1. Insolvency resolution process &
liquidation for corporate entities

2. Corporate insolvency Resolution22
Corporate insolvency Resolution
process: initiation and commencement
Who can trigger?
▫ A financial creditor (solely or jointly), or
▫ An operational creditor, or
▫ The corporate debtor itself.
When?
▫ Once there is occurrence of default on the part of the corporate debtor
▫ In case a financial creditor is the applicant, default may be in respect of a financial debt owed to any financial creditor
▫ In case of an operational creditor, the creditor has to deliver a demand notice before the CIR can be triggered.
The corporate debtor, in turn, has to show a dispute or show evidence of repayment to avoid initiation of CIR.
How?
▫ By applying to AA, which under part II is NCLT.
▫ Requisite documentation to be done.
After-effect?
▫ AA either admits or rejects the application;
▫ If admitted, CIR commences and the date of admission of application is called the insolvency commencement date
Who cannot initiate the process?
▫ a corporate debtor who is already undergoing CIR
▫ a corporate debtor who has completed CIR 12 months preceding the date of making of the application
▫ a corporate debtor or 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 corporate debtor in respect of whom a liquidation order has been made.

3. Snapshot of corporate insolvency23
Snapshot of corporate insolvency
resolution process (1/3)
Pre-insolvency process
▫ Default by C.Dr.
▫ Initiation of CIR by F.Cr./ O.Cr./ Corporate applicant
No time limit prescribed for filing an application before the AA
▫ Admission of CIR application by AA
Order shall be communicated within 7 days of admission/ rejection of such application
Insolvency and resolution process
▫ Commencement of CIR
▫ Declare moratorium by an order
Shall be declared on the insolvency commencement date
▫ Cause a public announcement
initiation of corporate insolvency resolution process and call for the submission of claims

4. Snapshot of corporate insolvency24
Snapshot of corporate insolvency
resolution process (2/3)
▫ Appointment of an IRP
AA shall appoint an IRP within 14 days from the insolvency commencement date
Term shall not exceed 30 days from the date of his appointment
▫ An IRP shall constitute a committee of creditors
Comprising of financial creditors
▫ Hold 1st meeting of committee of creditors
Within 7 days of the constitution of committee
▫ Appointment of RP
▫ Collection of claims and other relevant details
▫ Preparation of information memorandum by RP
▫ Submission of resolution plan by resolution applicant
▫ Acceptance of resolution plan by committee of creditors

5. Snapshot of corporate insolvency25
Snapshot of corporate insolvency
resolution process (3/3)
▫ Submission of resolution plan to AA
▫ Approval of resolution plan by AA
▫ CIR process shall be completed
Within 180 days from the date of admission
One time extension is allowed
Not exceeding 90 days
Post-insolvency process
▫ Moratorium shall cease from the date of completion of CIR process
Date of passing an order approving the resolution plan OR order for liquidation
▫ Resolution professional shall forward all records relating to conduct of CIR process and resolution plan to the board

6. Conflict between the CIRP and MRU Act26
Conflict between the CIRP and MRU Act
Whether the provisions of the Code shall have
overriding effect over the MRU Act?
If yes, whether an application under the Code shall
be accepted?
▫ In ICICI Bank Ltd. vs. M/s. Innoventive Industries Ltd., the NCLT held
The Code has come into existence subsequent to the MRU Act.
The non-obstante clause contained in section 238 of the Code shall prevail upon any other law for time being in force
The notification issued under the MRU Act will not operate as a bar to passing an order under section 7 of the Code.

7. Initiation of CIRP 27 Occurrence of Default by C. Dr. Initiation of
F. Cr.
O. Cr.
C. Dr. (itself)

8. Initiation of CIRP by F.CR(S).28
Initiation of CIRP by F.CR(S).
Default exists + Application complete
+ No disciplinary proceeding against proposed IRP?
Occurrence of Default by C. Dr.
Notice to F. Cr. by AA for rectification of defects No
Within 7 days of receipt of notice
Application by F. Cr(s). to AA
Yes
Yes
Admission of Application
Defects rectified?
Within 14 days
Ascertainment of existence/non-existence of default by AA No
Rejection of Application
Commencement of CIR
Within 7 days
Within 7
days
Order Communicated to
F. Cr. and C. Dr.
Order Communicated to
F. Cr.

9. Initiation of CIRP by O.CR.29
Initiation of CIRP by O.CR.
Application by
O. Cr. To AA
Application complete + no repayment by C. Dr.
+ demand notice delivered by O.Cr.
+ no dispute notice received by O. Cr./no record of any dispute?
Yes
Demand
Occurrence of Default by C. Dr.
notice by O.Cr. To C.
Dr. No
Notice to O. Cr. by AA for rectification of defects
C. Dr. shows evidence of repayment?
Within 10 days of receipt of demand
notice
Yes
Within 7 days of receipt of
Yes notice No
Within 14 days
C. Dr. shows a
dispute? No
Defects rectifie d?
Admission of
Application
Yes No further No
Commencement
of CIR
action
Communication
Rejection of
Application
to O.Cr. and C.Dr.

10. Initiation of CIRP by C.DR. itself30
Initiation of CIRP by C.DR. itself
Occurrence of
Default by
C.Dr.
Application by C.Dr. to AA
Notice to C.Dr. by AA for rectification of defects
Application is
complete
Yes No
Within 14 days
Defects
rectified?
Admission of Application
Communication
by AA to C.Dr.
Rejection of
Application
Commencement of CIR

11. Once CIRP commences . . . Commencement of CIRP 31
Within 14 days of Insolvency Commencem ent Date
Declaration of Moratorium
Public
announcement of Initiation of CIRP
Call for submission of Claims
Appointment of IRP by AA
Managem ent of affairs of C.Dr.
Review of Financial Position of C.Dr.
Consolidation of Claims against C.Dr.
Within 7 days
Appointment of
1st meeting of
Crs. Committee
Constitution of
Crs. Committee
RP for Conduct
of CIRP
Max. 30 days tenure for IRP

12. Appointment of resolution professional32
Appointment of resolution professional
Constitution of Crs. Committee by IRP
Within 7 days
1st meeting of Crs.
Committee
Propose to
replace the RP
Application to AA
for appointment of proposed RP
AA forwards the
name to Board
Board confirms within 10
days?
Yes
AA to direct the IRP to continue as RP until Board confirms otherwise
Existing IRP appointed as RP? No No
Yes
Intimation to IRP, C.Dr., & AA AA
appoints RP

13. Conduct of CIRP by RP 33 Preparation of Submission of
Selection of Resolution Plan(s) confirming to specified conditions
Preparation of
Submission of
Review of Resolution Plan by RP
Information Memorandum by RP
Resolution Plan by Resolution Applicant
Submission of approved Resolution Plan to AA by RP
Approval of a Resolution Plan by Crs. Committee
Presentation of
selected Resolution Plan(s) to Crs. Committee
Review of
Resolution Plan by AA
Admit the
Resolution Plan
Order of AA
Reject the Resolution Plan

14. 3 stages of corporate insolvency resolution34
3 stages of corporate insolvency resolution
Insolvency application accepted, plan not yet sanctioned
▫ Moratorium of SARFAESI action, any other action
Resolution plan sanctioned
▫ Creditor action will depend on the resolution plan; resolution
plan mandatory on all
Liquidation proceedings
▫ Secured creditor staying in liquidation process
Security interest relinquished, secured creditor cannot take enforcement action
▫ Secured creditor stays out of liquidation
Security interest enforcement/SARFAESI permitted

15. Effect of Moratorium order35
Effect of Moratorium order
AA shall declare moratorium order on the insolvency
commencement date prohibiting –
▫ institution of suits or continuation of pending suits or proceedings against the C.Dr.
including execution of any judgment, decree or order in any court of
law, tribunal, arbitration panel or other authority
▫ transferring, encumbering, alienating or disposing of assets or any legal right or beneficial interest
▫ recovery of any property by an owner or lessor
any of its
▫ action to foreclose, recover or enforce any security interest created by the C.Dr. in respect of its property
including any action under the SARFAESI Act, 2002
Moratorium shall have effect till the completion of the CIR process or liquidation order

16. Effect of Moratorium order on36
Effect of Moratorium order on
SARFAESI Proceedings
Code prohibits SARFAESI proceedings during moratorium period.
Following circumstances might arise –
▫ Moratorium starts before sending notice under section 13 (2)
Notice shall be served after completion of 180 days (or 270 days, if an
extension is granted)
▫ Moratorium starts after sending notice under section 13 (2) to the borrower
Fresh notice under section 13 (2) shall be served after completion of 180 days or 270 days, as the case may be.
▫ Moratorium starts after sending notice under section 13 (2) to the
borrower + repossessing the asset
Repossessed asset shall be sold only after completion of 180 days or days, as the case may be.
▫ Moratorium starts after sending notice under section 13 (2) to the borrower + repossessing the asset + sale of repossessed asset
Such secured creditor shall rank 5th in the waterfall priority to the extent of unsecured portion

17. Implementation of the resolution plan37
Implementation of the resolution plan
There is nothing in the Code for implementation
▫ Unlike non-corporate resolution, where implementation of repayment plan is under the aegis of the resolution professional
Resolution plan is binding [sec 31 (1) ]
▫ On debtor
▫ Employees
▫ Members
▫ Creditors
▫ Guarantors
▫ Other stakeholders
What is the effect of non adherence?
▫ In case of non corporate persons, failure to implements leads to bankruptcy