With the enactment of the new Insolvency and Bankruptcy Code, 2016 and the establishment of the National Company Law Tribunals across India, the previous framework of laws on insolvency and bankruptcy were consolidated into a single law. This area of law, which was previously cumbersome and ineffective, quickly came of age with the changing times and it swiftly developed into a specialised practice area at our Firm.

This new and powerful law allows creditors of a company to sue a defaulting company for insolvency which often helps the creditors in recovering their dues, either by way of a settlement or from monies realised from the insolvency/liquidation process viz. from the sale of the debtor’s assets or restructuring/reorganisation of the debtor’s business. Under the ambit of this new law, the Firm also provides solutions to its Clients who are in a cash crunch and assists them in getting relief from arduous legal and financial burdens.

The Firm leverages its proficiency in dispute resolution and advises its clients, in not only invoking the Code to enforce their rights, but also how best to defend itself, in the event, it is invoked against them. We also assist and advise, our Clients in implementing an effective restructuring of the business through the framework of the prevailing law as well as in investing in distressed businesses undergoing insolvency and bankruptcy proceedings.

The National Company Law Tribunal has benches all over the country, and the Firm has in a short span of time, advised its clients and acted on their behalf before most of them.

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FAQS

To whom does the Insolvency and Bankruptcy Code, 2016 (‘Code’) apply?

It applies mainly to the following entities
a. Any company incorporated under the Companies Act, 2013 or under any previous law.
b. Any Limited Liability Partnership under the LLP Act 2008.
c. Any other body incorporated under any law for the time being in force, as the Central Government may by notification specify in this behalf.
d. Partnership firms and individuals.

What is considered as a Claim under the Code?

As per Section 3(6) of the Code, Claim means a right to payment or right to remedy for breach of contract if such breach gives rise to a right to payment whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.

What shall be treated as Debt under the Code?

As per Section 3(11) of the Code, 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.

Who is termed as a Corporate Debtor?

As per Section 3(8) of the Code, Corporate Debtor means a corporate person who owes a debt to any person.

What is included in the Financial Debt?

As per Section 5(8) of the Code, Financial Debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes:-
a. Any money borrowed against the payment of interest.
b. Any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent.
c. Any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument.
d. 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

What is included in Operational Debt?

As per Section 5(21) of the Code, Operational Debt means a claim in respect of
a. Provision of goods or
b. Provision of services including employment c
c. a debt in respect of the repayment 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.

Who may initiate corporate insolvency process against a corporate person?

The corporate insolvency process may be initiated against any defaulting corporate debtor by
a) Financial creditor
b) Operational creditor
c) Corporate Applicant of a Corporate debtor

Can a Demand Notice by an operational creditor be issued in any form?

No, the Demand Notice has to be issued in Form No. 3 as provided in the Application to Adjudicating Authority Rules.

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