HOW TO RECOVER MONEY IN QUICKEST WAY UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016

Before going into The Insolvency and Bankruptcy Code, 2016, hereinafter referred to as IBC,  it is necessary for us to understand the meaning of certain terms.

1. Insolvency is a state wherein a person or corporation (debtor) is unable to repay the debts owed by them to any person or corporation (creditor). This state of insolvency is called insolvent.
2. Bankruptcy is a state herein the person is adjudge to be bankrupt by a bankruptcy order.

Basically in case you are by any chance on the verge of insolvency, as a Corporate person you have two options:

1. Undergo Insolvency Resolution Process.
2. Undergo Liquidation Process.

Both these processes can be applied for by Financial Creditor, Operational Creditor or Corporate Debtor.

Steps involved in Corporate Insolvency Resolution Process (hereinafter referred to as CIRP):

1. The Financial creditor shall either individually or jointly file an application for CIRP is to be made in Form 1 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016 (hereinafter referred to as IB AA Rules 2016) along with a fees of Rs. 25000 along with :
2. Record of default recorded with the Information Utility;,
3. Name of Resolution Professional Proposed;
4. Any other information required by the board (Insolvency and Bankruptcy Board of India (IBBI))
5. The operational creditor shall first serve a notice to the corporate debtor, on expiry of ten days of such notice the operational creditor may make an application for  CIRP in Form 5 IB AA Rules 2016 along with a fees of Rs.2000 along with:
6. A copy of the invoice or demand notice served to the corporate debtor by the operational creditor. (Form3 or Form 4 of IB AA Rules, 2016)
7. An affidavit stating that no notice has been given by the corporate debtor regarding the said debt.
8. A copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming the existence of the said debt.
9. Record of default recorded with the Information Utility.
10. Any other proofs if required.
11. The corporate debtor may also file an application for CIRP in Form 6 of IB AA Rules, 2016 along with a fees OF Rs.25,000 with;
12. The information regarding the books of accounts.
13. Resolution Professional Proposed.
14. A special resolution passed by the shareholders approving the application for CIRP.
15. It is necessary to know that according to the provisions of The IBC, 2019 allots a 14 day time period for the admission or rejection of an application for CIRP.
16. Further, the Adjudicating Authority (National Company Law Tribunal) has to complete the CIRP within 180, which is extendable upto 90 more days with by a resolution passed at a meeting of the committee of creditors by a vote of 66% of the voting shares.
17. Once the application has been submitted, the interim moratorium period comes into play which later, after the admitting of the application turns into moratorium period wherein:
18. No suit can be instituted or continued, if pending against the corporate debtor.
19. No transfer, encumbrance, alienation or disposition of the assets of the corporate debtor.
20. No foreclosure, recovery or enforcement of any security interest should be created by the corporate debtor.
21. The Adjudicating Authority may cause a public announcement of CIRP and call for submission of claims from creditors with the information and proofs relating to the claims made such as financial statement of the company, any existing agreement which caused the debt due and so on.
22. Based on the information received from the creditors a committee of creditors is constituted wherein the voting shares of the creditors will depend upon the debt owed to them by the corporate debtor.
23. The resolution professional selected will then conduct the meeting of creditors wherein they discuss the resolution plan, suggest ideas and come up with a resolution plan which is approved by not less than 66% of voting shares of financial creditors.
24. Once the resolution plan is approved, the resolution professional shall send all details relating to resolution plan to the board to be recorded in the data base.
25.  An appeal against the order approving the resolution plan may be filed at the appellate tribunal within 30 days, which is extended to 15 more days from the date of passing of order. 

Regards,

Adv (Dr.)Rajkumar S Adukia

International Legal Counsel, Motivational speaker and Growth Coach

Author of 300 plus books, 

B.Com (Hons.), FCA, FCS, FCMA, LL.B, MBA, M.Com, IP, MBF, DipIFRS (UK), DLL&LW, DIPR, Dip in Criminology, Ph.D.

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