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Chapter 6 – Insolvency Bankruptcy Code, 2016

AA Adjudication Authority IP Insolvency Professional
ARC Asset Reconstruction Company IRP Interim Resolution Professional
BRP Base Resolution Plan LEA Liquidation Estate Assets
CA Corporate Applicant OC Operational Creditor
CD Corporate Debtor OD Operational Debt
CIRP Corporate Insolvency Resolution Process PA Public Announcement
CIS Collective Investment Schemes PIM Preliminary Information Memorandum
CP Corporate Persons PPICD Pre-Package ICD
CSG Creditor, Surety, Guarantor PPIRP Pre-Package IRR
ECT Extortionate Credit Transaction PT Preferential Transaction
FC Financial Creditor RA Resolution Applicant
FSP Finance Service Provider RP Resolution Professional
IBBI Insolvency and Bankruptcy Board of India RFRP Request for Resolution Plan
IBC Insolvency Bankruptcy Code SC Secured Creditors
ICD Insolvency Commencement Date UnSC Unsecured Creditors
IM Information Memorandum UT Undervalued transaction

Introduction to the IBC 2016:

Approved by Lok Sabha Approved by Rajya Sabha Assent of President
5th May 2016 11th May, 2016 28th May, 2016

Purpose of the code:

 An Act to consolidate and amend the laws relating to reorganization and insolvency resolution of
corporate persons, partnership firms and individuals
 in a time-bound manner for maximization of value of assets of such persons,
 to promote entrepreneurship, availability of credit and
 balance interests of all stakeholders incl. alteration in order of priority of payment of Govt. dues &
 to establish an Insolvency and Bankruptcy Board of India (IBBI), and
 for matters connected therewith or incidental thereto.

Insolvency vs Bankruptcy vs Liquidation:

 Insolvency is a state of not being able to pay off debts due to insufficient cash flow.
 Insolvency can be treated with appropriate resolution mechanism
 If left untreated, insolvency results into Bankruptcy (for individuals) or liquidation (for company)
Structure of this Code!
Resoln for Regulations of IP,
Preliminary CIRP Miscellaneous
Indv/Firms Agencies and IU
[Sec 1-3] [Sec 4 - 77] [Sec 224 - 255]
[Sec 78 - 187] [Sec 188-223]
4 Pillars of this code:
Information Utilities Adjudicating
IP and IPA IBBI
(National E-Governance Services Limited) Authorities

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Sec 2 – Applicability of the Code

Any company Other co. LLP incorp. BC as Personal Partner/
incorporated in governed by under LLP notified by Guarantor Proprietor Indv
Co. Act special Act Act 2008 CG to CD ship firm

in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.

Applicability of this Code to Finance Service Provider (“FSP”):

 As per Section 3(7) – Corporate Person doesn’t include FSP (i.e., banks, FI, Insurance co., ARC,
MFs, CIS)
 However, as per Sec 227, CG has power to notify FSP to whom IBC may be applicable
 CG vide notification notified that IBC shall be applicable to NBFC (incl. Housing Fin. Co.) with asset
size >= Rs. 500 crores as per last audited BS

Sec 3 – Definitions – Read towards end and add some more from ICAI Mat.

Part II - Insolvency Resolution and Liquidation for Corporate Persons

Section 4: Applicability of this Part
Minimum amt of Default = Rs. 1 lakh or such HIGHER amount as may be prescribed by CG (max. 1 cr.)
W.e.f. 24th March, 2020 – Amount of default to initiate this process stands increased to Rs. 1 crore
Provided that - CG may, by notification, specify min. amount of default of higher value (not > Rs. 1
crore) for matters relating to “PPIRP” of CD under Chapter III-A

Section 6: If a CD commits default, CIRP may be initiated by Financial Creditor (FC), Operational
Creditor (OC) or the Corporate Debtor (CD) itself.

Section 7: Initiation of CIRP by a FC

Financial Creditor
Application (presc. Form)
(Itself or jointly with other Adjudication Authority (NCLT)
FCs/Person notified by CG) Against CD for initiating CIRP

Following person are notified by CG and may file an application on behalf of FC:
executor or administrator of trustee including person duly authorized by
Guardian
an estate of FC debenture trustee BOD of a company
• Applicant shall serve copy of such application to registered office of CD and to Board by register
post, speed post, or hand delivery or e-mode BEFORE filing with AA. [Amendment]
• Default includes a default w.r.t. a FD owed not only to applicant FC but to any other FC of the CD.
• Documents to be enclosed:
Record or evidence of default Other info as may be
Name of proposed IRP
with IU or others specified by Board
• AA to ascertain default within 14 days (otherwise record reason) based on record / evidence
• Admit application if: No pending disciplinary proceedings against
Default has occurred Application complete proposed IRP

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• Reject if either of the above not satisfied

• AA shall communicate such order (admission/rejection) to FC within 7 days of order
• However, where AA intends to reject the application on grounds that it is incomplete, give notice
to applicant to rectify defects within 7 days of such notice from AA.
• CIRP to commence from date of admission of application by AA – Insolvency Commencement Date

Note (Read after Sec 21:

For FC referred under Clause (a) and (b) of Sec 21(6A), CIRP application shall be jointly filed by not
less than LOWER of:
100 creditors in same class, OR 10% of total crs. in same class
Where FCs are allotees under a Real Estate (RE) project, application shall be filed jointly by not less
than LOWER of:
100 such allottees in same RE Project , OR 10% of total allotteesin same same RE Proj.

When application is made by OC u/s 9, AA be like:

Ruko zara! Sabar Karo!

Section 8 – Insolvency Resolution by OC

 OC to deliver Demand Notice and copy of invoice to CD demanding payment
 CD shall within 10 days, bring to notice of OC:
 Existence of a dispute (amount, quality, breach) or record of pendency of suit or arbitration
filed before receipt of such notice
 Payment of OD by attested copy of electronic transfer or record that OC has encashed a
cheque

Section 9 –Initiation of CIRP by OC

Operational After 10 days, apply

Creditor Adjudication Authority (NCLT)
IRP Optional

• Furnish along with application: [NAI FO]

 Copy of invoice or demand Notice
 Copy of certificate from Financial Institution of OC, if available, confirming non payment
 Affidavit to the effect that no notice of dispute or payment given by CD
 Copy of record from IU, if available
 Other proofs confirming non-payment

• AA shall within 14 days admit the application and communicate it to OC and CD if:
 Invoice or demand notice was delivered to CD
 No payment of unpaid OD
 No notice of dispute and no record of payment in IU
 Application is complete
 No disciplinary proceeding

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• Otherwise reject and communicate to OC. However, give 7 days to rectify

• CIRP to commence on date of admission - Insolvency Commencement Date

Section 10 –Initiation of CIRP by CD itself

Where a CD has committed a default, CA to file an application with AA. Furnish along with application:
• Information relating to BOA and others as may be prescribed
• Information of Resolution Professional proposed as IRP
• SR (for co.) or resolution by >= 3/4th of partners (for LLP) of CD approving filing of such
application

AA shall within 14 day:

 Admit application if – Default occurred + Application complete + no pending disciplinary proceeding
against proposed IRP
 Reject if either of the above not satisfied. However, give 7 days to rectify application.

CIRP to commence from date of admission of application by AA – Insolvency Commencement Date

Summary of Section 7,9 and 10

Particulars Section 7 Section 9 Section 10
Application by: Financial Creditor Operational Creditor Corporate
Applicant
Apply when: Default has occurred Default + Sec 8 complied Default has
occurred
Proposed IRP Mandatory Optional Mandatory
Obtain consent of IP Obtain consent of
for appointment as IRP IP for appt as IRP
AA to ascertain Within 14 days of receipt of application (and then communicate order in 7
default days)
Annexure to  Record of default  Copy of demand notice  BoA or other
application: (IU)  Affidvt of no reply from docs
 Name of prop IRP CD  Proposed IRP
 Other info  Cert. from FI  Resolution (SR or
 Record of IU 3/4th partners)
 Other proofs
Accept Application if Default + Application Demand notice + No Default + Appln
 complete + No payment + No dispute + complete + No
disciplinary proceeding Appln complete + No disciplinary proc.
Otherwise reject disciplinary proc.
Period for Within 7 days of receipt of notice from AA
rectification
Initiation of CIRP Date of admission of application by AA
(ICD)

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Section 10A – Suspension of initiation of CIRP

Applicability of Sec. 7,9 and 10 suspended w.r.t, default arising on/after 25th Mar,2020 for 1 year (till
24/3/21)

Note: No application shall ever be filed for initiation of CIRP of CD for said default occurring during
said period.

Section 11 – Person not entitled to make application to initiate CIRP:

CD whose Resoln Plan is approved

CD undergoing CIRP or PPIRP FC/OC of CD undergoing PPIRP
12m prior to appln

CD which completed CIRP 12m CD/FC who violated terms of resoln plan CD whose liquidation order
prior to appln approved 12m before appln is made

Explanation - Nothing in this section shall prevent a CD referred above from initiating CIRP against
another CD.

Note – This section restricts an applicant from filing application u/s 10. He can still file application u/s 7 or 9
Section 11A – Included with PPIRP portion

Section 12 – Time Limit for Completion of CIRP

 Within 180 days from date of admission of application
 Extension:
 After resoln is passed at CoC by vote of >=66% voting share, RP may apply to AA seeking extn.
 If AA is satisfied that CIRP cannot be completed in 180 days, it may further extend – Not > 90
days but only once.

Note: CIRP to be mandatorily completed within 330 days of ICD including extension and time taken in
legal proceedings

Section 12A – Withdrawal of Application admitted u/s 7,9,10

On application made with the approval of 90% voting share of CoC, AA may permit withdrawal.
Summary of Withdrawal of Applications [Sec 12A of Code, Rule 8 and Regulation 30A]
Stage at which appln. is Process
withdrawn
Before admission by AA (AA has AA may permit such withdrawal on application for withdrawal
to admit or reject in 14 days)
Application admitted but CoC not AA may permit on application made through IRP. IRP to apply
formed within 3 days of receipt from applicant
After constitution of CoC but Withdrawal application to be first approved by CoC by 90%
before invitation for EOI voting shares within 7 days of such withdrawal appln and then
Expression of Interest IRP/RP to submit application to AA within 3 days of approval
from CoC
After invitation of Expression of Same as above with only difference that applicant to state
interest reasons justifying such withdrawal

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Section 13 – Declaration of © and Public announcement:

Where an application u/s 7,9 or 10 is admitted, AA shall make an order (on ICD) w.r.t:
(a) Appointment of IRP as per sec 16
(b) Cause public announcement of initiation of CIRP & call for submission of claims u/s 15
(c) Declare moratorium for the purpose referred to in sec 14

Section 14 –Moratorium
On the ICD, AA shall by order declare moratorium prohibiting [RAIES]:
Institution of Suits, Recovery of any Transferring,
Enforcement of
Continuation of pending suits property by any owner encumbering or
security Interest as
against CD, execution of or lessor which is in disposing off by CD
per SARFAESI, 2002
order of any court possession of CD any Asset

Note:
1. A license, permit, registration, quota, concession, clearance, or similar grant or right given by CG,
SG, local authority, sectoral regulator, etc., shall not be suspended/terminated on grounds of
insolvency, provide that there is no default in payment of current dues arising for use of such
license/grant during moratorium.
Example: Jet airways slots allocated by DGCA.

2. Supply of essential goods & services not to be terminated, suspended/interrupted (except where
dues arising from such supply has not been paid)

Non applicability of moratorium provision:

Provision of section 14(1) shall not apply to:
a. Such transactions, agreements as may be notified by CG + Financial Sector Regulator (RBI, SEBI, etc);
b. a surety in a contract of guarantee to CD [Question in exam]
Period of Moratorium: Till completion of CIRP. However, it may cease to have effect, if during CIRP:
• AA approves Resolution Plan u/s 31
• Passes order of liquidation u/s 33
Regulation 29 – RP may sell unencumbered assets of CD during CIRP. However, book value of all asset
sold during CIRP shall not exceed 10% of total claims admitted by IRP.

Section 15– Public announcement of CIRP: [As per FAQs - within 3 days of appointment of IRP]
AA shall cause public announcement of CIRP containing following info [RAPID2]:
Name Name of Details of IRP vested Last date
Last date of CIRP (i.e.
and authority under with power of for Penalties for
180th day from
Address which CD is management & submission false claims
admission. u/s 7,9,10)
of CD incorp./ Regt. responsible for claims of claims

Section 16 – Appointment and Tenure of IRP (Tenure: Till appointment of RP u/s 22)
 The AA shall on ICD appoint an IRP (where the name of IRP is proposed in the application)
 Who shall be IRP?
 Where appln. u/s 7 &10, the proposed IRP to become IRP if no disciplinary proceeding is pending.
 Appln u/s 9 + IRP proposed - The same shall become IRP provided no disciplinary proceeding.
 However, in case of appln. u/s 9, if no IRP proposed, IRP shall be appointed by AA on
recommendation of Board (Board to recommend within 10 days of receipt of such request)

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Section 17 – Management of Affairs of CD by IRP

From the date of appointment of IRP :
Management of Power of BoD/ Officers of CD to report to IRP Financial Inst. to act on
Affairs of CD Partners – Suspended and provide access to all docs instruction of IRP & furnish
vests with IRP and exercised by IRP and records as required by IRP. info. avl with them to IRP

The IRP vested with management of CD shall [ DA2LO]:

act and execute authority to access BOA responsible to
authority to take such other
all deeds, etc. available with Govt comply with
access records actions as may be
receipts and auth., stat auth., law on behalf
of CD from IU specified by Board
documents accountants, etc. of CD

Section 18: Duties of IRP [O IC2A2I]

collect all information w.r.t., assets, receive and collate all Claims monitor Assets of CD
finances and operations of CD for submitted by crs, pursuant to and manage its ops
determining the financial position of CD public announcement u/s 15 until a RP is appt

constitute a take control & custody of to perform such Other

file Info. collected
committee of any Asset over which CD duties as may be specified
with IU, if necessary
creditors (CoC) has ownership rights by the Board

Section 20: Management of operation of CD as going concern

IRP shall make every endeavor to:
a. protect and preserve the value of the property of the CD and
b. manage its operations as a going concern.

For this purpose, IRP shall have authority to [CF IPO]:

appoint accountants, raise interim finance provided that no security intt.
enter into contracts or
legal or other shall be created over any encumbered property of
amend /modify contracts
professionals as may be CD w/o prior consent* of crs. whose debt is secured
already entered into
necessary over such property

issue instructions to take all other actions as are

personnel of the CD as necessary to keep the CD
may be necessary as a going concern

*No prior consent of such crs shall be required where value of such property is >= 2x amount of debt.

Manner of submission of proof of claims to IRP? (Regulation)

Claims with proof by: Submit How to submit? Regulation of IBBI Others
to: (IRP of CP)
OC (other than workmen) Form B Regulation 7
IRP Submit proofs (IU,
FC Form C Regulation 8
invoice, etc.)
Workmen and Employees Form D Regulation 9
Additional Points:
 Claims to be submitted with proof on or before last date mentioned in PA u/s 15
 IRP shall verify claim within 7 days from last date of receipt of claim
 Within 2 days of such verification – File report to AA certifying constitution of CoC
 A person who fails to file claim can file claim with IRP/RP on/before 90th date from ICD.

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Section 21 – Committee of Creditors (CoC)

Constitution – CoC to be constitute by IRP after:

21(1) Collation of claims + Determination of financial position
Composition – All Financial Creditors. (If no FC – Board to specify)
21(2)
Provided that - FC who is a related party of CD will not have any right of
representation, participation or voting in CoC meeting

Provided further that, above proviso shall be N.A to FC regulated by financial

sector regulator, if it is a related party of CD solely on account of conversion of
debt to equity prior to ICD
If No FC If FC do not exist or all FCs are related party, CoC shall comprise of:
18 largest OCs by Value, 1 representative of all workmen, 1 representative of all
employees
If number of OCs < 18 – Include all OCs.
Consortium - Each FC shall be part of CoC and voting share based on FD owed to them
21(3) (Read sec 21(6) after this and come back to 21(4))
Person is FC + Will be considered as both FC and OC and included in CoC with voting share
OC – 21(4) proportionate to the FD owed to such creditor
OC assigns OD Assignee to be considered as OC to the extent of such assignment
to FC - 21(5)
Consortium If consortium agreement provides for single trustee/agent for all FC, each FC may:
Agreement (a) Authorize that agent/trustee to act on his behalf, or
provides for (b) Represent himself
single trustee (c) Appoint an IP (other than RP) at his own cost to represent him
– 21(6) (d) Exercise his right to vote with one or more FC jointly or severally
Who can act Where a financial debt is:
as Authorised a. In form of securities or deposits and terms of such debt provide for
Representative appointment of trustees/agents - Such trustee/agents shall act on behalf of FC
of FC? – b. Is owed to a class of creditors exceeding numbers as may be specified – IRP
21(6A) make application to AA the list of creditors along with the name of IP for the
AA to appoint**
c. Represented by a guardian, executor, etc, such person shall act as authorized
representative for financial creditor

All such above AR shall attend the meeting of CoC and vote on behalf of FC

**AR from State/UT having highest no. of FCs

In case of Sec 21(6A)(b) - IRP shall offer names of 3 IPs to be voted upon by Crs.
Such IPs must be from state/UTs having highest no. of creditors in class as per
records of CD.
If State/UTs does not have adequate no. of IPs, consider nearby state/UTs.

Decision of Except as otherwise provided in this code, all decisions of CoC shall be taken by CoC
CoC – 21(8) by a vote of not less than 51% of voting share of FC

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RP to furnish CoC may require RP to furnish any financial information related to CD any time
info. 21(9) & during CIRP. RP to furnish within 7 days
(10)
Quorum of CoC A meeting of CoC shall quorate if members representing >= 33% of the voting rights
are present either in person or by video/audio means.
If no quorum – Automatic adjournment to same time and same place – Next day
The adjourned meeting shall be quorate with the members of the CoC attending the
meeting.

Rights and Rights of AR - Participate and vote in meetings of CoC on behalf of FC he

Duties of AR represents as per the prior voting instructions obtained by AR from such creditors
of FC [Sec Duty of AR –
25A]  Circulate agenda & minutes of CoC meeting to FC that he represents
 Act in the interest of FC he represents and always act as per their prior
instructions
 If AR represents several FCs, then cast his vote w.r.t, each FC as per
instructions received from each FC to the extent of his voting share.
 AR to file such voting instructions with CoC.
 Abstain from voting if no prior instructions from FC.

Section 22 – Appointment of RP
Step 1 - CoC to be constituted by IRP
Step 2 - First CoC meeting to be held within 7 days of constitution [Not later than 30 days of ICD]
Step 3 - By majority vote of >=66% of FC resolve to either appoint IRP as RP or to replace IRP.

If CoC resolves to appoint IRP as RP – Subject to written consent from IRP, CoC to communicate
decision to IRP, AA and CD

If CoC resolves to replace IRP:

1 AA
CoC to file an application
(+Name and written consent of proposed RP) 2

Board
If Board confirms – Proceed
3
No response within 10 days, IRP to function
as RP till Board confirms

Where appointment of RP is delayed, IRP to act as RP from 40th day of ICD till RP is appointed u/s 22

Eligibility of IP to become IRP/RP (as per Regulation 3)

IP (not IRP) shall be eligible to be appointed as IRP or RP if he and all other partners and directors
(P/D) of the Insolvency Professionals Entity of which he is a P/D are independent of the CD.

Independent to CD bole toh:

1. Eligible to be appointed as Independent Director of CD u/s 149(6)
2. Not a Related Party to CD
3. Not a PPE of firm of auditors/secretarial auditors/cost auditors in practice of the CD in last 3 FY

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4. Not a PPE of legal/consulting firm that had any transaction with CD > = 5% of Gross T/O of firm in
last 3 FY (the limit was 10% of Gross T/O in Sec 149(6))

Section 23 – RP to conduct CIRP

 Subject to sec 27 (replacement of RP)
 RP to conduct the CIRP and manage operations of CD during CIRP period.
RP to continue to do so after expiry of CIRP until an order is passed by AA u/s 31 or 34
 Powers and duties – As were vested on IRP
 IRP to provide all records, documents and information related to CD in his possession to RP
 Sec 5(13) – Fees payable to RP shall be considered as CIRP cost

Section 24 – Meeting of CoC

 Mode of meeting– In person or such e-means as may be specified
 Meetings to be conducted by RP.
 Meeting of CoC: [Amendment]
o RP to convene meeting of CoC as and when it considers necessary
o RP to convene meeting on request by members of CoC having at least 33% of voting rights
o RP may place proposal received from member of CoC – If he considers necessary + Such
proposal is made by members representing at least 33% of voting right.
 RP to give notice of each CoC meeting to:
o Members of CoC including ARs
o Members of suspended BOD or partners of CD
o OC if the amount of aggregate dues (towards OD) is >= 10% of total debt
 BOD, partners and 1 rep of OCs may attend the meeting but no right to vote and their absence not
to invalidate proceedings of meeting.
 Period of Notice of meeting
o Not less than 5 days’ notice to all participants
o CoC may reduce period of notice to not less than 24 hours (48 hrs in case if there is any AR)
 FC who is a member of CoC may at his own cost appoint an IP (other than RP) to represent himself
 Voting shares to be based on financial debt owed to such creditor and shall be determined by RP
 Meeting to be conducted in such manner as specified

Note - Meetings may be convened till the RP is approved u/s 31 or order for liquidation is passed u/s
33 & decide on matters which do not affect the RP submitted before AA.

Section 25 – Duties of RP – To protect assets and continue business operations of CD

 Preserve and Protect the Assets of CD  Prepare Information Memorandum u/s 29
 Take Immediate custody of assets  Convene all meetings of CoC
 Represent the CD with third parties  Invite prospective resolution applicants (PRA)
 Raise interim Finances subject to CoC to submit resolution plans
approval  Present all Resolution Plans to CoC
 Appoint accountants, legal and other  Such other actions as may be specified by
professionals Board
 Maintain updated list of claims

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Section 27– Replacement of RP by CoC

 At any time during CIRP, if CoC is of the opinion that RP is to be replaced
 CoC may by vote of >=66% of voting shares, make an appln to AA containing name of proposed RP for
appt.
 Written consent of proposed RP required
 AA to forward the same to Board for confirmation and RP shall be then appointed as per manner
laid u/s 16
 If any disciplinary proceeding is pending, existing RP to continue till another RP appointed

Section 28 – Approval of CoC for certain actions (RP can’t do without approval) [ FIT2S(CCD) MCD T2]
Raise any interim Instruction to FI for
Create any security Disposal of shares of
finance in excess of debit Transaction > Amt.
interest over assets any shareholder
amount decided decided

Record any change in Change the capital Undertake any Related

Delegate his authorities
ownership interest structure Party Transaction

Changes in appt. or
Changes in appointment
Amend any terms of contract of Make any changes in the
or terms of contract of
constitutional document such personnel as may management of CD
stat / internal auditors
be specified
 For taking any of above actions, RP to convene meeting and get it approved by >=66% of CoC
 Effect of contravention:
o Action void
o CoC may report to Board for necessary action under this code.
Section 29 – Preparation of Information Memorandum (IM)
 RP to prepare IM containing “Relevant Info.” as may be specified by Board for formulating
Resolution Plan
 Duty of RP to provide information to Resolution Applicant, provided he undertakes to:
o Comply with law related to confidentiality and insider trading
o Protect Intellectual property of the CD
o Not to share Relevant info with third parties unless above 2 conditions are complied with.

Relevant info means any info necessary for preparation of resolution plan such as financial position of
CD, disputes and such other matter as may be specified by Board.

Section 29A – Person not eligible to be Resolution Applicant

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 u/s 25

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A person shall not be eligible to submit a resolution plan if such person is [CID AT SEBI 164 Guarantee]:
wilful Defaulter – As per At the time of such submission – Has an Account OR is the promoter or
undischarg
Guidelines of RBI issued in charge of management or control of a CD who has an account which is
ed
under Banking Regulation classified as NPA AND > = 1 year has lapsed from date of such
Insolvent
Act, 1949 classification till date of ICD*

Promoter or in mgt./control of CD in Had executed Guarantee in favor of a Prohibited by

(e)
which – preferential / undervalued / creditor in respect of CD undergoing SEBI from trading
Disqualifi
fraudulent / extortionate credit CIRP and the creditor invoked such in securities or
ed u/s
Transaction has taken place + Order guarantee and it remains unpaid in full or accessing
164
made by AA under this code. part. securities market

(d) Has been Convicted of an offence punishable with imprisonment subject to disability Has a
(Eligible after completion of 2 years from release from imprisonment) in any of above connected
mentioned clauses person not
For >= 2 years under any Act specified in the 12th Schedule
under any law o/s eligible under
For >= 7 years under any other law for the time being in force India (Foreign) above clauses

*Can submit if paid all overdue and interest thereon before submission.
*Moreover, this Clause N.A. if applicant is Financial entity + Not a Related Party

Connected Person means:

(i) Any person who is Promoter or in Management/Control (PMC) of the resolution applicant
(ii) Any person who shall be the P or in M/C PMC of the business of CD during implementation of
resolution plan
(iii) ASH or Related party to above referred persons.

Note – Clause (d) [convicted of offence] and (e) [disqualified] above shall not apply in relation to
connected person referred to in Clause (iii) above

Section 30 – Submission of a Resolution Plan

(1) RA to submit R. Plan to RP prepared on basis of IM along with affidavit that RA eligible u/s 29A.
(2) RP shall examine to confirm that each resolution plan [COMILO]:
Provides for payment of Provides for payment to OC such that it
Provides for Management
Insolvency Resolution is not less than higher of amt. paid in
of Affairs of the CD after
Process Cost in priority to [1] Liquidation u/s 53 or
approval of resolution plan
other debts of CD [2] Distribution u/s 53(1)

Provides for Conforms to such Other

Implementation & Does not contravene any provision of
requirement as may be
supervision of resoln plan Law for the time being in force
specified by the Board

(3) RP to present to CoC for its approval such resolution plan which confirm to Sec 30(2)

(4) CoC to approve the plan by vote >=66% voting share after considering
• feasibility and viability,
• the manner of distribution proposed
• such other requirements as may be specified by the Board

(5) CoC shall not approve the resolution plan submitted by a resolution applicant ineligible u/s 29A.
However, if RA not eligible under clause (c) of Sec 29A (NPA Account), CoC may allow such RA a

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period not exceeding 30 days to clear dues (This ext. will not impact time limit u/s 12 i.e., complete
CIRP in 180 days )

(6) Right of RA to attend CoC meeting in which plan is considered. But no right to vote unless RA is FC
Can RA vote on his own plan if he is a FC? – Yes

(7) RP to submit approved resolution plan to AA

Note: Nowhere during the consideration (and even implementation) of the resolution plan is the
approval of SH of CD required. Any such approval reqd. for implementation is deemed to be given on
approval of plan by AA.

Section 31 – Approval of Resolution Plan

1. If AA satisfied that resolution plan meets conditions of Sec 30(2) and has provision for effective
implementation, it shall, by order approve it.

Once approved, it shall be binding on the CD, its employees, members, creditors, CG, SG for
statutory dues, etc., guarantors and other stakeholders.

2. If not in conformity with Sec 30(2), reject the plan

3. Consequences of approval:
 Moratorium u/s 14 ceases to have effect
 RP to forward to the Board all records related to CIRP and resolution plan to be recorded in its
database

4. RA to obtain necessary approval within 1 year of approval of plan by AA (If CCI approval needed,
obtain prior to approval of AA)
Consequence of non-submission of R. Plan within 180 days or extended period – AA may order
Liquidation.

Section 32 – Appeal
Appeal against order approving Resolution plan shall be as per Sec 61(3) [Cant’s appeal if plan rejected]

As per Section 61(3), appeal against above order can be made on following grounds:
(similar to COMILO)
a) L - the approved R. plan is in contravention of the provisions of any law
b) I - there has been material irregularity in exercise of the powers by the RP during the CIRP;
c) O - the payment to OD has not been provided for in R. plan in the manner specified by the Board
d) C - IRP costs have not been provided for repayment in priority to all other debts
e) O - R. Plan doesn’t comply with any other specified criteria

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Section 32A – Liability for prior offences

Notwithstanding anything, the liability of a CD for an offence committed prior to the ICD shall cease,
and the CD shall not be prosecuted for such an offence from the date the R. Plan has been approved by
the AA u/s 31 provided that the R. Plan results in the change in the management or control of the CD
to a person who was:
a) not a promoter or in the management or control of the CD or a related party of such a person; or
b) not a person w.r.t whom the relevant investigating authority (IA) has, on the basis of material in its
possession, RTB that he had conspired for commission of offence and has submitted report to
relevant auth.

Provided that if prosecution had been instituted during the CIRP against such CD, it shall stand
discharged from the date of approval of the R. plan subject to requirements of this sub-section having
fulfilled.

Provided further that Designated Partner (DP) or an OID, or any person was in any manner in-charge of
the CD for the conduct of its business and who was involved in the commission of such offence as per
the report of IA, shall continue to be liable to be prosecuted and punished for such an offence
committed.

No action shall be taken against the property of the CD w.r.t an offence committed prior to the ICD,
where such property is covered under a R. Plan approved u/s 31, which results in the change in control
of the CD to a person, or sale of liquidation assets to a person, who was
a) not a promoter or in the management or control of the CD or a related party of such a person; or
b) not a person w.r.t whom the relevant investigating authority (IA) has, on the basis of material in its
possession, RTB that he had conspired for commission of offence and has submitted report to
relevant auth.

Nothing in this section shall be construed to bar an action against the property of any person, other
than CD or a person who has acquired such property through CIRP or liquidation process, against whom
such an action may be taken under such law as may be applicable.

Explanation: For the purposes of this sub-section, it is hereby clarified that

a. an action against property of CD in relation to an offence shall include the attachment, seizure,
retention or confiscation of such property under such law as may be applicable to CD;
b. Nothing in this sub-section shall be construed to bar an action against the property of any person,
other than the CD or a person who has acquired such property through CIRP or liquidation process
under this Code and fulfils the requirements specified in this section, against whom such an action
may be taken under such law as may be applicable

Reporting of status of ongoing CIRPs through Form CIRP 7 [Amendment]

IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘Regulation’)

Regulation 40A - Provides a model timeline for carrying out various activities envisaged in CIRP

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Regulation 40B–
 IRP/RP to file a set of forms (Form CIRP 1 to CIRP 6) within 7 days of completion of specific
activities (E.g. Form 1 to be filed within 7 days of Public Announcement)
 Where such specific activities is not completed, such Form need not be filed and that made making
monitoring of the progress difficult.
 Hence, Clause (1A) was added to Regulation 40B

Regulation 40B (1A) Where any activity stated in column (2) of table below is not complete by the date
specified therein, the IRP/RP, as the case may be, shall file Form CIRP 7 within 3 days of the said
date, and continue to file (only one) Form CIRP 7, every 30 days, until the said activity remains
incomplete.

Sl. Activity requiring filing of Form CIRP 7, if not completed by Form CIRP 7 Subsequent
No. the specified date – 1st time filing of Form
filing CIRP 7
(1) (2) (3) (4)
1 Public announcement is not made by T+3 day rd
Date X+30th day,
2 Appointment of RP is not made by T+30 day th
specified in X+60th day,
3 Information memo. is not issued within 51 days from the PA column (2) + X+90th day, and
4 RFRP is not issued within 51 days from the issue of Info. 3 days so on, till the
Memo activity is
5 CIRP is not completed by T+180th day completed.
T = Insolvency commencement date, and
X = Date of filing of Form CIRP 7 for the first time under column (3).

This circular is applicable for all the processes ongoing as on the date of this circular.

Some practical updates! 6 years to IBC

a) Unlike popular perception of financial creditors or lending banks triggering the IBC code for taking
defaulters to the cleaners, it is operational crs, who have utilised the code for getting money back.
b) Most of the cases under the IBC have ended in liquidation, which means selling the assets of the
company as junk. Out of total disposed cases, almost half the cases resulted in liquidation.
c) Real estate & construction is the biggest sector facing bankruptcy proceedings
d) More than 80% the admitted cases have overshot the 270 days deadline for resolution.
CHAPTER III – LIQUIDATION PROCESS
Section 33 – Initiation of Liquidation
 AA to pass an order to liquidate CD if:
o Resolution plan is not received by AA before:
 Expiry of CIRP period or
 Maximum period for completion u/s 12, or
 Fast track CIRP u/s 56
o AA rejects the resolution plan u/s 31 for non-compliance
o RP during CIRP communicates to AA the decision of CoC (>=66%) to liquidate CD

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o Resolution plan approved by AA (u/s 31 or 54L) is contravened by CD and any person whose
interests are prejudicially affected makes an application to AA for liquidation order
 On passing an order for liquidation, AA shall:
o Issue a public announcement that the CD is in liquidation
o Require such order of liquidation to be sent to the authority under which CD is registered

 Effects of liquidation order:

o No suits or other legal proceedings shall be instituted by or against CD. (Moratorium Part 2)
(However, may be initiated by the liquidator on behalf of CD with prior approval of AA)
o Order shall be deemed to be notice of discharge to the officers, employees and workmen of
the CD (Except where the business of CD is continued during the Liquidation process)
Liquidation commencement date - Date on which proceedings for liquidation commence u/s 33 or 59

Section 34 – Appointment of Liquidator and Fee to be paid

Appointment of Liquidator:
 On passing of order u/s 33, the RP (appointed for CIRP or PPIRP) to act as liquidator (unless
replaced by AA) subject to submission of written consent to AA
 However, AA shall by order replace RP if:
o Resolution plan submitted by RP was rejected for failure to meet the requirements of Sec 30(2)
o Board makes recommendation to AA that RP should be replaced (reasons recorded in writing)
o RP fails to submit written consent to act as a liquidator

 Manner of replacement of RP (except where Board suo motu recommends such replacement)
o AA may direct the Board to propose name of IP to be appointed as liquidator
o Board shall specify name along with written consent of IP within 10 days
o On receipt of such recommendation, AA to appoint the IP as Liquidator
 Consequences of appointment of liquidator :
o Power of BOD, KMP and partners of CD shall CEASE to have effect & shall vest with Liq.
o Personnel of CD to extend all necessary support and assistance to CD

Fee of the liquidator: Such proportion (as specified by Board) to the value of Liquidation Estate Assets
(LEA) and shall be paid out of proceeds of LEA u/s 53

Section 35 – Power and Duties of Liquidator

• Verify claims • Sells properties of CD via public auction / private
• Invite and settle claims contracts (can’t sell to person ineligible u/s 29A)
• Take custody of assets • Draw, accept, make & endorse NI
• Protect and preserve assets • Obtain professional assistance
• Evaluate assets • Investigate the financial affairs to determine
• Carry on business of CD undervalued and preferential transaction
• Power to consult stakeholders entitled to • Apply to AA for necessary orders & directions
proceeds u/s 53. However, not binding • Perform such other function as specified by the Board

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Section 36 – Liquidation Estate

 Liquidator shall form an estate of assets called the Liquidation Estate (LE)
 Liquidator to hold LE in a fiduciary capacity for the benefit of creditors

LE shall comprise of: LE shall NOT include:

 All assets over which CD has ownership right o Asset owned by third party but in possession
whether in his possession or not of CD (such as – Asset held in trust i.e.,
(Ownership evidenced in balance sheet or IU or fiduciary capacity, bailment contracts, sum
such other means specified by Board) due to employee from PF, pension fund,
 Tangible assets gratuity fund, etc. )
 Intangible assets (Intellectual prop, financial o Assets in security collateral held by FSP and
instruments, securities, insurance policies, etc.) are subject to netting and set-off in multi-
 Assets subj to determinatn of ownership by court lateral trading or clearing transaction
 Assets in respect of which the secured creditor o Personal assets of SH or partners as the case
has relinquished security interest may be
 Proceeds of liquidation as and when realized o Assets of subsidiary of CD (Indian/Foreign)
Other assets specified by Board
Section 37 – Power of Liquidators to access information
 Liquidator shall have power to access any information system for the purpose of admission and
proof of claims and identification of LEA relating to CD from following sources:
Information systems (IS) for financial and non- IS for securities and assets posted as security
IU
financial liabilities regulated under any law interest regulated under any law

Credit IS under any Any agency of CG,SG, Local govt including Database maintained Sources specified by
law registration authorities by Board Board

 Any creditor may require Liquidator to provide financial info and Liquidator shall within 7 days
provide such information or provide reasons for not providing such information.

Section 38 – Consolidation of Claims

 Liquidator to collect claims of creditors within 30 days of Liquidation Commencement Date (LCD)
 Submission of claim by FC – FC to provide records of such claim with an IU. If no such records in
IU, then submit as an OC would.
 Submission of claim by OC – Such manner and supporting documents as may be specified by Board
 Partly FC & partly OC – To the extent of FD - In manner specified above. And for OD, manner
specified above
 Creditor may vary or withdraw his claims within 14 days of submission of such claim

Section 39 - Verification of Claims

 The liquidator shall verify the claims within such time as may be specified by the Board (30 days
from the last date of the receipt of the claim)
 Liquidator may require any creditors/CD/ others to produce any other evidence to verify claims.
 Liquidator shall also verify claims collated during CIPR but not submitted during liquidation, within
30 days from last date for receipt of claims during liquidation & may either admit/reject claim.

Section 40 - Admission/ Rejection of Claims

 Liquidator may, after verification, admit or reject a claim, in whole or in part, as the case may be
 Reasons to be recorded in writing for rejections of claim
 Liquidator to communicate his decision to creditor & CD within 7 days of such admission/ rejection

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Section 41 - Valuation of Claims -

Liquidator shall determine value of claims admitted u/s 40 in specified manner

Section 42 - Appeal against decision of Liquidator:

A creditor may appeal to the AA against the decision of the liquidator accepting or rejecting the
claims within 14 days of the receipt of such decision.

Preferential Transaction (PT) and Relevant time (Section 43 and 44)

A preference shall be deemed to be given at a relevant time, if:
Relevant
 Related Party (other than just employee) – During 2 years preceding ICD
time?
 Person other than related party – During 1 year preceding ICD
Appln. for
Such application shall be filed to the AA by Liquidator or RP as the case may be
avoidance
 Trf. of property or interest for benefit of Creditor, Guarantor or Surety
When is a
(transferee) w.r.t, antecedent FD/OD/other liab., AND
transaction
 Such trf. transfer puts such transferee in a beneficial position than it would
preferential?
have been in event of distribution u/s 53
1. Transfer in OCOB of CD or transferee;
Following trf. 2. Transfer creating security interest in property acquired by CD to extent that:
not to be a. Such interest secures new value and was given at time of signing security
considered agreement that contains description of such property as security interest
as and was used to acquire such property, AND
preferential b. Such transfer was registered with IU within 30 days of CD receiving
possession of prop.
On application by RP or Liquidator, AA may order the following:
1. The property so transferred to be vested in CD
2. Property that represents the application of proceeds of sale of prop. so
transferred or money so transferred – Vested with CD
Order of AA 3. Release/discharge of security interest created by CD
[Section 44] 4. Require any person to pay such sums in respect of benefits received from CD
5. Direct Guarantor (whose FD/OD was released under such preference) to be
under such new FD/OD to that person as AA orders
6. Direct for providing security on any property for discharge of FD/OD (other
than to which preference given)
1. Affect interest in prop. acquired in good faith and for value
Order shall
2. Require a person to pay any sum if such benefit was received in good faith or
not:
for value.
Where the person to whom preference is given,:
a. Had sufficient info. of commencement of CIRP or
Presumption b. Is a related party,
it shall be presumed that interest was acquired otherwise than in good faith.
A person shall be deemed to have sufficient info. if a PA u/s 13 has been made
V. Nagarajan (Liquidator) v. Asset Reconstruction Company India Ltd.
The consideration amount for executing of sale deed was paid to the corporate debtor much prior to
the execution of sale deed by way of demand draft. The insolvency commencement date (date of

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admission) was 16-6-2017, however, the execution of sale deed reached finality on 30-5-2016, which
was much prior to one year preceding the insolvency commencement date. Therefore, NCLT rightly
rejected the application filed by RP

Undervalued Transactions (Section 45 to 48)

Relevant A preference shall be deemed to be given at a relevant time, if:
time?  Related Party (other than just employee) – During 2 years preceding ICD
 Person other than related party – During 1 year preceding ICD
Appln. made Liquidator or RP
by
When is Transaction (not in OCOB) where the CD:
transaction a. Makes gift to a person
said to be b. Transfers asset for consideration significantly less than value of consideration
undervalued? provided by CD for acquiring such asset
In case where Where Liq./RP has sufficient info. of an undervalued transaction but has not
Liq./RP reported to AA  A creditor/member or partner of CD may make application to
doesn’t report AA.
such
transaction On such application, if AA satisfied that UT has occurred and Liq./RP despite
having sufficient info. did not report, it may order:
a. Restore the position as it existed before such transaction
b. Require Board to initiate disciplinary proceedings

Order of AA On application by RP or Liquidator, AA may order the following:

1. The property so trfd. to be vested in CD
2. Release/discharge sec. intt. created by CD
3. Require any person to pay such in respect of benefits received from CD
4. Require payment of consideration as may be determined by independent expert.

Section 49 – Transactions Defrauding Creditors

Where the CD has entered into an UT u/s 45(2) and AA is satisfied that it was deliberately entered
into:
a. for keeping assets of CD beyond reach of any person who is entitled to make a claim against CD; or
b. in order to adversely affect the interests of such a person in relation to the claim,

the AA shall make an order-

i. restoring position as it existed before such transaction as if the transaction had not been entered
into; and
ii. protecting the interests of persons who are victims of such transactions

Provided that an order under this section shall not:

a. affect any intt. in prop. acquired in good faith, for value & without notice of relevant circumstances
b. require a person who received a benefit from such in good faith, for value and without notice to
pay any sum unless he was a party to the transaction.

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Section 50 – Extortionate Credit Transaction (ECT)

1. Where the CD has been a party to an ECT involving the receipt of FD/OD during the period within
2 years preceding the ICD, the liquidator or the RP, may make an application for avoidance of such
transaction to the AA if terms of such transn required exorbitant payments to be made by the CD.
2. The Board may specify the circumstances in which a transaction which shall be covered u/ss(1).
Explanation - For the purpose of this section, it is clarified that any debt extended by person
providing financial services which is in compliance with any law in relation to such debt shall in no event
be considered as an ECT.

Section 51 – Orders of AA w.r.t. ECT

Where the AA after examining application u/s 50(1) is satisfied that ECT has taken place, it shall, by
an order:
1. Restore the position as it existed prior to such transaction;
2. Set aside the whole or part of the debt created on account of the such ECT;
3. Modify the terms of the transaction;
4. Require any person who is, or was, a party to transaction to repay any amt. received by such person;
5. Require any security interest that was created as part of ECT to be relinquished in favour of
Liquidator or the RP

Section 52 – Secured Creditors (“SC”) in Liquidation proceedings

 A SC in the liquidation proceeding may either:
o Relinquish its security interest to the LEA and receive proceeds for the sale of assets by
Liquidator, or
o Realize its security interest as per this Section
 If SC intends to realize the security interest:
Liq. to verify existence of SC may then enforce/deal
SC to inform Liq. about
sec. interest (from IU, with secured asset as per
such sec. interest and
etc.) and permit law and apply proceed to
identify the asset
realisation recover debts due to it
On enforcement:
If Proceeds > Debt Dues (i.e., Surplus) SC to account for such surplus and tender it to Liq.
If proceeds inadequate to repay debts Unpaid debts to be paid u/s 53(1)(e)
of such SC

Amount of CIRP cost to be recovered from proceeds of any realization by SC & it shall be included in
LEA.

Where SC is facing resistance from CD or any person connected therewith, in taking

possession/selling/disposing the secured asset  It shall make an application to AA to facilitate
realization of Security interest.
On receipt of such application – AA to pass necessary order.

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Section 53 – Distribution of Assets

Insolvency Resolution Process Cost and Liquidation Cost in Full
Workmen dues for 24m preceding LCD AND
Debts owed to SC who relinquished their security interest
Wages and any unpaid dues owed to employees other than
workmen (12m preceding LCD)
Fin. debts owed to unsecured crs
Amt due to CG/SG for 2 years prior to LCD
AND
Unpaid debt of SC who realized their SI

Any remaining debts and dues

PSH

ESH

 Contractual arrangements between recipients of equal ranking, if disrupting the order of priority,
shall be disregarded by the Liquidator
 Fees payable to liquidator to be deduced proportionately from the proceeds payable to each class
of recipients and the proceed shall be distributed after such deduction

Requirements for commencement of Distribution (Reg 42 of IBBI (Liquidation Process) Reg, 2016)
 List of stakeholder and the asset memorandum has been filed with AA
 The proceeds to be distributed to the stakeholders within 90 days of the receipt the amount
 Liquidation and CIRP cost to deducted before such distribution is made.

Section 54 – Dissolution of Corporate Debtor

 On complete liquidation of assets, Liquidator to make application to AA for dissolution of such CD
 On receipt of such application, AA to make an order that the CD is dissolved from date of order
 Copy of order to be forwarded within 7 days of such order to the authority under which CD is
registered

Additional Point (as per Regulation)

Liq. to liquidate CD within 1 year of LCD. Else make apply to AA seeking extension along with reason
for such delay.

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Chapter IIIA – Pre-package Insolvency Resolution Process (PPIRP)

Certain definitions:
“Base Resolution Plan (BRP)” means a resolution plan provided by the CD u/s 54A(4)(c);
“Preliminary information” means a memorandum submitted by CD u/s 54G(1)(b)
“Pre-packaged insolvency date” means date of admission of application for initiating PPIRP by the AA
u/s 54C(4);

Section 11A – Disposal of applications u/s 54C and u/s 7/9/10

Crux: Application u/s 54C to be given priority over application u/s 7,9 or 10 (provided that CIRP is not
initiated)
Situation Action
Application u/s 54C is pending and during such AA to pass order for application u/s 54C
pendency, application u/s 7/9/10 is filed before considering application u/s 7/9/10
Application u/s 7/9/10 is filed and pending and Notwithstanding Sec 7/9/10 , AA shall first
within 14 days of such application, application u/s dispose application u/s 54C (Hadd hai yaar)
54C is filed
Application u/s 7/9/10 is filed and pending and AA shall first dispose application u/s 7/9/10
AFTER 14 days of such application, application u/s
54C is filed
Prov. of this section shall N.A. where appln. u/s 7/9/10 is pending on date of commencement of this
ordinance

Section 54A: CD eligible for PPIRP

 Application for initiating PPIRP may be made w.r.t, CD classified as MSMEs u/s 7(1) of MSME
Development Act

 Application may be made w.r.t., MSME CD, who commits default referred u/s 4, subject to following
conditions:
a. it has not undergone PPIRP or completed CIRP - During 3 years preceding the initiation date;
b. it is not undergoing a CIRP;
c. no order requiring it to be liquidated is passed u/s 33;
d. it is eligible to submit a resolution plan u/s 29A;
e. the FC (other than related party) of CD have proposed the name of the IP to be appointed as RP
(not IRP) for conducting the PPIRP, and FC representing > = 66% in value, have approved such
proposal.
If no FC – Such person as may be specified
f. majority of directors or partners of CD, have made a declaration, stating, inter alia,
 that CD shall file an application for initiating PPIRP within a definite time period not > 90
days;
 that PPIRP is not being initiated to defraud any person; and
 the name of the IP proposed and approved to be appointed as RP under clause (e);
g. the members of the CD have passed a SR, or at least ¾ of the total number of partners, as the
case may be, have passed a resolution, approving the filing of an application for initiating PPIRP

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 The CD shall obtain an approval from its FC (>=66%) for the filing of an application for initiating
PPIRP.
Provided that if no FC, such person as may be specified.

 Prior to seeking approval from FC above, the CD shall provide such FC with:
(a) the declaration referred to in clause (f) of sub- section (2) [declaration by directors/partners];
(b) the special resolution or resolution passed by members/partners
(c) a base resolution plan which conforms to the requirements referred to in section 54K, and
(d) such other information and documents as may be specified.

Section 54B: Duties of RP before initiation of PPIRP:

(1) The RP shall have following duties from date of approval of IP to act as RP, namely:
a. prepare report confirming whether CD meets requirement u/s 54A, and BRP meets requirement
u/s 54A;
b. file such reports and other docs, with the Board, as may be specified; and
c. perform such other duties as may be specified.

(2) The duties of the IP above shall cease, if the:

a. CD fails to file an appln for initiating PPIRP within time period as stated in declaration by
dir./mem; or
b. application for initiating PPIRP is admitted or rejected by the AA, as the case may be.

(3) Fees payable to RP shall be determined and borne in manner specified and shall form part of PPIRP
costs, if application is admitted.

Section 54C: Application to initiate PPIRP:

(1) Where a CD meets requirements u/s 54A, a Corporate Applicant (CA) thereof may file application
with AA for initiating PPIRP in the prescribed manner.
(2) The CA shall, along with the application, furnish:
a. the declaration, SR or resolution, and approval of FC for initiating PPIRP;
b. the name and written consent, of the IP proposed to be appointed as RP and his report u/s 54B,
c. a declaration regarding the existence of any avoidable transactions;
d. information relating to BOA of CD and such other documents as may be specified.

(3) The AA shall, within 14 days of receipt of application, by an order:

a. admit the application, if it is complete; or
b. reject the application, if it is incomplete (give 7 days for rectification)

(4) The PPIRP shall commence from the date of admission of the application (PPICD).

Section 54D: Time limit for completion of PPIRP:

1. Complete within 120 days from PPICD.
2. RP shall submit resoln plan, as approved by the CoC, to AA u/s 54K within 90 days from the PPICD.
3. Where no resoln plan is approved by CoC within 90 days of PPICD, the RP shall, on the day after
expiry of 90 days, file an application with AA for termination of PPIRP in specified form & manner.

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Section 54E: Declaration of moratorium and public announcement during PPIRP:

1. The AA shall, on the PPICD, along with order of admission u/s 54C:
a. declare a moratorium [Sec 14 shall mutatis mutandis apply to proceedings under this Chapter];
b. appoint RP (not IRP):
i. as named in application - If no disciplinary proceeding is pending against him; or
ii. Based on recommendation made by Board- If any disciplinary proceeding is pending against
such IP.
c. cause a public announcement of initiation of PPIRP to be made by RP immediately after his
appointment.

2. The order of moratorium shall have effect from date of such order till date on which PPIRP comes
to an end.

Section 54F: Duties and Power of RP during PPIRP:

1. The RP shall conduct the PPIRP of a CD during the PPIRP period
2. The RP shall perform the following duties, namely:
confirm list of claims inform creditors maintain an updated list monitor mgt. of affairs of
submitted by CD u/s 54G regarding their claims of claims CD

constitute CoC & convene inform CoC in event of breach of any prepare the Info. Memorandum on basis of PIM
& attend all its meetings obligations of BOD or partners of CD submitted u/s 54G and any other relevant info.

file applications for avoidance of transactions under Chapter III or such other duties as may be
fraudulent or wrongful trading under Chapter VI specified

3. The RP shall exercise the following powers, namely:

a. access all BOA, records and information available with CD;
b. access e-records of CD from an IU having financial info. of CD;
c. access BOA, records & other docs of CD avl. with Govt. auth., stat. auditors, accountant &
other persons;
d. attend meetings of members, BOD and committee of directors, or partners, of CD;
e. appoint accountants, legal or other professionals in such manner as may be specified;
f. collect all info. w.r.t., assets, finances and operations of CD for determining fin. position of CD
and existence of any avoidable transactions relating to:
i. business operations for the previous 2 years from date of PPICD;
ii. financial and operational payments for the previous 2 years from the date of PPICD;
iii. list of assets and liabilities as on the initiation date; and
iv. such other matters as may be specified;
g. take such other actions in such manner as may be specified

4. Financial institution maintaining accounts of CD shall furnish info. w.r.t, CD available with them to
RP, as required by him.

5. All personnel of CD, its promoters and other person associated with its mgt. shall extend all
assistance and cooperation to RP to perform his duties and exercise powers, and Sec 19(2) and (3)
shall, mutatis mutandis apply.

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6. Fees of RP & any expenses incurred by him for PPIRP shall be determined in such manner as may be
specified:
Provided that the CoC may impose limits and conditions on such fees and expenses:
Moreover, the fees and expenses for period prior to constitution of CoC shall be subject to
ratification by it.

7. The fees and expenses referred to in sub-section (6) shall be borne in such manner as may be
specified.

Section 54G: List of Claims and Preliminary Information Memorandum (PIM):

1. The CD shall, within 2 days of PPICD, submit to RP the following updated information namely:
a. a list of claims, along with details of respective creditors, their sec. interest and
guarantees, and
b. a PIM containing information relevant for formulating a resolution plan.

2. Where any person has sustained any loss or damage as a consequence of the omission of any
material info. or inclusion of any misleading info. in the list of claims or the PIM submitted by the
CD, every person who:
a. is a promoter/director/partner of the CD, at time of submission of list of claims or PIM; or
b. has authorized the submission of the list of claims or the PIM by the CD,
shall, without prejudice to section 77A, be liable to pay compensation to every person who has
sustained such loss or damage.

3. No person shall be liable above, if list of claims or PIM was submitted by CD w/o his knowledge or
consent.

4. Subject to section 54E, such person, who sustained any loss /damage shall also be entitled to move
a court having jurisdiction for seeking compensation for such loss or damage.
Section 54H: Management of affairs of CD:
During the PPIRP period:
(a) the management of affairs of the CD shall continue to vest in the BOD/partners of CD
(b) the BOD/Partners shall protect & preserve value of property and manage its ops as going concern;
(c) the promoters, members, personnel and partners, as the case may be, of the CD, shall exercise and
discharge their contractual or statutory rights and obligations in relation to the CD, subject to
prov. of this Chapter

Section 54I: Committee of Creditors:

1. The RP shall, within 7 days of PPICD, constitute a CoC, based on list of claims confirmed u/s 54F.
Provided that composition of CoC shall be altered on basis of updated list of claims and such
alteration shall not affect the validity of any past decision of the CoC.
2. The first meeting of the CoC shall be held within 7 days of its constitution.
3. Provisions of sec 21, except 21(1) thereof, shall, mutatis mutandis apply, w.r.t, CoC in this Chapter.

For this sub-section, references to “RP” u/s 21 (9) and (10) shall be construed as references to “CD
or RP”.

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Section 54J: Vesting management of CD with RP

1. Where the CoC, at any time during the PPIRP, by a vote of > = 66% of voting shares, resolves to
vest the mgt. of CD with RP, the RP shall make application in this regard to AA, in such form and
manner as may be specified.

2. On receipt of such application, if AA is of the opinion that during the PPIRP:

a. the affairs of the CD have been conducted in a fraudulent manner; or
b. there has been gross mismanagement of the affairs of the CD
it shall pass an order vesting the management of the CD with the RP

3. Notwithstanding anything to the contrary contained in this Chapter, the provisions of following
section shall apply mutatis mutandis to proceedings under this chapter:
14(2) 14(2A) 17 18 (e to g) 19 20 25(1) 25(2) 28

Section 54K: Consideration and approval of Resolution Plan

1. The CD shall submit the BRP, to RP within 2 days of ICD, and RP shall present it to CoC.
2. The CoC may provide CD an opportunity to revise the BRP prior to its approval or invitation of PRA.
3. The Resolution Plans and BRP, submitted under this section shall conform to requirements u/s 30(1)
and 30(2), and provisions u/s 30(1), (2) and (5) shall, mutatis mutandis apply to proceedings under
this Chapter.
4. The CoC may approve BRP for submission to AA if it does not impair any claims owed by the CD to
OC.
5. Where:
(a) the CoC does not approve the BRP under sub-section (4); or
(b) the BRP impairs any claims owed by the CD to the OC,
the RP shall invite PRA to submit a resolution plan(s), to compete with the BRP, in such manner as
specified.
6. The RA (not PRA) submitting R. plans pursuant to invitation shall fulfil such criteria as may be laid
down by RP with approval of CoC, having regard to complexity and scale of business ops of CD and
other conditions.
7. The RP shall provide to the RA:
(a) the basis for evaluation of R. Plans for the purposes of sub-section (9), as approved by the
CoC; and
(b) the relevant information referred to in section 29, which shall, mutatis mutandis apply
8. The RP shall present to CoC, for its evaluation, R. plans which conform to the requirements u/s
30(2).
9. The CoC shall evaluate the R. Plans presented and select a R. plan from amongst them.
10. Where, on the basis of criteria laid down by it, the CoC decides that the R. plan selected u/ss (9)
is significantly better than the BRP, such R. plan may be selected for approval u/ss (12)
Provided that the criteria laid down by CoC shall be subject to conditions as may be specified.

11. Where the R. plan selected u/ss (9) is not considered for approval or does not fulfil the
requirements u/ss(10), it shall compete with BRP and one of them shall be selected for approval
u/ss(12).

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12. The resolution plan selected for approval u/ss (10) or (11), may be approved by CoC for submission
to AA.
In case where the R. plan selected for approval u/ss (11) is not approved by CoC, the RP to file for
termination of PPIRP in manner specified

13. The approval of R. plan u/ss (4) or (12), by CoC, shall be by a vote of >=66% of voting shares, after
considering its feasibility and viability, the manner of distribution proposed, and order of priority
u/s 53(1)

14. While considering feasibility and viability, if R. plan submitted by CD provides for impairment of
any claims owed by CD, the CoC may require promoters of CD to dilute their
shareholding/voting/control rights in CD.
Provided that where the R. plan does not provide for such dilution, the CoC shall, prior to the
approval of such R. plan record reasons for its approval.
15. The RP shall submit the R. plan as approved by the CoC to the AA.

It is hereby clarified that, CD being a RA u/s 5(25), may submit BRP either indv./jointly with other
person.
For the purposes of subsections (4) and (14), claims shall be considered to be impaired where the R.
plan does not provide for the full payment of the confirmed claims as per the updated list of claims
maintained by the RP.

Section 54L: Approval of Resolution Plan (by AA):

1. If the AA is satisfied that the R. plan as approved by the CoC meets the requirements u/s 30(2), it
shall, within 30 days of the receipt of such R. plan, by order, approve it.
AA shall, before approval order, satisfy itself that R. plan has prov. for effective implementation.
2. The approval order shall have such effect u/s 31(1),(3) and (4), which shall, mutatis mutandis apply

3. Where AA is satisfied that the R. plan does not conform to requirements u/ss (1), it may, within 30
days of the receipt of R. plan, by an order, reject the R. plan and pass an order u/s 54N.

4. Notwithstanding anything to the contrary contained in this section, where AA has passed an order
u/s 54J(2) and R. plan approved by the CoC u/s 54K, does not result in the change in management
or control of the CD to a person who was not a promoter or in mgt. or control of the CD, the AA
shall pass an order:
a. rejecting such R. plan;
b. terminating the PPIRP and passing a liquidation order as per section 33; and
c. declaring that PPIRP costs, shall be included as part of liquidation costs.
Section 54M: Appeal against order u/s 54L:
Any appeal from an order approving the R. plan u/s 54L(1), shall be on the grounds laid down in section
61(3)

Section 54N: Termination of PPIRP:

1. Where the RP files an application with AA for termination of PPIRP,
(a) under the proviso to section 54K (12); or
(b) under u/s 54D (3),

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the AA shall, within 30 days of date of such application, by an order,

1. terminate the PPIRP; and
2. provide for manner of continuation of proceedings initiated for avoidable transactions if any.

2. Where the RP, at any time before approval of R. Plan intimates the AA of decision of CoC (66%) to
terminate the PPIRP, the AA shall pass an order under sub-section (1).
3. Where the AA passes an order under sub-section (1), the CD shall bear the PPIRP costs, if any.
4. Notwithstanding anything to the contrary contained in this section, where the AA has passed an
order u/s 54J(2) and the PPIRP is required to be terminated, the AA shall pass an order:
a. of liquidation in respect of the CD as per section 33; and
b. declare that the PPIRP costs, if any, shall be included as part of the liquidation costs

Section 54O: Initiation of CIRP

1. The CoC, at any time after PPICD but before approval of R. plan, by a vote of >= 66%, may resolve
to initiate a CIRP in respect of CD, if such CD is eligible under Chapter II.
2. Where RP intimates AA of decision of CoC, AA shall, within 30 days of intimation, pass order to:
a. terminate the PPIRP and initiate CIRP,
b. appoint the RP under PPIRP as the IRP, subject to submission of written consent
c. declare that PPIRP Costs to be included as part of IRP costs for the purposes of the CIRP.
3. Where RP fails to submit written consent, AA shall appoint an IRP by reference to Board u/s 16.
4. Where the AA passes an order under sub-section (2):
a. such order shall be deemed to be an order of admission of appln. u/s 7
b. the CIRP shall commence from the date of such order;
c. the proceedings initiated for avoidable transactions, shall continue during the CIRP
d. for the purposes of sec. 43, 46 and 50, references to “ICD” shall mean “pre-packaged ICD”;
e. in computing relevant time for avoidable transactions, the duration of PPIRP shall be included

Fast track CIRP (FTCIRP)

Section 55: Fast track CIRP:
An application for fast track CIRP may be made in respect of following CD:
 A small company as per Sec 2(85) of Companies Act, 2013
 A start-up (other than partnership firm) as defined by the Ministry
 Unlisted co. with total assets, as per FS of immediately preceding FY, not > Rs. 1 crore

Section 56: Time Limit for completion of FTCIRP

 Fast track CIRP to be completed within 90 days of ICD.
 RP may file appln to AA for 1 time ext. of 45 days if CoC resolves >=75% vote + AA satisfied that
such extension is needed

Section 57: Manner of initiating FTCIRP:

Application for fast track CIRP may be filed by creditor or CD along with:
 proof of existence of default such as records of IU or such other means as specified by Board
 Such other info, to establish that CD is eligible for fast track CIRP
Section 58: Applicability of Chapter II to this Chapter
CIRP process u/s sec 4-32 and provisions of offences & penalties under Chap. VII shall apply to fast
track CIRP

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Section 59 – Voluntary Liquidation of Corporate Persons (CP)

1. A CP who intends to liquidate itself voluntarily and has NOT committed any default may initiate
voluntary liquidation proceedings under the provisions of this Chapter

2. The voluntary liquidation of CP shall meet such conditions & procedural requirements as specified
by Board.

3. Voluntary Liq. proceedings of CP registered as a company shall meet the following conditions,
namely:
a declaration from majority the declaration under sub- within 4 weeks of a declaration, there
of directors of co. verified clause (a) shall be shall be:
by an affidavit stating that: accompanied with the a) SR in GM requiring co. to be
a) they have made a full following documents, liquidated voluntarily and
inquiry into affairs & they namely: appointing IP to act as Liq; or
are of opinion that either a) audited FS and record b) a resolution in GM requiring co. to
company has no debt or of business ops. for last be liquidated voluntarily as a
that it will be able to pay 2 years or for period result of expiry of period of its
its debts in full, from the since incorp, whichever duration fixed by AoA or
proceeds of assets; and is later; occurrence of event w.r.t, which
b) the company is not being b) a report of valuation of the AoA provide that co. shall be
liquidated to defraud any assets, if any prepared dissolved, as the case may be and
person; by registered valuer; appointing an IP to act as the
Liquidator*

*Where co. owes any debt, crs >= 2/3 in value shall approve such resolution within 7 days of
resolution.

4. Co. to notify RoC and Board about such resolution within 7 days of resoln/approval of crs. as case
may be.

5. Subject to approval of the creditors, the voluntary liquidation proceedings in respect of a company
shall be deemed to have commenced from the date of passing of the resolution by the co.

6. Provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply with necessary
modifications.

7. Where CP is completely wound up + Asset liquidated – Liq. to make application to AA for dissolution

8. On receipt of such appln, AA shall pass order that CD shall be dissolved from date of that order.

9. Forward copy of order u/ss (8) to auth. with which CP is registered within 14 days of date of
order.

Replacement of Liquidator – CP may replace liquidator by passing a SR. Such IP shall, within 3 days 7
days of his appointment, intimate IBBI about such appointment

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CIRP vs PPIRP

Basis Corporate Insolvency Resolution Pre-Packaged Insolvency Resolution

Process (CIRP) Process (PPIRP)
Applicability Any Corporate Debtor Only to MSME CD
Priority to CIRP only if CIRP PPIRP gets priority if appln. filed before
Priority (Section 11A)
already commenced CIRP or within 14 days of filing of CIRP
Minimum Default Rs. 1 crore Rs. 10 lakhs
None before filing application
Extensive Preliminary work before
Preliminary work to NCLT by FC/OC.
application
(Except in case of Sec 10,
where SR is required)
Who can initiate? FC/OC/CD Corp. Applicant (on behalf of CD)
Time Limit 180 days (max 330) [Sec 12] 120 days [Section 54D]
Appt. of IRP? Yes No, direct appointment of RP
Management of CD Vests with IRP on ICD Stays with CD unless fraud involved
Constitution of COC Within 30 days of ICD Within 7 days
Who prepares Info. Preliminary IM prepared by CD and
Resolution Professional
memorandum? finalized by RP
CD may improve BRP and CoC may
Base Resolution Plan
No such provision. approve the same if it does not impair
(BRP)
operational creditors
No specific provision for Swiss Introduction of concept of Swiss
What’s New
challenge (no prohibition either) Challenge to get best possible R. plan
Approval of R. Plan By AA By AA

%age Sec Provision

66% 12 Extension of time limit of CIRP beyond 180 days\
66% 22 Appointment of IRP as RP or replacing RP
66% 27 Replace RP
66% 28 Approval of CoC for certain actions of RP
66% 30 Approval of resolution plan by CoC
66% 33 Decision of CoC to liquidate the corporate debtor
66% 54A Approval of proposed insolvency professional to act as RP for PPIRP and
approval to file application for PPIRP
66% 54J Resolution by CoC that management of CD will vest with RP
66% 54K Approval of Resolution plan by CoC
66% 54N Resolution by CoC deciding to terminate PPIRP
66% 54O Resolution by CoC to initiate CIRP by terminating PPIRP
75% 56 Extending time limit of Fasttrack CIRP beyond 90 days
90% 12A AA may permit withdrawal of CIPR application if resolution passed by CoC
51% 21 All decision of CoC to be taken by resolution of such CoC

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Important Definitions: [Please cover other definitions of IBC from the Study Module as well]
Corporate Company u/s 2(20) Co. Act, 2013, an LLP as per LLP Act, 2008, or any other person
Person (CP) incorporated with limited liability under any law but shall not include any FSP
Corporate CP who owes a debt to any person;
Debtor (CD)
Corporate • CD; or
Applicant (CA) • a member/partner authorized by constitution doc. of CD to make appln for
CIRP/PPIRP
• an individual who is in charge of managing the operations and resources of CD
[CEO]; or
a person who has the control, and supervision over financial affairs of the CD [CFO];
Constitutional Includes AoA, MoA in case of co. and incorporation doc. in case of LLP
Doc
Creditor Any person to whom debt is owed and includes FC, OC and Decree Holder
Financial Person to whom a financial debt is owed and includes any person to whom such debt
Creditor (FC) has been legally assigned or transferred
Financial Debt A debt + interest, if any, disbursed against consideration for time value of money and
(FD) includes:
any note
money acceptance issue of bonds, notes, lease or hire
purchase
borrowed credit facility debentures, loan stock purchase contract
facility

receivables derivative counter-indemnity Amount raised under forward

sold/discounted transaction obligation sale or purcase agreement
Note – Amount raised from allottee under a Real Estate Project = Deemed to have
commercial effect of borrowing [Amendment]
Financial Person engaged in business of providing financial services in terms of authorisation
Service granted by Financial Service Regulators
Providers FSP includes – ARCs, Mutual Funds, Insurance co., Pension Funds, CIS, Bank/FI, etc.
Initiation Date Date on which application is made by FC or OC or CA to the AA u/s 7,9 or 10
Insolvency Date of admission of an application for initiating CIRP by AA u/s 7, 9 or 10
Commencement
Date (ICD)
Operational Person to whom an operational debt is owed and includes any person to whom such
Creditors (OC) debt has been legally assigned or transferred
Operational a claim w.r.t., provision of goods/services including employment or a debt w.r.t, the
Debt (OD) payment of dues payable to CG/SG or any local authority
Voting share the share of voting rights of a single FC in the CoC which is based on the proportion
of the FD owed to such FC in relation to the FD owed by the CD
Read Definitions of Claim, Financial Product, Financial Service Regulator and Related Party and Relative
from Module.

You are a Rockstar, and you deserve nothing but the best.
All the best to you, Dear Future CA!

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