The regulations governing the corporate bankruptcy procedure provided for an extremely complex and fragmented structure. The said framework provides for ample rights for the stakeholders in the insolvency process, but the said rights are scattered across multiple legislations. These multiple legislations prescribed for separate judicial for a wherein under most of the circumstances are decision given by BIFR, Debt Recovery Tribunal, etc, had to be reviewed by the High Courts.
This created sufficient problem as regards the clarity of the jurisdiction and considerable overlap between them. Moreover, the complexity arising from multiple for also lead to inordinate delays due to an enhanced possibility of matters going into appeals. This was also the case as due to multiciplity of for a, aggrieved parties use to approach the forum as per their own conveniences.
Since the BIFR/AAFIR is in New Delhi, appeal/writs against its order could have been filed in the Delhi High Court as well as the High Court where the registered office of the company existed. Thus, more often than not leading to a situation where parties at their whims and fancies invoking respective jurisdiction of the court for personal reasons.
It is also noteworthy that as per Proviso to section 15 of SICA, a reference before it shall abate at any stage in case the 75% of the secured creditors take action under SARFAESI Act. Thus, the legislation itself left scope for interference of multiple forums in same subject matter.
In this article we will discuss about corporate insolvency resolution process and how it benefits the corporate creditor and speedy insolvency case disposal helping recover dues.
Person who may initiate corporate insolvency resolution process (Section 6)
In case any default committed by a corporate debtor, following may initiate corporate insolvency resolution process:
- A corporate debtor itself
- A financial creditor
- An operational creditor
Initiation of corporate insolvency resolution process by Financial Creditor (Section 7)
Anyone or more financial creditor/s either jointly or separately may file an application for initiating corporate insolvency resolution process against a corporate debtor. The said application is to be filed before the adjudicating authority in case of a default, which can be with respect to default of debt of applicant, financial creditor or any financial creditor. Thus, pre-emptive initiation of the process is permissible where in case of default towards another financial creditor, a financial creditor whose debt through though not has not been defaulted, who anticipates such a default may also approach the tribunal/adjudicating authority. The application shall be made in the prescribed form, and shall be accompanied by:
- Prescribed fee;
- 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;
- Any other information as may be specified by the Insolvency and bankruptcy Board of India.
The tribunal shall ascertain the existence of such default within 14 days of receipt of such application and when satisfied about the said default it may pass an order admitting such application, where upon the insolvency and any defect in the application or where the proposed Resolution professional has any disciplinary proceedings pending before him, the Tribunal may reject the application after giving an opportunity by way of a notice to the applicant to remove defects within seven days.
The scheme as provided under the Code stipulates a mechanism wherein the IRP is reckoned upon any default upon non-payment of debt due. The term ‘default’ has been given a wider scope under the Code including the non-payment of even a part or installment of debt due. The trigger point under the Code is the occurrence of a default of Rupees 1 lakh or more.
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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.