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Corporate Insolvency Code Overview

This document provides an index of sections for the Insolvency and Bankruptcy Code of 2016 in India. It outlines the structure of the code, which contains four parts dealing with insolvency resolution and liquidation for corporate persons, insolvency resolution and bankruptcy for individuals and partnership firms, offenses and penalties, and miscellaneous provisions. Key chapters include those on the corporate insolvency resolution process, liquidation process, pre-packaged insolvency resolution process, fast track corporate insolvency resolution process, voluntary liquidation, and adjudicating authorities. Chapters are also included for fresh start process, insolvency resolution process, and bankruptcy order for individuals and partnership firms.

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35 views9 pages

Corporate Insolvency Code Overview

This document provides an index of sections for the Insolvency and Bankruptcy Code of 2016 in India. It outlines the structure of the code, which contains four parts dealing with insolvency resolution and liquidation for corporate persons, insolvency resolution and bankruptcy for individuals and partnership firms, offenses and penalties, and miscellaneous provisions. Key chapters include those on the corporate insolvency resolution process, liquidation process, pre-packaged insolvency resolution process, fast track corporate insolvency resolution process, voluntary liquidation, and adjudicating authorities. Chapters are also included for fresh start process, insolvency resolution process, and bankruptcy order for individuals and partnership firms.

Uploaded by

varad dongre
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

THE INSOLVENCY AND BANKRUPTCY CODE, 2016

Index of Sections
PART I

PRELIMINARY

1. Short title, extent and commencement.


2. Application.
3. Definitions.

PART II

INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS

CHAPTER I

PRELIMINARY

4. Application of this Part.


5. Definitions.

CHAPTER II

CORPORATE INSOLVENCY RESOLUTION PROCESS

6. Persons who may initiate corporate insolvency resolution process.


7. Initiation of corporate insolvency resolution process by financial creditor.
8. Insolvency resolution by operational creditor.
9. Application for initiation of corporate insolvency resolution process by operational creditor.
10. Initiation of corporate insolvency resolution process by corporate applicant.
10A. Suspension of initiation of corporate insolvency resolution process.
11. Persons not entitled to make application.
11A. Disposal of applications under section 54C and under section 7 or section 9 or section 10.
12. Time-limit for completion of insolvency resolution process.
12A. Withdrawal of application admitted under section 7, 9 or 10.
13. Declaration of moratorium and public announcement.
14. Moratorium.
15. Public announcement of corporate insolvency resolution process.
16. Appointment and tenure of interim resolution professional.
17. Management of affairs of corporate debtor by interim resolution professional.
18. Duties of interim resolution professional.
19. Personnel to extend co-operation to interim resolution professional.
20. Management of operations of corporate debtor as going concern.
21. Committee of creditors.
22. Appointment of resolution professional.
23. Resolution professional to conduct corporate insolvency resolution process.
24. Meeting of committee of creditors.
25. Duties of resolution professional.
25A. Rights and duties of authorised representative of financial creditors.
26. Application for avoidance of transactions not to affect proceedings.
27. Replacement of resolution professional by committee of creditors.

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28. Approval of committee of creditors for certain actions.
29. Preparation of information memorandum.
29A. Persons not eligible to be resolution applicant.
30. Submission of resolution plan.
31. Approval of resolution plan.
32. Appeal.
32A. Liability for prior offences, etc.

CHAPTER III
LIQUIDATION PROCESS

33. Initiation of liquidation.


34. Appointment of liquidator and fee to be paid.
35. Powers and duties of liquidator.
36. Liquidation estate.
37. Powers of liquidator to access information.
38. Consolidation of claims.
39. Verification of claims.
40. Admission or rejection of claims.
41. Determination of valuation of claims.
42. Appeal against the decision of liquidator.
43. Preferential transactions and relevant time.
44. Orders in case of preferential transactions.
45. Avoidance of undervalued transactions.
46. Relevant period for avoidable transactions.
47. Application by creditor in cases of undervalued transactions.
48. Order in cases of undervalued transactions.
49. Transactions defrauding creditors.
50. Extortionate credit transactions.
51. Orders of Adjudicating Authority in respect of extortionate credit transactions.
52. Secured creditor in liquidation proceedings.
53. Distribution of assets.
54. Dissolution of corporate debtor.

CHAPTER III-A
PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS

54A. Corporate debtors eligible for pre-packaged insolvency resolution process.


54B. Duties of insolvency professional before initiation of pre-packaged insolvency resolution
process.
54C. Application to initiate pre-packaged insolvency resolution process.
54D. Time-limit for completion of pre-packaged insolvency resolution process.
54E. Declaration of moratorium and public announcement during pre-packaged insolvency resolution
process.
54F. Duties and powers of resolution professional during pre-packaged insolvency resolution process.
54G. List of claims and preliminary information memorandum.
54H. Management of affairs of corporate debtor.
54-I. Committee of creditors.

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54J. Vesting management of corporate debtor with resolution professional.
54K. Consideration and approval of resolution plan.
54L. Approval of resolution plan.
54M. Appeal against order under section 54L.
54N. Termination of pre-packaged insolvency resolution process.
54-O Initiation of corporate insolvency resolution process.
54P. Application of provisions of Chapters II, III, VI, and VII to this Chapter.

CHAPTER IV
FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS

55. Fast track corporation insolvency resolution process.


56. Time period for completion of fast track corporate insolvency resolution process.
57. Manner of initiating fast track corporate insolvency resolution process.
58. Applicability of Chapter II to this Chapter.

CHAPTER V
VOLUNTARY LIQUIDATION OF CORPORATE PERSONS

59. Voluntary liquidation of corporate persons.

CHAPTER VI
ADJUDICATING AUTHORITY FOR CORPORATE PERSONS

60. Adjudicating Authority for corporate persons.


61. Appeals and Appellate Authority.
62. Appeal to Supreme Court.
63. Civil court not to have jurisdiction.
64. Expeditious disposal of applications.
65. Fraudulent or malicious initiation of proceedings.
66. Fraudulent trading or wrongful trading.
67. Proceedings under section 66.
67A. Fraudulent management of corporate debtor during pre-packaged insolvency resolution
process.

CHAPTER VII
OFFENCES AND PENALTIES

68. Punishment for concealment of property.


69. Punishment for transactions defrauding creditors.
70. Punishment for misconduct in course of corporate insolvency resolution process.
71. Punishment for falsification of books of corporate debtor.
72. Punishment for wilful and material omissions from statements relating to affairs of corporate
debtor.
73. Punishment for false representations to creditors.
74. Punishment for contravention of moratorium or the resolution plan.
75. Punishment for false information furnished in application.
76. Punishment for non-disclosure of dispute or 1[payment] of debt by operational creditor.
77. Punishment for providing false information in application made by corporate debtor.
77A. Punishment for offences related to pre-packaged insolvency resolution process.

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PART III
INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS
CHAPTER I
PRELIMINARY

78. Application.
79. Definitions.

CHAPTER II
FRESH START PROCESS

80. Eligibility for making an application.


81. Application for fresh start order.
82. Appointment of resolution professional.
83. Examination of application by resolution professional.
84. Admission or rejection of application by Adjudicating Authority.
85. Effect of admission of application.
86. Objections by creditor and their examination by resolution professional.
87. Application against decision of resolution professional.
88. General duties of debtor.
89. Replacement of resolution professional.
90. Directions for compliances of restrictions, etc.
91. Revocation of order admitting application.
92. Discharge order.
93. Standard of conduct.

CHAPTER III
INSOLVENCY RESOLUTION PROCESS

94. Application by debtor to initiate insolvency resolution process.


95. Application by creditor to initiate insolvency resolution process.
96. Interim- moratorium.
97. Appointment of resolution professional.
98. Replacement of resolution professional.
99. Submission of report by resolution professional.
100. Admission or rejection of application.
101. Moratorium.
102. Public notice and claims from creditors.
103. Registering of claims by creditors.
104. Preparation of list of creditors.
105. Repayment plan.
106. Report of resolution professional on repayment plan.
107. Summoning of meeting of creditors.
108. Conduct of meeting of creditors.
109. Voting rights in meeting of creditors.
110. Rights of secured creditors in relation to repayment plan.
111. Approval of repayment plan by creditors.
112. Report of meeting of creditors on repayment plan.
113. Notice of decisions taken at meeting of creditors.
114. Order of Adjudicating Authority on repayment plan.

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115. Effect of order of Adjudicating Authority on repayment plan.
116. Implementation and supervision of repayment plan.
117. Completion of repayment plan.
118. Repayment plan coming to end prematurely.
119. Discharge order.
120. Standard of conduct.

CHAPTER IV
BANKRUPTCY ORDER FOR INDIVIDUALS AND PARTNERSHIP FIRMS

121. Application for bankruptcy.


122. Application by debtor.
123. Application by creditor.
124. Effect of application.
125. Appointment of insolvency professional as bankruptcy trustee.
126. Bankruptcy order.
127. Validity of bankruptcy order.
128. Effect of bankruptcy order.
129. Statement of financial position.
130. Public notice inviting claims from creditors.
131. Registration of claims.
132. Preparation of list of creditors.
133. Summoning of meeting of creditors.
134. Conduct of meeting of creditors.
135. Voting rights of creditors.
136. Administration and distribution of estate of bankrupt.
137. Completion of administration.
138. Discharge order.
139. Effect of discharge.
140. Disqualification of bankrupt.
141. Restrictions on bankrupt.
142. Modification or recall of bankruptcy order.
143. Standard of conduct.
144. Fees of bankruptcy trustee.
145. Replacement of bankruptcy trustee.
146. Resignation by bankruptcy trustee.
147. Vacancy in office of bankruptcy trustee.
148. Release of bankruptcy trustee.

CHAPTER V
ADMINISTRATION AND DISTRIBUTION OF THE ESTATE OF THE BANKRUPT

149. Functions of bankruptcy trustee.


150. Duties of bankrupt towards bankruptcy trustee.
151. Rights of bankruptcy trustee.
152. General powers of bankruptcy trustee.
153. Approval of creditors for certain acts.
154. Vesting of estate of bankrupt in bankruptcy trustee.
155. Estate of bankrupt.
156. Delivery of property and documents to bankruptcy trustee.
157. Acquisition of control by bankruptcy trustee.

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158. Restrictions on disposition of property.
159. After-acquired property of bankrupt.
160. Onerous property of bankrupt.
161. Notice to disclaim onerous property.
162. Disclaimer of leaseholds.
163. Challenge against disclaimed property.
164. Undervalued transactions.
165. Preference transactions.
166. Effect of order.
167. Extortionate credit transactions.
168. Obligations under contracts.
169. Continuance of proceedings on death of bankrupt.
170. Administration of estate of deceased bankrupt.
171. Proof of debt
172. Proof of debt by secured creditors.
173. Mutual credit and set-off.
174. Distribution of interim dividend.
175. Distribution of property.
176. Final dividend.
177. Claims of creditors.
178. Priority of payment of debts.

CHAPTER VI
ADJUDICATING AUTHORITY FOR INDIVIDUALS AND PARTNERSHIP FIRMS

179. Adjudicating Authority for individuals and partnership firms.


180. Civil court not to have jurisdiction.
181. Appeal to Debt Recovery Appellate Tribunal.
182. Appeal to Supreme Court.
183. Expeditious disposal of applications.

CHAPTER VII
OFFENCES AND PENALTIES

184. Punishment for false information etc. by creditor in insolvency resolution process.
185. Punishment for contravention of provisions.
186. Punishment for false information, concealment, etc., by bankrupt.
187. Punishment for certain actions.

PART IV
REGULATION OF INSOLVENCY PROFESSIONALS, AGENCIES AND INFORMATION UTILITIES
CHAPTER I
THE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

188. Establishment and incorporation of Board.


189. Constitution of Board.
190. Removal of member from office.
191. Powers of Chairperson.
192. Meetings of Board.
193. Member not to participate in meetings in certain cases.
194. Vacancies etc., not to invalidate proceedings of Board, and Officers and employees of Board.

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195. Power to designate financial sector regulator.

CHAPTER II
POWERS AND FUNCTIONS OF THE BOARD

196. Powers and functions of Board.


197. Constitution of advisory committee, executive committee or other committee.
198. Condonation of delay.

CHAPTER III
INSOLVENCY PROFESSIONAL AGENCIES

199. No person to function as insolvency professional agency without valid certificate of registration.
200. Principles governing registration of insolvency professional agency.
201. Registration of insolvency professional agency.
202. Appeal to National Company Law Appellate Tribunal.
203. Governing Board of insolvency professional agency.
204. Functions of insolvency professional agencies.
205. Insolvency professional agencies to make bye-laws.

CHAPTER IV
INSOLVENCY PROFESSIONALS

206. Enrolled and registered persons to act as insolvency professionals.


207. Registration of insolvency professionals.
208. Functions and obligations of insolvency professionals.

CHAPTER V
INFORMATION UTILITIES

209. No person to function as information utility without certificate of registration.


210. Registration of information utility.
211. Appeal to National Company Law Appellate Tribunal.
212. Governing Board of information utility.
213. Core services, etc. of information utilities.
214. Obligations of information utility.
215. Procedure for submission, etc. of financial information.
216. Rights and obligations of persons submitting financial information.

CHAPTER VI
INSPECTION AND INVESTIGATION

217. Complaints against insolvency professional agency or its member or information utility.
218. Investigation of insolvency professional agency or its member or information utility.
219. Show cause notice to insolvency professional agency or its member or information utility.
220. Appointment of disciplinary committee.

CHAPTER VII

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FINANCE, ACCOUNTS AND AUDIT

221. Grants by Central Government.


222. Board’s Fund.
223. Accounts and audit.

PART V
MISCELLENEOUS

224. Insolvency and Bankruptcy Fund.


225. Power of Central Government to issue directions.
226. Power of Central Government to supersede Board.
227. Power of Central Government to notify financial sector providers etc.
228. Budget.
229. Annual Report.
230. Delegation.
231. Bar of jurisdiction.
232. Members, officers and employees of the Board to be public servants.
233. Protection of action taken in good faith.
234. Agreements with foreign countries.
235. Letter of request to a country outside India in certain cases.
235A. Punishment where no specific penalty or punishment is provided.
236. Trial of offences by Special Court.
237. Appeal and revision.
238. Provisions of this Code to override other laws.
238A. Limitation.
239. Power to make rules.
240. Power to make regulations.
240A. Application of this Code to micro, small and medium enterprises.
241. Rules and Regulations to be laid before Parliament.
242. Power to remove difficulties.
243. Repeal of certain enactments and savings.
244. Transitional provisions.
245. Amendments of Act 9 of 1932.
246. Amendments of Act 1 of 1944.
247. Amendments of Act 43 of 1961.
248. Amendments of Act 52 of 1962.
249. Amendments of Act 51 of 1993.
250. Amendments of Act 32 of 1994.
251. Amendments of Act 54 of 2002.
252. Amendments of Act 1of 2004.
253. Amendments of Act 51of 2007.
254. Amendments of Act 6 of 2009.
255. Amendments of Act 18 of 2013.
THE FIRST SCHEDULE
THE SECOND SCHEDULE
THE THIRD SCHEDULE
THE FOURTH SCHEDULE
THE FIFTH SCHEDULE
THE SIXTH SCHEDULE
THE SEVENTH SCHEDULE

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THE EIGHTH SCHEDULE
THE NINTH SCHEDULE
THE TENTH SCHEDULE
THE ELEVENTH SCHEDULE
THE TWELFTH SCHEDULE

Common questions

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The Insolvency and Bankruptcy Code, 2016 provides specific legal protections for the board members of the Insolvency and Bankruptcy Board of India (IBBI) to ensure they can perform their duties without fear of undue repercussions. Actions taken in good faith by the board members in pursuance of the code are protected from legal harassment . There are clauses that specifically bar jurisdiction of civil courts over matters undertaken by the board, ensuring that disputes fall within designated tribunals that understand the specific frameworks applicable . This insulation is crucial given the complex, sensitive nature of insolvency administration tasks .

The regular corporate insolvency resolution process is longer and often more comprehensive, providing a time-bound process for resolution of insolvency of corporate persons through a structured intervention by financial and operational creditors . In contrast, the fast track process is a streamlined version meant for smaller, less complex cases. It involves a shorter time period for completion and fewer procedural requirements, aiming to quickly ascertain the viability of restructuring the corporate debtor . The fast track process is applicable in cases where the total assets or liabilities do not exceed a specified limit, making it suited for small and medium enterprises .

Under the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority plays a pivotal role in overseeing and administering the insolvency and bankruptcy processes for individuals and partnership firms. Its core function includes the timely processing and approval of applications for insolvency commencement, reviewing and approving repayment plans, and adjudicating disputes . The Authority ensures that the process adheres to statutory guidelines, supervises the actions of the resolution professional, and enforces compliance with the code . Moreover, it holds the power to replace resolution professionals and resolve creditor-debtor disagreements, thereby maintaining an impartial forum for resolving financial distress .

The moratorium under the Insolvency and Bankruptcy Code, 2016 serves as a crucial mechanism to provide relief and maintain status quo by halting all legal proceedings and enforcement actions against the corporate debtor for the duration of the insolvency resolution process . This pause allows the debtor to focus on restructuring without the pressure of ongoing litigation or asset seizures . The effectiveness lies in creating a conducive environment for the formulation of a viable resolution plan, devoid of external interferences . However, there are criticisms regarding delayed creditor enforcement rights and potential misuse by debtors to stall legal proceedings, highlighting the need for strict oversight and timely conclusion of the resolution process .

Non-cooperation by the personnel of a corporate debtor can severely impede the progress of the insolvency resolution process. The Insolvency and Bankruptcy Code, 2016 mandates that all personnel, officers, and managers of the debtor provide cooperation and assistance to the interim resolution professional to carry out their duties effectively . Failure to comply can lead to the imposition of penalties and fines, and legal proceedings may be initiated for non-cooperation . Such actions can further delay the resolution process and may result in the deterioration of the debtor's assets, impacting creditor recoveries negatively .

The Insolvency and Bankruptcy Code, 2016 provides several mechanisms to protect and manage the assets of a corporate debtor during the insolvency resolution process. A moratorium is declared, halting all proceedings against the debtor that could drain assets or distract focuses from restructuring . The interim resolution professional takes over the management to ensure continued operations as a going concern, maintaining the debtor's business viability . Measures like securing the assets from preferential, undervalued, or fraudulent transactions are undertaken to preserve their value for creditors . Additionally, the code provides for the replacement of management if necessary to avoid conflict of interests and assure professional oversight .

The Insolvency and Bankruptcy Code, 2016 clearly distinguishes between financial and operational creditors. Financial creditors are entities that have extended any financial credit to the corporate debtor, like loans or credit facilities, and they primarily include banks, financial institutions, and debenture holders . These creditors have voting rights in the decision-making process during the corporate insolvency resolution process . On the other hand, operational creditors are individuals or institutions that the corporate debtor owes for operational or trade purposes, such as suppliers, customers, and employees . Although they can initiate the insolvency process, operational creditors do not have the same initial voting rights in decision-making within the committee of creditors .

The pre-packaged insolvency resolution process is a hybrid, offering a more flexible, cooperative approach compared to traditional bankruptcy processes. It allows pre-negotiation of a resolution plan before formal proceedings begin, enabling quicker resolutions . Traditional processes often involve court-driven resolutions, longer timelines, and greater uncertainty. In contrast, pre-packaged deals support debtor-creditor collusion and create an opportunity for minimal disruption to the business during insolvency proceedings . Tailored for micro, small, and medium enterprises, it aids in retaining value and jobs within the organization while ensuring compliance with statutory obligations .

The interim resolution professional has several key responsibilities during the corporate insolvency resolution process. They include managing the affairs of the corporate debtor by taking control of the assets and management . Additionally, they must protect and preserve the value of the property of the corporate debtor and ensure its continued business operations as a going concern . The interim resolution professional is also responsible for constituting a committee of creditors to guide the resolution process . Furthermore, they are expected to work towards a time-bound resolution process while ensuring necessary legal compliance .

Section 29A of the Insolvency and Bankruptcy Code, 2016 outlines the criteria determining the ineligibility of certain applicants in the resolution process, primarily aimed at preventing defaulting promoters from regaining control of the debtor firm. It significantly impacts the integrity and transparency of the resolution process by ensuring that entities responsible for the debtor's financial distress cannot repurchase the distressed assets at reduced values . This section has tightened the eligibility norms to avoid re-entry and control by unscrupulous elements, thus fostering fair competition and ensuring the promotion of genuine interests in the revival of financially stressed entities .

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