MODULE 2

INSOLVENCY AND BANKRUPTCY CODE, 2016

Insolvency concepts and Evolution

➢ The term insolvency is used for both individuals and organizations.

➢ For individuals, it is known as bankruptcy and for corporate it is called corporate insolvency.
➢ Both refer to a situation when an individual or company are not able to pay the debt in present
or near future and the value of assets held by them are less than liability.
➢ Insolvency in this Code is regarded as a “state” where assets are insufficient to meet the
liabilities. Untreated insolvency will lead to bankruptcy for non-corporates and liquidation of
corporates.
➢ While insolvency is a situation which arises due to inability to pay off the debts due to insufficient
assets, bankruptcy is a situation wherein application is made to an authority declaring
insolvency and seeking to be declared as bankrupt, which will continue until discharge.
➢ From the above it is evident that insolvency is a state and bankruptcy is a conclusion. A bankrupt
would be a conclusive insolvent whereas all insolvencies will not lead to bankruptcies. Typically
insolvency situations have two options – resolution and recoveryor liquidation

Bankruptcy/Insolvency

Bankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding
debts. The bankruptcy process begins with a petition filed by the debtor, or bythe creditors.

Insolvency-If any person or entity is unable to pay off the debts, it owes, to their creditor, on time or as
and when they became due and payable, then such person or entity is regardedas “insolvent”.

Liquidation is the winding up of a corporation or incorporated entity. There are many entities that can
initiate proceedings to cause the Liquidation, those being:-

➢ The Regulatory Bodies;

➢ The Directors of a Company;
➢ The Shareholders of a Company; and
➢ An Unpaid Creditor of a Company

OBJECTIVES OF INSOLVENCY AND BANKRUPTCY CODE,2016

A sound legal framework of bankruptcy law is required for achieving the following objectives:-

[Link] handling of conflicts between creditors and the debtor: It can provide procedural
certainty about the process of negotiation, in such a way as to reduce problemsof common property and
reduce information asymmetry for all economic participants.

[Link] destruction of value: It can also provide flexibility for parties to arrive at the most efficient
solution to maximise value during negotiations. The bankruptcy law will create a platform for
negotiation between creditors and external financiers which can create the possibility of such
rearrangements.

[Link] the line between malfeasance and business failure: Under a weak insolvencyregime, the
stereotype of “rich promoters of defaulting entities” generates two strands of thinking: the idea that all
default involves malfeasance and the idea that promoters should be held personally financially
responsible for defaultsof the firms that they control.

[Link] allocate losses in macroeconomic downturns: With a sound bankruptcy framework, these
losses are clearly allocated to some people. Loss allocation could take place through taxes, inflation,
currency depreciation, expropriation, or wage or consumption suppression. These could fall upon foreign
creditors, small business owners, savers, workers, owners of financial and non-financial assets, importers,
exporters.

Features of the Insolvency and Bankruptcy Code:

The Insolvency and Bankruptcy Code, 2016 has following distinguishing features:-

[Link] Law: Insolvency Code is a comprehensive law which envisages and regulates the
process of insolvency and bankruptcy of all persons including corporates, partnerships, LLP’s and
individuals.

[Link] Multiplicity of Laws: The Code has withered away the multiple laws covering the recovery of debts
and insolvency and liquidation process and presents singular platform for all the reliefs relating to
recovery of debts and insolvency.

[Link] Time Resolution: The Code provides a low time resolution and defines fixed time frames for
insolvency resolution of companies and individuals. The process is mandated to be completed within
180 days, extendable to maximum of 90 days. Further, for a speedier process there is provision for fast-
track resolution of corporate insolvency within 90 days. If insolvency cannot be resolved, the assets of the
borrowers may be sold to repay creditors.

[Link] Window Clearance: It has been drafted to provide one window clearance to the applicant
whereby he gets the appropriate relief at the same authority unlike the earlier position of law where in
case the company is not able to revive the procedure for winding up and liquidation has to be initiated
under separate laws governed by separate authorities.

[Link] Chain of Authority: There is one chain of authority under the Code. It does not even allow the civil
courts to interfere with the application pending before the adjudicating authority, thereby reducing the
multiplicity of litigations. The National Company Law Tribunal (NCLT) will adjudicate insolvency
resolution for companies. The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for
individuals.

[Link] to the interests of workman and employees: The Code also protects the interests of
workman and employees. It excludes dues payable to workmen under provident fund, pension fund and
gratuity fund from the debtor’s assets during liquidation.
[Link] Regulatory Authority: It provides for constitution of a new regulatory authority ‘Insolvency and
Bankruptcy Board of India’ to regulate professionals, agencies and information utilities engaged in
resolution of insolvencies of companies, partnership firms and individuals. The Board has already been
established and started functioning.

Historical developments of Insolvency laws in India

The Insolvency and Bankruptcy Code, 2016

➢ In December 2015, the Insolvency and Bankruptcy Code, 2015, was introduced in
Lok Sabha.
➢ The law came into force in December 2016. A Notification was passed by the
national company law tribunal under SICA (special provisions) repeal act 2003.
Therefore, the SICA is repealed with effect from 1 December 2016.
➢ Because of this, the government announced that all ongoing processes before the
BIFR and AAIFR will be suspended and terminated.
➢ However, it shall be open to the company whose appeal, reference or inquiry has
abated to initiate fresh proceedings before the National Company Law Tribunal
(NCLT).
➢ In accordance with the provision of the insolvency code, within 180 days of the
implementation of the insolvency code and to get protection under section 14 of
IBC 2016.
➢ IBC offers a venue for group healing and settlement. It allows all significant parties
the chance to take part in the bankruptcy processes and jointly evaluate the
defaulting firm’s viability.
➢ When the firm has been reported “sick” which might be too late to recover any
value, IBC 2016 enables the resolution process to start at the earliest sign of
financial distress as reflected in a single default.
➢ IBC also establishes time constraints that must pass before determining if a debtor
is viable.
➢ In the current system, judicial intervention in corporate choices frequently results
in excessive delays in insolvency resolution.
➢ The adjudicator’s primary responsibility under IBC is to ensure that the
procedures are legal.
➢ A committee made up of all financial creditors will make all company decisions.

Need for the Insolvency and Bankruptcy code,2016

➢ To consolidate and amend all existing insolvency laws in India.

➢ To simplify and expedite the Insolvency and Bankruptcy Proceedings in India.
➢ To protect the interest of creditors including stakeholders in a company.
➢ To revive the company in a time-bound manner.
➢ To promote entrepreneurship.
 ➢ To get the necessary relief to the creditors and consequently increase the credit
supply in the economy.
➢ To work out a new and timely recovery procedure to be adopted by the banks,
financial institutions or individuals.
➢ To set up an Insolvency and Bankruptcy Board of India.
➢ Maximization of the value of assets of corporate persons

Important Definitions

[Link] means the Insolvency and Bankruptcy Board of India established under section 188(1)

[Link] means an interest or lien created on the property or assets of any person or any of its
undertakings or both, as the case may be, as security and includes a mortgage;

[Link] means a right to payment or right to remedy for breach of contract if such breach gives rise to a
right to payment whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured.

[Link] Person means

➢ A company as defined under section 2(20) of the Companies Act, 2013;

➢ A Limited Liability Partnership as defined in 2(1)(n) of Limited Liability Act, 2008; or,
➢ Any other person incorporated with limited liability under any law for the time beingin force
but shall not include any financial service provider.

[Link] Debtor means a corporate person who owes a debt to any person.

[Link] means any person to whom a debt is owed and includes –

➢ A financial creditor,
➢ An operational creditor,
➢ A secured creditor,
➢ An unsecured creditor, and
➢ A decree holder.
[Link] means a liability or obligation in respect of a claim which is due from any person and includes a
financial debt and operational debt.

[Link] means non-payment of debt when whole or any part or instalment of the amountof debt has
become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be.

[Link] information, in relation to a person, means one or more of the following categories of
information, namely:—

➢ Records of the debt of the person;

➢ Records of liabilities when the person is solvent;
➢ Records of assets of person over which security interest has been created;
 ➢ Records, if any, of instances of default by the person against any debt;
➢ Records of the balance sheet and cash-flow statements of the person; and
➢ Such other information as may be specified. [section 3(13)]

[Link] Product means securities, contracts of insurance, deposits, credit arrangements

including loans and advances by banks and financial institutions, retirement benefit plans, small savings
instruments, foreign currency contracts other than contracts

[Link] professional means a person registered with the Board as an insolvency professional ,
who act as intermediaries & who would play a key role in the efficient functioning of the
insolvency and bankruptcy processes.

12."Insolvency professional agency" means any person registered with the Board under section 201
as an insolvency professional agency; Insolvency professional agency has the primary
function of granting membership to insolvency professionals. These agencies frame the
standard of professional conduct and ethics to the members enrolled under them.

13."Information utility" means a person who is registered with the Board as an information utility who
provide authenticated information about debt and default, which an adjudicating
authority can rely on as evidence of money owed by the company facing insolvency.

14.A person includes:-

➢ An individual
➢ A hindu undivided family
➢ A company
➢ A trust
➢ A partnership
➢ A limited liability partnership, and
➢ Any other entity established under a statute.
➢ And includes a person resident outside india

[Link] includes money, goods, actionable claims, land and every description of property situated in India
or outside India and every description of interest including present or future or vested or contingent
interest arising out of, or incidental to, property;

[Link] creditor means a creditor in favour of whom security interest is created;

INSOLVENCY PROFESSIONAL AGENCIES

The Code provides for establishment of insolvency professionals agencies to enroll and regulate
insolvency professionals as its members in accordance with the Insolvency and Bankruptcy Code 2016
and read with regulations.
Principles governing registration of Insolvency Professional Agency

(a) To promote the professional development of and regulation of insolvency

professionals;

(b) To promote the services of competent insolvency professionals to cater to the needs
of debtors, creditors and such other persons as may be specified;

(c) To promote good professional and ethical conduct amongst insolvency professionals;

(d) To protect the interests of debtors, creditors and such other persons as may be
specified;

(e) To promote the growth of insolvency professional agencies for the effective resolution
of insolvency and bankruptcy processes under this Code.

Functions of Insolvency professional agencies (IPA): It will perform three key functions

[Link] functions: Insolvency professional agencies will draft detailed standards and codes of conduct
through bye-laws, that are made public and are binding on all members. It has to be followed by all the
corporates and individuals.

[Link] Functions: Insolvency professional agencies will also take up few executive functions such as

➢ Monitoring, inspecting and investigating members on a regular basis.

➢ They will also monitor and investigate books, financial statements ,etc on a regular basis.
➢ Gathering information on their performance, with the over-arching objective of preventing frivolous
behavior.

[Link] – judicial functions: Insolvency professional agencies are the concerned authorities for addressing
grievances of aggrieved parties, hearing complaints against members and taking suitable actions. They try to
rectify the issues and give solutions as soon as possible on a priority basis.

INSOLVENCY PROFESSIONALS

The Code provides for insolvency professionals as intermediaries who would play a key role in the efficient
working of the bankruptcy process.

Appointment, Role and duty of Insolvency Professional

Appointment of Insolvency Professional: Any creditor who is a member of the committee of creditors
may appoint an insolvency professional other than the resolution professional to represent such
creditor in a meeting of the committee of creditors: Provided that the fees payable to such insolvency
professional representing any individual creditor will be borne by such creditor.

An Insolvency Professional if appointed as a Resolution Professional shall act as a as a neutral trustee of

the assets of the organization.
Role and duty of Insolvency Professional

Every insolvency professional shall abide by the following code of conduct:—

➢ The role of the IP encompasses a wide range of functions, which include adhering to procedure
of the law, as well as accounting and finance related functions.
➢ He shall have the power and responsibility to monitor and manage the operations and assets of
the enterprise.
➢ The insolvency professional verifies the claims of the creditors, constitutes a creditors committee,
runs the debtor's business during the moratorium period and helps the creditors in reaching a
consensus for a revival plan.
➢ In liquidation, the insolvency professional acts as a liquidator and bankruptcy trustee.
➢ To take reasonable care and diligence while performing his duties;
➢ To comply with all requirements and terms and conditions specified in the bye-lawsof the
insolvency professional agency of which he is a member;
➢ To allow the insolvency professional agency to inspect his records;
➢ 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
➢ To perform his functions in such manner and subject to such conditions as may be specified.

ADJUDICATING AUTHORITY

The Adjudicating Authority for corporate insolvency and liquidation is the National Company Law
Tribunal (NCLT). Appeals against NCLT orders shall lie with National Company Law Appellate Tribunal
(NCLAT) and thereafter to the Supreme Court of India.

Duties of Adjudicating authority

➢ The Code has created one chain of authority for adjudication under the Code.
➢ Civil Courts have been prohibited to interfere in the matters related with application pending before
the Adjudicating Authority.
➢ No injunction shall be granted by any Court, Tribunal or Authorityin respect of any action
taken by the NCLT.
➢ For individuals and other persons, the Adjudicating Authority is the Debt Recovery Tribunal (DRT),
 appeals lie to the Debt Recovery Appellate Tribunal (DRAT) and thereafter to the Supreme
Court.
Example : XY & Co., a firm applied to NCLT to be declared insolvent as the firm is not able to pay off debts
to his creditors in present and in coming future. State whether the act of the firm is valid as to the filing
of application in terms of jurisdiction.

Answer: No, as per the Code, individual & firms in relation to Insolvency matters shall apply to the DRT not
to NCLT. Here there is violation of jurisdiction in relation to adjudicating authority.

RESOLUTION PLAN

A resolution plan is a proposal agreed to by the Debtors and Creditors of an entity in a collective mechanism
to propose a time bound solution to resolve the situation of insolvency. Resolution professional shall
prepare an Information Memorandum which shall contain information for preparing resolution plan.

Provisions regarding resolution plan

[Link] Resolution Professional shall prepare an Information Memorandum which shall contain information
for preparing resolution plan.

[Link] Professional shall provide access of the following to a Resolution applicant inorder to
prepare the Resolution Plan:

➢ Financial position of corporate debtor

➢ Information required by applicant for resolution plan
➢ Other matters pertaining to corporate debtor

[Link] Professional shall examine the Resolution Plan confirming the following andsubmit the
same to Committee of Creditors for its approval.

[Link] for the payment of insolvency resolution process costs in a manner specified bythe Board in
priority to the repayment of other debts of the corporate debtor;

[Link] for the repayment of the debts of operational creditors in such manner as may be specified
by the Board which shall not be less than the amount to be paid to the operational creditors in the
event of a liquidation of the corporate debtor under section 53;

[Link] for the management of the affairs of the Corporate debtor after approval of the resolution
plan;

➢ The implementation and supervision of the resolution plan;

➢ Does not contravene any of the provisions of the law for the time being in force.
➢ Conforms to such other requirements as may be specified by the board.

INSTITUTIONS UNDER INSOLVENCY AND BANKRUPTCY CODE ,2016

Important Institutions Under IBC

[Link] Company Law Tribunal (NCLT)

The National Company Law Tribunal which was constituted by the central government
under the Companies Act, 2013[i] is considered as the 'Adjudicating Authority'[ii] under
the Code. This body is empowered to deal with cases regarding the resolution of
insolvency or liquidation of sick companies. The jurisdiction of the tribunal extend over
to the companies and other limited entities. Appeals regarding the orders of NCLT can be
filed in National Company Law Appellate Tribunal (NCLAT).

[Link] Recovery Tribunal (DRT)

The Debt Recovery Tribunal was initially created under the Recovery of Debts due to
Banks and Financial Institutions Act, 1993 for efficient recovery of bad debts. But due to
the risk in complexity in remedies for non performing assets and deficit companies, the
government by amending the old fashioned and lacking laws, inserted provisions relating
to the jurisdictions[iii] and powers of Debt Recovery Tribunal under the insolvency and
Bankruptcy Code, 2016. According to the court the Debt Recovery Tribunal shall be the
adjudicating authority for Individuals and Partnership firms. Appeal regarding the orders
passed by the Debt Recovery Tribunal can be filed in Debt Recovery Appeal Tribunal
(DRAT).

[Link] Insolvency and Bankruptcy Board of India (IBBI)

The Insolvency and Bankruptcy Board of India is considered the peak body that looks into
the governance and administration of the insolvency and Bankruptcy Code. Under section
188 of the Code, the Insolvency and Bankruptcy Board of India is constituted. The
board[iv] consists of a Chairman, three members (ex officio) that shall each represent the
Ministry of Finance, the Ministry of Corporate Affairs and the Ministry of Law, one ex
officio member appointed by the Reserve Bank of India and five other members as
nominated by the central government. The board manages and adjudicates the
insolvency professionals, information utilities and insolvency professional agencies
constituted under the code.

FAST-TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS

Who may apply?

An application under this category can be made by any corporate debtor falling under any of the below
mentioned category:-

➢ A corporate debtor with assets and income below a level as may be notified by the Central
Government; or
➢ A corporate debtor with such class of creditors or such amount of debt as may be notifiedby
the Central Government; or
 ➢ Such other category of corporate persons as may be notified by the Central
Government.[Section 55]

FAST-TRACK RESOLUTION PROCESS

[Link] period for completion of fast track corporate insolvency resolution process

The fast track corporate insolvency resolution process shall be completed within a period ofninety
days from the insolvency commencement date.

2."Fast track commencement date" means the date of admission of an application by the Adjudicating
Authority for initiating the fast track process under Chapter IV of Part II of the Code;

[Link]: The Adjudicating Authority may extend time period for fast track corporate insolvency
resolution process. 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 percent of the voting share.

And if Adjudicating Authority is satisfied that the 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
to a further period which shall not be exceeding forty-five days.

[Link] 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-— 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;

[Link] of Chapter II to his 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.

VOLUNTARY LIQUIDATION OF CORPORATE PERSONS: LEGAL PROVISIONS

[Link] who may initiate voluntary liquidation proceeding: 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 V of Part II of the Code.

[Link] for voluntary liquidation to be specified by the Board: The voluntary liquidation of
a corporate person shall meet such conditions and procedural requirements as may be specified by the
Board.

[Link] of initiation of voluntary liquidation proceedings: Voluntary liquidation proceedings of

a corporate person registered as a company shall meet the following conditions, namely:— a
declaration from majority of the directors of the company verified by an affidavit stating that— 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 the company is not being liquidated to defraud any person; the
declaration given above shall be accompanied with the following documents, namely:—

➢ 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;
➢ A report of the valuation of the assets of the company, if any prepared by a registered valuer;
➢ Within four weeks of a declaration, there shall be—
➢ A special resolution of the members of the company in a general meetingrequiring the company
to be liquidated voluntarily and appointing an insolvency professional to act as the liquidator; or
➢ 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 thirdsin value
of the debt of the company shall approve the resolution passed under sub-clause (c) within seven
days of such resolution.

[Link] to Registrar of company and the Board: The Company shall notify the Registrar of
Companies and the Board about the resolution to liquidate the company within seven days of such resolution
or the subsequent approval by the creditors, as the case may be.

[Link] of liquidation proceeding: The voluntary liquidation proceedings in respect of a company

shall be deemed to have commenced from the date of passing of the resolution.

[Link] of provisions of this Code: The provisions of sections 35 to 53 of ChapterIII and Chapter
VII shall apply to voluntary liquidation proceedings for corporate persons with such modifications as
may be necessary.

[Link] to adjudicating authority on complete wound up of the corporate person: 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.

[Link] of an order of dissolution: The Adjudicating Authority shall on an application filed by the
liquidator, pass an order that the corporate debtor shall be dissolved from the date of that order and the
corporate debtor shall be dissolved accordingly.

[Link] of copy of order: A copy of an order shall within fourteen days from the date of such order,
be forwarded to the authority with which the corporate person is registered.

IMPORTANT CONCEPTS UNDER INSOLVENCY AND BANKRUPTY CODE

"Resolution applicant" means a person, who individually or jointly with any other person, submits a
resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-
section (2)

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;

Resolution professional, for the purposes of this Part, means an insolvency professional appointed to conduct
the corporate insolvency resolution process and includes an interim resolution professional Persons not
eligible f o r r e s o l u t i o n a p p l i c a t i o n / to initiate insolvency process

Following persons shall not be entitled to initiate the corporate insolvency process:-

➢ A corporate debtor already undergoing an insolvency resolution process; or

➢ A corporate debtor having completed corporate insolvency resolution process 12 (twelve) months
preceding the date of making of the application; or
➢ A corporate debtor or a financial creditor who has violated any of the terms of resolution plan
which was approved 12 (twelve) months before the date of making of an application;
➢ A corporate debtor in respect of whom a liquidation order has been made.
➢ In this section, a corporate debtor includes a corporate applicant in respect of such corporate
debtor.
Example: Suppose a ABC Pvt. Ltd. has committed a default, and is undergoing a corporate insolvency
resolution process. Mr. X and Mr. Y, are partners of the ABC Pvt. Ltd. However, Mr. X under the
constitutional document of the Company, is being authorized to make an application for the corporate
insolvency resolution process. Being a partner of ABC Pvt. Ltd. Mr. Y filed an application on behalf of Mr. X
for initiation of corporate insolvency process. State the validity of the act of Mr. Y for initiating corporate
insolvency resolution process with the Adjudicating Authority?

Answer: According to section 11, a corporate debtor includes a corporate applicant in respectof such
corporate debtor. Whereas as Corporate applicant means as per the definition given in section 5(15) corporate
applicant can also be a member or partner of the corporate debtor who is authorized to make an
application for the corporate insolvency resolution process under the constitutional document of the
corporate debtor. Since in the given case, Mr. X is the authorized person not Mr. Y , so his act is invalid as to
filing of an application to Adjudicating authority to initiate corporate insolvency resolution process.

LIQUIDATOR

Liquidator means an insolvency professional appointed as a liquidator in accordance withthe provisions of

Chapter III or Chapter V of this Part, as the case may be; [Section 5(18)]

Liquidation Process

The Code concerns itself only with those corporate debtors which have defaulted in payment of debts. The
corporate debtor, at the first stage, is put into resolution mode. The process is called the corporate
insolvency resolution process. However, if attempts to resolve the insolvency of the corporate debtor fail,
then only the liquidation provisions of the Code are triggered.
Section 33 to 54 of the Code provides the law related to the liquidation process.

[Link] of liquidation: Section 33 of the Code deals with the initiation of liquidation process.
Provisions states that where the Adjudicating Authority, —

[Link] received a Resolution plan: Before the expiry of the insolvency resolution process period or the
maximum period permitted for completion of the corporate insolvency resolution process or the fast
track corporate insolvency resolution process, as the case may be, does not receive a resolution plan;
or rejects the resolution plan for the non-compliance of the requirements specified therein.

[Link] of the decision of the committee of creditors to liquidate to Adjudicating authority:

Where the resolution professional, at any time during the corporate insolvency resolution process but
before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the
committee of creditors [approved by not less than sixty-six per cent of the voting share] to liquidate the
corporate debtor, the Adjudicating Authority shall pass a liquidation order.

[Link] of resolution plan as approved by the Adjudicating Authority: Where the

resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate
debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such
contravention, may make an application to the Adjudicating Authority for a liquidation order.

[Link] of contravention of the provisions of the resolution plan: On receipt of an

application, if the Adjudicating Authority determines that the corporate debtor has contravened the
provisions of the resolution plan, it shall pass a liquidation order.

[Link] to filing to suits and legal proceedings: Subject to section 52, when a liquidation order has been
passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor. A suit or other
legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior
approval of the Adjudicating Authority.

[Link]: Restrictions on filing of suits and legal proceedings shall not apply to legal proceedings in
relation to such transactions as may be notified by the Central Government in consultation with any
financial sector regulator.

[Link] to be deemed to be notice of discharge: The order for liquidation under this section shall be
deemed to be a notice of discharge to the officers, employees and workmen of the corporate debtor,
except when the business of the corporate debtor is continued during the liquidation process by the
liquidator.

POWERS AND DUTIES OF LIQUIDATOR

Section 35 of the Code specifies the following power and duties of liquidator-

➢ To verify claims of the creditors;

➢ To take into his custody or control all the assets, property, effects and actionable claims of the
corporate debtor;
➢ To evaluate the assets and property of the corporate debtor as may be specified by the board
 and prepare a report;
➢ To take measures to protect and preserve the assets and properties of the corporate debtor;
➢ To carry on the business of the corporate debtor for its beneficial liquidation;
➢ 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]
➢ To draw, accept, make and endorse any negotiable instruments 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;
➢ 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;
➢ To obtain any professional assistance from any person or appoint any professional, in
discharge of his duties, obligations and responsibilities;
➢ To invite and settle claims of creditors and claimants and distribute proceeds in
accordance with the provisions of this code;
➢ To institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in
the name of on behalf of the corporate debtor;
➢ To investigate the financial affairs of the corporate debtor to determine undervalued or
preferential transactions;
➢ 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;
➢ 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
➢ To perform such other functions as may be specified by the board.

Conclusion

The liquidator shall have the power to consult any of the stakeholders entitled to a distributionof
proceeds. Any such consultation shall not be binding on the liquidator. Provided further 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.