64

65
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Registration of ARC (Section
3)
1) Conditions to be fulfill by SRC:-
a) SRC has not incurred losses in any of Registration if company-
3 preceding FY
b) SRC has made adequate
arrangements for realisation of
financial assets & shall be able to pay c) Failed to comply with any conditions
periodical returns & redeem on
respective due dates on investments registration has been granted to it
made in company by QIB or other
persons;
c) Directors of SRC have adequate
professional experience in matters
78
related to finance
d) Any of its directors has not been
convicted of any offence involving
moral turpitude
e) sponsor of an ARC is a fit & proper
person
f) SRC has complied with or is in a
position to comply with prudential
norms specified by Reserve Bank
2) Company is registered as a SRC, it
must obtain prior approval of RBI for
following purposes:-
a) Any substantial change in its
management
b) Change of location of its registered
office
c) Change in its name
Cancellation of certificate of
registration (Section 4)
1) RBI may cancel certificate of
a) Ceases to carry on business of SRC
b) Ceases to receive or hold any
investment from a QIB
subject to which certificate of
d) Fails to comply with any direction
issued by Reserve Bank
e) Fails to maintain accounts in
accordance with requirements of any
law
f) Fails to submit or offer for inspection 1) If any financial asset, of a borrower acquired
its books of account or other relevant by an ARC, comprise of secured debts or more
documents
g) Fails to obtain prior approval of
Reserve Bank
2) In case SRC is aggrieved by order of
cancellation of certificate of registration 2) On receipt of such application for transfer of
by Reserve Bank, then it may prefer an all pending applications, Appellate Tribunal may,
appeal, within a period of 30 days from pass an order for transfer of pending applications
date on which such order of
cancellation is communicated to it, to
CG
SARFAESI ACT, 2002 (Chart 2.1 )
Acquisition of rights or interest in
financial assets (Section 5)
SRC may acquire financial assets of any bank or
financial institution-
a) By issuing a debenture or bond or any other give a notice of acquisition of
security for consideration agreed upon
b) By entering into an agreement with such bank
or financial institution for transfer of such
financial assets to such company
Transfer of pending applications to any
one of Debts Recovery Tribunals in
Issue of security by raising
certain cases (Section 5A)
of receipts or funds by ARC
than one bank or financial institution for
recovery of which such banks or financial
institutions has filed applications before two or
more Debts Recovery Tribunals
to any one of Debts Recovery Tribunals.
Notice to obligor &
discharge of obligation of
such obligor (Section 6)
1) Bank or financial institution may creating, declaring, assigning, limiting or
financial assets by any ARC to
concerned obligor
2) obligor shall make payment to
concerned ARC in discharge of any
of obligations in relation to
financial asset
(Section 7)
1) Any ARC, may, after acquisition
of any financial asset, offer
security receipts to qualified
buyers
2) ARC may raise funds from
qualified buyers by formulating
schemes for acquiring financial
assets & shall keep & maintain
separate & distinct accounts in
respect of each such scheme
Exemption from registration of Other functions of SRC Power of Reserve Bank to
security receipt (Section 8) (Section 10)
Any security receipt issued by ARC & not
extinguishing any right, title or interest,
to or in immovable property except in so
far as it entitles holder of security
receipt to an undivided interest afforded
by a registered instrument, or any
transfer of security receipts, shall not
require compulsory registration
Measures for assets
reconstruction ( section 9 )
ARC may, for purposes of asset
reconstruction, provide for any one or
more of following measures, namely:—
1) Proper management of business of
borrower
2) Sale or lease of a part or whole of
business of borrower;
3) Rescheduling of payment of debts
payable by borrower
4) Enforcement of security interest
5) Settlement of dues payable
6) Taking possession of secured assets
7) Conversion of any portion of debt into
shares of a borrower company
Power of Reserve
determine policy & issue
Bank to carry out
directions (Section 12)
audit & inspection
SRC May:-
(Section 12 B)
1) Act as an agent for any Reserve bank may give directions
bank or FI for purpose of to any ARC in particular as to:
recovering their dues from 1) Type of financial asset of a bank 1) Reserve Bank may, for
borrower or FI which can be acquired & carry out audit &
procedure for acquisition of such inspection of an ARC from
2) Act as a manager on such
assets & valuation thereof time to time.
fee as may be mutually
agreed upon between parties 2) Aggregate value of financial 2) For securing proper
assets which may be acquired by management of an ARC, by
3) As receiver if appointed by any SRC an order-
any court or tribunal
3) Fee & other charges which may a) remove Chairman or any
be charged or incurred for director or appoint
management of financial assets additional directors on
Resolution of disputes board of directors of ARC
4) Transfer of security receipts
(Section 11) issued to qualified buyers b) Appoint any of its
officers as an observer to
Where any dispute relating observe working of board
to SRC or non-payment of
Power of Reserve Bank to of directors of such ARC
any amount due including Call for Statements &
interest arises amongst any information (Section 12 A)
of parties, bank, or FI, or SRC
or QIB, such dispute shall be
Reserve Bank may direct ARC to
settled by conciliation or
furnish it within such time as may
arbitration
be specified by Reserve Bank, with
such statements & information
relating to business or affairs of
such SRC
 SARFAESI ACT, 2002 (Chart 2.2)
Enforcement of security interest (Section 13)

1) Where borrower makes a 3) Borrower fails to discharge 4) Discharge from payment:- 6) Right related to transfer of secured assets 9) Role of liquidator with respect to 12) Filing of an application
default payment of debt:- his liability:- Any payment made by any person by secured creditor:- workmen dues:- by secured creditor:
Then, secured creditor may Following measures to to secured creditor shall give such Any transfer of secured asset after taking liquidator shall intimate secured
require borrower by notice in recover his secured debt- person a valid discharge as if he possession thereof by secured creditor shall creditor workmen’s dues in Where dues of secured
writing to discharge in full his a) Take possession of secured has made payment to borrower vest in transferee all rights in, or in relation accordance with provisions & in creditor are not fully
liabilities to secured creditor assets including right to to, secured asset transferred as if transfer case such workmen’s dues cannot satisfied with sale
within 60 days transfer by way of lease, had been made by owner of such secured be ascertained , liquidator shall proceeds, he may file an
assignment or sale for asset intimate estimated amount of application in form &
5) Right with respect to immovable
realising secured asset workmen’s dues manner as may be
2) Notice prescribing details of property:-
prescribed to Debts
debts:- b) Take over management of a) Where sale of an immovable 7) Recovery of expenses from borrower:- 10) In case of deposits of amount of Recovery Tribunal
business, including right to property, for which a reserve price workmen dues by secured creditor:

79
a) Notice shall give details of
amount payable by borrower & transfer by way of lease, has been specified, has been All costs, charges & expenses shall be 13) Rights of secured
secured assets in event of non- assignment or sale for postponed for want of a bid of an recoverable from borrower In case secured creditor deposits creditors in relation to
payment of secured debts realising secured asset amount not less than such reserve estimated amount of workmen’s secured assets:
price, it shall be lawful for any dues, such creditor shall be liable to
c) Appoint any person to 8) Payment of dues of secured creditors: a) Rights of a secured
officer of secured creditor, if so pay balance of workmen’s dues or
b) If borrower makes any manage secured assets creditor under this Act
authorised by secured creditor in entitled to receive excess amount,
representation or raises any possession of which has been a) Secured assets shall not be transferred by may be exercised by one
this behalf, to bid for immovable if any, deposited by secured
objection, secured creditor shall taken over by secured way of lease assignment or sale by secured or more of his officers
property on behalf of secured creditor with liquidator
consider such representation or creditor creditor; & authorised in this behalf
creditor at any subsequent sale.
objection in such manner as may be
d) Any money is due or may b) In case, any step has been taken by
prescribed
c) & if rejection is not become due to borrower, to b) If secured creditor, declared to secured creditor for transfer by way of lease 11) Furnishing of undertaking by
acceptable then he shall pay secured creditor, so much be purchaser of immovable or assignment or sale of assets before secured creditor: b) No borrower shall, after
communicate within 15 days of of money as is sufficient to property at any subsequent sale, tendering of such amount no further step secured creditor shall furnish an receipt of notice, transfer
receipt of such representation pay secured debt amt of purchase price shall be shall be taken by such secured creditor for undertaking to liquidator to pay by way of sale, lease or
or objection reasons for non- adjusted towards amount of claim transfer by way of lease or assignment balance of workmen’s dues otherwise any of his
acceptance secured assets

Chief Metropolitan Magistrate
or District Magistrate to assist
secured creditor in taking
possession of secured asset
(Section 14)
Secured creditor may, for purpose of
taking possession or control of secured published in English language & in a
asset, request, in writing, Chief
Metropolitan Magistrate to take
possession thereof.
on such request being made to him-
80
a) take possession of such asset &
documents relating thereto; and
b) forward such asset & documents to
secured creditor within a period of 30
days from the date of application
No compensation to directors
for loss of office (Section 16):
No managing director or any other
director or a manager or any person in
charge of management of business of
borrower shall be entitled to any
compensation for loss of office or for
premature termination under this Act
Manner & effect of take over of management (Section 15)
1) Appointment of persons by secured
creditors:
i) When management of business of a
borrower is taken over by a SRC or by a
secured creditor, secured creditor may, by
publishing a notice in a newspaper
newspaper published in an Indian
language in circulation in place where
principal office of borrower is situated,
appoint as many persons as it thinks fit-
a) In case Borrower is Co. - Director
b) Other cases Administrator of business
of borrower
ii) On publication of above notice - All
person holding as office as a director, &
other person holding any office having
power to control & direction of business of
borrower shall be deemed to vacate their
office
2) When any contract of management
shall be deemed to be terminated:
Any contract of management between
borrower & any director or manager
thereof holding office as such immediately
before publication of above notice, shall
court, except with consent of secured
be deemed to be terminated.
creditor
SARFAESI ACT, 2002 (Chart 2.3)
Application against measures to recover secured debts (Section 17)
3) Exercise of powers of person so 5) Obligation of secured 1) Filing of an application:- 3) Measures taken shall 4) Measures taken shall be in
appointed for borrowers: creditor: be in compliance: compliance:
Any person aggrieved by any
of measures taken by secured
All directors appointed in accordance a) Secured creditor is If, Debts Recovery Secured creditor shall be
with above notice shall, for all purposes, under an obligation to creditor or his authorised Tribunal, comes to entitled to take recourse to one
be directors of company of borrower & restore management of officer make an application to conclusion that any of or more of measures to recover
such directors or administrators, powers business of borrower, Debts Recovery Tribunal measures are not in his secured debt.
having jurisdiction in matter
are derived from MOA or AOA of on realisation of his accordance, it may, by
company of borrower or from any other debt in full, in case of within 45 days order-
5) Time limit for disposal of an
source takeover of
a) Declare recourse to application:
management of
business of a borrower 2) Jurisdiction :- any one or more Any application made under sub-
4) Management of borrower taken by by such secured An application shall be filed measures taken by section (1) shall be dealt with by
secured creditor as Debts Recovery Tribunal within
secured creditor: creditor. before Debts Recovery
Tribunal within local limits of invalid 60 days from date of such
Where management of business of a
whose jurisdiction- application
borrower, is taken over by secured b) If any secured b) Restore possession of
creditor- creditor jointly with a) Cause of action, wholly or secured assets to
a) It shall not be lawful for shareholders other secured creditors in part, arises borrower 6) Order by appellate tribunal
of such company or any other person to or ARC or FI has b) Where secured asset is c) Pass such other for expeditious disposal of
nominate or appoint any person to be a converted part of its located;or direction as it may pending application:
director of company debt into shares of a
c) Branch or any other office consider appropriate & If application is not disposed of
borrower company &
of abank or financial necessary in relation to by Debts Recovery Tribunal
thereby acquired
b) No resolution passed at any meeting controlling interest in institution is maintaining an any of recourse taken within the period of 4 months,
account in which debt claimed by secured creditor any part to application may
of shareholders of such company shall be borrower company,
given effect to unless approved by is outstanding for time being. make an application, to
such secured creditors
secured creditor Appellate Tribunal for directing
shall not be liable to
Debts Recovery Tribunal
c) No proceeding for winding up of such restore management of
company or for appointment of a business to such
receiver in respect thereof shall lie in any borrower
 SARFAESI ACT, 2002 (Chart 2.4)
Making of application to
Court of District Judge in
certain cases (Section 17A)
In case of a borrower residing in
State of Jammu & Kashmir,
application under section 17 shall be Enforcement of Security
made to Court of District Judge in
that State having jurisdiction over
borrower which shall pass an order Shall be deemed always to
on such application.
Appeal to Appellate Tribunal
(section 18)
a) Any person aggrieved, by any
order made by DRT, may prefer an
appeal to Appellate Tribunal.
Within 30 days from date of receipt
of order of DRT.
b) Appeal shall be entertained only
if borrower has deposited 50% of
amount of debt due from him
Validation of fees levied Right to lodge a caveat
(Section 18A) (Section 18C)
Any fee levied & collected for Notice of caveat: Where a caveat has
preferring an appeal to DRT been lodged -
before commencement of
Secured creditor or any other person
by whom caveat has been lodged shall
Interest & Recovery of Debts
serve notice of caveat by registered
Laws (Amendment) Act, 2004.
post, acknowledgement due, on
person by whom application has been
have been levied & collected in
or is expected to be made
accordance with law
Validity of period of caveat -
Appeal to High Court in Caveat shall not remain in force after
certain cases expiry of period of 90 days from date
on which it was lodged unless
(Section 18B)
application or appeal has been made
before expiry of period
a) Any borrower residing in
State of Jammu & Kashmir &
aggrieved by any order made
by Court of District Judge under Right of borrower to receive
section 17A- may prefer an compensation and costs in
appeal, to High Court, within 30 certain cases (Section 19)
days from date of receipt of
order of Court of District Judge
If DRT or the Court of District Judge,
b) No appeal shall be preferred on an application made to Appellate
unless borrower has Tribunal, holds that possession of
deposited, with Jammu and secured assets by secured creditor is
Kashmir High Court, 50 per cent not in accordance with provisions of
of amount of debt due from this Act, then he shall be entitled to
him as claimed by secured payment of such compensation &
creditor costs
81
82
83
84
85
 The Foreign Contribution (Regulation) Act, 2010 (Chart 4.5)
I) Confiscation of article or currency or
security obtained in contravention of the
Act (Section 28)
Any article or currency or security which
is seized shall be liable to confiscation if
such article or currency or security has
been adjudged under section 29 to have
been received or obtained in
contravention of this Act
90
II) Adjudication of confiscation (Section
19)
a) Without limit, by Court of Session
within local limits of whose jurisdiction
seizure was made.
b) Subject to such limits as may be
prescribed, by such officer, not below
rank of an Assistant Sessions Judge
III) Procedure for confiscation (Sec 30)
No order of adjudication of confiscation
shall be made unless a reasonable
opportunity of making a representation
has been given
Adjudication Miscellaneous
IV) Appeal (Section 31) I) Power to call of
information or document &
Investigation into cases
under the Act
(Sections 42 &43)
II) Power of Central
Government to give
directions & delegation of
powers (Sections 46 & 47)
III) Power to make rules
(Section 48)
V) Revision of orders by Central Government (Section 32) IV) Power to exempt in
certain cases (Section 50)
a) Power to central Government: V) Act not to apply to certain
CG may either- of its own motion or on an application for revision Government transactions
by person registered under this Act, call for & examine record (Section 51)
VI) Application of other laws
b) Restriction on entertainment of revision: not barred (Section 52)
CG shall not of its own motion revise any orde if order has been
made more than 1 year previously VII) Power to remove
c) In case of an application for revision under this section – difficulties (Section 53)
Application must be made within 1 year from date on which order
in question was communicated to him or the date on which he
otherwise came to know of it, whichever is earlier
 The Arbitration And Conciliation Act, 1996 (Chart 5.1)
Arbitration - General Provisions

I) Alternate methods of dispute III) Arbitration VI) Basic Features of VII) Distinction between Arbitration and Litigation IX) Arbitration Agreement
resolution a) It is a method of adjudication of disputes Arbitration Litigation Arbitration
a) Arbitration b) by a neutral third person(s) selected by a) Arbitration a) Takes place in court a) Place of arbitration is a) Definition d) Requirements of a valid
b) Conciliation parties agreement chosen by parties "It means an agreement by arbitration agreement
c) Mediation c) who renders a final & binding decision b) Arbitrator b) A judge is assigned by b) Arbitrator(s) is selected by parties to submit to arbitration • Writing
d) Negotiation c) Seat of arbitration court parties all or certain disputes which • Clarity of consent
IV) Process of arbitration d) Party autonomy & c) Procedure followed by c) Parties have adequate have arisen or which may arise • Defined Legal relationship
II) Primary legislation dealing procedure court is fixed & determined flexibility to choose between them in respect of a • Final & binding award
with alternate methods of Arbitral Tribunal e) Finality of outcome by Rules of court procedures that would apply defined legal relationship, • Specific words
dispute resolution (neutral third to their arbitration whether contractual or not"

91
f) Confidentiality • Dispute
a) Legislation g) Arbitral Awards d) Proceedings are generally d) Confidentiality is one of • Arbitrability
• The Arbitration and h) Enforcement of open to public most important characteristic b) Types • Signature
Conciliation Act, 1996 Adjudication arbitral awards of arbitration • Arbitration clause
• Legal Services Authorities Act, e) Court decisions are subject e) Arbitral awards can be • Submission agreement e) Termination of an
1987 VII) Authorities under to numerous appeals challenged on very limited arbitration agreement
Arbitral Award Act grounds
• The Code of Civil Procedure, c) General Principles • Mutual consent
(binding decision)
1908 a) Judicial authority f) It is often difficult to f) Enforcing an arbitral award • It is an agreement • Termination of principal
b) Methods b) Court enforce judgments of court of in foreign nations is much enforceable under law contract
• Arbitration c) Supreme or High one country in a foreign easier & is governed by • Consent (consensus ad idem) • Death of parties
• Conciliation Court or any person or country international treaties • Ouster of jurisdiction • Operation of Law
• Mediation institution designated • Doctrine of separability
Party 1 Party 2
• Judicial Settlement by such court • Competency to rule on its
• Lok Adalat jurisdiction
• Permanent Lok Adalat

I) Arbitral Tribunal
An arbitrator(s) or arbitral tribunal
performs function of a judge, in other
words an arbitrator adjudicates/ judges
dispute between parties
II) Who can be an arbitrator?
Any person capable of contracting, in
theory can be an arbitrator.
III) Appointment of Arbitral Tribunal
a) An important principle of arbitration is
92
principle of party autonomy. Party
autonomy means ‘freedom to choose’
whether it is procedure, venue, seat or
arbitrators
b) Parties have right to choose persons
who would act as arbitrators in their
dispute
c) There are two aspects to appointment,
namely number of arbitrators, & actual
procedure of appointment
IV) Number of Arbitrators
Parties tend to have high level of
freedom when deciding on number of
persons that can be chosen as
arbitrators
The Arbitration And Conciliation Act, 1996 (Chart 5.2)
Arbitral Tribunal
V) Procedure for appointment
a) Parties will jointly appoint
b) Each party will appoint one & two
arbitrators would appoint rest
c) Appointment would be made by an
unrelated person or institution, e.g.
President of ICAI, President FICCI, etc
Step 1
Parties fail to appoint arbitrator in
accordance with agreed procedure OR
Parties had not decided on a procedure
to appoint an arbitrator
Step 2
Parties are required to proceed in
accordance with default procedure noted
in the Act
Step 3
If any party fails to follow the default
procedure, then other party can
approach court.
Step 4
Court may require parties to act in
accordance with their agreement OR may
itself appoint arbitrator. While
appointing an arbitrator court must take
into account qualifications that parties
had agreed upon.
VI) Requirements of an arbitral
tribunal
a) Arbitrator could be of any
nationality
b) Capable of contracting
c) Lack of Bias
VII) Duties & liabilities of
arbitrator
a) Conduct arbitral proceedings
without delay
b) Remain at all times impartial
i.e. treat both parties equally
c) Keep all matters concerning
arbitration confidential
d) Deliberation
e) Avoid unilateral communication should be removed
with one party
f) Ensure all documents &
communication received from one
party is communicated to other
party
g) Ensure that award & all other
decisions comply with legal
requirements
h) Ensure that he/she himself at
all times comply with legal
requirements associated with
arbitrator
VIII) Termination, I) Definition
Removal & substitution An arbitral award is similar to
of arbitral tribunal a judgment given by a court
a) When arbitrator leaves of law. It is given by arbitral
voluntarily tribunal as a decision on
b) When all parties various issues in a matter
involved in arbitration which parties had placed
agree that arbitrator before arbitral tribunal
should be removed
c) Operation of law II) General Principles
• Arbitrator unable to a) Who can challenge
continue b) Authority
• When arbitration c) Timeline
process ends d) Automatic stay
d) When the court
decides that arbitrator III) Types of arbitral award
a) Final Award
b) Interim Award
c) Settlement Award
d) Additional Award
IV) Consequence of
challenge
a) Set aside
b) Confirm
c) Modify
d) Remit back to arbitral
tribunal
Arbitral Award Conciliation
IV) Requirements of an arbitral award I) Definition
a) Must be a decision by majority There is no single definition of
b) Must be made in writing, signed & dated Conciliation. It is an alternative
c) Must be reasoned method of dispute resolution.
d) Must not be vague
e) Should be capable of being performed II) Characteristics
f) Must not be illegal (against public policy) a) Voluntary
b) Non Adversarial
V) Challenging an Award c) Assisted procedure
a) under Section 13 – challenge of bias against d) Finality of settlement
arbitral tribunal e) Confidentiality
b) under Section 16 – overstepping of jurisdiction
by the arbitral tribunal III) Conciliation in India
c) under Section 34 – specific grounds for a) Number of Conciliator
reviewing an award b) Appointment of Conciliators
c) Procedure of Conciliation
i) The first set of grounds includes: d) Bar on judicial or arbitral
• Party is under some incapacity proceedings
• Invalid arbitration agreement
• Party is not given proper notice about V) Settlement Agreement
appointment of arbitrator or arbitral proceedings a) Initial steps
• Award deals with disputes not submitted to b) Agreement
arbitration c) Enforcement
• AT or procedure was not in accordance with
necessary requirements under law VI) Confidentiality
ii) Second set of grounds which court can look at its Both conciliator & parties are
own motion, includes: required to keep all matter
relating to proceedings &
• Subject matter of dispute is not capable of
settlement by arbitration settlement agreement
• It is in contravention of public policy of India confidential
93
94
95
 Since, it is better to understand through
Pictures/ Slides.

96
It is advisable to revise
Insolvency and Bankruptcy Code, 2016
through PPT’s
97
 Chapter 6 - Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.2)
REGULATORY MECHANISM
Structure of the Code
iali\....------ -----------------------
- - -

Part 1: Part 11:

Short titl 7 chapter
e s
'xt ent CIRP Liq
definitio1n ' Uidation
s Fast' frac
kc
. .
Voluntary1R .. .
W1nding '
lJp . .
ICSI -IPA l
--
ICAI - IPA 1

98
ICMAI -IPA 1
Structure of the Code
 Chapter 6 - Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.3)
Section 4 - Applicability of Part II

Immediate suspension of
Powers of Board of
Directors

I Appoint
Rs. 1 Cr

99
CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP}

Corporate Insolvency Resolution is process during which financial

creditors assess whether debtor's business is viable to continue &
options for its rescue & revival Operational
creditor
If insolvency resolution process fails or financial creditors decide
Section 5(7)- Section 5(20)­ Section3(8)-
that business of debtor cannot be carried on profitably & it should "flnanclal creditor" means "operatlonal creditor" "corporatedebtor" means
means a person to whom �
any person to whom a a corporate person who
be wound up, debtor will undergo liquidation process & assets of financial debt* Is owed & an operational debt• Is owes a debt to any person
Includes a person to whom owed & Includes any
debtor are realized & distributed by liquidator such debt has been legally person to whom such debt
assigned or transferred to has been legally assigned
or t.-ansferred
Insolvency Resolution Process provides a collective mechanism to
lenders to deal with the overall distressed position of a corporate (21) " operational debt" means a claim in respect of the provision of goods or
services including employment or a debt in respect of the repayment of dues arising
debtor under any law for the time being in force and payable to the Central Government, any
State GoYemmcnt or any local authority:
 Chapter 6 Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.4)
0 m nd
Notice

Demand
Notice

Commencement
of CIRP

Communlcet,e t:O
Operatton■I Cr•dltor &
Corpor•t• Debtor

Within

Application I
+

book,o of acco..nt & ,oud,

other doeument.a

a copy of any record with lnfor-matton utlUtv conffrmln& reaolutlon profea.alon•I

that there Is no P•vment of an unpaid operational debt propo••d to •ct •• Interim

100
by the corporat-e debtor,. ff available; end reaolutlon professional

any o�h•r proof conflrmtnc t'hat t'.her• I• no payment

of an unpaid opera·tfonal debt by th• corporate debtor
the SR paas•d by ahar•hold••• of th•
corporate debtor or the resolution P••••d
-�- �
- ROIAft rglvlng
notk to
°' auch other Information ., •• may b• prescribed ... ; by at l•••t S/4th of the tot•I number of Commenc.ement appllc. ntto
partner• of t-he corporate debtor. •• th• e,a.,. of CIRP r Uyd�f d
maybe, approvlns flllns of th• appllc:atlon. - ; wtlhln7 d•�
application made ls complete

no p ym nt o unp id op r tion I d
(ll
lnvol
orpor t o n"'\lernber or _pnrtltc."r of' dliC corpo: te debtor ,vho •� utJ\01"1!:C'd to 1,"'lnke
n npplsc h n f ,· the c nte ,n .. 1'. nc>� , ' luh n p :..' uod (1
by operational creditor
c-ou!.LJ.futa. 1:.\.1. the c--o:,:p01 re dc:bt01�. or

no noti of di put nt'llgu, the opernn011 -- ru,d n:.:c:J1..U'C'<':;

no di IJX"l"""' •10Jl '\IC"r tl\C' fin.. 1ol f. t\U�

any r

application made is incomplete

payment of unpaid operational debt

creditor has not delivered invoice or

notice for payment to the corporate
debtor
Corpor�te i::lebtor who has
notice of dispute has been received
comp eted C1RP 12 months
disciplinary proceeding pending against 1precedrng date of making of
any proposed resolution professional application
 Chapter 6 - Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.5)
Section 12 - Time-limit for completion of insolvency Section 14 - Moratorium
resolution process
Completion
Within 180 days Moratorium
Date of Admi:;:;ion of CIRP
of Application

•supply of essential aood$Or

services to corponte debtor not
be terminated or suspended or
Interrupted durin& moratorium
Resolution period

vote of 66% of Professional •Acts prohibited durina

Montorium period, shall not
voting shares apply to such transactions notified
by CG
owneror
I ssor

101
moratorium

a1alnstCo. of claims from Penalties forfalseor misleading

creditors
Claims
moratorium
/_more ·t:, nem/ ◄:> Last date for submission of claims
no,.,n
noun moratorium plur I nou, moratori plural noun moratorium
a temporary pc-ohlblUon of an aclMty
moratorium on th u of dnft n b
yn y.,., embargo ban p,ohibitlon suspension postponement stay stoppage ha freeze
stanc!Still ,.spite hiatus delay deferm n1 defeff I adjournment
t mpor ry mor I m on no rI g

A legally �uJhgr;l,ed postponement before some obligation must be

discharged Expenses of public announcement shall be borne by applicant which may
Suspension of ongoing activity be reimbursed by Committee of Creditors, to the extent, it ratifies them ,..--.....
 Chapter 6 - Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.6)
Section 16 - Appointment, tenure & Power of interim resolution professionnl

Adjudlc.tlnc Authority Within 14 Days

a)act& 7 b}take suoh I c)hav� d)have the e)be 7

execute in actions, in the authority to authority to acoess responsible
the name& manner and acoess the the books of for complying
on behalf of subject to electronic acoount, records with the
the suoh records of and other relevant requirements
corporate restrictions, corporate documents of under any law
debtonll IS may be debtor from corpor-.te debtor for the time
deeds, specified by information available with beinc in force
receipts,& the Board; utility havinc covemment on behalf of
other financial authorities, the corporate
documents, Information of statutory auditors, debtor:
if any; the corporate acoountants and
debtor; suoh other persons
IS may be
speolfied; and

102
,t
I

'I
financial position

Key roles of an Interim Resolution Professional

Within 7 Days
i) Issuance of public notice of the Corporate Insolvency
(ii) Resolution prOGess

(iii) Collation of claims received

(iv) Constitution of the Committee of Creditors

(v) Conduct of the first meeting of the Committee of Oeditors

7
 Chapter 6 - Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.7)
* All decisions of committee of creditors shall be taken by a vote of not less than 75% of voting
share
(28) "mting share" means the shm"' of tl� votmg nghts of a smgk fumnctnl
crcditOI' Ill th� COUUlll!t� of crcditOl'S wluch IS b.iscd Oli ti� propOl'tlOll of tl� M'lllCi..iJ
ckbt owed to such fmm1C1nl et-editor m 1dauon to llie fu1ru1C10l ckbt O\\"Cd by the
roq:,orote ckbtor.
record of the
default
name of • Where corporate debtor does not have any financial creditors, CoC be constituted &
resolution
professional comprise of such persons to exercise such functions in such manner specified by Board
proposed to . -
act as interim
resolution
professional Commencement • CoC has right to require resolution professional to furnish any financial information at any
Other
• of CIRP time during CIRP
Information I Within 7 days 11
Communicate to • Resolution professional shall make available any financial information so required within 7
financial creditor &
corporate d ebtor days of such requisition

103
,,

• corporate debtor owes financial debts to 2 or more financial creditors as part of a

consortium or acreement, each such financial creditor shall be part of �oC

• Any person is a financial creditor as well as operational creditor, he shall be

• financial creditor to the extent of financial debt owed & be included in the committee
• operational creditor to the extent of operational debt owed
- ---
• operational creditor has assigned or legally transferred any operational debt to financial
creditor, assignee or transferee be considered as operational creditor
�

• Terms of financial debt extended as part of consortium arrangement or syndicated facility or 000/,••••• •••••••••••-of••�••�•
u
issued as securities provide for single trustee or agent to act for all financial creditors, each creditors, may attend meetirc
(no rii:ht to vote) 1
financial creditor may-
ope rational Absence not invalidate proceedires of such
(i) !!Jlh2.ri.u trustee or agent to act on his behalf in CoJ: to the extent of his voting share; meetinc
aeditors or their
(ii) represent himself in CoC to the extent of his voting share; representatives if
(iii) appoint an insolvency professional (other than resolution professional) at his own cost to amount of their Any member of f2£_may appoint insolvency
represent himself in CoC to the extent of his voting share; or aggregate dues is professional other than resolution professional
not less than 10% to represent him in meetirc
(iv) exercise his right to vote to the extent of his voting share with one or more financial
of the debt (Fees of such insolvency professional be borne
creditors jointly or severally.
- by such creditor)
 Chapter 6 - Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.8)

Section 27 - Replacement of resolution professional by committee of

creditors

opinion Replacement Vote of 66"

of RP

Corpor11t. Adjudicating
Where any disciplinary proceedings are penu111; 0;0111:.l
Debtor Authority
proposed resolution professional, resolution professional
IRP appointed shall continue till appointment of another
resolution professional under this section

104
change capital structure

record change In ownersh p lnte<est

CoC may report actions of resolution

professional to Board for taking necessary
actions against him under Code
Resolution Professional'sprimary function is to take over the management of the
make changes In appointment or
corporate borrower and operate its business asa going concern te<ms of contract of statutory
auditors / Internal auditors/
peuonnt! Spet�byCoC
Thrust of Code isto allow a shift of control from the defaulting debtor's
These actions taken without
management to its creditors approval
 (Chart 6.9)
Section 29 - Preparation of information memorandum

prepare Information
Memorandum

Attend meeting
n (no right to
9J "finnncinlposition·. inrelntion toan · }Xl'SOfl. nx:u: the fin.mdnl infon ..·1tion
of :i pe= ru; on n �:tin d.·ue: vote)
10 "infoml:ltion nie-i11or:mdum·· nxans :i nxnl01'31ldwn prepared b)· resolution
profe ·on,'\l tmtkr sub-5tttion 1 of scction _q :
25 " lmion :ipplic-:uu" nlC'ans an· person who submi :i resohuion pl:in to

105
the resolution profi ·on.-u:
26 ·resolution plan"' lllC'ans :i pl:m propos«t b · an · person for inso1'�nc ·
resolution of the C'01p0rote debtor n.s :i going cone-em in :icrorcl..'Ultt \\ilh P:in ll:

M•morandum
R CO(d In
M•morandum daub.ase
t

contravene -�-
It p,ovid s for
any of Cfofr)H4fi:F
man gm ntof
provisions
affairs of
of law
Co<po<ate debtor
lmplcmentotlon 3-
su.p,cf'Mlon of
rNOlutionpltin
 (Chart 6.10)

Debtor
contravenes
aareed
resolution plan

After determination
that Corporate O.btor
has c,ontrawnecl

106
Propose name of another
Insolvency professional to be
appointed •s liquidator

tt�tr:m,ttiffiti:�'!:.;t�fti�iil'Z!.·�• no suit or other legal proceeding shall be

.i
Instituted by or aplnst corporate debtor

�h11llbep11ldtothellquld11tor r
proceeds of liqu idation estate
-------------------------------
 Chapter 26 (Chart 6.11)

ownership rights possession of corporate debtor, including­

(i) assets held in trust for any third party;
assets that may or may not be in possession (ii) ballment contracts;
tangible assets, whether movable or immovable (iii) all sums due to any workman or employee
(iv) other contractual arrangements which do not
intangible assets stipulate transfer of title but only use of assets;
(v) other assets notified by CG
assets subject to determination of ownership by To the extent of To the extent
court or authority assets in security collateral held by financial Financial debt of Operational
services providers and are subject to netting and Debt
any assets or their value recovered through
set-off Such forrn/
proceedings for avoidance of transactions
manner & with
personal assets of any shareholder or partner of a in
any asset of corporate debtor in respect of which such supporting
corporate debtor information
a secured creditor has relinquished security documents
information utility
interest; assets of any Indian or foreign subsidiary of specified by Board
utility
any other property belonging to or vested in the corporate debtor
corporate debtor
other assets specified by Board
all proceeds of liquidation
-------

107
Section 37 - Powers of liquidator to access information Section 39 - Verification of claims

Within time
Liquidator shall have the power to access any Liquidator �erify Claims
specified by
information systems for purpose of admission & Board
proof of claims & identification of liquidation estate
assets May require
Documents/ evidences
necessary for verifying
claims from
provide information
Lii:iuidator
provide reasons for Creditor Other
not providing Person
Corporate
information Debtor
 Chapter 6 - Overview of Insolvency & Bankruptcy Code, 2016 (Chart 6.12)
Section 53 - Distribution of assets

Record in
Writing Dues to CG, SG for 2 years & unpaid dues of secured creditors
reasons for
rejedion

Section 41 - Determination of valuation of claims

•
Manner
Liquidator
specified by Equity Shareholders

108
Board

Accepting or
Rejectin Claim

Receipt of
such Decision
Within 14 Days
by Creditor Appeal
 Overview of Insolvency and Bankruptcy Code 2016 (6.13)
Fast Track Insolvency Resolution
for Corporate Persons
I) Who may apply?
a) small company as defined under
clause (85) of section 2 of Companies
Act, 2013,or
b) a Startup as defined in the notification
of the Government of India
c) an unlisted company with total assets,
as reported in financial statement of
immediately preceding FY, not exceeding
109
rupees 1 crore
II) Time period for completion
Fast track corporate insolvency
resolution process shall be completed
within a period of 90 days from
insolvency commencement date.
III) Extension
a) AA may extend time period for fast
track corporate insolvency resolution
process- for further period which shall
not be exceeding 45 days.
b) Extension of fast track corporate
insolvency resolution process under this
section shall not be granted more than
once.
Voluntary Liquidation of Corporate Persons (Section 59)
I) Person who may initiate
voluntary liquidation
proceeding
A corporate person who
intends to liquidate itself
voluntarily and has not
committed any default may
initiate voluntary liquidation
proceedings
II) Voluntary liquidation of a
corporate person shall meet
such conditions & procedural
requirements as may be
specified by Board
III) Conditions of initiation of voluntary liquidation IV) Notification to Registrar of
proceedings: company and the Board
a) A declaration from majority of directors of company
verified by an affidavit stating that- V) Commencement of
i) They have made a full inquiry into & they have liquidation proceeding
formed an opinion that either company has no debt or
that it will be able to pay its debts in full from VI) Application of provisions of
proceeds of assets to be sold in voluntary liquidation this Code
ii) Company is not being liquidated to defraud any VII) Application to adjudicating
person authority on complete wound
b) Declaration given above shall be accompanied with up of corporate person
audited financial statements & record of business
operations of company for previous 2 years or for
period since its incorporation, whichever is later & a VIII) Passing of an order of
report of valuation of assets of company, if any dissolution
prepared by a registered valuer
c) within 4 weeks of a declaration, there shall be- IX) Forward of copy of order
i) SR of members of company in a GM requiring Within 14 days
company to be liquidated voluntarily & appointing an
IPl to act as liquidator
ii) A resolution of members of company in a GM
requiring company to be liquidated voluntarily as a
result of expiry the period of its duration, if any, fixed
by its articles
iii) on occurrence of any event in respect of which
articles provide that company shall be dissolved, as
case may be & appointing an insolvency professional to
act as liquidator