The CIRP starts when either one of the applications under Section 7, 9 or 10 is filed before the NCLT by a financial creditor, operational creditor or a corporate applicant. The prerequisite for filing such application is the existence of a default , as defined in Section 3(12). Section 11 lays down which persons are not entitled to make an application under this Chapter under the aforesaid sections.
Upon admission of the application, an order under Section 13 is passed by the Adjudicating Authority whereby moratorium is imposed and an interim resolution professional (IRP) is appointed . The public announcement is caused to be made after the appointment of the IRP.
The moratorium comes into effect from the date of pronouncement of the order and continues till the completion of the CIRP. It entails :
a. institution or continuation of suits or proceedings against the corporate debtor, including execution of any judgment, decree or order by any court, tribunal, arbitration panel or other authority;
b. transferring, encumbering, alienating or disposing of any assets, legal right or beneficial interest of the corporate debtor;
c. any action to foreclose, recover or enforce any security interest created by the corporate debtor, including actions under the SARFAESI Act, 2002;
d. recovery of any property by an owner or lessor where such property is occupied by or in possession of the corporate debtor.
It is important to note that the moratorium imposed is as against the CD; no bar exists on the CD to pursue any legal proceeding. Further, the supply of essential goods and services cannot be terminated. Supply of such goods and services which the IRP or the resolution professional (RP) considers critical for the CD shall also not be terminated except where there are unpaid dues.
The IRP is vested with the management of the CD and his tenure is till the date of appointment of the RP. The IRP makes a public announcement containing:
a. Name and address of the CD;
b. Name of the authority with which CD is registered;
c. Details of the IRP vested with the management of the CD;
d. Last date for submission of claims;
e. Penalty for false or misleading Claims;
f. Date of closing of CIRP.
The duties of the IRP are laid down in Section 18. There are two primary duties of the IRP – receiving and collating claims and, constituting a committee of creditors (CoC).
The CoC is constituted on the basis on the claims received and collated by the IRP , and consists of financial creditors. Authorized representatives and operational creditors could form a part of the CoC as well in certain circumstances. Once constituted, the CoC meets in person or via electronic means . The directors, partners and one representative of operational creditors may attend the meetings of CoC, but shall not have any right to vote in such meetings. In its first meeting, the CoC appoints the RP, which is to be conducted within seven days of its constitution. The IRP may continue and be appointed as the RP or he may be replaced, as per the majority vote of the CoC of not less than sixty-six percent of voting share.
The management is vested in the RP upon his appointment and he shall exercise powers and perform duties as vested or conferred on the IRP . The duties of the RP are listed in Section 25. Under Section 29, RP has to prepare an information memorandum. In reference to the duties and powers which both IRP and RP carry out and possess are those in Sections 17, 20, and 19.
By virtue of Section 17, the IRP/RP can exercise the powers of the board of directors of the CD; the officers of the CD report to him. The financial institutions maintaining accounts of the CD also act on the instructions of the IRP/RP. Section 17(2) extends authority to access electronic records of CD, books of accounts, act and execute in the name of the CD and be responsible for complying with the requirements of the law for the time being in force. Connected to this provision is Section 20(2), which extends authority to appoint professionals, enter into contracts on behalf of the CD, raise interim finance and issue instructions to the personnel of the CD. Section 19 lays down that the personnel of the CD shall cooperate with the IRP/RP and in case of failure to doing so, application for non-cooperation under sub-section 2 can be made by the IRP/RP before the Adjudicating Authority.
The RP invites prospective resolution applicants, who should fulfill such criteria as may be laid down by him with the approval of CoC and Section 29A, to submit a resolution plan. Upon the receipt of the plans, he shall confirm that each resolution plan :
a. provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor;
b. provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not be less than- (i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under section 53; or (ii) the amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53, whichever is higher, and provides for the payment of debts of financial creditors, who do not vote in favour of the resolution plan, in such manner as may be specified by the Board, which shall not be less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.
c. provides for the management of the affairs of the CD after approval of the resolution plan;
d. the implementation and supervision of the resolution plan;
e. does not contravene any of the provisions of the law for the time being in force;
f. conforms to such other requirements as may be specified by the Board.
Once confirmed, the RP shall present all such resolution plans at the meetings of the CoC which conform to the above stated conditions. The primary role of the CoC is to vote upon the resolution plans submitted by resolution applicants. The CoC may approve a plan by a vote of not less than six-six percent of the voting share. A plan once approved has to be submitted before the Adjudicating Authority under Section 31(1). The moratorium shall cease to have effect. Any appeal to the order of approval of the plan by the Adjudicating Authority has filed under Section 32 on the grounds laid down in Section 61(3).
Section 6, IBC, 2016.
Section 14, IBC, 2016.
Section 16, IBC, 2016.
Section 13(2), IBC, 2016.
Section 13(1)(b), IBC, 2016.
Section 14(4), IBC, 2016.
Section 14(1), IBC, 2016.
Section 14(2), 2016.
Section 14(2A), 2016.
Section 17(1)(a), IBC, 2016.
Section 15, IBC, 2016.
Section 18(1), clauses (a) and (b), IBC, 2016.
Section 21(1), IBC, 2016.
Section 21(2), IBC, 2016.
Section 24(1), IBC, 2016.
Section 24(4), IBC, 2016.
Section 22(1), IBC, 2016.
Section 22(2), IBC, 2016.
Section 23(1), IBC, 2016.
Section 23(2), IBC, 2016.
Section 25(1)(h), IBC, 2016.
Section 30(2), IBC, 2016.
Section 25(1)(i), and Section 30(3)
Section 30(4), IBC, 2016.
Section 31(3)(a), IBC, 2016.