|Procedure in case of Corporate Debtor under Insolvency and Bankruptcy Code, 2016
Source : http://www.legalserviceindia.com
Author : sabooankur
Published on : August 29, 2017
Procedure in case of Corporate Debtor under Insolvency and Bankruptcy Code, 2016
I & B code is the codification of laws and its one of its kind which inter- alia shifts the control of the management of corporate persons as well as other persons defined under the Code from debtor driven to creditors driven.
Steps Involved as per latest amendments and judicially settled issues are:
Application for initiation of Corporate Insolvency Resolution Process (CIRP) can be filed by following persons:
Financial Creditor, Operational Creditor and Corporate Debtor.
The minimum amount of the default shall be one lakh rupees or more for matters relating to insolvency and liquidation.
Types of Creditors:
There are three types of creditors: Operational Creditor (including workmen and employees), financial creditors and creditors who do not come under the previous two categories. The third type of category of the creditors implied to be taken as the creditors as per the notification issued by the Insolvency and Bankruptcy Board of India via its Press release dated 16th August, 2017 as The Insolvency and Bankruptcy Board of India has amended these regulations today to provide for a form (Form F) for submission of claims by creditors other than financial and operational creditors. It is still not clarified whether this third type of creditor can initiate CIRP proceedings before the NCLAT.
Filling of Application by Operational Creditors:
· The application before Adjudicating Authority has to be filed under Section 9 of the Insolvency & Bankruptcy Code, 2016.
Filling of Application by Corporate Debtor:
In addition to the creditors as mentioned above, corporate debtor by its own can also file application for initiation of corporate resolution process under section 10 of the Code.
Proceedings before NCLT:
· The ‘adjudicating authority’ is duty bound to give a notice to the corporate debtor before admission of a petition under Section 7 or Section 9 is Notice as with the rules of natural justice, as stipulated under Section 424 of the Companies Act, 2013. (A well settled proposition in the case of M/s Innoventive Industries Ltd. v/s ICICI Bank subsequently was reiterated in the case of Starlog Enterprises Limited v/s ICICI Bank by Hon’ble NCLAT ).
Appointment of Interim Resolution Professional:
In case of financial creditor/ corporate debtor: It is mandatory on the part of the financial creditor that along with the application furnishes the name of the resolution professional proposed to act as an interim professional.
Public announcement of the CIRP shall be immediately made as will be directed by the Adjudicating authority after admission of the Application.
Submission of Claims:
The financial creditors shall submit their proof of claims by electronic means only. All other creditors may submit the proof of claims in person, by post or by electronic means.
Formation of committee of creditors:
The committee of creditors (COC) shall be constituted by the IRPs and the first meeting of the COC shall take place within a period of seven days of its constitution.
Appointment of Resolution Professional:
The committee of creditors may, in the first meeting either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional.
Preparation of Information Memorandum:
Resolution Professional shall prepare information Memorandum as per the code.
Preparation of Resolution Plan:
Resolution plan can be proposed by any person for insolvency resolution of the corporate debtor and shall submit it to the resolution professional. For this purpose, he shall be termed as “Resolution Applicant”.
Time- Line for completing corporate resolution process:
The corporate resolution process shall be completed in 180 days from the date the petition is admitted. However, if the resolution to extend the process of resolution process beyond 180 days but not more than 90 days passed by committee of creditors having a vote of seventy-five per cent of the voting shares, such extension shall be valid and no other such extension can be granted thereafter.
If the resolution plan is put before the Adjudicating authority after the dead line or not in the manner prescribed under the Code may pass an order requiring the corporate debtor to be liquidated. It is interesting to note that during the existence of resolution process also, the committee of creditors may take direction from NCLT to liquidate the Corporate Debtor. The resolution professional will automatically perform the duties of the liquidator if not replaced. Proceeds from the sale of the liquidation assets shall be distributed in order of priority mentioned under the code.
Dissolving the Corporate Debtor:
Upon the assets of corporate debtor completely liquidated and the liquidator making an application, the NCLT shall pass an order dissolving the corporate debtor.