FAST TRACK CORPORATE INSOLVENCY RESOLUTION

PROCESS

Corporate failure may be due to business or financial

failure. Business failure is break-down of business model
and inability to generate enough revenues. Financial
failure is due to mismatch between payments and
receivables of an enterprise
The aim of the Fast Track Insolvency Resolution Process
under the insolvency and Bankruptcy Code. 2016
(‘Code’) is to conclude the procedure within half of the default
time period specified under the Code. person or entity seeking
the fast relief will have onus on the process at set-off
and that person or entity that sets off the fast track
process must support that the case is fit for the fast
track

REGULATORY FRAMEWORK

 Section 55 to 58 of the Insolvency and Bankruptcy Code, 2016

 Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for
Corporate Persons) Regulations, 2017

CHAPTER IV FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS

According to Section 55 of the Insolvency and Bankruptcy

Code, 2016, a corporate insolvency resolution process carried
out in accordance with this Chapter IV of Part II of the Code shall
be called as fast track corporate insolvency resolution process.
55. Fast track corporate insolvency resolution process.—(1) A corporate insolvency resolution
process carried out in accordance with this Chapter shall be called as fast track corporate insolvency
resolution process.
(2) An application for fast track corporate insolvency resolution process may be made in respect of
the following corporate debtors, namely:—

(a) a corporate debtor with assets and income below a level as may be notified by the Central
Government; or

(b) a corporate debtor with such class of creditors or such amount of debt as may be notified by the
Central Government; or

(c) such other category of corporate persons as may be notified by the Central Government.

56. Time period for completion of fast track corporate insolvency resolution process.—

(1) Subject to the provisions of sub-section (3), the fast track corporate insolvency resolution process
shall be completed within a period of ninety days from the insolvency commencement date.

(2) The resolution professional shall file an application to the Adjudicating Authority to extend the
period of the fast track corporate insolvency resolution process beyond ninety days if instructed to
do so by a resolution passed at a meeting of the committee of creditors and supported by a vote of
seventy five per cent of the voting share.

(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 fast track corporate insolvency resolution process cannot
be completed within a period of ninety days, it may, by order, extend the duration of such process
beyond the said period of ninety days by such further period, as it thinks fit, but not exceeding forty-
five days: Provided that any extension of the fast track corporate insolvency resolution process
under this section shall not be granted more than once.

57. Manner of initiating fast track corporate insolvency resolution process.—An application for fast
track corporate insolvency resolution process may be filed by a creditor or corporate debtor as the
case may be, along with—
(a) the proof of the existence of default as evidenced by records available with an information utility
or such other means as may be specified by the Board; and

(b) such other information as may be specified by the Board to establish that the corporate debtor is
eligible for fast track corporate insolvency resolution process.

58. Applicability of Chapter II to this Chapter.—The process for conducting a corporate insolvency
resolution process under Chapter II and the provisions relating to offences and penalties under
Chapter VII shall apply to this Chapter as the context may require.

Sanjay Kumar Ruia v. Catholic Syrian Bank Ltd. & Anr . It was held that the NCLT had no
jurisdiction to proceed with the ‘Corporate Insolvency Resolution Process’
beyond the period of 270 days and it cannot exercise its power under sub-
section (2) of Section 55 of the Code, which was not applicable, and
therefore the Adjudicating Authority has no power to convert the
‘Corporate Insolvency Resolution Process’ into a ‘Fast Track Corporate
Insolvency Resolution Process’ under Section 55 of the Code.

 Sections 55 to 58 of the Code contain provisions relating

to Fast Track Corporate Insolvency Resolution Process.
 A corporate insolvency resolution process carried out in
accordance with Chapter IV of Part II of the Code shall be
called as fast track corporate insolvency resolution
process. [Section 55]
 Section 56(1) provides that subject to the provisions of
sub-section (3), the fast track corporate insolvency
resolution process shall be completed within a period of
ninety days from the insolvency commencement date.
 The Adjudicating Authority may extend the duration of
such process beyond the said period of ninety days by
such further period, as it thinks fit, but not exceeding
forty-five days.
 According to Section 57 of the Code, an application for fast
track corporate insolvency resolution process may be filed
by a creditor or corporate debtor as the case may be.
 Insolvency and Bankruptcy Board of India (Fast Track
Insolvency Resolution Process for Corporate Persons)
Regulations, 2017 contains the procedure for fast track
corporate insolvency resolution process.
 Regulation 3 of the Insolvency and Bankruptcy Board of
India (Fast Track Insolvency Resolution Process for
Corporate Persons) Regulations, 2017 provides for eligibility
for Resolution Professional.
 Provision relating to claims by operational creditor, financial creditor,
workmen and employees are contained in Regulations 7, 8 and
9 respectively.
 As per Regulation 17, the interim resolution professional
shall file a report certifying the constitution of the
committee to the Adjudicating Authority on or before the
expiry of twenty-one days from the date of his
appointment.
 As per Regulation 26, the resolution professional shall
within seven days of his appointment, appoint one
registered valuer to determine the fair value and the
liquidation value of the corporate debtor in accordance
with Regulation 34.
 Regulation 37 contains the mandatory contents of the Resolution
Plan and Regulation 38 relating to approval of Resolution Plan.
 Regulation 39 contains the provisions relating to the
extension of the Fast Track Process Period
 CHAPTER V
VOLUNTARY LIQUIDATION OF CORPORATE PERSONS
The Insolvency and Bankruptcy Code, 2016 (Code) contains
provisions for solvent entities that want to surrender their business
and refrain from carrying on their business. To be eligible for
voluntary liquidation, the solvent entity must be in a state to pay
off its debts. Voluntary liquidation of a company is now governed
by the provisions of Section 59. Code reduces the intervention
of the regulatory authorities drastically that fasten up the
process. Once the liquidation process is completed, the liquidator
has to make an application to the Tribunal for passing the order of
dissolution of the company. Only solvent companies can file for
voluntary liquidation and approval of creditors is mandatory.

REGULATORY FRAMEWORK
 Section 59 of the Insolvency and Bankruptcy Code, 2016
 The Insolvency and Bankruptcy Board of India (Voluntary Liquidation
Process) Regulations, 2017

A corporate person will be eligible to opt for voluntary liquidation under the
Code provided it fulfills

THE TWO MANDATORY CONDITIONS

(i) either the company has no debt or that it will be able to pay its
debts in full from the proceeds of assets to be sold in the
voluntary liquidation; and
(ii) the company is not being liquidated to defraud any person.
59. Voluntary liquidation of corporate persons.—
(1) A corporate person who intends to liquidate itself voluntarily and has not committed
any default may initiate voluntary liquidation proceedings under the provisions of this
Chapter.
(2) The voluntary liquidation of a corporate person under sub-section (1) shall meet such
conditions and procedural requirements as may be specified by the Board.
(3) Without prejudice to sub-section (2), voluntary liquidation proceedings of a corporate
person registered as a company shall meet the following conditions, namely:—
(a) a declaration from majority of the directors of the company verified by an affidavit
stating that—
(i) they have made a full inquiry into the affairs of the company and they have formed an
opinion that either the company has no debt or that it will be able to pay its debts in full
from the proceeds of assets to be sold in the voluntary liquidation; and
(ii) the company is not being liquidated to defraud any person;

(b) the declaration under sub-clause (a) shall be accompanied with the following documents,
namely:—
(i) audited financial statements and record of business operations of the company for the
previous two years or for the period since its incorporation, whichever is later;
(ii) a report of the valuation of the assets of the company, if any prepared by a registered
valuer;
(c) within four weeks of a declaration under sub-clause (a), there shall be—
(i) a special resolution of the members of the company in a general meeting requiring the
company to be liquidated voluntarily and appointing an insolvency professional to act as the
liquidator; or
(ii) a resolution of the members of the company in a general meeting requiring the
company to be liquidated voluntarily as a result of expiry of the period of its duration, if any,
fixed by its articles or on the occurrence of any event in respect of which the articles provide
that the company shall be dissolved, as the case may be and appointing an insolvency
professional to act as the liquidator:
Provided that the company owes any debt to any person, creditors representing two-thirds
in value of the debt of the company shall approve the resolution passed under sub-clause (c)
within seven days of such resolution.
(4) The company shall notify the Registrar of Companies and the Board about the resolution
under sub-section (3) to liquidate the company within seven days of such resolution or the
subsequent approval by the creditors, as the case may be.
(5) Subject to approval of the creditors under sub-section (3), the voluntary liquidation
proceedings in respect of a company shall be deemed to have commenced from the date of
passing of the resolution under sub-clause (c) of sub-section (3).
(6) The provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply to voluntary
liquidation proceedings for corporate persons with such modifications as may be necessary.
(7) Where the affairs of the corporate person have been completely wound up, and its assets
completely liquidated, the liquidator shall make an application to the Adjudicating Authority
for the dissolution of such corporate person.
(8) The Adjudicating Authority shall on an application filed by the liquidator under sub-
section (7), pass an order that the corporate debtor shall be dissolved from the date of that
order and the corporate debtor shall be dissolved accordingly.
(9) A copy of an order under sub-section (8) shall within fourteen days from the date of such
order, be forwarded to the authority with which the corporate person is registered.
Nippei Toyoma India Private Limited, incorporated on April 27, 2007,
resolved to voluntary liquidate on September 28, 2017, due to not
carrying on any business activities and the associated cost and time
involved in ensuring compliances, initiating proceedings under Section 59
of the Insolvency and Bankruptcy Code, 2016 (IBC). Before the resolution,
the directors declared under affidavit that they had made full inquiry into
the company's affairs, believed the company had no debts or could pay
them in full from asset proceeds, and were not pursuing the winding-up to
defraud any person, attaching audited financial statements for the years
ending March 31, 2016, and March 31, 2017. Following the payment of
stakeholders and the disbursement of Rs. 53,06,973/- in accumulated
profit and Rs. 1,00,00,000/- in share capital to members, the assets were
fully liquidated, leading the NCLT to issue an order directing the
dissolution of the company from the date of the order after reviewing the
Liquidator’s final report
 As per section 59, a corporate person who intends to liquidate itself voluntarily and has not
committed any default may initiate voluntary liquidation proceedings under the provisions of
Chapter V of Part II of the Code.

� The Insolvency and Bankruptcy Board of India has made the IBBI (Voluntary Liquidation
Process) Regulations, 2017 to regulate the voluntary liquidation of corporate persons.

� The corporate person shall from the liquidation commencement date cease to carry on
its business except as far as required for the beneficial winding-up of its business.

� It is required to submit a declaration to ROC, stating that the company will be able to pay
its dues and is not being liquidated to defraud any person.

� Passing of special resolution for approving the proposal of voluntary liquidation and
appointment of liquidator, within four weeks of the aforesaid declaration(s). If a corporate person
owes debts, approval of two-third majority creditors would also be required.

� Public announcement is issued inviting claims of all stakeholders, within five days of such
approval, in newspaper as well as on website of the corporate person.

� A person, who claims to be a stakeholder, shall prove his claim for debt or dues to him,
including interest, if any, as on the liquidation commencement date.

� The liquidator shall verify the claims submitted within thirty days from the last date for
receipt of claims and may either admit or reject the claim, in whole or in part, as the case may be, as
per section 40 of the Code.

� The liquidator may value and sell the assets of the corporate person in the manner and
mode approved by the corporate person in compliance with provisions, if any, in the applicable
statute.

� The liquidator shall distribute the proceeds from realization within six months from the
receipt of the amount to the stakeholders.

� The liquidator shall endeavor to complete the liquidation process of the corporate person
within the prescribed timelines from the liquidation commencement date.

LIQUIDATION PROCESS UNDER IBC

Liquidation of corporate person is considered to be the last
resort in order to recover money under the Insolvency and
Bankruptcy Code, 2016 (‘Code’). When the resolution plan fails
and no other way can be adopted, then dissolution of the
company is the only resort. An auction is conducted where the
assets of the company is sold to realize money in order to
return it to the lenders. An attempt is first made to resolve the
insolvency of corporate debtor through corporate insolvency
resolution process laid down in Chapter II of Part II of the
Code. The provisions relating to liquidation in Chapter III of
Part II of the Code comes into effect if the attempts to resolve
corporate insolvency under Chapter II of the Code fail. It can
thus be seen that the primary focus of the legislation is to
ensure revival and continuation of the corporate debtor by
protecting the corporate debtor from its own management and
from a corporate death by liquidation.

REGULATORY FRAMEWORK

 Section 33 to 54 of the Insolvency and Bankruptcy Code, 2016

 The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016

The Hon’ble Supreme Court in the matter of ‘Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India &
Ors.’, observed:
“What is interesting to note is that the Preamble
does not, in any manner, refer to liquidation, which is only
availed of as a last resort if there is either no resolution plan or
the resolution plans submitted are not up to the mark. Even in
liquidation, the liquidator can sell the business of the corporate
debtor as a going concern.…”
According to the Insolvency and Bankruptcy Code (IBC), 2016,
a Corporation or Limited Liability Partnership (LLP) that
is unable to continue operating because of financial
difficulties may be wound up through a structured
process known as liquidation. This procedure is started
when the corporate debtor cannot pay back its debts and
the Corporate Insolvency Resolution Process (CIRP) does not
have a workable resolution plan.
The National firm Law Tribunal (NCLT) receives an application to start the
liquidation process under IBC, which can be started by the firm or its
creditors. After accepting the application, the NCLT designates a
liquidator who will oversee the company’s assets and operations while
safeguarding the interests of all parties involved, including shareholders,
workers, and creditors.
Controlling the company’s assets, selling them, and allocating the
money in priority order—paying secured creditors first, then
unsecured creditors, employees, and shareholders—is the
liquidator’s job. Though extensions are conceivable, the procedure is
intended to be time-bound and usually finished in a year. If a
resolution plan is approved, the IBC also permits the corporation to be
revived. In an effort to stop additional financial harm, this liquidation
process under IBC guarantees openness, safeguards stakeholders and
offers a legal framework for resolving troubled businesses.
What Is the Liquidation Process Under IBC
The term “liquidation” is not defined under the IBC. Liquidation,
however, generally refers to the process of dissolving or winding
up the corporate debtor. When a corporate debtor is dissolved or
wound up, it indicates it will either stop existing or shut down entirely.
According to the IBC, when a corporate debtor is unable to pay its
debts and continue operating its business as usual, the
liquidation process under the IBC begins. Under the IBC, liquidation
falls into two primary categories:
Compulsory Liquidation under IBC: Following a failed settlement process, a
corporation is declared insolvent by the National Corporation Law
Tribunal (NCLT). If it determines that the corporate debtor has committed a
default, the tribunal has the authority to order liquidation.
Voluntary Liquidation process under IBC: A solvent business that chooses to
shut down and is able to settle all of its debts may choose to go through
voluntary liquidation. For this to happen, the shareholders must pass a
resolution.
The liquidation Process under IBC is given under Section 33 of IBC which is as follows:

 Assigning a liquidator- A liquidator will be chosen to oversee the

corporate debtor’s activities and carry out the liquidation process
under IBC after it has begun. The Resolution Professional (RP) assigned
 to oversee the bankruptcy resolution procedure is typically also hired
to carry out the liquidation process under IBC. The eligibility
requirements for an insolvency practitioner to be appointed as a
liquidator are listed in Regulation 3 of the Liquidation Regulations.
Section 35 of the IBC specifies the liquidator’s responsibilities and authority.
Verification of the claims made by the creditors, assessment of the
corporate debtor’s assets, doing business on behalf of the corporate
debtor, taking possession of the corporate debtor’s assets, etc. are all
included.
Section 35 provides a non-exhaustive list of powers and duties of the
liquidator to ensure orderly completion of the liquidation proceedings.
Section 35(1) provides that subject to the directions of the Adjudicating
Authority, the liquidator shall have the following powers and duties:

(a) to verify claims of all the creditors;

(b) to take into his custody or control all the assets, property,
effects and actionable claims of the corporate debtor;

(c) to evaluate the assets and property of the corporate debtor in the
manner as may be specified by the Board and prepare a report.

(d) to take such measures to protect and preserve the assets and
properties of the corporate debtor as he considers necessary;

(e) to carry on the business of the corporate debtor for its

beneficial liquidation as he considers necessary;

(f) subject to section 52, 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 in such manner as may be specified: Provided that the
liquidator shall not sell the immovable and movable property or
actionable claims of the corporate debtor in liquidation to any person
who is not eligible to be a resolution applicant.

(g) to draw, accept, make and endorse any negotiable

instruments including bill of exchange, hundi or promissory note in
the name and on behalf of the corporate debtor, with the same
effect with respect to the liability 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;

(h) to take out, in his official name, letter of administration to

any deceased contributory and to do in his official name any other
act necessary for obtaining payment of any money due and payable
from a contributory or his estate which cannot be ordinarily done in the
name of the corporate debtor, and in all such cases, the money due
and payable shall, for the purpose of enabling the liquidator to take out
the letter of administration or recover the money, be deemed to be due
to the liquidator himself;

(i) to obtain any professional assistance from any person or

appoint any professional, in discharge of his duties, obligations and
responsibilities;

( j) to invite and settle claims of creditors and claimants and

distribute proceeds in accordance with the provisions of this Code;

(k) to institute or defend any suit, prosecution or other legal

proceedings, civil or criminal, in the name of on behalf of the
corporate debtor;

(l) to investigate the financial affairs of the corporate debtor to

determine undervalued or preferential transaction,

(m) to take all such actions, steps, or to sign, execute and

verify any paper, deed, receipt document, application, petition,
affidavit, bond or instrument and for such purpose to use the
common seal, if any, as may be necessary for liquidation, distribution
of assets and in discharge of his duties and obligations and functions as
liquidator;

(n) to apply to the Adjudicating Authority for such orders or

directions as may be necessary for the liquidation of the corporate
debtor and to report the progress of the liquidation process in a
manner as may be specified by the Board; and

(o) to perform such other functions as may be specified by the

Board.

Section 35(2) further provides that the liquidator shall have the power to
consult any of the stakeholders entitled to a distribution of
proceeds under section 53.

First proviso to section 35(2) provides that any such consultation shall not be
binding on the liquidator. The second proviso further provides that the
records of any such consultation shall be made available to all other
stakeholders not so consulted, in a manner specified by the Board.

Section 37 provides that the liquidator shall have the power to access
any information systems for the purpose of admission and
proof of claims and identification of assets to be held in the
liquidation estate. This power to access information ensures easier
verification of claims and identification of assets and liabilities of the
corporate debtor.
  The liquidator’s public declaration- Within five days after the
appointment, the liquidator must publish a public statement in
Form B of Schedule II of the Liquidation Regulations. The format for
a public notification is specified in Schedule II, Form B. The public
announcement’s objective is to request that creditors and other
relevant parties submit their claims about the corporate
debtor.
 Verification and consolidation of claims- Within 30 days of the
liquidation process under IBC starting, the corporate debtor’s
creditors must submit their claims. The liquidator will review the
claims that the creditors have filed after receiving them. For the
purpose of verification, the liquidators may also request that the
creditors provide any supporting documentation for their claims.
 Acceptance, rejection, and evaluation of the valuation of claims- A
liquidator has the authority to accept or deny the claims based on
their verification. The liquidator must notify both the corporate
debtor and the creditor within seven days after making a
decision about the acceptance or rejection of a creditor’s claim.
Following the liquidation’s admission of all necessary claims, the liquidator must assess
the claims’ worth in order to allocate the corporate debtor’s assets.

 The time limit for the liquidation process under IBC- Regulation 47 of the
Liquidation Regulations specifies the model timeline for the liquidation
process under IBC, which states that the liquidation proceedings must
be finished within a year of the date of liquidation. This is in
contrast to the resolution process’s extendable time limit of 330 days.
 Corporate debtor dissolution- The Adjudicating Authority will
dissolve the corporate debtor upon the liquidator’s application,
following the distribution of the liquidator’s assets according to the
priority of claims.
 Appeal against the liquidator- In accordance with Section 42 of the IBC,
a creditor who feels wronged by the liquidator’s decision may appeal to
the Adjudicating Authority within fourteen days of the creditor being
informed of the decision.
Cases Concerning Liquidation Process Under IBC

1. Section 14 of the Insolvency and Bankruptcy Code (IBC) was used by the
National Company Law Tribunal (NCLT) Kolkata Bench to order the
company’s liquidation in the Gujarat NRE Coke Limited case. The
company, a significant producer of metallurgical coke, declared a loss of ₹676 crore
in the 2016–17 and owing lenders over ₹4,600 crore. The Resolution Professional
(RP), Sumit Binani, was named the liquidator by the NCLT . With a reserve price
equal to the entire debt amount, including interest, the tribunal ordered
 the liquidator to try to liquidate the corporate debtor as a
going concern. Within three months after the order date, this sale
was to be finalized. This case demonstrates the NCLT’s
dedication to maintaining sustainable business operations
and protecting jobs even in the midst of liquidation process
under IBC. The tribunal sought to minimize the negative
impacts on workers and other stakeholders while optimizing
value for creditors by directing the sale of the business as a
continuing concern.

1. According to the Delhi High Court’s ruling in re IndorRama Textile Limited

((2013) 4 CompLJ 141 (Del)), a firm is considered to be
transferred as a going concern provided the assets and
liabilities involved in the transfer represent a commercial
activity that may be operated independently for a
reasonable amount of time.
2. In Allahabad Bank v. ARC Holding (AIR 2000 SC 3098) (“Allahabad Bank
Case”), the Supreme Court ruled that if the business is
sold off as a continuing concern, all liabilities
related to the enterprise or business are also
transferred together with the company’s assets.
3. According to the ruling in Jayaprakash Shyamsundar Mandare v.
Laxminarayan Murlidhar (AIR 1983 Bom 364), a business can only be
auctioned off as a going concern if it is still operating.
4. In IAE International Aero Engines AG and Ors. vs. United Breweries
(Holdings) Limited and Ors (ILR 2017 KARNATAKA 2225), the
Karnataka High Court noted that a business cannot be
auctioned off as a going concern if it has already ceased
operations.
5. Can CoC challenge the appointment of liquidator after the liquidation order is passed by the
Adjudicating Authority? In the case of ‘Punjab National Bank Vs. Mr. Kiran Shah, Liquidator
of ORG Informatics Ltd.’, NCLAT held that after the liquidation
order, the CoC has no role to play and that they are
simply claimants, whose matters are to be determined
by the liquidator and hence cannot move an application
for his removal.
Liquidation provisions in Chapter III of Part II of the Code came into effect if
the attempts to resolve corporate insolvency under Chapter II of the Code fail.

Section 33 of the Code lists out the triggers for initiating the liquidation
process for corporate persons.
 � Section 34 of the Code provides for the appointment of liquidator
and the fees to be paid to him. ‘Liquidator’ means an insolvency
professional appointed as a liquidator in accordance with the provisions
of Chapter III or Chapter V of this Part, as the case may be.

The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018

has amended section 34 so as to require a written consent of
resolution professional in specified form for appointment as a
liquidator.

� Section 35 provides a non-exhaustive list of powers and duties of

the liquidator to ensure orderly completion of the liquidation
proceedings.

� Section 37 provides that the liquidator shall have the power to

access any information systems for the purpose of admission
and proof of claims and identification of assets to be held in
the liquidation estate.

� Section 36 provides for the creation of a liquidation estate

comprising the assets of the corporate debtor as set out in section
36(3). Section 36 also lists out the assets which are to be excluded
from the liquidation estate.

� Section 38 prescribes a time period for the collection of claims by

the liquidator. It also specifies the methods by which different
categories of creditors can submit and prove their claims.

� According to section 42, a creditor may appeal to the Adjudicating

Authority against the decision of the liquidator accepting or rejecting
the claims within fourteen days of the receipt of such decision.

� Section 53 deals with distribution of assets in liquidation. The

Insolvency and Bankruptcy Code, 2016 makes significant changes in
the priority of claims for distribution of liquidation proceeds.

� ‘Liquidation cost’ means any cost incurred by the liquidator during

the period of liquidation subject to such regulations, as may be
specified by the Board.

� ‘Liquidation commencement date’ means the date on which

proceedings for liquidation commence in accordance with section 33 or
section 59, as the case may be.

� Section 54 provides that after the affairs of the corporate debtor

have been wound up and its assets are completely liquidated, the
liquidator shall make an application to the Adjudicating Authority for
the dissolution of the corporate debtor.
Conclusion
The concept of liquidation process under IBC, as a going concern aims to
strike a balance between insolvency and bankruptcy law processes that
aren’t practical due to a number of factors, including the company’s business
(if it’s in the public sector), the number of employees or workers employed by
the corporate debtor, and the company’s current going concern nature,
either fully or partially. Creditors, employees, and the community at large are
all affected by these elements, which have a cascading influence on the
business operation. As a third arm of possibilities in the event of a
default, it is evident that this method is rarely employed and only in
extreme cases.

INSOLVENCY RESOLUTION OF INDIVIDUAL AND

PARTNERSHIP FIRMS
The provisions of the Code aim to maximize the value of assets of
such persons in order to promote entrepreneurship in the country and
also increase the availability of credit in the economy and balance
interest of all stakeholders. This lesson envisages how debtor or
creditor either on their own or through a Resolution Professional can
initiate insolvency resolution process, role of a Resolution Professional and
issuance of discharge order by Adjudicating Authority and effect upon the
declaration of interim-moratorium and moratorium by adjudicating
authority.

REGULATORY FRAMEWORK

Section 94 to 120 in Chapter III of Part III of Insolvency and Bankruptcy Code,
2016

 Under Chapter III of Part III of the Code, both debtor as well as the creditor can initiate the
insolvency resolution process.
 How debtor or creditor either on their own or through Resolution
Professional can initiate insolvency resolution process
 Role of a Resolution Professional and
 Issuance of discharge order by Adjudicating Authority and
 Effect upon the declaration of interim moratorium and moratorium by
adjudicating authority
Adjudicating authority for dealing with insolvency and bankruptcy of
individual and partnership firms is Debt Recovery Tribunal and
Appellate Authority for the same is Debt Recovery Appellate Tribunal..
 Section 94 of the Insolvency and Bankruptcy Code, 2016 lays down
the eligibility criteria for filing of an application for insolvency
resolution by a debtor who has committed a default. An
 application under section 94 of the Code may be filed by the debtor
personally, or through a resolution professional.
Section 94 of the Code provides that the debtor who commits a
default may apply to the adjudicating authority for initiating the
insolvency resolution process by submitting an application with such
fee and in such form as may be prescribed, either personally or
through a Resolution Professional. Where the debtor is a partner of a
firm, such debtor shall not apply to the Adjudicating Authority for
initiating the insolvency resolution process in respect of the firm
unless all or a majority of the partners of the firm file the
application jointly. Application for initiating the insolvency
resolution process shall be submitted only in respect of debts which
are not excluded debts.

Excluded debt means:

i. Liability to pay fine imposed by a court or Tribunal;
ii. Liability to pay damages for negligence, nuisance or breach
of a statutory, contractual or other legal obligation;
iii. Liability to pay maintenance to any person under any law for
the time being in force;
iv. Liability in relation to a student loan; and
v. Any other debt as may be prescribed

PERSONS DISENTITLED TO FILE PROCEEDINGS FOR PERSONAL INSOLVENCY – SECTION 94(4)

AND 94(5) OF THE IBC
• An undischarged bankrupt
• Undergoing a fresh start process
• Undergoing an insolvency resolution process
• Undergoing a bankruptcy process

 Section 95 of the Code provides for an insolvency resolution process

application by a creditor(s). In relation to a partnership debt owed
to the creditor, the creditor may file an application against the firm
or one or more of the partners, provided that separate
applications made against partners of the same firm shall be
consolidated and heard together.
Section 95 of the Code provides that a creditor may apply to the
Adjudicating Authority for initiating the insolvency resolution
process by submitting an application with such fee and in such form
as may be prescribed, either by himself or jointly with other
creditors or through a Resolution Professional. A creditor may
apply under this Section in relation to any partnership debt owed to
him for initiating an insolvency resolution process against any one
or more partners of the firm or the firm. Where an application has
been made against one partner in a firm, any other application
against another partner in the same firm shall be presented in or
 transferred to the Adjudicating Authority in which the first
mentioned application is pending for adjudication and such
adjudicating authority may give such directions for consolidating the
proceedings under the applications as it thinks just
An application under sub-section (1) shall be accompanied with
details and documents relating to—
(a) the debts owed by the debtor to the creditor or creditors
submitting the application for insolvency resolution process as on
the date of application;
(b) the failure by the debtor to pay the debt within a period of
fourteen days of the service of the notice of demand; and
(c) relevant evidence of such default or non-repayment of debt.
The creditor shall also provide a copy of the application made under this Section to the
debtor

State Bank of India vs Nathella Sampath Chetty & Co, IBA/763/2020– Firm cannot apply under
section 95. “6… Combined reading of Section 60(5) and 5(22) makes clear that to file the application
against the Personal Guarantors of the Corporate Debtor before this Adjudicating Authority; the
Personal Guarantor must be an individual. Moreover, the definition of 'firm' in Section
79(16) clarifies that a firm is a body of individual, which implies the expression 'individual' does not
include partnership firm. 7. It can be seen that the deeds of guarantee dated 25.02.2013 and
12.10.2015, have been executed between the Applicant and Nathella Sampath Chetty & Co.,
Respondent herein who is a partnership firm. 8. From the above
discussions, it is clear that the Respondent who is a guarantor of the
Corporate Debtor is a partnership firm and this application is not under
the purview of this Adjudicating Authority. Further, the provisions relating
to partnership firm is yet to come into force”

 Section 96 provides for interim moratorium which shall commence on the date of the
application initiating the insolvency resolution and shall cease to have effect on the date of
admission of such application.

During the interim moratorium period any pending legal action or

proceeding in respect of any debt shall be deemed to have been
stayed and the creditors of the debtor shall not initiate any legal action
or proceedings in respect of any debt.

Where the application for initiating the insolvency resolution process has
been made in relation to a firm, the interim moratorium shall operate
against all the partners of the firm as on the date of the application. The
provisions of this Section shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial
sector regulator.

In the case of State Bank of India vs. Krishan Kumar Basia CP(IB) 111 (ND)/2022, the Hon’ble NCLT
decided as follows Mere plain reading of the provisions referred to supra show that an interim
moratorium under Section 96(1)(a) shall commence on the date of the applications in relation to all
the debts and shall as cease to have effect on the date of admission of such application.
Therefore, the date of filing of the application is the prime
consideration so far applicability of Section 96 of IBC, 2016 is
concerned. Here in the case in hand, as we have already observed that the application filed by
the Applicant was prior to the date of filing of the application by the respondent. Hence the
interim moratorium in terms of Section 96 of the IBC, 2016 shall
commence on the date of the filing of application in terms of Rule 2(14)
of the NCLT Rules and not on the date when the application was
numbered or listed for hearing

FILING IS COMPLETE WHEN CASE IS E-FILED In the case of Dinesh Kumar Basia v. State
Bank of India, the Hon’ble NCLAT decided as follows 18. When as per Rule 10, sub-rule (2),
when an electronic facility is available and an Application is filed
in electronic form, the filing is complete as soon as it is registered
electronically, we do not find any support from the statutory scheme to the submission of
learned Counsel for the Appellant that petition would be treated as filed when it is numbered by the
Registry. Numbering of an Application by Registry is a process, which is undertaken by the Registry
as per the relevant rules and instructions. Several consequences ensue on filing of the Application in
the Registry, if it is accepted that the filing shall be dependent on numbering of the Application by
the Registry. It will lead to uncertainty regarding date of filing. When statutory consequences are
provided, there has to be certainty regarding such consequences. We cannot accept any
interpretation, which may lead to uncertainty regarding the date of filing, resulting in uncertainty,
regarding enforcement of the Interim Moratorium has serious consequences, which consequences
flow immediately after filing of the Application. If we accept the submission of the Appellant that
filing is postponed till it is numbered, it will lead to uncertainty and allow the Guarantors and other
Respondents to delay the moratorium by pleading that filing is not complete, since the Application
has not yet numbered. The statutory scheme, thus, does not in any manner support the submission
of learned Counsel for the Appellant. Numbering of Application is essential for different purpose and
cannot be equated with the filing as contemplated by the Rules.
The difference between Filing and Numbering was brought up in the case of PNB Housing Finance
Ltd. vs. Mohit Arora , I.A. 4750/ND/2021 in Company Petition No. (IB)-395(ND)/2021 by the Hon’ble
NCLT in a manner as stated below As per the above Rules, it is clear that "filing", "scrutiny" and
"numbering" are separate consequential stages. At the time an application is filed, the same is
allotted a diary number and date of filing. Thereafter, the application is sent for scrutiny and if found
defect-free, then numbered and registered. Pertinently, the date of filing remains the same,
i.e., the first date on which the application is presented before the filing-counter
of the Registry
RAVI AJIT KULKARNI V. STATE BANK OF INDIA • 46. The observations have been made by the
Adjudicating Authority that the Corporate Guarantor (should have been only "Guarantor') has not
filed any submission and on date of hearing there was no representation. It appears that the
Adjudicating Authority was of the view that service of "Form C" on 29th August, 2020 and "Amended
Form C" on 28th January, 2021 was the notice. Having gone through the Form and Rules and
Regulations, we do not find that anywhere it is provided that when the Form is submitted it would
also contain notice of date as to when the matter is coming up before the Adjudicating Authority. In
the absence of any such requirement, we find, as above, that there has to be limited notice for
presence conveying the 'filing" of application and commencing of Interim Moratorium under Section
96 from date "filling (to be mentioned)
 Section 97 of the Code provides for the appointment of Resolution Professional. An
application for insolvency resolution process may be made by the debtor either personally
or through a Resolution Professional

Section 97 of the Code provides that if an application under Section 94

or 95 is filed through a Resolution Professional, the Adjudicating
Authority shall direct the Insolvency and Bankruptcy Board of India
within seven days of the date of the application to confirm that there
are no disciplinary proceedings pending against the resolution
Professional. The Insolvency and Bankruptcy Board of India shall within
seven days from the date of receipt of directions from Adjudicating
Authority; communicate to the Adjudicating Authority in writing either
confirming the appointment of the Resolution Professional or rejecting
the appointment of the Resolution Professional and nominating another
Resolution Professional for the insolvency resolution process. Where an
application for initiating the insolvency resolution process under
Section 94 or 95 of the Code, is f iled by the debtor or the creditor
himself (as the case may be) and not through the Resolution
Professional, the Adjudicating Authority shall direct the Insolvency and
Bankruptcy Board of India within seven days of the filing of such
application, to nominate a Resolution Professional for the insolvency
resolution process. The Insolvency and Bankruptcy Board of India shall
nominate a Resolution Professional within ten days of receiving the
direction from the adjudicating authority. The Adjudicating Authority
shall by an order appoint the resolution Professional recommended or
as nominated by the Insolvency and Bankruptcy Board of India. The
Resolution Professional appointed by the Adjudicating Authority shall
be provided a copy of the application for insolvency resolution process

 Section 98 provides for the grounds and the manner in which a Resolution Professional can
be replaced with another Resolution Professional in an insolvency resolution process
initiated under section 94 or section 95 of the Code.

Section 98 of the Code provides that where the debtor or the creditor is
of the opinion that the Resolution Professional appointed under Section
97 of the Code, is required to be replaced, the debtor or creditor (as
the case may be) may apply to the adjudicating authority for the
replacement of such Resolution Professional. The Adjudicating
Authority shall within seven days from the date of receipt of the
application with regard to the replacement of Resolution Professional
shall make a reference to the Insolvency and Bankruptcy Board of India
for replacement of the Resolution Professional. The Insolvency and
Bankruptcy Board of India shall within ten days from the date of receipt
of the reference from the Adjudicating Authority, shall recommend the
name of the Resolution Professional to the adjudicating authority
against whom no disciplinary proceedings are pending. Without
prejudice to the provisions contained in this Section, the creditors may
apply to the Adjudicating Authority for replacement of the Resolution
Professional where it has been decided in the meeting of the creditors
to replace the Resolution Professional with a new Resolution
Professional for implementation of the repayment plan. Where the
Adjudicating Authority admits an application with regard to the
replacement of the Resolution Professional, it shall direct the
Insolvency and Bankruptcy Board of India to confirm that there are no
disciplinary proceedings pending against the proposed resolution
Professional. The Insolvency and Bankruptcy Board of India shall send a
communication within ten days from the date of receipt of the direction
from Adjudicating Authority either confirming the appointment of the
nominated Resolution Professional or rejecting the appointment of the
nominated Resolution Professional and recommend a new Resolution
Professional. On the basis of the communication of the Insolvency and
Bankruptcy Board of India, the Adjudicating Authority shall pass an
order appointing a new Resolution Professional and the Adjudicating
Authority may give directions to the replaced Resolution Professional to
share all information with the new Resolution Professional in respect of
the insolvency resolution process and also to co-operate with the new
Resolution Professional in such matters as may be required

 Section 99 of the Code provides the manner in which the Resolution Professional should
make a report either recommending acceptance or rejection of the application for
Insolvency Resolution process.

PURPOSE OF SECTION 99(1) AND 99(2) In the case of Ravi Ajit Kulkarni, Personal Guarantor of
Pratibha Industries Limited vs. State Bank of India, MANU/NL/0331/2021, the Hon’ble NCLAT
stated as follows “Section 99 require the Resolution Professional to
"examine the application" and to "submit the report" to the
Adjudicating Authority "recommending for approval or
rejection of the application". What the Resolution Professional does under
Section 99(2) is to "require the Debtor to prove repayment of the debt claimed as unpaid by the
Creditor" by furnishing (a) evidence of electronic transfer of the unpaid amount from the bank
account of the Debtor; (b) evidence of encashment of a cheque issued by the Debtor; or (c) a
signed acknowledgement by the Creditor accepting receipt of dues. This is mere collection of
evidence.”

 Section 100 requires the Adjudicating Authority to pass an order either accepting or
rejecting the application for insolvency resolution process within the prescribed time frame
of 14 days from the date of submission of the report under section 99.
Section 100 of the Code provides that the Adjudicating Authority shall within
fourteen days from the date of submission of the report by Resolution
Professional under Section 99 of the Code; pass an order either admitting or
rejecting the application under Section 94 or Section 95 as the case may be.
Where the Adjudicating Authority admits an application for initiation of the
insolvency resolution process on the request of the Resolution Professional then
Adjudicating Authority shall issue instructions for the purpose of conducting
negotiations between the debtor and creditors and for arriving at a repayment
plan. The Adjudicating Authority shall provide a copy of the order passed along
with the report of the Resolution Professional and the application referred under
Section 94 or Section 95 of the Insolvency and Bankruptcy Code, 2016 (as the
case may be), to the creditors within seven days from the date of passing the
said order. If the application referred under Section 94 or Section 95 of the
Insolvency and Bankruptcy Code, 2016 (as the case may be), is rejected by the
Adjudicating Authority on the basis of report submitted by the Resolution
Professional or that the application was made with the intention to defraud his
creditors or the Resolution Professional, the order passed by Adjudicating
Authority shall record that the creditor is entitled to fi le for the Bankruptcy Order
under Section 121 to 148 of the Code.
PRESCRIBED 14 DAY PERIOD – MANDATORY OR DIRECTORY? In the case of Surendra Trading Co v
Juggilal Kamlapat Jute Mills Co Ltd, the Hon’ble Supreme Court of India decided as follows Further,
we are of the view that the judgments cited by the NCLAT and the principle contained therein
applied while deciding that period of fourteen days within which the
adjudicating authority has to pass the order is not mandatory but
directory in nature would equally apply while interpreting proviso to Sub-section (5) of
Section 7, Section 9 or Sub-section (4) of Section 10 as well. After all, the applicant does not gain
anything by not removing the objections inasmuch as till the objections are removed, such an
application would not be entertained. Therefore, it is in the interest of the applicant to remove the
defects as early as possible. Thus, we hold that the aforesaid provision of removing the defects
within seven days is directory and not mandatory in nature.

Section 95 to Section 100 of the IBC are not unconstitutional as they do not violate Article 14 and
Article 21 of the Constitution: In the case of Dilip B Jiwrajka{Petitioner(s)} Vs. Union of India & Ors
{Respondent(s)} Writ Petition (Civil) No 1281 of 2021, judgement dated November 09, 2023,

 Section 101 provides that an order Admitting an application for Insolvency Resolution has
the effect of a fresh moratorium from the date of such admission for a period of one
hundred and eighty days, or up to the date on which an order approving the repayment plan
is passed by the adjudicating authority under section 114, whichever is earlier.

Section 101 of the Code provides that when the application for initiating
insolvency resolution process is admitted under Section 100 of the Code;
a moratorium shall commence in relation to all the debts and shall cease
to have effect at the end of the period of one hundred and eighty days
beginning with the date of admission of the application or on the date the
Adjudicating Authority passes an order on the repayment plan under
Section 114 of the Code, whichever is earlier.
During the moratorium period:

a) any pending legal action or proceeding in respect of any debt shall be

deemed to have been stayed;

b) the creditors shall not initiate any legal action or legal proceedings in
respect of any debt; and

c) the debtor shall not transfer, alienate, encumber or dispose of any of

the assets or his legal right or beneficial interest therein.

Where an order admitting the application for initiating insolvency

resolution process under Section 96 of the Code has been made in relation
to a firm, the moratorium shall operate against all the partners of the fi
rm. The provisions of this Section shall not apply to such transactions as
may be notified by the Central Government in consultation with any
financial sector regulator

 Section 102 provides for the issuance of a public notice by the Adjudicating Authority inviting
claims from the creditors of the debtor.

102. Public notice and claims from creditors.—

(1) The Adjudicating Authority shall issue a public notice within seven days of passing the order
under section 100 inviting claims from all creditors within twenty-one days of such issue.

(2) The notice under sub-section (1) shall include—

(a) details of the order admitting the application;

(b) particulars of the resolution professional with whom the claims are to be registered; and (c)
the last date for submission of claims.

(3) The notice shall be—

(a) published in at least one English and one vernacular newspaper which is in circulation in the
state where the debtor resides;

(b) affixed in the premises of the Adjudicating Authority; and

(c) placed on the website of the Adjudicating Authority.

 Section 104 provides for the preparation of list of creditors by the resolution professional.
Such a list is required for the purposes of organizing meetings of creditors and for matters
relating to the repayment plan.
 Section 105 of the Code provides for the preparation of a repayment plan by the debtor in
consultation with the resolution professional.

Section 105 of the Code provides that the debtor shall in consultation with the
Resolution Professional prepare a repayment plan containing a proposal to the
creditors for restructuring of the debts or affairs of the concerned debtor. The
repayment plan may authorize or require the Resolution Professional to:

(a) carry on the debtor’s business or trade on his behalf or in his name; or

(b) realize the assets of the debtor; or

(c) administer or dispose of any funds of the debtor.

The repayment plan shall include

1. The justification for preparation of such repayment plan and reasons

on the basis of which the creditors may agree upon the plan;
2. Provision for payment of fee to the resolution professional and
3. Such other matters as may be specified.

 Section 106 of the Code provides for the preparation of a report by the resolution
professional on the repayment plan. Such report is to be submitted to the Adjudicating
Authority along with the repayment plan.
 Section 108 provides for the conduct of meeting of creditors by the Resolution Professional.
In the meeting, the creditors may decide to approve, modify or reject the repayment plan.
 Section 109 provides for voting rights and determination of voting share in meeting of
creditors. The weightage of the vote shall depend on the value of the debt on the date of
admission of the application for insolvency resolution process under section 100.
 Section 113 mandates the Resolution Professional to provide a copy of the report of the
meeting of creditors prepared under section 99.
 Section 114 provides for an order by the Adjudicating Authority approving or rejecting the
repayment plan.
 Section 115 provides that a repayment plan approved by the adjudicating authority under
section 114 is binding on all the creditors mentioned in the repayment plan as well as the
debtor and take effect as if proposed by the debtor in the meeting.
 Section 116 requires the Resolution Professional appointed under section 97 or under
section 98 to supervise the implementation of the approved repayment plan.
 Section 117 provides for the sharing of certain documents by the resolution professional
after completion of the repayment plan.

For Chapter III, the Adjudicating Authority prescribed under the IBC is the DRT. But under section 60
of the IBC, the NCLT is to act as the Adjudicating Authority, where a personal guarantee has been
issued and the CD is undergoing process under IBC
.
.
PARTNERS, PARTNERSHIP DEBT AND APPLICATIONS UNDER SECTION 95 •
POWER TO ADMIT OR REJECT • As per section 100 for the furtherance and acceptance of •
Requirements as provided under section 94 and 95 are to be satisfied. • In addition to the above, the
facts of each case may raise certain defenses, which may result in the consideration of the following
questions: I. II. III. IV. V. VI. VII. Proceedings barred by limitation. Guarantee not valid/ guarantee
stands discharged/ guarantee not executed – Questioning the validity of the underlying guarantee.
Liability extinguished by previously approved resolution plan. Liability is disputed and disputed debts
cannot be subject matter of personal insolvency proceedings. No proceeding for corporate
insolvency pending or ongoing. Guarantor Dead and Guarantee lapses with guarantor. Liability not
arisen in terms of the contract inter se parties
SECTION 101 - MORATORIUM
(1) When the application is admitted under section 100, a moratorium shall
commence in relation to all the debts and shall cease to have effect at the end of
the period of one hundred and eighty days beginning with the date of admission
of the application or on the date the Adjudicating Authority passes an order on
the repayment plan under section 114, whichever is earlier. (2) During the
moratorium period— (a) any pending legal action or proceeding in respect of
any debt shall be deemed to have been stayed; (b) the creditors shall not initiate
any legal action or legal proceedings in respect of any debt; and (c) the debtor
shall not transfer, alienate, encumber or dispose of any of his assets or his legal
rights or beneficial interest therein; (3) Where an order admitting the
application under section 96 has been made in relation to a firm, the
moratorium under sub-section (1) shall operate against all the partners of the
firm. (4) The provisions of this section shall not apply to such transactions as
may be notified by the Central Government in consultation with any financial
sector regulator
SECTION 102 – PUBLIC NOTICE 102. (1) The Adjudicating Authority shall issue a public notice within
seven days of passing the order under section 100 inviting claims from all creditors within twenty-
one days of such issue. (2) The notice under sub-section (1) shall include— (a) details of the order
admitting the application; (b) particulars of the resolution professional with whom the claims are to
be registered; and (c) the last date for submission of claims. (3) The notice shall be— (a) published in
at least one English and one vernacular newspaper which is in circulation in the state where the
debtor resides; (b) affixed in the premises of the Adjudicating Authority; and (c) placed on the
website of the Adjudicating Authority
SECTION 103 – REGISTERING OF CLAIMS BY RP Section 103: Registering of claims by creditors. (1)
The creditors shall register claims with the resolution professional by sending details of the claims by
way of electronic communications or through courier, speed post or registered letter. (2) In addition
to the claims referred to in sub-section (1) , the creditor shall provide to the resolution professional,
personal information and such particulars as may be prescribed
SECTION 104 – PREPARATION OF LIST OF CREDITORS Section 104: Preparation of list of creditors.
104. (1) The resolution professional shall prepare a list of creditors on the basis of— (a) the
information disclosed in the application filed by the debtor under section 94 or 95, as the case may
be; (b) claims received by the resolution professional under section 102. (2) The resolution
professional shall prepare the list mentioned in sub-section (1) within thirty days from the date of
the notice
SECTION 105 – REPAYMENT PLAN Section 105: Repayment plan. (1) The debtor shall prepare, in
consultation with the resolution professional, a repayment plan containing a proposal to the
creditors for restructuring of his debts or affairs. (2) The repayment plan may authorise or require
the resolution professional to— (a) carry on the debtor’s business or trade on his behalf or in his
name; or (b) realise the assets of the debtor; or (c) administer or dispose of any funds of the debtor.
(3) The repayment plan shall include the following, namely:— (a) justification for preparation of such
repayment plan and reasons on the basis of which the creditors may agree upon the plan; (b)
provision for payment of fee to the resolution professional; (c) such other matters as may be
specified.
REGULATION 17 - CONTENTS OF REPAYMENT PLAN. (1) The repayment plan shall provide the
following (a) the term of the repayment plan and its implementation schedule, including the
amounts to be repaid and dates of repayment to creditors; (b) the source of funds that will be used
to pay resolution process costs and that such payment shall be made in priority over any creditor; (c)
a minimum budget for the duration of the repayment plan, to cover the reasonable expenses of the
guarantor and members of his immediate family to the extent they are dependent on him, provided
that at least ten percent of the realisable income of the guarantor shall be utilised for repayment of
debts; (d) financing required for implementation of the repayment plan; (e) if the guarantor has any
business, the manner in which it is proposed to be conducted during the course of the repayment
plan, and the role of the resolution professional; (f) the manner in which funds held for the purposes
of the repayment plan, invested or otherwise dealt with, pending repayment to creditors; (g) the
functions which are to be undertaken by the resolution professional, including supervision and
implementation of the repayment plan; (h) variation of onerous terms of a contract or transaction
involving the guarantor; (i) the details of excluded assets and excluded debts of the guarantor; and
(j) terms and conditions for the discharge of the guaranto(2) The repayment plan may provide for
the following (a) transfer or sale of all or part of the assets of the guarantor along with the mode and
manner of such sale; (b) administration or disposal of any funds of the guarantor; (c) satisfaction or
modification of any security interest; (d) reduction in the amount payable to creditors; (e) curing or
waiving of any breach of a debt due from the guarantor; (f) modification in the terms of repayment
of any debt due from the guarantor; (g) part of the income of the guarantor to be used for the
repayment of the debt, and the manner of calculating the income of the guarantor; (h) the manner
in which funds held for the purpose of repayment to creditors, and not so repaid at the end of the
repayment plan, are to be dealt with; and (i) such other matters as may be required by the creditors
SECTION 106 – REPORT ON THE REPAYMENT PLAN Section 106: Report of resolution professional on
repayment plan. (1) The resolution professional shall submit the repayment plan under section 105
along with his report on such plan to the Adjudicating Authority within a period of twenty-one days
from the last date of submission of claims under section 102. (2) The report referred in sub-section
(1) shall include that— (a) the repayment plan is in compliance with the provisions of any law for the
time being in force; (b) the repayment plan has a reasonable prospect of being approved and
implemented; and (c) there is a necessity of summoning a meeting of the creditors, if required, to
consider the repayment plan: Provided that where the resolution professional recommends that a
meeting of the creditors is not required to be summoned, reasons for the same shall be provided
(2) The report referred to in sub-section (2) shall also specify the date on which, and
the time and place at which, the meeting should be held if he is of the opinion
that a meeting of the creditors should be summoned. (4) For the purposes of
sub-section (3)— (a) the date on which the meeting is to be held shall be not less
than fourteen days and not more than twenty eight days from the date of
submission of report under sub-section (1); (b) the resolution professional shall
consider the convenience of creditors in fixing the date and venue of the
meeting of the creditors. NOTE: There is no adjudication by the Hon’ble NCLT at
this stage and this report, is merely for providing information to the DRT/ NCLT,
which is the jurisdictional authority to supervise the process
 FOUR PILLARS
INSOLVENCY AND INSOLVENCY INSOLVENCY ADJUDICATING INFORMATION
BANKRUPTCY BOARD PROFESSIONAL PROFESSIONAL AUTHORITY UTILITY
OF INDIA (IBBI) AGENCY
D Section 3(19) : a Section 3(20) as any Section 5(1): the Section 3(21) as a
E person enrolled person registered with “Adjudicating person who is
F under section 206 the Board under Authority” for registered with the
I
N with an insolvency section 201 as an insolvency Board as an
I professional insolvency professional resolution and information utility
T agency as its agency. liquidation for under section 210.
I member and corporate persons
O registered with the means National
N Board as an Company Law
insolvency Tribunal
professional under constituted under
section 207 section 408 of the
Companies Act,
, section 79(1)
“Adjudicating
Authority” for
insolvency
resolution and
bankruptcy for
individuals and
partnership firms is
the Debt Recovery
Tribunal
constituted under
section 3(1) of the
Recovery of Debts
Due to Banks and
Financial
Institutions Act,
1993.
P Section 196(1): Section 208(1) Section 204: Section 214:
o Register and renew, function of an Obligations of
w withdraw, suspend or insolvency (a) grant membership information utility
e cancel such professional to (b) lay down standards create and store
r registrations. take such actions of professional financial
s (aa) promote the as may be conduct (c) monitor information in a
development of, and necessary, the performance (d) universally
a regulate, the working Section 208(2) safeguard the rights, accessible format;
n and practices. mandates that privileges and interests (b) accept
d (b) Specify the every insolvency of its members; (e) electronic
minimum eligibility professional shall suspend or cancel the submissions of
F requirements for abide by the membership; financial
u registration following code of (f) redress the information
n (c) Levy fee or other conduct: grievances of (c) accept,
c charges consumers (g) publish electronic
t (d) standards for the information about its submissions of
i functioning functions, list of its financial
o minimum curriculum members, information from
n for the examination performance of its persons who
s (f) Carry out members and such intend to submit
inspections and other information such information;
investigations (d) meet such
(g) Monitor the minimum service
performance of quality standards
insolvency (e) get the
(h) Call for any information
information and received from
records various persons
(i)Publish such authenticate
information, data, (f) provide access
research studies and to the financial
other information information stored
(j)manner of collecting (g) publish such
and storing data and statistical
providing access to information
such data. (h) have
(k) Collect and interoperatabiliy
maintain records
(l) Constitute such
committees
(m) Promote
transparency and best
practices in its
governance.
(n) Maintain websites
and such other
universally accessible
repositories
(o) MoU with any
other statutory
authorities.
(p) necessary
guidelines.
(q) mechanism for
redressal of grievances
(r) Conduct periodic
study, research and
audit the functioning
and
Specify mechanisms
for issuing regulations,
Make regulations and
guidelines on matters
relating to insolvency
and. (u) Perform such
other functions
Section 188 (2):body IBBI (Insolvency The Insolvency and Section 60(5):
corporate Professional) Bankruptcy Board of jurisdiction of
Section 196(2): Board Regulations, 2016. India (Model Bye-Laws NCLT
may make model bye- and Governing Board Section 179(2):
laws to be to adopted of Insolvency JURISDICTION OF
by insolvency Professional Agencies) DRT
professional agencies Regulations, 2016, and
Section 196(3): same The Insolvency and
powers as are vested Bankruptcy Board of
in a civil court India (Insolvency
Professional Agencies)
Regulations, 2016.
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 unique
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 (B) Insolvency Professionals (IPs) The Code provides for Insolvency Professionals (IPs) to act
as intermediary in the insolvency resolution process. Insolvency professionals are a class of regulated
but private professionals having minimum standards of professional and ethical conduct. Section
3(19) of the Code defines an “insolvency professional” as 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 An insolvency professional plays a very important role under the
Code. He acts as an “interim resolution professional” and/or as a “resolution professional” in the
corporate insolvency resolution process (specified in Part II of the Code which deals with corporate
persons) as well as Part III of the Code (which deals with Insolvency Resolution and Bankruptcy for
Individuals and Partnership Firms) for conducting the fresh start process or insolvency resolution
process. An insolvency professional also acts as a liquidator in accordance with the provisions of Part
II as well as a “bankruptcy trustee” for the estate of the bankrupt under section 125 in Part III of the
Code Functions and obligations of insolvency professionals Section 208(1) of the Code provides that
where any insolvency resolution, fresh start, liquidation or bankruptcy process has been initiated, it
shall be the function of an insolvency professional to take such actions as may be necessary, in the
following matters, namely: (a) a fresh start order process under Chapter II of Part III; (b) individual
insolvency resolution process under Chapter III of Part III; (c) corporate insolvency resolution process
under Chapter II of Part II; (d) individual bankruptcy process under Chapter IV of Part III; and (e)
liquidation of a corporate debtor firm under Chapter III of Part II. Section 208(2) mandates that every
insolvency professional shall abide by the following code of conduct:– (a) to take reasonable care
and diligence while performing his duties; (b) to comply with all requirements and terms and
conditions specified in the bye-laws of the insolvency professional agency of which he is a member;
(c) to allow the insolvency professional agency to inspect his records; (d) to submit a copy of the
records of every proceeding before the Adjudicating Authority to the Board as well as to the
insolvency professional agency of which he is a member; and (e) to perform his functions in such
manner and subject to such conditions as may be specified. (C)

Insolvency Professional Agencies (IPA)

Section 3(20) of the Code defines “insolvency professional agency” as any person registered
with the Board under section 201 as an insolvency professional agency. Insolvency Professional
Agencies are designated to regulate Insolvency Professionals. These agencies enrol Insolvency
Professionals, provide pre-registration educational course to its enrolled members and enforce a
code of conduct for their functioning. They also issue ‘authorisation for assignment’ to the IPs
enrolled with them. In exercise of powers conferred by the Insolvency and Bankruptcy Code, 2016,
the Insolvency and Bankruptcy Board of India (IBBI) has framed the following regulations to regulate
the working of Insolvency Professional Agencies (IPAs): The Insolvency and Bankruptcy Board of
India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016,
and The Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulations,
2016 According to Section 204 of the Code, insolvency professional agencies perform the following
functions, namely: (a) grant membership to persons who fulfil all requirements set out in its byelaws
on payment of membership fee; (b) lay down standards of professional conduct for its members; (c)
monitor the performance of its members; (d) safeguard the rights, privileges and interests of
insolvency professionals who are its members; (e) suspend or cancel the membership of insolvency
professionals who are its members on the grounds set out in its bye-laws; (f) redress the grievances
of consumers against insolvency professionals who are its members; and (g) publish information
about its functions, list of its members, performance of its members and such other information as
may be specified by regulations.

(D) Adjudicating Authority (AA)

Section 5(1) of the Code provides that the “Adjudicating Authority” for insolvency resolution
and liquidation for corporate persons means National Company Law Tribunal constituted under
section 408 of the Companies Act, 2013. Section 60(5) of the Code further provides that
notwithstanding anything to the contrary contained in any other law for the time being in force, the
National Company Law Tribunal shall have jurisdiction to entertain or dispose of (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 179(2) of the Code further provides that the Debt Recovery Tribunal shall, have
jurisdiction to entertain or dispose of (a) any suit or proceeding by or against the individual debtor;
(b) any claim made by or against the individual debtor; (c) any question of priorities or any other
question whether of law or facts, arising out of or in relation to insolvency and bankruptcy of the
individual debtor or firm under this Code. Section 180 of the Code excludes the jurisdiction of civil
courts. The section provides that no civil court or authority shall have jurisdiction to entertain any
suit or proceedings in respect of any matter on which the Debt Recovery Tribunal or the Debt
Recovery Appellate Tribunal has jurisdiction under this Code. Thus, the Insolvency and Bankruptcy
Code proposes two tribunals to adjudicate insolvency resolution cases. In the case of insolvency of
companies and Limited Liability Partnerships (LLPs), the adjudication authority is the National
Company Law Tribunal (NCLT), while the cases involving individuals and partnership firms are
handled by the Debts Recovery Tribunals (DRTs). Appeals from NCLT orders lie to the National
Company Law Appellate Tribunal (NCLAT) and thereafter to the Supreme Court of India. For
individuals and other persons, the adjudicating authority is the DRT. Appeals from DRT orders lie to
the Debt Recovery Appellate Tribunal (DRAT) and thereafter to the Supreme Court.

(E) Information Utility (IU) Section 3(21) of the Code defines an “information utility” as a
person who is registered with the Board as an information utility under section 210. While the
Insolvency professionals assist in the insolvency resolution proceedings envisaged in the Code, the
Information Utility, on the other hand, collect, collate, authenticate and disseminate financial
information. The purpose of such collection, collation, authentication and dissemination financial
information of debtors is to facilitation swift decision making in the resolution proceedings. The
Insolvency and Bankruptcy Board of India oversees the functioning of such information utilities. The
Insolvency and Bankruptcy Board of India has framed the IBBI (Information Utilities) Regulations,
2017. These regulations are amended from time to time by the Insolvency and Bankruptcy Board of
India. Obligations of information utility (Section 214) (a) create and store financial information in a
universally accessible format; (b) accept electronic submissions of financial information from
persons who are under obligations to submit financial information under sub-section (1) of section
215, in such form and manner as may be specified by regulations; (c) accept, in specified form and
manner, electronic submissions of financial information from persons who intend to submit such
information meet such minimum service quality standards as may be specified by regulations; (e) get
the information received from various persons authenticated by all concerned parties before storing
such information; (f) provide access to the financial information stored by it to any person who
intends to access such information in such manner as may be specified by regulations; (g) publish
such statistical information as may be specified by regulations; (h) have inter-operatability with
other information utilities

CIRP PROBLEM

Question:

XYZ Constructions Ltd. launched a residential real estate project in 2016. Several homebuyers,
including Mr. A, booked apartments and paid substantial amounts as advance. The project got
delayed, and possession was not given within the promised time. Mr. A now wants to initiate
insolvency proceedings against XYZ Constructions Ltd. before the NCLT.

He argues that:

He is an allottee and hence a financial creditor under the IBC.

Being a single homebuyer, he can file the application under Section 7.

XYZ Constructions Ltd. counters that:

Homebuyers cannot be treated as financial creditors.

Even if they are financial creditors, after the amendment, a single homebuyer cannot maintain an
application.

Discuss whether Mr. A’s application is maintainable.

Model Answer

Relevant Provisions

Section 5(7), IBC – Financial Creditor: any person to whom a financial debt is owed, including a
person to whom such debt has been legally assigned or transferred.
Section 5(8)(f), IBC – Financial Debt: includes amounts raised under any other transaction having
the commercial effect of a borrowing.

Explanation (inserted by IBC Second Amendment Act, 2018): any amount raised from an allottee
under a real estate project shall be deemed to be a financial debt.

Section 7, IBC – Financial creditors can initiate Corporate Insolvency Resolution Process (CIRP)
before NCLT when default occurs.

Proviso inserted by IBC (Amendment) Ordinance, 2019 and confirmed by IBC Amendment Act,
2020: For real estate projects, application must be filed jointly by at least 100 allottees or 10% of
the total number of allottees, whichever is less.

Judicial Pronouncements

B.V.S. Lakshmi v. Geometrix Laser Solutions Pvt. Ltd. (2017, NCLAT): Essential criteria for being a
financial creditor – (i) debt owed, (ii) disbursal against consideration for time value of money.

Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019, SC): Upheld constitutional
validity of recognizing homebuyers as financial creditors; clarified that allottees’ payments have
the commercial effect of borrowing.

Manish Kumar v. Union of India (2021, SC): Upheld validity of the 2020 amendment introducing
the threshold of 100 allottees or 10%.

Application to Facts

Whether homebuyers are financial creditors?

Yes. After the 2018 amendment, read with Pioneer Urban case, amounts paid by allottees are
deemed to be financial debt. Therefore, homebuyers are financial creditors under Section 5(7) IBC.

Whether a single homebuyer can file under Section 7?

No. After the 2020 amendment, a single homebuyer cannot initiate insolvency. The proviso to
Section 7 requires that the application be filed jointly by at least 100 allottees or 10% of the total
allottees in the same real estate project. This threshold has been upheld as constitutionally valid in
Manish Kumar v. Union of India.

Forum: Since it is a corporate debtor (real estate company), the application must be filed before
NCLT and not DRT.

Conclusion
While Mr. A, as a homebuyer, qualifies as a financial creditor after the 2018 amendment, he
cannot individually initiate CIRP against XYZ Constructions Ltd. post the 2020 amendment. His
application as a single allottee is not maintainable unless joined by at least 100 allottees or 10% of
the total number of allottees in the project.

Question:
X Ltd. (Corporate Debtor) availed a loan of ₹50 crores from ABC Bank. To secure the
repayment, Mr. Y, the Managing Director of X Ltd., executed a personal guarantee in favour
of the bank. On default by X Ltd., ABC Bank files an application under Section 95 of the
Insolvency and Bankruptcy Code, 2016 against Mr. Y (personal guarantor) without initiating
Corporate Insolvency Resolution Process (CIRP) against X Ltd.

Mr. Y challenges the application on the ground that CIRP must first be initiated against the
corporate debtor before any proceedings can be filed against the personal guarantor.

Discuss whether ABC Bank’s application is maintainable under the IBC. Who is the
Adjudicating Authority for such proceedings?

Model Answer
Relevant Provisions

1. Section 7, IBC – Financial creditors can initiate CIRP against a corporate debtor upon
default.
2. Sections 95–100, IBC – Provide the mechanism for initiation of insolvency resolution
against personal guarantors to corporate debtors.
3. Section 60(1), IBC – NCLT is the Adjudicating Authority for insolvency resolution
and liquidation of corporate persons, including corporate debtors and personal
guarantors.
4. Section 60(2) & (3), IBC – Where CIRP or liquidation of a corporate debtor is
pending before NCLT, any application relating to insolvency of the guarantor must
also be filed before the same NCLT. If already pending elsewhere, it shall be
transferred to NCLT.
5. Section 128, Indian Contract Act, 1872 – Surety’s liability is co-extensive with that
of the principal debtor unless otherwise agreed.

Judicial Pronouncements

 Lalit Kumar Jain v. Union of India (2021) 9 SCC 321: The Supreme Court upheld
that personal guarantors can be proceeded against independently under IBC; liability
of guarantors is distinct and co-extensive.
 SBI v. V. Ramakrishnan (2018) 17 SCC 394: Moratorium under Section 14 applies
only to the corporate debtor and not to personal guarantors; hence proceedings against
guarantors are maintainable even if CIRP is pending against the CD.
  SBI v. D.S. Rajendra Kumar (NCLAT, 2018): CIRP of a personal guarantor can be
initiated before the same NCLT where the corporate debtor’s CIRP is pending;
moratorium does not prevent filing against guarantor.
 Sanjeev Shriya v. SBI (Allahabad HC, 2017): Parallel proceedings against CD and
guarantor cannot be allowed in two different jurisdictions; they must be brought
before NCLT.

Application to the Present Case

 Mr. Y argues that CIRP must first be initiated against the corporate debtor before
filing against him. This is incorrect because:
o The IBC, read with Section 128 of the Contract Act, makes the guarantor’s
liability co-extensive.
o As per Lalit Kumar Jain, creditors can directly proceed against the personal
guarantor without first commencing CIRP against the corporate debtor.
o Section 60 ensures that once CIRP of CD is pending, related guarantor
proceedings must be before the same NCLT for consolidation and consistency.
 Therefore, ABC Bank is within its rights to initiate insolvency proceedings against
Mr. Y under Section 95, even without CIRP being initiated against X Ltd.

Adjudicating Authority

 Under Section 60(1), IBC, the Adjudicating Authority for insolvency proceedings of
corporate debtors and their personal guarantors is the NCLT having jurisdiction over
the registered office of the corporate debtor.
 If CIRP of X Ltd. were already pending, any application against Mr. Y would
mandatorily lie before the same NCLT (Section 60(2) & (3)).

Conclusion

The application under Section 95 against Mr. Y, the personal guarantor, is maintainable
even without CIRP against X Ltd. The NCLT is the competent Adjudicating Authority,
ensuring that proceedings against the corporate debtor and its guarantors are consolidated
before the same forum.