same.
• In the case of Maharashtra Seamless Ltd. Vs. Padmanabhan Venkatesh & Ors. [Civil
Appeal No. 4242 of 2019 and another appeal, dated 22.01.2020, the Supreme Court held
that once the resolution plan has been approved by the CoC, the AA ought to cede ground
to the commercial wisdom of the creditors rather than assess the resolution plan itself.
Approval of resolution plan [Section 31]
If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of
creditors under section 30(4) meets the requirements as per section 30(2), it shall by order
approve the resolution plan which shall be binding on the corporate debtor and its employees,
members, creditors, including the Central Government, any State Government or any local
authority to whom a debt in respect of the payment of dues arising under any law for the time
being in force, such as authorities to whom statutory dues are owed, guarantors and other
stakeholders involved in the resolution plan.
Provided that the Adjudicating Authority shall, before passing an order for approval of resolution
plan under this sub-section, satisfy that the resolution plan has provisions for its effective
implementation.
(1) Binding of the resolution plan on the following person [Section 31(1)]
corporate debtor and its employees,
members, creditors, guarantors, and
other stakeholders involved in the resolution plan
Central Government, State Government and Local Authority
(2) Rejection of the resolution plan [Section 31(2)]

Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the
requirements referred to in sub-section (1), it may, by an order, reject the resolution plan.
(3) Consequences of approval [Section 31(2)]
After the order of approval under sub-section (1),—

(a) the moratorium order passed by the AA under section 14 shall cease to have effect; and
(b) the resolution professional shall forward all records relating to the conduct of the corporate
insolvency resolution process and the resolution plan to the Board to be recorded on its
database.
the resolution professional shall forward

the moratorium order passed shall cease all records relating to the conduct of the
to have effect; and CIRP and the resolution plan to the
Board to be recorded on its database.
(4) Obtaining of necessary approval by the Resolution Applicant [Section 31(4)]

The resolution applicant shall obtain the necessary approval pursuant to the resolution plan
approved,
• within a period of one year from the date of approval of the resolution plan by the
Adjudicating Authority or
• within such period as provided for in such law,
whichever is later.
Provided that where the resolution plan contains a provision for combination, as per section 5 of
the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition
Commission of India under that Act prior to the approval of such resolution plan by the committee
of creditors.
• In the case of K. Sashidhar Vs. Indian Overseas Bank & Ors. [Civil Appeal No. 10673 of
2018 and other appeals, dated 05.02.2019], the Supreme Court opined that the legislature
has not endowed the AA with the jurisdiction or authority to analyse or evaluate the
commercial decision of the CoC much less to enquire into the justness of the rejection of
the resolution plan by the dissenting FCs. The discretion of the AA is circumscribed by
section 31 to scrutiny of resolution plan ‘as approved’ by the requisite percent of
voting share of FCs.
• In the case of Kalpraj Dharamshi & Anr. Vs. Kotak Investment Advisors Ltd. & Anr.
[Civil Appeal Nos. 2943-2944 of 2020, dated 10.03.2021], the Supreme Court held that-

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(i) The commercial wisdom of CoC has been given paramount status without any judicial
intervention for ensuring completion of the stated processes within the timelines
prescribed by the Code.
(ii) There is an intrinsic assumption, that financial creditors are fully informed about the
viability of the corporate debtor and feasibility of the proposed resolution plan. The
opinion expressed by CoC after due deliberations in the meetings through voting, as
per voting shares, is a collective business decision.
(iii) The legislature has consciously not provided any ground to challenge the
“commercial wisdom” of the individual financial creditors or their collective decision
before the AA and that the decision of CoC’s ‘commercial wisdom’ is made non
justiciable.
(iv) Appeal is a creature of statute and that the statute has not invested jurisdiction and
authority either with NCLT or NCLAT, to review the commercial decision exercised by
CoC of approving the resolution plan or rejecting the same
(v) The commercial wisdom of CoC is not to be interfered with, excepting the limited scope
as provided under Sections 30 and 31 of the Code
• In the matter of Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs.
NBCC (India) Ltd. & Ors. [Civil Appeal No. 3395 of 2020 and other appeals, dated
24.03.2021], the Supreme Court held that –
(i) The role of CoC is akin to that of a protagonist, giving finality to the process (subject
to approval by the AA), who takes the key decisions in its commercial wisdom and the
consequences thereof. The power of judicial review in section 31 of the Code is
not akin to the power of a superior authority to deal with the merits of the
decision of any inferior or subordinate authority. The AA has limited jurisdiction
in the matter of approval of a resolution plan, which is well defined and
circumscribed by sections 30(2) and 31 read with the parameters delineated by
the SC in its various judgments. Within its limited jurisdiction, if the AA finds any
shortcoming in the resolution plan vis - à -vis the specified parameters, it would only
send the resolution plan back to the CoC for re -submission after satisfying the
parameters delineated by Code and exposited by the SC.
(ii) The process of simultaneous voting over two plans for electing one of them cannot be
faulted. The legislature itself has made the position clear by way of a later amendment
with effect from August 7, 2020, by specifically making stipulations for simultaneous
voting over more than one resolution plan by the CoC, particularly with amendment of
sub -regulation (3) of regulation 39 of CIRP Regulations and insertion of sub -
regulations (3A) and (3B) thereto.

(iii) The dissenting financial creditor is entitled to receive the amount payable in monetary
terms and not in any other term. It cannot be forced to remain attached to the CD by
way of equities or securities.
(iv) The homebuyers as a class having assented to the resolution plan of the resolution
applicant, any individual homebuyer or any association of homebuyers cannot
maintain a challenge to the resolution plan and cannot be treated as a dissenting FC
or an aggrieved person.
Appeal [Section 32]
Any appeal from an order approving the resolution plan shall be in the manner and on the grounds
laid down in section 61(3).
Section 61(3) provides that -
An appeal against an order approving a resolution plan under section 31 may be filed on the
following grounds, namely: –
(i) the approved resolution plan is in contravention of the provisions of any law for the time being
in force;
(ii) there has been material irregularity in exercise of the powers by the resolution professional
during the corporate insolvency resolution period;
(iii) the debts owed to operational creditors of the corporate debtor have not been provided for in
the resolution plan in the manner specified by the Board;
(iv) the insolvency resolution process costs have not been provided for repayment in priority to
all other debts; or
(v) the resolution plan does not comply with any other criteria specified by the Board.
Chapter X (Consisting of Regulation 35 to 40C of the IBBI (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 deals with the Resolution Plan.
Liabilities for previous offences [Section 32A]

(1) Liability of corporate debtor for an offence prior to the commencement of CIRP
[Section 32A(1) ]
Notwithstanding anything to the contrary contained in this Code or any other law for the time being
in force, the liability of a corporate debtor for an offence committed prior to the commencement
of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be
prosecuted for such an offence from the date the resolution plan has been approved by the
Adjudicating Authority under section 31, if the resolution plan results in the change in the
management or control of the corporate debtor to a person who was not-
a) a promoter or in the management or control of the corporate debtor or a related party of
such a person; or

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b) a person with regard to whom the relevant investigating authority has, on the basis of
material in its possession, reason to believe that he had abetted or conspired for the
commission of the offence, and has submitted or filed a report or a complaint to the relevant
statutory authority or Court:
Provided that if a prosecution had been instituted during the corporate insolvency resolution
process against such corporate debtor, it shall stand discharged from the date of approval of
the resolution plan subject to requirements of this sub-section having fulfilled:
Provided further that every person who was a “designated partner” as defined in clause (j) of
section 2 of the Limited Liability Partnership Act, 2008 or an “officer who is in default”, as
defined in clause (60) of section 2 of the Companies Act, 2013, or was in any manner in-
charge of, or responsible to the corporate debtor for the conduct of its business or associated
with the corporate debtor in any manner and who was directly or indirectly involved in the
commission of such offence as per the report submitted or complaint filed by the investigating
authority, shall continue to be liable to be prosecuted and punished for such an offence
committed by the corporate debtor notwithstanding that the corporate debtor’s liability has
ceased under this sub-section.
(2) Action against the property of the CD [Section 32A(2)]
No action shall be taken against the property of the corporate debtor in relation to an offence
committed prior to the commencement of the corporate insolvency resolution process of the
corporate debtor, where such property is covered under a resolution plan approved by the
Adjudicating Authority under section 31, which results in the change in control of the corporate
debtor to a person, or sale of liquidation assets under the provisions of Chapter III of Part II of this
Code to a person, who was not –
(i) a promoter or in the management or control of the corporate debtor or a related party of such
a person; or
(ii) a person with regard to whom the relevant investigating authority has, on the basis of material
in its possession, reason to believe that he had abetted or conspired for the commission of
the offence, and has submitted or filed a report or a complaint to the relevant statutory
authority or Court.
Explanation- For the purposes of this sub-section, it is hereby clarified that,-
(i) an action against the property of the corporate debtor in relation to an offence shall include
the attachment, seizure, retention or confiscation of such property under such law as may be
applicable to the corporate debtor;
(ii) nothing in this sub-section shall be construed to bar an action against the property of any
person, other than the corporate debtor or a person who has acquired such property through
corporate insolvency resolution process or liquidation process under this Code and fulfils the

requirements specified in this section, against whom such an action may be taken under such
law as may be applicable
(3) Providing assistance and cooperation to investigating authority [Section 32A(3)]
Subject to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity
given in this section, the corporate debtor and any person, who may be required to provide
assistance under such law as may be applicable to such corporate debtor or person, shall extend
all assistance and co-operation to any authority investigating an offence committed prior to the
commencement of the corporate insolvency resolution process.
5. LIQUIDATION PROCESS – Chapter III OF Part II,

(SECTION 33 to 54)
The Code concerns itself only with those corporate debtors which have defaulted in payment of
debts. The corporate debtor, at the first stage, is put into resolution mode. The process is called
the corporate insolvency resolution process. However, if attempts to resolve the insolvency of the
corporate debtor fail, then only the liquidation provisions of the Code are triggered.
Where no plan is received during the CIRP period or where the plan presented is rejected by the
Committee of Creditors or if the plan is not approved by the Adjudicating Authority, the
Adjudicating Authority shall pass an order requiring the Corporate Debtor to be liquidated in the
manner as laid down in Chapter III of the Act.
Section 33 to 54 of the Code provides the law related to the liquidation process.
(I) Initiation of liquidation [Section 33]
As per Section 33(1),
Where the Adjudicating Authority, —
(a) Not received a Resolution plan: Before the expiry of the insolvency resolution process
period or the maximum period permitted for completion of the corporate insolvency resolution
process or the fast track corporate insolvency resolution process, as the case may be, does
not receive a resolution plan; or
(b) Rejects the resolution plan for the non-compliance of the requirements specified therein, it
shall—
(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid
down in this Chapter;
(ii) issue a public announcement stating that the corporate debtor is in liquidation; and
(iii) require such order to be sent to the authority with which the corporate debtor is
registered.

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pass an order requiring the issue a public announcement require such order to be sent
corporate debtor to be stating that the corporate to the authority with which the
liquidated debtor is in liquidation; and corporate debtor is registered
Intimation of the decision of the committee of creditors to liquidate to Adjudicating

authority [Section 33(2)]
Where the resolution professional, at any time during the corporate insolvency resolution process
but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of
the committee of creditors approved by not less than sixty-six per cent of the voting share to
liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred
to in sub-section (1)(b) (i), (ii) and (iii).
Explanation – For the purpose of this sub-section, it is hereby declared that the committee of
creditors may take the decision to liquidate the corporate debtor, any time after its constitution
under section 21(1) and before the confirmation of the resolution plan, including at any time before
the preparation of the information memorandum.
Contravention of resolution plan as approved by the Adjudicating Authority
[Section 33(3)]
Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned
corporate debtor, any person other than the corporate debtor, whose interests are prejudicially
affected by such contravention, may make an application to the Adjudicating Authority for a
liquidation order as referred to in sub-section (1)(b)(i), (ii) and (iii).
Determination of contravention of the provisions of the resolution plan [Section 33(4)]
On receipt of an application under sub-section (3), if the Adjudicating Authority determines that
the corporate debtor has contravened the provisions of the resolution plan, it shall pass a
liquidation order of sub-section (1)(b)(i), (ii) and (iii).
Bar to filing of suits and legal proceedings [Section 33(5)]
Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding
shall be instituted by or against the corporate debtor.
Provided a suit or other legal proceeding may be instituted by the liquidator, on behalf of the
corporate debtor, with the prior approval of the Adjudicating Authority.

Exception [Section 33(6)]

Restrictions on filing of suits and legal proceedings shall not apply to legal proceedings in relation
to such transactions as may be notified by the Central Government in consultation with any
financial sector regulator.
Order to be deemed to be notice of discharge
The order for liquidation under this section shall be deemed to be a notice of discharge to the
officers, employees and workmen of the corporate debtor, except when the business of the
corporate debtor is continued during the liquidation process by the liquidator.
So, from above it can be concluded that under the Code, a corporate debtor may be put into
liquidation in the following scenarios:
(i) Non-receipt of resolution plan during CIRP period;
(ii) A 66% majority of the creditor's committee resolves to liquidate the corporate debtor at any
time during the insolvency resolution process before confirmation of the resolution plan;
(iii) The creditor's committee does not approve a resolution plan within 180 days (or within the
extended 90 days);
(iv) The NCLT rejects the resolution plan submitted to it on technical grounds; or
(v) The debtor contravenes the agreed resolution plan and an affected person makes an
application to the NCLT to liquidate the corporate debtor.
Once the NCLT passes an order of liquidation, a moratorium is imposed on the pending legal
proceedings against the corporate debtor, and the assets of the debtor (including the proceeds of
liquidation) vest in the liquidation estate.
Events triggering
liquidation
• On rejection of resolution plan

• Adjudicating Authority does not receive a Resolution Plan on or before the expiry of the maximum time
permitted for resolution
• Corporate debtor contravenes the Resolution Plan approved by AA, and any other person being
prejudicially affected applies against such contravention
• Creditors' Committee decides to liquidate the corporate debtor at any time during insolvency process,
before confirmation of any Resolution Plan

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(II) Appointment of liquidator and fee to be paid [Section 34]

Resolution professional to act as liquidator [Section 34(1)]
Where the Adjudicating Authority passes an order for liquidation of the corporate debtor under
section 33, the resolution professional appointed for the corporate insolvency resolution process
under Chapter II or for the pre-packaged insolvency resolution process under Chapter III-A shall,
subject to submission of a written consent by the resolution professional to the Adjudicatory
Authority in specified form, shall act as the liquidator for the purposes of liquidation unless
replaced by the Adjudicating Authority under sub-section (4).
Eligibility for appointment as liquidator
Regulation 3 of the IBBI (Liquidation Process) Regulations, 2016 provides that-
(1) An insolvency professional shall be eligible to be appointed as a liquidator if he, and every
partner or director of the insolvency professional entity of which he is a partner or director,
is independent of the corporate debtor.
Explanation– A person shall be considered independent of the corporate debtor, if he-
(a) is eligible to be appointed as an independent director on the board of the corporate
debtor under section 149 of the Companies Act, 2013 (18 of 2013), where the
corporate debtor is a company;
(b) is not a related party of the corporate debtor; or
(c) has not been an employee or proprietor or a partner:
(i) of a firm of auditors or secretarial auditors or cost auditors of the corporate
debtor; or
(ii) of a legal or a consulting firm, that has or had any transaction with the
corporate debtor contributing ten per cent or more of the gross turnover
of such firm, in the last three financial years.
(2) A liquidator shall disclose the existence of any pecuniary or personal relationship with the
concerned corporate debtor or any of its stakeholders as soon as he becomes aware of
it, to the Board and the Adjudicating Authority.
(3) An insolvency professional shall not continue as a liquidator if the insolvency professional
entity of which he is a director or partner, or any other partner or director of such
insolvency professional entity represents any other stakeholder in the same liquidation
process.

Powers of BoD/ KMP vested in liquidator [Section 34(2)]

On the appointment of a liquidator, all powers of the board of directors, key managerial personnel
and the partners of the corporate debtor, as the case may be, shall cease to have effect and shall
be vested in the liquidator.
Personnel to extend cooperation to liquidator [Section 34(3)]
The personnel of the corporate debtor shall extend all assistance and cooperation to the liquidator
as may be required by him in managing the affairs of the corporate debtor and provisions of section
19 shall apply in relation to voluntary liquidation process as they apply in relation to liquidation
process with the substitution of references to the liquidator for references to the interim resolution
professional.
Order to replace the resolution professional [Section 34(4)]
The Adjudicating Authority shall by order replace the resolution professional, if—
(a) the resolution plan submitted by the resolution professional under section 30 was rejected for
failure to meet the requirements mentioned in section 30(2); or
(b) the Board recommends the replacement of a resolution professional to the Adjudicating
Authority for reasons to be recorded in writing; or
(c) the resolution professional fails to submit written consent under sub-section (1).
• the resolution plan submitted by the resolution professional was rejected

for failure to meet the requirements; or
Ground for replacement • the Board recommends the replacement of a resolution professional to the
of RP Adjudicating Authority for reasons to be recorded in writing, or
•the resolution professional fails to submit written consent
AA to direct the IBBI to propose name of another IP [Section 34(5)]

For the purposes of sub-section (4)(a) and (c) , the Adjudicating Authority may direct the Board to
propose name of another insolvency professional to be appointed as a liquidator.
IBBI to propose the name of another IP [Section 34(6)]
The Board shall propose the name of another insolvency professional 15along with written consent
from the insolvency professional in the specified form within ten days of the direction issued by
the Adjudicating Authority under sub-section (5).
15 along with written consent from the insolvency professional in the specified form

3.96 ECONOMIC LAWS
Adjudicating Authority to appoint insolvency professional as the liquidator [Section

34(7)]
The Adjudicating Authority shall, on receipt of the proposal of the Board for the appointment of
an insolvency professional as liquidator, by an order appoint such insolvency professional as the
liquidator.
Charge of fees for conduct of liquidation proceedings [Section 34(8)]
An insolvency professional proposed to be appointed as a liquidator shall charge such fee for the
conduct of the liquidation proceedings and in such proportion to the value of the liquidation estate
assets, as may be 16specified by the Board.
Payment of fees [Section 34(9) ]
The fees for the conduct of the liquidation proceedings shall be paid to the liquidator from the
proceeds of the liquidation estate under section 53.
Liquidator’s Fee
Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016 provides that –
(1) The fee payable to the liquidator shall be in accordance with the decision taken by the
committee of creditors under regulation 39D of the Insolvency and Bankruptcy Board
of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
(2) In cases other than those covered under sub-regulation (1), the liquidator shall be
entitled to a fee:
(a) at the same rate as the resolution professional was entitled to during the corporate
insolvency resolution process, for the period of compromise or arrangement under
section 230 of the Companies Act, 2013; and
(b) as a percentage of the amount realised net of other liquidation costs, and of the
amount distributed, for the balance period of liquidation, as under:
Amount of Realisation Percentage of fee on the amount realized / distributed
/ Distribution (in In the first 6 In the next 6 Thereafter
Rupees.) months months
Amount of Realisation (exclusive of liquidation costs)
On the first 1 crore 5.00 3.75 1.88
On the next 9 crore 3.75 2.80 1.41
16 Regulations 3, 4 and 12 of the IBBI (Liquidation Process) Regulations, 2016

On further sums 0.25 0.19 0.10

realized
Amount Distributed to Stakeholders
On the first 1 crore 2.50 1.88 0.94
On the next 40 crore 1.25. 0.94 0.47
On further sums 0.13 0.10 0.05
distributed
Clarification: For the purposes of clause (b), it is hereby clarified that where a liquidator
realises any amount, but does not distribute the same, he shall be entitled to a fee
corresponding to the amount realised by him. Where a liquidator distributes any amount,
which is not realised by him, he shall be entitled to a fee corresponding to the amount
distributed by him.
(3) Where the fee is payable under clause (b) of sub-regulation (2), the liquidator shall be
entitled to receive half of the fee payable on realisation only after such realised amount
is distributed.
Clarification: Regulation 4 of these regulations, as it stood before the commencement of
the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment)
Regulations, 2019 shall continue to be applicable in relation to the liquidation processes
already commenced before the coming into force of the said amendment Regulations.
Powers and duties of liquidator [Section 35]

[Section 35(1)]
Subject to the directions of the Adjudicating Authority, the liquidator shall have the following
powers and duties, namely;
(a) to verify claims of the creditors;
(b) to take into his custody or control all the assets, property, effects and actionable claims of
the corporate debtor;
(c) to evaluate the assets and property of the corporate debtor as may be specified by the
Board and prepare a report;
(d) to take measures to protect and preserve the assets and properties of the corporate
debtor;
(e) to carry on the business of the corporate debtor for its beneficial liquidation;

3.98 ECONOMIC LAWS
(f) subject to section 52, to sell the immovable and movable property and actionable claims
of the corporate debtor in liquidation by –
• public auction or private contract,
• with power to transfer such property to any person or body corporate, or
• to sell the same in parcels in such manner as may be specified;
Provided that the liquidator shall not sell the above said properties of the corporate debtor in
liquidation to any person who is not eligible to be a resolution applicant.
(g) to draw, accept, make and endorse any negotiable instruments in the name and on behalf
of the corporate debtor, with the same effect with respect to the liability as if such instruments
were drawn, accepted, made or endorsed by or on behalf of the corporate debtor in the
ordinary course of its business;
(h) to take out, in his official name, letter of administration to any deceased contributory
and to do in his official name any other act necessary for obtaining payment of any money
due and payable from a contributory or his estate which cannot be ordinarily done in the name
of the corporate debtor, and in all such cases, the money due and payable shall, for the
purpose of enabling the liquidator to take out the letter of administration or recover the money,
be deemed to be due to the liquidator himself;
(i) to obtain any professional assistance from any person or appoint any professional, in
discharge of his duties, obligations and responsibilities;
(j) to invite and settle claims of creditors and claimants and distribute proceeds in accordance
with the provisions of this Code;
(k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal,
in the name of on behalf of the corporate debtor;
(l) to investigate the financial affairs of the corporate debtor to determine undervalued or
preferential transactions;
(m) to take all such actions, steps, or to sign, execute and verify any paper, deed, receipt
document, application, petition, affidavit, bond or instrument and for such purpose to
use the common seal, if any, as may be necessary for liquidation, distribution of assets and
in discharge of his duties and obligations and functions as liquidator;
(n) to apply to the Adjudicating Authority for such orders or directions as may be necessary
for the liquidation of the corporate debtor and to report the progress of the liquidation process
in a manner as may be specified by the Board; and

(o) to perform such other functions as may be specified by the Board.

Reporting
Regulation 5 of the IBBI (Liquidation Process) Regulations, 2016 provides that-
(1) The liquidator shall prepare and submit:
(a) a preliminary report;
(b) an asset memorandum;
(c) progress report(s);
(d) sale report(s);
(e) minutes of consultation with stakeholders; and
(f) the final report prior to dissolution to the Adjudicating Authority in the manner
specified under these Regulations.
(2) The liquidator shall preserve a physical as well as an electronic copy of the reports
and minutes referred to in sub-regulation (1) for eight years after the dissolution of
the corporate debtor.
(3) Subject to other provisions of these Regulations, the liquidator shall make the
reports and minutes referred to sub-regulation (1) available to a stakeholder in
either electronic or physical form, on receipt of
(a) an application in writing;
(b) costs of making such reports and minutes available to it; and
(c) an undertaking from the stakeholder that it shall maintain confidentiality of
such reports and minutes and shall not use these to cause an undue gain or
undue loss to itself or any other person.
Power to consult stakeholders [Section 35(2)]

The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of
proceeds under section 53.
Provided that any such consultation shall not be binding on the liquidator.
Provided further that the records of any such consultation shall be made available to all other
stakeholders not so consulted, in a manner specified by the Board.
Regulation 8(1) of the IBBI (Liquidation Process) Regulations, 2016 states that the stakeholders
consulted under section 35(2) shall extend all assistance and cooperation to the liquidator to
complete the liquidation of the corporate debtor.

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Liquidation Estate [Section 36]

Form an Estate of Assets [Section 36(1)]
For the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-
section (3), which will be called the liquidation estate in relation to the corporate debtor.
Liquidator to hold Liquidation Estate in Fiduciary [Section 36(2)]
The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors.
Assets which for part of Liquidation Estate [Section 36(3)]
Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which
shall include the following: -
(a) any assets over which the corporate debtor has ownership rights, including all rights and
interests therein as evidenced in the balance sheet of the corporate debtor or an information
utility or records in the registry or any depository recording securities of the corporate debtor
or by any other means as may be specified by the Board, including shares held in any
subsidiary of the corporate debtor;
(b) assets that may or may not be in possession of the corporate debtor including but not limited
to encumbered assets;
(c) tangible assets, whether movable or immovable;
(d) intangible assets including but not limited to intellectual property, securities (including shares
held in a subsidiary of the corporate debtor) and financial instruments, insurance policies,
contractual rights;
(e) assets subject to the determination of ownership by the court or authority;
(f) any assets or their value recovered through proceedings for avoidance of transactions in
accordance with this Chapter;
(g) any asset of the corporate debtor in respect of which a secured creditor has relinquished
security interest;
(h) any other property belonging to or vested in the corporate debtor at the insolvency
commencement date; and
(i) all proceeds of liquidation as and when they are realised.
Regulation 34 of the IBBI (Liquidation Process) Regulations, 2016 provides that on forming the
liquidation estate under section 36, the liquidator shall prepare an asset memorandum in
accordance with this Regulation within 75 days from the liquidation commencement date.

Assets which do not form part of Liquidation Estate [Section 36(4)]

The following shall not be included in the liquidation estate assets and shall not be used for
recovery in the liquidation: -
(a) assets owned by a third party which are in possession of the corporate debtor, including-
(i) assets held in trust for any third party;
(ii) bailment contracts;
(iii) all sums due to any workmen or employee from the provident fund, the pension fund
and the gratuity fund;
(iv) other contractual arrangements which do not stipulate transfer of title but only use of
the assets; and
(v) such other assets as may be notified by the Central Government in consultation with
any financial sector regulator;
(b) assets in security collateral held by financial services providers and are subject to netting and
set-off in multi-lateral trading or clearing transactions;
(c) personal assets of any shareholder or partner of a corporate debtor as the case may be
provided such assets are not held on account of avoidance transactions that may be avoided
under this Chapter;
(d) assets of any Indian or foreign subsidiary of the corporate debtor; or
(e) any other assets as may be specified by the Board, including assets which could be subject
to set-off on account of mutual dealings between the corporate debtor and any creditor
Powers of liquidator to access information [Section 37]
Access to following information [Section 37(1)]
Notwithstanding anything contained in any other las for the time being in force, the liquidator shall
have the power to access following information systems for the purpose of admission and proof
of claims and identification of the liquidation estate assets relating to the corporate debtor from
the following sources, namely:

3.102 ECONOMIC LAWS
an information utility;
credit information systems regulated under law;
any agency of the Central, State or Local Government including any registration authorities;
information systems for financial and non-financial liabilities regulated under any law;
information systems for securities and assets posted as security interest regulated under
any law
any database maintained by the Board; and
any other source as may be specified by the Board.
Liquidator to provide financial information to creditors [Section 37(2)]

The creditors may require the liquidator to provide them any financial information relating to the
corporate debtor.
Time-limit within which the financial information is to be provided to creditors
[Section 37(3)]
The liquidator shall provide information to such creditors who have requested for such information
within a period of seven days from the date of such request or provide reasons for not providing
such information.
Consolidation of claims [Section 38]
Collection of claims by liquidator [Section 38(1)]
The liquidator shall receive or collect the claims of creditors within a period of thirty days from the
date of the commencement of the liquidation process.
Submission of claims [Section 38(2)]
A financial creditor may submit a claim to the liquidator by providing a record of such claim with
an information utility.
Provided that where the information relating to the claim is not recorded in the information utility,
the financial creditor may submit the claim in the same manner as provided for the submission of
claims for the operational creditor under sub-section (3).

Supportive documents [Section 38(3)]

An operational creditor may submit a claim to the liquidator in such form and in such manner and
along with such supporting documents required to prove the claim as may be specified by the
Board.
Extent of claims to be submitted [Section 38(4)]
A creditor who is partly a financial creditor and partly an operational creditor shall submit claims
to the liquidator to the extent of his financial debt in the manner as provided in sub-section (2) and
to the extent of his operational debt under sub-section (3).
Alteration in claim [Section 38(5)]
A creditor may withdraw or vary his claim under this section within fourteen days of its submission.
Verification of claims [Section 39]
Time limit for submission of claim [Section 39(1)]
The liquidator shall verify the claims submitted within 30 days from the last date for receipt of
claims.
Documentary Evidence for submission of claim [Section 39(2)]
The liquidator may require any creditor or the corporate debtor or any other person to produce
any other document or evidence which he thinks necessary for the purpose of verifying the whole
or any part of the claim
Admission or rejection of claims [Section 40]
Admission / rejection of claims [Section 40(1)]
The liquidator may, after verification of claims under section 39, either admit or reject the claim,
in whole or in part.
Provided that where the liquidator rejects a claim, he shall record in writing the reasons for such
rejection.
Communication of decision of admission / rejection [Section 40(2)]
The liquidator shall communicate his decision of admission or rejection of claims to the creditor
and corporate debtor within seven days of such admission or rejection of claims
Determination of valuation of claims [Section 41]
The liquidator shall determine the value of claims admitted in such manner as may be specified
by the Board.

3.104 ECONOMIC LAWS
Appeal against the decision of liquidator [Section 42]

A creditor may appeal to the Adjudicating Authority against the decision of the liquidator accepting
or rejecting the claims within fourteen days of the receipt of such decision.
Preferential transactions & Extortionate Credit Transactions [Section 43]
Preferential Transactions [Section 43(1)]
Where the liquidator or the resolution professional (RP), is of the opinion that the corporate debtor
has at a relevant time given a preference in such transactions and in such manner as laid down
in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the
Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders
referred to in section 44.
Deemed preferential transactions [Section 43(2)]
A corporate debtor shall be deemed to have given a preference, if–
(a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of
a creditor or a surety or a guarantor for or on account of an antecedent financial debt or
operational debt or other liabilities owed by the corporate debtor; and
(b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor
in a beneficial position than it would have been in the event of a distribution of assets being
made in accordance with section 53.
Transactions which are not preferential transactions [Section 43(3)]
For the purposes of sub-section (2), a preference shall not include the following transfers–
(a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor
or the transferee;
(b) any transfer creating a security interest in property acquired by the corporate debtor to the
extent that –
(i) such security interest secures new value and was given at the time of or after the
signing of a security agreement that contains a description of such property as security
interest, and was used by corporate debtor to acquire such property; and
(ii) such transfer was registered with an information utility on or before thirty days after
the corporate debtor receives possession of such property:
Provided that any transfer made in pursuance of the order of a court shall not, preclude such
transfer to be deemed as giving of preference by the corporate debtor.
Explanation. – For the purpose of sub-section (3) of this section, “new value” means money or
its worth in goods, services, or new credit, or release by the transferee of property previously

transferred to such transferee in a transaction that is neither void nor voidable by the liquidator or
the resolution professional under this Code, including proceeds of such property, but does not
include a financial debt or operational debt substituted for existing financial debt or operational
debt.
Preference deemed to be given at relevant time [Section 43(4)]
A preference shall be deemed to be given at a relevant time, if –
(a) It is given to a related party (other than by reason only of being an employee), during the
period of two years preceding the insolvency commencement date; or
(b) a preference is given to a person other than a related party during the period of one year
preceding the insolvency commencement date.
circumstances under which transactions will circumstances under which transactions will
be referred to as preferential transactions not be referred to as preferential transactions
A corporate debtor shall be deemed to have Following transfers shall not be referred to as
given a preference in the following a preference transaction:-
circumstances:- a) The transfer made in the ordinary course
a) If there is a transfer of property or an
of the business or financial affairs of the
interest thereof of the corporate debtor for the
corporate debtor or the transferee.
benefit of a creditor or a surety or a guarantor
b) Any transfer creating a security interest in
for or on account of an antecedent financial property acquired by the corporate debtor to
debt or operational debt or other liabilitiesthe extent that-
owed by the corporate debtor. (i) such security interest secures new value
b) If the transfer has the effect of putting
and was given at the time of or after the
such creditor or a surety or a guarantor in asigning of a security agreement that contains
beneficial position than it would have been in
a description of such property as security
the event of a distribution of assets being interest and was used by corporate debtor to
made in accordance with Section 53 of the acquire such property; and
Code. (ii) such transfer was registered with an
information utility on or before thirty days after
the corporate debtor receives possession of
such property.
Further, any transfer made in pursuance of the
order of a Court shall not preclude such
transfer to be deemed as giving of preference
by the corporate debtor.
If sale deed was executed prior to one year preceding commencement of insolvency proceedings,
application under section 43 of Insolvency Code is not maintainable [V Nagarajan
(Liquidator) v. Asset Reconstruction Co. (2018)]

3.106 ECONOMIC LAWS
Orders in case of preferential transactions [Section 44]

AA to order for reversal of preferential transactions [Section 44(1)]
The Adjudicating Authority, may, on an application made by the resolution professional or
liquidator, under section 43(1), by an order :
a) require any property transferred in connection with the giving of the preference to be vested
in the corporate debtor;
b) require any property to be so vested if it represents the application either of the proceeds of
sale of property so transferred or of money so transferred;
c) release or discharge (in whole or in part) of any security interest created by the corporate
debtor;
d) require any person to pay such sums in respect of benefits received by him from the corporate
debtor, such sums to the liquidator or the resolution professional, as the Adjudicating
Authority may direct;
e) direct any guarantor, whose financial debts or operational debts owed to any person were
released or discharged (in whole or in part) by the giving of the preference, to be under such
new or revived financial debts or operational debts to that person as the Adjudicating
Authority deems appropriate;
f) direct for providing security or charge on any property for the discharge of any financial debt
or operational debt under the order, and such security or charge to have the same priority as
a security or charge released or discharged wholly or in part by the giving of the preference;
and
g) direct for providing the extent to which any person whose property is so vested in the
corporate debtor, or on whom financial debts or operational debts are imposed by the order,
are to be proved in the liquidation or the corporate insolvency resolution process for financial
debts or operational debts which arose from, or were released or discharged wholly or in part
by the giving of the preference:
Provided that an order under this section shall not—
a) affect any interest in property which was acquired from a person other than the corporate
debtor or any interest derived from such interest and was acquired in good faith and for value;
b) require a person, who received a benefit from the preferential transaction in good faith and
for value to pay a sum to the liquidator or the resolution professional. [Section 44]
Explanation I—For the purpose of this section, it is clarified that where a person, who has
acquired an interest in property from another person other than the corporate debtor, or who has
received a benefit from the preference or such another person to whom the corporate debtor gave
the preference, —

(a) had sufficient information of the initiation or commencement of insolvency resolution process
of the corporate debtor;
(b) is a related party,
it shall be presumed that the interest was acquired or the benefit was received otherwise than in
good faith unless the contrary is shown.
Explanation II—A person shall be deemed to have sufficient information or opportunity to avail
such information if a public announcement regarding the corporate insolvency resolution process
has been made under section 13.
In the case of Anuj Jain Vs. Axis Bank Ltd. & Ors. [Civil Appeal Nos. 8512-8527 of 2019 with
other appeals, dated 26.02.2020], the Supreme Court held as under –
(a) Preferential Transactions: A CD shall be deemed to have given a preference at a relevant
time if:
(i) there is a transfer of property or the interest thereof of the CD for the benefit of a
creditor or surety or guarantor for or on account of an antecedent financial debt or
operational debt or other liability;
(ii) such transfer has the effect of putting such creditor or surety or guarantor in a
beneficial position than it would have been in the event of distribution of assets in
accordance with section 53 of the Code; and
(iii) preference is given, either during the period of two years/one year preceding the ICD
when the beneficiary is a related/an unrelated party. However, such deemed
preference may not be an offending preference, if it falls into any or both exclusions
provided by section 43(3). Section 43(3)(a) exempts transfers made in ordinary course
of business of the CD or the transferee. This calls for purposive interpretation. The
expression ‘or’, appearing as disjunctive between the expressions ‘corporate debtor’
and ‘transferee’, ought to be read as ‘and’. Therefore, a preference shall not include
the transfer made in the ordinary course of the business of the CD and the transferee.
(b) Duties and responsibilities of RP: The RP shall –
(i) sift through all transactions relating to the property/interest of the CD backwards from
the ICD and up to the preceding two years;
(ii) identify persons involved in the transactions and put them in two categories: (1) related
party under section 5(24) and (2) remaining persons;
(iii) identify which of the said transactions of preceding two years, the beneficiary is a
related party of the CD and in which the beneficiary is not a related party. The sub -
set relating to unrelated parties shall be trimmed to include only the transactions
preceding one year from the ICD;

3.108 ECONOMIC LAWS
(iv) examine every transaction in each of these sub -sets to find out whether (1) the
transaction is of transfer of property of the CD or its interest in it; and (2) beneficiary
involved in the transaction stands in the capacity of creditor/surety/guarantor;
(v) scrutinise the shortlisted transactions to find, if the transfer is for or on account of
antecedent financial debt/operational debt/other liability of the CD;
(vi) examine the scanned and scrutinised transactions to find, if the transfer has the effect
of putting such creditor/surety/guarantor in beneficial position, then it would have been
in the event of distribution of assets under section 53. If answer is in the affirmative,
the transaction shall be deemed to be of preferential, provided it does not fall within
the exclusion under section 43(3); and then
(vii) apply to the AA for necessary orders, after carrying out the aforesaid volumetric and
gravimetric analysis of the transactions.
(c) Undervalued and fraudulent transactions: As the transactions are held as preferential, it
is not necessary to examine whether these are undervalued and/or fraudulent. In preferential
transaction, the question of intent is not involved and by virtue of legal fiction, upon existence
of the given ingredients, a transaction is deemed to be of giving preference at a relevant time,
while undervalued transaction requires different enquiry under sections 45 and 46 where the
AA is required to examine the intent, if such transactions were to defraud the creditors. The
AA needs to examine the aspect of preferential, undervalued and fraudulent separately and
distinctively.
Avoidance of undervalued transactions [Section 45]
Reversal of undervalued transactions [Section 45(1)]
If the liquidator or the RP, on an examination of the transactions of the corporate debtor,
determines that certain transactions were made during the relevant period under section 46, were
undervalued, he shall make an application to the Adjudicating Authority to declare such
transactions as void and reverse the effect of such transaction in accordance with this Chapter.
Transactions considered as undervalued [Section 45(2)]
A transaction shall be considered undervalued where the corporate debtor —
(a) makes a gift to a person; or
(b) enters into a transaction with a person which involves the transfer of one or more assets by
the corporate debtor for a consideration the value of which is significantly less than the value
of the consideration provided by the corporate debtor,
and such transaction has not taken place in the ordinary course of business of the corporate debtor.

Relevant period for avoidable transactions [Section 46]

(1) In an application for avoiding a transaction at undervalue, the liquidator or resolution
professional shall determine:
(i) That the transaction was entered within the period of one year preceding the
insolvency commencement date; or
(ii) That the transaction was made with a related party within a period of two years
preceding the insolvency commencement date.
(2) The adjudicating Authority may require an independent expert to assess evidence relating to
the value of the transactions.
Application by creditor in cases of undervalued transactions [Section 47]
Creditor and other person may report to AA about the undervalued transactions [Section 47(1)]
Where an undervalued transaction has taken place and the liquidator or the resolution
professional has not reported it to the Adjudicating Authority, a creditor, member or a partner of a
corporate debtor may make an application to the Adjudicating Authority to declare such
transactions void and reverse their effect in accordance with this Chapter.
AA may pass order in the matter of undervalued transactions [Section 47(2)]
Where, the Adjudicating Authority, after examination of the application made under sub-section
(1), is satisfied that –
(a) undervalued transactions had occurred; and
(b) liquidator or the resolution professional, as the case may be, after having sufficient
information or opportunity to avail information of such transactions did not report such
transaction to the Adjudicating Authority,
it shall pass an order-
(a) restoring the position as it existed before such transactions and reversing the effects thereof
in the manner as laid down in section 45 and section 48;
(b) requiring the Board to initiate disciplinary proceedings against the liquidator or the resolution
professional as the case may be.
Where the Adjudicating Authority, after

examination of the application is satisfied shall pass an order-
that-
• undervalued transactions had occurred; and • restoring the position as it existed before such
• liquidator or the resolution professional, after transactions and reversing the effects thereof
having sufficient information or opportunity to • requiring the Board to initiate disciplinary
avail information of such transactions did not proceedings against the liquidator or the
report such transaction to the Adjudicating resolution professional
Authority,

3.110 ECONOMIC LAWS
Order in cases of undervalued transactions [Section 48]

The order of the adjudicating authority may be passed under section 45(1) may provide for the
following:
Required any property so transferred as part of the transaction,

• to be vested in the corporate debtor
Any security interest granted by the corporate debtor;

• to be released or discharged
Require any person to pay such sums, in respect of benefits received by

such person,
• to the liquidator or the resolution professional as the case may be, as
the Adjudicating Authority may direct; or
Require the payment of such consideration for the transaction

• as may be determined by an independent expert.
Transactions defrauding creditors [Section 49]

Where the corporate debtor has entered into an undervalued transaction under section 45(2) and
the Adjudicating Authority is satisfied that such transaction was deliberately entered into by such
corporate debtor—
(a) for keeping assets of the corporate debtor beyond the reach of any person who is entitled to
make a claim against the corporate debtor; or
(b) in order to adversely affect the interests of such a person in relation to the claim, the
Adjudicating Authority shall make an order—
(i) restoring the position as it existed before such transaction as if the transaction had not
been entered into; and
(ii) protecting the interests of persons who are victims of such transactions:
However, an order passed under this section—
(1) shall not affect any interest in property which was acquired from a person other
than the corporate debtor and was acquired in good faith, for value and without
notice of the relevant circumstances, or affect any interest deriving from such an
interest, and
(2) shall not require a person who received a benefit from the transaction in good
faith, for value and without notice of the relevant circumstances to pay any sum unless
he was a party to the transaction.

Extortionate credit transactions [Section 50]

Where the CD is party to an extortionate credit transactions [Section 50(1)]
Where the corporate debtor has been a party to an extortionate credit transaction involving the
receipt of financial or operational debt during the period within two years preceding the
insolvency commencement date, the liquidator or the resolution professional as the case may be,
may make an application for avoidance of such transaction to the Adjudicating Authority if the
terms of such transaction required exorbitant payments to be made by the corporate debtor.
IBBI to specify [ Section 50(2)]
The Board may specify the circumstances in which a transactions which shall be covered under
sub-section (1).
Explanation - For the purpose of this section, it is clarified that any debt extended by any person
providing financial services which is in compliance with any law for the time being in force in
relation to such debt shall in no event be considered as an extortionate credit transaction.
Regulation 11 of the The IBBI (Liquidation Process) Regulations, 2016 state that a
transaction shall be considered an extortionate credit transaction under section 50(2)
where the terms-
(1) require the corporate debtor to make exorbitant payments in respect of the credit
provided; or
(2) are unconscionable under the principles of law relating to contracts.
Order of Adjudicating authority [Section 51]

Where the Adjudicating Authority after examining the application is satisfied that the terms of a
credit transaction required exorbitant payments to be made by the corporate debtor, it shall, by
an order:-
(a) Restore the position as it existed prior to such transaction;
(b) Set aside the debt created on account of the extortionate credit transaction;
(c) Modify the terms of the transaction;
(d) Require any person who is/ was, a party to the transaction to repay any amount received by
such person; or
(e) Require any security interest that was created as part of the extortionate credit transaction to
be relinquished in favour of the liquidator or the resolution professional, as the case may be.

3.112 ECONOMIC LAWS
Secured creditor in liquidation proceedings [Section 52]

(1) Rights of secured creditor Section 52(1)
A secured creditor in the liquidation proceedings may—
(a) relinquish its security interest to the liquidation estate and receive proceeds from the
sale of assets by the liquidator, or
(b) realise its security interest in the manner specified in this section.
To inform the liquidator of decision to realise security interest-Section 52(2)
Where the secured creditor realises security interest under clause (b) above, he shall inform the
liquidator of such security interest and identify the asset subject to such security interest to be
realised.
Verification by liquidator of security interest - Section 52(3)
Before any security interest is realised by the secured creditor, the liquidator shall verify such
security interest and permit the secured creditor to realise only such security interest, the
existence of which may be proved either—
(a) by the records of such security interest maintained by an information utility; or
(b) by such other means as may be specified by the Board.
Rights of secured creditor related to secured assets Section 52(4)
A secured creditor may enforce, realise, settle, compromise or deal with the secured assets in
accordance with such law as applicable to the security interest being realised and to the secured
creditor and apply the proceeds to recover the debts due to it.
Restriction in realising of a secured asset – Section 52(5)
If in the course of realising a secured asset, any secured creditor faces resistance from the
corporate debtor or any person connected therewith in taking possession of, selling or otherwise
disposing off the security, the secured creditor may make an application to the Adjudicating
Authority to facilitate the secured creditor to realise such security interest in accordance with law
for the time being in force.
Passing of order by Adjudicating Authority - Section 52(6)
The Adjudicating Authority, on the receipt of an application from a secured creditor may pass such
order as may be necessary to permit a secured creditor to realise security interest in accordance
with law for the time being in force.
Yield of surplus - Section 52(7)
Where the enforcement of the security interest yields an amount by way of proceeds which is in
excess of the debts due to the secured creditor, the secured creditor shall—

(a) account to the liquidator for such surplus; and

(b) tender to the liquidator any surplus funds received from the enforcement of such secured
assets.
Amount of insolvency resolution process to be included in the liquidation estate -
Section 52(8)
The amount of insolvency resolution process costs, due from secured creditors who realise their
security interests in the manner provided in this section, shall be deducted from the proceeds of
any realisation by such secured creditors, and they shall transfer such amounts to the liquidator
to be included in the liquidation estate.
Unpaid debts to be paid by liquidator - Section 52(9)
Where the proceeds of the realisation of the secured assets are not adequate to repay debts owed
to the secured creditor, the unpaid debts of such secured creditor shall be paid by the liquidator
[Section 52]
Distribution of assets [Section 53]
Section 53 of the Code lays the provisions related to distribution of assets or the proceeds from
the sale of the liquidation assets.
Distribution of proceeds from the sale of the liquidation assets- Section 53(1)
Notwithstanding anything to the contrary contained in any law enacted by the Parliament or any
State Legislature for the time being in force, the proceeds from the sale of the liquidation assets
shall be distributed in the following order of priority —
(a) the insolvency resolution process costs and the liquidation costs paid in full;
(b) the following debts which shall rank equally between and among the following :—
(i) workmen's dues for the period of twenty-four months preceding the liquidation
commencement date; and
(ii) debts owed to a secured creditor in the event such secured creditor has relinquished
security in the manner set out in section 52;
(c) wages and any unpaid dues owed to employees other than workmen for the period of twelve
months preceding the liquidation commencement date;
(d) financial debts owed to unsecured creditors;
(e) the following dues shall rank equally between and among the following:—
(i) any amount due to the Central Government and the State Government including the
amount to be received on account of the Consolidated Fund of India and the

3.114 ECONOMIC LAWS
Consolidated Fund of a State, if any, in respect of the whole or any part of the period
of two years preceding the liquidation commencement date;
(ii) debts owed to a secured creditor for any amount unpaid following the enforcement of
security interest;
(f) any remaining debts and dues;
(g) preference shareholders, if any; and
(h) equity shareholders or partners, as the case may be.
Disregard of order of priority [Section 53(2)]
Any contractual arrangements between recipients with equal ranking, if disrupting the order of
priority shall be disregarded by the liquidator.
Fees to liquidator [Section 53(3)]
The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to
each class of recipients under sub-section (1), and the proceeds to the relevant recipient shall be
distributed after such deduction.
Explanation. – For the purpose of this section-
(i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class of
recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal
proportion within the same class of recipients, if the proceeds are insufficient to meet the
debts in full; and
(ii) the term “workmen’s dues” shall have the same meaning as assigned to it in section 326 of
the Companies Act, 2013 (18 of 2013).
In the case of Swiss Ribbons Pvt. Ltd. &Anr. Vs. Union of India & Ors. [WP (Civil) Nos. 99,
100, 115, 459, 598, 775, 822, 849, and 1221 of 2018, SLP (Civil) No. 28623 of 2018 and WP
(Civil) 37 of 2019, dated 25.01.2019], the Supreme Court opined that there is an intelligible
differentia between the financial debts and operational debts, which are unsecured, which
has direct relation to the object sought to be achieved by the Code. It can be seen that unsecured
debts are of various kinds and as long as there is some legitimate interests sought to be protected,
having relation to the object sought to be achieved by the statute in question, Article 14 of the
Constitution does not get infracted. Accordingly, validity of section 53 was upheld.
Dissolution of corporate debtor- Section 54
Application by liquidator dissolution [Section 54(1)]
Where the assets of the corporate debtor have been completely liquidated, the liquidator shall
make an application to the Adjudicating Authority for the dissolution of such corporate debtor.

Date of dissolution [Section 54(2) ]

The Adjudicating Authority shall on application filed by the liquidator order that the corporate
debtor shall be dissolved from the date of that order and the corporate debtor shall be dissolved
accordingly.
Submission of order copy [Section 54(3)]
A copy of an order under sub-section shall within 7 days from the date of such order, be forwarded
to the authority with which the corporate debtor is registered.
Regulation 11 of the IBBI (Liquidation Process) Regulations, 2016 provides that -
(1) The liquidator shall liquidate the corporate debtor within a period of one year from the
liquidation commencement date, notwithstanding pendency of any application for
avoidance of transactions under Part II of the Code, before the Adjudicating Authority or
any action thereof:
Provided that where the sale is attempted under sub-regulation (1) of regulation 32A, the
liquidation process may take an additional period up to 90 days.
(2) If the liquidator fails to liquidate the corporate debtor within one year, he shall make an
application to the Adjudicating Authority to continue such liquidation, along with a report
explaining why the liquidation has not been completed and specifying the additional time
that shall be required for liquidation.
6. PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS

– CHAPTER III-A17 OF PART II, (SECTION 54A TO 54P)
Key Definitions relating to Chapter III-A
Base resolution plan means a resolution plan provided by the corporate debtor under section
54A(4)(c) [Section 5(2A)]
Pre-packaged insolvency commencement date means the date of admission of an application
for initiating the pre-packaged insolvency resolution process by the Adjudicating Authority under
section 54C(4)(a). [Section 5(23B)]
Pre-packaged insolvency resolution process costs means—
a. the amount of any interim finance and the costs incurred in raising such finance;
b. the fees payable to any person acting as a resolution professional and any expenses incurred
by him for conducting the pre-packaged insolvency resolution process during the pre-
packaged insolvency resolution process period, subject to section 54F(6);
17 Ins. by Act No. 26 of 2021, sec.8 (w.e.f. 04-04-2021)

3.116 ECONOMIC LAWS
c. any costs incurred by the resolution professional in running the business of the corporate
debtor as a going concern pursuant to an order under of section 54J(2);
d. any costs incurred at the expense of the Government to facilitate the prepackaged insolvency
resolution process; and
e. any other costs as may be specified. [Section 5(23C)]
Pre-packaged insolvency resolution process period means the period -
• beginning from the pre-packaged insolvency commencement date; and
• ending on the date on which an order under
 section 54L(1), or
 section 54N(1), or
 section 54-O(2),
as the case may be, is passed by the Adjudicating Authority. [Section 5(23D)]
Preliminary Information Memorandum means a memorandum submitted by the corporate
debtor under section 54G((1)(b). [Section 5(23A)]
Corporate debtors eligible for pre-packaged insolvency resolution process
[Section 54A]
(1) An application for initiating pre-packaged insolvency resolution process may be made in
respect of a corporate debtor classified as a micro, small or medium enterprise under
sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act,
2006.
(2) Without prejudice to sub-section (1), an application for initiating pre-packaged insolvency
resolution process may be made in respect of a corporate debtor, who commits a
default referred to in section 4, subject to the following conditions, that––
(a) it has not undergone pre-packaged insolvency resolution process or completed
corporate insolvency resolution process, as the case may be, during the period of
three years preceding the initiation date;
(b) it is not undergoing a corporate insolvency resolution process;
(c) no order requiring it to be liquidated is passed under section 33;
(d) it is eligible to submit a resolution plan under section 29A;
(e) the financial creditors of the corporate debtor, not being its related parties,
representing such number and in such manner as may be specified, have proposed
the name of the insolvency professional to be appointed as resolution professional for
conducting the pre-packaged insolvency resolution process of the corporate debtor,

and the financial creditors of the corporate debtor, not being its related parties,
representing not less than sixty-six per cent. in value of the financial debt due to such
creditors, have approved such proposal in such form as may be specified:
Provided that where a corporate debtor does not have any financial creditors, not being
its related parties, the proposal and approval under this clause shall be provided by
such persons as may be specified;
(f) the majority of the directors or partners of the corporate debtor, as the case may be,
have made a declaration, in such form as may be specified, stating, inter alia, that—
(i) the corporate debtor shall file an application for initiating pre-packaged
insolvency resolution process within a definite time period not exceeding ninety
days;
(ii) the pre-packaged insolvency resolution process is not being initiated to defraud
any person; and
(iii) the name of the insolvency professional proposed and approved to be
appointed as resolution professional under clause (e);
(g) the members of the corporate debtor have passed a special resolution, or at least
three-fourth of the total number of partners, as the case may be, of the corporate
debtor have passed a resolution, approving the filing of an application for initiating
prepackaged insolvency resolution process.
(3) The corporate debtor shall obtain an approval from its financial creditors, not being its related
parties, representing not less than sixty-six per cent. in value of the financial debt due to such
creditors, for the filing of an application for initiating pre-packaged insolvency resolution
process, in such form as may be specified:
Provided that where a corporate debtor does not have any financial creditors, not being its
related parties, the approval under this sub-section shall be provided by such persons as may
be specified.
(4) Prior to seeking approval from financial creditors under sub-section (3), the corporate debtor
shall provide such financial creditors with —
(a) the declaration referred to in clause (f) of sub-section (2);
(b) the special resolution or resolution referred to in clause (g) of subsection (2);
(c) a base resolution plan which conforms to the requirements referred to in section 54K,
and such other conditions as may be specified; and
(d) such other information and documents as may be specified.

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Regulation 14 of the IBBI (Pre-packaged Insolvency Resolution Process) Regulations,

2021, which deals with the approvals by financial creditors, provides that –
(1) For the purposes of section 54A(2)(e) and 54A(3), the applicant shall convene meetings
of the financial creditors, who are not related parties of the corporate debtor.
(2) The notice of the meeting under sub-regulation (1) shall be served to the financial
creditors, who are not related parties of the corporate debtor, at least five days before the
date of the meeting, unless a shorter time is agreed to by all of them.
(3) The notice of the meeting under this regulation shall indicate the date, time and venue of
the meeting, and enclose a list of creditors along with the amount due to them in Form
P2.
(4) The financial creditors who are not related parties of the corporate debtor and have not less
than ten per cent. of the value of the total financial debt of such creditors may propose
names of insolvency professionals for the purposes of section 54A(2)(e).
(5) The approval of the terms of appointment of resolution professional under section
54A(2)(e) shall be in Form P3.
(6) The terms of appointment of the resolution professional under this regulation shall include –
• fee payable to him for performing duties under sub-section (1) of section 54B;
• fee payable to him and expenses to be incurred by him for conducting the
process; and (c) fee payable to him and expenses to be incurred by him in case
management of the corporate debtor is vested with him under section 54J.
(7) The approval for filing of application under section 54A(3) shall be in Form P4.
(8) Where the corporate debtor has no financial debt or where all financial creditors are
related parties, the applicant shall convene a meeting of operational creditors, who are
not related parties of the corporate debtor and provisions of sub-regulations (1) to (7)
shall mutatis mutandis apply.
Points to Remember -Eligibility for PPIRP

A CD, which is an MSME under sub-section (1) of the section 7 of the Micro, Small and Medium
Enterprises Development Act, 2006, is eligible to apply for initiation of PPIRP, if it-
• has committed a default of at least Rs 10 lakh;
• is eligible to submit a resolution plan under section 29A of the Code;
• has not undergone a PPIRP during the 3 years preceding the initiation date;
• has not completed a CIRP during he 3 years preceding the initiation date;

• is not undergoing a CIRP; and

• is not required to be liquidated by an order under section 33 of the Code.
Duties of insolvency professional before initiation of pre-packaged insolvency
resolution process [Section 54B]
(1) The insolvency professional, proposed to be appointed as the resolution professional, shall
have the following duties commencing from the date of the approval under clause (e) of sub-
section (2) of section 54A, namely:—
(a) prepare a report in such form as may be specified, confirming whether the corporate
debtor meets the requirements of section 54A, and the base resolution plan conforms
to the requirements referred to in clause (c) of subsection (4) of section 54A;
(b) file such reports and other documents, with the Board, as may be specified; and
(c) perform such other duties as may be specified.
(2) The duties of the insolvency professional under sub-section (1) shall cease, if, —
(a) the corporate debtor fails to file an application for initiating pre-packaged insolvency
resolution process within the time period as stated under the declaration referred to in
clause (f) of sub-section (2) of section 54A; or
(b) the application for initiating pre-packaged insolvency resolution process is admitted or
rejected by the Adjudicating Authority, as the case may be.
(3) The fees payable to the insolvency professional in relation to the duties performed under sub-
section (1) shall be determined and borne in such manner as may be specified and such fees
shall form part of the pre-packaged insolvency resolution process costs, if the application for
initiation of pre-packaged insolvency resolution process is admitted.
Regulation 8(1) of the IBBI(Pre-packaged Insolvency Resolution Process)
Regulations, 2021 provides that where the corporate debtor fails to file an application or
the application for initiation of the process is rejected, the fee payable to the resolution
professional for performing duties under section 54B(3) shall be born by the corporate
debtor.
Points to Remember - Pre-initiation Phase

The following activities need to be undertaken in pre-initiation stage:
• For seeking approval of creditors under section 54A(2)(e) and (3), the applicant (corporate
applicant filing an application for initiation of PPIRP) shall convene meetings of the unrelated
financial creditors (UFCs), that is, financial creditors who are not related parties of the CD.
Where the CD has no financial debt or where all financial creditors are related parties, the

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applicant shall convene meetings of unrelated operational creditors (UOCs) and the UOCs
shall perform the same duties and functions as the UFCs.
• For convening a meeting of UFCs, the applicant shall serve the notice of the meeting to
UFCs at least five days before the date of the meeting (s) unless a shorter time is agreed to
by all of them. The notice of the meeting shall indicate the date, time, and venue of the
meeting and specific agenda items for discussion.
• The applicant shall enclose a list of creditors and the amount due to each of them in Form
P2, along with the notice convening the meeting seeking approval for appointment of an IP
as RP.
• In the meeting of UFCs, creditors having at least 10% of the value of debt shall propose the
name of an IP eligible under the Regulations, for appointment as RP. An IP is eligible to be
appointed as RP if he, and all partners and directors of the insolvency professional entity of
which he is a partner or director, are independent of the corporate debtor. A person is
considered independent if he meets the requirements specified under regulation 7.
• The UFCs representing not less than 66% in value of debt due to such creditors shall
approve the appointment as RP and the terms of appointment in Form P3. The terms of
appointment shall include: (a) fee payable to him for performing duties in relation to pre-
initiation phase under section 54B, (b) fee payable to him and expenses to be incurred by
him for conducting the PPIRP, and (c) fee payable to him and expenses to be incurred by
him in case management of the CD is vested with him under section 54J.
• The majority of director/partners of the CD shall make a declaration in Form P6 stating (a)
that the CD shall file an application for initiation within a definite time not exceeding 90 days,
(b) that the PPIRP is not being initiated to defraud any person, and (c) the name of the IP
approved by creditors to be appointed as the RP.
• The members of the CD shall pass a special resolution, or at least three-fourth of the total
number of partners of the CD shall pass a resolution, approving the filing of an application
for initiating PPIRP as required in section 54A(2)(g).
• The CD shall prepare a BRP in conformity with the requirements under section 54K.
• Along with the notice for convening the meeting(s) seeking approval for filing of an
application for initiating PPIRP, the applicant shall enclose (a) a list of creditors and the
amount due to each of them in Form P2, (b) declaration in Form 6, (c) the resolution of
members or partners referred to in section 54A(2)(g), and (d) the BRP.
• In the meeting of UFCs, creditors representing not less than 66% in value of debt due to
such creditors shall approve filing of application for initiation of PPIRP of the CD under
section 54A(3), in Form P4.

• The IP (proposed to be appointed as the RP) shall ascertain creditors in class(es), if any,
from the list of creditors in Form P2, identify three IPs to act as authorised representative
(AR) and obtain their consent in Form P5, seek choice of creditors in the class, select the
IP, who is the choice of the highest number of creditors in the class to act as the AR, and
inform the name of the IP, along with his consent in Form P5, to the applicant, in accordance
with regulation 15.
• The IP (proposed to be appointed as the RP) shall prepare report in Form P8 confirming if
the CD is eligible for PPIRP and the BRP confirms the requirements.
Application to initiate pre-packaged insolvency resolution process [Section 54C]
(1) Where a corporate debtor meets the requirements of section 54A, a corporate applicant
thereof may file an application with the Adjudicating Authority for initiating prepackaged
(2) The application under sub-section (1) shall be filed in such form, containing such particulars,
in such manner and accompanied with such fee as may be prescribed.
(3) The corporate applicant shall, along with the application, furnish—
(a) the declaration, special resolution or resolution, as the case may be, and the approval
of financial creditors for initiating pre-packaged insolvency resolution process in terms
of section 54A;
(b) the name and written consent, in such form as may be specified, of the insolvency
professional proposed to be appointed as resolution professional, as approved under
clause (c) of sub-section (2) of section 54A, and his report as referred to in clause (a)
of sub-section (1) of section 54B;
(c) a declaration regarding the existence of any transactions of the corporate debtor that
may be within the scope of provisions in respect of avoidance of transactions under
Chapter III or fraudulent or wrongful trading under Chapter VI, in such form as may be
specified;
(d) information relating to books of account of the corporate debtor and such other
documents relating to such period as may be specified.
(4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the
application, by an order,––
(a) admit the application, if it is complete; or
(b) reject the application, if it is incomplete:
Provided that the Adjudicating Authority shall, before rejecting an application, give notice to
the applicant to rectify the defect in the application within seven days from the date of receipt
of such notice from the Adjudicating Authority.

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(5) The pre-packaged insolvency resolution process shall commence from the date of admission
of the application under clause (a) of sub-section (4).
In terms of Rule 4(1) of the Insolvency and Bankruptcy (prepackaged insolvency
resolution process) Rules, 2021 a corporate applicant, shall make an application for
initiating pre-packaged insolvency resolution process under section 54C(1) of the Code
in Form 1, accompanied with affidavit, documents or records, s as referred in
Annexures therein, in electronic form, along with a fee of rupees fifteen thousand:
Points to Remember – Application for Initiation
• Only a corporate applicant can file an application for initiation of PPIRP.
• The applicant shall file the application in Form 1, in electronic form, before the AA for
initiating PPIRP.
• The application shall be accompanied by the following documents:
 Record of default;
 Consent of the IP proposed to be appointed as RP, in Form P1;
 Approval of UFCs for initiation, in Form P4;
 Consent of the IP proposed to act as AR, if any, in Form P5;
 Declaration by Directors/Partners, in Form P6;
 Members’ resolution or Partners’ resolution;
 Declaration by CD regarding avoidance transaction(s), in Form P7;
 Report of the RP, in Form P8;
 Audited financial statements of the last two financial years;
 Provisional financial statements for current financial year made up to the date of
declaration under section 54A(2)(f);
 Latest and updated Udyam Registration Certificate, or proof that the CD is an MSME;
 Affidavit stating that the CD is eligible under section 29A of the Code to submit
resolution plan in the PPIRP of the CD;
 A statement of affairs made up to a date not earlier than 14 days from the date of
application;
 A statement giving the names and addresses of the members or partners of the CD,
with details of their respective shareholdings;
 Proof that the application fee of ₹15,000 has been paid;
 Proof that a copy of the application has been served to the IBBI; and

 Document that records the authority of the applicant to make the application, where
the applicant is a member or partner of the CD.
• The applicant shall serve a copy of the application (for initiating PPIRP) to the IBBI before
filing it with the AA.
• Within 14 days of the receipt of the application, the AA shall admit the application, if the
application is complete or reject the same, if incomplete. However, before rejecting the
application, the AA shall provide a period of seven days to the applicant for rectifying the
defects, if any, in the application. The AA shall also deal with any application for initiation
of CIRP pending for admission in accordance with the Code while deciding on the
application.
• The PPIRP shall commence on the date of admission of the application.
• The AA shall, on the PPIRP commencement date along with the order of admission, declare
a moratorium of the purposes of sub-sections (1) and (3) of section 14 of the Code, appoint
the IP named in the application as the RP, and cause a public announcement to be made
by the RP.
• The duties of the IP shall cease if the application is either not filed within the time specified
in declaration in Form 6 or is not admitted by the AA.
Time-limit for completion of pre-packaged insolvency resolution process
[Section 54D]
(1) The pre-packaged insolvency resolution process shall be completed within a period of one
hundred and twenty days from the pre-packaged insolvency commencement date.
(2) Without prejudice to sub-section (1), the resolution professional shall submit the resolution
plan, as approved by the committee of creditors, to the Adjudicating Authority under sub-
section (4) or sub-section (12), as the case may be, of section 54K, within a period of ninety
days from the pre-packaged insolvency commencement date.
(3) Where no resolution plan is approved by the committee of creditors within the time period
referred to in sub-section (2), the resolution professional shall, on the day after the expiry of
such time period, file an application with the Adjudicating Authority for termination of the pre-
packaged insolvency resolution process in such form and manner as may be specified.
Declaration of moratorium and public announcement during pre-packaged insolvency
resolution process [Section 54C]
(1) The Adjudicating Authority shall, on the pre-packaged insolvency commencement date, along
with the order of admission under section 54C —
(a) declare a moratorium for the purposes referred to in sub-section (1) read with sub-
section (3) of section 14, which shall, mutatis mutandis apply, to the proceedings under
this Chapter;

3.124 ECONOMIC LAWS
(b) appoint a resolution professional —

(i) as named in the application, if no disciplinary proceeding is pending against
him; or
(ii) based on the recommendation made by the Board, if any disciplinary
proceeding is pending against the insolvency professional named in the
application;
(c) cause a public announcement of the initiation of the pre-packaged insolvency
resolution process to be made by the resolution professional, in such form and manner
as may be specified, immediately after his appointment.
(2) The order of moratorium shall have effect from the date of such order till the date on which
the pre-packaged insolvency resolution process period comes to an end.
Information to be furnished by the applicant - Regulation 18 of the IBBI(Pre-packaged
Insolvency Resolution Process)Regulations, 2021 provides that for the purposes of section
54C(3)(d), the applicant shall furnish-
(a) auditied financial statements of the corporate debtor for the last two financial years;
(b) provisional financial statements for the current financial year made upto the date of
declaration under section 54A(2)(f); and
(c) Form P5 submitted by the authorized representatives selected under regulations 15(5).
Duties and powers of resolution professional during pre-packaged insolvency

resolution process [Section 54F]
(1) The resolution professional shall conduct the pre-packaged insolvency resolution process of
a corporate debtor during the pre-packaged insolvency resolution process period.
(2) The resolution professional shall perform the following duties, namely:—
(a) confirm the list of claims submitted by the corporate debtor under section 54G, in such
manner as may be specified;
(b) inform creditors regarding their claims as confirmed under clause (a), in such manner
as may be specified;
(c) maintain an updated list of claims, in such manner as may be specified;
(d) monitor management of the affairs of the corporate debtor;
(e) inform the committee of creditors in the event of breach of any of the obligations of the
Board of Directors or partners, as the case may be, of the corporate debtor, under the
provisions of this Chapter and the rules and regulations made thereunder;
(f) constitute the committee of creditors and convene and attend all its meetings;

(g) prepare the information memorandum on the basis of the preliminary information
memorandum submitted under section 54G and any other relevant information, in such
form and manner as may be specified;
(h) file applications for avoidance of transactions under Chapter III or fraudulent or
wrongful trading under Chapter VI, if any; and (i) such other duties as may be specified.
(3) The resolution professional shall exercise the following powers, namely:—
(a) access all books of account, records and information available with the corporate
debtor;
(b) access the electronic records of the corporate debtor from an information utility having
financial information of the corporate debtor;
(c) access the books of account, records and other relevant documents of the corporate
debtor available with Government authorities, statutory auditors, accountants and
such other persons as may be specified;
(d) attend meetings of members, Board of Directors and committee of directors, or
partners, as the case may be, of the corporate debtor;
(e) appoint accountants, legal or other professionals in such manner as may be specified;
(f) collect all information relating to the assets, finances and operations of the corporate
debtor for determining the financial position of the corporate debtor and the existence
of any transactions that may be within the scope of provisions relating to avoidance of
transactions under Chapter III or fraudulent or wrongful trading under Chapter VI,
including information relating to —
(i) business operations for the previous two years from the date of prepackaged
insolvency commencement date;
(ii) financial and operational payments for the previous two years from the date of
pre-packaged insolvency commencement date;
(iii) list of assets and liabilities as on the initiation date; and
(iv) such other matters as may be specified;
(g) take such other actions in such manner as may be specified.
(4) From the date of appointment of the resolution professional, the financial institutions
maintaining accounts of the corporate debtor shall furnish all information relating to the
corporate debtor available with them to the resolution professional, as and when required by
him.
(5) The personnel of the corporate debtor, its promoters and any other person associated with
the management of the corporate debtor shall extend all assistance and cooperation to the

3.126 ECONOMIC LAWS
resolution professional as may be required by him to perform his duties and exercise his
powers, and for such purposes, the provisions of sub-sections (2) and (3) of section 19 shall,
mutatis mutandis apply, in relation to the proceedings under this Chapter.
(6) The fees of the resolution professional and any expenses incurred by him for conducting the
pre-packaged insolvency resolution process shall be determined in such manner as may be
specified:
Provided that the committee of creditors may impose limits and conditions on such fees and
expenses:
Provided further that the fees and expenses for the period prior to the constitution of the
committee of creditors shall be subject to ratification by it.
(7) The fees and expenses referred to in sub-section (6) shall be borne in such manner as may
be specified.
Appointment of professionals - Regulation 10 of the IBBI(Pre-packaged Insolvency
Resolution Process)Regulations, 2021 provides that the Resolution Professional may appoint
a professional under section 54F(3)(e), however the following persons shall not be appointed as
a professional, namely:
(a) a person who is not registered with the regulator of the profession concerned;
(b) a related party of the corporate debtor;
(c) an auditor of the corporate debtor at any time during the five years preceding the pre-
packaged insolvency commencement date;
(d) a partner or director of the insolvency professional entity of which the resolution professional
is a partner or director; or
(e) a relative of the resolution professional or of a partner or director of the insolvency
professional entity of which the resolution professional is a partner or director.
List of claims and preliminary information memorandum [Section 54G]
(1) The corporate debtor shall, within two days of the pre-packaged insolvency commencement
date, submit to the resolution professional the following information, updated as on that date,
in such form (Form P10) and manner as may be specified, namely:—
(a) a list of claims, along with details of the respective creditors, their security interests
and guarantees, if any; and
(b) a preliminary information memorandum containing information relevant for formulating
a resolution plan.
(2) Where any person has sustained any loss or damage as a consequence of the omission of
any material information or inclusion of any misleading information in the list of claims or the
preliminary information memorandum submitted by the corporate debtor, every person who—

(a) is a promoter or director or partner of the corporate debtor, as the case may be, at the
time of submission of the list of claims or the preliminary information memorandum by
the corporate debtor; or
(b) has authorised the submission of the list of claims or the preliminary information
memorandum by the corporate debtor, shall, without prejudice to section 77A, be liable
to pay compensation to every person who has sustained such loss or damage.
(3) No person shall be liable under sub-section (2), if the list of claims or the preliminary
information memorandum was submitted by the corporate debtor without his knowledge or
consent.
(4) Subject to section 54E, any person, who sustained any loss or damage as a consequence of
omission of material information or inclusion of any misleading information in the list of claims
or the preliminary information memorandum shall be entitled to move a court having
jurisdiction for seeking compensation for such loss or damage.
Management of affairs of corporate debtor [Section 54H]
During the pre-packaged insolvency resolution process period,—
(a) the management of the affairs of the corporate debtor shall continue to vest in the Board of
Directors or the partners, as the case may be, of the corporate debtor, subject to such
conditions as may be specified;
(b) the Board of Directors or the partners, as the case may be, of the corporate debtor, shall
make every endeavour to protect and preserve the value of the property of the corporate
debtor, and manage its operations as a going concern; and
(c) the promoters, members, personnel and partners, as the case may be, of the corporate
debtor, shall exercise and discharge their contractual or statutory rights and obligations in
relation to the corporate debtor, subject to the provisions of this Chapter and such other
conditions and restrictions as may be prescribed.
Committee of creditors [Section 54-I]
(1) The resolution professional shall, within seven days of the pre-packaged insolvency
commencement date, constitute a committee of creditors, based on the list of claims
confirmed under clause (a) of sub-section (2) of section 54F: Provided that the composition
of the committee of creditors shall be altered on the basis of the updated list of claims, in
such manner as may be specified, and any such alteration shall not affect the validity of any
past decision of the committee of creditors.
(2) The first meeting of the committee of creditors shall be held within seven days of the
constitution of the committee of creditors.
(3) The provisions of section 21, except sub-section (1) thereof, shall, mutatis mutandis apply, in
relation to the committee of creditors under this Chapter:

3.128 ECONOMIC LAWS
Provided that for the purposes of this sub-section, references to “resolution professional” under
sub-sections (9) and (10) of section 21, shall be construed as references to “corporate debtor or
the resolution professional”.
Vesting management of corporate debtor with resolution professional [Section 54J]
(1) Where the committee of creditors, at any time during the pre-packaged insolvency resolution
process period, by a vote of not less than sixty-six per cent. of the voting shares, resolves to
vest the management of the corporate debtor with the resolution professional, the resolution
professional shall make an application for this purpose to the Adjudicating Authority, in such
form ( Form P14) and manner as may be specified.
(2) On an application made under sub-section (1), if the Adjudicating Authority is of the opinion
that during the pre-packaged insolvency resolution process—
(a) the affairs of the corporate debtor have been conducted in a fraudulent manner; or
(b) there has been gross mismanagement of the affairs of the corporate debtor, it shall
pass an order vesting the management of the corporate debtor with the resolution
professional.
(3) Notwithstanding anything to the contrary contained in this Chapter, the provisions of —
(a) sub-sections (2) and (2A) of section 14;
(b) section 17;
(c) clauses (e) to (g) of section 18;
(d) sections 19 and 20;
(e) sub-section (1) of section 25;
(f) clauses (a) to (c) and clause (k) of sub-section (2) of section 25; and
(g) section 28,
shall, mutatis mutandis apply, to the proceedings under this Chapter, from the date of the
order under sub-section (2), until the pre-packaged insolvency resolution process period
comes to an end.
Consideration and approval of resolution plan [Section 54K]
(1) The corporate debtor shall submit the base resolution plan, referred to in clause © of sub-
section (4) of section 54A, to the resolution professional within two days of the prepackaged
insolvency commencement date, and the resolution professional shall present it to the
committee of creditors.

(2) The committee of creditors may provide the corporate debtor an opportunity to revise the
base resolution plan prior to its approval under sub-section (4) or invitation of prospective
resolution applicants under sub-section (5), as the case may be.
(3) The resolution plans and the base resolution plan, submitted under this section shall conform
to the requirements referred to in sub-sections (1) and (2) of section 30, and the provisions
of sub-sections (1), (2) and (5) of section 30 shall, mutatis mutandis apply, to the proceedings
under this Chapter.
(4) The committee of creditors may approve the base resolution plan for submission to the
Adjudicating Authority if it does not impair any claims owed by the corporate debtor to the
operational creditors.
(5) Where —
(a) the committee of creditors does not approve the base resolution plan under subsection
(4); or
(b) the base resolution plan impairs any claims owed by the corporate debtor to the
operational creditors, the resolution professional shall invite prospective resolution
applicants to submit a resolution plan or plans, to compete with the base resolution
plan, in such manner as may be specified.
(6) The resolution applicants submitting resolution plans pursuant to invitation under sub-section
(5), shall fulfil such criteria as may be laid down by the resolution professional with the
approval of the committee of creditors, having regard to the complexity and scale of
operations of the business of the corporate debtor and such other conditions as may be
specified.
(7) The resolution professional shall provide to the resolution applicants, —
(a) the basis for evaluation of resolution plans for the purposes of sub-section (9), as
approved by the committee of creditors subject to such conditions as may be specified;
and
(b) the relevant information referred to in section 29, which shall, mutatis mutandis apply,
to the proceedings under this Chapter, in such manner as may be specified.
(8) The resolution professional shall present to the committee of creditors, for its evaluation,
resolution plans which conform to the requirements referred to in sub-section (2) of section 30.
(9) The committee of creditors shall evaluate the resolution plans presented by the resolution
professional and select a resolution plan from amongst them.
(10) Where, on the basis of such criteria as may be laid down by it, the committee of creditors
decides that the resolution plan selected under sub-section (9) is significantly better than the
base resolution plan, such resolution plan may be selected for approval under subsection (12):

3.130 ECONOMIC LAWS
Provided that the criteria laid down by the committee of creditors under this sub-section shall
be subject to such conditions as may be specified.
(11) Where the resolution plan selected under subsection (9) is not considered for approval or
does not fulfil the requirements of sub-section (10), it shall compete with the base resolution
plan, in such manner and subject to such conditions as may be specified, and one of them
shall be selected for approval under sub-section (12).
(12) The resolution plan selected for approval under sub-section (10) or sub-section (11), as the
case may be, may be approved by the committee of creditors for submission to the
Adjudicating Authority: Provided that where the resolution plan selected for approval under
sub-section (11) is not approved by the committee of creditors, the resolution professional
shall file an application for termination of the pre-packaged insolvency resolution process in
such form and manner as may be specified.
(13) The approval of the resolution plan under sub-section (4) or sub-section (12), as the case
may be, by the committee of creditors, shall be by a vote of not less than sixty-six per cent.
Of the voting shares, after considering its feasibility and viability, the manner of distribution
proposed, taking into account the order of priority amongst creditors as laid down in sub-
section (1) of section 53, including the priority and value of the security interest of a secured
creditor and such other requirements as may be specified.
(14) While considering the feasibility and viability of a resolution plan, where the resolution plan
submitted by the corporate debtor provides for impairment of any claims owed by the
corporate debtor, the committee of creditors may require the promoters of the corporate
debtor to dilute their shareholding or voting or control rights in the corporate debtor: Provided
that where the resolution plan does not provide for such dilution, the committee of creditors
shall, prior to the approval of such resolution plan under sub-section (4) or sub-section (12),
as the case may be, record reasons for its approval.
(15) The resolution professional shall submit the resolution plan as approved by the committee of
creditors under sub-section (4) or sub-section (12), as the case may be, to the Adjudicating
Authority.
Explanation I.––For the removal of doubts, it is hereby clarified that, the corporate debtor being a
resolution applicant under clause (25) of section 5, may submit the base resolution plan either
individually or jointly with any other person.
Explanation II.––For the purposes of sub-sections (4) and (14), claims shall be considered to be
impaired where the resolution plan does not provide for the full payment of the confirmed claims
as per the updated list of claims maintained by the resolution professional.

Scoring and improvement of resolution plans- Regulation 42 of IBBI (Pre-packaged

Insolvency Resolution Process) Regulations, 2021 provides that-
For the purposes of consideration of resolution plans,-
(i) “basis for evaluation”, includes the parameters to be applied and the manner of
applying such parameters, as approved by the committee, for evaluating a resolution plan
to assign a score to the plan, and disclosed in the invitation for resolution plans.
 Illustration 1: The committee may identify three parameters, namely, X, Y and
Z for evaluation of resolution plans. It may apply these parameters in the form of
a formula, namely, 1.5 X + 2 Y + 2.5 Z. Where the values of X, Y and Z are 20,
25, and 30 respectively, the score of the resolution plan is 1.5 (20) + 2 (25) + 2.5
(30) = 155.
 Illustration 2: The committee may identify three parameters, namely, X, Y and
Z for evaluation of resolution plans. It may apply these parameters in the form of
a formula, namely, 1.5 X + 2 Y + 2.5 Z, subject to X being not less than 20.
Where the values of X, Y and Z are 20, 25, and 30 respectively, the score of the
resolution plan is 1.5 (20) + 2 (25) + 2.5 (30) = 155. It may apply these
parameters in the form of a formula, namely, 2 Y + 2.5 Z, subject to X being not
less than 20. Where the values of X, Y and Z are 20, 25, and 30 respectively,
the score of the resolution plan is 2 (25) + 2.5 (30) = 125. Where the values of
X, Y and Z are 15, 40, and 50 respectively, the resolution plan does not meet
the minimum value of X and hence this plan will not be evaluated;
(ii) “significantly better” in relation to resolution plan, means that the score of the resolution
plan is higher than that of another resolution plan by a certain number or percentage, as
approved by the committee and disclosed in the invitation for resolution plans.
 Illustration 1: The committee may consider a resolution plan to be significantly
better than another resolution plan, if the score of the former is higher than that
of the latter by 10. Where resolution plans ‗A‘ and ‗B‘ have scores of 100 and
110 respectively, ‗B‘ is significantly better than ‗A‘. Where resolution plans ‗A‘
and ‗B‘ have scores of 100 and 108 respectively, ‗B‘ is not significantly better
than ‗A‘.
 Illustration 2: The committee may consider a resolution plan to be significantly
better than another resolution plan, if the score of the former is higher than that
of the latter by 5 per cent. Where resolution plans ‗A‘ and ‗B‘ have scores of
100 and 107 respectively, ‗B‘ is significantly better than ‗A‘. Where resolution
plans ‗A‘ and ‗B‘ have scores of 100 and 104 respectively, ‗B‘ is not
significantly better than ‗A‘

3.132 ECONOMIC LAWS
(iii) “tick size” means minimum improvement over another resolution plan in terms of score,
as approved by the committee and disclosed in the invitation for resolution plans.
 Illustration 1: On the basis for evaluation, resolution plans ‗A‘ and ‗B‘ have
scores of 105 and 108, respectively. Resolution applicant of ‗A‘ may wish to
improve ‗A‘ over ‗B‘. It must improve ‗A‘ such that the score of ‗A‘ exceeds
that of ‗B‘ at least by tick size. If tick size is 5, resolution applicant of ‗A‘ must
improve ‗A‘ such that the score of ‗A‘ is at least 108 + 5 = 113.
 Illustration 2: In the example under Illustration 1, if tick size is 5 per cent.,
resolution applicant of ‗A‘ must improve ‗A‘ such that the score of ‗A‘ is at least
108 X 1.05 = 113.4.
Invitation for resolution plans - Regulation 43 of the IBBI(Pre-packaged Insolvency

Resolution Process)Regulations, 2021 provides that –
(1) For the purposes of sub-section (5) of section 54K, the resolution professional shall publish
brief particulars of the invitation for resolution plans in Form P11 not later than twenty-one
days from the pre-packaged insolvency commencement date.
(2) The resolution professional shall publish Form P11-
(a) on the website, if any, of the corporate debtor;
(b) on the website, if any, designated by the Board for the purpose; and
(c) in any other manner as may be decided by the committee.
(3) The Form P11 shall –
(a) state where the invitation for resolution plans can be downloaded or obtained from, as
the case may be; and
(b) provide the last date for submission of resolution plan which shall not be less than
fifteen days from the date of issue of invitation for resolution plan under sub-regulation
(2).
(4) The invitation for resolution plans shall-
(a) detail each step in the process, and the manner and purposes of interaction between
the resolution professional and the resolution applicant, along with corresponding
timelines;
(b) include-
(i) the basis for evaluation;
(ii) basis for considering a resolution plan significantly better than another
resolution plan;

(iii) tick size; and

(iv) the manner of improving a resolution plan; and
(c) not require any non-refundable deposit for submission of or along with resolution plan.
(5) The resolution professional shall require the resolution applicant, in case its resolution plan
is approved under section 54K(13), to provide a performance security within the time specified
therein and such performance security shall stand forfeited if the resolution applicant of such
plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the
failure of implementation of that plan in accordance with the terms of the plan and its
implementation schedule.
Explanation 1.– For the purposes of this sub-regulation, ―performance security‖ shall mean
security of such nature, value, duration and source, as may be specified in the invitation for
resolution plans with the approval of the committee, having regard to the nature of resolution plan
and business of the corporate debtor.
Explanation 2.– A performance security may be specified in absolute terms such as guarantee
from a bank for Rs. X for Y years or in relation to one or more variables such as the term of the
resolution plan, amount payable to creditors under the resolution plan, etc.
Points to Remember – Post Initiation Phase
• The process is required to be completed within a time frame of 120 days from the PPIRP
commencement date. A model timeline along-with details of the activities to be undertaken
during the process is presented in Annexure C.
• During the PPIRP,
 the management of the affairs of the CD shall continue to vest in the Board of Directors
/ the partners of the CD;
 the Board of Directors / the partners of the CD shall make every endeavour to protect
and preserve the value of the property of the CD, and manage its operations as a
going concern; and
 the promoters, members, personnel and partners of the CD shall exercise and
discharge their contractual or statutory rights and obligations in relation to the CD.
• The CD shall, within two days of the PPIRP commencement date, submit to the RP, updated
as on that date,
 a list of claims, along with details of the respective creditors, their security interests
and guarantees, in Form P10, and
 a preliminary information memorandum (PIM) containing information relevant for
formulating a resolution plan. If any person sustains any loss or damage as a
consequence of the omission of any material information or inclusion of any misleading

3.134 ECONOMIC LAWS
information in the list of claims or the PIM, every person who (a) is a promoter or
director or partner of the CD at the time of submission of the list of claims or the PIM,
or (b) has authorised the submission of the list of claims or the PIM, shall be liable to
pay compensation.
 The CD shall submit the BRP to the RP within two days of the PPIRP commencement
date. It may revise the BRP if permitted by the CoC.
 The RP shall make a public announcement, in Form P9, within two days of the
commencement of the process in the manner specified in regulation 19.
 The RP shall exercise powers and carry out duties as required under section 54F.
Approval of resolution plan [Section 54L]
(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee
of creditors under sub-section (4) or sub-section (12), as the case may be of section 54K,
subject to the conditions provided therein, meets the requirements as referred to in
subsection (2) of section 30, it shall, within thirty days of the receipt of such resolution plan,
by order, approve the resolution plan:
Provided that the Adjudicating Authority shall, before passing an order for approval of a
resolution plan under this sub-section, satisfy itself that the resolution plan has provisions for
its effective implementation.
(2) The order of approval under sub-section (1) shall have such effect as provided under sub-
sections (1), (3) and (4) of section 31, which shall, mutatis mutandis apply, to the proceedings
under this Chapter.
(3) Where the Adjudicating Authority is satisfied that the resolution plan does not conform to the
requirements referred to in sub-section (1), it may, within thirty days of the receipt of such
resolution plan, by an order, reject the resolution plan and pass an order under section 54N.
(4) Notwithstanding anything to the contrary contained in this section, where the Adjudicating
Authority has passed an order under sub-section (2) of section 54J and the resolution plan
approved by the committee of creditors under sub-section (4) or sub-section (12), as the case
may be of section 54K, does not result in the change in the management or control of the
corporate debtor to a person who was not a promoter or in the management or control of the
corporate debtor, the Adjudicating Authority shall pass an order —
(a) rejecting such resolution plan;
(b) terminating the pre-packaged insolvency resolution process and passing a liquidation
order in respect of the corporate debtor as referred to in sub-clauses (i), (ii) and (iii) of
clause (b) of sub-section (1) of section 33; and

(c) declaring that the pre-packaged insolvency resolution process costs, if any, shall be
included as part of the liquidation costs for the purposes of liquidation of the corporate
debtor.
Points to Remember – Approval of Resolution Plan
• If BRP does not impair claims owed to operational creditors (OCs), the CoC may approve
it for submission to the AA.
• If the CoC does not approve the BRP or the BRP impairs the claims of OCs, the RP shall
invite prospective resolution applicants to submit resolution plans to compete with the BRP.
He shall publish brief particulars of the invitation for resolution plans in Form P11, not later
than 21 days from the PPIRP commencement date, in accordance with regulation 43.
• The invitation for resolution plans shall detail each step in the process, and the manner and
purposes of interaction between the RP and the resolution applicant, along with
corresponding timelines. It shall include
 the basis for evaluation;
 the basis for considering a resolution plan significantly better than another resolution
plan;
 the tick size; and
 the manner of improving a resolution plan. It shall not require any non-refundable
deposit for submission of or along with resolution plan.
• The resolution plans received in response to invitation and complying with the requirements
of the Code and the Regulations shall be evaluated on the basis for evaluation. The
resolution plan which gets the highest score shall be selected as best alternate plan (BAP)
for competition with the BRP.
• The CoC may consider BRP for approval if no resolution plan is received.
• The CoC may consider the BAP for approval if it is significantly better than the BRP. If it
does not approve a significantly better BAP, the process terminates.
• If the BAP is not significantly better than the BRP, the RP shall disclose the scores of the
BAP and BRP to submitters of these plans and invite them to improve their plans in
accordance with regulation 48.
• The process of improvement shall continue till either of the submitters fails to use the option
within the specified time. The resolution plan having higher score on completion of process
of improvement shall be considered by the CoC for approval. If the CoC does not approve
it, the process terminates.

3.136 ECONOMIC LAWS
Appeal against order under section 54L [Section 54M]

Any appeal against an order approving the resolution plan under sub-section (1) of section 54L,
shall be on the grounds laid down in sub-section (3) of section 61.
54N. Termination of pre-packaged insolvency resolution process [Section 54N]
(1) Where the resolution professional files an application with the Adjudicating Authority, —
(a) under the proviso to sub-section (12) of section 54K; or
(b) under sub-section (3) of section 54D, the Adjudicating Authority shall, within thirty days
of the date of such application, by an order, —
(i) terminate the pre-packaged insolvency resolution process; and
(ii) provide for the manner of continuation of proceedings initiated for avoidance of
transactions under Chapter III or proceedings initiated under section 66 and
section 67A, if any.
(2) Where the resolution professional, at any time after the pre-packaged insolvency
commencement date, but before the approval of resolution plan under sub-section (4) or
subsection (12), as the case may be of section 54K, intimates the Adjudicating Authority of
the decision of the committee of creditors, approved by a vote of not less than sixty-six per
cent. of the voting shares, to terminate the pre-packaged insolvency resolution process, the
Adjudicating Authority shall pass an order under sub-section (1).
(3) Where the Adjudicating Authority passes an order under sub-section (1), the corporate debtor
shall bear the pre-packaged insolvency resolution process costs, if any.
(4) Notwithstanding anything to the contrary contained in this section, where the Adjudicating
Authority has passed an order under sub-section (2) of section 54J and the prepackaged
insolvency resolution process is required to be terminated under sub-section (1), the
Adjudicating Authority shall pass an order —
(a) of liquidation in respect of the corporate debtor as referred to in sub-clauses (i), (ii)
and (iii) of clause (b) of sub-section (1) of section 33; and
(b) declare that the pre-packaged insolvency resolution process costs, if any, shall be
included as part of the liquidation costs for the purposes of liquidation of the corporate
debtor.
Points to Remember - Closure of PPIRP
The PPIRP closes in the following circumstances:
• On approval of either the BRP or the BAP by the AA.
• On expiry of 90 days if no resolution plan is submitted to the AA for approval.

• On rejection of resolution plan by the AA.

• On approval by the AA of application filed by the RP for termination of PPIRP, where the
CoC approves termination with 66% of voting share.
• On conversion into CIRP based on an application filed by the RP, where the CoC approves
so with 66% of voting share, and the CD is eligible for CIRP. The RP of the PPIRP is
appointed as the IRP of the CIRP.
• On an order of termination in case either no resolution plan is approved by CoC or the
resolution plan approved by the CoC does not result in change in management, where the
AA has vested the management of the CD with the RP under section 54J.
Initiation of corporate insolvency resolution process [Section 54-O]
(1) The committee of creditors, at any time after the pre-packaged insolvency commencement
date but before the approval of resolution plan under sub-section (4) or subsection (12), as
the case may be of section 54K, by a vote of not less than sixty-six per cent. of the voting
shares, may resolve to initiate a corporate insolvency resolution process in respect of the
corporate debtor, if such corporate debtor is eligible for corporate insolvency resolution
process under Chapter II.
(2) Notwithstanding anything to the contrary contained in Chapter II, where the resolution
professional intimates the Adjudicating Authority of the decision of the committee of creditors
under sub-section (1), the Adjudicating Authority shall, within thirty days of the date of such
intimation, pass an order to —
(a) terminate the pre-packaged insolvency resolution process and initiate corporate
insolvency resolution process under Chapter II in respect of the corporate debtor;
(b) appoint the resolution professional referred to in clause (b) of sub-section (1) of section
54E as the interim resolution professional, subject to submission of written consent by
such resolution professional to the Adjudicating Authority in such form as may be
specified; and
(c) declare that the pre-packaged insolvency resolution process costs, if any, shall be
included as part of insolvency resolution process costs for the purposes of the
corporate insolvency resolution process of the corporate debtor.
(3) Where the resolution professional fails to submit written consent under clause (b) of sub-
section (2), the Adjudicating Authority shall appoint an interim resolution professional by
making a reference to the Board for recommendation, in the manner as provided under
section 16.
(4) Where the Adjudicating Authority passes an order under sub-section (2) —
(a) such order shall be deemed to be an order of admission of an application under section
7 and shall have the same effect;

3.138 ECONOMIC LAWS
(b) the corporate insolvency resolution process shall commence from the date of such
order;
(c) the proceedings initiated for avoidance of transactions under Chapter III or
proceedings initiated under section 66 and section 67A, if any, shall continue during
the corporate insolvency resolution process;
(d) for the purposes of sections 43, 46 and 50, references to “insolvency commencement
date” shall mean “pre-packaged insolvency commencement date”; and
(e) in computing the relevant time or the period for avoidable transactions, the time period for
the duration of the pre-packaged insolvency resolution process shall also be included,
notwithstanding anything to the contrary contained in sections 43, 46 and 50.
Application of provisions of Chapters II, III, VI, and VII to this Chapter [Section 54P]
(1) Save as provided under this Chapter, the provisions of sections 24, 25A, 26, 27, 28, 29A,
32A, 43 to 51, and the provisions of Chapters VI and VII of this Part shall, mutatis mutandis
apply, to the pre-packaged insolvency resolution process, subject to the following, namely:―
(a) reference to “members of the suspended Board of Directors or the partners” under
clause
(b) of sub-section (3) of section 24 shall be construed as reference to “members of the
Board of Directors or the partners, unless an order has been passed by the
Adjudicating Authority under section 54J”; (b) reference to “clause (j) of sub-section
(2) of section 25” under section 26 shall be construed as reference to “clause (h) of
sub-section (2) of section 54F”;
(c) reference to “section 16” under section 27 shall be construed as reference to “section
54E”; (d) reference to “resolution professional” in sub-sections (1) and (4) of section
28 shall be construed as “corporate debtor”;
(d) reference to “section 31” under sub-section (3) of section 61 shall be construed as
reference to “sub-section (1) of section 54L”;
(e) reference to “section 14” in sub-sections (1) and (2) of section 74 shall be construed
as reference to “clause (a) of sub-section (1) of section 54E”;
(f) reference to “section 31” in sub-section (3) of section 74 shall be construed as
reference to “sub-section (1) of section 54L”.
(2) Without prejudice to the provisions of this Chapter and unless the context otherwise requires,
where the provisions of Chapters II, III, VI and VII are applied to the proceedings under this
Chapter, references to —
(a) “insolvency commencement date” shall be construed as references to “prepackaged
insolvency commencement date”;

(b) “resolution professional” or “interim resolution professional”, as the case may be, shall
be construed as references to the resolution professional appointed under this
Chapter;
(c) “corporate insolvency resolution process” shall be construed as references to “pre-
packaged insolvency resolution process”; and
(d) “insolvency resolution process period” shall be construed as references to
“prepackaged insolvency resolution process period.”
FORMS PRESCRIBED FOR PPIRP UNDER RULES / REGUALTIONS
Form No. Rules/ Regulations Particulars
Form 1 The Insolvency and Application by Corporate Applicant to initiate
Bankruptcy (pre-packaged PPIRP
insolvency resolution
process) Rules, 2021
Form P1 Written Consent by IP to act as RP/IRP
Form P2 List of creditors to be provided by the
Applicant
Form P3 Approval of terms of appointment of
resolution professional
Form P4 Approval for filing application to initiate
PPIRP, by UFCs
Form P5 Written consent by IP to act as AR
The Insolvency and
Form P6 Declaration by majority of directors/ partners
Bankruptcy Board of India
Form P7 (Pre-packaged Insolvency Declaration regarding existence of avoidance
Resolution Process) of transaction(s)
Regulations, 2021
Form P8 Report by the IP proposed to be appointed as
the RP
Form P9 Public announcement by the RP
Form P10 List of claims by the CD
Form P11 Brief particulars of the invitation for resolution
plans
Form P12 Compliance certificate by the RP
Form P13 Application for termination of PPIRP

3.140 ECONOMIC LAWS
7. FAST TRACK INSOLVENCY RESOLUTION FOR

CORPORATE PERSONS [SECTION 55 – 58]
A fast track insolvency resolution, as the name suggests, is a process wherein the insolvency
resolution process shall be completed in an expeditious manner i.e., with 90 (ninety) days from
the insolvency commencement date. The provisions of the Insolvency and Bankruptcy Board
of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations,
2017 shall apply to the conduct of a fast track corporate insolvency resolution process. The
provisions related to the fast track insolvency resolution are being covered under sections 55 to
58 of the Code.
Fast Track Corporation Insolvency Resolution Process (FTCIRP) [Section 55]
As per sub-section 1 of the Code, a Corporate insolvency resolution process carried out in
accordance with this Chapter shall be called as fast track corporate insolvency resolution process.
According to sub-section 2, an application FTCIRP may be made in respect of the following
corporate debtors, namely,
(a) a corporate debtor with assets and income below a level as may be notified by the Central
Government; or
(b) a corporate debtor with such class of creditors or such amount of debt as may be notified
by the Central Government; or
(c) such other category of corporate persons as may be notified by the Central Government.
Notification: Vide notification no. SO 1911(E) dated 14-6-2017, the Central Government
prescribed the following class of corporate debtors on whom the provisions pertaining to the fast
track corporate insolvency resolution process are applicable –
(a) small company under section 2(85) of Companies Act, 2013
(b) a start-up (other than partnership firm) as defined by Ministry of Commerce and Industry
notification No. GSR 501(E) dated 23-5-2017
(c) an unlisted company with total assets not exceeding one crore as per financial
statement immediately preceding the financial year.
Time period for completion of fast track corporate insolvency resolution
process [Section 56]
Time limit of 90 days - Section 56(1)
Subject to the provisions of sub-section (3), the fast track corporate insolvency resolution
process shall be completed within a period of 90 days from the insolvency commencement
date.

"Fast track commencement date" means the date of admission of an application by the
Adjudicating Authority for initiating the fast track process under Chapter IV of Part II of the Code;
Extension: The Adjudicating Authority may extend time period for fast track corporate
Requirement of 75% of Voting Share - Section 56(2)
The resolution professional shall file an application to the Adjudicating Authority to extend the
period of the fast track corporate insolvency resolution process beyond 90 days if instructed
to do so by a resolution passed at a meeting of the committee of creditors and supported by a
vote of 75% of the voting share.
Extension of time-limit by AA -Section 56(3)
On receipt of an application under sub-section (2), if Adjudicating Authority is satisfied that the fast track
corporate insolvency resolution process cannot be completed within a period of ninety days, it may, by
order; extend the duration of such process to a further period which shall not be exceeding 45 days.
Provided that any extension of the fast track corporate insolvency resolution process under this
section shall not be granted more than once.
Manner of initiating fast track corporate insolvency resolution process
[Section 57]
An application for fast track corporate insolvency resolution process may be filed by a creditor
or corporate debtor as the case may be, along with-—
(a) the proof of the existence of default as evidenced by records available with an information
utility or such other means as may be specified by the Board; and
(b) such other information as may be specified by the Board to establish that the corporate debtor
is eligible for fast track corporate insolvency resolution process. Manner of initiating fast track
corporate insolvency resolution process.
Applicability of Chapter II to his chapter [Section 58]
The process for conducting a corporate insolvency resolution process under Chapter II and the
provisions relating to offences and penalties under Chapter VII shall apply to this Chapter as
the context may require.
Chapter VIII of The IBBI (Fast Track Insolvency Resolution Process for Corporate
Persons) Regulations, 2017 deals with the Conduct of the FTCIRP.
Appointment of Registered Valuer – Regulation 26
The resolution professional shall within 7 days of his appointment, appoint one registered
valuer to determine the fair value and the liquidation value of the corporate debtor in
accordance with Regulation 34:

3.142 ECONOMIC LAWS
Provided that the following persons shall not be appointed as registered valuers, namely:-
(a) a relative of the resolution professional;
(b) a related party of the corporate debtor;
(c) an auditor of the corporate debtor at any time during the five years preceding the
insolvency commencement date; or
(d) a partner or director of the insolvency professional entity of which the resolution
professional is a partner or director
Transfer of debt due to creditors – Regulation 27
(1) In the event a creditor assigns or transfers the debt due to such creditor to any other
person during the fast track process period, both parties shall provide the interim
resolution professional or the resolution professional, as the case may be, the terms of
such assignment or transfer and the identity of the assignee or transferee.
(2) The resolution professional shall notify each creditor and the Adjudicating Authority of
any resultant change in the committee within two days of such change.
Sale of assets outside the ordinary course of business – Regulation 28
(1) The resolution professional may sell unencumbered asset(s) of the corporate debtor,
other than in the ordinary course of business, if he is of the opinion that such a sale is
necessary for a better realisation of value under the facts and circumstances of the case:
Provided that the book value of all assets sold during fast track process period in
aggregate under this sub-regulation shall not exceed 10% of the total claims admitted by
the IRP.
(2) A sale of assets under this Regulation shall require the approval of the committee.
(3) A bona fide purchaser of assets sold under this Regulation shall have a free and
marketable title to such assets notwithstanding the terms of the constitutional documents
of the corporate debtor, shareholders’ agreement, joint venture agreement or other
document of a similar nature.
Assistance of local district administration – Regulation 29
The interim resolution professional or the resolution professional, as the case may be, may
make an application to the Adjudicating Authority for an order seeking the assistance of the
local district administration in discharging his duties under the Code or these Regulations.
Fast Track Process Cost – Chapter IX
Fast track process costs – Regulation 30
“Fast track process costs” shall mean –
(a) the amount of any interim finance and the costs incurred in raising such finance;
(b) the fees payable to any person acting as a resolution professional;

(c) any costs incurred by the resolution professional in running the business of the corporate
debtor as a going concern;
(d) any costs incurred at the expense of the Government to facilitate the process;
(e) amounts due to suppliers of essential goods and services under Regulation 31;
(f) amounts due to a person whose rights are prejudicially affected on account of the
moratorium imposed under section 14(1)(d);
(g) expenses incurred on or by the interim resolution professional to the extent ratified under
Regulation 32;
(h) expenses incurred on or by the resolution professional fixed under Regulation 33; and
(i) other costs directly relating to the fast track process and approved by the committee.
8. VOLUNTARY LIQUIDATION OF CORPORATE PERSONS –

[SECTION 59]
Person who may initiate voluntary liquidation proceeding [Section 59(1)]
A corporate person who intends to liquidate itself voluntarily and has not committed any default
may initiate voluntary liquidation proceedings under the Chapter V of Part II of the Code.
Requirements for voluntary liquidation to be specified by the [ Section 59(2)]
The voluntary liquidation of a corporate person shall meet such conditions and procedural
requirements as may be specified by the Board.
Conditions of initiation of voluntary liquidation proceedings [ Section 59(3) ]
Voluntary liquidation proceedings of a corporate person registered as a company shall meet the
following conditions, namely:—
(a) a declaration from majority of the directors of the company verified by an affidavit stating
that—
(i) they have made a full inquiry into the affairs of the company and they have formed an
opinion that either the company has no debt or that it will be able to pay its debts in
full from the proceeds of assets to be sold in the voluntary liquidation; and
(ii) the company is not being liquidated to defraud any person;
(b) the declaration given above shall be accompanied with the following documents, namely:—
(i) audited financial statements and record of business operations of the company for the
previous two years or for the period since its incorporation, whichever is later;
(ii) a report of the valuation of the assets of the company, if any prepared by a registered
valuer;

3.144 ECONOMIC LAWS
(c) within four weeks of a declaration, there shall be—

(i) a special resolution of the members of the company in a general meeting requiring the
company to be liquidated voluntarily and appointing an insolvency professional to act
as the liquidator; or
(ii) a resolution of the members of the company in a general meeting requiring the
company to be liquidated voluntarily as a result of expiry of the period of its duration,
if any, fixed by its articles, or
(iii) on the occurrence of any event in respect of which the articles provide that the
company shall be dissolved, as the case may be and appointing an insolvency
professional to act as the liquidator:
Provided that the company owes any debt to any person, creditors representing two thirds in
value of the debt of the company shall approve the resolution passed under sub-clause (c)
within 7 days of such resolution.
Notification to Registrar of company and the Board [Section 59(4)]
The Company shall notify the Registrar of Companies and the Board about the resolution to
liquidate the company within seven days of such resolution or the subsequent approval by the
creditors, as the case may be.
Commencement of liquidation proceeding [Section 59(5)]
The voluntary liquidation proceedings in respect of a company shall be deemed to have
commenced from the date of passing of the resolution.
The IBBI (Voluntary Liquidation Process) Regulations, 2017.
Initiation of Liquidation – Regulation 3
(1) Without prejudice to section 59(2), liquidation proceedings of a corporate person shall
meet the following conditions, namely: —
(a) a declaration from majority of
(i) the designated partners, if a corporate person is a limited liability
partnership,
(ii) individuals constituting the governing body in case of other corporate
persons,
as the case may be, verified by an affidavit stating that-
(i) they have made a full inquiry into the affairs of the corporate person and
they have formed an opinion that either the corporate person has no debt

or that it will be able to pay its debts in full from the proceeds of assets to
be sold in the liquidation; and
(ii) the corporate person is not being liquidated to defraud any person;
(b) the declaration under sub-clause (a) shall be accompanied with the following
documents, namely: —
(i) audited financial statements and record of business operations of the
corporate person for the previous two years or for the period since its
incorporation, whichever is later;
(ii) a report of the valuation of the assets of the corporate person, if any
prepared by a registered valuer;
(c) within four weeks of a declaration under sub-clause (a), there shall be-
(i) a resolution passed by a special majority of the partners or contributories,
as the case may be, of the corporate person requiring the corporate person
to be liquidated and appointing an insolvency professional to act as the
liquidator; or
(ii) a resolution of the partners or contributories, as the case may be, requiring
the corporate person to be liquidated as a result of expiry of the period of
its duration, if any, fixed by its constitutional documents or on the
occurrence of any event in respect of which the constitutional documents
provide that the corporate person shall be dissolved, as the case may be,
and appointing an insolvency professional to act as the liquidator:
Provided that the corporate person owes any debt to any person, creditors
representing two-thirds in value of the debt of the corporate person shall approve
the resolution passed under sub-clause (c) within seven days of such resolution.
(2) The corporate person shall notify the Registrar and the Board about the resolution under
sub-regulation (1) to liquidate the corporate person within seven days of such resolution
or the subsequent approval by the creditors, as the case may be.
(3) Subject to approval of the creditors under sub-regulation (1), the liquidation proceedings
in respect of a corporate person shall be deemed to have commenced from the date of
passing of the resolution under sub-clause (c) of sub-regulation (1):
Explanation: For the purposes of sub-regulations (1) to (3), corporate person means a
corporate person other than a company.
(4) The declaration under section 59(3)(a)(1)(a) shall list each debt of the corporate person
as on that date and state that the corporate person will be able to pay all its debts in full
from the proceeds of assets to be sold in the liquidation.

3.146 ECONOMIC LAWS
Reporting : In terms of Regulation 8 the liquidator shall prepare and submit-

(a) Preliminary Report
(b) Annual Status Report
(c) Minutes of consultations with stakeholders; and
(d) Final Report
in the manner specified under the IBBI (Voluntary Liquidation Process) Regulations, 2017.
Application of provisions of this Code [Section 59(6)]

The provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply to voluntary
liquidation proceedings for corporate persons with such modifications as may be necessary.
Application to adjudicating authority on complete wound up of the corporate
person [Section 59(7) ]
Where the affairs of the corporate person have been completely wound up, and its assets
completely liquidated, the liquidator shall make an application to the Adjudicating Authority for the
dissolution of such corporate person.
Passing of an order of dissolution [Section 59(8)]
The Adjudicating Authority shall on an application filed by the liquidator, pass an order that the
corporate debtor shall be dissolved from the date of that order and the corporate debtor shall be
dissolved accordingly.
Forward of copy of order [Section 59(9)]
A copy of an order shall within fourteen days from the date of such order, be forwarded to the
authority with which the corporate person is registered.
9. ADJUDICATING AUTHORITY FOR CORPORATE

PERSONS
Sections 60 to 77 of the Code deals with the provisions related to the adjudicating authority for
corporate persons.
The National Corporate Law Tribunal (‘NCLT’) and Debt Recovery Tribunal (‘DRT’) shall act as
Adjudicatory Authority for corporate insolvency and non-corporate insolvency respectively. These
bodies shall entertain or dispose any insolvency application, approve or reject resolution plans,
decide in respect of claims or matters of law or facts.

For Corporates & For Individuals

Guarantors to CD and Firms
National
National
Company Law Debt Recovery
Company Law
Appellate Tribunal (DRT)
Tribunal (NCLT)
Tribunal (NCLAT)
SUPREME
COURT
Appeals from NCLT orders lie to the National Company Law Appellate Tribunal and thereafter to
the Supreme Court of India whereas appeals from DRT orders lie to the Debt Recovery Appellate
Tribunal and thereafter to the Supreme Court.
Adjudicating Authority for corporate persons [Section 60]
NCLT shall be the AA for Corporate Persons [Section 60(1)]
The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate
persons including corporate debtors and personal guarantors thereof shall be the National
Company Law Tribunal having territorial jurisdiction over the place where the registered office of
the corporate person is located.
Transfer of pending cases [Section 60(2)]
Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this
Code, where a CIRP or liquidation proceeding of a corporate debtor is pending before a National
Company Law Tribunal, an application relating to the insolvency resolution 18or liquidation or
bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate
debtor shall be filed before such National Company Law Tribunal.
18Substituted for "bankruptcy of a personal guarantor of such corporate debtor" by the Insolvency and
Bankruptcy Code (Second Amendment) Act, 2018, w.r.e.f. 6-6-2018.

3.148 ECONOMIC LAWS
Transfer of cases [Section 60(3)]

An insolvency resolution process or liquidation or bankruptcy proceeding of a corporate guarantor
or personal guarantor, as the case may be, of the corporate debtor pending in any court or
tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency resolution
process or liquidation proceeding of such corporate debtor.
NCLT shall have powers of DRT [Section 60(4)]
The National Company Law Tribunal shall be vested with all the powers of the Debt Recovery
Tribunal as contemplated under Part III of this Code for the purposes of sub-section (2).
Jurisdiction of NCLT [Section 60(5)]
Notwithstanding anything to the contrary contained in any other law for the time being in force,
the National Company Law Tribunal shall have jurisdiction to entertain or dispose of—
(a) any application or proceeding by or against the corporate debtor or corporate person;
(b) any claim made by or against the corporate debtor or corporate person, including claims by
or against any of its subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts, arising out of or in relation to the
insolvency resolution or liquidation proceedings of the corporate debtor or corporate person
under this Code.
Period of moratorium excluded for purpose of limitation [Section 60(6)]
Notwithstanding anything contained in the Limitation Act, 1963 or in any other law for the time
being in force, in computing the period of limitation specified for any suit or application by or
against a corporate debtor for which an order of moratorium has been made under this Part, the
period during which such moratorium is in place shall be excluded. [Section 60]. This provision
overrides provision of Limitation Act or any other law.
• In the case of Embassy Property Development Pvt. Ltd. Vs. State of Karnataka & Ors.
[Civil Appeal No. 9170, 9172 of 2019, dated 03.12.2019], the Supreme Court held that
though the AA and the NCLAT have jurisdiction to enquire into questions of fraud, however,
they would not have jurisdiction to adjudicate upon disputes such as those arising under
the Mines & Minerals (Development and Regulation) Act, 1957, and the rules thereunder,
especially when the disputes revolve around decisions of statutory or quasi-judicial
authorities, which can be corrected only by way of judicial review of administrative action.
• In the case of State Bank of India Vs. V. Ramakrishnan & Anr. [CA No. 3595 of 2018,
dated 14.08.2018], the Supreme Court held that Section 60 of the Code in sub-section (1)
thereof, refers to insolvency resolution and liquidation for both CDs and personal
guarantors, the AA for which shall be the NCLT having territorial jurisdiction over the place

where the registered office of the corporate person is located. The scheme of section 60(2)
and (3) is clear that the moment there is a proceeding against the CD pending under the
Code, any bankruptcy proceeding against the individual personal guarantor will, if already
initiated before the proceeding against the CD, be transferred to the NCLT or, if initiated
after such proceedings had been commenced against the CD, be filed only in the NCLT.
• In the matter of Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar
Gupta & Ors. [Civil Appeal No. 8766-67 of 2019 with other Civil Appeals and WP(C)s,
dated 15.11.2019], the Supreme Court opined that the limited judicial review available
to AA can in no circumstance trespass upon a business decision of the majority of
the CoC. The residual jurisdiction of the AA under section 60(5)(c) cannot, in any manner,
whittle down section 31(1) of the Code, by the investment of some discretionary or equity
jurisdiction in the AA outside section 30(2) of the Code, while adjudicating a resolution plan.
• In the case of Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. [Civil
Appeal Nos. 9402 to 9405 of 2018, dated 04.10.2018], the Supreme Court opined that the
non-obstante clause in section 60(5) is designed for a different purpose i.e. to ensure
that the NCLT alone has jurisdiction when it comes to applications and proceedings
by or against a CD covered by the Code, making it clear that no other forum has
jurisdiction to entertain or dispose of such applications or proceedings.
• In the case of Gujarat Urja Vikas Nigam Ltd. Vs. Amit Gupta & Ors. [Civil Appeal No.
9241 of 2019, dated 08.03.2021], the Supreme Court held that –
(i) NCLT/NCLAT can exercise jurisdiction under section 60(5)(c) of the Code to stay
termination of contracts solely on account of CIRP being initiated against the CD.
(ii) NCLT has the jurisdiction to adjudicate disputes, which arise solely from or which
relate to the insolvency of the CD; however, in doing so, the NCLT and NCLAT must
ensure that they do not usurp the legitimate jurisdiction of other courts and tribunals.
(iii) RP can approach the NCLT for adjudication of disputes that are related to the
insolvency resolution process. However, for adjudication of disputes out of the
insolvency, the RP must approach the competent authority.
(iv) NCLT cannot do what the Code consciously did not provide it the power to do.
(v) The jurisdiction of the NCLT cannot be invoked in matters where a termination may
take place on grounds unrelated to the insolvency of the CD.
(vi) It cannot even be invoked in the event of a legitimate termination of a contract based
on an ipso facto clause, if such termination will not have the effect of making certain
the death of the CD.
(vii) NCLT to be cautious in setting aside valid contractual terminations which would merely
dilute the value of the CD, and not push it to its corporate death.

3.150 ECONOMIC LAWS
Appeals and Appellate Authority [Section 61]

Appeal to NCLAT [Section 61(1)]
Notwithstanding anything to the contrary contained under the Companies Act, 2013, any person
aggrieved by the order of the Adjudicating Authority may prefer an appeal to the National Company
Law Appellate Tribunal.
Time-limit to file appeal before NCLAT [ Section 61(2)]
Every appeal under sub-section (1) shall be filed within 30 days before the National Company
Law Appellate Tribunal.
Provided that the NCLAT may allow an appeal be filed after the expiry of the said period of thirty
days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall
not exceed 15 days.
Appeal against approving of Resolution Plan [Section 61(3)]
An appeal against an order approving a resolution plan under section 31 may be filed on the
following grounds, namely:—
(i) the approved resolution plan is in contravention of the provisions of any law for the time being
in force;
(ii) there has been material irregularity in exercise of the powers by the resolution professional
during the corporate insolvency resolution period;
(iii) the debts owed to operational creditors of the corporate debtor have not been provided for in
the resolution plan in the manner specified by the Board;
(iv) the insolvency resolution process costs have not been provided for repayment in priority to
all other debts; or
(v) the resolution plan does not comply with any other criteria specified by the Board.
Appeal to NCLAT against the liquidation order [Section 61(4)]
An appeal against a liquidation order passed under section 33, or 54L(4) or 54N(4) may be
filed on grounds of material irregularity or fraud committed in relation to such a liquidation order.
Appel to NCLAT against order under section 54-O(2) [Section 61(5)]
An appeal against an order for initiation of CIRP passed under section 54-O(2), may be filed on
grounds of material irregularity or fraud committed in relation to such an order.

Appeal to Supreme Court [Section 62]

Appeal to Supreme Court [Section 62(1)]
Any person aggrieved by an order of the National Company Law Appellate Tribunal may file an
appeal to the Supreme Court on a question of law arising out of such order within 45 days from
the date of receipt of such order.
Allowing appeal beyond the 45 days [Section 62(2)]
The Supreme Court may, if it is satisfied that a person was prevented by sufficient cause from
filing an appeal within 45 days, allow the appeal to be filed within a further period not exceeding
15 days
• In the case of Gammon India Ltd. Vs. Neelkanth Mansions and Infrastructure Pvt. Ltd.
[Civil Appeal No. D No 13202 of 2019, dated 20.11.2020], the Supreme Court held that
Section 62 of the Code provides a period of 45 days from the date of the receipt of an order
of the NCLAT for filing an appeal. It empowers the SC to condone a delay of a further
period up to 15 days for sufficient cause. Since the delay of 51 days is beyond the
period of delay which can be condoned, the SC dismissed the appeal on the ground
that it is barred by limitation.
• In the case of Upendra Choudhury Vs. Bulandshahar Development Authority & Ors.
[Writ Petition (Civil) No. 150 of 2021, dated 11.02.2021, the Supreme Court declined to
entertain a writ petition under Article 32 of the Constitution filed by a singular
homebuyer, stating that it would be inappropriate to do so as there are specific statutory
provisions holding the field, including the Consumer Protection Act 1986 and its successor
legislation; the Real Estate (Regulation and Development) Act 2016; and the Code.
Remedy under Article 32 cannot be used as a ruse to flood the SC with petitions that must
be filed before the competent authorities set up pursuant to the appropriate statutory
framework.
Civil Court is prohibited to entertain any suit or proceedings [Section 63]
No civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of
any matter on which National Company Law Tribunal or the National Company Law Appellate
Tribunal has jurisdiction under this Code. Civil court not to have jurisdiction.
Expeditious disposal of applications [Section 64]
Reasons for delaying Order to be recorded [Section 64(1)]
Where an application is not disposed of or an order is not passed within the period specified in
this Code, the NCLT or the NCLAT, as the case may be, shall record the reasons for not doing so
within the period so specified; and the President of the National Company Law Tribunal or the

3.152 ECONOMIC LAWS
Chairperson of the National Company Law Appellate Tribunal, as the case may be, may, after
taking into account the reasons so recorded, extend the period specified in the Act but not
exceeding 10 days.
No inunction on the powers conferred on NCLT or NCLAT [Section 64(2)]
No injunction shall be granted by any court, tribunal or authority in respect of any action taken, or
to be taken, in pursuance of any power conferred on the National Company Law Tribunal or the
National Company Law Tribunal under this Code.
Hence, the Code specify strict time limits for each action. If action is not completed within specified
time, the National Company Law Tribunal or the National Company Law Appellate Tribunal can
grant extension upto ten days.
In the case of Arcelormittal India Pvt. Ltd. Vs. Satish Kumar Gupta and Ors. [Civil Appeal Nos.
9402 to 9405 of 2018, dated 04.10.2018], the Supreme Court opined that Section 64 makes it
clear that the timelines are to be adhered to by the NCLT and NCLAT as they are of great
importance, and reasons must be recorded by either the NCLT or NCLAT, if the matter is not
disposed of within the time limit specified.
Fraudulent or malicious initiation of proceedings [Section 65]
Penalty for fraudulent intent [Section 65(1)]
If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently
or with malicious intent for any purpose other than for the resolution of insolvency, or
liquidation, as the case may be, the Adjudicating Authority may impose upon such persons a
penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.
Penalty to defraud any person [Section 65(2)]
If, any person initiates voluntary liquidation proceedings with the intent to defraud any person,
the Adjudicating Authority may impose upon such person a penalty which shall not be less
than one lakh rupees but may extend to one crore rupees.
Penalty for PPIRP with fraudulent intent [Section 65(3)]
If any person initiates the pre-packaged insolvency resolution process—
(a) fraudulently or with malicious intent for any purpose other than for the resolution of
insolvency; or
(b) with the intent to defraud any person, the Adjudicating Authority may impose upon such
person a penalty which shall not be less than one lakh rupees, but may extend to one crore
rupees.

Fraudulent trading or wrongful trading [Section 66]

Business of Corporate Debtor carried to defraud creditors [Section 66(1)]
If during the CIRP or a liquidation process, it is found that any business of the corporate debtor
has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent
purpose-the Adjudicating Authority may on the application of the resolution professional pass an
order that any persons who were knowingly parties to the carrying on of the business shall be
liable to make such contributions to the assets of the corporate debtor as it may deem fit.
NCLT can order contribution to assets by defrauding director or partner [Section 66(2)]
On application made by resolution professional during the CIRP, the Adjudicating Authority may
by an order direct that-
• a director, or
• partner of the corporate debtor, as the case may be,
shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit,
if—
(a) before the insolvency commencement date, such director or partner knew or ought to have
known that the there was no reasonable prospect of avoiding the commencement of a
corporate insolvency resolution process in respect of such corporate debtor, and
(b) such director or partner did not exercise due diligence in minimising the potential loss to
the creditors of the corporate debtor .
Suspended CIRP [Section 66(3)]
Notwithstanding anything contained in this section, no application shall be filed by a resolution
professional under sub-section (2), in respect of such default against which initiation of CIRP is
suspended as per section 10A.
Explanation: For the purposes of this section, a director or partner of the corporate debtor, as the
case may be, shall be deemed to have exercised due diligence if such diligence was reasonably
expected of a person carrying out the same functions as are carried out by such director or partner,
as the case may be, in relation to the corporate debtor.
Proceedings under section 66 [Section 67]
AA may give Directions [Section 67(1)]
Where the Adjudicating Authority passes an order under section 66(1) or (2), as the case may
be, it may give such further directions as it may deem appropriate for giving effect to the order,
and in particular, the Adjudicating Authority may—

3.154 ECONOMIC LAWS
(a) provide for the liability of any person under the order to be a charge on any debt or obligation
due from the corporate debtor to him, or on any mortgage or charge or any interest in a
mortgage or charge on assets of the corporate debtor held by or vested in him, or any person
on his behalf, or any person claiming as assignee from or through the person liable or any
person acting on his behalf; and
(b) from time to time, make such further directions as may be necessary for enforcing any charge
imposed under this section.
Explanation: For the purposes of section, "Assignee" includes a person to whom or in whose
favour, by the directions of the person held liable under clause (a) the debt, obligation, mortgage
or charge was created, issued or transferred or the interest created, but does not include an
assignee for valuable consideration given in good faith and without notice of any of the grounds
on which the directions have been made.
Order of Priority of Payment [Section 67(2)]
Even if the Adjudicating Authority has passed an order under section 66(1) or (2), as the case
may be, in relation to a person who is a creditor of the corporate debtor, it may, by an order, direct
that the whole or any part of any debt owed by the corporate debtor to that person and any interest
thereon shall rank in the order of priority of payment under section 53 after all other debts owed
by the corporate debtor [Section 67].
Thus, there is no relief to creditor who has been defrauded. Creditor can get only after all other
debts are paid off.
Fraudulent management of corporate debtor during pre-packaged insolvency resolution
process (PPIRP) [ Section 67A]
On and after the pre-packaged insolvency commencement date, where an officer of the corporate
debtor manages its affairs with the intent to:
• defraud creditors of the corporate debtor; or
• for any fraudulent purpose,
the Adjudicating Authority may, on an application by the resolution professional, pass an order
imposing upon any such officer, a penalty which shall not be less than one lakh rupees, but
may extend to one crore rupees.
10. OFFENCES AND PENALTIES

Types of offence Commission of offences Punishment
Punishment for Where any officer of the corporate Such officer shall be punishable
concealment of debtor has,— with-
property

[Section 68] (i) within the 12 months • imprisonment for a term 3 to

immediately preceding the 5 years, or
insolvency commencement • with fine ranging from one
date,— lakh rupees to one crore
(a) wilfully concealed any rupees, or
property of the • with both
corporate debtor or
concealed any debt due Provided that nothing in this
to, or from, the section shall render a person
corporate debtor, of the liable to any punishment under
value of ten thousand this section if he proves that he
rupees or more; or had no intent to defraud or to
conceal the state of affairs of the
(b) fraudulently removed corporate debtor.
the property of the
corporate debtor of the
value of ten thousand
rupees or more; or
(c) wilfully concealed,
destroyed, mutilated
or falsified any book or
paper relating to the
property of the
corporate debtor or its
affairs; or
(d) wilfully made any false
entry in any book or
paper relating to the
property of the
affairs; or
(e) fraudulently parted
with, altered or made
any omission in any
document relating to the
property of the
affairs; or
(f) wilfully created any
security interest over,
transferred or disposed
of any property of the
corporate debtor which
has been obtained on
credit and has not been

3.156 ECONOMIC LAWS
paid for unless such

creation, transfer or
disposal was in the
ordinary course of the
business of the
corporate debtor; or
(g) wilfully concealed the
knowledge of the
doing by others of any
of the acts mentioned in
clauses (c), (d) or clause
(e); or
(ii) at any time after the
insolvency commencement
date, committed any of the
acts mentioned in sub-
clauses (a) to (f) of clause (i)
or has the knowledge of the
doing by others of any of the
things mentioned in sub-
clauses (c) to (e) of clause (i);
or
(iii) at any time after the insolvency
commencement date, taken in
pawn or pledge, or otherwise
received the property knowing
it to be so secured, transferred
or disposed,
Punishment for If an officer of the corporate debtor Such officer of the corporate
transactions or the corporate debtor— debtor or the corporate debtor, as
defrauding creditors (a) has made or caused to be the case may be, shall be
[Section 69] made any gift or transfer of, punishable with-
or charge on, or has caused  imprisonment for a term of 1
or connived in the execution to 5 years, or
of a decree or order against,  with fine levying from one
the property of the corporate lakh rupees to one crore
debtor; rupees, or
(b) has concealed or removed  with both:
any part of the property of the Provided that a person shall not
corporate debtor within two be punishable under this section if
months before the date of the acts mentioned in clause (a)
any unsatisfied judgment, were committed more than five
decree or order for payment years before the insolvency

of money obtained against commencement date; or if he

the corporate debtor, proves that, at the time of
commission of those acts, he had
no intent to defraud the creditors
of the corporate debtor.
Punishment for (1) On or after the insolvency Such officer shall be punishable
misconduct in commencement date, where with-
courses of corporate an officer of the corporate • imprisonment for a term of 3
insolvency debtor— to 5 years, or
resolution process (a) does not disclose to the • with fine varying from one
[Section 70] resolution professional lakh rupees to one crore
all the details of property rupees, or
of the corporate debtor,
and details of • with both
transactions thereof, or Provided that nothing in this
any such other section shall render a person
information as the liable to any punishment under
resolution professional this section if he proves that he
may require; or had no intent to do so in relation
(b) does not deliver to the to the state of affairs of the
resolution professional corporate debtor.
all or part of the property
of the corporate debtor
in his control or custody
and which he is required
to deliver; or
(c) does not deliver to the
all books and papers in
his control or custody
belonging to the
corporate debtor and
which he is required to
deliver; or
(d) fails to inform the
the information in his
knowledge that a debt
has been falsely proved
by any person during
the corporate insolvency
resolution process; or
(e) prevents the production
of any book or paper

3.158 ECONOMIC LAWS
affecting or relating to
the property or affairs of
the corporate debtor; or
(f) accounts for any part of
the property of the
corporate debtor by
fictitious losses or
expenses, or if he has
so attempted at any
meeting of the creditors
of the corporate debtor
within the twelve months
immediately preceding
the insolvency
commencement date,
Punishment for (2) If an insolvency professional Such IP shall be punishable with:
misconduct in (IP) deliberately contravenes the  imprisonment for a term
courses of CIRP by provisions of this Part- which may extend to 6
Insolvency months, or
Professional -  with fine which shall not be
Section 70(2) less than one lakh rupees,
but may extend to five lakhs
rupees,
 or with both
Punishment for On and after the insolvency he shall be punishable with-
Falsification of commencement date, where any • imprisonment for a term 3
books of corporate person destroys, mutilates, alters or years to 5 years, or
debtor [Section 71] falsifies any books, papers or
• with fine from one lakh to one
securities, or makes or is in the
crore rupees, or
knowledge of making of any false or
fraudulent entry in any register, • with both.
book of account or document
belonging to the corporate debtor
with intent to defraud or deceive
any person
Punishment for Where an officer of the corporate he shall be punishable with-
wilful and material debtor makes any material and • imprisonment for a term
omissions from wilful omission in any statement 3 years to 5 years, or
statements relating relating to the affairs of the
• with fine from one lakh
to affairs of corporate debtor,
rupees to one crore rupees,
corporate debtor
or
[Section 72]
• with both.

Punishment for false (1) Where any officer of the he shall be punishable with-
representations to corporate debtor— • imprisonment for a term 3
creditors [Section (a) on or after the insolvency years to 5 years, or
73] commencement date, makes • with fine of one lakh rupees to
a false representation or one crore rupees, or
commits any fraud for the
purpose of obtaining the • with both.
consent of the creditors of the
corporate debtor or any of
them to an agreement with
reference to the affairs of the
corporate debtor, during the
corporate insolvency
resolution process, or the
liquidation process;
(b) prior to the insolvency
commencement date, has
made any false
representation, or committed
any fraud, for that purpose,
Punishment for (1) Where the corporate debtor or (1) any such officer who
contravention of any of its officer violates the knowingly or wilfully
moratorium or the provisions of section 14, committed or authorised or
resolution permitted such contravention
plan[Section 74](1) shall be punishable with
 imprisonment for a term
which shall not be less
than 3 years, but may
extend to 5 years or
 with fine which shall not
be less than one lakh
rupees, but may extend
to three lakh rupees, or
 with both.
Punishment for (2) Where any creditor violates the  Suvh person who
contravention of provisions of section 14 knowingly and wilfully
moratorium or the authorised or permitted
resolution plan by such contravention by a
the creditor [Section creditor shall be
74](2) punishable with-
 imprisonment for a term
which shall not be less

3.160 ECONOMIC LAWS
than one year, but may

extend to five years, or
 with fine which shall not
be less than one lakh
to one crore rupees, or
 with both.
Punishment for (3) Where the corporate Such corporate debtor, officer,
contravention of debtor, any of its officers or creditor or person shall be
moratorium or the creditors or any person on whom punishable with
resolution plan by the approved resolution plan is  Imprisonment of not less
the Corporate Debtor binding under section 31, than one year, but may
[Section 74](3) knowingly and wilfully contravenes extend to 5 years, or
any of the terms of such resolution  with fine which shall not
plan or abets such contravention, be less than one lakh
to one crore rupees, or
 with both
Punishment for false Where any person furnishes Such person shall be punishable
information information in the application with fine which shall not be less
furnished in made under section 7, which is than one lakh rupees, but may
application [Section false in material particulars, extend to one crore rupees.
75] knowing it to be false or omits any
material fact, knowing it to be
material,
Punishment for non- Where— Such operational creditor or
disclosure of dispute (a) an operational creditor has person, as the case may be, shall
or payment of debt wilfully or knowingly be punishable with
by operational concealed in an application  Imprisonment for a term
creditor [Section 76] under section 9 the fact that which shall not be less
the corporate debtor had than one year but may
notified him of a dispute in extend to five years or
respect of the unpaid  with fine which shall not
operational debt or the full be less than one lakh
and final payment of the rupees but may extend
unpaid operational debt; or to one crore rupees, or
(b) any person who knowingly  with both.
and wilfully authorised or
permitted such concealment
under clause (a),

Punishment for Where— Such corporate debtor or person,

providing false (a) a corporate debtor provides as the case may be, shall be
information in information in the application punishable with
application made by under section 10 which is  imprisonment for a term
corporate debtor false in material particulars, which shall not be less
[Section 77] knowing it to be false and than three years, but
omits any material fact, which may extend to five
knowing it to be material; or years or
(b) any person who knowingly  with fine which shall not be
and wilfully authorised or less than one lakh rupees,
permitted the furnishing of but which may extend to
such information under sub- one crore rupees, or
clause (a),  with both.
Punishment for (1) Where— Such person shall be punishable
offences related to (a) a corporate debtor provides with
pre-packaged any information in the  imprisonment for a term
insolvency application under section 54C which shall not be less
resolution process which is false in material than 3 years, but which
(PPIRP) - Section particulars, knowing it to be false may extend to 5 years or
77A(1) or omits any material fact, knowing  with fine which shall not
it to be material; or be less than one lakh
(b) a corporate debtor provides rupees, but which may
any information in the list of extend to one crore
claims or the preliminary rupees, or
information memorandum  with both
submitted under sub-section (1)
of section 54G which is false in
material particulars, knowing it to
be false or omits any material fact,
knowing it to be material; or
(c) any person who knowingly
and wilfully authorised or
permitted the furnishing of such
information under sub-clauses
(a) and (b), such corporate debtor
or person, as the case may be,
Punishment for (2) If a director or partner of the such person shall be punishable
offences related to corporate debtor, as the case with
pre-packaged may be, deliberately contravenes  imprisonment for not
insolvency the provisions of Chapter III-A, less than three years,
resolution process but which may extend to
five years, or

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(PPIRP) (- Section  with fine which shall not

77A(2) be less than one lakh
rupees, but which may
extend to one crore
rupees, or
 with both.
Explanation.–– For the purposes of
this section and sections 75, 76
and 77, an application shall be
deemed to be false in material
particulars in case the facts
mentioned or omitted in the
application, if true, or not omitted
from the application as the case
may be, would have been sufficient
to determine the existence of a
default under this Code.
11. INSOLVENCY RESOLUTION AND BANKRUPTCY FOR

INDIVIDUALS AND PARTNERSHIP FIRMS
Part III of Insolvency and Bankruptcy Code, 2016 deal with provisions relating to Bankruptcy for
Individuals and partnership firms. It comprises of sections 78 to 187. These provisions will replace
the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920. These
provisions have not yet notified and not in force [as on 30th of April, 2020]
Though provisions relating to bankruptcy of individuals have not been notified, the Code has been
made applicable to personal guarantors of corporate debtors with effect from 15th November
2019. Here the matters will go before NCLT and not before DRT.
As per section 2 of the Code it has been provided that the Code will apply to personal guarantors
of corporate debtors as a category different from individuals.
12. REGULATION OF INSOLVENCY PROFESSIONALS,

AGENCIES AND INFORMATION UTILITIES
(I) The Insolvency and Bankruptcy Board of India
Establishment and incorporation of Board [Section 188]
(1) With effect from such date as the Central Government may, by notification, appoint, there
shall be established, for the purposes of this Code, a Board, by the name of the Insolvency and
Bankruptcy Board of India.

The Central Government vide Gazette Notification No. S.O. 3110 (E) dated 1st October, 2016
appointed 01st October, 2016 as the date of establishment of Insolvency and Bankruptcy Board of
India (IBBI), having its head office at New Delhi.
(2) The Board shall be a body corporate by the name aforesaid, having perpetual succession
and a common seal, with power, subject to the provisions of this Code, to acquire, hold and
dispose of property, both movable and immovable, and to contract, and shall, by the said name,
sue or be sued.
(3) The head office of the Insolvency and Bankruptcy Board of India shall be at such place in
the National Capital Region as the Central Government may, by notification, specify.
Explanation. - For the purposes of this section, the expression “National Capital Region” shall
have the same meaning as assigned to it in section 2(f) of the National Capital Region Planning
Board Act, 1985.
The Head Office of the IBBI is at New Delhi as announced vide notification dated 1st October, 2016.
(4) The Board may establish offices at other places in India.
Constitution of Board [Section 189]
(1) Appointment of Members: The Board shall consist of the following members who shall be
appointed by the Central Government, namely:—
Members of Board
appointed by Central government shall consist of -
three members
from the Central one member to be five other members
Government not nominated by the to be nominated by
Chairperson
below the rank of Reserve Bank of the Central
Joint Secretary or India Government
equivalent
(2) Eligibility: The Chairperson and the other members shall be persons of ability, integrity and
standing, who have shown capacity in dealing with problems relating to insolvency or bankruptcy
and have special knowledge and experience in the field of law, finance, economics, accountancy or
administration.
(3) Appointment on recommendation of a selection committee: The appointment of the
Chairperson and the members of the Board other than the appointment of an ex officio member
under this section shall be made after obtaining the recommendation of a selection committee
consisting of—

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Cabinet Secretary Chairperson
Secretary to the GOI nominated by the Central

Member
Government
Selection
committee Chairperson of the Insolvency and Bankruptcy
Member
Board of India
three experts from the field of finance, law,

management, insolvency etc., nominated by the Members
Government
(4) Term of offices: The term of office of the Chairperson and members (other than ex
officio members) shall be five years or till they attain the age of sixty five years, whichever is
earlier, and they shall be eligible for re-appointment.
(5) Payment of salaries: The salaries and allowances payable to, and other terms and
conditions of service of, the Chairperson and members (other than the ex officio members) shall
be such as may be prescribed.
Removal of member from office [Section 190]
The Central Government may remove a member from office if he—
(a) is an undischarged bankrupt as defined under Part III;
(b) has become physically or mentally incapable of acting as a member;
(c) has been convicted of an offence, which in the opinion of Central Government involves moral
turpitude;
(d) has, so abused his position as to render his continuation in office detrimental to the public
interest.
Provided that no member shall be removed under clause (d) unless he has been given a
reasonable opportunity of being heard in the matter.
Powers of Chairperson [Section 191]
Save as otherwise determined by regulations, the Chairperson shall have powers of general
superintendence and direction of the affairs of the Board and may also exercise such other powers
as may be delegated to him by the Board.
Meetings of Board [Section 192]
(1) The Board shall meet at such times and places, and observe such rules of procedure in regard
to the transaction of business at its meetings (including quorum at such meetings) as may be
determined by regulations.

(2) The Chairperson, or if, for any reason, the Chairperson is unable to attend any meeting of
the Board, any other member chosen by the members present at the meeting shall preside
at the meeting.
(3) All questions which come up before any meeting of the Board shall be decided by a majority
votes of the members present and voting, and, in the event of an equality of votes, the
Chairperson, or in his absence, the person presiding, shall have a second or casting vote.
Member not to participate in meetings in certain cases [Section 193]
Any member, who is a director of a company and who as such director has any pecuniary interest
in any matter coming up for consideration at a meeting of the Board, shall –
• disclose the nature of his interest at such meeting, and
• such disclosure shall be recorded in the proceedings of the Board, and
• the member shall not take any part in any deliberation or decision of the Board with respect
to that matter.
Vacancies, etc., not to invalidate proceedings of Board, Officers and employees of
Board [ Section 194]
(1) No act or proceeding of the Board shall be invalid merely by reason of—
(a) any vacancy in, or any defect in the constitution of, the Board; or
(b) any defect in the appointment of a person acting as a member of the Board; or
(c) any irregularity in the procedure of the Board not affecting the merits of the case.
(2) The Board may appoint such other officers and employees as it considers necessary for the
efficient discharge of its functions in such manner as may be specified.
(3) The salaries and allowances payable to, and other terms and conditions of service of, officers
and employees of the Board appointed under sub-section (2) shall be such as may be
specified by regulations.
Power to designate financial sector regulator [Section 195]
Until the Board is established, the Central Government may by notification, designate any financial
sector regulator to exercise the powers and functions of the Board under this Code.
(II) Powers and Functions of the Board
Powers and functions of Board [Section 196]
(1) The Board shall, on the basis to the general direction of the Central Government, perform
all or any of the following functions namely :—

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(a) register insolvency professional agencies, insolvency professionals and information utilities
and renew, withdraw, suspend or cancel such registrations;
(aa) promote the development of, and regulate, the working and practices of, insolvency
professionals, insolvency professional agencies and information utilities and other
institutions, in furtherance of the purposes of this Code;
(b) specify the minimum eligibility requirements for registration of insolvency professional
agencies, insolvency professionals and information utilities;
(c) levy fee or other charges for the registration of insolvency professional agencies, insolvency
professionals and information utilities;
(d) specify by regulations standards for the functioning of insolvency professional agencies,
insolvency professionals and information utilities;
(e) lay down by regulations the minimum curriculum for the examination of the insolvency
professionals for their enrolment as members of the insolvency professional agencies;
(f) carry out inspections and investigations on insolvency professional agencies, insolvency
professionals and information utilities and pass such orders as may be required for
compliance of the provisions of this Code and the regulations issued hereunder;
(g) monitor the performance of insolvency professional agencies, insolvency professionals and
information utilities and pass any directions as may be required for compliance of the
provisions of this Code and the regulations issued hereunder;
(h) call for any information and records from the insolvency professional agencies, insolvency
professionals and information utilities;
(i) publish such information, data, research studies and other information as may be specified
by regulations;
(j) specify by regulations the manner of collecting and storing data by the information utilities
and for providing access to such data;
(k) collect and maintain records relating to insolvency and bankruptcy cases and disseminate
information relating to such cases;
(l) constitute such committees as may be required including in particular the committees laid
down in section 197;
(m) promote transparency and best practices in its governance;
(n) maintain websites and such other universally accessible repositories of electronic information
as may be necessary;
(o) enter into memorandum of understanding with any other statutory authorities;

(p) issue necessary guidelines to the insolvency professional agencies, insolvency professionals
and information utilities;
(q) specify mechanism for redressal of grievances against insolvency professionals, insolvency
professional agencies and information utilities and pass orders relating to complaints filed
against the aforesaid for compliance of the provisions of this Code and the regulations issued
hereunder;
(r) conduct periodic study, research and audit the functioning and performance of to the
insolvency professional agencies, insolvency professionals and information utilities at such
intervals as may be specified by the Board;
(s) specify mechanisms for issuing regulations, including the conduct of public consultation
processes before notification of any regulations;
(t) make regulations and guidelines on matters relating to insolvency and bankruptcy as may be
required under this Code, including mechanism for time bound disposal of the assets of the
corporate debtor or debtor; and
(u) perform such other functions as may be prescribed.
(2) The Board may make model bye-laws to be to adopted by insolvency professional agencies
which may provide for —
(a) the minimum standards of professional competence of the members of insolvency
professional agencies;
(b) the standards for professional and ethical conduct of the members of insolvency professional
agencies;
(c) requirements for enrolment of persons as members of insolvency professional agencies
which shall be non-discriminatory.
Explanation.— For the purposes of this clause, the term "non-discriminatory" means lack of
discrimination on the grounds of religion, caste, gender or place of birth and such other
grounds as may be specified;
(d) the manner of granting membership;
(e) setting up of a governing board for internal governance and management of insolvency
professional agency in accordance with the regulations specified by the Board;
(f) the information required to be submitted by members including the form and the time for
submitting such information;
(g) the specific classes of persons to whom services shall be provided at concessional rates or
for no remuneration by members;

3.168 ECONOMIC LAWS
(h) the grounds on which penalties may be levied upon the members of insolvency professional
agencies and the manner thereof;
(i) a fair and transparent mechanism for redressal of grievances against the members of
insolvency professional agencies;
(j) the grounds under which the insolvency professionals may be expelled from the membership
of insolvency professional agencies;
(k) the quantum of fee and the manner of collecting fee for inducting persons as its members;
(l) the procedure for enrolment of persons as members of insolvency professional agency;
(m) the manner of conducting examination for enrolment of insolvency professionals;
(n) the manner of monitoring and reviewing the working of insolvency professional who are
members;
(o) the duties and other activities to be performed by members;
(p) the manner of conducting disciplinary proceedings against its members and imposing
penalties;
(q) the manner of utilising the amount received as penalty imposed against any insolvency
professional.
(3) Board shall have the same powers as are vested in a civil court while trying a suit, in respect
of the following matters, namely:—
(i) the discovery and production of books of account and other documents, at such place and
such time as may be specified by the Board;
(ii) summoning and enforcing the attendance of persons and examining them on oath;
(iii) inspection of any books, registers and other documents of any person at any place;
(iv) issuing of commissions for the examination of witnesses or documents.
In the case of K. Sashidhar Vs. Indian Overseas Bank & Ors. [Civil Appeal No. 10673 of 2018
with other Cas, dated 05.02.2019], the Supreme Court opined that IBBI cannot under section
196, directly or indirectly regulate the manner of exercise of commercial wisdom by FCs
during the voting on resolution plan.
Constitution of advisory committee, executive committee or other committee
[Section 197]
The Board may, for the efficient discharge of its functions, may constitute advisory and executive
committees or such other committees, as it may deem fit, consisting of a Chairperson and such
other members as may be specified by regulations.

Condonation of delay [Section 198]

Where the Board does not perform any act within the period specified under this Code, the relevant
Adjudicating Authority may, for reasons to be recorded in writing, condone the delay.
(III) Insolvency Professional Agencies
Provisions related to insolvency professional agencies (IPA) are covered under sections 199 to
205 of the Code. Relevant provisions related to IPA are as follows:
No person to function as insolvency professional agency without valid certificate of
registration [Section 199]
No person shall carry on its business as insolvency professional agencies under this Code and
enrol insolvency professionals as its members except under and in accordance with a certificate
of registration issued in this behalf by the Board.
Principles governing registration of insolvency professional agency [Section 200]
The Board shall have regard to the following principles while registering the insolvency professional
agencies under this Code, namely:—
to promote the professional development

• of and regulation of insolvency professionals
to promote the services of competent insolvency professionals

• to cater to the needs of debtors, creditors and such other persons as may be
specified
to promote good professional and ethical conduct

• amongst insolvency professionals
to protect the interests

• of debtors, creditors and such other persons as may be specified
to promote the growth of insolvency professional agencies

• for the effective resolution of insolvency and bankruptcy processes under this
Code

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Registration of insolvency professional agency [Section 201]
Filing of application to the Board
Grant of certificate of registration to the applicant
Board may renew the certificate of registration from time to time
Board may, by order, suspend or cancel the certificate of registration granted to an

insolvency professional agency-
failed to comply with the

obtained registration by making requirements of the regulations contravened any of the
a false statement made by the Board / bye-laws provisions of the Act or the on any other ground as may
/misrepresentation / by any made by the insolvency rules or the regulations made be specified by regulations.
other unlawful means; professional agency; thereunder;
(1) Application to be made to the Board: Every application for registration shall be made to
the Board containing such particulars, and accompanied by such fee, as may be specified by
regulations.
Every application received by the Board shall be acknowledged within seven days of its receipt.
(2) Grant of certificate of registration: On receipt of the application, the Board may, on being
satisfied that the application conforms with all requirements, grant a certificate of registration to
the applicant or else, reject, by order, such application:
However an order rejecting the application shall be made by giving an opportunity of being heard
to the applicant:
Every such order so made shall be communicated to the applicant within a period of fifteen days.
(3) Board may specify the terms and conditions: The Board may issue a certificate of
registration to the applicant in such form and manner and subject to such terms and conditions as
may be specified.

(4) Renewal of certificate: The Board may renew the certificate of registration from time to
time in such manner and on payment of such fee as may be specified.
(5) Suspension or cancellation of certificate : The Board may, by order, suspend or cancel
the certificate of registration granted to an insolvency professional agency on any of the following
grounds, namely:—
(a) that it has obtained registration by making a false statement or misrepresentation or by
any other unlawful means;
(b) that it has failed to comply with the requirements of the regulations made by the Board
or bye-laws made by the insolvency professional agency;
(c) that it has contravened any of the provisions of the Act or the rules or the regulations
made thereunder;
(d) on any other ground as may be specified by regulations.
No order shall be made under this sub-section unless the insolvency professional agency
concerned has been given a reasonable opportunity of being heard. Further that such order shall
not be passed by any member except whole-time members of the Board
Appeal to National Company Law Appellate Tribunal [Section 202]
Any insolvency professional agency which is aggrieved by the order of the Board made under
section 201 may prefer an appeal to the National Company Law Appellate Tribunal in such form,
within such period, and in such manner, as may be specified by regulations.
Governing Board of insolvency professional agency [Section 203]
The Board may make regulations, for the purposes of ensuring that every insolvency professional
agency takes into account the objectives sought to be achieved under this Code, to specify—
(a) the setting up of a governing board of an insolvency professional agency;
(b) the minimum number of independent members to be on the governing board of the insolvency
professional agency; and
(c) the number of the insolvency professionals being its members who shall be on the governing
board of the insolvency professional agency.
Functions of insolvency professional agencies [Section 204]
As per the section 204, an insolvency professional agency shall perform the following functions,
namely:—
(a) grant membership to persons who fulfil all requirements set out in its bye-laws on payment of
membership fee;
(b) lay down standards of professional conduct for its members;

3.172 ECONOMIC LAWS
(c) monitor the performance of its members;

(d) safeguard the rights, privileges and interests of insolvency professionals who are its
members;
(e) suspend or cancel the membership of insolvency professionals who are its members on the
grounds set out in its bye-laws;
(f) redress the grievances of consumers against insolvency professionals who are its members;
and
(g) publish information about its functions, list of its members, performance of its members and
such other information as may be specified by regulations.
grant membership to persons who fulfil all requirements on payment

of fee
lay down standards of professional conduct
suspend or cancel the membership of insolvency professionals
monitor the performance of its member
safeguard the rights, privileges and interests of insolvency

professionals who are its members
redress the grievances of consumers against insolvency professionals
publish information about its functions, list of its members,

performance of its members and such other informations
every insolvency professional agency shall make bye-laws consistent

with the model bye-laws specified by the Board as per section 205.

Insolvency professional agencies to make bye-laws [Section 205]

Subject to the provisions of this Code and any rules or regulations made thereunder and after
obtaining the approval of the Board, every insolvency professional agency shall make bye-
laws consistent with the model bye-laws specified by the Board under section 196(2).
(IV) Insolvency Professionals

Sections 206 to 208 of the Code specify the relevant sections related to the Insolvency
professionals.
Who may act as insolvency professionals? [ Section 206]
No person shall render his services as insolvency professional under this Code without being
enrolled as a member of an insolvency professional agency and registered with the Board.
Registration of insolvency professionals [Section 207]
(1) Every insolvency professional shall, after obtaining the membership of any insolvency
professional agency, register himself with the Board within such time, in such manner and on
payment of such fee, as may be specified by the IBBI (Insolvency Professional) Regulations, 2016.
(2) The Board may specify the categories of professionals or persons possessing such
qualifications and experience in the field of finance, law, management, insolvency or such other
field, as it deems fit.
Eligibility – Regulation 4 of the IBBI (Insolvency Professionals) Regulations, 2016 provides
that -.
No individual shall be eligible to be registered as an insolvency professional if he—
(a) is a minor;
(b) is not a person resident in India;
(c) does not have the qualification and experience specified in Regulation 5 or Regulation 9, as
the case may be;
(d) has been convicted by any competent court for an offence punishable with imprisonment for
a term exceeding six months or for an offence involving moral turpitude, and a period of five
years has not elapsed from the date of expiry of the sentence:
Provided that if a person has been convicted of any offence and sentenced in respect thereof
to imprisonment for a period of seven years or more, he shall not be eligible to be registered;
(e) he is an undischarged insolvent, or has applied to be adjudicated as an insolvent;
(f) he has been declared to be of unsound mind; or
(g) he is not a fit and proper person;

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Explanation: For determining whether an individual is fit and proper under these Regulations, the
Board may take account of any consideration as it deems fit, including but not limited to the
following criteria—
(i) integrity, reputation and character,
(ii) absence of convictions and restraint orders, and
(iii) competence, including financial solvency and net worth.
Qualifications and experience – Regulation 5 of the IBBI (Insolvency Professionals)
Regulations, 2016 provides that-
Subject to the other provisions of these regulations, an individual shall be eligible for registration, if
he –
(a) has passed the Limited Insolvency Examination within twelve months before the date of his
application for enrolment with the insolvency professional agency;
(b) has completed a pre-registration educational course, as may be required by the Board, from
an insolvency professional agency after his enrolment as a professional member; and
(c) has-
(i) successfully completed the National Insolvency Programme, as may be approved by
the Board;
(ii) successfully completed the Graduate Insolvency Programme, as may approved by the
Board;
(iii) experience of –
(a) 10 years in the field of law, after receiving a Bachelor’s degree in law;
(b) 10 years in management, after receiving a Master’s degree in Management or
two-year full time Post Graduate Diploma in Management; or
(c) 15 years in management, after receiving a Bachelor’s degree, from a university
established or recognised by law or an Institute approved by All India Council
of Technical Education; or
(iv) 10 years’ of experience as –
(a) chartered accountant registered as a member of the Institute of Chartered
Accountants of India,
(b) company secretary registered as a member of the Institute of Company
Secretaries of India,

(c) cost accountant registered as a member of the Institute of Cost Accountants of

India, or
(d) advocate enrolled with the Bar Council.
Explanation 1.- For the purposes of this regulation, only professional and managerial experience
shall be considered.
Explanation 2.- For the purpose of computing,-
(a) the total experience of 10 or 15 years under sub-clause (iii), there shall be included
experience of any period under sub-clause (iv);
(b) the total experience of 10 years under sub-clause (iv), there shall be included experience of
any period under any of the items of that sub-clause. I
Illustration 1:
Where an individual has experience of nine years under sub-clause (iii) and experience of six
years under sub-clause (iv), he shall be considered having experience of fifteen years for the
purposes of sub-clause (iii).
Illustration 2:
Where an individual has experience of 6 years under item (a) of sub-clause (iv) and experience
of four years under item (d) of sub-clause (iv), he shall be considered as having total experience
of 10 years for the purposes of sub-clause (iv).
Application for Certificate of Registration – Regulation 6
(1) An individual enrolled with an insolvency professional agency as a professional member may
make an application to the Board in Form A of the Second Schedule to these Regulations,
along with a non-refundable application fee of ten thousand rupees to the Board.
(2) The Board shall acknowledge an application made under this Regulation within seven days
of its receipt.
(3) The Board may require the applicant to submit, within reasonable time, additional documents,
information or clarification that it deems fit.
(4) The Board may require the applicant to appear, within reasonable time, before the Board in
person, or through his authorised representative for clarifications required for processing the
application.
Certificate of Registration – Regulation 7
(1) If the Board is satisfied, after such inspection or inquiry as it deems necessary that the
applicant is eligible under these Regulations, it may grant a certificate of registration to the
applicant to carry on the activities of an insolvency professional in Form B of the Second
Schedule to these Regulations, within sixty days of receipt of the application, excluding the

3.176 ECONOMIC LAWS
time given by the Board for presenting additional documents, information or clarification, or
appearing in person, as the case may be.
(2) The registration shall be subject to the conditions that the insolvency professional shall –
(a) at all times abide by the Code, rules, regulations, and guidelines thereunder and the byelaws
of the insolvency professional agency with which he is enrolled;
(b) at all times continue to satisfy the requirements under Regulation 4;
(ba) undergo continuing professional education, as may be required by the Board;
(bb) not outsource any of his duties and responsibilities under the Code, except those specifically
permitted by the Board.]
(c) pay to the Board, a fee of ten thousand rupees, every five years after the year in which
the certificate is granted and such fee shall be paid on or before the 30th April of the year it
falls due; Where registration is granted on 2nd February, 2018 in the year 2017-18, the fee
shall become due on 1st April, 2023, after five years (2018-19, 2019-20, 2020-21, 2021-22
and 2022-23) and it shall be paid on or before the 30th April, 2023.
(ca) pay to the Board, a fee calculated at the rate of 0.25 percent of the professional fee
earned for the services rendered by him as an insolvency professional in the preceding
financial year, on or before the 30th of April every year, along with a statement in Form E of
the Second Schedule; Provided that for the financial year 2019-2020, an insolvency
professional shall pay the fee under this clause on or before the 30th June, 2020. Provided
further that for the financial year 2020-2021, an insolvency professional shall pay the fee
under this clause on or before the 30th June, 2021.
(d) not render services as an insolvency professional unless he becomes a partner or director of
an insolvency professional entity 176ecognized by the Board under Regulation 13, if he is not
a citizen of India;
(e) take prior permission of the Board for shifting his professional membership from one
insolvency professional agency to another, after receiving no objection from both the
concerned insolvency professional agencies;
(f) take adequate steps for redressal of grievances;
(g) maintain records of all assignments undertaken by him under the Code for at least three years
from the completion of such assignment;
(h) abide by the Code of Conduct specified in the First Schedule to these Regulations; and
(i) abide by such other conditions as may be imposed by the Board.

CODE OF CONDUCT FOR INSOLVENCY PROFESSIONALS – First Schedule

Integrity and objectivity.
1. An insolvency professional must maintain integrity by being honest, straightforward,
and forthright in all professional relationships.
2. An insolvency professional must not misrepresent any facts or situations and should
refrain from being involved in any action that would bring disrepute to the profession.
3. An insolvency professional must act with objectivity in his professional dealings by
ensuring that his decisions are made without the presence of any bias, conflict of interest,
coercion, or undue influence of any party, whether directly connected to the insolvency
proceedings or not.
3A. An insolvency professional must disclose the details of any conflict of interests to the
stakeholders, whenever he comes across such conflict of interest during an assignment.
4. An insolvency professional appointed as an interim resolution professional, resolution
professional, liquidator, or bankruptcy trustee should not himself acquire, directly or indirectly,
any of the assets of the debtor, nor knowingly permit any relative to do so.
Independence and impartiality.
5. An insolvency professional must maintain complete independence in his professional
relationships and should conduct the insolvency resolution, liquidation or bankruptcy process,
as the case may be, independent of external influences.
6. In cases where the insolvency professional is dealing with assets of a debtor during
liquidation or bankruptcy process, he must ensure that he or his relatives do not knowingly
acquire any such assets, whether directly or indirectly unless it is shown that there was no
impairment of objectivity, independence or impartiality in the liquidation or bankruptcy process
and the approval of the Board has been obtained in the matter.
7. An insolvency professional shall not take up an assignment under the Code if he, any
of his relatives, any of the partners or directors of the insolvency professional entity of which
he is a partner or director, or the insolvency professional entity of which he is a partner or
director is not independent, in terms of the Regulations related to the processes under the
Code, in relation to the corporate person/ debtor and its related parties.
8. An insolvency professional shall disclose the existence of any pecuniary or personal
relationship with any of the stakeholders entitled to distribution under sections 53 or 178 of
the Code, and the concerned corporate person/ debtor as soon as he becomes aware of it, by
making a declaration of the same to the applicant, committee of creditors, and the person
proposing appointment, as applicable.

3.178 ECONOMIC LAWS
8A. An insolvency professional shall disclose as to whether he was an employee of or has

been in the panel of any financial creditor of the corporate debtor, to the committee of creditors
and to the insolvency professional agency of which he is a professional member and the
agency shall publish such disclosure on its website.
9. An insolvency professional shall not influence the decision or the work of the committee
of creditors or debtor, or other stakeholders under the Code, so as to make any undue or
unlawful gains for himself or his related parties, or cause any undue preference for any other
persons for undue or unlawful gains and shall not adopt any illegal or improper means to
achieve any mala fide objectives.
Professional competence.
10. An insolvency professional must maintain and upgrade his professional knowledge and
skills to render competent professional service.
Representation of correct facts and correcting misapprehensions.
11. An insolvency professional must inform such persons under the Code as may be
required, of a misapprehension or wrongful consideration of a fact of which he becomes aware,
as soon as may be practicable.
12. An insolvency professional must not conceal any material information or knowingly
make a misleading statement to the Board, the Adjudicating Authority or any stakeholder, as
applicable.
Timeliness.
13. An insolvency professional must adhere to the time limits prescribed in the Code and
the rules, regulations and guidelines thereunder for insolvency resolution, liquidation or
bankruptcy process, as the case may be, and must carefully plan his actions, and promptly
communicate with all stakeholders involved for the timely discharge of his duties.
14. An insolvency professional must not act with mala fide or be negligent while performing
his functions and duties under the Code.
Information management.
15. An insolvency professional must make efforts to ensure that all communication to the
stakeholders, whether in the form of notices, reports, updates, directions, or clarifications, is
made well in advance and in a manner which is simple, clear, and easily understood by the
recipients.
16. An insolvency professional must ensure that he maintains written contemporaneous
records for any decision taken, the reasons for taking the decision, and the information and
evidence in support of such decision. This shall be maintained so as to sufficiently enable a
reasonable person to take a view on the appropriateness of his decisions and actions.

17. An insolvency professional must not make any private communication with any of the
stakeholders unless required by the Code, rules, regulations and guidelines thereunder, or
orders of the Adjudicating Authority.
18. An insolvency professional must appear, co-operate and be available for inspections
and investigations carried out by the Board, any person authorised by the Board or the
insolvency professional agency with which he is enrolled.
19. An insolvency professional must provide all information and records as may be required
by the Board or the insolvency professional agency with which he is enrolled.
20. An insolvency professional must be available and provide information for any periodic
study, research and audit conducted by the Board.
Confidentiality.
21. An insolvency professional must ensure that confidentiality of the information relating
to the insolvency resolution process, liquidation or bankruptcy process, as the case may be,
is maintained at all times. However, this shall not prevent him from disclosing any information
with the consent of the relevant parties or required by law.
Occupation, employability and restrictions.
22. An insolvency professional must refrain from accepting too many assignments, if he is
unlikely to be able to devote adequate time to each of his assignments.
Clarification: An insolvency professional may, at any point of time, not have more than ten
assignments as resolution professional in corporate insolvency resolution process, of which
not more than three shall have admitted claims exceeding one thousand crore rupees each.
23. An insolvency professional must not engage in any employment when he holds a valid
authorisation for assignment or when he is undertaking an assignment.
23A. Where an insolvency professional has conducted a corporate insolvency resolution
process, he and his relatives shall not accept any employment, other than an employment
secured through open competitive recruitment, with, or render professional services, other
than services under the Code, to a creditor having more than ten percent voting power, the
successful resolution applicant, the corporate debtor or any of their related parties, until a
period of one year has elapsed from the date of his cessation from such process.
23B. An insolvency professional shall not engage or appoint any of his relatives or related
parties, for or in connection with any work relating to any of his assignment.
23C. An insolvency professional shall not provide any service for or in connection with the
assignment which is being undertaken by any of his relatives or related parties.

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Explanation.- For the purpose of clauses 23A to 23C, “related party” shall have the same
meaning as assigned to it in clause (24A) of section 5, but does not include an insolvency
professional entity of which the insolvency professional is a partner or director.
24. An insolvency professional must not conduct business which in the opinion of the Board
is inconsistent with the reputation of the profession.
Remuneration and costs.
25. An insolvency professional must provide services for remuneration which is charged in
a transparent manner, is a reasonable reflection of the work necessarily and properly
undertaken, and is not inconsistent with the applicable regulations.
25A. An insolvency professional shall disclose the fee payable to him, the fee payable to the
insolvency professional entity, and the fee payable to professionals engaged by him to the
insolvency professional agency of which he is a professional member and the agency shall
publish such disclosure on its website.
26. An insolvency professional shall not accept any fees or charges other than those which
are disclosed to and approved by the persons fixing his remuneration.
27. An insolvency professional shall disclose all costs towards the insolvency resolution
process costs, liquidation costs, or costs of the bankruptcy process, as applicable, to all
relevant stakeholders, and must endeavour to ensure that such costs are not unreasonable.
Gifts and hospitality.
28. An insolvency professional, or his relative must not accept gifts or hospitality which
undermines or affects his independence as an insolvency professional.
29. An insolvency professional shall not offer gifts or hospitality or a financial or any other
advantage to a public servant or any other person, intending to obtain or retain work for
himself, or to obtain or retain an advantage in the conduct of profession for himself.
Authorisation for assignment – Regulation 7A

An insolvency professional shall not accept or undertake an assignment after 31st December,
2019 unless he holds a valid authorisation for assignment on the date of such acceptance or
commencement of such assignment, as the case may be:
Provided that provisions of this regulation shall not apply to an assignment which an insolvency
professional is undertaking as on-
(a) 31st December, 2019; or
(b) the date of expiry of his authorisation for assignment.]

Disciplinary proceedings – Regulation 11

(1) Based on the findings of an inspection or investigation, or on material otherwise available
on record, if the Board is of the prima facie opinion that sufficient cause exists to take actions
permissible under section 220, it shall issue a show-cause notice to the insolvency professional.
(2) The show-cause notice shall be in writing, and shall state
a. the provisions of the Code under which it has been issued;
b. the details of the alleged facts;
c. the details of the evidence in support of the alleged facts;
d. the provisions of the Code, rules, regulations and guidelines thereunder allegedly violated,
or the manner in which the public interest is allegedly affected;
e. the actions or directions that the Board proposes to take or issue if the allegations are
established;
f. the manner in which the insolvency professional is required to respond to the show-cause
notice;
g. consequences of failure to respond to the show-cause notice; and
h. procedure to be followed for disposal of the show-cause notice.
(3) The show-cause notice shall enclose copies of documents relied upon and extracts of
relevant portions from the report of investigation or inspection, or other records.
(4) A show-cause notice issued shall be served on the insolvency professional in the following
manner-
(a) by sending it to the insolvency professional, at the address provided by him or provided by
the insolvency professional agency with which he is enrolled, by registered post with
acknowledgement due; or
(b) by an appropriate electronic means to the email address of the insolvency professional,
provided by him or provided by the insolvency professional agency with which he is enrolled.
(5) The Board shall constitute a Disciplinary Committee for disposal of the show-cause notice.
(6) The Disciplinary Committee shall endeavour to dispose of the show-cause notice within a
period of six months of the assignment.
(7) The Disciplinary Committee shall dispose of the show-cause notice assigned under sub-
regulation (5) by a reasoned order in adherence to principles of natural justice, and after
considering the submissions, if any, made by the insolvency professional, the relevant material
facts and circumstances, and the material on record.

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(8) The order disposing of a show-cause notice may provide for-

(a) no action;
(b) warning;
(ba) suspension or cancellation of authorization for assignment;
(c) any of the actions under section 220(2) to (4); or
(d) a reference to the Board to take any action under section 220(5).
(9) The order passed under sub-regulation (7) shall not become effective until thirty days have
elapsed from the date of issue of the order unless the Disciplinary Committee states otherwise in
the order along with the reason for the same.
(10) The order passed under sub-regulation (7) shall be issued to the insolvency professional,
with a copy issued to the insolvency professional agency with which he is enrolled immediately,
and be published on the website of the Board.
Functions and obligations of insolvency professionals (IP) [Section 208]
Section 208 specifies the following functions and obligations of the IP:
Functions of IP [Section 208(1)]
Where any insolvency resolution, fresh start, liquidation or bankruptcy process has been
initiated, it shall be the function of an insolvency professional to take such actions as may be
necessary, in the following matters, namely: —
(a) a fresh start order process under Chapter II of Part III;
(b) individual insolvency resolution process under Chapter III of Part III;
(c) corporate insolvency resolution process under Chapter II of Part II;
(ca) pre-packaged insolvency resolution process under Chapter III-A of Part II;
(d) individual bankruptcy process under Chapter IV of Part III; and
(e) liquidation of a corporate debtor firm under Chapter III of Part II.
IP in PPIRP [Section 208(1A)]
Where the name of the insolvency professional proposed to be appointed as a resolution
professional, is approved under clause (e) of sub-section (2) of section 54A, it shall be the function
of such insolvency professional to take such actions as may be necessary to perform his functions
and duties prior to the initiation of the pre-packaged insolvency resolution process under Chapter
III-A of Part II.

IP to abide by the Code of Conduct [Section 208(2)]

Every insolvency professional shall abide by the following code of conduct:—
(a) to take reasonable care and diligence while performing his duties;
(b) to comply with all requirements and terms and conditions specified in the bye-laws of the
insolvency professional agency of which he is a member;
(c) to allow the insolvency professional agency to inspect his records;
(d) to submit a copy of the records of every proceeding before the Adjudicating Authority to
the Board as well as to the insolvency professional agency of which he is a member; and
(e) to perform his functions in such manner and subject to such conditions as may be
specified.
(V) Information Utilities
Provisions related to information utilities are covered under sections 209 to 216 of the Code.
No person to function as information utility without certificate of registration
[ Section 209]
Save as otherwise provided in this Code, no information utility shall carry on its business under
this Code except under and in accordance with a certificate of registration issued in that behalf by
the Board.
Registration of information utility [Section 210]
(1) Section 210 lays the procedure for the registration of the information utility. It states that
every application for registration shall be made to the Board containing such particulars, and
accompanied by such fee, as may be specified by regulations.
Every application received by the Board shall be acknowledged within seven days of its
receipt.
(2) On receipt of the application, the Board may, on being satisfied that the application
conforms to all requirements, grant a certificate of registration to the applicant or else, reject,
by order, such application.
(3) The Board may issue a certificate of registration to the applicant.
(4) The Board may renew the certificate of registration on payment of such fee as may be
(5) The Board may, by order, suspend or cancel the certificate of registration granted to an
information utility on any of the following grounds, namely:—
(a) that it has obtained registration by making a false statement or misrepresentation or any
other unlawful means;

3.184 ECONOMIC LAWS
(b) that it has failed to comply with the requirements of the regulations made by the Board;
(c) that it has contravened any of the provisions of the Act or the rules or the regulations
made thereunder;
(d) on any other ground as may be specified by regulations:
However, no order shall be made unless the information utility concerned has been given a
reasonable opportunity of being heard.
Further that no such order shall be passed by any member except whole-time members of the
Board.
Eligibility for registration – Regulation 3 of the IBBI (Information Utilities)
Regulations, 2017 provides that-
No person shall be eligible to be registered as an information utility unless it is a public company
and—
(a) its sole object is to provide core services and other services under these Regulations,
and discharge such functions as may be necessary for providing these services;
(b) its shareholding and governance is in accordance with Chapter III;
(c) its bye-laws are in accordance with Chapter IV;
(d) it has a minimum net worth of fifty crore rupees;
(e) Omitted
(f) Omitted
(g) the person itself, its promoters, its directors, its key managerial personnel, and persons
holding more than 5%, directly or indirectly, of its paid-up equity share capital or its total
voting power, are fit and proper persons:
Explanation: For determining whether a person is fit and proper under these Regulations, the
Board may take account of relevant considerations, including—
(i) integrity, reputation and character,
(ii) absence of conviction by a court for an offence:
Provided that a person may be considered 'fit and proper' if he has been sentenced to
imprisonment for a period of less than six months;
Provided that a person shall not be considered 'fit and proper' if he has been sentenced to
imprisonment for a period (a) of not less than six months, but less than seven years and a
period of five years has not elapsed from the date of expiry of the sentence, or (b) of seven
years or more.

(iii) absence of restraint order, in force, issued by a financial sector regulator or the Adjudicating
Authority, and
(iv) financial solvency.
Appeal to National Company Law Appellate Tribunal [Section 211]
Any information utility which is aggrieved by the order of the Board may prefer an appeal to the
National Company Law Appellate Tribunal as may be specified by regulations.
Governing Board of information utility [Section 212]
The Board may require every information utility to set up a governing board. It may contain such
number of independent members, as may be specified by regulations, for ensuring that an
information utility takes into account the objectives sought to be achieved under this Code.
Composition of the Governing Board – Regulation 9 of the IBBI (Information Utilities)
Regulations, 2017 provides that -
(1) The Governing Board shall consist of —
(a) managing director;
(b) independent directors; and
(c) shareholder directors:
Provided that more than half of the directors shall be citizens of India and shall be residents in
India.
(2) The managing director shall not be considered either an independent director or a
shareholder director.
(3) Any employee of an information utility may be appointed as a director on its Governing
Board in addition to the managing director, but such director shall be deemed to be a shareholder
director.
(4) The number of independent directors shall not be less than the number of shareholder
directors:
Provided that no meeting of the Governing Board shall be held without the presence of at least
one independent director.
(5) An independent director shall be an individual—
(a) who is a person of ability and integrity;
(b) who has expertise in the field of finance, law, management or insolvency;
(c) who is not a relative of the directors of the Governing Board;

3.186 ECONOMIC LAWS
(d) who has or had no pecuniary relationship with the information utility, or any of its directors, or any
of its shareholders holding more than ten per cent of its share capital, during the immediately
preceding two financial years or during the current financial year;
(e) who is not a shareholder of the information utility; and
(f) who is not a member of the Board of Directors of any of the shareholders holding more than
ten per cent of the share capital of the information utility.
(6) An independent director shall be nominated by the Board from amongst the list of names
proposed by the information utility.
(7) An individual may serve as an independent director for a maximum of two terms of three
years each or part thereof, or up to the age of seventy years, whichever is earlier.
(8) The second term referred to in sub-regulation (7) may be subject to a satisfactory
performance review of the first term by the Governing Board.
(9) A cooling off period of three years shall be applicable for an independent director to become
a shareholder director in the same or another information utility.
(10) The directors shall elect an independent director as the Chairperson of the Governing Board.
(11) A director, who has any interest, direct or indirect, pecuniary or otherwise, in any matter
coming up for consideration at a meeting of the Governing Board or any of its Committees, shall
as soon as possible after relevant circumstances have come to his knowledge, disclose the nature
of his interest at such meeting and such disclosure shall be recorded in the proceedings of the
Governing Board or the Committee, as the case may be, and the director shall not take part in any
deliberation or decision of the Governing Board or the Committee with respect to that matter.
Core services, etc. of information utilities [Section 213]
An information utility shall provide such services as may be specified including core services to
any person if such person complies with the terms and conditions as specified under Chapter V
of the IBBI (Information Utilities) Regulations, 2017.
Obligations of information utility [Section 214]
For the purposes of providing core services to any person, every information utility shall have
following obligations as per the section 214 of the Code—
(a) create and store financial information in a universally accessible format;
(b) accept electronic submissions of financial information from persons who are under obligations
to submit financial information under sub-section (1) of section 215, in such form and manner
as may be specified by regulations;
(c) accept, in specified form and manner, electronic submissions of financial information from
persons who intend to submit such information;

(d) meet such minimum service quality standards as may be specified by regulations;
(e) get the information received from various persons authenticated by all concerned parties
before storing such information;
(f) provide access to the financial information stored by it to any person who intends to access
such information in such manner as may be specified by regulations;
(g) publish such statistical information as may be specified by regulations;
(h) have inter-operatability with other information utilities.
Procedure for submission, etc., of financial information [Section 215]
(1) Any person who intends to submit financial information to the information utility or access the
information from the information utility shall pay such fee and submit information as may be
(2) A financial creditor shall submit financial information and information relating to assets in
relation to which any security interest has been created, in such form and manner as may be
(3) An operational creditor may submit financial information to the information utility in such form
and manner as may be specified.[Section 215]
Rights and obligations of persons submitting financial information [Section 216]
(1) A person who intends to update or modify or rectify errors in the financial information, he may
make an application to the information utility with the reasons therefor, in such manner and
within such time, as may be specified.
(2) A person who submits financial information to an information utility shall not provide such
information to any other person, except to such extent, under such circumstances, and in
such manner, as may be specified [Section 216]
(VI) Inspection and Investigation
Provisions given under sections 217 to 220 of the Code deals with the manner of inspection and
investigation against insolvency professional agency, its members, information utility. It also
provides of appointment of disciplinary committee.
"Investigating Authority" means an officer or a team of officers of the Board, which has been
directed by the Board, to conduct the investigation of a service provider;
"Inspecting Authority" means an officer or a team of officers of the Board, which has been
directed by the Board, to conduct the inspection of a service provider;

3.188 ECONOMIC LAWS
Relevant provisions are as follows:

Complaints against insolvency professional agency or its member or information
utility [ Section 217]
According to section 217, any person aggrieved by the functioning of an-
insolvency
professional
agency
OR OR
insolvency
information utility
professional
OR
may file a complaint to the Board in such form, within such time and in such manner as may be
specified.
Investigation of insolvency professional agency or its member or information utility
[Section 218].
(1) Board to direct any person or persons to act as an investigating authority: Where the
Board, on receipt of a complaint or has reasonable grounds to believe that any insolvency
professional agency or insolvency professional or an information utility has contravened any of
the provisions of the Code or the rules or regulations made or directions issued by the Board
thereunder, it may, at any time by an order in writing, direct any person or persons to act as an
investigating authority to conduct an inspection or investigation of the insolvency professional
agency or insolvency professional or an information utility.
(2) The inspection or investigation carried out, shall be conducted by regulations.
(3) Investigating Authority may bound to furnish the relevant documents: The
Investigating Authority may require any person who is likely to have any relevant document, record
or information to furnish the same, and such person shall be bound to furnish such document,
record or information.
(4) Seizure of relevant documentations: During the course of its inspection or investigation,
the Investigating Authority may enter any building or place where they may have reasons to

believe that any such document, record or information relating to the subject-matter of the inquiry
may be found and may seize any such document, record or information or take extracts or copies
therefrom, subject to the provisions of section 100 of the Code of Criminal Procedure, 1973, in so
far as they may be applicable.
(5) To take custody of the documents: The Investigating Authority shall keep in its custody
the books, registers, other documents and records seized for such period not later than the
conclusion of the investigation and thereafter shall return the same to the concerned person from
whose custody or power they were seized with an identification marks on them or any part thereof.
(6) Submission of detailed reports: A detailed report of inspection or investigation shall be
submitted to the Board by the Investigating Authority. [Section 218]
Show cause notice to insolvency professional agency or its member or information
utility [Section 219]
The Board may, upon completion of an inspection or investigation, issue a show cause notice to
such insolvency professional agency or insolvency professional or information utility, and carry
out inspection of such insolvency professional agency or insolvency professional or information
utility in such manner, giving such time for giving reply, as may be specified by regulations.
[Section 219]
Disposal of Show-cause notice - Regulation 13 of the Insolvency and Bankruptcy Board of
India (Inspection and Investigation) Regulations, 2017 provides that-
(1) The Disciplinary Committee, after providing an opportunity of being heard to the notice, shall
dispose of the show-cause notice by a reasoned order.
(2) The Disciplinary Committee shall dispose of the show-cause notice within a period of 180
days of the issue of the show-cause notice.
(3) The order under sub-regulation (1) may provide for—
(a) closure of show-cause notice without any direction;
(b) warning;
(c) any of the actions under sub-sections (2), (3) and (4) of section 220;
(d) a reference to the Board to take any action under sub-section (5) of section 220 or sub-section
(2) of section 236; or
(e) any other action or direction as may be considered appropriate.
(4) The order under sub-regulation (1) shall not become effective until thirty days have elapsed
from the date of issue of the order, unless the Disciplinary Committee states otherwise in the order
along with the reasons for the same.

3.190 ECONOMIC LAWS
(5) The order under sub-regulation (1) shall be issued to the noticee immediately, and be
published on the website of the Board.
(6) If the order under sub-regulation (1) suspends or cancels the registration of a service
provider, the Disciplinary Committee may, if it considers fit, require the service provider to—
(a) discharge pending obligations, if any;
(b) continue its functions till such time as may be directed, only to enable clients to shift to another
service provider; and
(c) comply with any other directions.
Appointment of disciplinary committee [Section 220]
(1) The Board shall constitute a disciplinary committee to consider the reports of the
investigating Authority submitted under section 218(6) consisting of whole-time members of the
Board only.
(2) On the examination of the report, if the disciplinary committee is satisfied that sufficient
cause exists, it may-
• impose penalty, as specified in sub-seciton (3); or
• suspend or cancel the registration of the insolvency professional or, suspend or cancel the
registration of insolvency professional agency or information utility as the case may be.
(3) Where any insolvency professional agency or insolvency professional or an information utility
has contravened any provision of this Code or rules or regulations made thereunder, the disciplinary
committee may impose penalty which shall be—
(i) three times the amount of the loss caused, or likely to have been caused, to persons
concerned on account of such contravention; or
(ii) three times the amount of the unlawful gain made on account of such contravention,
whichever is higher.
• In case, where such loss or unlawful gain is not quantifiable, the total amount of the penalty
imposed shall not exceed more than one crore rupees.
(4) Notwithstanding anything contained in sub-section (3), the Board may direct any person who
has made unlawful gain or averted loss by indulging in any activity in contravention of this Code, or
the rules or regulations made thereunder, to disgorge an amount equivalent to such unlawful gain
or aversion of loss.
(5) The Board may take such action as may be required to provide restitution to the person who
suffered loss on account of any contravention from the amount so disgorged, if the person who suffered
such loss is identifiable and the loss so suffered is directly attributable to such person.

(6) The Board may make regulations to specify—

(a) the procedure for claiming restitution under sub-section (5) ;
(b) the period within which such restitution may be claimed; and
(c) the manner in which restitution of amount may be made.
(VII) Finance, Accounts and Audit
Following are the relevant provisions of the Code that deals with the matter related to the
management of finance, accounts and audit by the Board under the Code:
Grants by Central Government [Section 221]
The Central Government may, after due appropriation made by Parliament by law, make to the
Board grants of such sums of money as that Government may think fit for being utilised for the
purposes of this Code.
Board's Fund [Section 222]
(1) There shall be constitutes a Fund to be called the Fund of the Insolvency and Bankruptcy
Board and there shall be credited thereto —
(a) all grants, fees and charges received by the Board under this Code;
(b) all sums received by the Board from such other sources as may be decided upon by the
Central Government;
(c) such other funds as may be specified by the Board or prescribed by the Central Government.
(2) The Fund shall be applied for meeting —
(a) the salaries, allowances and other remuneration of the members, officers and other
employees of the Board;
(b) the expenses of the Board in the discharge of its functions under section 196;
(c) the expenses on objects and for purpos191uthorizedsed by this Code.
(d) such other purposes as may be prescribed.
Accounts and audit [Section 223]
(1) According to section 223 of the Code, the Board shall maintain proper accounts and
other relevant records and prepare an annual statement of accounts in such form as may be
prescribed by the Central Government in consultation with the Comptroller and Auditor-General
of India.
(2) Audit of Accounts by the CAG: The accounts of the Board shall be audited by the
Comptroller and Auditor-General of India at such intervals as may be specified by him and any

3.192 ECONOMIC LAWS
expenditure incurred in connection with such audit shall be payable by the Board to the
Comptroller and Auditor- General of India.
(3) Right and privileges: The Comptroller and Auditor-General of India and any other person
appointed by him in connection with the audit of the accounts of the Board shall have the same
rights and privileges and authority in connection with such audit as the Comptroller and Auditor-
General generally has in connection with the audit of the Government accounts and, in particular,
shall have the right to demand the production of books, accounts, connected vouchers and other
documents and papers and to inspect any of the offices of the Board.
(4) Presentation of certified copy of the accounts and audit report to CG: The accounts
of the Board as certified by the Comptroller and Auditor General of India or any other person
appointed by him in this behalf together with the audit report thereon shall be forwarded annually
to the Central Government and that Government shall cause the same to be laid before each
House of Parliament.
12 MISCELLANOUS
Insolvency and Bankruptcy Fund [Section 224]
The Insolvency and Bankruptcy Fund (IB Fund) [ Section 224(1)]
There shall be formed a Fund to be called the Insolvency and Bankruptcy Fund (hereafter in this
section referred to as the “Fund”) for the purposes of insolvency resolution, liquidation and
bankruptcy of persons under the Code.
Credit in IB Fund [Section 224(2)]
There shall be credited to the Fund the following amounts, namely —
(a) the grants made by the Central Government for the purposes of the Fund;
(b) the amount deposited by persons as contribution to the Fund;
(c) the amount received in the Fund from any other source; and
(d) the interest or other income received out of the investment made from the Fund.
Withdrawal from IB Fund [Section 224(3)]
A person who has contributed any amount to the Fund may, in the event of proceedings initiated
in respect of such person under this Code before an Adjudicating Authority, make an application
to such Adjudicating Authority for withdrawal of funds not exceeding the amount contributed
by it, for making payment to workmen, protecting the assets of such persons, meeting the
incidental cost during the proceedings or such purposes as may be prescribed.

Administration of IB Fund [Section 224(4)]

The Central Government shall, by notification, appoint an administrator to administer the fund in
such manner as may be prescribed.
Power of Central Government to issue directions [Section 225]
IBBI to follow directions of the Central Government [Section 225(1)]
Without prejudice to the foregoing provisions of this Code the Board shall, in exercise of its
powers or the performance of its functions under this Code, be bound by such directions on
questions of policy as the Central Government may give in writing to it from time to time.
Provided that the Board shall, as far as practicable, be given an opportunity to express its views
before any direction in this sub-section.
Decision of Central Govt shall be final [Section 225(2)]
The decision of the Central Government as to whether a question is one of policy or not shall be
final.
Power of Central Government to supersede Board – Section 226
Central Government may superseded IBBI [Section 226(1)]
If at any time the Central Government is of opinion that—
(a) on account of grave emergency, the Board is unable to discharge the functions and duties
imposed on it by or under the provisions of this Code; or
(b) the Board has persistently not complied with any direction issued by the Central Government
under this Code or in the discharge of the functions and duties imposed on it by or under the
provisions of this Code and as a result of such non-compliance the financial position of the
Board or the administration of the Board has deteriorated; or
(c) circumstances exist which render it necessary in the public interest so to do,
the Central Government may, by notification, supersede the Board for such period, not exceeding
six months, as may be specified in the notification.
Publication of Notification [ Section 226(2)]
Upon the publication of a notification under sub-section (1) superseding the Board,
(a) all the members shall, as from the date of supersession, vacate their offices as such;
(b) all the powers, functions and duties which may, by or under the provisions of this Code, be
exercised or discharged by or on behalf of the Board, shall until the Board is reconstituted
under sub-section (3), be exercised and discharged by such person or persons as the Central
Government may direct; and

3.194 ECONOMIC LAWS
(c) all property owned or controlled by the Board shall, until the Board shall until the Board is
reconstituted under sub-section (3), vest in the Central Government.
Reconsitituion of IBBI [Section 226(3)]
On the expiration of the period of supersession specified in the notification issued under sub-
section (1), the Central Government may reconstitute the Board by a fresh appointment and in
such case any person or persons who vacated their offices under sub- section 2(a), shall not be
deemed disqualified for appointment.
Provided that the Central Government may, at any time, before the expiration of the period of
supersession, take action under this sub-section.
Action taken by Central Government [Section 226(4)]
The Central Government shall cause a notification issued under sub-section(1) and a full report
of any action taken under this section and the circumstances leading to such action to be laid
before each House of Parliament at the earliest.
Power of Central Government to notify financial service providers, etc.
[Section 227]
19Notwithstanding anything to the contrary contained in this Code or any other law for the time
being in force, the Central Government may, if it considers necessary, in consultation with the
appropriate financial sector regulators, notify financial service providers or categories of financial
service providers for the purpose of their insolvency and liquidation proceedings, which may be
conducted under this Code, in such manner as may be prescribed.
Explanation – For the removal of doubts, it is hereby clarified that the insolvency and liquidation
proceedings for financial service providers or categories of financial service providers may be
conducted with such modifications and in such manner as may be prescribed.
Notification:
The Central Government vide its Notification No. S.O.4139(E) dated 18th November, 2019 in
consultation with the RBI notified the insolvency resolution and liquidation proceedings of the
following categories of financial service providers shall be undertaken in accordance with the
provisions of the Insolvency and Bankruptcy Code, 2016 read with the Insolvency and Bankruptcy
(Insolvency and Liquidation Proceedings of Financial Service Providers and Application to
Adjudicating Authority) Rules, 2019 (in this notification referred to as the ‘Rules’) and the
applicable Regulations:
19Notification NO. SO. 1817(E) [F.N.30/23/2018-Insolvency Section], New Delhi, the 1st May, 2018.—In
exercise of the powers conferred by sub-section (3) of section 1 of the Insolvency and Bankruptcy Code, 2016
(31 of 2016), the Central Government hereby appoints the 1st day of May, 2018 as the date on which the
provisions of section 227 to section 229 (both inclusive) of the said Code shall come into force.

S.No. Category of Financial Appropriate Regulator Dealing with third-

Service Provider (rule 2 of [clause (a) of sub-rule party assets (rule 10 of
the Rules) (1) of rule 3 of the the Rules)
Rules
(1) (2) (3) (4)
1. Non-banking finance RBI To be notified separately
companies (which include
housing finance companies)
with asset size of Rs.500
crore or more, as per last
audited balance sheet.
The Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial

Service Providers and Application to Adjudicating Authority) Rules, 2019.
Administrator – Rule 3(a)
“Administrator” means an individual appointed by the Adjudicating Authority under rule
5(a)(iii), to exercise the powers and functions of the insolvency professional, interim resolution
professional, resolution professional or the liquidator for the purpose of insolvency and
liquidation proceedings of a financial service provider.
CIRP of Financial Service Provides – Rule 5
The provisions of the Code relating to the Corporate Insolvency Resolution Process of the
corporate debtor shall, mutatis mutandis apply, to the insolvency resolution process of a
financial service provider subject to the following modifications, namely:―
(a) Initiation of Corporate Insolvency Resolution Process
(i) no corporate insolvency resolution process shall be initiated against a financial
service provider which has committed a default under section 4, except upon an
application made by the appropriate regulator in accordance with rule 6;
(ii) the application under sub-clause (i) shall be dealt with in the same manner as an
application by a financial creditor under section 7, subject to clause (iii); and
(iii) on the admission of the application, the Adjudicating Authority shall appoint the
individual proposed by the appropriate regulator in the application filed under rule
5(a)(i), as the Administrator.

3.196 ECONOMIC LAWS
(b) Moratorium:
Save as provided in section 14,-
(i) an interim moratorium shall commence on and from the date of filing of the
application under clause (a) till its admission or rejection; and
(ii) the license or registration which authorises the financial service provider to engage
in the business of providing financial services shall not be suspended or cancelled
during the interim-moratorium and the corporate insolvency resolution process.
Explanation: For the purposes of this clause, “interim moratorium” shall have the
effect of the provisions of section 14(1), (2) and (3).
(c) Advisory Committee:
(i) the appropriate regulator may, where deemed necessary, constitute an Advisory
Committee, within 45 days of the insolvency commencement date, to advise the
Administrator in the operations of the financial service provider during the
corporate insolvency resolution process;
(ii) the Advisory Committee shall consist of three or more Members, who shall be
persons of ability, integrity and standing, and who have expertise or experience in
finance, economics, accountancy, law, public policy or any other profession in the
area of financial services or risk management, administration, supervision or
resolution of a financial service provider;
(iii) the terms and conditions of the Members of the Advisory Committee and the
manner of conducting meetings and observance of rules of procedure shall be
such as may be determined by the appropriate regulator;
(iv) the compensation paid to the Members of the Advisory Committee shall be part of
the insolvency resolution process costs;
(v) the Administrator shall chair the meetings of the Advisory Committee.
(d) Resolution plan:
(i) the resolution plan shall include a statement explaining how the resolution
applicant satisfies or intends to satisfy the requirements of engaging in the
business of the financial service provider, as per laws for the time being in force;
(ii) upon approval of the resolution plan by the committee of creditors under section
30(4), the Administrator shall seek ‘no objection’ of the appropriate regulator to the
effect that it has no objection to the persons, who would be in control or
management of the financial service provider after approval of the resolution plan
under section 31;

(iii) the appropriate regulator shall without prejudice to the provisions contained in
section 29A, issue ‘no objection’ on the basis of the ‘fit and proper’ criteria
applicable to the business of the financial service provider;
(iv) where an appropriate regulator does not refuse ‘no objection’ on an application
made under clause (ii) within 45 working days of receipt of such application, it shall
be deemed that ‘no objection’ has been granted.
In the matter of Vinay Kumar Mittal & Ors. Vs. Dewan Housing Finance Corporation Ltd. &
Ors. [Civil Appeal No. 654 to 660 of 2020, dated 31.01.2020] the Supreme Court observed that
the RBI filed an application under section 227 and 239 of the Code read with rule 5 and 6 of the
Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service
Providers and Application to Adjudicating Authority) Rules, 2019 for insolvency resolution of
Dewan Housing Finance Corporation Ltd. (DHFL), which was admitted by NCLT, Administrator
was appointed and moratorium imposed. The HC restrained DHFL from making any further
payments to any unsecured creditors and secured creditors except in cases where payments are
to be made on a pro-rata basis to all secured creditors out of its current and future receivables.
The fixed deposit holders aggrieved by the orders of the HC restraining from making any payments
towards their fixed deposits, challenged the order of the HC before SC. The SC held that since
the depositors are being represented by the authorised representative before the CoC, they are
free to raise all points and contentions before the CoC, the Administrator, and if necessary, before
the AA.
Budget [Section 228]
The Board shall prepare, in such form and at such time in each financial year as may be
prescribed, its budget for the next financial year, showing the estimated receipts and expenditure
of the Board and forward the same to the Central Government.
Annual Report [Section 229]
(1) The Board shall prepare, in such form and at such time in each financial year as may be
prescribed, its annual report, giving a full account of its activities during the previous financial
year, and submit a copy thereof to the Central Government.
(2) A copy of the report received under sub-section (1) shall be laid, as soon as may be after
it is received, before each House of Parliament.
Delegation [Section 230]
The Board may, by general or special order in writing delegate to any member or officer of the
Board subject to such conditions, if any, as may be specified in the order, such of its powers and
functions under this Code (except the powers under section 240 as it may deem necessary)

3.198 ECONOMIC LAWS
Bar of jurisdiction [Section 231]

No civil court shall have jurisdiction in respect of any matter in which the Adjudicating Authority or
Board is empowered by, or under, this Code to pass any order and no injunction shall be granted
by any court or other authority in respect of any action taken or to be taken in pursuance of any
order passed by such Adjudicating Authority or the Board under this Code.
In the matter of Liberty House Group PTE Ltd. Vs. State Bank of India & Ors. [CS (COMM)
1246 /2018 and IAs No. 16056/2018 and 16060/2018 and CS (COMM) 1247/2018 and IAs
No.16061/2018 and 16065/2018, dated 22.02.2019] the High Court of New Delhi opined that the
jurisdiction of the HC will also be barred by section 231 of the Code which provides that no Civil
Court shall have jurisdiction in respect of any matter in which the AA is empowered, by or under,
the Code to pass any order.
Members, officers and employees of Board to the public servants [Section 232]
The Chairperson, Members, officers and other employees of the Board shall be deemed, when
acting or purporting to act in pursuance of any of the provisions of this Code, to be public servants
within the meaning of section 21of the Indian Penal Code.
Protection of action taken in good faith [Section 233]
No suit, prosecution or other legal proceeding shall lie against the Government or any officer of
the Government, or the Chairperson, Member, officer or other employee of the Board or an
insolvency professional or liquidator for anything which is in done or intended to be done in good
faith under this Code or the rules or regulations made thereunder.
In the case of Jaypee Kensington Boulevard Apartments Welfare Association & Ors. Vs.
NBCC (India) Ltd. & Ors. [Civil Appeal No(s). 3395/2020, dated 02.03.2012], the Supreme Court
was appalled with the developments leading to arrest of the IRP, who was working pursuant to
the order passed by the Court and entrusted with the functioning of the CD. It observed that the
police official dealing with the case is not familiar with the provision of privilege of IRP appointed
by the Court in terms of section 233 of the Code. While directing immediate release of the IRP,
the SC directed the investigation officer not to take any coercive action against the IRP.
Enabling provisions for cross border transactions: India is no more an isolated business
place. India is now part of global business hub. Indian businesses have investments outside India
while many businesses outside India have presence in India. India is now a global village. Enabling
provisions in the Code are sections 234 and 235 for this purpose.
Agreements with Foreign Countries [ Section 234]
(1) The Central Government may enter into an agreement with the Government of any country
outside India for enforcing the provisions of this Code.

(2) The Central Government may, by notification in the Official Gazette, direct that the
application of provisions of this Code in relation to assets or property of corporate debtor or debtor,
including a personal guarantor of a corporate debtor, as the case may be, situated at any place
in a country outside India with which reciprocal arrangements have been made, shall be subject
to such conditions as may be specified.
Letter of request to a country outside India in respect of assets [Section 235]
(1) Notwithstanding anything contained in this Code or any law for the time being in force, if ,
in the course of insolvency resolution process, or liquidation or bankruptcy proceedings, as the
case may be, under this Code, the resolution professional, liquidator or bankruptcy trustee, is of
the opinion that assets of the corporate debtor or debtor, including a personal guarantor of a
corporate debtor, are situated in a country outside India with which reciprocal arrangements have
been made under section 234 of Insolvency Code, 2016, he may make an application to the
Adjudicating Authority that evidence or action relating to such assets is required in connection
with such process or proceeding.
(2) The Adjudicating Authority on receipt of an application and, on being satisfied that evidence
or action relating to assets, is required in connection with insolvency resolution process or
liquidation or bankruptcy proceeding, may issue a letter of request to a court or an authority of
such country competent to deal with such request.
Punishment where no specific penalty or punishment is provided [ Section 235A]
If any person contravenes any of the provisions of this Code or the rules or regulations made
thereunder for which no penalty or punishment is provided in this Code, such person shall be
punishable with fine which shall not be less than one lakh rupees but which may extend to two
crore rupees. [Section 235A]
Trial of offences by Special Court [Section236]
Trial of offences [Section 236(1)]
Notwithstanding anything in the Code of Criminal Procedure, 1973, offences under this Code
shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013.
Cognizance of an offence committed under this code [Section 236(2)]
No Court shall take cognizance of any offence punishable under this Act, save on a complaint
made by the Board or the Central Government or any person authorised by the Central
Government in this behalf.
Provisions of Cr.PC [Section 236(3)]
The provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a
Special Court and for the purposes of the said provisions, the Special Court shall be deemed to

3.200 ECONOMIC LAWS
be a Court of Session and the person conducting a prosecution before a Special Court shall be
deemed to be a Public Prosecutor.
Presence of authorized person [Section 236(4)]
Notwithstanding anything contained in the Code of Criminal Procedure, 1973, in case of a
complaint, the presence of the person authorised by the Central Government or the Board before
the Court trying the offences shall not be necessary unless the Court requires his personal
attendance at the trial.
In the case of Committee of Creditors of Amtek Auto Ltd. through Corporation Bank Vs.
Dinkar T. Venkatasubramanian & Ors. [CA (AT) (Ins.) No. 219, 442 & 443 of 2019, dated
16.08.2019] the NCLAT opined that before referring any matter to IBBI or the Central Government,
the AA is required to provide reasonable opportunity of hearing to the parties concerned/alleged
offenders of provisions of Chapter VII of Part II and, if satisfied, may request the Central
Government to investigate the matter by an Inspector or Inspectors and then to decide on such
opinion whether to refer and lodge any case before the Special Judge for trial under section 236
of the Code for alleged offence under section 74(3) or any other provision under Chapter VII of
Part II of the Code and for punishment under section 447 of the Companies Act, 2013.
In the matter of Alchemist Asset Reconstruction Co. Ltd. Vs. Hotel Gaudavan Pvt. Ltd.
[CP/CA. No. (IB)23(PB)/ 2017), dated 22.09.2017] the NCLT, New Delhi opined that there is
complete bar of trial of offences in the absence of filing of a complaint by IBBI as is evident from
a perusal of sub-sections (1) and (2) of section 236 the Code. Therefore, a complaint by a former
director with the police would not be maintainable and competent as the complaint is not lodged
by IBBI
Appeal and revision [Section237]
The High Court may exercise, all the powers conferred by Chapters XXIX (Appeals) and XXX
(Reference and Revision) of the Code of Criminal Procedure, 1973 on a High Court, as if a Special
Court within the local limits of the jurisdiction of the High Court were a Court of Session trying
cases within the local limits of the jurisdiction of the High Court.
Provisions of this Code to override other laws [Section 238]
The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or any instrument having effect by virtue of
any such law.
Judicial Pronouncement
• In the case of Rajendra K. Bhutta Vs. Maharashtra Housing and Area Development
Authority and Anr. [Civil Appeal No. 12248 of 2018, dated 19.02.2020] the Supreme
Court opined that when it comes to any clash between the Maharashtra Housing and Area

Development Act, 1976 and the Code, on the plain terms of section 238, the Code must
prevail.
• In the case of Duncans Industries Ltd. Vs. A. J. Agrochem [Civil Appeal No. 5120 of
2019, dated 04.10.2019], the Supreme Court opined that CIRP cannot be equated with
winding up proceedings and hence no prior consent of the Central Government under the
Tea Act, 1953 would be required for initiation of the proceedings under section 7 or 9 of
the Code as it overrides the said statute.
• In the case of Pioneer Urban Land and Infrastructure Ltd. & Anr. Vs. Union of India &
Ors. [WP (Civil) No. 43 of 2019 and other petitions, dated 09.08.2019] the Supreme Court
opined that even by a process of harmonious construction, Real Estate (Regulation and
Development) Act, 2016and the Code must be held to co-exist, and, in the event of a
conflict, the Code shall prevail.
• In the case of Innoventive Industries Ltd. Vs. ICICI Bank & Anr. [CA No. 8337- 8338 of
2017, dated 31.08.2017], the Supreme Court held that The Maharashtra Relief
Undertakings (Special Provisions Act), 1958 cannot stand in the way of the CIRP under the
Code.
• In the matter of Pr. Commissioner of Income Tax Vs. Monnet Ispat and Energy Ltd.
[SLP No. 6483/2018, dated 10.08.2018] the Supreme Court held that given section 238 of
the Code, it is obvious that the Code will override anything inconsistent contained in any
other enactment, including the Income-tax Act, 1961.
• In the case of K. Kishan Vs. Vijay Nirman Company Pvt. Ltd. [Civil Appeal No. 21824 &
21825 of 2017, dated 14.08.2018] the Supreme Court held that Section 238 of the Code
will apply in case there is an inconsistency between the Code and the Arbitration and
Conciliation Act, 1996.
• In the matter of A Navinchandra Steels Pvt. Ltd. Vs. SREI Equipment Finance Ltd. &
Ors. [Civil Appeal Nos. 4230- 4234 of 2020, dated 01.03.2021] the Supreme Court while
dealing with an appeal involving the issue of filing of an insolvency application under the
provisions of the Code when a winding up petition has already been admitted against the
same company, held, that a petition either under section 7 or 9 of the Code is an
independent proceeding which is unaffected by winding up proceedings that may be filed
qua the same company. It observed that a discretionary jurisdiction under the fifth proviso
to section 434(1)(c) of the Companies Act, 2013 cannot prevail over the undoubted
jurisdiction of the AA under the Code once the parameters under the Code are fulfilled.
Limitation [Section 238A]
The provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or
appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal, the Debt
Recovery Tribunal or the Debt Recovery Appellate Tribunal, as the case may be.

3.202 ECONOMIC LAWS
Judicial Pronouncement on the Limitation

In the matter of Syndicate Bank Vs. Bothra Metals and Alloys Ltd. [CP (IB) No. 2579/MB.IV/
2019, dated 06.07.2020], the NCLT, Mumbai opined that upon perusal of the documents on record
it was observed that there was acknowledgement of debt in the balance sheet of the CD and
that it was well-settled through various judgments of the SC that an acknowledgement in the
balance sheet of the company satisfies the requirements of section 18 of the Limitation Act, 1963,
leading to a fresh period of limitation commencing from each such acknowledgement.
In the matter of Jagdish Prasad Sarada Vs. Allahabad Bank [CA (AT) (Ins.) No. 183 of 2020,
dated 28.08.2020] the NCLAT opined that the provisions of the Limitation Act, 1963 vide section
238A of the Code will be applicable to all nonperforming asset cases provided they meet the
criteria of Article 137 of the Schedule to the Limitation Act, 1963 and that the extension of
the period of limitation can only be done by way of application of section 5 of the Limitation
Act, 1963, if any case for condonation of delay is made out.
In the matter of Invent Assets Securitization and Reconstruction Pvt. Ltd. Vs. Xylon Electrotechnic
Pvt. Ltd. [CA (AT) (Ins.) No. 677 of 2020, dated 11.08.2020], the NCLAT opined that the
application under section 7 of the Code is governed by Article 137 of the Limitation Act, 1963 and
any application filed by the FC for initiation of the CIRP beyond three years from the date of the
CDs account being classified as nonperforming asset, would be barred by limitation.
In the matter of Jayprakash Vyas Vs. Prabhat Steel Traders Pvt. Ltd. and Anr. [CA (AT) (Ins.) No.
1238 of 2019, dated 24.07.2020], the NCLAT opined that as acknowledgement of liability was
made after a lapse of about five years, a fresh period of limitation will not accrue since the period
of limitation was three years. Since the acknowledgement was made much later than the
prescribed period of limitation, the petitioner cannot claim the benefit of section 18 of the Limitation
Act, 1963, which provides a fresh period of limitation from the time when the acknowledgement
was so made.
In the case of Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminium Industries Pvt. Ltd. & Anr. [Civil
Appeal No. 6347 of 2019, dated 14.08.2020] the Supreme Court opined that any application filed
beyond 3 years from the date of default is barred by limitation. CIRP of the CD was set aside on
the ground that the application filed under section 7 of the Code is barred by limitation, with the
following observations:
(a) the Code is a beneficial legislation intended to put the CD back on its feet and is not a mere
money recovery legislation;
(b) CIRP is not intended to be adversarial to the CD but is aimed at protecting the interests of
the CD;
(c) intention of the Code is not to give a new lease of life to debts which are time-barred;

(d) the period of limitation for an application seeking initiation of CIRP under section 7 of the
Code is governed by Article 137 of the Limitation Act, 1963, and is, therefore, 3 years from
the date when right to apply accrues;
(e) trigger for initiation of CIRP by a FC is default on the part of the CD, that is to say, the right
to apply under the Code accrues on the date when default occurs;
(f) default referred to in the Code is that of actual non-payment by the CD when a debt has
become due and payable;
(g) if default had occurred over 3 years prior to the date of filing of the application, the application
would be time-barred save and except in those cases where, on facts, the delay in filing may
be condoned; and
(h) an application under section 7 of the Code is not for enforcement of mortgage liability and
Article 62 of the Limitation Act, 1963 does not apply to the application under consideration.
In the case of Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Ltd. &
Anr. [Civil Appeal No. 4952 of 2019, dated 18.09.2019] the Supreme Court opined that an
application which is filed under section 7 of the Code will fall within Article 137 instead of Article
62 of the Limitation Act, 1963.
In the matter of Rupesh Kumar Gupta Vs. Punjab National Bank & Anr [CA(AT)(Ins.) No. 1119 of
2019, dated 28.02.2020] the NCLAT opined that from the minutes of meeting of the Board of
Directors, it can be clearly stated that there was an acknowledgement of debt by the CD as on the
relevant date and the application for initiating CIRP was not time barred.
In the case of Digamber Bhondwe Vs. JM Financial Asset Reconstruction Company Ltd. [
CA(AT) (Ins.)No. 1379 of 2019, dated 05.03.2020] the NCLAT opined that Tte relevant date is the
date of default and article 137 of the Limitation Act, 1963 is applicable, for application under
section 7 or 9 of the Code. It was also clarified that though a ‘decree-holder’ is covered in the
definition of ‘creditor’ under section 3(10) of the Code, he cannot initiate CIRP under section 7
and 9 as FC and OC do not include a ‘decree-holder’.
In the case of Sagar Sharma & Anr. Vs. Phoenix ARC Pvt. Ltd. & Anr. [Civil Appeal No. 7673
of 2019, dated 30.09.2019] the Supreme Court opined that the date of coming into force of the
Code does not and cannot form a trigger point of limitation for applications filed under the Code.
Power to make rules [Section 239]
(1) The Central Government may, by notification, make rules for carrying out the provisions of
this Code.
(2) Without prejudice to the generality of the provisions of sub-section (1), the Central
Government may make rules for any of the following matters, namely: —
(a) any other instrument which shall be a financial product under of section 3(15)

3.204 ECONOMIC LAWS
(b) other accounting standards which shall be a financial debt under clause (d) of sub-
section (8) of section 5;
(c) the form, the manner and the fee for making application before the Adjudicating
Authority for initiating corporate insolvency resolution process by financial creditor
under of section 7(2);
(d) the form and manner in which demand notice may be made and the manner of
delivery thereof to the corporate debtor under section 8(1);
(e) the form, the manner and the fee for making application before the Adjudicating
Authority for initiating corporate insolvency resolution process by operational
creditor under section 9(2);
(ea) other proof confirming that there is no payment of an unpaid operational debt by the
corporate debtor or such other information under section 9(3)(e);
(f) the form, the manner and the fee for making application before the Adjudicating
Authority for initiating corporate insolvency resolution process by corporate applicant
under section 10(2);
(fa) the transactions under the second proviso to section 21(2);
(fb) the transactions under the Explanation I to section 29A(c)
(fc) the transactions under the second proviso to section 29A(i);
(fd) the form, particulars, manner and fee for making application before the Adjudicating
Authority under section 54C(2);
(fe) the conditions and restrictions with which the promoters, members, personnel and
partners of the corporate debtor shall exercise and discharge contractual or statutory
rights and obligations under section 54H (c);
(g) the persons who shall be relative under clause (ii) of the Explanation to section 79(1);
(h) the value of unencumbered single dwelling unit owned by the debtor under section
79(13)(e);
(i) the value under clause (c), and any other debt under clause (f), of sub-section (14)
of section 79;
(j) the form, the manner and the fee for making application for fresh start order under
section 81(3);
(k) the particulars of the debtor's personal details under section 81(3)(e);
(l) the information and documents to support application under section 86(3);

(m) the form, the manner and the fee for making application for initiating the insolvency
resolution process by the debtor under section 94(6);
(n) the form, the manner and the fee for making application for initiating the insolvency
resolution process by the creditor under section 95(6);
(o) the particulars to be provided by the creditor to the resolution professional under
section 103 (2);
(p) the form and the manner for making application for bankruptcy by the debtor under
section 122 (1)(b);
(q) the form and the manner for making application for bankruptcy by the debtor under
section 122(1)(b);
(r) the other information under section 123(1)(d);
(s) the form, the manner and the fee for making application for bankruptcy under of
section 123(6);
(t) the form and the manner in which statement of financial position shall be submitted
under section 129 (2);
(u) the matters and the details which shall be included in the public notice under section
130 (2);
(v) the matters and the details which shall be included in the notice to the creditors
(w) the manner of sending details of the claims to the bankruptcy trustee and other
information under sub-sections (1) and (2) of section 131(1) and (2);
(x) the value of financial or commercial transaction under clause (d) of subsection (1) of
section 141;
(y) the other things to be done by a bankrupt to assist bankruptcy trustee in carrying out
his functions under section 150(1)(d);
(z) the manner of dealing with the surplus under section 170(4);
(za) the form and the manner of proof of debt under section 171 (2)(c);
(zb) the manner of receiving dividends under section 171(7);
(zc) the particulars which the notice shall contain under section 176(2);
(zd) the salaries and allowances payable to, and other terms and conditions of service
of, the Chairperson and members of the Board under section 189(5);
(ze) the other functions of the Board under section 196(1)(u);

3.206 ECONOMIC LAWS
(zf) the other funds under section 222 (1)(c);

(zg) the other purposes for which the fund shall be applied under section 222(2)(d);
(zh) the form in which annual statement of accounts shall be prepared under section
223(1)
(zi) the purpose for which application for withdrawal of funds may be made under section
224(3)
(zj) the manner of administering the fund under section 224(4);
(zk) the manner of conducting insolvency and liquidation proceedings under section 227;
(zl) the form and the time for preparing budget by the Board under section 228;
(zm) the form and the time for preparing annual report under section 229(1);
(zn) the time up to which a person appointed to any office shall continue to hold such
office under section 243(2)(vi).
Power to make regulations [Section 240]

(1) The Board may, by notification, make regulations consistent with this Code and the rules
made thereunder, to carry out the provisions of this Code.
(2) In particular, and without prejudice to the generality of the foregoing power, such
regulations may provide for all or any of the following matters namely;
(a) the form and the manner of accepting electronic submission of financial information under
section 3(9)(a);
(b) the persons to whom access to information stored with the information utility may be provided
under section 3(9)(d);
(c) the other information under section 3(13)(f);
(d) the other costs under section 5(13)(e);
(e) the cost incurred by the liquidator during the period of liquidation which shall be liquidation
cost under section 5(16);
(ea) the other costs under section 5(23C)(e);
(f) the other record or evidence of default under clause (a), and any other information under
clause (c), of sub-section (3) of section 7;
(g) [* * * ]
(h) the period under section 10(3)(a);
(i) the supply of essential goods or services to the corporate debtor under section 14 (2);

(ia) circumstances in which supply of critical goods or services may be terminated, suspended or
interrupted during the period of moratorium under section 14(2A);
(j) the manner of making public announcement under section 15(2);
(ja) the last date for submission of claims under section 15(1)(c);
(k) the manner of taking action and the restrictions thereof under section 17(2)(b);
(l) the other persons under section 17(2)(d);
(m) the other matters under section 17(2)(d);
(n) the other matters under sub-clause (iv) of clause (a), and the other duties to be performed by
the interim resolution professional under clause (g), of section 18;
(na) the number of creditors within a class of creditors under section 21(6A)(b);
(nb) the remuneration payable to 207uthorized representative under clause (ii) of the proviso to
section 21(6B);
(nc) the manner of voting and determining the voting share in respect of financial debts under
section 21(7);
(o) the persons who shall comprise the committee of creditors, the functions to be exercised such
committee and the manner in which functions shall be exercised under the proviso to section
21(8);
(p) the other electronic means by which the members of the committee of creditors may meet
(q) the manner of assigning voting share to each creditor under section 24(7);
(r) the manner of conducting the meetings of the committee of creditors under section 24(8);
(s) the manner of appointing accountants, lawyers and other advisors under section 25(2)(d);
(sa) other conditions under section 25(2)(h);
(t) the other actions under section 25(2)(k);
(u) the form and the manner in which an information memorandum shall be prepared by the
resolution professional section 29(1);
(v) the other matter pertaining to the corporate debtor under the Explanation to section 29(2);
(w) the manner of making payment of insolvency resolution process costs under clause (a), the
manner of payment of debts under clause (b), and the other requirements to which a
resolution plan shall conform to under clause (d), of subsection (2) of section 30;
(wa) other requirements under section 30(4);

3.208 ECONOMIC LAWS
(x) the fee for the conduct of the liquidation proceedings and proportion to the value of the
liquidation estate assets under section 34(8);
(y) the manner of evaluating the assets and property of the corporate debtor under clause (c),
the manner of selling property in parcels under clause (f), the manner of reporting progress
of the liquidation process under clause (n), and the other functions to be performed under
clause (o), of sub-section (1) of section 35;
(z) the manner of making the records available to other stakeholders under section 35(2);
(za) the other means under section 36 (3)(a);
(zb) the other assets under section 36(4)(e);
(zc) the other source under section 37(1)(g);
(zd) the manner of providing financial information relating to the corporate debtor under section
37(2);
(ze) the form, the manner and the supporting documents to be submitted by operational creditor
to prove the claim under section 38(3);
(zf) the time within which the liquidator shall verify the claims under section 39(1);
(zg) the manner of determining the value of claims under section 41;
(zh) the manner of relinquishing security interest to the liquidation estate and receiving proceeds
from the sale of assets by the liquidator under clause (a), and the manner of 208ealizing
security interest under clause (b) of sub-section (1) of section 52;
(zi) the other means under section 52(3)(b);
(zj) the manner in which secured creditor shall be paid by the liquidator under section 52(9);
(zk) the period and the manner of distribution of proceeds of sale under section 53(1);
(zka) such number of financial creditors and the manner of proposing the insolvency professional,
and the form for approving such insolvency professional by the financial creditors under
clause (e), the persons who shall provide approval under the proviso to clause (e), the form
for making a declaration under clause (f) of subsection (2) of section 54A;
(zkb) the form for obtaining approval from financial creditors under sub-section (3), and the persons
who shall provide approval under the proviso to sub-section (3) of section 54A;
(zkc) the other conditions for the base resolution plan under clause (c), and such information and
documents under clause (d) of sub-section (4) of section 54A;
(zkd) the form in which the report is to be prepared under clause (a), such reports and other
documents under clause (b), and such other duties under clause (c) of subsection (1), and
the manner of determining and bearing the fees in sub-section (3) of section 54B;

(zke) the form for providing written consent of the insolvency professional under clause (b), the
form for declaration under clause (c), the information relating to books of account and such
other documents relating to such period under clause (d) of subsection (3) of section 54C;
(zkf) the form and manner for making application for termination of the prepackaged insolvency
resolution process under section 54D(3);
(zkg) the form and manner of making public announcement under section 54E(1)(c);
(zkh) the manner of confirming the list of claims under clause (a), the manner of informing creditors
under clause (b), the manner of maintaining an updated list of claims under clause (c), the
form and manner of preparing the information memorandum under clause (g), and such other
duties under clause (i) of sub-section (2) of section 54F;
(zki) such other persons under clause (c), the manner of appointing accountants, legal or other
professionals under clause (e), such other matters under sub-clause (iv) of clause (f) and the
manner of taking other actions under clause (g) of sub-section (3) of section 54F;
(zkj) the manner of determination of fees and expenses as may be incurred by the resolution
professional under section 54F(6);
(zkk) the manner of bearing fees and expenses under section 54F(7);
(zkl) the form and manner of list of claims and preliminary information memorandum under section
54G (1);
(zkm) the conditions under section 54H(a);
(zkn) the manner of alteration of the composition of the committee of creditors under the proviso to
section 54-I(1);
(zko) the form and manner of making application under section 54J(1);
(zkp) the manner of inviting prospective resolution applicants under section 54K(5);
(zkq) the other conditions under section 54K(6);
(zkr) the conditions under clause (a) and the manner of providing the basis for evaluation of
resolution plans and the information referred to in section 29 under sub-section (7) of section
54K;
(zks) the conditions under the proviso to section 54K(10);
(zkt) the manner and conditions under section 54K(11);
(zku) the form and manner of filing application under the proviso to section 54K(12);
(zkv) the other requirements under section 54K(13);
(zkw) the form for submission of written consent under section 54-O(2)(b);
(zl) the other means under clause (a) and the other information under clause (b) of section 57;

3.210 ECONOMIC LAWS
(zm) the conditions and procedural requirements under section 59(2);

(zn) the details and the documents required to be submitted under section 95(7);
(zo) the other matters under section 105(3)(c);
(zp) the manner and form of proxy voting under section 107(4);
(zq) the manner of assigning voting share to creditor under section 109(2);
(zr) the manner and form of proxy voting under section 133(3);
(zs) the fee to be charged under section 144(1);
(zt) the appointment of other officers and employees under sub-section (2), and the salaries and
allowances payable to, and other terms and conditions of service of, such officers and
employees of the Board under sub-section (3), of section 194;
(zu) the other information under section 196(1)(i);
(zv) the intervals in which the periodic study, research and audit of the functioning and
performance of the insolvency professional agencies, insolvency professionals and
information utilities under clause (r), and mechanism for disposal of assets under clause (t),
of sub-section (1) of section 196;
(zw) the place and the time for discovery and production of books of account and other documents
under section 196(3)(i);
(zx) the other committees to be constituted by the Board and the other members of such
committees under section 197;
(zy) the other persons under section 200(b) and (d);
(zz) the form and the manner of application for registration, the particulars to be contained therein
and the fee it shall accompany under section 201(1);
(zza) the form and manner of issuing a certificate of registration and the terms and conditions
thereof, under section 201(3);
(zzb) the manner of renewal of the certificate of registration and the fee therefor, under section
201(4);
(zzc) the other ground under section 201(5)(d);
(zzd) the form of appeal to the National Company Law Appellate Tribunal, the period within which
it shall be filed under section 202;
(zze) the other information under section 204(g);
(zzf) the other grounds under Explanation to section 196;

(zzg) the setting up of a governing board for its internal governance and management under clause
(e), the curriculum under clause (l), the manner of conducting examination under clause (m),
of section 196;
(zzh) the time within which, the manner in which, and the fee for registration of insolvency
professional under section 207(1);
(zzi) the categories of professionals or persons, the qualifications and experience and the fields
(zzj) the manner and the conditions subject to which the insolvency professional shall perform his
function under section 208(2)(f);
(zzk) the form and manner in which, and the fee for registration of information utility under section
210(1);
(zzl) the form and manner for issuing certificate of registration and the terms and conditions
thereof, under section 210(3);
(zzm) the manner of renewal of the certificate of registration and the fee therefor, under section
210(4);
(zzn) the other ground under section 210(5)(d);
(zzo) the form, the period and the manner of filling appeal to the National Company Law Appellate
Tribunal under section 211;
(zzp) the number of independent members under section 212;
(zzq) the services to be provided by information utility and the terms and conditions under section
213;
(zzr) the form and manner of accepting electronic submissions of financial information under
section 214(b) and (c);
(zzs) the minimum service quality standards under section 214(d);
(zzt) the information to be accessed and the manner of accessing such information under section
214(f);
(zzu) the statistical information to be published under section 214(g);
(zzv) the form, the fee and the manner for submitting or accessing information under section
215(1);
(zzw) the form and manner for submitting financial information and information relating to assets
(zzx) the manner and the time within which financial information may be updated or modified or
rectified under section 216;

3.212 ECONOMIC LAWS
(zzy) the form, manner and time of filing complaint under section 217;
(zzz) the time and manner of carrying out inspection or investigation under section 218(2);
(zzza) the manner of carrying out inspection of insolvency professional agency or insolvency
professional or information utility and the time for giving reply under section 219;
(zzzb) the procedure for claiming restitution under sub-section (6), the period within which such
restitution may be claimed and the manner in which restitution of amount may be made under
sub-section (7) of section 220;
(zzzc) the other funds of section 222(1)(c). More
Application of this Code to micro, small and medium enterprises [Section 240A]
(1) Notwithstanding anything to the contrary contained in this Code, the provisions of clauses
(c) and (h) of section 29A shall not apply to the resolution applicant in respect of corporate
insolvency resolution process or pre-packaged insolvency resolution process of any micro, small
and medium enterprises.
(2) The Central Government may, in the public interest, by notification, direct that any of the
provisions of this Code shall—
(a) not apply to micro, small and medium enterprises; or
(b) apply to micro, small and medium enterprises, with such modifications as may be specified
in the notification.
(3) A draft of every notification proposed to be issued, shall be laid before each House of
Parliament, while it is in session, for a total period of thirty days which may be comprised in one
session or in two or more successive sessions.
(4) If both Houses agree in disapproving the issue of notification or both Houses agree in
making any modification in the notification, the notification shall not be issued or shall be issued
only in such modified form as may be agreed upon by both the Houses, as the case may be.
(5) The period of thirty days shall not include any period during which the House is prorogued
or adjourned for more than four consecutive days.
(6) Every notification issued under this section shall be laid, as soon as may be after it is
issued, before each House of Parliament.
The expression here "micro, small and medium enterprises" means any class or classes of
enterprises classified as such under section 7(1) of the Micro, Small and Medium Enterprises
Development Act, 2006.
Rules and Regulations to be laid before Parliament [Section 241]
Every rule and every regulation made under this Code shall be laid, as soon as may be after it is
made, before each House of Parliament, while it is in session, for a total period of thirty days

which may be comprised in one session or in two or more successive sessions, and if, before the
expiry of the session immediately following the session or the successive sessions aforesaid, both
Houses agree in making any modification in the rule or regulation or both Houses agree that the
rule or regulation should not be made, the rule or regulation shall thereafter have effect only in
such modified form or be of no effect, as the case may be; so, however, that any such modification
or annulment shall be without prejudice to the validity of anything previously done under that rule
or regulation.
Power to remove difficulties [Section 242]
(1) If any difficulty arises in giving effect to the provisions of this Code, the Central Government
may, by order, published in the Official Gazette, make such provisions not inconsistent with the
provisions of this Code as may appear to be necessary for removing the difficulty: Provided that
no order shall be made under this section after the expiry of five years from the commencement
of this Code.
(2) Every order made under this section shall be laid, as soon as may be after it is made,
before each House of Parliament.
Repeal of certain enactments and savings [Section 243]
(1) The Presidency Towns Insolvency Act, 1909 (3 of 1909) and the Provincial Insolvency Act,
1920 (5 of 1920) are hereby repealed.
(2) Notwithstanding the repeal under sub-sections (1) –
(i) all proceedings pending under and relating to the Presidency Towns Insolvency Act 1909,
and the Provincial Insolvency Act 1920 immediately before the commencement of this
Code shall continue to be governed under the aforementioned Acts and be heard and
disposed of by the concerned courts or tribunals, as if the aforementioned Acts have not
been repealed;
(ii) any order, rule, notification, regulation, appointment, conveyance, mortgage, deed,
document or agreement made, fee directed, resolution passed, direction given,
proceeding taken, instrument executed or issued, or thing done under or in pursuance of
any repealed enactment shall, if in force at the commencement of this Code, continue to
be in force, and shall have effect as if the aforementioned Acts have not been repealed;
(iii) anything done or any action taken or purported to have been done or taken, including any
rule, notification, inspection, order or notice made or issued or any appointment or
declaration made or any operation undertaken or any direction given or any proceeding
taken or any penalty, punishment, forfeiture or fine imposed under the repealed
enactments shall be deemed valid;
(iv) any principle or rule of law, or established jurisdiction, form or course of pleading, practice
or procedure or existing usage, custom, privilege, restriction or exemption shall not be

3.214 ECONOMIC LAWS
affected, notwithstanding that the same respectively may have been in any manner
affirmed or recognised or derived by, in, or from, the repealed enactments;
(v) any prosecution instituted under the repealed enactments and pending immediately
before the commencement of this Code before any court or tribunal shall, subject to the
provisions of this Code, continue to be heard and disposed of by the concerned court or
tribunal;
(vi) any person appointed to any office under or by virtue of any repealed enactment shall
continue to hold such office until such time as may be prescribed; and
(vii) any jurisdiction, custom, liability, right, title, privilege, restriction, exemption, usage,
practice, procedure or other matter or thing not in existence or in force shall not be revised
or restored.
(3) The mention of particular matters in sub-section (2) shall not be held to prejudice the
general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the
effect of repeal of the repealed enactments or provisions of the enactments mentioned in the
Schedule.
Transitional provisions [Section 244]
(1) Until the Board is constituted or a financial sector regulator is designated under section
195, as the case may be, the powers and functions of the Board or such designated financial
sector regulator, including its power to make regulations, shall be exercised by the Central
Government.
(2) Without prejudice to the generality of the power under sub-section (1), the Central
Government may by regulations provide for the following matters: -
(a) recognition of persons, categories of professionals and persons having such qualifications
and experience in the field of finance, law, management or insolvency as it deems necessary,
as insolvency professionals and insolvency professional agencies under this Code;
(b) recognition of persons with technological, statistical, and data protection capability as it
deems necessary, as information utilities under this Code; and
(c) conduct of the corporate insolvency resolution process, insolvency resolution process,
liquidation process, fresh start process and bankruptcy process under this Code.
Section 245 to 255 deals with the amendments of certain Acts:
Section Amendment of Act Amendment in the manner
specified in Schedule
245 Indian Partnership Act, 1932 First Schedule
246 The Central Excise Act, 1944 Second Schedule

247 The Income-tax Act, 1961 Third Schedule

248 The Customs Act, 1962 Fourth Schedule
249 The Recovery of Debts due to Banks and Financial Fifth Schedule
Institutions Act, 1993
250 The Finance Act, 1994 Sixth Schedule
251 The Securitisation and Reconstruction of Financial Seventh Schedule
Assets and Enforcement of Security Interest Act,
2002
252 The Sick Industrial Companies (Special Provisions) Eighth Schedule
Repeal Act, 2003
253 The Payment and Settlement Systems Act, 2007 Ninth Schedule
254 The Limited Liability Partnership Act, 2008 Tenth Schedule
255 The Companies Act, 2013 Eleven Schedule

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© The Institute of Chartered Accountants of India

Term 'Insolvency' can be used for-

If, untreated insolvency, it will lead to-

For non-corporates Corporates

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

The detailed procedure for initiation of CIRP by stakeholders is described as follows:

Control of Assess the

• individual, • revive the

© The Institute of Chartered Accountants of India

4 Notification dated November 15, 2019

© The Institute of Chartered Accountants of India

Extent and Commencement of the Code:

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(e) 5Personal guarantors to corporate debtors (CD);

© The Institute of Chartered Accountants of India

3. IMPORTANT DEFINITIONS [SECTIONS 3 AND 5]

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(b) safeguarding and administering assets consisting of financial products, belonging to

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(30) Corporate applicant means—

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Home buyers / allottees are Financial Creditors

© The Institute of Chartered Accountants of India

appointed as a result of non-initiation of the interim resolution process, it is clear that,

© The Institute of Chartered Accountants of India

(b) a key managerial personnel or a relative of a key managerial personnel of the

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

4. CORPORATE INSOLVENCY RESOLUTION PROCESS

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Filing of Application with Appointment of Interim Formation of Committee

Invitation of Expression of Preparation of Information Appointment of Resolution

Submission of Resolution Evaluation of Resolution Plans

Resolution Plan Resolution Plan

Resolution Plan Approved Resolution Plan Rejected

© The Institute of Chartered Accountants of India

Application to National Company Law Tribunal

Operational creditor any person to whom a operational debt is owed &

Corporate debtor A corporate person who owes a debt to any person

Initiation of corporate insolvency resolution process (CIRP) by financial

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Allottees under a real estate project – [Second Proviso to section 7(1)]

© The Institute of Chartered Accountants of India

(4) Filing of application [Section 7(2)]

© The Institute of Chartered Accountants of India

(7) Admission / Rejection of Application by the Adjudicating Authority –

(8) Acceptance date is the date of commencement of CIRP [[Section 7(6)]