Important FAQ’s on IBC:
- The Presidency Towns Insolvency Act, 1909
- The Provincial Insolvency Act, 1920
- Companies Act, 1956/2013
- LLP Act, 2008 for closure of LLPs
- SARFAESI Act, 2002
- Recovery of debts due to Banks and Financial Institutions Act, 1993
- Sick Industries Companies (Special Provisions) Act, 1985 Sample Description
- Financial Creditors (singly or jointly with other creditors);
- Operational Creditors (including Government and Employees/Workmen);
- Corporate Debtor
A. A Corporate Debtor:
- already undergoing CIRP; or
- who has completed CIRP during 12 months preceding the date of making application; or
- who has violated any of the terms of a resolution plan which was approved 12 months before the date of making an application; or
- in respect of whom a liquidation order has been made.
And a Financial Creditor:
- who has violated any of the terms of a resolution plan which was approved 12 months before the date of making an application
A. Yes, an Applicant may withdraw application for insolvency process by making a request to the Adjudicating Authority. However, such a withdrawal may not be made after the application has been admitted by the adjudicating authority.
A. Since there is no specific exemption for Government Companies, the Code shall apply to Government Companies as well.
A. IP can only exercise control over the assets of the Borrower and not over its Subsidiary. In such a case it can only act as a Shareholder.
A. Moratorium shall prohibit:
- Institution of Suits;
- Transfer of Assets;
- Foreclosure, recovery or enforcement under SARFAESI;
- Recovery of Assets
A. No, the supply of essential goods/services shall not be terminated or suspended or interrupted during moratorium period.
A. During the moratorium period, all legal proceedings and execution of awards against the Corporate Debtor shall be stayed.
15. What is the remedy if a Creditor fails to submit proof of claim within the time stipulated in the public announcement?
A. A Creditor who failed to submit proof of claim within stipulated time may submit such proof to Interim Resolution Professional before the Resolution Plan is approved by the Committee of Creditors.
A. A Related Party to whom a Corporate Debtor owes a financial debt shall not have any right of Representation, Participation or Voting in a meeting of the Committee of Creditors.
A. The voting share is determined based on the value of the debt of the creditor in proportion to the total debt.
A. The quorum shall be valid if members of the committee of creditors representing at least thirty three percent of the voting rights are present either in person or by video/audio means.
A. Yes, a member of CoC may attend the meeting by video conferencing or other audio and visual means.
A. The resolution plan shall be approved by the CoC by a vote of not less than seventy five percent of voting share of the financial creditors.
A. Yes, NCLT has powers to reject Resolution plans approved by the CoC.
A. Yes, the period during which moratorium is in place shall be excluded in computing the period of limitation specified for any suit or application by or against a Corporate Debtor for which an order of moratorium has been made.
A. No, insolvency proceeding against the Corporate Guarantor is barred on account of moratorium against Principal Borrower.
A. No, as NCLT may only approve (or reject) the Resolution Plan approved by CoC with 75% majority.
25. Can an interlocutory application for closure of CIRP be entertained if dispute has been settled between the Corporate Debtor and Creditors?
A. No, Insolvency Resolution Process is not merely a recovery proceeding to recover the dues of the creditors. In such a case the Adjudicating Authority without waiting for 180 days of resolution process, may approve resolution plan, if any, after recording its satisfaction that all creditors have been paid/ satisfied & close the Insolvency Resolution Process.
26. Will an application in respect of debt which is time-barred under the provisions of Limitation Act, 1963, be rejected?
A. Yes, If a debt is time barred as per the provision of the Limitation Act 1963, the application will be rejected.
27. What shall be the treatment of a creditor who acts in the capacity of both the Financial Creditor as well as Operational Creditor for the Corporate Debtor?
A. A Creditor who acts in the capacity of both the Financial Creditor as well as Operational Creditor for the Corporate Debtor will be treated as a Financial Creditor for those contracts in which financial debt is owed by the Corporate Debtor and an Operational Creditor for such transactions in which operational debt is owed by the Corporate Debtor.
28. What is the impact of the Code on the existing legislations such as SARFAESI Act, SICA and Companies Act?
A. The existing judicial proceedings under the Companies Act will be transferred from CLB to NCLT for all cases and from High Court to NCLT in specific cases. Further, on declaration of moratorium, all actions under the SARFAESI Act will be prohibited until the insolvency resolution process is completed.
A. The Code does not make a distinction between Domestic and Foreign Creditors. Any Creditor, Operational or Financial, could exercise the rights available under the Code so far as the application for insolvency is made within India and under the provisions of the Code.
30. Will unexpired warranty given by the Company on the products sold be included in unsecured claims in case of liquidation?
A. Any liability that is not due on the insolvency commencement date may not be included in the claims. Thus it would entirely depend upon the contractual arrangement between the customer and the Debtor.