APPLICABILITY OF INSOLVENCY AND BANKRUPTCY CODE-

This act accordingly applies to –

● Any company incorporated under companies’ act 2013, or under any previous
company law.
● Any other company governed by any other special Act for the time being in force
except in so far as the said provisions are inconsistent with the provisions of such special
Act;
● Any Limited Liability Partnership Incorporated under the Limited Liability
Partnership Act,2008;
● Such other body incorporated under any law for the time being in force, as the Central
Government may, by notification, specify in this behalf; and
● Partnership firms and individuals.

In relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.

SOME IMPORTANT DEFINITIONS

➢ “BOARD” means the Insolvency and Bankruptcy Code of India established under
sub-section (1) of Section 188;
➢ “CHARGE” means an interest or lien created on the property or assets of any person
or any of its undertakings or both, as the case may be, as security and includes a mortgage;
➢ “CORPORATE PERSON” means a company as defined in clause (20) of section 2
of the Companies Act, 2013, a Limited Liability Partnership, as defined in clause (n) of
sub-section (1) of section 2 of the Limited Liability Partnership Act,2008 or any other
person incorporated with the limited liability under any law for the time being in force but
shall not include any financial service provider;
➢ “CORPORATE DEBTOR” means a corporate person who owes a debt to any
person;
➢ “CREDITOR” means any person to whom a debt is owed and includes a Financial
Creditor, Operational Creditor, a Secured Creditor, an Unsecured Creditor and a Decree
holder;
➢ “DEBT” means a liability or obligation in respect of a claim which is due from any
person and includes a Financial debt and Operational debt;
➢ “DEFAULT” means non-payment of debt when whole or any part or instalment of
the amount of debt has become due and payable and is not repaid by the debtor or corporate
debtor, as the case may be;
➢ “PERSON” includes –
(a) An individual;
(b) A Hindu Undivided Family;
(c) A Company;
(d) A Trust;
(e) A Partnership;
 (f) A Limited Liability Partnership; and
(g) Any other entity established under a statute,
And includes a person resident outside India;
➢ “PROPERTY” includes money, goods, actionable claims, land and every description
of property situated in India or outside India and every description of interest including
present or future or vested or contingent interest arising out of, or incidental to, property;

SECTION 4
➢ This part shall apply to matters relating to the insolvency and liquidation of
corporate debtors where the MINIMUM AMOUINT OF DEFAULT IS ONE
LAKH RUPEES;
NOW SPECIFICALLY FOR THIS CODE:

➢ “ADJUDICATING AUTHORITY”, for the purpose of this Part, means

NATIONAL COMPANY LAW TRIBUNAL constituted under Section – 408 of
the Companies Act, 2013;
➢ “CONSTITUTIONAL DOCUMENT”, in relation to a corporate person, includes
Articles of Association, Memorandum of association of a company and
incorporation document of a Limited Liability Partnership;
➢ “FINANCIAL CREDITOR”, means a person to whom a financial debt is owed
and includes a person to whom such debt has been legally assigned or transferred to;
➢ “FINANCIAL DEBT”, means a debt along with interest, if any, which is
disbursed(given, paid out) against the consideration for the time value of money and
includes-
(a) Money borrowed against payment of interest;
(b) Any amount raised by acceptance under any acceptance credit facility or its
de-materialised equivalent;
(c) Any amount raised pursuant to any note purchase facility or the issue of
bonds, notes, debentures, loan stock or any similar instrument;
(d) 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;
(e) Receivable sold or discounted other than any receivables sold on non recourse
basis;
(f) Any amount raised under any other transaction, including any forward sale or
purchase agreement, having the commercial effect of a borrowing;
(g) 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;
(h) 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;
(i) 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;
 ➢ “OPERATIONAL CREDITOR” means a person to whom an operational debt is
owed and includes any person to whom such debt has been legally assigned or transferred;
➢ “OPERATIONAL DEBT” means a claim in respect of the provision of goods or
services including employment or a debt in respect of the repayment of dues arising under
any law for the time being in force and payable to the Central Government, any State
Government or any local authority;

PERSONS WHO MAY INITIATE CORPORATE INSOLVENCY RESOLUTION

PROCESS

SECTION – 6

Where any corporate debtor commits a default, a financial creditor, an operational creditor or the
corporate debtor may itself initiate corporate insolvency resolution process in respect of such
corporate debtor in the manner as provided under this Chapter.

SECTION – 7 (Initiationof corporate insolvency resolution process

by financial creditor)
1.) A financial creditor either by itself or jointly with other financial creditors may file an
application for initiating corporate insolvency resolution process against a corporate debtor
before the Adjudicating Authority when a default has occurred.
2.) The financial creditor shall make an application under sub-section (1) in such form
and manner and accompanied with such fee as may be prescribed.
3.) The financial creditor shall, along with the application furnish-
(a) A record of the default recorded with the information utility or such other record or
evidence of default as may be specified.
(b) The name of the resolution professional proposed to act as an interim resolution
professional; and
(c) Any other information as may be specified by the Board.
4.) The Adjudicating Authority shall, within fourteen days of the receipt of the application
under sub-section (2), ascertain the existence of default from the records of an information
utility or on the basis of other evidence furnished by the financial creditor under sub-section
(3).
5.) Where the Adjudicating Authority is satisfied that-
(a)A default has occurred and the application under sub-section (2) is complete and no
disciplinary proceeding is pending against the proposed resolution professional, it may by
order, admit such application; or
(b) Default has not occurred or the application under sub-section (2) is incomplete or any
disciplinary proceeding is pending against the proposed resolution professional it may, by
order, reject such application.
Provided that the Adjudicating Authority shall, before rejecting the application under the clause (b)
of sub-section (5), give notice to the applicant to rectify the defect in his application within
seven (7) days of receipt of such notice from the Adjudicating Authority.
6.) The corporate insolvency resolution process shall commence from the date of the
admission of the application under sub-section (5).
7.) The Adjudicating Authority shall communicate-
(a)The order under clause (a) of sub-section (5) to the financial creditor and the corporate
debtor;
(b) The order under clause (b) of sub-section (5) to the financial creditor, within seven
days of admission or rejection of such application, as the case may be.
SECTION - 8 (Insolvency resolutions by an operational creditor).
1. 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 such form and manner as may be prescribed.
2. The Corporate Debtor shall, within a period of ten(10) days of the receipt of the demand
notice or copy of the invoice mentioned in the sub-section (1) of the notice of operational
creditor-
(a)Existence of a dispute, if any, and record of the pendency of the suit or arbitration
proceedings field before the receipt of such notice or invoice in relation to such dispute;
(b) The repayment of operational debt-
i.By sending an attested copy of the record of electronic transfer of the unpaid amount from
the bank account of the corporate debtor; or
ii.By sending an attested copy of record that the operational creditor has encashed a cheque
issued by the corporate debtor.

SECTION – 9 (Applicationfor initiation of corporate insolvency resolution

process by operational creditor)

1. 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.
2. The application under sub-section (1) shall be filed in such form and manner and
accompanied with such fee as may be prescribed.
3. The operational creditor shall, along with the application furnish –
(a) A copy of the invoice demanding payment or demand notice delivered b the
operational creditor to the corporate debtor;
(b) An affidavit to the effect that there is no notice given by the corporate debtor
relating to a dispute of the unpaid operational debt;
(c) A copy of the certificate from the financial institutions maintaining accounts of
the operational creditor confirming that there is no payment of an unpaid
operational debt by the corporate debtor; and
(d) Such other information as may be prescribed.
4. An operational creditor initiating a corporate insolvency resolution process under this
section, may propose a resolution professional to act as an interim resolution
professional.
5. The Adjudicating Authority shall, within fourteen days of the receipt of the
application under sub-section (2), by an order-
(1) Admit the application and communicate such decision to the operational
creditor and the corporate debtor if, -
(a) The application made under sub-section (2) is complete;
(b) There is no repayment of the unpaid operational debt;
(c) The invoice or notice for payment to the corporate debtor has been
delivered by the operational creditor;
(d) No notice of dispute has been received by the operational creditor or
there is no record of dispute in the information utility; and
(e) There is no disciplinary proceeding ending against any resolution
professional proposed under sub-section (4) if any.
(2) Reject the application and communicate such decision to the operational
creditor and the corporate debtor, if-
(a) The application made under sub-section (2) is incomplete
(b) There has been repayment of the unpaid operational debt;
(c) The creditor has not delivered the invoice or notice for payment to the
corporate debtor;
(d) Notice of dispute has been received by the operational creditor or there
is a record of dispute in the information utility; or
(e) Any disciplinary proceeding is pending against any proposed
resolution professional:
Provided that Adjudicating Authority, shall before rejecting an application
under sub-clause (a) of class (2) give a notice to the applicant to rectify
the defect in his application within seven (7) days of the receipt of such
notice from the Adjudicating Authority.

6. The Corporate Insolvency resolution process shall commence from the date of
admission of the application under sub-section (5) of this section.