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  • THE INSOLVENCY AND BANKRUPTCY CODE, 2016

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THE INSOLVENCY AND BANKRUPTCY CODE, 2016

THE INSOLVENCY AND BANKRUPTCY CODE, 2016

SECTIONS

  1. Short title, extent and
  2. Applications
  3. Definition

 

PART I PRELIMINARY

 

SECTIONS

  1. Short title, extent and
  2. Applications
  3. Definitions

 

PART II

 

INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS CHAPTER I

PRELIMINARY

  1. Application of this
  2. Definitions

CHAPTER II

CORPORATE INSOLVENCY RESOLUTION PROCESS

  1. Persons who may initiate corporate insolvency resolution
  2. Initiation of corporate insolvency resolution process by financial
  3. Insolvency resolution by operational
  4. Application for initiation of corporate insolvency resolution process by operational
  5. Initiation of corporate insolvency resolution process by corporate
  6. Persons not entitled to make
  7. Time-limit for completion of insolvency resolution process. 12A. Withdrawal of application admitted under section 7, 9 or
  8. Declaration of moratorium and public
  10. Public announcement of corporate insolvency resolution
  11. Appointment and tenure of interim resolution
  12. Management of affairs of corporate debtor by interim resolution
  13. Duties of interim resolution

 

 

 

SECTIONS

  1. Personnel to extend co-operation to interim resolution
  2. Management of operations of corporate debtor as going
  3. Committee of
  4. Appointment of resolution
  5. Resolution professional to conduct corporate insolvency resolution
  6. Meeting of committee of
  7. Duties of resolution

25A. Rights and duties of authorised representative of financial creditors.

  1. Application for avoidance of transactions not to affect
  2. Replacement of resolution professional by committee of
  3. Approval of committee of creditors for certain
  4. Preparation of information 29A. Person not eligible to be resolution applicant.
  5. Submission of resolution
  6. Approval of resolution
  7. Appeal

CHAPTER III LIQUIDATION PROCESS

  1. Initiation of
  2. Appointment of liquidator and fee to be
  3. Powers and duties of liquidator.
  4. Liquidation estate.
  5. Powers of liquidator to access
  6. Consolidation of
  7. Verification of
  8. Admission or rejection of
  9. Determination of valuation of
  10. Appeal against the decision of
  11. Preferential transactions and relevant
  12. Orders in case of preferential
  13. Avoidance of undervalued
  14. Relevant period for avoidable

 

 

 

SECTIONS

  1. Application by creditor in cases of undervalued
  2. Order in cases of undervalued
  3. Transactions defrauding
  4. Extortionate credit transactions.
  5. Orders of Adjudicating Authority in respect of extortionate credit
  6. Secured creditor in liquidation
  7. Distribution of
  8. Dissolution of corporate

CHAPTER IV

FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS

  1. Fast track corporate insolvency resolution process.
  2. Time period for completion of fast track corporate insolvency resolution
  3. Manner of initiating fast track corporate insolvency resolution
  4. Applicability of Chapter II to this Chapter.

CHAPTER V

VOLUNTARY LIQUIDATION OF CORPORATE PERSONS

  1. Voluntary liquidation of corporate

CHAPTER VI

ADJUDICATING AUTHORITY FOR CORPORATE PERSONS

  1. Adjudicating Authority for corporate
  2. Appeals and Appellate
  3. Appeal to Supreme Court.
  4. Civil court not to have
  5. Expeditious disposal of
  6. Fraudulent or malicious initiation of
  7. Fraudulent trading or wrongful
  8. Proceedings under section

CHAPTER VII OFFENCES AND PENALTIES

  1. Punishment for concealment of
  2. Punishment for transactions defrauding
  3. Punishment for misconduct in course of corporate insolvency resolution

 

 

 

SECTIONS

  1. Punishment for falsification of books of corporate
  • Punishment for wilful and material omissions from statements relating to affairs of corporate debtor.
  1. Punishment for false representations to
  2. Punishment for contravention of moratorium or the resolution
  3. Punishment for false information furnished in
  4. Punishment for non-disclosure of dispute or payment of debt by operational
  5. Punishment for providing false information in application made by corporate

PART III

INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS CHAPTER I

PRELIMINARY

CHAPTER II FRESH START PROCESS

  1. Eligibility for making an application.
  2. Application for fresh start
  3. Appointment of resolution
  4. Examination of application by resolution professional.
  5. Admission or rejection of application by Adjudicating
  6. Effect of admission of
  7. Objections by creditor and their examination by resolution
  8. Application against decision of resolution
  9. General duties of
  10. Replacement of resolution
  11. Directions for compliances of restrictions,
  12. Revocation of order admitting application.
  13. Discharge order.
  14. Standard of

 

 

 

 

 

 

 

SECTIONS

 

CHAPTER III INSOLVENCY RESOLUTION PROCESS

 

  1. Application by debtor to initiate insolvency resolution
  2. Application by creditor to initiate insolvency resolution
  3. Interim
  4. Appointment of resolution
  5. Replacement of resolution
  6. Submission of report by resolution
  7. Admission or rejection of
  9. Public notice and claims from
  10. Registering of claims by
  11. Preparation of list of
  12. Repayment
  13. Report of resolution professional on repayment
  14. Summoning of meeting of
  15. Conduct of meeting of
  16. Voting rights in meeting of
  17. Rights of secured creditors in relation to repayment
  18. Approval of repayment plan by
  19. Report of meeting of creditors on repayment
  20. Notice of decisions taken at meeting of
  21. Order of Adjudicating Authority on repayment
  22. Effect of order of Adjudicating Authority on repayment
  23. Implementation and supervision of repayment
  24. Completion of repayment
  25. Repayment plan coming to end
  26. Discharge
  27. Standard of

 

 

 

 

 

 

 

SECTIONS

 

CHAPTER IV

BANKRUPTCY ORDER FOR INDIVIDUALS AND PARTNERSHIP FIRMS

 

  1. Application for bankruptcy.
  2. Application by
  3. Application by
  4. Effect of
  5. Appointment of insolvency professional as bankruptcy
  6. Bankruptcy
  7. Validity of bankruptcy
  8. Effect of bankruptcy
  9. Statement of financial
  10. Public notice inviting claims from
  11. Registration of
  12. Preparation of list of
  13. Summoning of meeting of
  14. Conduct of meeting of
  15. Voting rights of
  16. Administration and distribution of estate of
  17. Completion of
  18. Discharge
  19. Effect of
  20. Disqualification of
  21. Restrictions on
  22. Modification or recall of bankruptcy
  23. Standard of
  24. Fees of bankruptcy
  25. Replacement of bankruptcy
  26. Resignation by bankruptcy
  27. Vacancy in office of bankruptcy
  28. Release of bankruptcy

 

 

 

 

 

 

 

SECTIONS

 

CHAPTER V

ADMINISTRATION AND DISTRIBUTION OF THE ESTATE OF THE BANKRUPT

 

  1. Functions of bankruptcy
  2. Duties of bankrupt towards bankruptcy
  3. Rights of bankruptcy
  4. General powers of bankruptcy
  5. Approval of creditors for certain
  6. Vesting of estate of bankrupt in bankruptcy
  7. Estate of
  8. Delivery of property and documents to bankruptcy
  9. Acquisition of control by bankruptcy
  10. Restrictions on disposition of
  11. After-acquired property of
  12. Onerous property of
  13. Notice to disclaim onerous property.
  14. Disclaimer of
  15. Challenge against disclaimed
  16. Undervalued
  17. Preference transactions.
  18. Effect of
  19. Extortionate credit
  20. Obligations under contracts.
  21. Continuance of proceedings on death of
  22. Administration of estate of deceased
  23. Proof of
  24. Proof of debt by secured
  25. Mutual credit and set-off.
  26. Distribution of interim
  27. Distribution of property.
  28. Final dividend.

 

 

 

SECTIONS

  1. Claims of
  2. Priority of payment of

CHAPTER VI

ADJUDICATING AUTHORITY FOR INDIVIDUALS AND PARTNERSHIP FIRMS

  1. Adjudicating authority for individuals and partnership
  2. Civil court not to have
  3. Appeal to Debt Recovery Appellate
  4. Appeal to Supreme
  5. Expeditious disposal of

CHAPTER VII OFFENCES AND PENALTIES

  1. Punishment for false information, etc., by creditor in insolvency resolution
  2. Punishment for contravention of
  3. Punishment for false information, concealment, etc., by
  4. Punishment for certain

PART IV

REGULATION OF INSOLVENCY PROFESSIONALS, AGENCIES AND INFORMATION UTILITIES

CHAPTER I

THE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

  1. Establishment and incorporation of Board.
  2. Constitution of
  3. Removal of member from
  4. Powers of Chairperson.
  5. Meetings of Board.
  6. Member not to participate in meetings in certain
  7. Vacancies, etc., not to invalidate proceedings of Board, Officers and employees of
  8. Power to designate financial sector

CHAPTER II

POWERS AND FUNCTIONS OF THE BOARD

  1. Powers and functions of

 

 

 

SECTIONS

  1. Constitution of advisory committee, executive committee or other
  2. Condonation of

CHAPTER III INSOLVENCY PROFESSIONAL AGENCIES

  1. No person to function as insolvency professional agency without valid certificate of
  2. Principles governing registration of insolvency professional
  3. Registration of insolvency professional
  4. Appeal to National Company Law Appellate
  5. Governing Board of insolvency professional
  6. Functions of insolvency professional
  7. Insolvency professional agencies to make bye-laws.

CHAPTER IV INSOLVENCY PROFESSIONALS

  1. Enrolled and registered persons to act as insolvency
  2. Registration of insolvency professionals.
  3. Functions and obligations of insolvency

CHAPTER V INFORMATION UTILITIES

  1. No person to function as information utility without certificate of
  2. Registration of information
  3. Appeal to National Company Law Appellate
  4. Governing Board of information
  5. Core services, etc., of information
  6. Obligations of information
  7. Procedure for submission, etc., of financial
  8. Rights and obligations of persons submitting financial

CHAPTER VI INSPECTION AND INVESTIGATION

  1. Complaints against insolvency professional agency or its member or information
  2. Investigation of insolvency professional agency or its member or information

 

 

 

SECTIONS

  1. Show cause notice to insolvency professional agency or its member or information
  2. Appointment of disciplinary

CHAPTER VII FINANCE, ACCOUNTS AND AUDIT

  1. Grants by Central
  2. Board’s Fund.
  3. Accounts and

PART V MISCELLANEOUS

  1. Insolvency and Bankruptcy
  2. Power of Central Government to issue
  3. Power of Central Government to supersede
  4. Power of Central Government to notify financial service providers,
  6. Annual report.
  8. Bar of
  9. Members, officers and employees of Board to the public
  10. Protection of action taken in good
  11. Agreements with foreign
  12. Letter of request to a country outside India in certain

235A. Punishment where no specific penalty or punishment is provided.

  1. Trial of offences by Special
  2. Appeal and revision.
  3. Provisions of this Code to override other laws. 238A.
  4. Power to make rules.
  5. Power to make regulations.

240A. Application of this Code to micro, small and medium enterprises.

  1. Rules and regulations to be laid before

 

 

 

SECTIONS

  1. Power to remove
  2. Repeal of certain enactments and
  3. Transitional
  4. Amendments of Act 9 of
  5. Amendments of Act 1 of
  6. Amendments of Act 43 of
  7. Amendments of Act 52 of
  8. Amendments of Act 51 of
  9. Amendments of Act 32 of
  10. Amendments of Act 54 of
  11. Amendments of Act 1 of
  12. Amendments of Act 51 of
  13. Amendments of Act 6 of
  14. Amendments of Act 18 of 2013. THE FIRST

THE SECOND SCHEDULE. THE THIRD SCHEDULE. THE FOURTH SCHEDULE. THE FIFTH SCHEDULE. THE SIXTH SCHEDULE. THE SEVENTH SCHEDULE. THE EIGHTH SCHEDULE. THE NINTH SCHEDULE. THE TENTH SCHEDULE.

THE ELEVENTH SCHEDULE. THE TWELFTH SCHEDULE.

 

 

 

THE INSOLVENCY AND BANKRUPTCY CODE, 2016 ACT NO. 31 OF 2016

[28th May, 2016.]

An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner  for  maximisation of value of assets of such persons, 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 to establish an Insolvency  and  Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Sixty-seventh Year of the Republic of India as follows:—

PART I PRELIMINARY

  1. Short title, extent and commencement.—(1) This Code may be called the Insolvency and Bankruptcy Code, 2016.
  • It extends to the whole of India:

Provided that Part III of this Code shall not extend to the State of Jammu and Kashmir.

  • It shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint:
 
   

 

  1. 5th August, 2016, vide Notification no. S.O. 2618(E), dated 5th August, 2016 (ss. 188 to 194), see Gazette of India, Extraordinary, Part II, sec. 3(ii).

19th August, 2016—S. 3, cls. (1), (5), (22), (26), (28), (37), ss. 221, 222, 225, 230, 232, 233, sub-section (1) of cls. (zd), sub-

section (2) of section 239, sub-section (1) and cls. (zt), sub-section (2) of section 240; ss. 241 and 242; vide notification No.

S.O. 2746(E), dated 19th August 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

1st November, 2016—S. 3 of Cla. (2), (3), (4), (6), (7), (8), (9), (10), (11), (12),(13), (14), (15), (16), (17), (18), (19), (20),

(21), (23), (24), (25), (27), (29), (30), (31), (32), (33), (34), (35), (36), ss. 196, 197, 223, sub-section (2) of section 239, clause

(ze), (zf), (zg), (zh), (zl), (zm), sub-section (2) of section 240;cls. (a) to (zm); (zu) to (zzzc); s. 244, 246 to 248 (both inclusive); 250, 252, vide notification No. S.O. 3344(E), see Gazette of India, Extraordinary, Part II, sec. 3(ii).

15th November, 2016—S. 199 to 207 (both inclusive), sub-section (1) of 208, Cl.(c), (e), s. 208(2), s. 217 to 220 (both

inclusive), ss. 251, 253, 254 and 255, vide Notification No. S.O. 3453(E), dated 15th November, 2016

1st December, 2016 —S. 2, Cl.(a) to (d)(except with regard to voluntary liquidation or Bankruptcy), s. 60, 61, 62, 63, 64, 65,

66, 67, 68, 69, 70 (both inclusive), ss. 198, 231, 236, 237, 238(both inclusive), sub-section (2) of s. 239, cl (a), (b), (c), (d), (e), (d), (f), vide notification No. S.O. 3594(E) dated 30th November 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

15th December 2016—Ss 33 to 54 (both inclusive), vide notification No. S.O. 3687(E), dated 9th December 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

1st April 2017—Sub-section (2) of cls. (a) to (d), vide notification No. S.O. 1570(E), dated 15th May 2017, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

1st April 2017—S. 59; Ss. 209 to 215 (both inclusive); Sub-section (1) of S 216; Ss. 234 and 235 vide notification No. S.O. 1005(E), dated 30th March 2017, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

14th June 2017—Ss 55 to 58 (both inclusive), vide notification No. S.O. 1910(E), dated 14th June 2017, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

1st May, 2018—Ss. 227 to 229 (both inclusive), vide notification No. S.O. 1817(E), dated 1st May 2018, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

 

 

 

Provided that different dates may be appointed for different provisions of this Code and any reference in any such provision to the commencement of this Code shall be construed as a reference to the commencement of that provision.

  1. Application.—The provisions of this Code shall apply to—
    • any company incorporated under the Companies Act, 2013 (18 of 2013) or under any previous company law;
    • any other company governed by any 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 (6 of 2009);
    • such other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf; 1***

2[(e) personal guarantors to corporate debtors;

  • partnership firms and proprietorship firms; and
  • individuals, other than persons referred to in clause (e),]
  1. Definitions.—In this Code, unless the context otherwise requires,—
  • “Board” means the Insolvency and Bankruptcy Board of  India  established  under  sub-section (1) of section 188;
  • “bench” means a bench of the Adjudicating Authority;
  • “bye-laws” mean the bye-laws made by the insolvency professional agency under section 205;
  • “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;
  • “Chairperson” means the Chairperson of the Board;
  • “claim” means—
    • a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured;
    • right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;
  • “corporate person” means 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;
  • “corporate debtor” means a corporate person who owes a debt to any person;
  • “core services” means services rendered by an information utility for—
    • accepting electronic submission of financial information in such form and manner as may be specified;
 
   

 

  1. The word “and” omitted by Act 8 of 2018, 2 (w.e.f. 23-11-2017).
  2. by s. 2, ibid., for clause (e) (w.e.f. 23-11-2017).

 

 

 

  • safe and accurate recording of financial information;
  • authenticating and verifying the financial information submitted by a person; and
  • providing access to information stored with the information utility to persons as may be specified;
  • “creditor” means any person to whom a debt is owed and includes a financial creditor, an 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 1[paid] by the debtor or the corporate debtor, as the case may be;
  • “financial information”, in relation to a person, means one or more of the following categories of information, namely:—
    • records of the debt of the person;
    • records of liabilities when the person is solvent;
    • records of assets of person over which security interest has been created;
    • records, if any, of instances of default by the person against any debt;
    • records of the balance sheet and cash-flow statements of the person; and
    • such other information as may be specified;
  • “financial institution” means—
    • a scheduled bank;
    • financial institution  as  defined  in  section  45-I   of   the   Reserve   Bank   of   India  Act, 1934 (2 of 1934);
    • public financial institution as defined in clause  (72)  of  section  2  of  the  Companies  Act, 2013 (18 of 2013); and
    • such other institution as the Central Government may by notification specify as a financial institution;
  • “financial product” means securities, contracts of insurance, deposits, credit arrangements including loans and advances by banks and financial institutions, retirement benefit plans, small savings instruments, foreign currency contracts other than contracts to exchange one  currency  (whether Indian or  not) for another which are to be settled immediately, or any other instrument as  may be prescribed;
  • “financial service” includes any of the following services, namely:—
    • accepting of deposits;
    • safeguarding and administering assets consisting of financial products, belonging to another person, or agreeing to do so;
    • effecting contracts of insurance;
 
   

 

  1. Subs. by Act 26 of 2018, s. 2 for “repaid” (w.e.f. 6-6-2018).

 

 

 

  • offering, managing or agreeing to manage assets consisting of financial products belonging to another person;
  • rendering or agreeing, for consideration, to render advice on or soliciting for the purposes of—
    • buying, selling, or subscribing to, a financial product;
    • availing a financial service; or
    • exercising any right associated with a financial product or financial service;
  • establishing or operating an investment scheme;
  • maintaining or transferring records of ownership of a financial product;
  • underwriting the issuance or subscription of a financial product; or
  • selling, providing, or issuing stored value or payment instruments or providing payment services;
  • “financial service provider” means a person engaged in the business of providing financial services in terms of authorisation issued or registration granted by a financial sector regulator;
  • “financial sector regulator” means an authority or body constituted under any law for the  time being in force to regulate services or transactions of financial sector and includes the Reserve  Bank of India, the Securities and Exchange Board of India, the  Insurance  Regulatory  and Development Authority of India, the Pension Fund Regulatory Authority and such other regulatory authorities as may be notified by the Central Government;
  • “insolvency professional” means a person enrolled under section 206 with an insolvency professional agency as its member and registered with the Board as an insolvency professional under section 207;
  • “insolvency professional agency” means any person registered with the  Board  under  section 201 as an insolvency professional agency;
  • “information utility” means a person who is registered with the Board as an information utility under section 210;
  • “notification” means a notification published in the Official Gazette, and the terms “notified” and “notify” shall be construed accordingly;
  • “person” includes—
    • an individual;
    • a Hindu Undivided Family;
    • a company;
    • a trust;
    • a partnership;
    • a limited liability partnership; and
    • any other entity established under a statute, and includes a person resident outside India;
  • “person resident in India” shall have the meaning as assigned to such term in clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);

 

 

 

  • “person resident outside India” means a person other than a person resident in India;
  • “prescribed” means prescribed by rules made by the Central Government;
  • “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;
  • “regulations” means the regulations made by the Board under this Code;
  • “Schedule” means the Schedule annexed to this Code;
  • “secured creditor” means a creditor in favour of whom security interest is created;
  • “security interest” means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of  an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person:

Provided that security interest shall not include a performance guarantee;

  • “specified” means specified by regulations made by the Board under this Code and the term “specify” shall be construed accordingly;
  • “transaction” includes a agreement or arrangement in writing for the transfer of assets, or funds, goods or services, from or to the corporate debtor;
  • “transfer” includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien;
  • “transfer of property” means transfer of any property and includes a transfer of any interest in the property and creation of any charge upon such property;
  • “workman” shall have the same meaning as assigned to it in clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947);
  • words and expressions used but not defined in this Code but defined in the Indian Contract Act, 1872 (9 of 1872), the Indian Partnership Act, 1932 (9 of 1932), the Securities Contact (Regulation) Act, 1956 (42 of 1956), the Securities Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), the Limited Liability Partnership Act, 2008 (6 of 2009) and the Companies Act, 2013 (18 of 2013), shall have the meanings respectively assigned to them in those

PART II

INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS CHAPTER I

PRELIMINARY

  1. Application of this Part.—This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees:

Provided that the Central Government may, by notification,  specify the minimum  amount of default  of higher value which shall not be more than one crore rupees.

  1. Definitions.—In this Part, unless the context otherwise requires,—
    • “Adjudicating Authority”, for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013);

 

 

 

  • “auditor” means a chartered accountant certified to practice as such by the Institute of Chartered Accountants of India under section 6 of the Chartered Accountants Act, 1949 (38 of 1949);
  • “Chapter” means a Chapter under this Part;
  • “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;
  • “corporate applicant” means—
    • corporate debtor; or
    • a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution process under the constitutional document of the corporate debtor; or
    • an individual who is in charge of managing the operations and resources of the corporate debtor; or
    • a person who has the control and supervision over the financial affairs of the corporate debtor;

1[(5A) “corporate guarantor” means a corporate person who is the surety in a contract of guarantee to a corporate debtor;]

  • “dispute” includes a suit or arbitration proceedings relating to—
    • the existence of the amount of debt;
    • the quality of goods or service; or
    • the breach of a representation or warranty;
  • “financial creditor” means any 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 against the consideration for the time value of money and includes—
    • money borrowed against the payment of interest;
    • any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent;
    • any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
    • 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;
    • receivables sold or discounted other than any receivables sold on non-recourse basis;
    • any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a

 

 

 

 
   

 

  1. Ins. by Act 26 of 2018, s. 3 (w.e.f. 6-6-2018).

 

 

 

1[Explanation.—For the purposes of this sub-clause,—

  • any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and
  • the expressions, “allottee” and “real estate project” shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);]
  • 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;
  • 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;
  • 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;
  • “financial position”, in relation to any person, means the financial information of a person as on a certain date;
  • “information memorandum” means a memorandum prepared by resolution professional under sub-section (1) of section 29;
  • “initiation date” means the date on which a financial creditor, corporate applicant or operational creditor, as the case may be, makes an application to the Adjudicating Authority for initiating corporate insolvency resolution process;
  • “insolvency commencement date” means the date of admission of an application  for initiating corporate insolvency resolution process by the Adjudicating Authority under sections 7, 9 or section 10, as the case may be;

2[Provided that where the interim resolution professional is not appointed in the order admitting application under section 7, 9 or section 10, the insolvency commencement date shall be the date on which such interim resolution professional is appointed by the Adjudicating Authority;]

  • “insolvency resolution process costs” means—
    • the amount of any interim finance and the costs incurred in raising such finance;
    • the fees payable to any person acting as a resolution professional;
    • any costs incurred by the resolution professional in running the business of the corporate debtor as a going concern;
    • any costs incurred at the expense of the Government to facilitate the insolvency resolution process; and
    • any other costs as may be specified by the Board;
  • “insolvency resolution process period” means the period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day;
  • “interim finance” means any financial debt raised by the resolution professional during the insolvency resolution process period;
 
   

 

  1. The Explanation by Act 26 of 2018, s. 3 (w.e.f. 6-6-2018).
  2. The proviso ins. by s. 3, ibid (w.e.f. 6-6-2018).

 

 

 

  • “liquidation cost” means any cost incurred by the liquidator during the period of liquidation subject to such regulations, as may be specified by the Board;
  • “liquidation commencement date” means the date on which proceedings for liquidation commence in accordance with section 33 or section 59, as the case may be;
  • “liquidator” means an insolvency professional appointed as a liquidator in accordance with the provisions of Chapter III or Chapter V of this Part, as the case may be;
  • “officer” for the purposes of Chapter VII of this Part, means an officer who is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013) or a designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009),  as the  case may be;
  • “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 1[payment] 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;
  • “personal guarantor” means an individual who is the surety in a contract of guarantee to a corporate debtor;
  • “personnel” includes the directors, managers, key managerial personnel, designated partners and employees, if any, of the corporate debtor;
  • “related party”, in relation to a corporate debtor, means—
    • a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor;
    • a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor;
    • a limited liability partnership or a partnership firm in which a director, partner, or manager of the corporate debtor or his relative is a partner;
    • a private company in which a director, partner or manager of the corporate debtor is a director and holds along with his relatives, more than two per cent. of its share capital;
    • a public company in which a director, partner or manager of the corporate debtor is a director and holds along with relatives, more than two per of its paid-up share capital;
    • any body corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor;
    • any limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor;
    • any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act;
    • a body corporate which is a holding, subsidiary or an associate company of the corporate debtor, or a subsidiary of a holding company to which the corporate debtor is a subsidiary;
 
   

 

  1. by Act 26 of 2018, s. 3, for “repayment” (w.e.f. 6-6-2018).

 

 

 

  • any person who controls more than twenty per cent. of voting rights in the  corporate  debtor on account of ownership or a voting agreement;
  • any person in whom the corporate debtor controls more than twenty per cent. of voting rights on account of ownership or a voting agreement;
  • any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor;
  • any person who is associated with the corporate debtor on account of—
    • participation in policy making processes of the corporate debtor; or
    • having more than two directors in common between the corporate debtor and such person; or
    • interchange of managerial personnel between the corporate debtor and such person;

or

  • provision of essential technical information to, or from, the corporate debtor;

1[(24A) “related party”, in relation to an individual, means—

  • a person who is a relative of the individual or a relative of the spouse of the  individual;
  • a partner of a limited liability partnership, or a limited liability partnership or a partnership firm, in which the individual is a partner;
  • a person who is a trustee of a trust in which the beneficiary of the trust includes the individual, or the terms of the trust confers a power on the trustee which may be exercised for the benefit of the individual;
  • a private company in which the individual is a director and holds along with his relatives, more than two per of its share capital;
  • a public company in which the individual is a director and holds along with relatives, more than two per cent. of its paid-up share capital;
  • a body corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of the individual;
  • a limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, act on the advice, directions or instructions of the individual;
  • a person on whose advice, directions or instructions, the individual is accustomed to

act;

  • a company, where the individual or the individual along with its related party, own

more than fifty per cent.  of the share capital of the company or controls the appointment of   the board of directors of the company.

Explanation.—For the purposes of this clause,—

  • “relative”, with reference to any person, means anyone who is related to another, in the following manner, namely:—
 
   

 

  1. Ins. by Act 26 of 2018, s. 3 (w.e.f. 6-6-2018).

 

 

 

  • members of a Hindu Undivided Family,
  • husband,
  • wife,
  • father,
  • mother,
  • son,
  • daughter,
  • son’s daughter and son,
  • daughter’s daughter and son,
  • grandson’s daughter and son,
  • granddaughter’s daughter and son,
  • brother,
  • sister,
  • brother’s son and daughter,
  • sister’s son and daughter,
  • father’s father and mother,
  • mother’s father and mother,
  • father’s brother and sister,
  • mother’s brother and sister, and
    • wherever the relation is that of a son, daughter, sister or brother, their spouses shall also be included;]

1[(25) “resolution applicant” means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause

(h) of sub-section (2) of section 25];

  • “resolution plan” means a plan proposed by 2[resolution applicant] for insolvency resolution of the corporate debtor as a going concern in accordance with Part II;
  • “resolution professional”, for the purposes of this Part, means an insolvency professional appointed to conduct the corporate insolvency resolution process and includes an interim resolution professional; and
  • “voting share” means the share of the voting rights of a single financial creditor in the committee of creditors which is based on the proportion of the financial debt owed to such financial creditor in relation to the financial debt owed by the corporate

 

 

 

 

 
   

 

  1. Subs. by Act 8 of 2018, s.3, for clause (25) (w.e.f. 23-11-2017).
  2. by s. 3, ibid., for “any person” (w.e.f. 23-11-2017).

 

 

 

CHAPTER II

CORPORATE INSOLVENCY RESOLUTION PROCESS

  1. Persons who may initiate corporate insolvency resolution process.—Where any  corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor in the manner as provided under this
  2. Initiation of corporate insolvency resolution process by financial creditor.—(1) A financial creditor either by itself or jointly with 1[other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government,] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the  Adjudicating  Authority when a default has

Explanation.—For the purposes of this sub-section, a default includes a default in respect of  a  financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.

  • 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.
  • The financial creditor shall, along with the application furnish—
    • record of the default recorded with the information utility or such other record or evidence of default as may be specified;
    • the name of the resolution professional proposed to act as an interim resolution professional;

and

  • any other information as may be specified by the
  • The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the  basis of other evidence furnished by the financial creditor under sub-section (3).
  • Where the Adjudicating Authority is satisfied that—
    • a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or
    • 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 clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.

  • The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).
  • The Adjudicating Authority shall communicate—
    • the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor;

 

 
   

 

  1. by Act 26 of 2018, s. 4, for “other financial creditors” (w.e.f. 6-6-2018).

 

 

 

  • 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.
  1. Insolvency resolution by 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
  • 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—
    • existence of a dispute, 1[if any, or] record of the pendency of the suit or arbitration  proceedings filed before the receipt of such notice or invoice in relation to such dispute;
    • the 2[payment] 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 encashed a cheque issued by the corporate

Explanation.—For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding 2[payment] of the operational debt in respect of which the default has occurred.

  1. Application for 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 or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution
  • The application under sub-section (1) shall be filed in such form and manner and  accompanied with such fee as may be
  • The operational creditor shall, along with the application furnish—
    • a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;
    • an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;
    • 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 3[by the corporate debtor,    if available;]

4[(d) a copy of any record with information utility confirming that there is no payment  of  an unpaid operational debt by the corporate debtor, if available; and

(e) any other proof confirming that there is no payment of an unpaid operational debt by the corporate debtor or such other information, as may be prescribed.]

 

 

 
   

 

  1. Subs. by Act 26 of 2018, s. 5, for “if any, and” (w.e.f. 6-6-2018).
  1. by s. 5, ibid for “repayment” (w.e.f. 6-6-2018).
  2. by s. 6, ibid., for “by the corporate debtor; and” (w.e.f. 6-6-2018).
  3. by s. 6, ibid., for clause (d) (w.e.f. 6-6-2018).

 

 

 

  • An operational creditor initiating a corporate insolvency resolution process under  this  section, may propose a resolution professional to act as an interim resolution
  • The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—
  • admit the application and communicate such decision to the operational creditor and the corporate debtor if,—
    • the application made under sub-section (2) is complete;
    • there is no 1[payment] of the unpaid operational debt;
    • the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;
    • no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and
    • there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any;
  • reject the application and communicate such decision to the operational creditor and the corporate debtor, if—
    • the application made under sub-section (2) is incomplete;
    • there has been 1[payment] of the unpaid operational debt;
    • the creditor has not delivered the invoice or notice for payment to the corporate debtor;
    • notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or
    • any disciplinary proceeding is pending against any proposed resolution professional:

Provided that Adjudicating Authority, shall before rejecting an application under sub-clause

(a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the Adjudicating Authority.

  • The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this
  1. Initiation of corporate insolvency resolution process by corporate applicant.—(1) Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority.
  • The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be

2[(3) The corporate applicant shall, along with the application, furnish—

  • the information relating to its books of account and such other documents for such period as  may be specified;
  • the information relating to the resolution professional proposed to be appointed as an interim resolution professional; and

 

 

 

 
   

 

  1. by Act 26 of 2018, s. 6, for “repayment” (w.e.f. 6-6-2018).
  2. by s. 7, ibid., for sub-section (3) (w.e.f. 6-6-2018).

 

 

 

  • the special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving filing of the ]
  • The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order—
    • admit the application, if it is complete 1[and no disciplinary proceeding is pending against the proposed resolution professional]; or
    • reject the application, if it is incomplete: 1[or any disciplinary proceeding is pending against  the proposed resolution professional:]

Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority.

  • The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (4) of this
    1. Persons not entitled to make application.—The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter, namely:—
      • a corporate debtor undergoing a corporate insolvency resolution process; or
      • a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or
      • a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or
      • a corporate debtor in respect of whom a liquidation order has been

Explanation.—For the purposes of this section, a corporate debtor includes a corporate applicant in respect of such corporate debtor.

  1. Time-limit for completion of insolvency resolution process.—(1) Subject to  sub-section (2),  the corporate insolvency resolution process shall be completed within a period of one hundred and eighty days from the date of admission of the application to initiate such
  • The resolution professional shall file an application to the Adjudicating Authority to extend the period of the corporate insolvency resolution process beyond one hundred and eighty days, if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 2[sixty-six] per cent. of the voting
  • On receipt of an application under sub-section (2), if the Adjudicating Authority is satisfied that  the subject matter of the case is such that corporate insolvency resolution process cannot be completed within one hundred and eighty days, it may by order extend the duration of such process beyond one hundred and eighty days by such further period as it thinks fit, but not exceeding ninety days:

Provided that any extension of the period of corporate insolvency resolution  process  under  this  section shall not be granted more than once.

 

 

 

 

 
   

 

  1. Ins. by Act 26 of 2018, s. 7 (w.e.f. 6-6-2018).
  2. by s. 8, ibid. for “seventy-five” (w.e.f. 6-6-2018).

 

 

 

1[12A. Withdrawal of application admitted under section 7, 9 or 10.—The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified.].

  1. Declaration of moratorium and public announcement.— (1) The Adjudicating Authority, after admission of the application under section 7 or section 9 or section 10, shall, by an order—
    • declare a moratorium for the purposes referred to in section 14;
    • cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under section 15; and
    • appoint an interim resolution professional in the manner as laid down in section

(2) The public announcement referred to in clause (b) of sub-section (1) shall be made immediately after the appointment of the interim resolution professional.

  1. Moratorium.—(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:—
    • the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
    • transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
    • 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 (54 of 2002);
    • the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate
  • The supply of es


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