UNIVERSITY OF PETROLEUM & ENERGY STUDIES

SCHOOL OF LAW
B.A.LLB(HONS.)
SEMESTER – VI
ACADEMIC YEAR- 2019-20 SESSION: JAN-MAY

ASSIGNMENT
(TOPIC- THE INSOLVENCY AND BANKRUPTCY CODE, 2016)

Under the supervision of: Ms. Priyanka Choudhary

NAME- RASHI GOEL

SAP ID- 500060416

ROLL NO.- 70
 INSOLVENCY AND BANKRUPTCY CODE, 2016

The Insolvency and Bankruptcy Code, 2016 came into force vide notification dated 28
May, 2016. The Insolvency and Bankruptcy Code, 2016 extends to the whole of India (except
Part III which deals with Insolvency Resolution and Bankruptcy for Individuals and
Partnership Firms of the Code which shall not extend to the State of Jammu and Kashmir). In
order to welcome foreign investors to invest in the Indian economy and with a view to ease
doing business in India, the Insolvency and Bankruptcy Code, 2016 is going to play a vital
role in the economic system of the country.

OBJECTIVE OF THE CODE

1. To create a new institutional framework, consisting of Insolvency Professional

Agency, Insolvency Professionals, Information Utilities and Adjudicating authorities
thus offering a uniform and comprehensive legislation.
2. To Facilitates time bound insolvency resolution process and liquidation.
3. To improve ease of doing business in India and also to set up a better and faster debt
recovery mechanism in India.

THE INSOLVENCY REGULATOR (Sec. 188)

The Insolvency Regulator also known as The Insolvency and Bankruptcy Board of India. The
Central Government may, by notification, notify a date and appoint the Insolvency and
Bankruptcy Board of India. The board shall be a body corporate having perpetual succession,
a common seal, power to acquire hold and dispose of property, power to contract, can sue and
be sued.
 INSOLVENCY PROFESSIONALS

Section 3 (19) of IBC, 2016 states that insolvency professional means a person enrolled under
section 206 with an insolvency professional agency as its member and registered with the
Board as an insolvency professional under Section 207. Insolvency Professionals register
themselves as member with the Insolvency Professional Agencies enrol and regulate the
Insolvency Professionals in accordance with the provisions of the Code. Insolvency
Professionals to function in accordance with the provisions of Section 208 of the IBC, 2016.

RESOLUTION PROCESS (Sec.6)

When any corporate debtor makes a default, persons may initiate the corporate insolvency
resolution process financial creditor, operational creditor, corporate debtor.

CORPORATE INSOLVENCY RESOLUTION PROCESS

Corporate Insolvency Resolution Process (CIRP) is a recovery mechanism for creditors. If a

corporate becomes insolvent, a financial creditor, an operational creditor, or the corporate
itself may initiate CIRP.

 Financial Creditor could be any person to whom a business debt is owed or a person

to whom such amount is legally assigned or transmitted. For example: Banks or other
financial institutions

 Operational Creditor could be any person to whom an operational debt is owed and

includes any person to whom such amount has been legally assigned or transferred for goods
or services done by them. For example: vendors and suppliers, employees, government etc.

The Insolvency and Bankruptcy Code, 2016 provides a provision for an application for
insolvency or bankruptcy of start-ups, individuals, partnership firms, limited liability
partnership, and companies. The Code has provided a slab of default amount in each category
however the final amount is to be notified by the Government as the trigger point to initiate
the proceeding while keeping in view the fluctuation of the economy.
Following are the steps to be followed for resolution or liquidation of a corporate:

1. Application to NCLT: A financial or operational creditor of the company or the company

itself can apply to the National Company Law Tribunal (NCLT). The application is made to
admit that the Company (Corporate Debtor as per IBC) is into corporate insolvency
resolution process. For this the creditor needs to show the default payment of a debt which
exceeds INR 1,00,000 and within 14 days the NCLT has to pass an order either admitting or
denying the application. There are different obligations that a financial and an operational
creditor have to comply with when making their applications before NCLT. A financial
creditor needs to submit the record of the default whereas an operational creditor needs to
first make a demand for his unpaid debt.

2. Interim Resolution Professional & Moratorium: When a corporate debtor is admitted

into the CIRP, it suspends the board of directors. Also, the management is placed under an
independent ‘interim resolution professional’.  Further, from this point onward the
management ceases to have any control over the company affairs till the end of the CIRP.
Simultaneously, a moratorium becomes effective which prohibits:

a) Continuation or initiation of any legal proceedings against the corporate debtor

b) Transfer of its assets
c) Enforcement of any security interest
d) Recovery of any property from it by an owner

However, the moratorium does not extend to key business contracts entered into by the
corporate debtor.

3. Verification and Analysis of Claims: At this stage, interim resolution professional will
summon and verify the claims made the creditors and also classify them. After that, within 30
days of acceptance into CIRP, will form a Committee of Creditors (COC) which comprises of
all the financial creditors of the corporate debtor.

4. Appointment of Resolution Professional: Within seven days of the forming the

committee, the COC will have to either resolve to appoint the interim resolution professional
as a resolution professional or to replace the interim resolution professional by another
resolution professional.

5. Approval of the “Resolution Plan”: A resolution plan for the revival of the company
must be approved within 180 days from the commencement of CIRP by creditors. The NCLT
can extend this period by another 90 days. Any person, management, the creditors or a third
party can propose such a plan. Resolution professional is responsible to ensure that the plan
meets the criteria set out in Insolvency and Bankruptcy Code, 2016.

LIQUIDATION PROCESS
Section 33 to 54 of the IBC, 2016 deals with provision related to liquidation and it’s process.
The provisions relating to liquidation are set off in following situation-

a) No resolution plan is submitted before the Adjudicating Authority.

b) Adjudicating Authority rejects the resolution plan.

Section 33. It talks about Initiation of Liquidation Process and the process shall be initiated
by-

1. If resolution plan is not received by the Adjudicating Authority within the stipulated
time.
2. The resolution plan is rejected by the Adjudicating Authority for non- compliance
with the requirement of the Code.
3. If before the confirmation of the resolution plan, the resolution professional intimates
the decision of the committee of creditors to liquidate the corporate debtor.
4. Resolution plan is contravened by the corporate debtor and aggrieved person applies
to the NCLT to liquidate the corporate debtor.

Section 34. It talks about Appointment/ Replacement of Liquidator. The resolution

professional shall act as the liquidator unless replaced by the Adjudicating Authority.
The Adjudicating Authority can replace the resolution professional if –

1. Resolution plan submitted by the resolution professional was rejected, the

Adjudicating Authority may direct the Board to propose name of another insolvency
professional to act as liquidator.
2. The Board recommends replacement of a resolution professional, the reason for
replacement are to be recorded in writing.

Section 35. It talks about power and duties of Liquidator.

1. to verify claims of all the creditors and consolidate them;

 2. to take into his custody or control all the assets, property, effects and actionable
claims of the corporate debtor;
3. to evaluate the assets and property of the corporate debtor in the manner and prepare a
report;
4. to take such measures to protect and preserve the assets and properties of the
corporate debtor;
5. to carry on the business of the corporate debtor for its beneficial liquidation;
6. to sell the immovable and movable property and actionable claims of the corporate
debtor in liquidation by public auction or private contract, with power to transfer such
property to any person or body corporate, or to sell the same in parcels, though
transfer are subjected to section 52 and further the liquidator shall not sell the
immovable and movable property or actionable claims to any person who is not
eligible to be a resolution applicant.
7. to draw, accept, make and endorse any negotiable instruments on behalf of the
corporate debtor, with the same effect as if such instruments were drawn, accepted,
made or endorsed by or on behalf of the corporate debtor in the ordinary course of its
business;
8. to obtain any professional assistance, in the discharge of his duties, obligations and
responsibilities;

Section 36. It talks about Liquidation Estate of Assets of Corporate Debtor. The Liquidator
shall form an estate of the assets of the corporate debtor which will be called the liquidation
estate. The liquidator shall hold the liquidation estate as fiduciary for the benefit of all
creditor.

Section 48. This Section talks about Appeal. A creditor can file an appeal to the Adjudicating
Authority against the decision of the liquidator within 14 days of the receipt of decision of the
liquidator.

Section 54. It talks about Dissolution of Corporate Debtor. Once the assets of the corporate
debtor are completely liquidated, application is sent by liquidator to the Adjudicating
Authority for the dissolution of the corporate debtor. From the date of order of the
Adjudicating Authority, the corporate debtor shall stand dissolved.