Recent changes in The Insolvency And Bankruptcy Code
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Written by Venkata Kiran Kumar Nedunuri , pursuing Certificate Course in Insolvency and Bankruptcy Code as part of his coursework.  Venkata is a Project Manager at Tech Mahindra. He holds various other credentials which includes MBA, PGDBM, PGDCL and IPR, LLB. 

When an Individual or an Entity is unable to meet its outstanding debts to the investors, creditors or lenders is termed as Insolvent and this state is called Insolvency. Insolvency can be resolved by two ways as mentioned below:

  1. Modifying the repayment plan to the creditors or investors.
  2. Selling off the assets of the company and paying back to the creditors or investors from the sale proceeds of the assets.

It would be more precise to understand and the Insolvency Resolution Process stage wise in detail as laid out in the code.


Inability to pay back the amount to its creditors or investors or lenders on time and also for a very long time by any corporate or business entity, makes a company to be insolvent and this state is called as insolvency for which the application of insolvency is submitted to the National Company Law Tribunal (NCLT) by anyone of Financial Creditor or Operational Creditor or Corporate Debtor himself.  In case of corporate debtor himself, the operational creditor has to send a prior notice of demand for 10 days to the corporate debtor before the initiation of insolvency resolution process.

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Bank or Financial institution or any other lender or anyone providing loan, credit facility or other financial assistance falls into the category of “Financial Creditors”

Someone who has been extended a payment of credit during the course of business is an “Operational Creditor”. Suppliers and service providers are covered under this provision.

Insolvency Resolution process by a Financial Creditor

  1. Financial creditor either by himself or jointly shall initiate filing of application before NCLT against the corporate debtor for insolvency proceedings.
  2. The proof of default and the name of the proposed insolvency professional to be appointed shall be submitted along with the application

Financial Creditors under Section 7 of IBC, 2016 by Operational Creditors under Section 9 of the IBC, 2016 and by the Corporate Debtor himself under Section 10 of the IBC, 2016.

  1. NCLT may reject the application if it is of the opinion that the corporate debtor is not default or if there is any proceeding pending against the proposed resolution professional.
  2. Within fourteen days of making application to it, NCLT has to entertain the application.

Insolvency Resolution process by an Operational Creditor

  1. An operational creditor will have to serve 10 days of prior notice to the corporate debtor asking him to pay back the dues before initiating insolvency resolution process.
  2. In the event of corporate debtor not paying back the amount in that time period and doesn’t bring to the notice of operational creditor about any dispute or any arbitration proceeding pending against it then the operational creditor can file application for insolvency resolution.

Insolvency Resolution by the Corporate Debtor

As per provisions contained in Chapter- II of the Code, where a corporate debtor has defaulted on the payment of dues to a financial or operational creditor, the corporate debtor or any applicant (i.e. the financial or operational creditor) can file the application for the initiation of insolvency resolution process along with the books of accounts and other financial documents of the business. Furthermore, as per Section 10 (3) (b) the corporate debtor shall also file the name of the proposed resolution professional along with the application.

Time period for the completion of the insolvency resolution process

As per Section 12 of the IBC the insolvency process must be completed within 180 days from the date of initiation in the National Company Law Tribunal. The claims of the Creditors shall be frozen for a period of six months on admission of application by NCLT. No legal claim shall be sought against the corporate debtor in any other forum or court unless liquidation process is initiated or a resolution plan is made. In all the above situations the application for initiation of insolvency resolution must be admitted or rejected by NCLT within 14 days of application before it. Further as per section 16 of the Code NCLT shall appoint the interim insolvency professional with the permission of insolvency and bankruptcy board within 14 days of admitting the application.

Public announcement of Moratorium

Upon the admission of insolvency resolution application before it, NCLT will make a public announcement for the submission of claims by the creditors. Also, NCLT appoints the interim resolution professional.


The moratorium will be declared by the NCLT for prohibiting the following: 

  1. Institution of any suit or pending suit including execution of any judgement or decree against the corporate debtor.
  2. Transferring, encumbering, alienating or disposing of any property or right or beneficial interest.
  3. Any action to foreclose, recover or any security interest created by the corporate debtor in respect of his property.
  4. Recovery of any property by the owner or lessor which is under the possession of the corporate debtor.
  5. Terminate the supply of goods and services to the corporate debtor.

On the date on which the resolution process is approved or on the date of liquidation order the moratorium shall cease to have effect. Insolvency resolution professional or Committee of creditors do not have any powers, conferred by the Code, to invalidate / withdraw or cancel any of the pending actions or proceedings involving the corporate debtor. There will be no impact on the proceedings which are pending before the imposition of moratorium except that during moratorium period, such proceedings or actions will be adjourned sine die.

In case of Canara Bank V. Deccan Chronical Holdings Ltd.  the National Company Law Tribunal (Hyderabad) held that the power of the Hon’ble Supreme Court Article 32 of the Constitution of India and Hon’ble High Courts under Article 226 of Constitution of India cannot be curtailed by any provision of an Act or a Court. Therefore the moratorium under IBC excludes these proceedings under the Constitution.

Role of Insolvency Professional

  1. Interim resolution professional(IRP) is appointed by NCLT within 14 days from the insolvency commencement date and the term of his appointment shall not exceed 30 days from the date of appointment.
  2. Manages the operation of the corporate Debtor as a going concern and protect and preserve the value of property and also take control and custody of assets which the Corporate Debtor has the ownership.
  3. Receive and collate claims from creditors.
  4. The officers and managers of the Corporate Debtor shall report to the Interim resolution professional (IRP) and provide access to all the documents and records pertinent to the Corporate Debtor.
  5. Accounts of Corporate Debtor maintained by the financial institutions shall be furnished to the IRP. Also, IRP shall have access to the records and documents of corporate debtor available with government authorities, statutory auditors, accountants etc.
  6. IRP shall have access to the electronic records of the corporate debtor.

Formation of Creditors’ Committee

Insolvency professional after submission of claims by all the creditors shall form a creditor’s committee and all the creditors who have submitted the claims shall be a part of creditors’ committee. As per Section 21 (2) of the Code, the creditors’ committee shall consist of only financial creditors. Any resolution plan can be implemented only if it has the approval of 75% of the creditors with voting right in accordance with the voting share assigned.

As per Section 24 (3) (c) of the Code, operational creditors having aggregate dues of at least 10% of the total debt are only given the notice of the meeting. Operational creditors cannot be the members of the committee and it is irrespective of the claim size.

The decision of the Creditors’ Committee with respect to the reason of inability of the corporate debtor to pay back the debts, whether it is a business or financial crisis, shall pave the way to the committee to either go for restructuring plan to the creditors or for liquidation process.

  • Creditors committee shall hold their first meeting within seven days of appointment and may appoint a final insolvency resolution professional or may give affirmation to the interim insolvency professional to be appointed as insolvency professional with the approval of 75% votes of the creditors of the creditors committee.
  • The partners, directors will not have voting rights but they shall attend the meeting.
  • Operational creditors shall have one representative joining the meeting on behalf of them but the representative shall not have the voting right.

To enable the resolution applicant to form a resolution plan, the resolution professional shall prepare an information memorandum. Resolution professional shall, if satisfied by the restructuring of repayment plan submitted by the resolution applicant, present the plan to the Creditors’ committee for approval. The plan will be confirmed based on the 75% of votes of the creditors of the Creditors’ committee in favour.

If the approval is obtained then NCLT will order the execution of the restructuring plan in a prescribed manner.

The moratorium shall cease to have effect after the approval by NCLT and the resolution professional will forward all the records and documents to the board of directors to conduct the insolvency resolution process effectively.

Jaypee Infratech Insolvency Case

Brief Facts

The Jaypee Infratech” project started its “wish town city” project in Noida. Jaiprakash Associates Limited ( JAL) and Jaypee Infratech Limited are two subsidiary companies of Jaypee Group. JAL allocated the letters to the homebuyers and JIL received the payments from around 35000 homebuyers. It collected 25000 crore rupees from around 35000 homebuyers. Years after its inception the project remains abandoned and merely a skeleton has been built for the purpose of appeasing the homebuyers. Buyers have alleged that the money collected for the Wish Town city was diverted to its other marquee projects like the Formula 1 circuit and the Yamuna Expressway.

Aggrieved by the pace of the project a small group of homebuyers approached the National Consumer Disputes Redressal Commission (NCDRC) but the commission did not adjudicate on the same. The situation changed as Supreme Court bench headed by the Chief Justice of India, Dipak Misra, agreed to hear the case through a public interest litigation (PIL). Before Supreme court agreed to hear the case, the matter came up before the Allahabad bench of National Company Law Tribunal (NCLT) after a petition by the IDBI which advanced a loan that amounted to approximately 526 crore rupees to the company. The company did not pay back to the bank and since the bank was a secured creditor it had the right to ask for Insolvency Resolution Process under Section 7 of the IBC, 2016.

On August 9th 2017, the Allahabad bench of NCLT ordered the appointment of any Insolvency Resolution Professional (RP) after IDBI bank sought initiation of bankruptcy proceedings against the company. If the NCLT admits a petition on insolvency, the board of the company concerned is suspended and an interim resolution professional within 180 days after its appointment has to turn the company around. The company goes into liquidation automatically should nothing materialize within 270 days. The NCLT has appointed an insolvency professional on 10th August 2017 providing thousands of buyers in Jaypee projects two weeks to raise claims pertinent to their properties.

Anuj Jain, appointed by the National Company Law Tribunal, to take over the management of Jaypee Infratech Ltd. and asked its parent company to deposit Rs 2,000 crore. The IRP was to submit the interim resolution plan to court within 45 days considering the interest of the homebuyers.  

On September 4th 2017, Supreme Court (SC), stayed the NCLT order initiating insolvency proceedings against Jaypee Infratech. The 30000 homebuyers whose position has become weak after 9th August NCLT order. Their status was unclear under the Code despite paying 90% of the price without being handed over the flats and kept pending for long.

The order from Supreme Court came following a writ petition filed by one of the homebuyers Chitra Sharma. The court has issued notices to all parties, the company, the Noida Authority and the UP government including the Centre. The petitioner Chitra Sharma through her representative, Aishwarya Sinha, was questioning the constitutional validity of the insolvency code owing it’s not recognising the right of homebuyers.

On January 8th 2018, Reserve Bank of India (RBI) moved the Supreme Court seeking permission to initiate insolvency proceedings against Jaiprakash Associates Ltd. Jaiprakash Associates, parent company of Jaypee Infratech Ltd, is among the 12 companies against which the RBI asked banks to file insolvency petitions.

On February 12th 2018, NCLT has extended resolution process by 90 days as 180-day timeline expired owing to banks’ seeking a 90-day extension from NCLT to enable them to have sufficient time to reassess defaulters under IBC norms.

On March 21st 2018, The Supreme Court allowed pro-rata disbursement of claims of homebuyers who had opted for refund of their money.

On May 10th 2018, lenders of Jaypee Infratech rejected Lakshadweep offer of resolution. Lakshadweep, chosen by the Committee of Creditors (CoC) as the highest bidder, had offered to buy the realty company for a Rs 28-billion loan dues write-off. Lakshadweep is a joint venture between Suraksha Asset Reconstruction Company and Mumbai-based Dosti Realty.

On May 16th 2018, The Supreme Court stayed the liquidation proceedings against Jaypee Infratech while asking the promoters to deposit Rs.1000 crore by June 15th to refund homebuyers.


The vital factor in the entire gamut of proceedings is the fact that the homebuyers weren’t adequately represented in the IBC, 2016 and weren’t falling under the ambit of secured creditors though the Apex Court felt the urge to save the homebuyers. The Supreme Court to protect the interest of the homebuyers the group to deposit 2000 crore rupees to its registry. Owing to these facts on June 6th 2018, President Ram Nath Kovind has given his nod to promulgate an ordinance amending the insolvency law, recognizing homebuyers as financial creditors. Under the Insolvency and Bankruptcy Code Amendment Ordinance, 2018, homebuyers will get a representation in the committee of creditors (COC) making them an integral part of the decision making process. However, the amended Code doesn’t specify whether homebuyers will be treated as secured or unsecured creditors. Homebuyers would be able to invoke Section 7 of IBC,2016 against errant developers. Following the amendment of the Code, The Supreme Court on 9th August 2018, has ordered that the insolvency case of Jaypee Infratech be returned to the NCLT and the entire proceedings to be restarted with the amendments not being retrospectively applicable though.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills. This course also provides all other processes and drafting related to IBC.  




  1. मोठय़ा उद्योजकांकडून थकीत कर्ज वसुलीत मोठे यश – Laghu Udyog Bharati (Maharashtra)

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