The Insolvency and

Bankruptcy Code, 2016

Padmaja Dholakia
1. The Act applies to any company incorporated under the Companies At, 2013, or under any previous
company law.
2. Any other company governed by any special Act for the time being in force.
3. Any Limited Liability Partnership incorporated under the LLP Act, 2008
4. Personal guarantors to corporate debtors;
5. Partnership firms and proprietorship firms;
6. Such other body incorporated under any other law for the time being in force;
7. Individuals other than persons referred to in (4)
In relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.

Corporate Debtor: means a corporate person who owes a debt to any person.
Section 4: Insolvency proceedings can be commenced against any corporate body where the minimum amount
of the default is Rs.1 Lakh.
Section 6: Corporate Insolvency Resolution Process: Where any corporate debtor commits a default -,
i. a financial creditor,
ii. an operational creditor or
iii. the corporate debtor itself may initiate corporate insolvency resolution process in respect of such
corporate debtor in the manner provided.
Section 7: Initiation of corporate insolvency resolution process by financial creditor:
1. A financial creditor either by itself or along with other financial creditors may file an application for
initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating
Authority (NCLT) when a default has occurred.
2. The financial creditor shall make an application in such manner and form and pay such fees as prescribed.
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.
4. The Adjudicating Authority shall, within 14 days of the receipt of the application, ascertain the existence of
a default from the records of an information utility or on the basis or on the basis of other evidence
furnished by the financial creditor;
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;
b. Default has not occurred or the application under sub-section (2) is incomplete and any disciplinary
proceedings is pending against the proposed resolution professional, it may, by order, reject the
application.
6. The corporate insolvency resolution process shall commence from the date of admission of the application;
7. The Adjudicating Authority shall communicate –
a. the order under clause 5 a to the financial creditor and the corporate debtor
b. the order under clause 5 b to the financial creditor, within 7 days of admission or rejection of such
application.
Section 8: Insolvency Resolution by operational creditor –
1. An operational creditor may, on the occurrence of a default, deliver a demand notice (for payment )of
unpaid operational debt, along with a copy of an invoice demanding payment of the amount involved in
the default to the corporate debtor in such form as prescribed.
2. The corporate debtor shall, within a period of 10 days of the receipt of the demand notice or copy of the
invoice mentioned above, bring to the notice of the operational creditor –
a) the 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 form the
bank account of the corporate debtor; or
ii. By sending an attested copy of the record that the operational creditor has encashed a cheque
issued by the operational debtor.
Section 9: Application for initiation of corporate insolvency resolution process by operational creditor:
1. After the expiry of the period of 10 days from the date of delivery of the notice or invoice demanding
payment under sub-section 1 of section 8, if the operational creditor does not receive payment from the
corporate debtor or notice of the dispute under sub-section 2 of section 8, the operational creditor may file
an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.
2. The application shall be filed in such form and manner as may be prescribed.
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 operational 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 an unpaid operational debt by the corporate
debtor, or such information.
4. An operational creditor initiating a corporate insolvency resolution process under this section, may propose
a resolution professional to act as an interim resolution professional.
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 (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 or there is no record of dispute In the
information utility;
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;
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 record of dispute in the
information utility;
e. any disciplinary proceeding is pending against any proposed resolution professional
 Provided that the Adjudicating Authority, shall, before rejecting an application, give notice to the applicant
to rectify the defect in his application within 7 days of the date of receipt of such notice from the AA
(NCLT).
6. The corporate insolvency resolution process shall commence from the date of the admission of the
application under section 9(5).

Section 10: Initiation of corporate insolvency resolution process by a corporate applicant.

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 AA.
2. The application should be filed in such form and manner as prescribed;
3. All information relating to the books of accounts, the name of the resolution professional proposed; special
resolution passed by the shareholders of the corporate debtor or at least 3/4th of the total number o f
partners of the corporate debtor for filing the application;
4. The AA shall within 14 days – by an order- admit the application if it is complete; reject the application if it
is incomplete; provided that before rejection the applicant shall be given an opportunity to rectify the
defects in the application within 7 days of the receipt of the notice;
5. The corporate resolution process shall commence from the date of admission of the application.

Section 11: Persons not entitled to make an application:

a. A corporate debtor who is already undergoing corporate insolvency resolution process;
b. A corporate debtor having completed corporate insolvency resolution process 12 months 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 the resolution plan which
was approved 12 months preceding the date of making the application ; or
d. A corporate debtor in respect of whom a liquidation order has been made.

Section 12: Time-limit for completion of insolvency resolution process:

1. 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. The resolution professional shall file an application to the AA to extend the period of corporate insolvency
resolution process beyond 180 days, if instructed to do so by a resolution passes at a meeting of the
committee of creditors by a vote of 66% of the voting shares.
3. On receipt of an application under (2), if the AA if satisfied that it is needed, may extend the period beyond
180 days, by not more than 90 days; such extension shall not be granted more than once.

Section 13: Declaration of Moratorium and public announcement:

1. The AA shall after admission of the application, -
a. Declare a moratorium;
b. Cause a public announcement of the initiation of corporate insolvency resolution process and call
for the submission of claims under section 15;
 c. appoint an interim resolution professional as per section 16
2. The public announcement shall be made immediately after the appointment of the interim resolution
professional.
Section 14: Moratorium:
1. On the insolvency commencement date, the AA shall by an order declare moratorium for prohibiting all of the
following, namely –
a. the institution of suits, or continuing of pending suits, or proceedings against the corporate debtor including
execution of any decrees, judgement or order of 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 under SARFAESI Act, 2002
d. the recovery of any property by an owner or lessor where such property is occupied by or is in the
possession of the corporate debtor.
2. The supply of essential goods or services to all corporate debtor, shall not be terminated or suspended or
interrupted during the moratorium period.
3. The provisions of moratorium shall not apply to transactions of the Central Government
4. The order of moratorium shall have effect from the date of such order till the completion of the corporate
insolvency resolution process;