FAQ’s on The Insolvency and Bankruptcy Code, 2016

FAQ’s on The Insolvency and Bankruptcy Code, 2016 (IBC): 

Q.1.  What is the objective of IBC, 2016?

Ans.   As provided under the preamble of the Code, the objective of the Code

are as under: 

1. 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,  
2. To promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues, and  
3. To establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. 

Q2.    Whom shall the Code be applicable? 

Ans.  As per Section 2 of the Code, the provisions of the Code are applicable for Insolvency, liquidation, voluntary liquidation or bankruptcy of the following entities:

1. Company incorporated under the Companies Incorporation Act, 2013 or under any previous Act,
   1. Any other company governed by any special Act except in so far as the said provisions are inconsistent with the provisions of such Special Act, 
   1. Limited Liability Partnership Firms registered under LLP Act

    2008, 

1. Any body incorporated under any Law for the time being in force  

    as the Government may by notification specify in this behalf,

• Personal guarantors to corporate debtors,
  • Partnership Firms and proprietorship firms,
  • Individuals, other than persons referred to in clause (e).

Q.3.   Who is a corporate person?

Ans.   As per Section 3 (7), a corporate person is defined as under:

• A company as defined in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013),
• a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or
• any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider;

Q. 4.  Who are Corporate Debtor and Corporate Creditor?

Ans.   As per Section 3 (8) of the Code, Corporate Debtor means a corporate person who owes a debt to any person. Financial Creditor means any person to whom the debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor, and a decree-holder. 

Q.5.   Who all are covered under definition of Financial Service Provider?

Ans.   The Financial Service Provider means a person engaged in the business of providing financial services in terms of authorization issued or registration granted by a financial sector regulator.  Financial Sector Regulator includes Reserve Bank of India, Securities Exchange Board of India, IRDA and such other regulatory authorities as notified by Central Government.

Q.6.   What will be considered as Claim under the Code?

Ans.   As per section 3(6) of the Code, Claim means :

1. a right to payment whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured,
   1. right to remedy for breach of contract under any law for time being in force, if such breach gives rise to right to payment whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured.

 Q.7. What is Financial Debt?

Ans.   As per section 5(8) of the Code, Financial Debt means, a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes-

1. Money borrowed against the payment of interest
   1. Any amount raised by acceptance under any acceptance credit facility or its dematerialized equivalent;
   1. Any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument.
   1. the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;
   1. receivables sold or discounted other than any receivables sold on nonrecourse basis;
   1. any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;
   1. any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;
   1. any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;
   1. the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;

Q. 8.  What is the pecuniary jurisdiction for making an application for Insolvency and liquidation of corporate person?

Ans.   The provisions relating to the insolvency and liquidation of corporate debtors shall be applicable only when the amount of default is one lakh rupees or more. However, the Central Government may by notification specify the minimum default amount, which should not be more than one crore rupees.

Q.9.   What types of disputes are governed under the Code?

Ans.   Under the Code, Disputes includes a suit or arbitration proceeding relating to –

1. the amount of debt,
2. the quality of goods and services, or
3. the breach of a representation or warranty.

Q.10. What is the insolvency commencement date under the Code?

Ans.   As per section 5(12) of the Code, the date of admission of an application under section 7, 9 and 10 of the Code for initiating corporate insolvency resolution process by the Adjudicating Authority shall be considered as insolvency commencement date.

Q.11  When the debt is defaulted by the Corporate Debtor, what are the remedies you have?

Ans.   When an individual or corporate entity defaults on due payment of debts, then the following 3 remedies are available:

1. A creditor or group of creditors can enforce the debt repayment against the debtor;
2. The debt can be reorganized;
3. If the entity is limited liability firm or a company, then the same shall be liquidated, but if the entity is an individual, then bankruptcy proceedings can be initiated. In all these cases, the assets of the entity will be distributed with Creditors. 

Q.12. Can the allottees of the real estate project initiate the proceedings of corporate insolvency resolution process?

Ans.   As per amendment in section 7 of the Code, the allottees of the real estate project can file an application for initiating corporate insolvency resolution process against the corporate debtor and shall be filed jointly by not less than one hundred of such allottees under same real estate project or not less than 10% of the total number of such allottees, whichever is less.

Q.13. Who cannot initiate Corporate Insolvency Resolution Process?

Ans.   As per Section 11 of the Code, the following persons are not entitled to make an application to initiate Corporate Insolvency Resolution Process:

1. Corporate Debtor undergoing the corporate insolvency resolution process;
   1. A Corporate Debtor having completed corporate insolvency resolution process twelve months preceding the date of application.
   1. A corporate debtor or financial creditor who has violated any terms of the resolution plan which was approved twelve months before the date of making application.
   1. A corporate debtor in respect of whom a liquidation order has been made.

Here, corporate debtor includes a corporate applicant in respect of such corporate debtor.

Q.14. What is the time limit within which Adjudicating Authority may reject the application on Corporate Insolvency Resolution?

Ans.   The Adjudicating Authority shall admit or reject application within 14 days of receipt of application.

Q.15. Who is Interim Resolution Professional?

Ans.   Interim Resolution Professional is the Insolvency Professional proposed by the Resolution applicant and appointed by Adjudicating Authority to manage the affairs of Corporate Debtor from the date of such appointment till the date of appointment of Resolution Professional (the other Insolvency Professional) by Committee of Creditors.

Q.16. When is Interim Resolution Professional appointed?

Ans.   The Adjudicating Authority shall appoint the Interim Resolution Professional within 14 days from the insolvency commencement date i.e. the date of admission of application for insolvency resolution.

Q.17. What is the tenure of Interim Resolution Professional so appointed?

Ans.   The tenure of IRP so appointed shall act for a maximum period of 30 days.

Q.18. What is the Insolvency Resolution Process for financial creditors?

Ans.   As per section 7 of the Code, a financial creditor either itself or alongwith other financial creditor, as may be notified by Central Government, may file an application before Adjudicating Authority for initiating corporate insolvency resolution process against a corporate debtor who commits default in payment in its dues.

           The financial creditors shall alongwith the application give documentary evidences in support of the default of the debtor. He shall also nominate the name of the Resolution Professional, who will acts as a Interim Resolution Professional (IRP).

           The Adjudicating Authority shall within 14 days of the receipt of application, ascertain the existence of a default from the records of an Information Utility or on basis of other evidence furnished by the financial creditor.

           Where the Adjudicating is satisfied that the application is complete and default has occurred, and there is no disciplinary action pending against the resolution professional, then the application gets admitted. Otherwise the application gets rejected and the applicant gets 7 days time period to rectify the defect in the application.

Q.19. Is it essential for operational creditor to send demand notice under section 8 of the Code?

Ans.   Yes, as per section 8 of the Code, the operational creditors are required to send a demand notice and a copy of the invoice to the corporate debtor. After receipt of notice by the corporate debtor, within 10 days notify the operational creditor about the existence of dispute or record of pendency of any suit or arbitration proceedings. He shall also provide the evidence of payment of unpaid operational debts, if he has paid them. 

Q.20. What is the Insolvency Resolution Process for operational creditors?

Ans.   After the expiry of 10 days as provided under section 8 of the Code, the operational creditor may file an application before Adjudicating Authority for initiating a corporate insolvency resolution process. The application shall be file alongwith following documents and such fees as prescribed in the Code:

1. A copy of invoice demanding payment or demand notice delivered by the operational creditor to corporate debtor;
   1. An affidavit stating that there is no notice given by the corporate debtor relating to unpaid operational debt;
   1. A copy of certificate from financial institutions maintaining accounts of operational creditor confirming that there is no payment of unpaid operational debt;
   1. A copy of any record with information utility confirming that there is no payment of debt by the creditor;
   1. Any other proof confirming that there is no payment of any debt by the corporate debtor.

An operational creditor may propose the name of the resolution professional who will act as a interim resolution professional. The Adjudicating Authority shall within 14 days of the receipt of an application, by an order admit / reject after accessing the documents on records and the application and communicate the same to operational creditor and corporate debtor. The corporate insolvency process shall commence from the date of admission of the application.    

Q.21. What is Moratorium ?

Ans.   Moratorium means an injunction/status quo, in civil terminology.

1. On insolvency commencement date, the Adjudicating Authority shall order/declare moratorium for prohibiting following –
2. Institution of suits or continuation of pending suits or proceedings, including execution of any judgement, decree or order in any court, tribunal etc.
3. Transferring, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;
4. Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
5. The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.
6. The supply of essential goods and services to corporate debtor shall not be terminated or suspended during this period.
7. Interim Resolution Profession or resolution professional thinks that the supply of essential goods and services are critical to protect and preserve the value of corporate debtors and manage the affair of corporate debtor, then the supply of such goods and services shall not be terminated or suspended except where the corporate debtor is unable to pay the dues arising from such supply during moratorium.
8. The abovementioned provisions is not applicable to :
   1. Such transaction, agreement as notified by Central Government in consultation with any financial sector;
   1. A surety in contract of guarantee.
9. The order of moratorium is effective from date of such order till completion of corporate insolvency resolution process or if Adjudicating Authority passes an order for liquidation of corporate debtor, then the moratorium order ceases from the date of such liquidation order.

Q.22  What should be contained in the public announcement of corporate insolvency resolution process?

Ans.   As per section 15 of the Code, the order passed under section 13 for initiating process, the public announcement should contain following information:

1. Name and address of the corporate debtor;
   1. Name of the authority with which corporate debtor is registered;
   1. Last date of submission of claims;
   1. Details of interim resolution professional;
   1. Penalties for false or misleading claims;
   1. The date of its closure which shall be 180^th day from date of admission of application under section 7, 9 & 10.

Q.23. Who shall appoint the Interim Resolution Professional (IRP)?

Ans.   The Adjudicating Authority shall appoint an interim resolution professional on the insolvency commencement date, under section 16 of the Code.

Q.24. Where the application for corporate insolvency resolution process is made by operational creditor and no proposal has been made for an IRP, who shall appoint the IRP?

Ans.   As per section 16(3) of the Code, the Adjudicating Authority shall make a reference to the Board for the recommendation of an insolvency professional who may act as an interim resolution professional (IRP).

Q.25. What shall be the term of interim resolution professional (IRP)?

Ans.   The term of the interim resolution professional shall continue till the date of appointment of the resolution professional under section 22.

Q.26. What are the rights of IRP when he is vested with the management of affairs of corporate debtor?

Ans.   The following are the rights of IRP for managing the affairs:

1. act and execute in the name and on behalf of the corporate debtor all deeds, receipts and other documents;
   1. take such actions as may be specified by the Board;
   1. have the authority to access the electronic records of the corporate debtor from information utility having financial information of the corporate debtor;
   1. have the authority to access the books of accounts, records and other relevant documents of corporate debtor available with government authorities, statutory auditors, accountants and such other persons;
   1. be responsible for complying with the requirements under any law for time being in force on behalf of corporate debtor.

Q.27. What shall be the duties of IRP in case of management of operations of corporate debtors as going concern?

Ans.   As per section 20 of the Code, the IRP shall act to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. The IRP shall have the following authority:

1. to appoint accountants, legal professionals as may be necessary;
2. to enter into contracts on behalf of corporate debtor, or amend or modify the contracts which were entered before commencement of corporate insolvency resolution process;
3. to raise interim finance provided that no security interest should be created without prior consent of the creditors (consent not required if the value of such property is twice the amount of the debt), whose debts are secured against that property.
4. Issue instructions to personnel and to take all necessary steps for keeping it a going concern.

Q.28. What shall be composition of Committee of Creditors?

Ans.   The Committee of Creditors shall comprise of all financial creditors of the corporate debtor, provided that:

1. a financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor,  shall not have any right of representation, participation or voting in a meeting of the committee of creditors;
2.  that the above provision shall not apply to a financial creditor, regulated by a financial sector regulator, if it is a related party of the corporate debtor solely on account of conversion or substitution of debt into equity shares or instruments convertible into equity shares or completion of such transactions as may be prescribed, prior to the insolvency commencement date.

Q.29. In case a person is financial creditor as well as operational creditor, how will he be included in Committee of Creditors (CoC)?

Ans.   As per section 24(4) of the Code, where any person is financial creditor as well as operational creditor:

1. Such person shall be financial creditor to the extent of financial debts owed by the corporate debtor and shall be included in CoC, with voting share proportionate to the extent of debts owed to such creditor;
2. Such person shall be considered to be operational creditor to the extent of operational debts owed by the corporate debtor to such creditor.

Q.30. Who will conduct the meeting of Committee of Creditors?

Ans.   As per section 24, the Resolution Professional shall conduct all meetings of the Committee of Creditors.  

Q.31. How is the voting share of a creditor in committee of creditors determine?

Ans.   The voting share is determined based on the value of the debt of the                             creditor in proportion to the total debt.

Q.32. Do operational creditors have voting rights in the meeting of Committee of Creditors (CoC)?

Ans.   No, the operational creditor do not have right to vote in the CoC, however the directors, partners and one representative of operational creditor may attend the meeting of CoC.

Q.33. What is tenure of Interim Resolution Professional?

Ans.   The tenure of IRP shall continue till the date of appointment of resolution professional under section 22 of the Code.

Q.34. What is the minimum voting right requirement for appointment of IRP as Resolution Professional?

Ans.   The committee of creditors, in the first meeting, by a majority vote of not less than sixty-six per cent of the voting share of the financial creditors, either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional, as provided under section 22(2) of the Code.

Q.35. What is the procedure for replacement of IRP?

Ans.   As per section 27 of the Code, the Committee of Creditors may at meeting by a vote of sixty-six percent of voting shares, resolve to replace the resolution  professional appointed under section 22 with another resolution professional, subject to a written consent from the proposed resolution professional in specified form;

The committee of creditors shall forward the name of the insolvency professional proposed by them to the Adjudicating Authority and after the confirmation of proposed insolvency resolution professional by the Board he shall be appointed in the same manner as laid down in section 16.

                     Where any disciplinary proceedings are pending against the proposed resolution professional under sub-section (3), the resolution professional appointed under section 22 shall continue till the appointment of another resolution professional under this section.

Q.36. Who is not eligible to be Resolution Applicant?

Ans.   Under section 29A of the Code, a person shall not be eligible to submit a resolution plan, if such person or any other person acting for such person:

1. Is an undischarged insolvent;
2. Is a wilful defaulter as per guidelines of RBI under Banking Regulation Act, 1949;
3. At the time of submission of resolution plan has an account as non-performing assets as per guidelines of RBI, and atleast a period of one year has lapsed from the date of such classification till the date of commencement of corporate insolvency resolution process of the corporate debtor.

Provided that person is eligible to submit resolution plan if he makes repayment of all overdue amount alongwith interest thereon and charges relating to NPA account before submission of resolution plan.

This provision is not applicable to such applicant who is a financial entity and is not a related party to the corporate debtor. 

• Convicted for any offence punishable with imprisonment for two/seven years or more as specified under any Act.
• Disqualified to act as a director under Companies Act,2013;
• Prohibited by SEBI from trading in securities or accessing the market
• Has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code.
• Has executed a guaranteein favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code and such guarantee has been invoked by the creditor and remains unpaid in full or part.
• Is subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside India;
• Has a connected person not eligible under clause (a) to (i), here connected person means a person who is promoter or a holding or subsidiary company having control in the management of the business of corporate debtor.

Q.37. What is a Resolution Plan?

Ans.   As per section 5(26) of the Code, resolution plan means a plan proposed by resolution applicant for insolvency resolution of corporate debtor as a going concern in accordance with Part II of the Code.

A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under section 29A to the resolution professional prepared on the basis of the information memorandum.

The Resolution Plan should provide for:

1. Payment of insolvency resolution costs;
2. Payment of the debts to operational creditors;
3. Management of affairs of the Company after approval of the resolution plan;
4. Implementation and supervision of the resolution plan;
5. Does not contravene any of the provisions of the law for time being in force;
6. Confirms to such other requirement as specified by the Board.

Q.38. What is the procedure for submission of Resolution Plan?

Ans.   The procedure is as follows:

1. A resolution applicant may submit a resolution plan, along with affidavit stating that he is eligible under section 29A, to the resolution professional prepared on the basis of information memorandum;
2. The resolution professional shall examine all the resolution plan received by him and confirms that the resolution plan-
3. Provides for payment of insolvency resolution process costs as specified by Board in priority to payment of other debts of corporate debtor;
4. Provides for payments of debts of operational creditors as specified by the Board which shall not be less than the amount paid in liquidation of corporate debtor or the amount that would be paid to such creditors if amount to be distributed has been distributed in order of priority, whichever is higher and provides for payment of debts of financial creditors, who do not vote in favour of resolution plan in such manner as specified by the Board which shall not be less than the amount to be paid to such creditor in the event of liquidation.
5. Provides for the management of affairs of the Corporate debtor after approval of the resolution plan;
6. Implementation and supervision of resolution plan;
7. Does not contravene any provision of the law for time being in force;
8. Confirms to the requirements of the Board.
9. The resolution professional shall present the resolution plan before the committee of Creditors for its approval.
10. The Committee of Creditors may approve a resolution plan by vote not less than 66% of voting share of the financial creditors, after considering the manner of distribution proposed, feasibility, viability which may be considered for order of priority amongst the creditors.
11. The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered, provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor.
12. The resolution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority.

Q.39. After approval of the CoC and Adjudicating Authority, the resolution plan is binding on whom?

Ans.   After the approval by the committee of creditors under section 30 of the Code, the resolution plan is approved by the adjudicating authority and becomes binding on the corporate debtor and its employees, members, creditors including Central Government, any state government or any local authority to whom statutory debts are owed, the guarantors, and other stakeholders involved in resolution plan.  

Q.40. What is the time limit for taking approval under any law after the resolution plan is approved by the Adjudicating Authority?

Ans.   The resolution applicant shall, pursuant to the resolution plan approved, obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later:

Provided that where the resolution plan contains a provision for combination, as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.

Q.41. In which circumstances the Adjudicating Authority can order for liquidation of Corporate Debtor?

Ans.   As provided under section 33 of the Code, the Adjudicating Authority may order for liquidation of the corporate debtor in the following cases:

1. Where before the expiry of the insolvency resolution process or within 180 days of the initiation of insolvency resolution process (i.e. the maximum period permitted under section 12), if the Adjudicating Authority does not receive a resolution plan under section 30(6).
2. If the resolution professional before the expiry of insolvency resolution process, intimates the Adjudicating Authority, of the decision of the CoC (approved by not less than sixty six percent of voting share) that they have passed an order for liquidation of the corporate debtor, including the anytime before the preparation of information memorandum (which means a memorandum prepared by resolution professional under sub-section (1) of section 29;).
3. Where the resolution plan approved by the Adjudicating Authority is contravened by concerned corporate debtor or any other person whose interest is prejudicially affected by such contravention may make an application to Adjudicating Authority to pass liquidation order.

Q.42. What will be the effect of order of liquidation?

Ans.   As per section 33 of the Code, the effect of an order of liquidation by Adjudicating Authority shall be as under:

1. No suit or other legal proceeding shall be instituted by or against the Corporate debtor, however a suit or legal proceeding may be instituted by liquidator on his behalf with the prior approval of Adjudicating Authority;
2. The legal proceeding in relation to such transactions as may be notified by Central Government in consultation with any financial sector regulator shall not be affected;
3.  The order for liquidation under this section shall be deemed to be a notice of discharge to the officers, employees and workmen of the corporate debtor, except when the business of the corporate debtor is continued during the liquidation process by the liquidator.

Q.43. Can a resolution professional act as a liquidator?

Ans.   Yes, as provided under section 34 (1) of the Code.

Q.44. What is the remedy available to the creditor if the liquidator rejects his claims?

Ans.   As per section 42 of the Code, a creditor may appeal to the Adjudicating Authority against the decision of the liquidator accepting orrejecting the claims within fourteen days of the receipt of such decision.

Q.45. Under what circumstances transaction will be referred to as preferential transactions?

Ans.   As per section 43 of the Code, a corporate debtor shall be deemed to have given a preference in the following circumstances:

1. If there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and 
2. If the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53 of the Code.

Q.46. Under what circumstances transaction will not be referred to as preferential transactions?

Ans.   As per section 43(3) of the Code, following transfers shall not be referred to as a preferential transaction:

1. The transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee;
2. Any transfer creating a security interest in property acquired by the corporate debtor to the extent that:
3. Such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest and was used by corporate debtor to acquire such property; and
4. Such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property.

Further any transfer made in pursuance of the order of a court shall not preclude such transfer to be deemed as giving of preference by the corporate debtor.

Q.47. What are Extortionate credit transaction?

Ans.   As per section 50 of the Code, any debt extended by any person providing financial services which is in compliance with any law for the time being in force in relation to such debt shall in no event be considered as an Extortionate credit transaction. The extortionate transaction will be considered as extortionate if following terms are fulfilled:

1. The corporate debtor is required to make exorbitant payments in respect of the credit provided to him during the period within two years preceding the insolvency commencement date, the liquidator or resolution professional may make an application to the Adjudicating Authority;
2. The Board may specify the transactions covered under the abovementioned provision.

Q. 48. In what order shall a liquidator distribute the assets?

Ans.   As per section 53 of the Code, the proceeds from the sale of the liquidation assets shall be distributed in following order of priority:

1. Any insolvency resolution process costs and the liquidation costs to be paid in full;
2. Debts which shall rank equally between and among the workmen dues outstanding for a period of 24 months preceding the liquidation commencement date and also to the debts which are owed to a secured creditors where they have relinquished their security;
3. Wages and any unpaid dues owed to employees other than the workmen for a period of 12 months preceding the liquidation commencement date;
4.  Financial debts owed to unsecured creditors;
5. Equally between :
   1. Amount that is due to Central Government and State Government inclusive of Consolidated Fund of India and Consolidated Fund of a State for a whole period or any part of the period of two years preceding the liquidation commencement date.
   1. All debts owed to secured creditors for any amount unpaid following the enforcement of security interest;
6. Any remaining debts an dues;
7. Preference Shareholders;
8. Equity Shareholders or partners;

Any contractual arrangements if disrupting the order of priority shall be disregarded by the liquidator.

The fees payable to the liquidator shall be deducted proportionately from the sale proceeds payable to each class of recipients and the proceeds shall be distributed after such deduction.

Q.49. Which assets shall not be used for recovery in liquidation?

Ans.   Any assets owned by a third party which are in possession of a corporate debtor and which includes:

1. Assets held in trust for any third party;
2. Bailment contracts;
3. All sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund;
4. Other contractual arrangements which do not stipulates transfer of title but only use of assets;
5. Such other assets as specified by the Central Government in consultation with financial sector regulator;
6. Assets in security collateral held by financial services providers and are subject to netting and set-off in multilateral trading or clearing transaction;
7. Personal assets of the any shareholder or partner of a corporate debtor;
8. Assets of any Indian or foreign subsidiary of corporate debtor;
9. Any other assets as provided by the Board.

Q.50. Is there any time limit for receipt of claims of creditors?

Ans.   Yes, the liquidator shall receive or collect the claims within 30 days from the date of commencement of the liquidation process.

Q.51. Can a creditor withdraw or vary his claims?

Ans.   Yes, a creditor may withdraw or vary his claim within 14 days of its submission.             

Q.52. What is the fast track insolvency resolution process?

Ans.   A fast track insolvency resolution is a process wherein the process shall be completed within 90 days from the insolvency commencement date.

According to section 55 of the Code, an application under this category can be made by corporate debtor, as notified by the Central Government, falling under below mentioned category:

1. A corporate debtor with assets and income;
2. A corporate debtor with such creditor or amount of debts;
3. Such other category of corporate person 

Q.53. Can the time period for fast track corporate insolvency process be extended?

Ans.   Yes, the Adjudicating Authority may extend the time period, as provided under section 56(2) which cannot be extended beyond 90 days, if a resolution is passed at a meeting of Committee of Creditors and supported by 75% of voting share.

           Further, under section 56(3), if it is satisfied by the Adjudicating Authority that the process cannot be completed within 90 days, it may extend to further period which shall not extend 45 days and such extension shall not be granted more than once.

Q.54. What is the process for voluntary liquidation of corporate person?

Ans.   As per section 59 of the Code, a corporate person, who has not committed any defaults, may initiate the liquidation proceeding, as specified by the Board, under the following conditions:

1.   A declaration from majority of the directors of company verified by an affidavit stating tht:
2. They have formed an opinion that the company has no debts or that it will pay its debts in full from the proceeds of the assets to be sold;
3. The company is not being liquidated to defraud any person.

• The following documents should be attached along with declaration:
• audited financial statements and record of business operations of the company for previous two years or from its incorporation, whichever is later;
• valuation report of the assets of the company.
• The following steps are to be complied within four weeks of the declaration:
• A special resolution regarding voluntary liquidation by the members of the company in a general meeting and appointing an insolvency professional to act as a liquidator;
• A resolution of the members of the company in a general meeting requiring for expiry of period of its duration as stated in articles or occurrence of certain event as stated in the articles that the company shall be dissolved, alongwith appointment of insolvency professional to act as liquidator.

• The company shall notify to the Registrar of Companies and the Board, about the resolution to liquidate the company within seven days of resolution or subsequent approval by creditors.
• After approval of creditors, voluntary liquidation proceeding shall deemed to commence from date of resolution.
•  Where the affairs of company have been completely wound up and assets are liquidated, then the liquidator shall make an application to adjudicating authority for dissolution of such company.
• The adjudicating Authority will pass an order that the corporate debtor shall be dissolved from the date of that order.
• The copy of such order shall be sent to the Authority within 14 days from date of such order.

Q.55. Who is the Adjudicating Authority for insolvency resolution and liquidation of corporate persons?

Ans.   The Adjudicating Authority for insolvency resolution and liquidation of corporate persons shall be National Company Law Tribunal (NCLT) having territorial jurisdiction over the place where the registered office of the corporate person is registered. This section also provides that insolvency resolution or bankruptcy proceedings relating to a personal guarantor of a corporate debtor shall be filed before NCLT.

Q.56  Is the period of moratorium excluded for the purpose of limitation?

Ans.   Yes, as provided under section 60(6) of the Code.

Q.57. Whether an appeal can be filed against the order of NCLT?

Ans.   Yes, as per section 61 of the Code, any person aggrieved by the order of National Company Law Tribunal (NCLT) may prefer an appeal to National Company Law Appellate Tribunal (NCLAT) within 30 days from the date of order of NCLT. 

Q.58. Does an appeal lie from the order of National Company Law Appellate Tribunal (NCLAT)?

Ans.   Yes, as per section 62 of the Code, any person aggrieved by the order of NCLAT may refer an appeal to Supreme Court within 45 days from date of receipt of such order. If the appeal is filed on question of law then the appeal lies to Supreme Court and shall be filed within a period of 90 days.

Q.59. Does civil courts have jurisdiction to entertain any suit in respect of matters relating to insolvency and bankruptcy?

Ans.   No, as per section 63 of the Code, civil courts does not have jurisdiction.

Q.60. What remedies are available if the matter is not disposed off within time specified in the Code?

Ans.   The President of NCLT or Chairperson of NCLAT may extend the time specified in the Code for not more than 10 days, if the application is not disposed off within time specified in the Code.