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Understanding Insolvency and Bankruptcy Code (IBC) 2016

The Insolvency and Bankruptcy Code, 2016 (IBC) is a comprehensive legislation that consolidates and amends laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals. It provides a time-bound process for resolving insolvency and recovery of debts, overseen by the National Company Law Tribunal (NCLT).

At Metis Law Chamber, we have successfully handled over 120 insolvency and bankruptcy cases before NCLT and NCLAT, recovering more than ₹45 crores for creditors and stakeholders. Our experienced IBC lawyers provide comprehensive legal assistance in corporate insolvency resolution processes, liquidation proceedings, and debt restructuring with proven success rate.

Key Objectives of IBC:

  • Time-Bound Resolution: 330-day maximum timeline for resolution process
  • Creditor Control: Committee of creditors drives the resolution process
  • Value Maximization: Maximize asset value for all stakeholders
  • Professional Management: Insolvency professionals manage the process
  • Revival Priority: Business revival prioritized over liquidation
  • Consolidated Framework: Single code replacing multiple laws

  └─ Purpose of Insolvency and Bankruptcy Law

The Insolvency and Bankruptcy Code, 2016 was introduced to provide a legal framework for resolving financial distress in a structured and time-bound manner. The purpose of insolvency proceedings is to assess whether a business or individual can be revived or whether liquidation is required under law.

Insolvency proceedings are not meant to guarantee recovery or punishment, but to balance the interests of creditors, debtors, and other stakeholders through a transparent legal process supervised by tribunals.

  └─ Corporate Insolvency Resolution Process (CIRP) Timeline

1

Insolvency Petition Filing (Day 0-14)

File petition before NCLT by financial/operational creditor or corporate debtor with required documentation and evidence.

2

Admission & Moratorium (Day 14)

NCLT admits petition, declares moratorium, and appoints Interim Resolution Professional (IRP) to manage corporate debtor.

3

Committee of Creditors Formation (Day 30)

IRP constitutes Committee of Creditors (CoC), verifies claims, and prepares information memorandum for potential bidders.

4

Resolution Professional Appointment (Day 30-60)

CoC appoints Resolution Professional (RP) and approves process for inviting resolution plans from eligible bidders.

5

Resolution Plan Submission (Day 90-180)

Eligible bidders submit resolution plans, RP evaluates plans with CoC, and negotiations conducted for plan improvement.

6

Plan Approval & Implementation (Day 270-330)

CoC approves resolution plan by 66% majority, NCLT approves plan, and implementation begins under RP supervision.

  └─ Types of Insolvency and Bankruptcy Proceedings

IBC covers various types of insolvency proceedings for different entities and situations:

Corporate Insolvency Resolution Process (CIRP):

  • Financial Creditor Petition: Filed by banks, financial institutions, bondholders
  • Operational Creditor Petition: Filed by suppliers, vendors, service providers
  • Corporate Debtor Petition: Voluntary insolvency by the company itself
  • Resolution Plan: Revival and restructuring of financially distressed companies
  • Liquidation: Winding up when resolution fails or is not feasible

Individual Insolvency (Fresh Start & Insolvency Resolution):

  • Fresh Start Process: For individuals with limited assets and income
  • Individual Insolvency Resolution: For individuals with significant assets
  • Partnership Firm Insolvency: Insolvency of partnership firms
  • Proprietorship Insolvency: Individual entrepreneur insolvency

Voluntary Liquidation:

  • Members Voluntary Liquidation: Solvent companies choosing to wind up
  • Creditors Voluntary Liquidation: Insolvent companies voluntarily liquidating
  • Fast Track Liquidation: Expedited process for specific company types

Cross-Border Insolvency:

  • UNCITRAL Model Law: Recognition of foreign insolvency proceedings
  • Cooperation Mechanisms: Coordination with foreign courts and professionals
  • Asset Recovery: Recovery of assets located in different jurisdictions

  └─ Key Stakeholders and Their Rights Under IBC

IBC defines specific rights and roles for different stakeholders in insolvency proceedings:

Financial Creditors:

  • Definition: Banks, NBFCs, bondholders, and other lenders with financial debt
  • Rights: Initiate CIRP, voting rights in CoC, recovery priority
  • Powers: Approve resolution plans, replace RP, decide on liquidation
  • Representation: Form majority in Committee of Creditors
  • Documentation: Financial agreements, loan documents, security creation

Operational Creditors:

  • Definition: Suppliers, vendors, employees, service providers
  • Rights: Initiate CIRP, receive notice of proceedings, file claims
  • Limitations: No voting rights in CoC, limited role in decision making
  • Protection: Moratorium protection, priority in liquidation waterfall
  • Evidence: Invoices, supply agreements, service contracts

Corporate Debtor:

  • Rights: File voluntary petition, propose resolution plan (with restrictions)
  • Suspension: Management powers suspended during CIRP
  • Cooperation: Provide information and assistance to RP
  • Restrictions: Cannot dispose assets or enter new contracts

Resolution Professional:

  • Appointment: Licensed insolvency professional appointed by CoC
  • Powers: Manage corporate debtor, conduct resolution process
  • Duties: Maximize asset value, maintain corporate debtor as going concern
  • Responsibilities: Invite resolution plans, coordinate with stakeholders

Other Stakeholders:

  • Employees: Dues priority, consultation rights, employment protection
  • Government: Tax dues, regulatory compliance, public interest
  • Shareholders: Residual rights after creditor satisfaction
  • Guarantors: Personal guarantee enforcement, asset attachment

Corporate Liquidation Process Under IBC

When resolution fails or is not feasible, companies undergo liquidation for asset realization:

Liquidation Triggers:

  • No Resolution Plan: No viable resolution plan received or approved
  • CoC Decision: 66% majority voting for liquidation over resolution
  • Plan Failure: Approved resolution plan fails during implementation
  • NCLT Order: Tribunal orders liquidation in specific circumstances

Liquidation Process Steps:

  • Liquidator Appointment: NCLT appoints liquidator to manage assets
  • Asset Identification: Complete inventory of corporate debtor assets
  • Asset Valuation: Professional valuation of all identified assets
  • Stakeholder Verification: Verification and admission of all claims
  • Asset Sale: Sale through public auction, private treaty, or slump sale
  • Distribution: Proceeds distribution as per liquidation waterfall

Liquidation Waterfall (Distribution Priority):

  1. Insolvency Resolution Process Costs: CIRP and liquidation expenses
  2. Workmen Dues: Two years preceding liquidation commencement
  3. Secured Creditors: Against assets subject to security interest
  4. Employee Dues: One year wages and unpaid dues
  5. Unsecured Creditors: Financial and operational creditors
  6. Government Dues: Tax and regulatory dues
  7. Remaining Debts: Other claims and liabilities
  8. Preference Shareholders: Preference share capital
  9. Equity Shareholders: Equity share capital and surplus

Asset Sale Methods:

  • Public Auction: Transparent bidding process for asset sale
  • Private Treaty: Negotiated sale to specific buyers
  • Slump Sale: Sale of business as going concern
  • E-Auction Platform: Online bidding for wider participation

Why Choose Metis Law Chamber for IBC Proceedings?

120+ IBC Cases Handled

Extensive experience in NCLT and NCLAT proceedings with proven expertise in corporate insolvency resolution and liquidation processes.

High Success Rate in NCLT

High success rate in insolvency proceedings through comprehensive case preparation and expert NCLT advocacy.

Complete IBC Services

End-to-end services from petition filing to resolution plan approval covering all aspects of insolvency law.

Multi-Stakeholder Representation

Experienced in representing creditors, debtors, resolution professionals, and bidders across different IBC proceedings.

Frequently Asked Questions About Insolvency and Bankruptcy

What is the difference between insolvency and bankruptcy?

Insolvency is a financial state where a person/company cannot pay debts when due. Bankruptcy is a legal procedure to deal with insolvency. Under IBC, both terms are used interchangeably for the legal process.

How long does the Corporate Insolvency Resolution Process take?

CIRP must be completed within 330 days including any extension. Initially 180 days, extendable by 90 days, with additional 60 days in exceptional circumstances. Fast-track CIRP takes maximum 90 days.

Can promoters bid for their own company during CIRP?

Generally no. Section 29A disqualifies connected persons including promoters from bidding. However, exceptions exist for MSMEs and if they settle all dues before submitting resolution plan.

What happens to employees during insolvency proceedings?

Employees continue working under resolution professional management. Their dues get priority in liquidation waterfall. Resolution plans must address employee interests and job security.

Can individual guarantors be proceeded against during CIRP?

Yes, personal guarantees can be enforced against individual guarantors even during corporate CIRP. However, there's moratorium on corporate debtor assets.

What is the minimum amount for filing insolvency petition?

Minimum default amount is ₹1 crore for corporate insolvency. For individuals, it varies based on minimum amount specified for different categories under the Code.

Can the insolvency process be withdrawn?

Yes, with 90% approval from Committee of Creditors, the process can be withdrawn before approval of resolution plan. NCLT approval is also required for withdrawal.

Client Testimonials – Insolvency & Bankruptcy Matters

SK

Sanjeev Khanna

Chandigarh

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"I consulted the firm for an insolvency matter before NCLT. The lawyers explained the IBC process clearly and guided me through each procedural stage."

NB

Neha Bansal

Mohali

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"The legal team provided clear advice regarding creditor rights and the insolvency resolution process under the IBC."

RM

Rohit Mehra

Panchkula

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"I received practical guidance on CIRP timelines, documentation, and stakeholder roles. The approach was professional and structured."

AA

Amit Arora

Chandigarh

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"The lawyers explained the differences between resolution and liquidation in a simple manner and handled the proceedings responsibly."

PV

Pooja Verma

Mohali

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"Clear and honest assessment helped me understand whether insolvency proceedings were appropriate in my case."

VS

Vikas Sharma

Kullu

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"Professional handling of an IBC matter with transparent explanation of legal limitations and process."

Facing Financial Distress? Get Expert IBC Legal Assistance

Don't let financial difficulties destroy your business or investment. Our experienced insolvency lawyers have successfully handled a lot of IBC cases before NCLT, recovering substantial amount of money for stakeholders. Whether you're a creditor seeking recovery or a company needing restructuring, we provide strategic legal solutions under the Insolvency and Bankruptcy Code.

Free IBC Strategy Consultation

Every insolvency situation requires immediate expert evaluation. Get professional assessment of your options under IBC and the most effective strategy from our experienced NCLT specialists.

Complete Insolvency & Bankruptcy Services:

  • CIRP Petitions: Filing and defending corporate insolvency resolution process petitions
  • Resolution Plans: Drafting, evaluation, and approval of comprehensive revival plans
  • Liquidation Proceedings: Managing corporate liquidation and asset realization processes
  • Creditor Representation: Protecting financial and operational creditor interests
  • NCLT & NCLAT Practice: Expert advocacy before insolvency tribunals
  • Due Diligence: Comprehensive asset and liability assessment for stakeholders
  • Compliance & Advisory: IBC compliance and strategic insolvency planning

  └─ Free Consultation for Insolvency & Bankruptcy matters

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