INSOLVENCY AND BANKRUPTCY CODE, 2016

EXPLANATIONS OF IMPORTANT DEFINITIONS 1-17

LINK TO THE LATEST VERSION OF IBC 2016

https://indiacode.nic.in/bitstream/123456789/2154/1/a2016-31.pdf

EXPLANATIONS OF IMPORTANT DEFINITIONS

The name of the act is Insolvency and Bankruptcy Code, 2016 [hereinafter ‘IBC’]

IBC was 31st Act of 2016 and it came into force on 5th August, 2016, vide Notification no. S.O. 2618(E), dated
5th August, 2016 (ss. 188 to 194), see Gazette of India, Extraordinary, Part II, sec. 3(ii).

There are two definition clauses in IBC. The first definition clause being Section 3, IBC deals with all the general
definition for the code while Section 5 deals with definition for Part I of the code, i.e. insolvency resolution process
and liquidation for corporate persons.

SECTION 3: DEFINITIONS [general definitions]

3 (7) “corporate person” means a company as defined in clause (20) of section 2 of the Companies Act, 2013
(18 of 2013), a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited
Liability Partnership Act, 2008 (6 of 2009), or any other person incorporated with limited liability under any
law for the time being in force but shall not include any financial service provider;

3 (8) “corporate debtor” means a corporate person who owes a debt to any person;

3 (10) “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;

3 (11) “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;

3 (12) “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;

PART II

INSOLVENCY RESOLUTION PROCESS AND LIQUIDATION FOR CORPORATE PERSONS

Section 4 states that this chapter shall only apply to matters relating to insolvency and liquidation for corporate
debtor when the default is of minimum amount of rupees one lakh. The Central Government may however set a
higher default amount which may not be more than One Crore.

Section 5 DEFINITION [certain terms contained under Part II of the IBC]

Section 5 (5) deals with “corporate applicant” which means—

(a) corporate debtor; or

(b) a member or partner of the corporate debtor who is authorized 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 (5A) defines “corporate guarantor” as a corporate person who is the surety in a contract of guarantee
to a corporate debtor.

Section 5(6) “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(7) “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;

The Hon’ble Supreme Court in the case of Pioneer Urban Land and Infrastructure Limited v. Union of India
2019 has held that homebuyers come under the definition of financial creditors.

Section 5 (8) “financial debt” means a debt along with interest, if any, which is disbursed against the consideration
for the time value of money and includes—

Section 5 (20) defines “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;

What is operational debt” has been defined under Section 5(21) as “operational debt” means a claim in respect
of the provision of goods or services including employment or a debt in respect of the 1 [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;

Corporate Insolvency Resolution Process

Section 6 deals with person who can initiate Corporate Insolvency Resolution Process [hereinafter CIRP]. As
per Section 6, when any corporate debtor commits default, a financial creditor, an operational creditor or the
corporate debtor itself my initiate CIRP in respect of such corporate debt.

Initiation of CIRP by a Financial Creditor.

Section 7 deals with Initiation of CIRP by a financial creditor.

(1) A financial creditor either by itself or jointly with 1 [other financial creditors, or any other person on
behalf of the financial creditor, as may be notified by the Central Government,] may file an application
for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating
Authority when a default has occurred.

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.

(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.

(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 fourteen 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.]

(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:

Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-
section (5), 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.

(6) The corporate insolvency resolution process shall commence from the date of admission of the
application under sub-section (5).
 (7) The Adjudicating Authority shall communicate— (a) the order under clause (a) of sub-section (5) to the
financial creditor and the corporate debtor.

Initiation of CIRP by Operational Creditor.

8. Insolvency resolution by operational creditor. —

(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 may be prescribed.

(2) The corporate debtor shall, within a period of ten 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;

The National Company Law Appellate Tribunal in the case of Ahluwalia Contracts (India) Ltd. v. Raheja
Developers Limited has held that an application under Section 9, IBC can only be rejected if the dispute in
relation to the claim pre-exists the date of receipt of demand notice or invoice issued under Section 8(2), IBC.

The Supreme Court in the case of Mobilox Innovations Private Ltd. v. Kirusa Software Private Ltd. 2017
has held that the dispute should be ‘bonafide’ and not a frivolous one. The court relying upon the Oxford
Dictionary held that it should be genuine, substantial and is likely to succeed on a point of law.

(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 enchased a cheque issued by
the corporate debtor.

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.

9. Application for initiation of corporate insolvency resolution process by operational creditor—

(1) After the expiry of the period of ten 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 under sub-section (1) shall be filed in such form and manner and accompanied with such
fee 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 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 4[by the corporate debtor, if
available;]

5[(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 other information, as may be prescribed];

(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 fourteen 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 1[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 2[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:
 Provided 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.

(6) The corporate insolvency resolution process shall commence from the date of admission of the application
under sub-section (5) of this section.

Initiation of CIRP by Corporate Debtor Itself

10. Initiation of corporate insolvency resolution process by 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 Adjudicating Authority.

(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.

3[(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 professional 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) 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; 1[and no disciplinary proceeding is pending against the proposed
resolution professional] or

(b) reject the application, if it is incomplete: 2[or any disciplinary proceeding is pending against the
proposed resolution professional]

Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to
rectify the defects in his application within seven days from the date of receipt of such notice from the
Adjudicating Authority.

(5) The corporate insolvency resolution process shall commence from the date of admission of the application
under sub-section (4) of this section
Section 11, IBC deals with persons who are not entitled to make application. —The following persons shall
not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter,
namely: —

(a) a corporate debtor undergoing a corporate insolvency resolution process; or

(b) a corporate debtor having completed corporate insolvency resolution process twelve 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 resolution plan which was
approved twelve months before the date of making of an application under this Chapter; or

(d) a corporate debtor in respect of whom a liquidation order has been made. Explanation—For the purposes
of this section, a corporate debtor includes a corporate applicant in respect of such corporate debtor.

Timeline of CIRP

12. Time-limit for completion of insolvency resolution process. —

(1) Subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period
of one hundred and eighty days from the date of admission of the application to initiate such process.

(2) The resolution professional shall file an application to the Adjudicating Authority to extend the period of
the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a
resolution passed at a meeting of the committee of creditors by a vote of 3[sixty-six] per cent. of the
voting shares.

(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 one hundred
and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by
such further period as it thinks fit, but not exceeding ninety days:

Provided that any extension of the period of corporate insolvency resolution process under this section shall
not be granted more than once.

Provided further that the corporate insolvency resolution process shall mandatorily be completed within a
period of three hundred and thirty days from the insolvency commencement date, including any extension
of the period of corporate insolvency resolution process granted under this section and the time taken
in legal proceedings in relation to such resolution process of the corporate debtor:

Provided also 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 ninety days from the date of commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2019- [This applies only to those proceedings which are pending]
 In the case of Surinder Trading Company Limited v. J.K. Jute Mills Limited, the Hon’ble Supreme Court
held that the timeline of 14 days and 7 days under Section 7, 9 0r 10 is not mandatory and it is directory. If
sufficient cause is shown as to the delay, the same should be condoned, else it would result in travesty of
justice.

The word ‘shall’ should be read as ‘may’ as the same does not impact the timeline of 180 days under Section
12.

CORPORATE INSOLVENCY RESOLUTION PROCESS [FLOW-CHART]

After the admission of an application under Section 7, 9 or 10 as the case may be.

Imposition of Moratorium under Section 14, IBC and making of a public announcement under Section 13, IBC.

Appointment of Insolvency Resolution Professional.

Committee of Creditors and Power of Decision.

Information Memorandum

Submission of Resolution Plan [Satisfaction of all the debts]

Approval of the Resolution Plan

Appeal, if any.
Section 13, IBC deals with the Imposition of Moratorium and Public announcement. As per Section 13, the NCLT
has to do three things.

1. Declare a moratorium under Section 14.

2. Appoint an Interim Resolution Professional in the manner as laid down in Section 16.
3. Cause a public announcement to be made under Section 15, immediately after the appointment of Interim
Resolution Professional.

Moratorium

Section 14, IBC deals with Moratorium and the NCLT has to declare moratorium on the date of commencement
of CIRP, by an order for prohibiting the following, namely:

(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating
Authority shall by order declare moratorium for prohibiting all of the following, namely: —

(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 Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (54 of 2002);

(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.

(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) The provisions of sub-section (1) shall not apply to—

(a) such transaction as may be notified by the Central Government in consultation with any financial regulator;

(b) a surety in a contract of guarantee to a corporate debtor..

(4) The order of moratorium shall have effect from the date of such order till the completion of the corporate
insolvency resolution process:

Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating
Authority approves the resolution plan under sub-section (1) of section 31 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.

Information Memorandum
15. Public announcement of corporate insolvency resolution process—

(1) The public announcement of the corporate insolvency resolution process under the order referred to in
section 13 shall contain the following information, namely:

(a) name and address of the corporate debtor under the corporate insolvency resolution process;

(b) name of the authority with which the corporate debtor is incorporated or registered;

(c) the last date for submission of 1[claims, as may be specified];

(d) details of the interim resolution professional who shall be vested with the management of the corporate
debtor and be responsible for receiving claims;

(e) penalties for false or misleading claims; and

(f) the date on which the corporate insolvency resolution process shall close, which shall be the one
hundred and eightieth day from the date of the admission of the application under sections 7, 9 or section
10, as the case may be.

(2) The public announcement under this section shall be made in such manner as may be specified.

Appointment and Tenure of Interim Resolution Professional

Section 16 (1) states that the AA shall appoint an interim RP within fourteen days from the commencement of
CIRP.

Section 16(2) states that when under Section 7 or 10, the name of IRP is forwarded, he/she should be made as the
IRP, if no disciplinary actions are pending against him.

Section 16(3) states that when an application is made by OC under Section 10. If the name of IRP is forwarded,
he/she should be made as the IRP, if no disciplinary actions are pending against him. However, if the name of IRP
is not forwarded, the NCLT shall make a reference to IBBI for the recommendation of insolvency professional.
The NCLT has to recommend the name within ten days.

The term of IRP shall continue till the appointment of RP under Section 22.

Section 17 deals with the management and affairs of corporate debtors by the IRP and Section 18 deals with the
duties of Interim RP- Look at it.

Committee of Creditors

Section 21 (1) stated that the committee of creditors has to be formed by the IRP after he/she collects all claims
received against the Corporate Debtor to ascertain the financial position of the company.

Section 21 (2) states that committee of creditors shall comprise all financial creditors of the corporate debtor.
Provided that a 1[financial creditor or the authorized representative of the financial creditor referred to in sub-
section (6) or sub-section (6A) or sub-section (5) of section 24, 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.
2[Provided further 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) Subject to sub-sections (6) and (6A), where 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 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) 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) Where the terms of the financial debt extended as part of a consortium arrangement or syndicated facility 4***
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) 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)

(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 fifty-one per cent. 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.

(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.

(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 seven days of such requisition
The power of COC is mainly two-fold:

1. approval of the resolution plan

2. in case there is no resolution plan, then go for liquidation.

Submission of Resolution Plan

Section 30 deals with the Submission of Resolution Plan:

Who can submit a plan?

The plan can be submitted by a resolution applicant who is eligible under Section 29A. He has to give an
undertaking to the effect that he is eligible under Section 29A and that the plan has been prepared on the basis of
the information memorandum.

Duty of the RP after receiving the resolution Plan

Section 30(2): The resolution professional shall examine each resolution plan and confirm that the plans provide
for:

a. payment of the insolvency resolution process cost in a manner specified by the board in priority of other
debts of corporate debtor;
b. payment of operational creditor in such a manner as may be specified by the board, which shall not be
less than- the amount to be paid to such creditors in event of liquidation under Section 53 or the amount
that would have been paid to such creditors, if the amount to be distributed under the resolution plan in
accordance with the order of priority under Section 53(l), in the event of liquidation, which is higher.
c. payment of debt of financial creditors, who do not vote in favor of the plan, which shall not be less than
with the order of priority under Section 53(l), in the event of liquidation;
d. management of the affairs of the company after the approval of the plan
e. the implementation and supervision of the plan;
f. does not contravene any other law in force;
g. confirm to such requirements as has been prescribed by the board

Selection of Plan by COC

The RP shall after seeing that the plan confirms to the requirement of Section 30(2) present the best plan to COC
for its approval- Section 30(3).

The COC shall then approve the resolution plan by a vote of not less than sixty-six percent of voting shares of the
financial creditors. – Section 30(4) A resolution applicant shall not have the right to vote unless and until he is a
financial creditor.

Submission of Plan to NCLT

The RP shall then submit the approved plan to NCLT for its approval- Section 30(6)

Approval of Plan by NCLT

Section 31 deals with the approval of the plan by the Adjudicating Authority.

Section 31(1) states that the AA after it is satisfied that the plan has met with all the requirements as stated under
sub-section 2 of Section 30, IBC shall by an order approve the plan which shall be then binding on the corporate
debtor and its employees, members, creditors, guarantors and other stakeholders involved in the plan. The
moratorium then ceases to exist and the RP has to send in all the records to the database of the IBBI.

Section 31(2) states that if the AA is satisfied that the plan does not satisfy the requirements mentioned in sub-
section (1) of Section 31, it shall reject the plan.

Appeal

An appeal can be filed against the order of NCLT approving the plan under Section 31, on the following grounds
mentioned in Section 61(3), 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.
 LIQUIDATION PROCESS

Initiation of Liquidation

Section 33 deals with Initiation of Liquidation.

There are four categories of cases where the assets of the corporate debtor can be liquidated:

a. no submission of a resolution plan before the expiry of insolvency resolution process period as mentioned
under Section 12 or the fast track insolvency process under Section 56.- Section 33(1)(a)
b. rejection of the resolution plan under Section 31 for non-compliance of the requirements- Section
33(1)(b)
c. where the RP communicates the decision of the COC to liquidate [this decision should be taken by the
COC with the decision of 66% of the voting shares and should come before the submission of a resolution
plan] Section 33(2)
d. where the plan approved contravened by the corporate debtor is in contravention of any provision of the
plan, any person other than CD whose interest is prejudicially affected- Section 33(3).

Now in any of the four abovementioned categories, the AA shall pass an order than the corporate debtor is to be
liquidated and issue a public notice to that effect.

Section 33(5) states that no suit or legal proceedings may be instituted by or against the corporate debtor, except
under Section 52 or prior approval of AA.

Section 33(7) The order of liquidation shall be deemed to be a notice of discharge of the officers, employees and
workmen of the CD, except when the business of the CD is to be continued during the liquidation process.

Appointment of Liquidator

As per Section 34, the RP shall continue to be the liquidator unless he is replaced by the AA.

Appointment of Liquidator

As per Section 34, the RP shall continue to be the liquidator unless he is replaced by the AA.

Distribution of Assets [Waterfall Mechanism]

As per Section 53(1), the proceeds from the sale of the liquidation of assets shall be distributed in the following
order of priority, and within such time as prescribed:

(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 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.

 CHAPTER VI

ADJUDICATING AUTHORITY FOR CORPORATE PERSONS

Section 60 IBC which deals with the Adjudicating Authority for Corporate Persons states that the adjudicating
authority for any matter in relation to CIRP or liquidation shall be the NCLT having territorial jurisdiction over
the place where the registered office of the corporate person is located. It also states that any application to be
filed between the CIRP pending has to be filed in the same NCLT, which had admitted the CIRP process. The
NCLT shall be vested with the power of Debt Recovery Tribunal, under SRFAESI.

Section 60 (5) NCLT have jurisdiction to hear:

(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.

Section 61 IBC Appeals and Appellate Authority: Any person aggrieved by the order of the Adjudicating
Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal [NCLAT] and
every appeal shall be filed within thirty days before the NCLAT. However, the NCLAT may allow an appeal to
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 fifteen days.

Section 61(3) Grounds on which an appeal against an order approving a resolution plan under section 31
may be filed:—

(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.

Section 62 deals with the Appeal to Supreme Court which states that any person aggrieved by an order of
NCLAT may file an appeal to the Supreme Court of India on a question arising out of any matter in NCLT
or NCLAT within 45 days. The Supreme Court may, if it is satisfied that a person was prevented by sufficient
cause from filing an app

Section 63-67 are sort of important, but not pertinent to the case at hand, a bare reading should suffice.