Insolvency and Bankruptcy Code/Law is known as the unified code which was implemented in 2016. This law is a type of social legislation that includes every company, partnership, and individual. The purpose of this code is to provide relief to each of them. It undertakes to optimize the debtor’s asset value along with striving to balance the interests of every shareholder. The Insolvency and Bankruptcy Code/Law guarantees to achieve reforms that are far-reaching by the means of a push on creditor-driven insolvency resolution. The purpose of this law/code is to identify the financial failure in advance and hence increase the asset value of insolvent firms/companies. The Insolvency and Bankruptcy Code/Law is called a statutory procedure that happens because of the insolvency which allows a person to be relieved of a large amount of debts along with undergoing judiciary supervision or liquidator to the advantage of that individual’s creditor.

Who Can Initiate The Corporate Insolvency Resolution Process (CIRP)?
CIRP can be initiated by the following entities when a default is admitted by the Corporate Person:
1.Financial Creditor: A person to whom the financial debt is owed
2.Operational Creditor: A person to whom an operational debt is owed

Here, the term operational debt refers to a claim regarding the provision of goods or services, employment, or debt related to dues repayment, which occurs under any law for the time being in force & payable to any local authority, any state govt, or central government.

How to Initiate The Corporate Insolvency Resolution Process (CIRP)?

In case of a default, an operational creditor can deliver a demand notice of unpaid operational debt with a copy of invoices according to Section 8 of the Insolvency & Bankruptcy Code, 2016. Within a time of 10 days of receiving this notice and invoices cited in sub-section (1), the corporate debtor must bring to the notice of the operational creditor

1. Existence of a dispute, if any, along with the record of the suit’s pendency or Arbitration proceedings that are filed before the receipt of such notice or invoice related to such dispute;
2. The repayment of unpaid operational debt: It is possible by sending an attested copy of the electronic transfer record showing the payment from the company’s bank account OR by sending an attested copy of the record that the operational creditor has cashed a cheque issued by the corporate debtor.

If, at the end of 10 days from delivering a payment demand notice and/or invoice (as mentioned in section 8, sub-section 1), the operational creditor doesn’t get paid or receive notice of a dispute (as stated in section 8, sub-section 2), they can file an application with the NCLT to start a corporate insolvency resolution process, according to section 9 of the Insolvency & Bankruptcy Code 2016.

When initiating the Corporate Insolvency Resolution Process (CIRP), the operation creditor may suggest a resolution professional to work as an interim resolution professional. The NCLT (Adjudicating Authority) must issue an order within 14 days of receiving the application (as mentioned in sub-section 2):

1. Accept the application along with communicating such decisions to the corporate debtor & the operational creditor, if:

• The application submitted under the sub-section (2) is complete;
• The unpaid operational debt is not repaid;
• The operational creditor has delivered the payment notice or invoice to the corporate debtor;
• The operation creditor has not received any notice of dispute OR dispute records are absent in the information utility; AND

The resolution proposed by the professional under sub-section (4) does not have any pending disciplinary proceedings, if any.

1. Reject the application along with communicating such decisions to the corporate debtor & the operational creditor, if:

○The application submitted under the sub-section (2) is incomplete;

○The unpaid operational debt has been paid;
○The operational creditor has NOT delivered the payment notice or invoice to the corporate debtor;
○The operation creditor has received a notice of dispute OR there is a record of dispute records in the information utility; AND
○The resolution proposed by the professional under sub-section (4) has a pending disciplinary proceeding.

The below-mentioned individuals are not entitled to make an application for initiating The Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016:

• A corporate debtor who is going through CIRP;
• A corporate debtor who has completed the corporate insolvency resolution process 12 months before the date of making the application;
• A corporate debtor or a financial creditor who is found to have violated any of the conditions of the resolution plan that was authorized 12 months before the application date under this chapter;

A corporate debtor who has a liquidation order against them.

What is The Time Duration to Complete the Corporate Insolvency Resolution Process (CIRP)?

According to the mandate of Section 12 of the Insolvency and Bankruptcy Code (IBC), the CIRP must be concluded within a period of one hundred and eighty (180) days from the date of admission of the application that initiates such a process.

If necessary, the resolution professional can submit an application to the Adjudicating Authority for an extension of the CIRP beyond one hundred and eighty (180) days. This application can be submitted only if a resolution to do so is passed at a meeting of the committee of creditors, securing a vote of seventy-five percent of the voting shares. Upon receiving this application, if the Adjudicating Authority is satisfied that the CIRP will not be completed within 180 days, then it can order an extension on the duration of this process for a further period, which will not exceed ninety days.

After the admission of an application under Section 7, Section 9, or Section 10, the Adjudicating Authority or the National Company Law Tribunal (NCLT), shall, by an order:

1. Declare a moratorium for the purposes outlined in Section 14;
2. Make a public announcement of the initiation of the CIRP & invite the submission of claims as per Section 15; and
3. Appoint an interim resolution professional according to the procedures laid down in Section 16 of the IBC.

The public announcement, as mentioned in clause (b) of sub-section (1), is made immediately after the appointment of the interim resolution professional.

How Does Corpsage Legal LLP Help You?

Corpsage Legal LLP was established to become a beacon of expertise in the domain of insolvency and bankruptcy. We are offering invaluable assistance to our clients through the Corporate Insolvency Resolution Process (CIRP). We have a proficient team of legal professionals, who are practicing Insolvency and Bankruptcy law before the NCLT and the Insolvency and Bankruptcy Board of India.

We provide full-fledged assistance to our clients at all the stages of insolvency and bankruptcy procedures, starting from sending notices under Section 8 of the IBC to the filing of applications under Section 9 before the NCLT, for seeking the initiation of the Corporate Insolvency Resolution Process (CIRP).

We adroitly navigate the complexities of insolvency proceedings, providing customized solutions to clients, and ensuring the facilitation of a smooth Corporate Insolvency Resolution Process. At Corpsage Legal LLP, we are dedicated to safeguarding the interests of each of our clients by providing adept legal counsel, along with paving the way for effective resolution in the face of financial challenges.