Corporate Insolvency Resolution Process is the new buzz in the market with the Adjudicating Authority i.e NCLT emphasizing on it for speedy recovery of bad debts. This trend is soon catching up and seems that if it continues with the same pace then most of the pending insolvency and winding up cases will be resolved quickly making the economy free of bad debts.
In this article we have discussed about how an Operational creditor can file an application for initiation of Corporate Insolvency Process against it debtors.
Process for application
The application made in the prescribed manner shall be accompanied by the following:
- Prescribed fee;
- 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 by the corporate debtor;
- Such other information as may be specified.
Rules 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 requires that an operational creditor, shall make an application for initiating the corporate insolvency resolution process against a corporate debtor under s 9 of the code in Form 5, accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The applicant operational creditor shall dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by registered post or speed post to the registered office of the corporate debtor.
Upon satisfaction, of the above, the Tribunal may admit the application of the creditor within 14 days or in case of any defect may reject the same if the defects are not cured.
Case law– In Uttam Galva Steels Limited v DF Deutsche Forfait AG and Anr., it was held that an operational creditor is required to file his petition individually after complying with s 8 of the Code.
- Neither the notice can be issued nor the petition under s 9 can be filed jointly by more than one operational creditor.
- A certificate issued by a foreign bank not recognized as financial institution cannot be called as compliance of the Code and the certificate issued by bank not recognized as financial institution as per s 3(14) of the Code.
- Notice under section is required to be issued by the Operational Creditor itself or a person who holds some position with or in regard to the operational creditor.
- A notice issued by a lawyer, company secretary etc. cannot be treated as notice under s 8 of the Code and in absence whereof, a petition under s 9 would not be maintainable.
- A third party aggrieved by an order of admission of application under section 9 cannot impugn the said order before the appellate tribunal but can make its claim before the insolvency resolution professional.
Corporate resolution process is a fine way of dealing with bad debts especially when there are a lot of stressed assets hampering the growth of the economy. The sections have clearly defined the complete procedure and requirement of filing a case before NCLT under IBC for speedy disposal of recovery and winding up cases.
Disclaimer – the above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.