The Insolvency and Bankruptcy Code (Amendment) bill 2017, describes the Financial Creditor and the Operational Creditor and the ambit of its applicability on creditor-debtor relationship.
When it comes to a detailed and again rather complicated legal framework of insolvency law under the Insolvency and Bankruptcy Code, 2016,(IBC) the key point is the commencement of the Corporate Insolvency Resolution Process (CIRP). This process is intended to assist firms that are in deficit and also to aid in avoiding being caught in the financial debt trap.
In today’s rapidly evolving technological landscape, the integration of artificial intelligence (AI) into insolvency proceedings presents both challenges and opportunities for practitioners.
The Insolvency and Bankruptcy Code, 2016 (IBC) marks a significant milestone in the realm of insolvency and bankruptcy resolution in India. With its passage by Parliament and Presidential assent on May 28, 2016, the IBC revolutionized the legal framework surrounding insolvency and bankruptcy.
The provisions Insolvency and Bankruptcy Code, 2016 specifically provides for treatment for all sums due to any workman or employee from the provident fund
Main reasons for the delay is the spate of litigations by the promoters. Once the CIRP order is passed, the promoters get into the action with the sole objective of getting back the company at a cheaper price.
interim finance can be raised by the resolution professional appointed by the National Company Law Tribunal (NCLT). The resolution professional is authorized to raise interim finance after obtaining approval from the Committee of Creditors (CoC).
A debt arising from an advance payment given to a corporate debtor for the supply of goods or services would be deemed an operational debt.
Homebuyers could only engage in the IBC procedure as a class of financial creditor. Individual homebuyer rights were absorbed by homebuyer rights as a class.
Mobilization Advance is an Operational Debt and not a Financial Debt referring to the abovementioned Supreme Court Judgement.
A banker’s certificate is not mandatorily required for an operational creditor to begin Corporate Insolvency Resolution Process (CIRP) under section 9 of Insolvency and Bankruptcy Code, 2016.
Both operational creditors and financial creditors own certain advantages over each other. But Financial creditors are given some priorities over other creditors such as they are members of the creditor’s committee and have voting power etc and operational is not a member of the creditor’s committee.
NCLT held that the “interest” component alone cannot be claimed or pursued, in absence of the debt, to trigger a CIRP against the corporate Debtor. Further, the application pursued realization of the interest amount alone is against the intent of the IBC, 2016.
The Liquidator has a fiduciary responsibility with the Company and its creditors. The major goal of choosing a Liquidator is to resurrect a failing firm and operate professionally.
‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body.
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