ABSTRACT

The Code recognizes National Company Law Tribunal (the NCLT) constituted under Section
408 of the Companies Act, 2013 as Adjudicating Authority for the purpose of insolvency
resolution and liquidation for corporate persons. CIRP application can filed by any of
financial creditor or operational creditor or the corporate debtor himself by pleading before
the NCLT with required documents. NCLT has to declare moratorium. Application to be filed
before NCLT for extension of time. NCLT has limited powers while examining an approved
plan. NCLT has to now appoint a liquidator. the order of dissolution is passed by the NCLT.
The NCLT has been empowered under the Code to deal with cases of fraudulent and
malicious initiation of proceedings. Application for avoidance of preferential transaction is
made to the NCLT. The NCLT, on being satisfied about undervalued transaction and
failure of the resolution professional or liquidator to file application will pass order. The
application for avoidance of extortionate credit transaction may be made by the resolution
professional or the liquidator to the NCLT.
 NATIONAL LAW INSTITUTE UNIVERSITY
BHOPAL
INSOLVENCY AND BANKRUTCY LAW

ROLE OF ADJUDICATING AUTHORITY

IN
CIRP AND LIQUIDATION
X SEMESTER
SESSION 2020-21

SUBMITTED TO: SUBMITTED BY:

PROF. AMIT PRATAP SINGH VIPUL DOHLE
2016BALLB110
 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Prof. Amit
Pratap Singh for her exemplary guidance, monitoring and constant encouragement throughout the
course of this project. The blessing, help and guidance given by him time to time shall carry me a
long way in the journey of life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to my seniors, the library staff and
my friends for their valuable information and guidance, which helped me in completing this task
through various stages.

I would also thank my institution and my faculty members without whom this project would have
been a distant reality. I also extend my heartfelt thanks to my family and well-wishers.

-VIPUL
DOHLE
TITLE OF THE PROJECT:
ROLE of Adjudicating Authority in CIRP and Liquidation

STATEMENT OF PROBLEM:
NCLT is a creature of a special statute to discharge certain specific functions. NCLT can only
exercise only such powers which are within the contours of jurisdiction prescribed by the statute,
which it is required to administer.

OBJECTIVE OF STUDY:
To understand and reproduce the role and functions of the adjudicating authority in CIRP and
Liquidation process undergoing by a corporate debtor.

HYPOTHESIS:
It is clear that the jurisdiction of Adjudicating Authority is confined only to contractual matters
between parties, and an order passed by a statutory/ quasi- judicial authority under certain special
laws

RESEARCH QUESTIONS:

1. Who is the Adjudicating authority inn casde of corporate debtor?

2. What is the jurisdiction of NCLT?

3. What powers and duties is NCLT bound to perform during CIRP?

4. What role does NCLT plays during liquidation process of corporate debtor?

RESEARCH METHODOLOGY:
No stone has been left unturned to make this project a worthy task. To let it not go a futile exercise
every possible step has been taken. It is being believed by the researcher that it will open a door of
success in making many such academic researches and even better than it, when needed. It would
quench the thirst for academic excellence and dealing with such wrong in real life, if continued.
Besides this it will also fulfill the desire of the researcher to contribute services to the society. The
method adopted in making this project is the Doctrinal Method of research. The method of writing
followed in the course of this research paper is primarily analytical. The researcher has followed a
uniform mode of citation throughout the course of this research paper.
 TABLE OF AUTHORITIES

I. STATUTES
 Companies Act 2013

 Insolvency and Bankruptcy Code

II. CASES

 Annapurna Infrastructure Pvt. Ltd and Ors. Vs. Soril Infra Resources Ltd.

 Madhusudar Gordhandas & Co Vs. Madhu Woollen Industries (P) Ltd 1971 SC 2600.

 Indian Turpentine & Resin Co Ltd Vs. Pioneer Consolidated Co of India Ltd 1988 (64)
Company Cases 169

 Vineet Udyog Ltd Vs. Roayale Manor Hotel 1999 (20) SCL 298 (Guj).

 Prem Swarup Narula vs. Bycell Telecommunications (I) Pvt. Ltd.

 Re: Smart Timing Steel Ltd

 Edu comp Solutions

 Astonfield Solar

 Metalyst Forgings

III. ARTICLES

 Role played by NCLT in insolvency proceedings

by Rachit Garg

 NCLT’s jurisdiction: Changing dynamics in the field of insolvency

by Aishwarya V and Raghavi R
 Insolvency and Bankruptcy Code
 by Vasanth Rajasekaran  , Saurabh Babulkar and  Reshma Ravipati

IV. BOOKS

 Insolvency and Bankruptcy Code 2016 (Bare Act)

By EBC

 INSOLVENCY & BANKRUPTCY CODE, LAW AND PRACTICE

By Dr. Avadesh Ojha

 Corporate Insolvency + IBC

By Sumant Batra
 CONTENTS

INTRODUCTION..................................................................................................................................6

JURISDICTION OF NCLT...................................................................................................................7

Admission of CIRP Application............................................................................................................7

MORATORIUM AND PUBLIC ANNOUNCEMENT......................................................................12

Power to Extend Time Limit................................................................................................................13

Approval of Resolution Plan................................................................................................................14

Power to Initiate Liquidation Process..................................................................................................15

Verification of Claims......................................................................................................................16

Dissolution Order.............................................................................................................................16

Avoidance of Preferential Transactions...........................................................................................17

Avoidance of Undervalued Transactions.........................................................................................17

Avoidance of Extortionate Credit Transactions...............................................................................18

Power in Case of Malicious and Fraudulent Proceedings....................................................................18

Power in Case of Fraudulent or Wrongful Trading.........................................................................19

CONCLUSION....................................................................................................................................20

BIBLIOGRAPHY................................................................................................................................20
 INTRODUCTION

The Insolvency and Bankruptcy Code, 2016 proved to be a gamechanger with respect to both revival
and liquidation of a company. Instead of terming a company on the verge of its extinction as ‘sick’, it
focuses upon effective restructuring through plans that even involve mergers and acquisitions. This
can be attributed to the objective of the Code, i.e., a time bound revival of a company in default. It
facilitates the rebuilding of companies by admitting bona fide initiations of the Corporate Insolvency
Resolution Process (“CIRP”) and by-passing liquidation orders where necessary.
The Code recognizes National Company Law Tribunal (the NCLT) constituted under Section 408
of the Companies Act, 2013 as Adjudicating Authority for the purpose of insolvency resolution and
liquidation for corporate persons1. National Company Law Tribunal is the outcome of the Eradi
Committee. NCLT was intended to be introduced in the Indian legal system in 2002 under the
framework of Companies Act, 1956 however, due to the litigation with respect to the constitutional
validity of NCLT which went for over 10 years, therefore, it was notified under the Companies Act,
2013. It is a quasi-judicial authority.
The Code also recognizes Debt Recovery Tribunal (the DRT) constituted under sub- section (1) of
Section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 as
Adjudicating Authority for the purpose of insolvency resolution and bankruptcy of partnership firms
and individuals.

IBC with its unique design combines executive and judicial powers in the form of the National
Company Law Tribunal (NCLT). The NCLT is the first level of decision-making and fuses
together executive and judicial powers in a manner that has made the legal process of insolvency
follow an inquisitorial system. As appeals are filed before the National Companies Law Appellate
Tribunal (NCLAT) and the Supreme Court, there is complete separation of judiciary from the
executive. The design of IBC, thus, consists of an admixture of executive and judicial powers at
the first level and complete separation at higher levels and this unique feature is a key reason for
the continued success of the IBC.

1
Section 60 of IBC 2016
 JURISDICTION OF NCLT

Situs of the registered office of the corporate entity is the deciding criteria for insolvency resolution
and liquidation of corporate persons, corporate debtors, and personal guarantors thereof.
Application for initiating insolvency resolution process or liquidation of corporate debtor shall be
filed before the NCLT having jurisdiction over the place where registered office of the corporate
entity is situated.

Similarly, voluntary liquidation application of corporate person shall be filed before the NCLT
having jurisdiction over the place where registered office of the corporate entity is situated.

Though, DRT is recognized as adjudicating authority for partnership firms and individuals, but,
where an individual is personal guarantor of a corporate debtor and a corporate insolvency resolution
process or liquidation proceedings of such corporate debtor is pending before a NCLT, an
application relating to the insolvency resolution or bankruptcy of personal guarantor of such
corporate debtor shall also be filed before such NCLT.

In dealing with the application relating to the insolvency resolution or bankruptcy of personal
guarantor of corporate debtor the NCLT shall be vested with the powers of DRT dealing with the
insolvency resolution or bankruptcy of individual.

Admission of CIRP Application

As provided under Section 6 of the Code an application for Insolvency Resolution Process can be
filed by:

a) Financial creditor (Section 7) or

b) Operational Creditor (Section 8-9) or
c) Corporate debtor itself (Section 10).

The following are condition precedent to be considered before filing an application before the NCLT
Tribunal2:

2
Annapurna Infrastructure Pvt. Ltd and Ors. Vs. Soril Infra Resources Ltd.
 1. An application before NCLT under Section 7 and Section 8 of the Insolvency and Bankruptcy
Code, won’t be maintainable before the tribunal, if at all there is a slightest doubt or dispute
regarding the playability of the amount claimed either by the Operational Creditor or the
Financial Creditor.3

Section 5(6) of Code:

“Dispute includes Suit or Arbitration Proceedings relating to: -

i) Existence of the amount of debt.

ii) The quality of goods or services; or

iii) The breach of representation or warranty.”

2. If the amount claimed by the creditor is time-barred, then the application is not
maintainable.4 

3. The claim for short delivery or non-delivery is also not maintainable.5

The above provisions have been held in the case law Annapurna Infrastructure Pvt. Ltd and Ors.
Vs. Sorel Infra Resources Ltd.6 where the petition is rejected since the amount claimed was in
dispute due to a counter claim.

 SECTION 7
As per the provisions of Section 7 - Financial creditor can, either alone or jointly with others, file an
application before NCLT for initiating IRP when default has occurred.

Explanation to Sec. 7(1) tries to simplify the meaning of Default as includes a default in respect of a
financial debt7 owned not only to the financial creditor who has filed the application but also to any
other financial creditors of the corporate debtor.

3
Madhusudar Gordhandas & Co Vs. Madhu Woollen Industries (P) Ltd 1971 SC 2600.
4
Indian Turpentine & Resin Co Ltd Vs. Pioneer Consolidated Co of India Ltd 1988 (64) Company Cases 169
5
Vineet Udyog Ltd Vs. Roayale Manor Hotel 1999 (20) SCL 298 (Guj).
6
MANU/NC/0190/2017
7
Section 5(8): “Financial Debt means a debt along with interest, if any, which is disbursed against the consideration
and include…”
 Section 7(4) – Scrutiny of debt:
The NCLT under Section 7(4) shall, within 14 days from the receipt of an application, ascertain the
existence of default from the records of information utility or based on other evidence furnished by
the financial creditor.

Section 7(5) – Admission of petition by NCLT:

Where NCLT is satisfied that default has occurred and application is complete in all respect and no
disciplinary proceedings are pending against the proposed Interim Resolution Professional -
Invariably the NCLT is also requiring a certificate from IRP saying that he is not attached or
connected to the Petitioner Company. Therefore, a separate certificate may be obtained and annexed
along with the petition.

But, where NCLT is satisfied that no default has occurred or application is incomplete or any
disciplinary proceedings are pending against the resolution professional, it may, by order, reject the
application. NCLT shall before rejecting application give notice to the applicant to rectify the default
in his application within seven days of receipt of such notice from NCLT. It is mandatory on the
part of the Petitioner Company to remove the defects within a period of seven days failing which, on
many occasions, the Company Petition has been dismissed.

Financial Creditor shall make an application in Form No.6 along with the following documents:
a) A record of default
b) Evidence of default
c) Other records
d) Letters exchanged between the parties.
e) Statement of Account showing the financial debt payment by the Corporate Debtor
f)Legal Notice sent by the Financial Creditor.
g) Reply, if any, received from the Corporate Debtor
h) Board Resolution authorizing person who signed petition
i) Evidence of Fees of Rs.25,000 – The DD in the name of The Pay & Accounts Officer, Ministry of
Corporate Affairs.
j) Copy of Memorandum & Article of Corporate Debtor.
k) Consent of Insolvency Resolution Professional
l) Application for interim stay.

 SECTION-8

The Section 8(1) says if there is a default in payment of debt, the creditor needs to give a 10-day
demand notice along with the copy of the invoice demanding the payment so defaulted. It is
mandatory that along with the notice, copies of invoice must be sent to the operational debtor
otherwise notice shall be held defective and the petition is liable to be dismissed.

The above provision is stated in the case law- Prem Swarup Narula vs. Bycell
Telecommunications (I) Pvt. Ltd. 8 :

“It is thus evident that in the absence of demand notice under Section 8 (1) of the Code, the
petitioner could not have approached this Tribunal for initiation of insolvency resolution process
against the respondent company. In the present case, there are many other defects pointed out by the
learned counsel for the respondent. Therefore, we find that the present application is incomplete as
the same is liable to be dismissed.”

The corporate debtor has to point out, within 10 days any existence of a dispute and should produce
the evidence of any suit which is pending or any arbitration proceedings or alternatively, the
corporate debtor may produce the proof of payment.

 Section 9

Section 9 of the Code says that after the expiry of ten days and where the payment has not been
received by the Operational Creditor, the operational creditor may file a petition before the NCLT.
The petition should be accompanied by with the following documents:
 Invoice showing supply of goods/service.
 Statement of Account
 Correspondence exchanged between the parties.
 Consent of Insolvency Resolution Professional
 An Affidavit swearing that no notice was given by the corporate debtor relating to dispute.
 Copy of 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.
The NCLT has dismissed number of petitions where the certificate has not been enclosed
from the banker about the non-receipt of payment in respect of which the petition has been
filed.
In Re: Smart Timing Steel Ltd.9, i t w a s held that “ NCLAT holds that filing of
certificate copy from Financial Institution maintaining Operational Creditor’s accounts is
mandatory and rejects the application for failing to furnish the same.”
8
MANU/NC/0330/2017
9
LSI-1676-NCLAT- 2017-(NDEL)
 Board Resolution authorizing person who signed petition
 Evidence of Fees of Rs.2,500 – The DD in the name of The Pay & Accounts Officer, Ministry of
Corporate Affairs.
 Copy of Memorandum & Article of Corporate Debtor.
 j) Application for interim stay.

However, it is not mandatory to suggest the name of Insolvency Resolution Professional. If no name
is given, then it is the duty of NCLT to seek name of such IRP from the Board and then appoint such
person as IRP. Therefore, it is recommended that whenever any Operational Creditor is filing a
petition, he should always recommend a name of IRP in the petition itself so that IRP is their own
person.

 SECTION 10

The Corporate Debtor can also file a petition for initiating corporate insolvency resolution process
with the NCLT as stated in section 10(1) of the Code:

“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.”

As stated in the case law:

1. In Re: P&S Jewelers10

2. In Re: LML Limited11

3. In Re: Dunn Foods Private Limited12

4. In Re: SRS Modern Sales Limited13

5. In Re: Sky Blue Papers (P.) Ltd14

The petitions were filed in the above cases by the corporate debtor as corporate applicant for the
insolvency resolution process and it was rightly admitted by the NCLT.

10
LSI-1697-NCLT-2017(MUM)
11
MANU/NC/0501/2017
12
MANU/NC/0385/2017
13
MANU/NC/0256/2017
14
MANU/NC/0490/2017
 MORATORIUM AND PUBLIC ANNOUNCEMENT

Once a corporate debtor goes into CIRP after the admission of the petition filed against the company
in NCLT, a moratorium is declared whereby which all the pending cases against the insolvent
company before any court of law are stayed. The term Moratorium is nowhere defined in the Code,
however, the term in basic parlance means, “a stopping of activity for an agreed amount of
time”. Under the Code, Moratorium is actually described as a period wherein no judicial proceedings
for recovery, enforcement of security interest, sale or transfer of assets, or termination of essential
contracts can be instituted or continued against the Corporate Debtor. NCLT whilst admitting
a petition against the Corporate Debtor is required to declare the moratorium period.

 Section 13
“(1) The Adjudicating Authority, after admission of the application under section 7 or section 9 or
section 10, shall, by an order—
(a) declare a moratorium for the purposes referred to in section 14;
(b) cause a public announcement of the initiation of corporate insolvency resolution process
and call for the submission of claims under section 15; and
(c) appoint an interim resolution professional in the manner as laid down in section 16.
(2) The public announcement referred to in clause (b) of sub-section (1) shall be made immediately
after the appointment of the interim resolution professional.”

 Section 14
Whenever any petition is filed either by

(i) Financial Creditor; or

(ii) Operational Creditor; or

(iii) Corporate Debtor,

the NCLT has to declare moratorium for the purpose of Section 14. In other words, it is mandatory
for the NCLT to declare moratorium in terms of Section 14.

 Section 15
Also, public announcement has to be done as per section 15, but it will be done by the IRP
appointed, such announcement will be caused by the order of NCLT.
  Section 16
The next major duty of NCLT is of appointing Interim Resolution Professional. This has to be done
within 14 days of accepting the application.

 Since financial creditor suggests a name and it is now upon the NCLT to appoint that
particular person as IRP. NCLT has to do a background check of the person so requested to
be appointed as IRP and to ensure that no disciplinary proceedings are pending against that
person. If no pending action against him, NCLT has to mandatorily appoint that person.

 Operational creditor is not required to propose a name for IRP, but if they do so, in their
interest, then such IP may be appointed if no proceedings are pending against him. If
operational creditor has not proposed any name, NCLT will make a reference to the Board for
recommending an IP who can act as IRP.

Power to Extend Time Limit

As per the Bankruptcy Law Reform Committee one of the main objectives of the Insolvency &
Bankruptcy Code was “ensure that time value of money is preserved and the delaying tactics in
negotiation between creditors and debtors should not extend the time set for negotiations at the
start.”

Section 12 of the Code has set default maximum time of 180 days for completing insolvency
resolution process in normal case and 90 days in fast tacked insolvency resolution process under
Section 56. The resolution professional, if instructed by committee of creditors, has to file an
application before NCLT for extension of time beyond 180 days, or 90 days, as the case may be.

NCLT on being satisfied that the subject matter of the case is such that it cannot be completed within
default maximum time, may, by order, grant one time extension beyond prescribed default maximum
time. One time extension in case of normal process cannot exceed 90 days and in case of fast-tracked
process cannot exceed 45 days. The NCLT, in both cases, is empowered to grant extension of time
only once.

After 2019 amendment, proviso has been added to Section 12 as follows:

“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”
This period of 330 days includes
(a) normal CIRP period of 180 days,
(b) one-time extension, if any, up to 90 days of such CIRP period granted by the Adjudicating
Authority, and
(c) the time taken in legal proceedings in relation to the CIRP of the CD.

Approval of Resolution Plan

The Code aims to resolve the woes of stressed businesses by putting them through CIRP and
transferring them as ‘going concerns’ to Resolution Applicants willing to take over their
management and assets, and service their debts. The CIRP is seen as a more beneficial alternative to
liquidation, as a going concern is likely to fetch a higher value for the creditors than a simpliciter sale
of its assets. The solution is left to the market. Interested resolution applicants can participate in the
CIRP and submit ‘resolution plans’, which are basically instruments for taking over the corporate
debtor, paying the dues of its creditors and undertaking its revival and turn-around. These plans are
placed for consideration before the CoC which may examine, negotiate and approve any one of them
by a vote of 65% or higher.

When the NCLT is satisfied that resolution, plan approved by committee of creditors meets
requirement of the Code, it will order approval of the submitted plan. An approved plan is binding on
debtors and its employees, members, creditors, guarantors, and other stakeholders in the resolution
plan. However, where the NCLT is satisfied that resolution plan does not meet requirement of the
Code, it may reject the plan. On approval of resolution plan, the IRP is closed. When IRP is closed,
the moratorium ceases to have effect, resolution professional is relieved of his duties and all
documents related to IRP are consigned to the Board.
NCLT has limited powers while examining an approved plan and cannot sit in appeal over the CoC’s
commercial decision. Once the plan is approved by the NCLT, it must be fully and effectively
implemented. But what happens if the plan, post approval by CoC but before its effective
implementation, becomes unviable and incapable of being implemented? There are different
opinions of the tribunal available for considering this issue.

1. In Edu comp Solutions15 a two-member bench of the National Company Law Appellate
Tribunal has rejected the successful resolution applicant’s plea for withdrawal of plan and
held that the NCLT has “no jurisdiction” to entertain a plea once the plan is approved by the
15
Company Appeal (AT) (Insolvency) No. 203 of 2020 
 CoC. The NCLT, New Delhi in Astonfield Solar16 has taken similar stand, that it has “no
jurisdiction” to entertain the resolution applicant’s plea for withdrawal or modification of the
plan post CoC’s approval.

2. The decision of a three-member bench of NCLAT in Metalyst Forgings17 wherein it was held

that a plan could be withdrawn even after approval of the CoC, they also referred to none
provisions in the Code which bars or prohibits the NCLT from ‘entertaining’ a plea of
withdrawal or modification of the plan after CoC’s approval.

On in-depth examination of the Code, one may find that it has no provision which imposes a ban, bar
or prohibition, for withdrawal or modification of a plan post CoC’s approval, nor any provision to
compel specific performance of a plan. It is silent on such aspects and no prohibition or compulsion
should be read by the judicial bodies. Though, it can be noted that Section 60 (5)(c) vests NCLT
the “jurisdiction to entertain or disposed of…. any question of law or facts, arising out of or in
relation to the insolvency resolution or liquidation proceedings….”, and Rule 11 of the NCLT Rules,
2016 gives it “inherent powers” to pass orders as it may deem fit in given facts and circumstances.

Power to Initiate Liquidation Process

 Section 33
Circumstances under which NCLT has the authority to order for liquidation of the corporation:

1) When the decision is taken by CoC to liquidate the corporation and is intimated by
Resolution professional to the NCLT, it shall pass an order for liquidation.

2) When the time allowed for CIRP has expired including the extended time period granted, no
resolution plan is submitted to the NCLT.

3) When the NCLT has not approved of the plan so passed by CoC because it failed to meet the
requirements as demanded by the Code.

4) When the resolution plan is approved but corporate debtor contravenes in such a manner,
which disturbs the implementation of the plan, prejudicial to the interest of others, such other
can make an application to NCLT and then an order for liquidation will be passed by the
tribunal.

16
I.A. 1679 of 2019 in C.P. No. (IB)-940(ND)/2018 
17
Company Appeal (AT) No. 1276/2019 
NCLT has to now appoint a liquidator who will look into the liquidation process of the corporate
debtor. It will either appoint the Insolvency professional as liquidator or appoint a new insolvency
professional by passing an order, after seeking proposal from the Board. After receiving a name from
the Board within 10days of direction issued by NCLT, it will pass an order for appointment of new
resolution professional as liquidator.
Moratorium kicks in on passing of the order of liquidation also. No suit or legal proceedings will be
instituted by or against the corporate debtor. However, the liquidator may file such proceedings on
behalf of corporate debtor, with prior approval of NCLT.

Verification of Claims
 Section 39-42
The liquidator has to verify the claims within 30 days from the commencement of the liquidation
process. The liquidator may accept or reject the claim in whole or part. If in any case, the creditor is
not satisfied with the decision of liquidator for rejecting the claims has to appeal the NCLT within 14
days of receipt of decision of claims by liquidator.

Dissolution Order
 Section 54

When the business operations of the corporate person have been completely wound up and its assets
have been completely liquidated, the liquidator will make an application to the NCLT for dissolution
of corporate entity. On such application being filed, the NCLT will pass an order that corporate
person will be considered dissolved from the date of the order passed. The order of NCLT has effect
of dissolving the corporate person from the date of order.

Once the order of dissolution is passed by the NCLT, the order is required to be forwarded within
seven days from the date of order to the authority with which the corporate debtor is registered to
inform the Registrar to cut down the name of the corporation from the books.

Avoidance of Preferential Transactions

 Section 43-44
When liquidator or resolution professional, as the case may be, has opinion about the corporate
debtor, during the period specified under the Code, has transferred any property or an interest
thereof of the debtor to specified persons on account of antecedent debt or liability in a manner
putting specified person in a beneficial position than it would have been in the event of a distribution
of assets in liquidation(preferential transaction), he will apply to NCLT for avoidance of such
transactions.

When an application for avoidance of preferential transaction is made, the NCLT may, inter alia by
an order require that property transferred be vested in the corporate debtor; or release or discharge
security interest created by the corporate debtor; or require payment by any person of sum in respect
of benefit received by him from such transaction; or restore the position of guarantor whose debts
were released or discharged; or direct providing security or charge on any property for discharge of
any debt under order.

The period specified in respect of transactions with related parties is two years preceding the
insolvency commencement date and one year preceding the insolvency commencement date in other
transactions.

Avoidance of Undervalued Transactions

 Section 45-49
When a corporate debtor, except in the course of ordinary business, makes a gift or transfers one or
more assets for insignificant consideration (the undervalued transaction), the resolution
professional or liquidator, as the case may be, shall, or failing them a creditor, member or partner of
corporate debtor, as the case may be, may make an application to NCLT to declare such transaction
void and reverse their effect.

The NCLT, on being satisfied about undervalued transaction and failure of the resolution
professional or liquidator to file application, shall pass order:

(i) for restoring the position as it existed before transaction and reversing the effect thereof;
and

(ii) requiring the Board to initiate disciplinary proceedings against the resolution professional
or the liquidator.

An order reversing effect may require any property transferred as part of the transactions, to be
vested in the corporate debtor; or release or discharge any security interest granted by the corporate
debtor; or require the payment of such consideration for the transaction as may be determined by the
independent expert; or require beneficiary to pay such sum, to the liquidator or the resolution
professional, as the NCLT may direct.
Avoidance of Extortionate Credit Transactions
 Section 50-51
The term extortionate transaction means a transaction wherein one party was made to pay unfairly
high rate of interest or subjected to unfair credit term. The Code provides for avoidance of
extortionate transactions related to financial or operational debt during the period within two years
preceding insolvency commencement date. The application for avoidance of extortionate credit
transaction may be made by the resolution professional or the liquidator to the NCLT.

The NCLT on examining the application and being satisfied that terms of the credit transactions
required exorbitant payment to be made by debtor, it shall, by order:
(i) restore the position as it existed before the transaction.
(ii) set aside whole or part of debt created.
(iii) modify terms of the transaction.
(iv) require any person, who was party to transaction, to repay any amount received by such
person; or
(v) require relinquishing the security interest that was created as part of extortionate transaction.

Power in Case of Malicious and Fraudulent Proceedings

The NCLT has been empowered under the Code to deal with cases of fraudulent and malicious
initiation of proceedings to ensure proceedings are brought only for the purpose of resolution of
insolvency, or liquidation, as the case may be and not for malicious or fraudulent purpose. Where
any person initiates fraudulent or malicious liquidation proceeding or insolvency resolution process
the NCLT may impose upon such person a penalty which may not be less than rupees one lakh, but
which may extend to rupees one crore.

Also, where any person initiates voluntary liquidation proceeding with intent to defraud any person,
the NCLT may impose upon such person a penalty which may not be less than rupees one lakh, but
which may extend to rupees one crore.
Power in Case of Fraudulent or Wrongful Trading

When it is detected during the corporate insolvency resolution process or a liquidation process that
the business of corporate debtor has been carried on with the intent to defraud creditors of corporate
debtors or for any fraudulent purpose, the NCLT on an application may.

(i) pass an order that any persons who were party to such business transactions shall be liable
to make such contribution to the assets of the corporate debtors as it may deem fit.

(ii) by an order, under specified conditions, direct that a director or partner of corporate
debtor shall be liable to make such contribution to the assets of the corporate debtor as it
may deem fit.
 CONCLUSION

It is worth to mention that, since the inception of IBC Code in 2016, it has been easier for the
financial creditor, operational creditor or corporate itself to recover the amount from the debtor. This
is because the adjudicating authority i.e., the National Company Law Tribunal (NCLT) has been
vested with wide powers in order to ensure that there is balance in the interests of corporate debtor
and creditors. 
It can be inferred that Corporate Insolvency Resolution Process and Liquidation are detailed
processes wherein various steps need to be followed during the process for a desirable outcome from
it. The provisions and regulations which provide the essential requirements and stipulated time
frames for all the stages in the CIRP are important to be adhered to. Any delay and diversions from
the stages will call upon the adjudicating authority to settle down the matters and to ensure smooth
functioning of all the processes as mentioned in the Code.
The Code promises to bring about far-reaching reforms with a thrust on creditor driven insolvency
resolution with the help of NCLT. The unified regime envisages a structured and time-bound process
for insolvency resolution and liquidation, which should significantly improve debt recovery rates and
revitalise the ailing Indian corporate bond markets.
Section 5(1) of the IBC designates the National Company Law Tribunal (NCLT),[30] constituted
under section 408 of the Companies Act, 2013,[31] as the AA for the resolution and liquidation of
corporate persons. Section 60(1) of the IBC provides that the NCLT shall be the AA for the CIRP
and liquidation of corporate persons, including CDs and their personal guarantors. The NCLT has
various benches all over India, with each bench having territorial jurisdiction over the state where it
is located, as well as (in some cases) certain other states.
Insolvency applications against the corporate persons who owes a debt to some creditors and defaults
in making the payment to the creditors (financial or operational) shall be filed in the NCLT.
According to section 61 any aggrieved person can file an appeal before the NCLAT with 30 days of
receiving the order.
 BIBLIOGRAPHY

Websites:
1. https://www.icsi.edu/media/portals/72/year%202017/presentation/Role%20of%20NCLT
%20-%20PK%20Mittal.pdf
2. https://www.livemint.com/money/personal-finance/how-does-3. the-insolvency-resolution-
process-work-1562084179866.html
3. https://www.lexology.com/library/detail.aspx?g=54f3a56b-090a-4d9f-8830-39108a16a160
4. https://icsiiip.com/Portals/0/IBC%20Capsule-%20Series%204.pdf

Statutes:

1. Insolvency and bankruptcy Code, 2016

2. Companies Act, 2013

Articles:

1. Role of Adjudicating Authority in Resolution Plan

By Lakkaraju Srinivas
2. Ensuring efficient working of IBC
By Sameer Sharma