CHP 21

Corporate Insolvency Resolution

Process, Liquidation and Winding
Up: An Overview
 AUTHROTITIES UNDER IBC

Administrative
Judiciary Matters
Matters

Corporate Non Corporate

NCLT DRT

NCALT DRAT

High Court

Supreme Court
 DIFFERENCE BETWEEN INSOLVENCY AND BANKRUPTCY

INSOLVENCY
Insolvency denotes the general inability to pay his
debts
Insolvency describes a situation where the debtor
is unable to meet his/her obligations
BANKRUPTCY
“Bankruptcy” denotes a legal status of a person or an entity
who cannot repay debts to creditors.
Bankruptcy occurs when a court determines insolvency, and
gives legal orders for it to be resolved

Insolvency is a state Bankruptcy is the conclusion

If Insolvency is resolved it leads to Solvency State If Insolvency is not resolved it leads to bankruptcy in case of
which is positive individual and liquidation in case of corporates

CA MAYUR AGARWAL
 Earlier Insolvency Regime of India

Recovery of Debts Securitization and

Sick Industries
Companies Act, Due to bank and Reconstruction of Financial Companies Act,
Companies Act,
1956 Financial Institutions Assets and Enforcement of 2013
1985
Act,1993 Security Interest Act,2002
 INSOLVENY AND BANKRUPTCY CODE,2016

255 SECTIONS 5 PARTS

PART 1 PART 2 PART 3 PART 4 PART 5

Preliminary Insolvency Resolution Insolvency Resolution Regulation of Insolvency Miscellaneous

and Liquidation of and Liquidation of Professionals, Agencies Matters
Corporate Debtor Non Corporate and Information Utilities
Debtor

CA MAYUR AGARWAL
 Q-2 When does insolvency resolution is applicable? (Part II of IBC)

Section 4: Part II Insolvency Resolution under IBC

Corporate Debtor Minimum amount of Earlier the limit was

Default is Rs 1 crore Rs 1 lakh
Q-1 Who may initiate corporate insolvency resolution process under the Insolvency & Bankruptcy Code, 2016?

Section 6: Person Who may initiate Corporate Insolvency Resolution Process

Where any corporate debtor defaults

Financial Creditor Operational Creditor Corporate Debtor Itself

 INITIATION OF CIRP BY FINANCIAL CREDITOR-SECTION 7

1) Evidence or record of default

2) Name of Resolution Professional
3)Other Information
Financial Creditor Adjudicating Authority

14 Days

Admit such application Ascertain the

1) Default has occurred
2) No Disciplinary Proceedings
against RP
3) Application is complete
Corporate Debtor
CA Mayur Agarwal-8888022200
existence of Default
Reject such application
1) Default not occurred
2) Disciplinary Proceedings pending
against RP
3) Application is incomplete
 INITIATION OF CIRP OF OPERATIONAL CREDITOR-SECTION 8 and 9

Deliver a demand notice along with copy of invoice

Corporate Debtor
Operational Creditor

After expiry of 10 days

File application for initiating CIRP
Does not receive
before Adjudicating Authority
1) Payment
2) Notice of Dispute
Within 10 days
1) Existence of Dispute
2) Repayment
i) Record of Electronic Fund transfer
ii) Encash of Cheque

CA Mayur Agarwal-8888022200
 INITIATION OF CIRP BY CORPORATE DEBTOR HIMSELF-SECTION 10

Make application along with the following

Books of accounts and Interim Resolution Special resolution passes

other documents Professional by Shareholders

CA Mayur Agarwal-8888022200
 SUSPENSION OF INITIATION-SECTION 10A

Section 10A

No Application

Initiating CIRP shall be filed against corporate debtor

For defaults arising on or after 25th March 2020 for a

period of 6 months or further period,not exceedings
one year from such date, notified in this behalf

CA Mayur Agarwal-8087632076
 CG EXTENDED SUSPENSION OF INSOLVENCY PROFESSIONALBY ANOTHER 3 MONTHS

Central Exercise power 22nd December

Government conferred u/s 10A 2020

Extends further period by 3

months from 25th December
2020

CA Mayur Agarwal-8087632076
 TIME LIMIT FOR COMPLETION OF INSOLVENCY RESOLUTION PROCESS-SECTION 12

First Time Limit Extention Mandatory

Completion

180 Days 90 Days

Extention + Legal Proceedings

330 Days
 WITHDRAWAL OF APPLICATION

Application to withdraw CIRP

90 percent
Voting Share
Allow to withdraw
its Application
 MORATORIUM-SECTION 14

PASS ORDER DECLARING

MORATORIUM

Prohibit

Filing of suit or Transfering,Alienating Recover or enforce Recovery of Property

continuation of suit or or disposing assets security Interest by owner or Lessor
proceedings
 INTERIM RESOLUTION PROFESSIONAL

Powers of IRP

Take over In Charge of Day to Powers of Directors Appoint professional

management Day Affairs exercised by IRP and consultants to
assist him in duties
 INTERIM RESOLUTION PROFESSIONAL

Primary Duties

Make Public Invite Claims from Valuation of Corporate

Announcement of CIRP Creditors Debtor

Verify Claim

Make list of accepted Claim

Within 30 days
 RESOLUTION PROFESSIONAL

New Category Meeting Registered with

Professional Stipulated Criteria IBBI

CS Eligible to be
Resolution
registered after some
Professional
criteria
Appointed by 66%
Vote
Powers and Duties as
conferred by Insolvency
Bankruptcy Code
 COMMITTEE OF CREDITORS

Approves or Reject Extension of CIRP Liquidation of Ratification of

Resolution Plan Corporate Debtor expenses borne by RP

First Meeting Works under guidance

Appoints RP and supervision of COC
 RESOLUTION PLAN

Resolution is plan is Places such plan

submitted to RP before COC

Submitted for Approval

Accept COC shall approve the most
suitable plan

Reject
 INITIATION OF LIQUIDATION-SECTION 33

AA does not receive AA rejects the RP intimates to AA Resolution Plan is

the resolution plan resolution plan the decision of COC to approved but it is
Liquidate the contravened by
corporate debtor Corporate Debtor
 LIQUIDATOR

Definition-Section 5(18) Effect Duties

Insolvency Professional Board of Directors, Completion of the

appointed according to Key managerial Personnel Liquidation proceedings
provision of Chapter III or
Chapter V
Shall cease to effect
 WATERFALL ARRANGEMENT-SECTION 54

Insolvency Resolution Process and Liquidation Cost

Workmen dues ( upto 24 months) and Secured Creditors

Wages unpaid to employees upto 12 months

Financial Debt of unsecured Creditor

Government dues upto(upto 2 years) and unpaid secured creditor (to rank equally)

Any remaining debt and dues

Preference Shareholders,if any

Equity Shareholders
 PROCEDURE OF VOLUNTARY LIQUIDATION UNDER IBC

Submission of declaration stating that company will be able to pay its duties

Passing of Special Resolution for approving of voluntary liquidation

Public announcement inviting claims of all stakeholders (within 5 days)

Intimation to ROC and Board about approval (within 7 days)

Preparation of report and submission by liquidator within 45 days

Verification of claim within 30 days

Preparation of list of stakeholders within 45 days
 PROCEDURE OF VOLUNTARY LIQUIDATION UNDER IBC

Opening of Bank Account

Sale of Asset , recovery of monies

Distribution of proceeds from realization within 6 months

Submission of final report and application to NCLT

Submission of NCLT order to ROC within 14 days

 WINDING UP

Application for Acceptance of Appointment of Liquidation Dissolution

wing up winding up Liquidator Process
Application
 WINDING UP AND DISSOLUTION

Winding up Dissolution
Assets are realized,liabilities are paid of and surplus,if Legal existence comes to an end
any,is distributed among the shareholder

Handled by Liquidator/insolvency professional Dissolution can happen by order of Adjudicating Authority

Creditors can prove the claims during the winding up Creditors cannot prove claim upon dissolution

This is not possible in case of dissolution

 WINDING UP BY TRIBUNAL U/S 271

Company has passed Affairs of company is Just and Equitable

by Special Resolution conducted in Ground
fraudulent manner

Company has acted Default in filing Financial

against sovereignty Statements and Annual returns
and integrity of India for 5 consecutive years
 PETITION FOR WINDING UP- U/S 272

Company Contributories Person authorised

by Central
Government

Creditor or Creditors ROC