Chapter - 2 (CRVI + IBC Open Book )

GREEN अभ्यास sheet 2

Q1. An application for Corporate Insolvency Resolution Process (CIRP) was filed by a Bank
(being Financial Creditor) against RSI Ltd, which was admitted by the NCLT and an Interim
Resolution Professional was appointed, the Committee of Creditors (CoC) was constituted.
Vijay, who was a member of the suspended Board of Directors of RSI Ltd was neither allowed
participation in CoC nor any information considered confidential was given, either by the
resolution professional or the Committee of Creditors. Vijay made representations before the
Adjudicating Authority to attend the meeting and for information/documents. Will Vijay
succeed in his claim for attending the Meeting of Committee of Creditors and obtaining
information about the CoC proceedings. ( J 19, 6 Marks, IBC OPEN BOOK)

Answer :

The facts of the case are similar to the case of Vijay Kumar Jain v. Standard Chartered Bank,
Supreme Court of India, January 31, 2019.

In the matter, an appeal was filed with Supreme Court against orders rejecting the prayer
of an erstwhile director for getting copy of the resolution plans from the Resolution Professional
(RP). Both the NCLT and NCLAT ruled that appellant had no right to receive the resolution plans.

RP has contended that only the members of Committee of Creditors (CoC) are entitled to
have resolution plans, as per section 30(3) of the Code read with Regulation 39(2) of the IBBI
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Relying on the Notes
on Clauses to Section 24 of the Code, they argued that the members of suspended Board of
Directors are permitted to participate in CoC meetings only for the purpose of giving information
regarding the financial status of the debtor.

In this case the Supreme Court opined that the statutory scheme, makes it clear that
though the erstwhile Board of Directors are not members of the committee of creditors, yet, they
have a right to participate in each and every meeting held by the committee of creditors, and also
have a right to discuss along with members of the committee of creditors all resolution plans that
are presented at such meetings. The Supreme Court expressly rejected the argument based on
Notes on Clauses to Section 24 of the Code and noted that every participant is entitled to a notice
of every meeting of the committee of creditors. Such notice of meeting must contain an agenda of
the meeting, together with the copies of all documents relevant for matters to be discussed and
the issues to be voted upon at the meeting vide Regulation 21(3)(iii) of CIRP Regulations. The
Supreme Court said the expression ‘documents’ is a wide expression which would certainly
include resolution plans.

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 Thus, members of erstwhile Board of Directors, being vitally interested in resolution plans
that may be discussed at meetings of committee of creditors, must be given a copy of such plans
as part of 'documents' that have to be furnished along with notice of such meetings.

Hence, Vijay will succeed in his claim for attending the meetings of CoC and obtaining
information about the CoC proceedings.

Q2. Facts of the case :

Richa Infrastructure Limited engaged in the construction of roads is in default in repayment

of loans due to general slowdown in construction industry. Repeated follow-up by the
financial institutions with the Corporate Debtor, ‘Richa Infrastructure Ltd.’ for submitting its
specific plan for repayment of dues did not evoke any response.

One of the financial creditors filed a case against Richa Infrastructure Ltd. before the Debt
Recovery Tribunal.

Richa Infrastructure Ltd. had issued some cheques to some Operational Creditors. All the
cheques issued to creditors were dishonored/returned by the banker due to insufficient funds
in the account. Consequently, Operational Creditors issued legal notices to Richa
Infrastructure Ltd, with clear intimation that if due amount is not paid within 15 days from the
date of receipt of legal notice, criminal complaint shall be filed against Richa Infrastructure
Ltd. under the Negotiable Instrument Act, 1881 and criminal complaints were filed. After a
joint lenders meeting, all the financial institutions unanimously decided to apply under the
provisions of the Insolvency and Bankruptcy Code, 2016 to the National Company Law
Tribunal (NCLT) for starting the process of Insolvency Resolution. Their application was
admitted by NCLT on 30th June, 2018 and orders were issued for commencement of a
moratorium period of 180 days, appointment of an Interim Resolution Professional and issue
of public announcement inviting claims from all concerned.

After public announcement and the responses thereto, following details were brought out :

(1) Financial debts due to unsecured creditors (F1) - `15 Crores

(2) Workmen’s due for the period of 24 months preceding the liquidation commencement
date (F2) - `25 Crores.
(3) Debts due to a secured creditor who has relinquished his security (F3) - `30 Crores .
(4) Amount due to the Central Government (F4) - `27 Crores.
(5) Debts due to a secured creditor after the enforcement of security interest (F5) - `36
Crores

Insolvency Resolution Professional (IRP) approached the promoters, directors and officials of
Richa Infrastructure Ltd to provide the necessary information, documents, statutory records,
books of accounts to verify the claims filed by creditors. The promoters, directors and officials
of Richa Infrastructure Ltd. ignored the request of Resolution Professional.

M/s ANG & Associates, Chartered Accountants were the Statutory Auditors of Richa
Infrastructure Ltd. They audited the accounts for the financial year end March, 2018 of Richa
Infrastructure Ltd. and submitted the Annual Accounts for approval of the Board of Directors.

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

The Resolution Professional has appointed valuers and has received the valuation reports. The
Resolution Professional then started the efforts to get resolution proposals.

However during the normal resolution process period of 180 days, no resolution proposal
could be finalized. The Committee of Creditors decided that Resolution Professional should
get the extension as per the provisions of Insolvency and Bankruptcy Code, 2016.

Based on the above facts, answer the following questions :

(a) Can a Financial Creditor proceed against a Corporate Debtor under the Insolvency and
Bankruptcy Code, 2016, when the matter is already pending before the Debt Recovery
Tribunal ? Examine the issue with the help of decided case law/ laws.

(b) Is it necessary that application for extension of time period of 90 days must be filed
before the completion of 180 days ? What precautions should be taken by Insolvency
Professional while applying to NCLT for extension of time period by 90 days ? Examine
the issue by referring to decided case law, if any.

(c) Can criminal proceedings under Section 138 of Negotiable Instrument Act, 1881
continue even after initiation of Corporate Insolvency Resolution Process ? Examine
the issue by referring to decided case law, if any .

(d) Who will sign the Annual Financial Statements of the Corporate Debtor undergoing
Corporate Insolvency Resolution Process ?

(e) Can IRP take action against employees of the Corporate Debtor in terms of employment
agreement ? ( D 19, 3 Marks, IBC Open Book )

Answer 2(a) :

Section 238 of the Insolvency and Bankruptcy Code, 2016 (the Code) provides that the provisions
of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any
other law for the time being in force or any instrument having effect by virtue of any such law.

National Company Law Tribunal (NCLT), Ahmadabad Bench, in the case of Sarthak
Creations Pvt. Ltd v. Bank of Baroda & Others held that the pendency of proceedings before Debt
Recovery Tribunal (DRT) is no ground for not to commence Corporate Insolvency Resolution
Process (CIRP) in view of nonobstante clause under Section 238 of the Insolvency and Bankruptcy
Code, 2016.

In the case of PR Commissioner of Income Tax, New Delhi vs. Monnet Ispat & Energy Ltd.,
the Delhi High Court held that the moratorium period under Section 14 of the Code announced
by the National Company Law Tribunal would also apply to the order of the Income Tax
Appellate Tribunal in respect of the tax liability of the assesse.

Upholding the Delhi High Court Judgment (PR Commissioner of Income Tax, New Delhi vs.
Monnet Ispat & Energy Ltd.) which held that moratorium under the Insolvency and Bankruptcy
Code (IBC) will apply to the order of Income Tax Appellate Tribunal, the Supreme Court has

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

observed that IBC will override anything inconsistent contained in any other enactment,
including the Income Tax Act, 1961.

In view of the above, financial creditor can initiate proceedings under the Code even if
the matter is already pending before DRT.

Answer 2 (b) :

Section 12(2) of the Insolvency and Bankruptcy Code, 2016 provides that the Resolution
Professional shall file an application to the Adjudicating Authority to extend the period of the
Corporate Insolvency Resolution Process (CIRP) beyond one hundred and eighty days, if
instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of
sixty-six per cent of the voting shares.

However, reading the aforesaid provision, it appears that provision does not stipulate that
such application for extension of period of CIRP is to be filed before NCLT within 180 days.

The very same issue had come up for consideration before the NCLAT in case of Quantum
Ltd. v. Indus Finance Corporation Ltd. decided on 20th February, 2018, wherein NCLAT allowed an
application filed after 180 days. However, the resolution of the committee of the creditors has to
be passed within 180 days.

In view of the aforesaid judgment passed by NCLAT, when it becomes clear to the
Resolution Professional that CIRP cannot be completed within the specified period of 180 days,
he should propose to the Committee of Creditors for direction to seek extension of time from the
Adjudicating Authority so that the process does not get derailed because of technical reasons.

On receipt of an application under sub-section (2) of section 12 of the Code, if the

Adjudicating Authority is satisfied that the subject matter of the case is such that Corporate
Insolvency Resolution Process cannot be completed within one hundred and eighty days, it may
by order extend the duration of such process beyond one hundred and eighty days by such
further period as it thinks fit, but not exceeding ninety days. [Section 12(3)].

Answer 2 (c) :

Section 14(1) of the Insolvency and Bankruptcy Code, 2016 prohibits, inter alia, the institution of
suits or continuation of pending suits or proceedings against the Corporate Debtor including
execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other
authority.

From the provision and the words used therein, it becomes clear that the prohibition is
not applicable to criminal proceedings which can continue to be pursued. The proceedings under
Section 138 of the Negotiable Instruments Act, 1881 can thus continue even after initiation of
CIRP.

In the appeal of Shah Brothers Ispat (P) Ltd. Vs. P. Mohanraj before the NCLAT, the very
same question arose for consideration. The question was whether the order of moratorium covers
a criminal proceeding under Section 138 of the Negotiable Instruments Act, 1881which provides
punishment of imprisonment or imposition of fine. It was held that the court of competent

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

jurisdiction may proceed with the proceeding under Section 138 of Negotiable Instruments Act,
1881 even during the period of moratorium.

It is pertinent to note that Section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits any
proceeding or judgment or decree of money claim against the Corporate Debtor after the order
of moratorium which is passed on the insolvency commencement date.

The Appellate Tribunal observed that Section 138 is a penal provision. The imposition of a fine
cannot be held to be a money claim or recovery against the Corporate Debtor. As such the said
section is not covered within the purview of Section 14 of the Insolvency and Bankruptcy Code,
2016. In fact, no criminal proceeding is covered under section 14 of the Code.

Answer 2(d) :

Section 17(1)(b) of the Insolvency and Bankruptcy Code, 2016 provides that the powers of the
Board of directors (Board) or the partners of the corporate debtor, shall stand suspended and be
exercised by Interim Resolution Professional (IRP). It may be noted that though the powers of the
Board are suspended, they are bound to provide all assistance to Insolvency Professional as only
the powers of the Board are suspended and not their duties.

Further, Section 19 of the Insolvency and Bankruptcy Code, 2016 imposes an obligation on the
personnel and promoters of the corporate debtor to extend all assistance and cooperation
required by the IRP in the management of the affairs of the corporate debtor. Where the personnel
of the corporate debtor or any other person required to co-operate with the IRP do not extend co-
operation or assistance to the IRP, he may apply to the Adjudicating Authority for an order. The
Adjudicating Authority may, by order, direct the personnel to comply with the instructions of
the IRP or to provide information to the IRP. ‘Personnel’ includes the directors, managers, key
managerial personal, designated partners and employees, if any, of the corporate debtor.

Moreover, the powers of the resolution professional do not include the power to represent the
corporate debtor or initiate proceedings on behalf of the corporate debtor. The suspension is of
the functioning of the Board and not of the directors. Signing of the Annual Report is a duty of
the Board and the Board as a whole has to take the legal responsibility for the correctness of the
report.

This is further clarified by the NCLAT in the matter of Steel Konnect (India) Pvt. Ltd. v. M/s. Hero
Fincorp Ltd. that directors of the company do not cease to be directors, as they are not suspended
but their function as ‘Board of directors’ is suspended.

The members of the Board also has to work under the Insolvency Professional which again means
that if the professional asks them to consider the financial statement, they have to do so. In the
aforesaid context, the existing directors of corporate debtor shall sign the financial statements of
Corporate Debtor undergoing CIRP.

Answer 2 (e) :

Section 28(1)(j) and (l) of the Insolvency and Bankruptcy Code, 2016 provides that Resolution
Professional, during the Corporate Insolvency Resolution Process (CIRP), shall not make any

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

change in the management of the corporate debtor or its subsidiary, make changes in the
appointment or terms of contract of such personnel as specified by the Committee of Creditors,
without prior approval of the Committee of Creditors.

Thus, if action of IRP / RP has effect of change in management of corporate debtor or has
the effect of making changes in appointment of such persons as may be specified by Committee
of Creditors, he shall take approval of Committee of Creditors in terms of Section 28 (1)(j) and (l)
of the Code.

IRP may take action against an employee of corporate debtor for hindering the CIRP
process if he does not provide assistance and co-operation to IRP. However, by way of abundant
caution, IRP may also place the matter before Committee of Creditors before taking any action.
IRP may also approach Adjudicating Authority under section 19(2) of the Code for necessary
directions.

The Adjudicating Authority, on receiving an application under Section 19(2) of the Code,
shall by an order, direct such personnel or other person to comply with the instructions of the
Resolution Professional and to co-operate with him in collection of information and management
of the Corporate Debtor.

Q3. Can an assignee of Financial Contract make an application under Corporate Insolvency
Resolution Process ? (D 19, 3 Marks, IBC OPEN BOOK )

Answer :

Yes, as per Rule 4(2) of Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016, where an applicant for a Corporate Insolvency Resolution Process is an assignee or
transferee of a Financial Contract the application shall be accompanied with a copy of the
assignment or transfer agreement and other relevant documents as may be required to
demonstrate the assignment or transfer.

Q4. Naveen Kumar, a Financial Creditor filed an Insolvency Application under Section 7 of
Insolvency and Bankruptcy Code, 2016 against M/s ABC Private Ltd, Corporate Debtor
(Defaulter) before the National Company Law Tribunal on 1st July, 2018.

National Company Law Tribunal after satisfying that the default has occurred and the
application is complete in all respects and all the related compliances have been met, admitted
the application, by an order passed on 10th July, 2018 and appointed Kamal Kishore as Interim
Resolution Professional (IRP).

As per the Insolvency and Bankruptcy Code, 2016, state the following:

(i) Initiation date for the Corporate Insolvency Resolution Process

(ii) Date of commencement of Insolvency.
(iii) Date of issuance of Public Announcement.
(iv) Tenure of Interim Resolution Professional.
(v) Last Date for Creditors to file their Claims
(vi) Calculate Time Period for the completion of the Insolvency Resolution Process by
the NCLT. (D 19, 1 mark each * 6 = 6 Marks, IBC Open Book )

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

Answer 4(i) :

As per section 5(11) of the Insolvency & Bankruptcy Code, 2016 (the Code), initiation date for
Corporate Insolvency Resolution Process is the date on which a financial creditor, corporate
applicant or operational creditor, as the case may be, makes an application to the Adjudicating
Authority for initiating Corporate Insolvency Resolution Process. So 1st July, 2018 would be the
initiation date.

Answer 4 (ii) :

According to section 5(12) of the Code, insolvency commencement date is the date of admission
of an application for initiating Corporate Insolvency Resolution Process by the Adjudicating
Authority under Sections 7, 9 or Section 10, as the case may be. Accordingly, 10th July, 2018 is the
insolvency commencement date.

Answer 4 ( iii ) :

As per Regulation 6 of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016, an Insolvency Professional shall make a public announcement not later than
three days from the date of his appointment as an Interim Resolution Professional. Accordingly,
13th July, 2018 is the date of making public announcement.

Answer 4 (iv) :

The term of the Interim Resolution Professional continues till the date of appointment of the
Resolution Professional under Section 22 of the Code.

Answer 4 ( v ) :

As per regulation 12(1) of the IBBI (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016, subject to sub-regulation (2), a creditor shall submit claim with proof on or
before the last date mentioned in the public announcement.

However, as per regulation 12(2) a creditor, who fails to submit claim with proof within the time
stipulated in the public announcement, may submit the claim with proof to the Interim Resolution
Professional or the Resolution Professional, as the case may be, on or before the ninetieth day of
the insolvency commencement date. Accordingly, 7th October, 2018 is last date of submission of
claim. However, in many judgments, this timeline is held to be directory in nature.

Answer 4 ( vi ) :

Section 12 of the Code states that any Insolvency Resolution Process shall be completed within a
period of one hundred and eighty days from the date of admission of the application to initiate
the process. Accordingly, Corporate Insolvency Resolution Process should be completed by 6th
January, 2019. However, the NCLT may on an application made by the Resolution Professional,
under a resolution passed by the Committee of Creditors, by a vote of 66% of voting shares, after
consideration provide extension which shall not exceed 90 days. Further, Insolvency and
Bankruptcy Code (Amendment) Act, 2019 w.e.f. 6th August, 2019, has added a proviso to section
12(3) stating that corporate insolvency resolution process shall mandatorily be completed within

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

a period of three hundred and thirty days from the insolvency commencement date, including
any extension of the period of corporate insolvency resolution process granted under this section
and the time taken in legal proceedings in relation to such resolution process of the corporate
debtor.

Q5. Under what circumstances Debtor is not entitled to make an application to the NCLT ? ( D
19, 3 Marks, IBC Open Book )

Answer :

According to section 11, the following persons shall not be entitled to make an application to
initiate corporate insolvency resolution process under Chapter II of Part II of the Insolvency and
Bankruptcy Code, 2016:

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

or
(aa) a financial creditor or an operational creditor of a corporate debtor undergoing a pre
- packaged insolvency resolution process;
Or
( ab ) a corporate debtor in respect of whom a resolution plan has been approved under
Chapter III-A, twelve months preceding the date of making of the application;
Or
(b) a corporate debtor having completed corporate insolvency resolution process twelve
months preceding the date of making of the application;
or
(c) a corporate debtor or a financial creditor who has violated any of the terms of resolution
plan which was approved twelve months before the date of making of an application
under this Chapter; or
(d) a corporate debtor in respect of whom a liquidation order has been made.

Q6. If there is NO Financial Creditor, how will the Committee of Creditors be constituted? ( D
19, 4 marks, IBC Open Book )

Answer :

Regulation 16 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016 deals with situations where either the corporate debtor
has no financial debt or where all financial creditors are related parties of the corporate debtor.
Regulation 16 provides as follows:

1. Where the corporate debtor has no financial debt or where all financial creditors are
related parties of the corporate debtor, the committee shall be set up in accordance with
this regulation
2. The committee formed under this regulation shall consist of members as under:
(a) Eighteen largest operational creditors by value, provided if the number of operational
creditors is less than eighteen, the committee shall include all such operational creditors;

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 (b) One representative elected by all workmen other than those workmen included under sub
- clause (a); and
(c) One representative elected by all employees other than those employees included under
sub - clause (a).
3. A member of the committee formed under this regulation shall have voting rights in
proportion of the debt due to such creditor or debt represented by such representative, as
the case may be, to the total debt.
Explanation – For the purposes of this sub-regulation, ‘total debt’ is the sum of-
(a) the amount of debt due to the creditors listed in sub-regulation 2(a);
(b) the amount of the aggregate debt due to workmen under sub-regulation 2(b); and
(c) the amount of the aggregate debt due to employees under sub-regulation 2(c).
4. A committee formed under this regulation and its members shall have the same rights,
powers, duties and obligations as a committee comprising financial creditors and its
members, as the case may be.

Q7. What will be the consequence if Demand of Debt is disputed ? ( D 19, 4 Marks, IBC Open
Book )

Answer :

If demand of debt is disputed and such dispute has been raised before the issuance of notice
under section 8 of the Insolvency and Bankruptcy Code, 2016, the application shall not be
admitted as the Adjudicating Authority is not empowered to go into the dispute. Thus,
application can be admitted only if the demand of debt is undisputed.

Q8. What shall be included in ‘‘Financial Information’’ as defined under IBC, 2016 ? ( D 19, 4
Marks, IBC Open Book )

Answer :

As per section 3(13) of the Insolvency and bankruptcy Code, 2016, ‘financial information’, in
relation to a person, means one or more of the following categories of information, namely:

(a) Records of debt of the person.

(b) Records of liabilities when the person is insolvent.
(c) Records of assets of the person over which security interest has been created.
(d) Records, if any, of instances of default by the person against any debt.
(e) Records of the Balance Sheet and Cash Flow Statements of the persons; and
(f) Such other information as may be specified

Q9. You are appointed as Resolution Professional by Committee of Creditors. You have made
a public announcement inviting Expression of Interest. Based on your invitation few Parties
have submitted Resolution plans. As per the provisions of Insolvency and Bankruptcy Code,
2016 (IBC, 2016) Resolution Plans submitted should satisfy few criteria. As a Resolution

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

Professional brief the criteria for a valid Resolution Plan under IBC, 2016. ( D 20 , 6 Marks ,
IBC Open Book )

Answer :

Section 30(2) of the Insolvency and Bankruptcy Code, 2016 provides that the Resolution
Professional shall examine each resolution plan received by him to confirm that each resolution
plan fulfils the following criteria:

(a) provides for the payment of insolvency resolution process costs in a manner specified by
the Board in priority to the payment of other debts of the corporate debtor;
(b) provides for the payment of debts of operational creditors in such manner as may be
specified by the Board which shall not be less than-
(i) the amount to be paid to such creditors in the event of a liquidation of the
corporate debtor under section 53; or
(ii) the amount that would have been paid to such creditors, if the amount to be
distributed under the resolution plan had been distributed in accordance with the
order of priority in sub-section (1) of section 53
whichever is higher, and Each resolution plan shall provide for the payment of
debts of financial creditors, who do not vote in favour of the resolution plan, in
such manner as may be specified by the Board, which shall not be less than the
amount to be paid to such creditors in accordance with sub-section (1) of section
53 in the event of a liquidation of the corporate debtor.
(iii) provides for the management of the affairs of the corporate debtor after approval
of the resolution plan;
(iv) the implementation and supervision of the resolution plan;
(v) does not contravene any of the provisions of the law for the time being in force
(vi) conforms to such other requirements as may be specified by the Board.

Q10. An Operational Creditor of a Company has made an application to National Company

Law Tribunal (NCLT) for initiating Corporate Insolvency Resolution Process (CIRP) for non-
payment his dues for long time. The NCLT ordered for commencement of CIRP. During the
course of CIRP period Corporate Director has agreed to settle the dues of Operational Creditor
and requested him to withdraw the CIRP. Whether NCLT may allow the withdrawal of
application admitted under Insolvency and Bankruptcy Code, 2016 in the above case. Will your
answer differ, if the above application is made by Financial Creditor and subsequently
Corporate Debtor settle its dues? ( D 20 / 6 Marks / IBC Open Book )

Answer :

Section 12A of the Insolvency and Bankruptcy Code, 2012 provides that the Adjudicating
Authority may allow the withdrawal of application admitted under section 7 or section 9 or
section 10. on an application made by the applicant with the approval of ninety per cent voting
share of the committee of creditors, in such manner as may be specified.

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 Section 12 A of IBC read with Regulation 30A of the Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 specifically deals
with withdrawal of CIRP after admission. Section 12A provides that CIRP can be withdrawn after
admission, if the same is approved by ninety per cent voting share of the committee of creditors.
Withdrawal may be allowed even after issuance of invitation for Expression of Interest.

Where Committee of Creditors (CoC) is not constituted, a party can approach NCLT for
withdrawal of an application on settlement and where CoC is constituted, 90% of the voting share
of the CoC agree for withdrawal.

The answer would not differ if the application is made by the financial creditor and
subsequently corporate debtor settles its dues.

Q11. A German Company (Operational Creditor) filed application under Section 9 of the
Insolvency and Bankruptcy Code, 2016 against PQR Private Limited (Corporate Debtor)
alleging that the ‘Corporate Debtor’ committed default in making the payment of certain
operational dues. The Adjudicating Authority (National Company Law Tribunal), admitted
the application. Before, National Company Law Appellate Tribunal (NCLAT), the Corporate
Debtor has raised the question of jurisdiction of the National Company Law Tribunal in
entertaining the application Under Section 9 of the IBC, 2016. The Corporate Debtor referred
to the Agreement reached between the parties and submitted that as per the Agreement and as
the Office of the Respondent is in Germany, any suit or case is maintainable only in the Courts
at Germany. No case can be filed in any Court in India. Discuss with reasoning whether the
contention of the Corporate Debtor is correct. ( J 21, 6 Marks , IBC Open Book )

Answer :

The present facts of the case is similar to the case of Excel Metal Processors Ltd vs. Benteler Trading
International Gmbh & ANR. [NCLAT]. The Appellant (Corporate Debtor - Excel Metal) referred to
the Agreement reached between the parties and submitted that as per the Agreement and as the
Office of the Respondent is in Germany, any suit or case is maintainable only in the Court at
Germany.

No case can be filed in any Court in India. Therefore, the Appellant has raised the question
of jurisdiction of the National Company Law Tribunal, Mumbai Bench in entertaining the
application under Section 9 of the Insolvency and Bankruptcy Code (IBC).

However, the NCLAT, New Delhi Bench was not inclined to accept the aforesaid
statement as it is now settled and decided by the Appellate Tribunal in Binani Industries Ltd. vs.
Bank of Baroda & Anr. - Company Appeal (AT) (Insolvency) No.82 of 2018 etc. Decided on 14th
November, 2018 wherein it was held that 'Corporate Insolvency Resolution Process'/ insolvency
proceedings is not a 'suit' or a 'litigation' or a 'money claim' for any litigation; No one is selling or
buying the ‘Corporate Debtor’ a ‘Resolution Plan’; It is not an auction; it is not a recovery, which
is an individual effort by the creditor to recover the dues through a process that had debtor and
creditor on opposite sides; and it is not liquidation. The object is mere to get resolution brought
about, so that the Company do not default on dues.

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 Pursuant to Section 408 of the Companies Act, 2013, the National Company Law Tribunal
has been constituted in different States. In terms of the said provision, the Central Government
has notified and vested the power on respective National Company Law Tribunals to deal with
the matter within its territory, where the registered Offices of the Companies are situated.

As per Section 60(1) of the Insolvency and Bankruptcy Code (IBC), the Adjudicating
Authority, in relation to insolvency resolution and liquidation for corporate persons including
corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal
having territorial jurisdiction over the place where the registered office of the corporate person is
located. As admittedly, the Registered Office of the 'Corporate Debtor' is situated in Mumbai, we
hold that the National Company Law Tribunal, Mumbai Bench has the jurisdiction to entertain
an application under Section 9 of the l & B Code and the Appellant cannot derive advantage of
the terms of the Agreement reached between the parties.

For the reasons aforesaid, and in absence of any merit, the Appeal was dismissed.

Q12. Read the following carefully and answer the questions given at the end :

Pine Food Industries Limited (“PFIL”) is one of the top FMCG player and listed entity in India.
It is a leading manufacturer and marketer of various edible oils, food products and eatables.
Its Authorized Capital is Rs. 252.00 crore and Paid-up Capital is Rs. 65.00 crore. PFIL has
borrowed from various Banks and Financial institutions in India and its borrowings were
around Rs. 12,000 Crore.

Due to unprecedented crash in global prices of the oil seeds coupled with falling revenues in
the oil business gave a crippling blow to PFIL.

AB Bank and BC Bank filed an application under section 7 of the Insolvency and Bankruptcy
Code, 2016 (“Code”) for initiating the insolvency resolution process against PFIL (hereinafter
called as the Corporate Debtor (“CD”)). After hearing both the parties, National Company Law
Tribunal (“NCLT”) admitted the petition filed. The Financial Creditor proposed the name of
Kapoor to act as Interim Resolution Professional (“IRP”).

An application was filed before NCLT by one of the creditors who made a claim before the
Resolution Professional (“RP”) stating that the CD owed to pay USD 10.00 crore, based on the
Bills of Exchanges, ordering the CD to pay this creditor for the goods supplied by another
party. On making of such claim before the RP, it has been rejected by him saying that it is not
a Financial Debt as it is an Operational Debt therefore, it could not be considered as Financial
Debt as claimed by applicant therein.

Vijay Kumar Jain, suspended Director of the CD, filed an application before the NCLT under
section 60(5) of the Code seeking an order for setting aside the decision taken by the
Committee of Creditors (“CoC”) disallowing the erstwhile representatives of the Corporate
Debtor including Vijay to participate in the CoC meetings; declare that the CoC meeting is
non est; direct the RP to ensure active participation of the applicant in the meetings of CoC;
provide all the documents and information to the applicant. RP filed application in NCLT
under section 43(1) of the Code for seeking reversal of the amounts that were debited from the
current accounts of the CD maintained with XYZ Bank which had been debited by the XYZ

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

Bank before the insolvency commencement date and were utilized against the payment of the
dues owed by the CD to a Bank in relation to the Letter of Credit issued by them.

The RP submits that the payment of the impugned amount lead to preferential treatment
towards XYZ Bank by the CD as such payment has the effect of putting Respondents (i.e. XYZ
Bank) in a beneficial position than it would have been in liquidation of the CD in accordance
with Section 53 of the Code. It is further stated by the RP that the payments of the impugned
amount by the Corporate Debtor were not in the “ordinary course of business” of the CD.

NCLT, vide its order, held that the respondent Bank, which had debited an amount
aggregating to Rs. 65.98 crores from the current accounts of the Corporate Debtor is directed to
reverse the said amount within 30 days from the date of the said order. Since the resolution
plan is already submitted and under examination of the CoC without consideration of this
amount, therefore the appropriation of this amount will be decided by the CoC. XYZ Bank
filed appeal in NCLAT against the order of NCLT.

The main plea taken by the Appellant Bank is that the RP before filing an application under
Section 43(1) of the Code formed no independent opinion nor afforded an opportunity to the
Appellant to explain about the transactions in question.

The RP called for Expression of Interest (“EOI”). 28 prospective resolution applicants showed
their interest out of which two prospective resolution applicants were rejected as one was
disqualified under Section 29 A of the Code (being related party) and the other was a financial
investor who did not meet the criteria in the EOI evaluation parameters.

The applicant reviewed the four Resolution Plans submitted by the Resolution Applicants and
found that only the plans submitted by 2 Resolution Applicants (RA1 and RA2) provided for
the corporate insolvency resolution of the Corporate Debtor as a whole and on a going concern
basis.

The RP filed application under section 30(6) of the Code, seeking order for approval of the
resolution plan for the Corporate Debtor submitted by the consortium led by PAL (RA2) as
approved by the members of Committee of Creditors (CoC). The said resolution plan was
approved by a vote share of 96.85%. RP filed application in NCLT for approval of Resolution
Plan.

While the said application was pending for consideration before the NCLT, Hon’ble Supreme
Court, in Vijay Kumar Jain Vs. Standard Chartered Bank & Ors pronounced the judgment.
Under the Judgment of Hon’ble Supreme Court, the approval of the NCLT to the resolution
plan of RA2 was interdicted. In compliance of the abovementioned Hon'ble Supreme Court
order, NCLT by its order directed as follows : “Resolution Professional is directed to comply
with the directions of the Hon’ble Supreme Court and submit the report within the stipulated
time as provided by the Hon'ble Supreme Court.” Thereafter, NCLT approved the Resolution
Plan submitted by RA2 and passed orders and directions on the reliefs and concession sought.

Since in Para 38, NCLT in their order rejected some of the relief sought, RA2 moved to NCLT
for modification of order of NCLT.

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

In the application filed, RA2 had sought substitution of Para 38 of the order of NCLT
approving the Resolution Plan of RA2 as under :

Existing Para 38

Any relief sought for in the Resolution Plan, where the contract/agreement/ understanding/
proceedings/actions/notice etc is not specifically identified or is for future and contingent
liability, is at this moment rejected.”

Proposed Para

“All claims that were either not filed or not admitted during CIRP in terms of the provisions
of the Insolvency and Bankruptcy Code, 2016 shall stand extinguished. Further, claims
admitted/ verified by the Resolution Professional shall stand settled and extinguished as per
the Resolution Plan.”

Resolution Plan approved by NCLT of RA2 leads to a 60% haircut for the lenders. RA2
completed its acquisition of PFIL.

Referring decided case and relevant provisions of the Insolvency and Bankruptcy Code (IBC),
2016 and Rules and Regulations made thereunder, answer the following questions :

(a) Whether formation of Joint Lender Forum will have any bearing over filing of this case
or not? Brief, referring the provisions of IBC, 2016, who can initiate the case under the
Code.
(b) In the instant case explain whether Vijay Kumar Jain succeeded in his contention.
Referring Supreme Court’s decision, discuss the role and position of suspended Board
of Directors in the Committee of Creditors. ( J 21, 10 Marks each , IBC Open Book )

Answer 12 (a) :

It has already been held by the Hon’ble NCLAT in the case of Innoventive Industries Ltd. vs.
ICICI Bank Ltd. that Joint Lender Forum proceedings pending against the corporates debtor will
not have any bearing on the cases initiated under Insolvency and Bankruptcy Code (IBC),
therefore, this plea is hereby dismissed without having any further consideration on this point.

The corporate debtor counsel relied upon IDFC Bank Ltd. vs. Ruchi Soya Industries (Born
HC Com. Petition 570/2016, Central Bank of India vs. Ravindra (2002) 1 sec 367, Essar Steel India
Ltd. vs. RBI (SCA 12434 of 2017 dated 31.07.2017) to say that when a scheme is proposed for
settlement of the creditors dues, the creditors will have to wait for settlement of their dues, it is
not correct proposition of law as against IBC proceedings for two reasons, one - a mechanism
recommended by RBI Circular will not have any bearing on IBC proceedings owing to non-
obstante clause present in Insolvency and Bankruptcy Code, it has been settled by Hon'ble
NCLAT as well as Hon'ble Supreme Court in Innoventive Industries Ltd. vs. ICICI Bank Ltd. (SC
dated 31.08.2017) and this Bench in between Indian Bank vs. Varun Resources Ltd. (NCLT
Mumbai dated 14.06.2017) that RBI Circulars will not have any binding nature on the proceedings
under IBC.

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 Based on the above, Joint application made by the Financial Creditors are allowed. Section
7(1) of the IBC also allows filing of joint application by the Financial Creditors.

The Following persons can initiate the case under IBC, in case of default:

 Financial Creditors:

Financial creditors may either be secured creditors or unsecured creditors. The main difference
between secured and unsecured financial creditors is that in the event of liquidation and asset
distribution proceedings, secured creditors are given a higher priority than unsecured creditors.

When compared to operational creditors, the procedure for financial creditors to initiate
insolvency proceedings is a lot easier.

The IBC allows financial creditors to make an application to the NCLT directly and such
financial creditors will only need to show that there is a default.

It is also important to note that only financial creditors constitute the committee of
creditors, and no operational creditor can be part of this committee.

 Operational Creditor:

The term operational creditor has been defined under Section 5(20) of the IBC as any person to
whom operational debt is owed or to whom such debt has been assigned.

Operational debt has been defined in the IBC as a claim in respect of the provision of
goods or services, including employment or dues payable to any governmental authority.

An operational creditor, while filing an application for corporate insolvency resolution

before the NCLT against an operational debtor, in addition to the requirements of proving
default, will also have to prove that there is no dispute which exists between the operational
creditor and the debtor with respect to the amounts due.

Corporate Debtor:

Under Section 6 of the IBC, the Company itself (being a corporate debtor) can initiate the
Corporate Insolvency Resolution Process.

Answer 12 (b) :

In the case of Vijay Kumar Jain vs. Standard Chartered Bank and others 2019 SCC online SC103,
The Hon’ble NCLT held that the directors have the right to attend the Committee of Creditor
(COC) meetings as per Section 24 of the Insolvency and Bankruptcy Code (IBC).

However, the directors could not receive information that is considered confidential by
the resolution professional or the COC, including the resolution plans.

In the first appeal, the decision of the NCLT was upheld by the Appellate Tribunal. The
Director then moved the Supreme Court, challenging the decision of the Appellate Tribunal.

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 The Hon’ble Supreme Court held that the scheme of the Code makes it clear that the
directors, though not members of the COC, have a right to participate in every meeting of the
COC. In addition, for effective participation as vitally interested parties in discussion on
resolution plans, they have the right to receive copies of the resolution plans presented to the
COC.

The Hon'ble Supreme Court also clarified that under Regulation 21 (3)(iii) of the CIRP
Regulations, the notice of the CoC meeting, which is required to be given to the directors as well
must contain copies of all the documents relevant for matters to be discussed, including the
resolution plans.

The Hon’ble Supreme Court considered the directors to be vitally interested on two counts:

1. Such directors are often guarantors and bound by the approved plan, which may scale
down their own debts.
2. The directors, being well versed in the affairs of the company, may be able to assist the
CoC on determining whether the resolution plan addresses the cause of default by the
company (a mandatory requirement for resolution plans).

The Hon'ble Supreme Court also clarified that any concerns over breach of confidentiality
may be alleviated by the resolution professional obtaining a confidentiality undertaking from the
directors, which may also contain an indemnity to the resolution professional against any breach.

Of course, this judgement operates along with the judgments of the Hon'ble Supreme Court
in Swiss Ribbons Pvt. Ltd. & Anr. vs. Union of India and K. Sashidhar vs. Indian Overseas Bank & Ors.,
that have established the finality and non-justifiability of the decisions of the CoC as regards
commercial feasibility and viability of a resolution plan. On a positive note, this will enhance
transparency and openness in COCs. For now, the suspended directors, though they have no
vote, have a seat on the table.

Q13. A Resolution Professional appointed under Insolvency & Bankruptcy Code, 2016 (IBC,
2016), placed before the Committee of Creditors (CoC), a Consortium of Banks, a Resolution
Plan submitted to him. The CoC approved the Resolution Plan and National Company Law
Tribunal (NCLT), sanctioned it. As the Liquidation Value is not sufficient and there is a hair-
cut involved in the dues payable to the secured financial creditors, nothing is provided for the
Operational Creditors under the Resolution Plan. The Operational Creditor aggrieved by the
decision of the NCLT filed Appeal before National Company Law Appellate Tribunal
(NCLAT). The contention of the Operational Creditor is that the Resolution Plan approved is
not in compliance with the provisions of the Insolvency and Bankruptcy Code, 2016 and the
Regulations made thereunder :

Referring suitable case law answer whether the contention of Operational Creditor is Correct.
( J 21 , 6 Marks, IBC Open Book )

Answer :

In case of Hammond Power Solutions Pvt. Ltd. vs. Sanjit Kumar & ORS, the Hon’ble NCLAT has set
aside the Resolution plan and Matter remitted back to NCLT and observed that :

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 If the above minutes are perused, it can be hardly said that there are any reasons given by
the Committee to demonstrate that it has taken care of interest of all stakeholders. Para - 46 of the
Judgement in the matter of "Committee of Creditors of Essar Steel India Limited vs. Satish Kumar
Gupta & Ors." (Civil Appeal No.8766-67 of 2019) in the Judgement dated 15th November, 2019
["Essar Steel"] requires to see "the reasons given by the Committee of Creditors while approving
a resolution plan" from point of view stated in the paragraph.

The reasons for giving NIL to Operational Creditors is not reflected from record. We have
already reproduced portion from Part B - Financial Proposal with regard to what the approved
Resolution Plan states regarding dues to the Operational Creditors. The proposal is based on the
assessment that there is no liquidation value due to Operational Creditors. Although it is not
stated but there is reason to doubt that the Resolution Applicants were aware of the liquidation
value. There is no dispute that so many of the Operational Creditors have been left high and dry
giving them nil amount which Hon'ble Supreme Court has observed that giving NIL to
Operational Creditors "would certainly not balance the interest of all stakeholders or maximise
the value of assets of the Corporate Debtor if it becomes impossible to continue running its
business as a going concern."

For these reasons, we find that the Impugned Order accepting the Resolution Plan cannot
be upheld. The Resolution Plan does not appear to have taken care of interest of all stakeholders
including Operational Creditors and the decision of the COC also does not reflect that it has taken
into account the fact that the Corporate Debtor needs to be kept as a going concern and that there
is need to maximise the value of the assets and that the interest of all the stakeholders including
Operational Creditor has to be taken care of.

For the above reasons, we set aside the Impugned Order and remit the matter back to the
Adjudicating Authority with a direction to send back the Resolution Plan to the Committee of
Creditors to resubmit the Plan after satisfying the parameters as laid down by the Hon'ble
Supreme Court in the Judgement in the matter of "Essar Steel", portions of which have been
reproduced above, and IBC.

The Adjudicating Authority may give specific time period to the Resolution Professional
to place matter before Committee of Creditors for resubmitting the Resolution Plan after
satisfying the parameters laid down by the Hon'ble Supreme Court and IBC. Further incidental
Orders may also be passed. On resubmission of the Resolution Plan, the Adjudicating Authority
will deal with the same in accordance with law.

Q14. Images Gym Ltd. was granted credit facility of `100 lakh under consortium arrangements.

Under the consortium, there were 5 five banks, and credit facility provided by the respective
banks were as under :

A-One Bank Ltd. - Rs 45 Lakh

Best Bank Ltd - Rs 20 Lakh

Good Deal Bank Ltd. - Rs 15 Lakh

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

Credit Arrangers Bank Ltd. - Rs 10 Lakh and

Your Bank Ltd. - Rs 10 Lakh

Among theses the A-One Bank Ltd. was the leader.

Images Gym Ltd. was engaged in the business of manufacturing and trading of Gym exercise
machines. However, due to poor demand of the products, the company could not sell out the
machines and as a result the account of the company with respective banks were classified as
Non-performing Advances (NPAs).

Apart from credit facility from the above banks, the company was also having outstanding
dues of the creditor, which the company was not able to pay-off. The total amount outstanding
of such operational creditors amounted `30 lakh.

The company has also not paid the salary to its employees and workers for the last 6 months
and the total dues amounted to `10 lakh.

The leader of the consortium filed Corporate Insolvency Resolution Process (CIRP) with the
Adjudicating Authority (AA) and proposed the name of Saket Sharma, as Interim Resolution
Professional (IRP).

The AA accepted the application and appointed Saket Sharma as IRP and put moratorium.

The IRP constituted the Committee of Creditors (CoC) and first meeting of the CoC was called
upon.

The operational creditors objected about the constitution of the committee and asked the IRP
to include operational creditors also in the CoC, which the IRP denied.

The CoC observed that IRP is not discharging his functions properly and was reluctant in
calling the expression of interest from Resolution Applicant(s), so they proposed for the
change of the existing IRP and appointment of the new Resolution Professional (RP) named
as Anubhav Dutt.

The RP called the expression of interest from the eligible applicants and each proposal was
placed before the CoC, but no consensus had arrived at. The initial period of 180 days was
going to elapsed so the CoC through the RP sought extension which the Adjudicating
Authority for further 90 days. The RP again called the expression of interest from other
Resolutionm Applicants, but it was also not agreed upon by the CoC and after lapse of total
270 days, the Adjudicating Authority ordered for its liquidation and the present RP was
appointed as Liquidator.

The Liquidator sold off the assets of the Company and realised only `150 lakh, whereas the
outstanding dues of the various stakeholders remained as under.

Dues Of Rs in Lakhs
Fee Payable as Resolution Professional 10
Fee Payable as Liquidator 10
Dues of the banks with interest 110
Outstanding from Operational Creditors 30

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 Dues of Govt. 15
Workmen’s Dues 10
Employee’s Salary 15
Equity Shareholders 30
Total 230

Based on the above information, answer the following questions:

(a) Mention the provisions relating to the constitution of the Committee of Creditors (CoC)
under the Insolvency and Bankruptcy Code, 2016. In the instant case, the IRP did not
included the Operational Creditors. Whether this action of the IRP was justified?
(b) Comment on the following :
(i) How the voting of share shall be determined in the meeting of the CoC, since in
the given case the finance was made available under the consortium
arrangement.
(ii) What would have been the position of constitution of the CoC, if some of the
operational creditor had assigned their rights in favour of the financial creditor?
(iii) What is the meaning of ‘Resolution Plan’ and ‘Resolution Applicant’? List out
the persons not eligible to be ‘Resolution Applicant’. ( D 21, a) = 10 Marks (b) =
7 + 3 = 10 Marks (c) = 2 + 2 + 6 = 10 Marks , IBC Open Book )

Answer 14(a) :

Section 21 of the Insolvency and Bankruptcy Code, 2016 (IBC) deals with the provisions relating
to the committee of creditors (CoC):

(1) The interim resolution professional shall after collation of all claims received against the
corporate debtor and determination of the financial position of the corporate debtor,
constitute a committee of creditors.
(2) The committee of creditors shall comprise all financial creditors of the corporate debtor:
Provided that a financial creditor or the authorized representative of the financial creditor
referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a
related party of the corporate debtor, shall not have any right of representation,
participation or voting in a meeting of the committee of creditors:

Provided further that the first proviso shall not apply to a financial creditor, regulated by
a financial sector regulator, if it is a related party of the corporate debtor solely on account
of conversion or substitution of debt into equity shares or instruments convertible into
equity shares or completion of such transactions as may be prescribed, prior to the
insolvency commencement date.

(3) Subject to sub-sections (6) and (6A), where the corporate debtor owes financial debts to
two or more financial creditors as part of a consortium or agreement, each such financial
creditor shall be part of the committee of creditors and their voting share shall be
determined on the basis of the financial debts owed to them.
(4) Where any person is a financial creditor as well as an operational creditor –

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 a. such person shall be a financial creditor to the extent of the financial debt owed by the
corporate debtor, and shall be included in the committee of creditors, with voting
share proportionate to the extent of financial debts owed to such creditor;
b. . such person shall be considered to be an operational creditor to the extent of the
operational debt owed by the corporate debtor to such creditor
(5) Where an operational creditor has assigned or legally transferred any operational debt to
a financial creditor, the assignee or transferee shall be considered as an operational
creditor to the extent of such assignment or legal transfer.
(6) Where the terms of the financial debt extended as part of a consortium arrangement or
syndicated facility provide for a single trustee or agent to act for all financial creditors,
each financial creditor may –
a. authorize the trustee or agent to act on his behalf in the committee of creditors to the
extent of his voting share;
b. represent himself in the committee of creditors to the extent of his voting share;
c. appoint an insolvency professional (other than the resolution professional) at his own
cost to represent himself in the committee of creditors to the extent of his voting share;
or
d. exercise his right to vote to the extent of his voting share with one or more financial
creditors jointly or severally.

(6A) Where a financial debt –

a. is in the form of securities or deposits and the terms of the financial debt provide for
appointment of a trustee or agent to act as authorized representative for all the financial
creditors, such trustee or agent shall act on behalf of such financial creditors;
b. is owed to a class of creditors exceeding the number as may be specified, other than the
creditors covered under clause (a) or sub-section (6), the interim resolution professional
shall make an application to the Adjudicating Authority along with the list of all financial
creditors, containing the name of an insolvency professional, other than the interim
resolution professional, to act as their authorized representative who shall be appointed
by the Adjudicating Authority prior to the first meeting of the committee of creditors;
c. is represented by a guardian, executor or administrator, such person shall act as
authorized representative on behalf of such financial creditors,

and such authorized representative under clause (a) or clause (b) or clause (c) shall attend the
meetings of the committee of creditors, and vote on behalf of each financial creditor to the extent
of his voting share.

(6B) The remuneration payable to the authorized representative –

i. under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the
financial debt or the relevant documentation; and
ii. under clause (b) of sub-section (6A) shall be as specified which shall be form part of
the insolvency resolution process costs.
(7) The Board may specify the manner of voting and the determining of the voting share in
respect of financial debts covered under sub-sections (6) and (6A).

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 (8) Save as otherwise provided in this Code, all decisions of the committee of creditors shall
be taken by a vote of not less than fifty-one per cent. of voting share of the financial
creditors:

Provided that where a corporate debtor does not have any financial creditors, the
committee of creditors shall be constituted and shall comprise of such persons to exercise
such functions in such manner as may be specified.

(9) The committee of creditors shall have the right to require the resolution professional to
furnish any financial information in relation to the corporate debtor at any time during
the corporate insolvency resolution process.
(10) The resolution professional shall make available any financial information so
required by the committee of creditors under sub-section (9) within a period of seven days
of such requisition.

As per section 21(2) of IBC the CoC shall comprise of financial creditors. The Operational
Creditors do not have right to vote in the meeting of Committee of Creditors, however, the
directors, partners and one representative of operational creditors may attend the meetings of
Committee of Creditors.

Answer 14(b)(i) :

Section 21(3) of the Insolvency and Bankruptcy Code, 2016 provides that subject to sub-sections
(6) and (6A), where the corporate debtor owes financial debts to two or more financial creditors
as part of a consortium or agreement, each such financial creditor shall be part of the committee
of creditors and their voting share shall be determined on the basis of the financial debts owed to
them.

Answer 14(b)(ii) :

Section 21(5) of the Insolvency and Bankruptcy Code, 2016 provides that where an operational
creditor has assigned or legally transferred any operational debt to a financial creditor, the
assignee or transferee shall be considered as an operational creditor to the extent of such
assignment or legal transfer.

Answer 14(b)(iii) :

In terms of Section 5(26) of the Insolvency and Bankruptcy Code, 2016 -"Resolution Plan" means
a plan proposed by resolution applicant for insolvency resolution of the corporate debtor as a
going concern in accordance with Part II.

Explanation - For removal of doubts, it is hereby clarified that a resolution plan may
include provisions for the restructuring of the corporate debtor, including by way of merger,
amalgamation and demerger.

Section 5(25) of the Insolvency and Bankruptcy Code, 2016 provides that "resolution
applicant" means a person, who individually or jointly with any other person, submits a

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

resolution plan to the resolution professional pursuant to the invitation made under clause (h) of
sub-section (2) of section 25 or pursuant to section 54K, as the case may be.

Persons not eligible to be resolution applicant – Section 29A :

A person shall not be eligible to submit a resolution plan, if such person, or any other person
acting jointly or in concert with such person –

a) is an undischarged insolvent;
b) is a wilful defaulter in accordance with the guidelines of the Reserve Bank of India issued
under the Banking Regulation Act, 1949 (10 of 1949);
c) at the time of submission of the resolution plan has an account, or an account of a
corporate debtor under the management or control of such person or of whom such
person is a promoter, classified as non-performing asset in accordance with the guidelines
of the Reserve Bank of India issued under the Banking Regulation Act, 1949 (10 of 1949)
or the guidelines of a financial sector regulator issued under any other law for the time
being in force, and at least a period of one year has lapsed from the date of such
classification till the date of commencement of the corporate insolvency resolution process
of the corporate debtor:

Provided that the person shall be eligible to submit a resolution plan if such person makes
payment of all overdue amounts with interest thereon and charges relating to
nonperforming asset accounts before submission of resolution plan: Provided further that
nothing in this clause shall apply to a resolution applicant where such applicant is a
financial entity and is not a related party to the corporate debtor.
d) has been convicted for any offence punishable with imprisonment –
i. for two years or more under any Act specified under the Twelfth Schedule; or
ii. for seven years or more under any law for the time being in force

Provided that this clause shall not apply to a person after the expiry of a period of
two years from the date of his release from imprisonment:

Provided further that this clause shall not apply in relation to a connected person.
e) is disqualified to act as a director under the Companies Act, 2013:
Provided that this clause shall not apply in relation to a connected person.
f) is prohibited by the Securities and Exchange Board of India from trading in securities or
accessing the securities markets;
g) has been a promoter or in the management or control of a corporate debtor in which a
preferential transaction, undervalued transaction, extortionate credit transaction or
fraudulent transaction has taken place and in respect of which an order has been made by
the Adjudicating Authority under this Code:

Provided that this clause shall not apply if a preferential transaction, undervalued
transaction, extortionate credit transaction or fraudulent transaction has taken place prior
to the acquisition of the corporate debtor by the resolution applicant pursuant to a

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )

 resolution plan approved under this Code or pursuant to a scheme or plan approved by
a financial sector regulator or a court, and such resolution applicant has not otherwise
contributed to the preferential transaction, undervalued transaction, extortionate credit
transaction or fraudulent transaction;
h) has executed a guarantee in favour of a creditor in respect of a corporate debtor against
which an application for insolvency resolution made by such creditor has been admitted
under this Code and such guarantee has been invoked by the creditor and remains unpaid
in full or part;
i) is subject to any disability, corresponding to clauses (a) to (h), under any law in a
jurisdiction outside India; or
j) has a connected person not eligible under clauses (a) to (i).

INSPIRE ACADEMY SHUBHAMM SUKHLECHA ( CA, CS, LLM )