Taxmann's Insolvency and Bankruptcy Code Ready Reckoner

u Contents I-9
u Acronyms I-23
u Amendments made by Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2021 at a glance I-27
u Guide to Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2021 I-29
u Section Index I-53
CHAPTER 1
DECLINING STAGE OF AN ORGANISATION 1
CHAPTER 2
INSOLVENCY PROFESSIONAL 40
CHAPTER 3
INSOLVENCY RESOLUTION OF CORPORATE PERSONS 53
CHAPTER 4
CONDUCTING CORPORATE INSOLVENCY RESOLUTION
PROCESS 93
CHAPTER 5
RESOLUTION PLAN BY RESOLUTION APPLICANT 132
CHAPTER 6
FAST TRACK CORPORATE INSOLVENCY RESOLUTION
PROCESS 163
Chapter-Heads
PAGE
I-5

CHAPTER 6A
PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS
(PPIRP) 165
CHAPTER 6B
PROCEDURE FOR PPIRP AFTER ADMISSION OF
APPLICATION 189
CHAPTER 6C
SUBMISSION AND APPROVAL OF RESOLUTION PLAN
UNDER PPIRP 211
CHAPTER 7
LIQUIDATION OF CORPORATE PERSON 231
CHAPTER 8
ADMISSION AND PROOF OF CLAIMS BY LIQUIDATOR 248
CHAPTER 9
REALISATION AND DISTRIBUTION OF ASSETS BY
LIQUIDATOR 260
CHAPTER 10
PAYMENT OF DUES TO STAKEHOLDERS AFTER LIQUI-
DATION OR DURING FORMULATION OF RESOLUTION
PLAN 267
CHAPTER 11
VOLUNTARY LIQUIDATION OF COMPANIES 276
CHAPTER 12
ADJUDICATION AND APPEALS FOR CORPORATE
PERSONS 283
CHAPTER 13
CROSS BORDER INSOLVENCY AND BANKRUPTCY 291
CHAPTER 14
OFFENCES AND PENALTIES IN RELATION TO COR-
PORATE INSOLVENCY 293
PAGE
CHAPTER-HEADS I-6

CHAPTER 15
BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP
FIRMS 300
CHAPTER 16
FRESH START PROCESS 303
CHAPTER 17
INSOLVENCY RESOLUTION OF INDIVIDUAL AND FIRM 309
CHAPTER 18
BANKRUPTCY ORDER FOR INDIVIDUALS AND FIRMS 323
CHAPTER 19
BANKRUPTCY TRUSTEE 336
CHAPTER 20
SETTLEMENT OF CLAIMS AGAINST BANKRUPT 347
CHAPTER 21
COMPROMISES, ARRANGEMENTS AND AMALGAMA-
TIONS 351
CHAPTER 22
REGISTERED VALUERS 365
CHAPTER 23
REMOVAL OF NAME OF COMPANIES FROM REGISTER
OF MEMBERS 372
CHAPTER 24
NCLT AND NCLAT 383
CHAPTER 25
RECOVERY OF DEBTS AND BANKRUPTCY ACT, 1993 395
CHAPTER 26
SARFAESI ACT 416
PAGE
I-7 CHAPTER-HEADS

CHAPTER 27
RBI DIRECTIONS ON RESOLUTION OF STRESSED
ASSETS 472
SUBJECT INDEX 479
PAGE
CHAPTER-HEADS I-8

Contents
u Chapter-heads I-5
u Acronyms I-23
u Amendments made by Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2021 at a glance I-27
u Guide to Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2021 I-29
u Section Index I-53
1
DECLINING STAGE OF AN ORGANISATION
1.1 Background 1
1.2 Overall scheme of the Insolvency and Bankruptcy Code 9
1.3 Insolvency Code has overriding effect 14
1.4 Limitation Act applies to proceedings before NCLT or
NCLAT 15
1.5 Provisions in Companies Act, 2013 relating to winding up
are applicable to the extent not contrary to Insolvency
Code 21
1.6 Insolvency and Bankruptcy Board of India (IBBI) 21
1.7 Adjudicating Authority (AA) and Appellate Authorities 24
1.8 Information Utility (IU) 25
1.9 Insolvency and Bankruptcy Fund 27
1.10 Winding up provisions under Companies Act revamped 27
1.11 Transitory provisions for shifting from winding up
proceedings to Insolvency 28
1.12 Lenders may apply under SARFAESI and DRT and in
addition they can go for Insolvency resolution 30
I-9
PAGE

1.13 Transitory provisions as SICA repealed 31
1.14 Income-tax provisions for corporate debtors where app-
lication for CIRP has been admitted 32
1.15 Promoter/director can be Resolution applicant if Corpo-
rate Debtors is MSME 33
1.16 Special provisions under GST relating to companies under
Insolvency Process 37
1.17 Institution and/or continuation of proceedings under
FTDR against companies against whom proceedings
have been instituted under Insolvency Code 38
1.18 Role of Government and its agencies in CIRP and Liqui-
dation Process 39
2
INSOLVENCY PROFESSIONAL
2.1 Background 40
2.2 Insolvency Professional Agency (IPA) 40
2.3 Insolvency Professional (IP) 42
2.4 Panel of Insolvency Professionals to recommend to NCLT
as Interim Resolution Professional or Liquidator 50
2.5 Insolvency Professional Entities 51
3
INSOLVENCY RESOLUTION OF
CORPORATE PERSONS
3.1 Background 53
3.2 Initiation of corporate insolvency resolution process 53
3.3 Who can initiate insolvency resolution process 62
3.4 Initiation of proceedings by financial creditor 65
3.5 Insolvency proceedings can be initiated against corporate
guarantor or personal guarantors 75
3.6 Initiation of insolvency resolution by operational creditor 77
3.7 Initiation of insolvency resolution process by corporate
applicant himself 89
3.8 Appointment of Interim Resolution Professional 91
CONTENTS I-10
PAGE

3.9 Further procedure before NCLT 92
3.10 Withdrawal of application after admission with approval
of 90% voting by CoC 92
4
CONDUCTING CORPORATE INSOLVENCY
RESOLUTION PROCESS
4.1 Background 93
4.2 Moratorium and public announcement 96
4.3 Public announcement of corporate insolvency resolution
process 104
4.4 Appointment and tenure of interim resolution professional 105
4.5 Submission of proof of claims to interim resolution
professional 109
4.6 Committee of Creditors (CoC) 111
4.7 Appointment of resolution professional in first meeting of
CoC 119
4.8 Powers and functions of Committee of Creditors (CoC) 120
4.9 Duties of resolution professional 123
4.10 Prior approval of committee of creditors for certain actions
by resolution professional 126
4.11 Preparation of information memorandum 127
4.12 Protection to insolvency resolution professional in respect
of earlier transactions 128
4.13 Special Provisions in respect of NBFC with assets of Rs. 500
crore or more 128
5
RESOLUTION PLAN BY RESOLUTION APPLICANT
5.1 Background 132
5.2 Ineligible Resolution Applicant 133
5.3 Invitation for expression of interest 140
5.4 Submission of resolution plan by resolution applicant to
insolvency professional 142
5.5 Insolvency resolution process costs 149
5.6 Approval of resolution plan by Committee of Creditors 151
I-11 CONTENTS
PAGE

5.7 Submission of plan to Adjudicating Authority 155
5.8 Assistance of district administration in implementing the
resolution plan 159
5.9 Effect if resolution plan rejected by NCLT 159
5.10 Appeal against order of adjudicating authority 159
5.11 Immunity from prosecution of corporate debtor after
approval of CIRP 159
5.12 No action against property of corporate debtor in respect
of offence committed prior to CIRP if there was change
in management or sale of assets 161
5.13 Preservation of records of CIRP by RP 162
6
FAST TRACK CORPORATE INSOLVENCY
RESOLUTION PROCESS
6.1 Speedy process for insolvency resolution 163
6.2 Application for fast track process 163
6.3 Procedure for fast track process 164
6A
PRE-PACKAGED INSOLVENCY RESOLUTION
PROCESS (PPIRP)
6A.1 Background of the PPIRP (Pre-packaged Insolvency
Resolution Process) 165
6A.2 Basic design of pre-packaged insolvency resolution
process (PPIRP) 169
6A.3 Application of provisions of CIRP to PPIRP 173
6A.4 Priority to PPIRP over CIRP, except where CIRP
proceedings have already commenced 175
6A.5 Eligibility and conditions to apply for PPIRP 177
6A.6 Initiation of PPIRP by Corporate Debtor 179
6A.7 Duties and authorities of Insolvency Professional
proposed to be appointed as Resolution Professional 181
6A.8 Procedure prior to application to AA for approval to
initiate PPIRP 183
6A.9 Filing of application by Corporate Applicant with
Adjudicating Authority 185
CONTENTS I-12
PAGE

6A.10 Admission or rejection of application by Adjudicating
Authority (NCLT) 187
6A.11 Moratorium during PPIRP period 188
6B
PROCEDURE FOR PPIRP AFTER
ADMISSION OF APPLICATION
6B.1 Formal process of PPIRP starts only after admission of
application 189
6B.2 Conduct of PPIRP by Resolution Professional 190
6B.3 Powers of Resolution Professional during initial stages
of PPIRP 192
6B.4 Filing of Application for avoidance of transactions 193
6B.5 Prior approval of Committee of Creditors (CoC) for
certain actions by corporate debtor 195
6B.6 Information to be supplied by financial institutions to
Resolution Professional 197
6B.7 Submission of List of claims and its updation in PPIRP 197
6B.8 Conduct of business of Corporate Debtor during PPIRP 200
6B.9 Constitution and functioning of Committee of Creditors
in PPIRP 201
6B.10 Meeting of Committee of Creditors in PPIRP 203
6C
SUBMISSION AND APPROVAL OF
RESOLUTION PLAN UNDER PPIRP
6C.1 What is a resolution plan 211
6C.2 Submission of Base Resolution Plan by RP to CoC 215
6C.3 Invitation to Resolution Applicants if CoC does not
approve base resolution plan or operational creditors
cannot be satisfied 217
6C.4 Furnishing of information to Resolution Applicants 219
6C.5 Submission of resolution plan by resolution applicant
and its evaluation 221
6C.6 Submission of Resolution Plans by Resolution
Professional to CoC 222
I-13 CONTENTS
PAGE

6C.7 Submission of Resolution Plan approved by CoC for
approval by AA 225
6C.8 Termination of PPIRP which ultimately results in
liquidation of corporate debtor 227
6C.9 CoC may terminate PPIRP if corporate debtor eligible
for CIRP 229
7
LIQUIDATION OF CORPORATE PERSON
7.1 Initiation of Liquidation 231
7.2 Appointment of Liquidator and his fees 234
7.3 Powers and duties of Liquidator 237
7.4 Liquidation Estate 241
7.5 Realization of security interest by secured creditor 243
7.6 Distribution of unsold assets 244
7.7 Liabilities of contributory in liquidation 245
8
ADMISSION AND PROOF OF
CLAIMS BY LIQUIDATOR
8.1 Liquidator has powers to access information 248
8.2 Ascertaining claims against corporate debtor 249
8.3 Avoidance of preferential transactions by liquidator 251
8.4 Avoidance of undervalued transactions 255
8.5 Action if corporate debtor had defraud creditors 256
8.6 Protection to corporate debtor against extortionate credit
transactions 256
8.7 Position of secured creditor in liquidation proceedings 258
9
REALISATION AND DISTRIBUTION
OF ASSETS BY LIQUIDATOR
9.1 Realisation of assets by Liquidator 260
9.2 Mode of sale 260
9.3 All money to be paid into bank account except petty cash 261
CONTENTS I-14
PAGE

9.4 Distribution of assets 261
9.5 Distribution of cash to stakeholders 264
9.6 Completion of liquidation within one year 264
9.7 Final report by Liquidator prior to dissolution 265
9.8 Unclaimed proceeds of liquidation or undistributed
assets to be transferred to Corporate Liquidation
Account 265
9.9 Dissolution of corporate debtor 266
10
PAYMENT OF DUES TO STAKEHOLDERS AFTER
LIQUIDATION OR DURING FORMULATION
OF RESOLUTION PLAN
10.1 Insolvency Code is complete code in respect of distribution
of assets 267
10.2 Money held in trust has priority over all dues 268
10.3 Statutory dues under other laws 269
10.4 Workmen’s portion of Workmen’s dues previous for two
years have overriding priority 270
10.5 Provisions relating to secured creditors 272
10.6 Priority of tax dues in winding up over secured creditors 273
10.7 Preferential Payments under Companies Act 275
10.8 Distribution of surplus amount members 275
10.9 Tax liability under Income Tax in respect of distribution
of assets to equity shareholders 275
11
VOLUNTARY LIQUIDATION OF COMPANIES
11.1 Voluntary liquidation by corporates with no default 276
11.2 Procedure for Voluntary Liquidation 276
11.3 Notification to Registrar after resolution 277
11.4 Application to NCLT after assets wound up 277
11.5 Procedure for voluntary liquidation 277
11.6 Claim by various creditors Proof of claim 278
11.7 Realisation of Assets 279
I-15 CONTENTS
PAGE

11.8 Completion of liquidation 280
11.9 Cases where voluntary liquidation was allowed 282
12
ADJUDICATION AND APPEALS FOR
CORPORATE PERSONS
12.1 Adjudicating Authority in relation to insolvency resolution
and liquidation for corporate persons 283
12.2 Appeals and Appellate Authority 285
12.3 Appeal to Supreme Court on question of law 286
12.4 Civil Court not to have jurisdiction where NCLT or IBBI
has jurisdiction 287
12.5 Expeditious disposal of applications 287
12.6 Penalty for Fraudulent or malicious initiation of
proceedings 288
12.7 Penalty of carrying on business fraudulently to defraud
traders 288
13
CROSS BORDER INSOLVENCY
AND BANKRUPTCY
13.1 Enabling provisions for cross border transactions 291
13.2 Agreements with foreign countries 291
13.3 Letter of request to a country outside India in respect of
assets 291
14
OFFENCES AND PENALTIES IN RELATION
TO CORPORATE INSOLVENCY
14.1 Punishments for offences 293
14.2 Punishment for concealment of property 293
14.3 Punishment for transactions defrauding creditors 294
14.4 Punishment for misconduct in course of corporate
insolvency resolution process 295
14.5 Offences by insolvency professional 296
14.6 Punishment for falsification of books of corporate debtor 296
CONTENTS I-16
PAGE

14.7 Punishment for wilful and material omissions from
statements relating to affairs of corporate debtor 296
14.8 Punishment for false representations to creditors 296
14.9 Punishment for contravention of moratorium or the
resolution plan 296
14.10 Punishment for false information furnished in application 297
14.11 Punishment for non-disclosure of (a) dispute or (b) payment
of debt by operational creditor 297
14.12 Punishment for providing false information in application
made by corporate debtor 297
14.13 Residual punishment of fine for violation of provisions of
Insolvency Code 298
14.14 NCLT can ask Government to investigate and Government
can file complaint before Special Court 298
14.15 Punishment for providing false information in pre-pack-
aged insolvency resolution process 298
14.16 Punishment for providing false information in pre-pack-
aged insolvency resolution process 299
14.17 When the application shall be deemed to be false in
material particulars 299
15
BANKRUPTCY FOR INDIVIDUALS
AND PARTNERSHIP FIRMS
15.1 Background 300
15.2 Adjudicating Authority 301
15.3 Civil Court not to have jurisdiction 302
15.4 Appeal against order of DRT 302
15.5 Appeal to Supreme Court 302
16
FRESH START PROCESS
16.1 Introduction 303
16.2 Interim moratorium 305
16.3 Procedure after receipt of application 305
16.4 Objections by creditor 306
16.5 Discharge order 307
PAGE
I-17 CONTENTS

17
INSOLVENCY RESOLUTION OF
INDIVIDUAL AND FIRM
17.1 What is insolvency resolution? 309
17.2 Creditor can initiate insolvency resolution process 310
17.3 Interim moratorium 311
17.4 Admission or rejection of application by Adjudicating
Authority 312
17.5 Moratorium if application is admitted by Adjudicating
Authority 312
17.6 Registering of claims by creditors after public notice 313
17.7 Repayment plan by debtor in consultation with resolution
professional 313
17.8 Summoning of meeting of creditors 314
17.9 Rights of secured creditors in relation to repayment plan 315
17.10 Approval of repayment plan by creditors by more than
75% voting 316
17.11 Order of Adjudicating Authority on repayment plan 316
17.12 Report of Completion of repayment plan 317
17.14 Special provisions for insolvency resolution for personal
guarantors of corporate debtors 318
18
BANKRUPTCY ORDER FOR
INDIVIDUALS AND FIRMS
18.1 Bankruptcy if insolvency resolution process fails 323
18.2 Interim moratorium as soon as application is filed 324
18.3 Bankruptcy order by Adjudicating Authority 325
18.4 Statement of financial position by bankrupt 326
18.5 Settlement of claims of creditors 327
18.6 Administration and distribution of estate of bankrupt 328
18.8 Modification or recall of bankruptcy order 329
18.9 Disqualification of bankrupt from bankruptcy com-
mencement date till he is discharged 329
PAGE
CONTENTS I-18

18.10 Bankruptcy process for personal guarantors to Corporate
Debtors 330
19
BANKRUPTCY TRUSTEE
19.1 Standard of conduct of bankruptcy trustee 336
19.2 Release of bankruptcy trustee 337
19.3 Administration and distribution of estate of bankrupt by
bankruptcy trustee 337
19.4 Approval of creditors for certain acts to be done by
bankruptcy trustee 339
19.5 Estate of bankrupt 339
19.6 Onerous property of bankrupt can be disowned 341
19.7 Challenge against disclaimed property 342
19.8 Undervalued transactions 343
19.9 Preference transactions 344
19.10 Extortionate credit transactions 345
19.11 Proceedings continue even if bankrupt dies 345
20
SETTLEMENT OF CLAIMS AGAINST BANKRUPT
20.1 Proof of debt 347
20.2 Distribution of interim dividend 348
20.3 Distribution of property among creditors 348
20.4 Final dividend 348
20.5 Claims of creditors who had not proved their debt 349
20.6 Priority of payment of debts 349
21
COMPROMISES, ARRANGEMENTS
AND AMALGAMATIONS
21.1 Background 351
21.2 Application to NCLT 353
21.3 Sections 230 to 240 is complete code of ‘single window
clearance’ 355
PAGE
I-19 CONTENTS

21.4 Merger and Amalgamation 356
21.5 Procedure to be followed 358
21.6 Simplified fast track procedure in case of small companies
or holding/subsidiary companies 361
21.7 Cross border mergers 361
21.8 Takeover of another company by purchasing 100% of
shares 362
21.9 Compromise or arrangement may include takeover 362
21.10 Compulsory offer to purchase of minority shareholding
if acquirer already holds 90% or more equity shares 363
21.11 Power to Central Government to order compulsory
amalgamation 363
22
REGISTERED VALUERS
22.1 Background 365
22.2 Qualifications and eligibility and registration as valuer 368
22.3 Methods of valuation 371
22.4 Liability of valuer is as ‘expert’ 371
23
REMOVAL OF NAME OF COMPANIES
FROM REGISTER OF MEMBERS
23.1 Removal of name - Short cut to winding up 372
23.2 Striking off name of a company 372
23.3 Company may itself request for removal of its name from
register of companies 374
23.4 NCLT can issue winding up order even if name of struck
off the register 376
23.5 Restrictions in applying for removal of name 376
23.6 Effect if company is dissolved by removing name from
register 377
23.7 Effect if company carries on business even after name is
struck off the register 377
23.8 Fraudulent application for removal of name 377
23.9 Appeal before NCLT against removal of name of company 378
CONTENTS I-20
PAGE

23.10 When NCLT can restore name of company 379
23.11 Restoration of name of company if application made
within 20 years 382
24
NCLT AND NCLAT
24.1 Background 383
24.2 Constitution of Tribunal (NCLT) 386
24.3 National Company Law Appellate Tribunal 387
24.4 Provisions common to NCLT and NCLAT 388
24.5 Procedural aspects of NCLT and NCLAT 390
24.6 Appeal to Supreme Court against order of NCLAT 393
25
RECOVERY OF DEBTS AND
BANKRUPTCY ACT, 1993
25.1 Background of RDB Act 395
25.2 Debt Recovery Tribunal 402
25.3 General provisions relating to DRT and DRAT 406
25.4 Procedure at Debt Recovery Tribunal 406
25.5 Appeal against order of DRT 411
25.6 Further appeals after order of DRAT 412
25.7 Decree of foreign court should be executed through DRT
only 413
25.8 Recovery Powers after issue of certificate 414
26
SARFAESI ACT
26.1 Overview 416
26.2 Enforcement of Security Interest 418
26.3 How to enforce security interest 427
26.4 How the secured creditor can exercise his right? 432
26.5 Other related provisions 433
PAGE
I-21 CONTENTS

6 Procedure for sale of asset 437
26.7 Takeover of management of defaulting borrower 448
26.8 Application, Appeals and Penalty 450
26.9 Securitisation 456
26.10 Asset Reconstruction Companies 458
26.11 Acquiring financial assets by ARC from Bank/FI 463
26.12 Central Registry under SARFAESI Act 467
26.13 Asset Reconstruction 470
27
RBI DIRECTIONS ON RESOLUTION
OF STRESSED ASSETS
27.1 Background 472
27.2 RBI Directions on Prudential Framework for Resolution
of Stressed Assets 473
27.3 Framework for Resolution of Stressed Assets as directed
by RBI 474
27.4 Provisioning in case of delayed Implementation of Reso-
lution Plan 476
27.5 Prudential Norms 476
27.6 Supervisory Review by RBI 477
27.7 Disclosures by lenders in financial statements 477
27.8 Exceptions to the directions for stressed assets 477
SUBJECT INDEX 479
CONTENTS I-22

53
Insolvency Resolution of
corporate persons
3.1 Background
Part II of Insolvency Code, 2016 [sections 4 to 77] deal with Insolvency Resolution and
liquidation of corporate persons.
This part is divided into seven chapters. Each chapter dealing with different issues relating
to Insolvency Resolution and liquidation of corporate persons.
3.2 Initiation of corporate insolvency resolution process
Corporate insolvency resolution process (CIRP) can be commenced when a corporate
debtor commits a default - section 4(1) of Insolvency Code, 2016.
The default should be minimum Rs one crore - proviso to section 4(1) of Insolvency Code,
2016 [Limit of Rs one lakh increased to Rs one crore vide Notification No. S.O. 1205(E)
dated 24-3-2020] - noted and followed in Pankaj Aggrawal v. UOI (2020) 160 SCL 624 = 117
taxmann.com 494 (Del HC).
CIRP cannot be initiated if amount involved is less than Rs one lakh (now Rs one crore)
- Deltas Pharma v. Life Essential Personalcare (2018) 148 SCL 234 = 94 taxmann.com 222
(NCLT).
When amount involved exceeds Rs one lakh (now Rs one crore), Adjudicating Authority
is not required to determine exact amount defaulted. Discrepancy in calculation can be
settled by CoC - Bank of Baroda v. Barnala Steel Industries P Ltd. (2018) 148 SCL 246 = 94
taxmann.com 202 (NCLT) * Standard Chartered Bank v. Woolways India Ltd. [2018] 94
taxmann.com 381 (NCLT).
Minimum default for pre-packaged IRP (PPIRP) can be set upto Rupees one crore
(presently minimum Rs. 10 lakhs) - The Central Government may, by notification, specify
such minimum amount of default of higher value, which shall not be more than one
crore rupees, for matters relating to the pre-packaged insolvency resolution process of
corporate debtors (PPIRP) under Chapter III-A (Pre-packaged insolvency resolution
3
3
3
3
3
C H A P T E R

process) - second proviso to section 4 of Insolvency Code inserted vide Ordinance w.e.f.
4-4-2021.
Minimum default should be Rupees ten lakhs in case of PPIRP - Minimum default
should be Rs. ten lakhs for the matters relating to the pre-packaged insolvency resolu-
tion process of corporate debtor under Chapter III-A of the Insolvency Code - Notifica-
tion No. S.O. 1543(E) dated 9-4-2021. There is no upper limit for maximum default.
Corporate debtor - “Corporate debtor” means a corporate person who owes a debt to any
person - section 3(8) of Insolvency Code, 2016 - section 3(8) of Insolvency Code, 2016.
Proceedings for CIRP is not a ‘suit’, hence partnership firm can apply under Insolvency
Code - Application for CIRP is not a ‘suit’. Provisions of section 69(2) of Indian Partnership
Act, 1932, applies to ‘suits’ and therefore, same cannot apply to ‘proceedings’ under Code
- NN Enterprises v. Relcon Infra Projects Ltd. [2020] 159 SCL 229 = 114 taxmann.com 673
(NCLT) * Shree Dev Chemicals v. Gammon India (2020) 161 SCL 59 = 118 taxmann.com
56 (NCLT) [section 69(2) of Indian Partnership Act bars an unregistered firm from filing
a ‘suit’].
InsolvencyproceedingsbeforeNCLTisnota‘suit’- BimalkumarManubhaiSavaliav.Bank
of India [2020] 117 taxmann.com 227 (NCLAT).
Reasons for default are not relevant – If there was debt and there is default, application
is required to be admitted. Reasons for default are not relevant – Dr. H N Nagaraj v.
Edelweiss Asset Reconstruction Co Ltd. (2018) 148 SCL 447 = 84 taxmann.com 326
(NCLAT). [In this case, the applicant argued that the restructured loan instalments were
to be paid by selling immovable properties. However, these could not be sold as financial
creditor had obtained injunction from Court].
Application is for resolution of insolvency and not recovery proceeding - Application to
initiate CIRP is for resolution of insolvency or liquidation and not (in effect) for recovery
of debt. Such application cannot be admitted - C Shivakumar Reddy v. Dena Bank (2020)
158 SCL 375 = 114 taxmann.com 219 (NCLAT) - relying on Jignesh Shah v. UOI (2019) 109
taxmann.com 486 = 156 SCL 542 = 10 SCC 750 (SC 3 member bench).
NCLT cannot exercise inherent powers to decide any dispute under section 7, 9 or 10 -
NCLT has to decide issue of ‘dispute’ as per the definition. NCLT cannot exercise inherent
powers to decide any dispute under section 7, 9 or 10 (by considering some extraneous
matters) – Neha Himatsinghka v. Himatsingka Resorts P Ltd. (2019) 151 SCL 359 = 100
taxmann.com 421 (NCLAT).
Joint application against two corporate debtors permissible - Joint application against
two corporate debtors is permissible if developer and landowner has collaborated i.e.
had Joint Development Agreement – Mrs Mamatha v. AMB Infrabuild P Ltd. (2019) 151
SCL 507 = 101 taxmann.com 309 (NCLAT).
In Edelweiss Asset Reconstruction Company Ltd. v. Sachet Infrastructure (P.) Ltd. [2019]
111 taxmann.com 115 (NCLAT), corporate debtors (landholders) in concert with principal
borrower decided to develop an area by constructing infrastructure for allottees. Lands
of all corporate debtors were consolidated for construction purpose. It was held that
Resolution Process would not succeed if whole project was not taken over by Resolution
Professionalforconsolidated‘resolutionplan’.Hence,groupCIRPproceedingsisrequired
to be initiated against corporate debtors apart from CIRP already initiated against
principal borrower.
Para 3.2 INSOLVENCY RESOLUTION OF CORPORATE PERSONS 54

However, in Dr. Vishnu Kumar Agarwal v. Piramal Enterprises Ltd. (2019) 151 SCL 555 =
101 taxmann.com 464 (NCLAT), it was held that financial creditor cannot file two CIRP
against two corporate guarantors, for same set of debt.
ConsolidatedCIRPincaseofgroupcompaniesi.e.holdingandsubsidiary-InAxisBank
Ltd., In re (2020) 162 SCL 67 = 115 taxmann.com 133 (NCLT), CIRP was initiated against
three group companies - one holding and two 100% subsidiaries. It was noted that each
100% subsidiary depended on outcome of holding company, and without consolidation of
CIRP of the three companies, resolution was not possible. Hence, consolidation of CIRP
was ordered.
Direct liquidation if no possibility of revival of corporate debtor - If there is no
possibility of revival of corporate debtor, it would be just and proper to put the corporate
debtor under liquidation process, rather than to put it in CIRP in first instance - GNB
Technologies P Ltd., In re [2020] 115 taxmann.com 188 (NCLT) * Ultratreat Industrial
Services v. Karan Processors (P.) Ltd. [2021] 124 taxmann.com 84 (NCLT).
Suspension of initiation of CIRP - No CIRP if default occurs on or after 25-3-2020 and
upto 24-3-2021 -InviewoflockdownduetoCovid-19(Coronavirus),ifanydefaultoccurs
on or after 25-3-2020, application for CIRP cannot be filed for one year (initially it was for
six months) in specified situations. This is not universal suspension of Insolvency Code but
only suspension of CIRP if default occurs during Covid-19 period i.e. 25-3-2020 to 24-3-
2021.
Section 10A of Insolvency Code, as introduced w.r.e.f. 5-6-2020, reads as follows -
Notwithstanding anything contained in sections 7, 9 and 10 of Insolvency Code, no
application for initiation of corporate insolvency resolution process of a corporate debtor
shallbefiled,foranydefaultarisingonorafter25-3-2020foraperiodofsixmonthsorsuch
further period, not exceeding one year from such date, as may be notified in this behalf.
No application shall ever be filed for initiation of corporate insolvency resolution process
of a corporate debtor for the said default occurring during the said period - Explanation
to section 10A of Insolvency Code.
It is clarified that the provisions of this section shall not apply to any default committed
under the said sections before 25-3-2020.
3.2-1 Meaning of Corporate Person
Corporate person means company or LLP or other body corporate with limited liability.
However, the Code does not cover Bank, Financial Institutions, Insurance Company,
Asset Reconstruction Company, Mutual Funds, Collective Investment Schemes or Pension
Funds.
“Corporate person” means a company as defined in section 2(20) of the Companies Act,
2013, a limited liability partnership (LLP) or any other person incorporated with limited
liability under any law for the time being in force, but shall not include any financial
service provider - section 3(7) of Insolvency Code, 2016.
However, section 227 of Insolvency Code empowers Central Government to notify
financial services to whom provisions of Insolvency Code shall apply. Under these powers,
Insolvency Code has been made applicable to NBFC with assets of Rs 500 crore or more.
Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service
Providers and Application to Adjudicating Authority) Rules, 2019.
55 INITIATION OF CORPORATE INSOLVENCY RESOLUTION PROCESS Para 3.2

“Financial service provider” means a person engaged in the business of providing financial
services in terms of authorisation issued or registration granted by a financial sector
regulator - section 3(17) of Insolvency Code, 2016.
“Financial sector regulator” means an authority or body constituted under any law for
the time being in force to regulate services or transactions of financial sector and includes
the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance
Regulatory and Development Authority of India, the Pension Fund Regulatory Authority
and such other regulatory authorities as may be notified by the Central Government -
section 3(18) of Insolvency Code, 2016.
“Financial service” includes any of the following services - section 3(16) of Insolvency
Code, 2016—
(a) accepting of deposits.
(b) safeguarding and administering assets consisting of financial products, belonging
to another person, or agreeing to do so.
(c) effecting contracts of insurance.
(d) offering, managing or agreeing to manage assets consisting of financial products
belonging to another person.
(e) rendering or agreeing, for consideration, to render advice on or soliciting for the
purposes of— (i) buying, selling, or subscribing to, a financial product (ii) availing
a financial service; or (iii) exercising any right associated with a financial product
or financial service.
(f) establishing or operating an investment scheme.
(g) maintaining or transferring records of ownership of a financial product.
(h) underwriting the issuance or subscription of a financial product.
(i) selling, providing, or issuing stored value or payment instruments or providing
payment services.
Financial Product - “Financial product” means securities, contracts of insurance, deposits,
credit arrangements including loans and advances by banks and financial institutions,
retirement benefit plans, small savings instruments, foreign currency contracts other
than contracts to exchange one currency (whether Indian or not) for another which are
to be settled immediately, or any other instrument as may be prescribed - section 3(15)
of Insolvency Code, 2016.
3.2-2 Limited coverage of financial service providers
Definition of ‘corporate person’ completely excludes financial service providers, unless
specifically notified under section 227 of Insolvency Code. The reason is that they are
regulated by specialized agencies.
Thus, the Code does not cover Bank, Financial Institutions, NBFC, Insurance Company,
AssetReconstructionCompany,MutualFunds,CollectiveInvestmentSchemesorPension
Funds, unless specifically notified.
The provisions of Insolvency Code have been made applicable to NBFC (which include
housing finance companies) with asset size of Rs 500 crore or more as per last audited
balance sheet, vide Notification No. S.O. 4139(E) dated 18-11-2019. RBI will be the
‘Appropriate Financial Regulator’ for this purpose.

NBFC cannot be a ‘corporate debtor’ (unless notified under section 227 of Insolvency
Code) - In Jindal Saxena Financial Services v. Mayfair Capital (2018) 146 SCL 76 = 90
taxmann.com 127 (NCLT), it was held that NBFC is engaged in various activities and hence
NBFC is not ipso facto excluded from definition of ‘corporate person’ under section 3(7)
of Insolvency Code. NBFC can be a ‘corporate debtor’. However, this decision has been
reversed in Randhiraj Thakur v. Jindal Saxena Financial Services (2018) 150 SCL 154 =
98 taxmann.com 192 (NCLAT), where it was held that when RBI has granted certificate
of registration as NBFC, it is financial service provider and hence NBFC cannot be a
corporate debtor.
Application against NBFC under section 7 of Insolvency Code is not maintainable –
Housing Development Finance Corporation Ltd. v. RHC Holding (P.) Ltd. [2019] 107
taxmann.com 200 (NCLAT).
NBFC cannot be a ‘corporate debtor as it is financial service provider. Application under
section 7 is not maintainable against NBFC – Housing Development Finance Corporation
Ltd. v. RHC Holding (2019) 155 SCL 4 = 107 taxmann.com 200 (NCLAT) * Saumil
A Bhavnagri v. Nimit Builders (2020) 158 SCL 133 = 114 taxmann.com 55 (NCLAT).
3.2-2A Specific provisions applicable to financial service providers (like NBFC) covered
under insolvency code
Provisions of Insolvency Code do not apply to financial service providers unless specific
notification is issued under section 227 of Insolvency Code.
The insolvency and liquidation proceedings for financial service providers or categories
of financial service providers may be conducted with such modifications and in such
manner as may be prescribed – Explanation to section 227 of Insolvency Code inserted
vide IBC (Amendment) Act, 2020, w.r.e.f. 28-12-2019.
Presently provisions of Insolvency Code apply to NBFC (which include housing finance
companies) with asset size of Rs 500 crore or more as per last audited balance sheet, vide
Notification No. S.O. 4139(E) dated 18-11-2019. RBI will be the ‘Appropriate Financial
Regulator’ for this purpose.
The Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial
Service Providers and Application to Adjudicating Authority) Rules, 2019 have been
notified on 1-12-2019.
The Rules shall apply to such FSPs or categories of FSPs, as will be notified by the Central
Government under section 227 of Insolvency Code from time to time in consultation with
appropriate regulators, for the purpose of their insolvency and liquidation proceedings.
The Rules provide that the provisions of the Code relating to the Corporate Insolvency
Resolution Process (CIRP), Liquidation Process and Voluntary Liquidation Process for a
corporate debtor shall, mutatis mutandis, apply to a process for an FSP, subject to
modifications, as under –
(a) The CIRP of an FSP shall be initiated only on an application by the appropriate
regulator (and not by corporate debtor). [In case of NBFC, ‘appropriate regulator’
is RBI]. This will be treated as application by financial creditor under section 7 of
Insolvency Code.

(b) On admission of the application, the Adjudicating Authority shall appoint the
individual, who has been proposed by the appropriate regulator in the application
for initiation of CIRP, as the Administrator (He will be termed as ‘administrator’
instead of ‘insolvency professional’, ‘insolvency resolution professional’, ‘resolution
professional’, ‘liquidator’ etc.)
(c) While conducting a proceeding of an FSP, the Administrator shall have the same
duties, functions, obligations, responsibilities, rights, and powers of an insolvency
professional, interim resolution professional, resolution professional or liquidator,
as the case may be. He shall be appointed or replaced by the Adjudicating Authority
on an application made by the appropriate regulator in this behalf.
(d) The appropriate regulator may constitute an Advisory Committee of three or more
experts to advise the Administrator in the operations of the FSP during the CIRP
Rule 5(c). Thus, there will be no Committee of Creditors. An interim moratorium
shall commence on and from the date of filing of the application for initiation of
CIRP by the appropriate regulator till its admission or rejection by the Adjudicating
Authority [Rule 5(b)(i)].
(e) The provisions of interim-moratorium under rule 5(b) or moratorium under
section 14 of Insolvency Code shall not apply to any third-party assets or properties
in custody or possession of the FSP, including any funds, securities and other assets
required to be held in trust for the benefit of third parties [Rule 10(1)]
(f) The Administrator shall take control and custody of third-party assets or properties
in custody or possession of the FSP and deal with them in the manner, to be notified
by the Central Government under section 227 [rule 10(2)]
(g) The license or registration which authorises the FSP to engage in the business of
providing financial services shall not be suspended or cancelled during the interim-
moratorium and the CIRP [rule 5(b)(ii)]
(h) Upon approval of the resolution plan by the Committee of Creditors under section
30(4) of Insolvency Code, the Administrator shall seek ‘no objection’ from the
appropriateregulatortotheeffectthatithasnoobjectiontothepersons,whowould
be in control or management of FSP after approval of the resolution plan under
section31ofInsolvencyCode[rule5(d)(ii)].Theappropriateregulatorshallissue‘no
objection’ on the basis of the ‘fit and proper’ criteria applicable to the business of
the FSP without prejudice to the provision of Section 29A of the Code [rule 5(d)(iii)].
(i) Provisions of voluntary liquidation apply to notified FSP. The FSP shall obtain prior
permission of the appropriate regulator for initiating voluntary liquidation
proceedings [rule 8]. The Adjudicating Authority shall provide the appropriate
regulator an opportunity of being heard before passing an order for dissolution of
financial service provider under section 59 of Insolvency Code [rule 8(c)]
(j) The Adjudicating Authority shall provide the appropriate regulator an opportunity
of being heard before passing an order for liquidation under section 33 or
dissolution of the FSP under section 54 of Insolvency Code [rule 7(b)].
Manner of dealing with third party assets in custody or possession of financial service
providers by administrator - Manner of dealing with third party assets in custody or
possession of financial service providers by administrator has been specified in Notifica-
tion No. SO 464(E) dated 30-1-2020.

Third party receivables which are administered by financial service provider as servicing
or collection agent on behalf of third parties should continue. Statements and records
should be maintained.
In case of third party assets in custody or possession of financial service provider, records
should be maintained, assets should be properly maintained and returned/transferred to
person entitled for the same.
3.2-3 Meaning of ‘debt’, financial debt, claim, operational debt
The definitions of debt, claim, financial debt, operational debt are highly relevant under
Insolvency Code.
Debt - “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 – section 3(11) of Insolvency
Code, 2016.
Debt due means debt due and payable. If the debt is barred by law under Limitation Act,
it is not ‘debt due’ - B K Educational Services v. Parag Gupta and Associates (2018) 150 SCL
293 = 98 taxmann.com 213 (SC) = (2019) 11 SCC 633 - followed in SK Systems v. Hamtek
Infra Projects India (2020) 157 SCL 678 = 113 taxmann.com 201 (NCLT).
If recovery certificate was issued on 24-12-2001, petition for CIRP on 21-7-2017 is barred.
Section 23 of Limitation Act applies to continuous wrong and not to continuous right –
Vashdeo R Bhojwani v. Abhyudaya Cooperative Bank (2019) 9 SCC 158.
Claim - “Claim” means— (a) a right to payment, whether or not such right is reduced to
judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured (b) right
to remedy for breach of contract under any law for the time being in force, if such
breach gives rise to a right to payment, whether or not such right is reduced to judgment,
fixed, matured, un-matured, disputed, undisputed, secured or unsecured – section 3(6)
of Insolvency Code, 2016.
Financial Debt - “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) 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 as may be prescribed.
(e) receivables sold or discounted other than any receivables sold on non-recourse
basis.
(f) any amount raised under any other transaction, including any forward sale or
purchase agreement, having the commercial effect of a borrowing.
Explanation.— For the purposes of this sub-clause - (i) any amount raised from an
allottee under a real estate project shall be deemed to be an amount having the

commercialeffectofaborrowing;and(ii)theexpressions,“allottee”and“realestate
project” shall have the meanings respectively assigned to them in section 2(d) and
2(zn) of the Real Estate (Regulation and Development) Act, 2016 [Explanation
inserted w.e.f. 6-6-2018].
(g) any derivative transaction entered into in connection with protection against or
benefit from fluctuation in any rate or price and for calculating the value of any
derivative transaction, only the market value of such transaction shall be taken into
account.
(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond,
documentary letter of credit or any other instrument issued by a bank or financial
institution.
(i) the amount of any liability in respect of any of the guarantee or indemnity for any
of the items referred to in sub-clauses (a) to (h) of this clause - Section 5(8) of
Insolvency Code, 2016.
Broad definition of ‘financial debt’ - In Pioneer Urban Land & Infrastructure Ltd. v. UOI
(2019) 8 SCC 416 = 108 taxmann.com 147 = 155 SCL 622 (SC 3 member bench), it was held
that wider words have been deliberately used in a residuary provision [section 5(8)(f) of
Insolvency Code, to make the scope of the definition of “financial debt” subsume matters
which are not found in the other sub-clauses of section 5(8) of Insolvency Code - quoted
and followed in Dr. S.K.Srihari Raju v. Leesa Lifesciences (P.) Ltd. [2021] 123 taxmann.com
367 (NCLT), where it was held that if petitioner paid certain amount to lender of corporate
debtor on behalf of corporate debtor as part of sale consideration for purchase of land,
petitioner would fall within definition of ‘financial creditor’.
Home Buyers can initiate Corporate Insolvency Process - The home buyers can initiate
Corporate Insolvency Process against builder or developer as they have been included
in definition of ‘financial debt’ as per explanation to section 5(8)(c) of Insolvency Code,
inserted w.e.f. 6-6-2018. – confirmed in Shinoj Koshy v. Granite Gate Properties (2019)
152 SCL 125 = 102 taxmann.com 165 (NCLT) * Mohan Agarwal v Crown Realtech (2020)
158 SCL 74 = 113 taxmann.com 546 (NCLT).
“Allottee” in relation to a real estate project, means the person to whom a plot, apartment
or building as the case may be, has been allotted, sold (whether as freehold or leasehold)
or otherwise transferred by the promoter, and includes the person who subsequently
acquires the said allotment through sale, transfer or otherwise but does not include a
person to whom such plot, apartment or building, as the case may be, is given on rent –
section 2(d) of RERA i.e. Real Estate (Regulation and Development) Act, 2016.
“Real estate project” means the development of a building or a building consisting of
apartments, or converting an existing building or a part thereof into apartments, or the
development of land into plots or apartments, as the case may be, for the purpose of
selling all or some of the said apartments or plots or building, as the case may be, and
includes the common areas, the development works, all improvements and structures
thereon, and all easement, rights and appurtenances belonging thereto - – section 2(zn)
of RERA i.e. Real Estate (Regulation and Development) Act, 2016.
In Chitra Sharma v. UOI (2018) 148 SCL 833 = 96 taxmann.com 216 (SC), SC directed
initiation of CIRP to protect interests of home buyers. It was also held that promoters will
not be eligible to participate in CIRP due to section 29A of Insolvency Code.

In Jaypee Greens Krescent Home Buyers Welfare Association v. Jaypee Infratech Ltd. (2019)
151 SCL 402 = 101 taxmann.com 220 (NCLT), it was found that due to scattered nature
of home buyers, it is difficult to get required 66% voting. However, there was difference
of opinion on how to determine voting shares in such cases. Hence, the matter was re-
ferred to President.
CIRP should be limited to particular real estate project and not to entire company -
CIRP should be limited to particular real estate project and not to entire company. CIRP
should not affect other projects where no default has occurred. Debt of corporate debtor
are specific to a project and creditors are also different for different projects - Flat Buyers
Association of Winter Hills-77 v. Umang Realtech [2020] 115 taxmann.com 249 (NCLAT)
[No doubt a practical view but its legality has to be tested in law, as it is doubtful if
resolution plan can be project wise].
Money disbursed by land owner to developer for construction is financial debt – Money
disbursed by land owner to developer for construction of residential building is financial
debt - G Sreevidhya v. Karishnaa Foundations P Ltd. (2019) 153 SCL 30 = 104 taxmann.com
202 (NCLAT).
Subscription money for purchase of shares is not financial debt - Subscription money
for purchase of shares is not financial debt– ACPC Enterprises v. Affinity Beauty Saon
(2018) 145 SCL 47 = 87 taxmann.com 324 (NCLT).
Credit facility availed through corporate credit card is financial debt - Credit facility
availed through corporate credit card is financial debt and if not paid, CIRP can be initi-
ated – American Express Banking Corporation v. Jambu Kuits P Ltd. (2018) 149 SCL 567
= 97 taxmann.com 310 (NCLT).
Financial Institution - “Financial institution” means – (a) a scheduled bank (b) Financial
institution as defined in section 45-I of the Reserve Bank of India Act, 1934 (c) Public
financial institution as defined in section 2(72) of the Companies Act, 2013 (d) such
other institution as the Central Government may by notification specify as a financial
institution – section 3(14) of Insolvency Code, 2016.
3.2-4 Meaning of ‘default’
The words creditor, ‘debt’ and ‘default’ are used at many places in Insolvency Code and
hence are very important.
‘Default’ means non-payment of debt when whole or any part of instalment of the amount
of debt has become due and payable and is not paid by the debtor or the corporate
debtor, as the case may be – section 3(12) of Insolvency Code [The word in italics was
‘repaid ’ upto 6-6-2018. It has been changed to ‘paid ’ w.e.f. 6-6-2018].
In fact, the words ‘repaid’ and ‘repayment’ were appearing at various places, which
have been changed to ‘paid’ and ‘repayment’, as the terms ‘repaid’ or ‘repayment’ can
apply to financial creditor who grants loans. These terms cannot apply to Operational
Creditors or surety (guarantors). Thus, a drafting mistake has been corrected.
3.2-5 RBI Guidelines on Resolution of Stressed Assets
Reserve Bank of India (RBI) had issued circular No. RBI/2017-18/131 [DBR. No. BP.BC.
101/21.04.048/2017-18] dated 12-2-2018 giving detailed guidelines on resolution of stressed

assets, after enactment of Insolvency Code. Banks and FI are expected to apply for CIRP
as per those guidelines.
This circular has been set aside by Supreme Court in Dharani Sugars v. UOI (2019) 104
taxmann.com 44 (SC), as beyond authority.
The revised directions issued by RBI on 7-6-2019 are discussed in a later chapter.
The guidelines issued by RBI are within scope of powers of RBI and are binding on
banks. RBI has full discretion as to which account is to be included in which trench of
insolvency proceedings – Asian Colour Coated Ispat v. RBI (2018) 150 SCL 695 = 99
taxmann.com 278 (Del HC) [Now this decision is not valid in view of judgment of
Supreme Court].
3.3 Who can initiate insolvency resolution process
Where any corporate debtor commits a default, a financial creditor, an operational creditor
or the corporate debtor itself may initiate corporate insolvency resolution process in
respect of such corporate debtor in the manner as provided under this Chapter (Chapter
II of part II) - section 6 of Insolvency Code, 2016.
Provisions and procedures relating to each initiator are different and hence discussed
separately.
Proprietor should file application on behalf of Proprietary concern or proprietary firm
is not a legal entity - In Wind Water System v. Narendra Emporis Ltd. [2020] 115
taxmann.com 275 (NCLT), it was held that proprietary concern is not a person entitled to
fileCIRPapplicationunderAct,asoperationalcreditor.Itwasobservedasfollows-‘Nosuit
can be instituted by a sole proprietorship firm in its own name unless there are specific
amendmentsstatingthatproprietorshipsuesthroughitsproprietor.Ithasbeenrecognised
in number of decisions that a proprietorship concern unlike a company or a partnership
is not a legal entity and therefore any proceeding initiated by it would be a nullity. On this
count alone the application is bad and is not maintainable - same view in S Crane
Engineering Works v. Jyoti Ltd. (2020) 161 SCL 525 = 117 taxmann.com 689 (NCLT) * Neev
Construction v. DCOM Systems Ltd. [2020] 163 SCL 194 = 119 taxmann.com 159 (NCLT).
In R.G. Steels v. Berrys Auto Ancillaries P. Ltd. [2020] 115 taxmann.com 218 (NCLT) also, it
has been held that though ‘person’ includes individual, it does not include ‘proprietary
concern’ [Doubtful, as individual is doing business under name of ‘proprietary concern’
with same Income Tax PAN].
Really, proprietor and proprietary firm are one and the same person with same Income
Tax PAN. The decision is doubtful and in any case, a highly technical view. At the most,
instead of rejecting application, amendment of cause title of application should have been
allowed as held in old case in Jai Jai Ram Manohar Lal v. National Building Material Supply
(1969) 1 SCC 869.
3.3-1 Distinction between Financial Creditor and Operational Creditor is valid
The Insolvency Code makes clear distinction between operational credit and financial
creditor in respect of same corporate debtor. More powers are given to the Financial
Creditors. For example, financial creditors are members of CoC (Committee of Creditors)
but not operational creditors.

Description
Insolvency & Bankruptcy Code Ready Reckoner is a comprehensive, topic-wise
commentary on laws governing Insolvency & Bankruptcy in India [as amended by the
Insolvency and Bankruptcy Code (Amendment) Ordinance 2021]. This book covers an
analysis of the following Laws:
u
Insolvency and Bankruptcy Code, 2016
u
Recovery of Debts and Bankruptcy Act, 1993
u
Securitization and Reconstruction of Financial Assets and Enforcement of Securi-
ties Interest Act, 2002 (SARFESI Act)
The book intends to provide answers to the practical issues faced by professionals on
a routine basis. It provides complete and accurate information about all provisions of
Insolvency and Bankruptcy Laws.
The Present Publication is the Latest Edition, authored by V.S. Datey, updated till
30th June 2021, with the following noteworthy features:
u [Topic-wise Commentary] on the Insolvency & Bankruptcy Code, 2016
u
Analysis of all provisions of the Insolvency and Bankruptcy Code, 2016 with rele-
vant Rules/Regulations, Judicial Pronouncements, Circulars and Notifications
u
[Previous Amendments] made by the Insolvency and Bankruptcy Code (Amend-
ment) Ordinance, 2021
u
[Short Commentary] on Insolvency and Bankruptcy Code (Amendment) Ordi-
nance, 2021
Rs. 1195 | USD 49
AUTHOR : V.S. DATEY
PUBLISHER : TAXMANN
DATE OF PUBLICATION : JULY 2021
EDITION : 1ST EDITION
ISBN NO : 9789390831722
NO. OF PAPERS : 556
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