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We advise lenders and investors at all levels of the capital structure as well as corporate/directors, central banks, insolvency officeholders/trustees and government institutions.
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Insolvency and Bankruptcy Code, 2016
Insolvency and Bankruptcy Code, 2016 provides a time-bound process for resolving insolvency in companies and among individuals.
Insolvency is a situation where individuals or companies are unable to repay their outstanding debt.
Bankruptcy, on the other hand, is a situation whereby a court of competent jurisdiction has declared a person or other entity insolvent, having passed appropriate orders to resolve it and protect the rights of the creditors.
It is a legal declaration of one’s inability to pay off debts.
The Government implemented the Insolvency and Bankruptcy Code (IBC) to consolidate all laws related to insolvency and bankruptcy and to tackle Non-Performing Assets (NPA), a problem that has been pulling the Indian economy down for years.
The Code is quite different from the earlier resolution systems as it shifts the responsibility to the creditor to initiate the insolvency resolution process against the corporate debtor.
The recently proposed amendments aim to remove bottlenecks, streamline the corporate insolvency resolution process, and protect the last mile funding in order to boost investment in financially distressed sectors.
Process of Initiation of Corporate Insolvency Resolution process :
An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in terms of section 8 of the Insolvency & Bankruptcy Code, 2016.
The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor
(a) existence of a dispute, if any, and record of the pendency of the suit or Arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;
(b) the repayment of unpaid operational debt—by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or by sending an attested copy of record that the operational creditor has encased a cheque issued by the corporate debtor.
After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the NCLT for initiating a corporate insolvency resolution process, in terms of section 9 of Insolvency & Bankruptcy Code 2016.
An operational creditor initiating a corporate insolvency resolution process under this section may propose a resolution professional to act as an interim resolution professional.
The Adjudicating Authority (NCLT) shall, within fourteen days of the receipt of the application under sub-section (2), by an order –