The document provides an overview of the Insolvency and Bankruptcy Code of 2016 in India. It discusses the key reasons for introducing the code, including reducing time to resolve insolvency, developing investor confidence, and addressing non-performing assets. The code aims to create a single framework for insolvency and bankruptcy proceedings. It allows for insolvency resolution and bankruptcy procedures for both corporate entities and individuals/partnership firms. The document outlines the structure and various parts of the code, as well as the roles and responsibilities of different authorities and professionals involved in insolvency resolution processes under the code.

1. INTERPRETING THE INSOLVENCY AND
BANKRUPTCY CODE, 2016
By-
Amrita Lala
amritalala.ils@gmail.com

2. WHY WAS THE CODE NEEDED
To reduce the
time taken to
resolve
insolvency
To develop
investor’s
confidence
To address
the NPA
situation
decisively
and develop
credit market
To eliminate
confusion
caused by
complex
judicial
framework

3. WHAT DOES THE CODE INTEND TO CHANGE
Create a single insolvency and bankruptcy framework
Set up a clear and unambiguous process to be followed by all
stakeholders in a time-bound manner
Provide a commercial solution to a commercial issue
Allow genuine business failures a second chance
Provide confidence to lenders of their rights and their enforcement

4. WHAT DOES IT CHANGE FOR THE BORROWERS
Any creditor can file an insolvency petition on default of INR 1
lakh or more
Insolvency Professional to take over the management and
operations of the borrower during Corporate Insolvency
Resolution Process
Need to be proactive in identifying issues/claims,
communicating with lenders and developing/implementing a
turnaround plan
In case of fraudulent diversion of assets, personal contribution
can be sought; imprisonment possible [Section 68]

5. STRUCTURE OF THE CODE
STRUCTURE
Code has 255 sections divided into 5 Parts as below:
Part I: Preliminary
Section 1 -3
Part II: Corporate Insolvency Resolution Process
7 Chapters
Section 4 –77
Part III
Insolvency Resolution and Bankruptcy for individuals and
Partnership Firms
7 Chapters
Section 78 –187
Part IV
Regulation of Insolvency Professionals, Agencies and
Information Utilities
7 Chapters
Section 188 –223
Part V
Miscellaneous
Section 224 –255
(Section 245 -255 enables amendments in other statutes
such as Companies Act 2013 etc)
Schedules
First Schedule–Eleventh Schedule
(Schedules provide for amendments to be carried out in
other statutes such as Companies Act 2013, IT Act 1961)
Divided into various chapters, the Code aims to address the different
aspects of insolvency and bankruptcy proceedings and the varying
processes used by different types of debtors

6. PREAMBLE/OBJECT OF THE CODE
Consolidate and amend laws
relating to insolvency and
bankruptcy
Promote entrepreneurship,
availability of credit and
balance the interest of all stake
holders including alteration in
the order of priority of payment
of government dues
Maximization of value Time-bound resolution
Insolvency and
Bankruptcy
Code, 2016

7. RESOLUTION OF
INSOLVENCY OF
CORPORATE PERSON
COMPULSORY
LIQUIDATION OF A
CORPORATE PERSON
VOLUNTARY
LIQUIDATION OF A
CORPORATE PERSON
BANKRUPTCY OF
INDIVIDUALS AND
PARTNERSHIP FIRM
SCOPE OF
THE CODE
SCOPE OF THE CODE

8. APPLICABILITY OF THE CODE
The Code applies to whole of India except
Part III (Insolvency Resolution and
Bankruptcy for individuals and Partnership
Firms) which does not apply to Jammu and
Kashmir [Section 1]
The provision of the Code applies to:
a) Companies incorporated under
Companies Act, 2013 or under any
previous company law;
b) Company governed by any special Act
except so far as the said provisions are
not inconsistent with provision of such
special act;
c) LLP incorporated under Limited Liability
Partnership Act, 2008
d) Any body corporate incorporated under
any law for time being in force, as Central
Government may, by notification specify
in this behalf;
e) Personal Guarantors of Corporate
Debtor;
f) Partnership firms and Proprietorship
firms; and
g) Any other individuals.
[Section 2]

9. REGULATORS AND
AUTHORITIES UNDER THE
CODE
Insolvency and
Bankruptcy Board of
India
Insolvency
Professional Agencies
Insolvency
Professional
Information Utilities
REGULATORS ADJUDICATING
AUTHORITY
For Corporate
Persons
NCLT
NCALT
Supreme Court
For individuals
and partnership
DRT
DRAT
Supreme Court

10. INSOLVENCY RESOLUTION AND LIQUIDATION FOR
CORPORATE PERSON [Part II of the Code]
When can the insolvency resolution process get triggered?
When the minimum amount of default by Corporate Debtor is Rs. 1,00,000/-
Central Government may, by notification, specify the minimum amount of
default of higher value which shall not be more than Rs. 100,00,000/- [Section
4]

11. Who can trigger the insolvency
resolution process?
Who cannot trigger the insolvency
process?
The Code provides for three types of
applicants who can trigger the corporate
insolvency resolution process:-
The Insolvency Code specifically
provides for following persons who
cannot trigger the corporate insolvency
resolution process:-
 Financial Creditors;
 Operational Creditors;
 Corporate Applicants/Corporate Debtors
itself. [Section 7,9,10 read with Rule 4, 6
and 7 of Insolvency and Bankruptcy
(Application to Adjudicating Authority)
Rules, 2016]
A corporate debtor undergoing a corporate
insolvency resolution process;
A corporate debtor having completed
corporate insolvency process 12 months
preceding the date of making application;
A corporate debtor or financial creditor who
has violated any of the terms of resolution
plan which was approved 12 months before
the date of making application under this
chapter;
A corporate debtor in respect of whom a
liquidation order has been made. [Section 11]

12. TIME BOUND CORPORATE INSOLVENCY RESOLUTION PROCESS [S.6-54
read with Rule Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016]
PHASE I
FINANCIAL CREDITOR
- Filing of application on
occurrence of default. Default
here means default not only
qua the applicant financial
creditor but also by any other
Financial creditor.
- Along with application, to
furnish record of default and
to propose of interim
resolution professional
OPERATIONAL CREDITOR
- Deliver a default notice to the corporate
debtor on occurrence of default
Within 10 days
Adequate reply Inadequate reply
Settlement
of dues
Dispute
Or
Filing of
application
CORPORATE APPLICANT
- Filing of application on occurrence
of default
- Along with application, to
furnish record of default and
to propose name of interim
resolution professional
Within 14 days
- To ascertain the existence of default. If satisfied, it shall accept, otherwise reject.
Accept
Proceed with
Phase II
Prior to rejection
Suggest rectification
Reapply Reject

13. PHASE II
The entire process shall be completed within Resolution period (180 days extendable by 90 days
- Order of admission of application by
NCLT;
- Declaration of moratorium on new and
pending suits, enforcement of security
interest, disposal of assets and recovery
of property of Corporate Debtor;
- Appointment of interim resolution
professional (IRP); who takes over the
assets and affairs of Corporate Debtor
- Public Announcement/Invitation of
claims by IRP.
Within 30
days
- IRP to appoint the
committee of
creditors; and
- Do all such other
duties as set out in
the Insolvency
Code.
Within 7 days
- First meeting of
Committee of Creditors;
- Appointment of
Resolution Professional
by majority vote and
communication to NCLT
for confirmation by
Board
- Resolution Professional to
conduct corporate
insolvency resolution
process;
- The Committee of Creditors
shall hold meetings as
necessary;
- Preparation of Information
Memorandum (Reg. 36-
CIRP Regulation).
- Submission of resolution
plans by Resolution
Applicant to the Resolution
Professional on basis of
information memorandum;
- Examination of resolution
plan.
- Approval of the resolution plan by
the committee of creditors and the
order of NCLT;
- Moratorium order shall cease to
have effect; and
- Resolution Professional to forward
all records to the Board

14. DUTIES OF INTERIM RESOLUTION PROFESSIONAL/RESOLUTION
PROFESSIONAL
IRP
Manage the affairs of Corporate Debtor by
exercising the powers of Board of Directors of
Corporate Debtor.
Collect all information relating to assets, finances
and operation of Corporate Debtor for
determining the financial position of Corporate
Debtor
Receive and collate claims of creditors
RP
Take immediate custody and control of all assets
including business records of Corporate Debtor
Raise interim finance subject to approval of
Committee of Creditors
Represent and act on behalf of Corporate Debtor
with their parties and appoint accountant, legal
and other professionals if need be
Maintain updated list of claims of creditors,
conduct Corporate insolvency resolution process
and prepare information memorandum
Constitute Committee of Creditors
Monitor the assets and manage
operation until RP is appointed
Convene and attend all meetings of
committee of creditors and invite prospective
resolution applicant
Present all resolution plans at the meeting of
committee of creditors
IRP Shall manage Corporate Debtor as a
going concern
RP Shall manage Corporate Debtor as a
going concern
IRP/RP to manage the Corporate Debtor as a going concern; preserve and protect its
assets including continued business operations.
The aim is to resolve the debt and not send the Corporate Debtor into Liquidation

15. APPROVAL OF COMMITTEE OF CREDITORS FOR CERTAIN ACTIONS
For raising any interim finance in excess of amount as decided in the meeting of Committee of
Creditors or for changing the capital structure of Corporate Debtor
For creating any security interest over the assets of Corporate Debtor or for recording any
change in ownership interest of Corporate Debtor
For undertaking any related party transaction or amending the constitutional document
of Corporate Debtor or for delegating its authority to any other person
For disposing or permitting to dispose shares of any shareholder of the Corporate
Debtor or for conducting debit transactions from bank account in excess of amount as
may be decided in meeting of Committee of Creditors
For making change in the management of Corporate Debtor or its subsidiary
For transfer rights or financial debts or operational debts under material contract
otherwise than in ordinary course of business
For making changes in the appointment or terms of the contract of personnel, statutory auditors
or internal auditors of corporate debtors

16. CORPORATE LIQUIDATION PROCESS
- On the expiry of resolution period (180
days extendable by 90 days), if no
resolution plan has been received or all
are rejected;
- Even during the resolution period, NCLT
may pass an order of liquidation on
recommendation of Committee of
Creditors;
- Contravention of approved plan on
application of affected persons
- Order for liquidation by
NCLT;
- After liquidation order, no
legal suits/proceedings can be
instituted by and against
Corporate Debtor;
- Issuance of public
announcement;
- Order sent to relevant RoC.
- Resolution Professional to act as a
liquidator;
- Vested with all powers under the
Code viz verifying claims,
evaluating assets, sell assets,
paying Creditors.
- Formation of liquidation estate;
- NCLT may replace the liquidator
on recommendation of Board or
on non-compliance of the Code by
the Resolution Professional
Collection of all claims by the
liquidator
Verification of claims by the
liquidator
Claimant to be intimated in 7
days
Claimant may appeal within
14 days
Within 30 days
Within 14 days, may be
revised by claimant
Reject
- NCLT may grant
orders for cancellation
of avoidable,
preferential,
undervalued
transactions and
transactions
defrauding creditors
- Monetization of
the assets forming
part of liquidation
at the prevalent
market price.
Distribution of
proceeds
amongst
creditors in
accordance
with
liquidation
waterfall –
Refer Slide 20
- Dissolution Order
by NCLT on
application of the
liquidator
- Corporate Debtor
stands dissolved;
- Order to be sent to
the RoC within 7
days.
Accept

17. Liquidation Estate –Inclusions and Exclusions
Inclusions [S. 36(3)] Exclusions [S. 36(4)]
 Any assets over which the corporate debtor has
ownership rights.
 Assets that may/ may not be in possession of the
corporate debtor, including encumbered assets.
 Tangible assets (movable/ immovable).
 Intangible assets (such as IPs), shares held in a
subsidiary, financial instruments, insurance policies,
contractual rights.
 Assets subject to determination of ownership by the court
or authority.
 Assets recovered through proceedings for avoidance of
transactions.
 Assets in respect of which secured creditor has
relinquished security interest.
 Any other property belonging to or vested in the
corporate debtor on the insolvency commencement date.
 Proceeds of liquidation when realized.
 Assets in the possession of corporate debtor but owned
by third parties.
 Assets in security collateral held by financial service
providers and are subject to netting and set-off in multi-
lateral trading or clearing transaction.
 Personal assets of shareholder or partner of corporate
debtor provided they are not held on account of
avoidance transaction.
 Assets of subsidiaries (Indian/ foreign) of the corporate
debtor.
 Any other assets as may be specified by the IBBI.

18.  Application for fast track insolvency resolution may be made in respect of following
corporate debtors, namely:
 a small company as defined under clause (85) of section 2 of Companies Act, 2013 (18 of
2013)
 a Start-up (other than the partnership firm) as defined in the notification of the
Government of India in the Ministry of Commerce and Industry dated the 23rd May,
2017
 an unlisted company with total assets, as reported in the financial statement of the
immediately preceding financial year, not exceeding rupees one crore.
Fast Track Insolvency process to be completed within 90 days from commencement date.
Provision for 1 extension only, for a period of 45 days.
Process may be initiated by a creditor or corporate debtor by furnishing proof of default
or any other specified details.
Process largely the same as that for regular insolvency resolution.
FAST TRACK CORPORATE INSOLVENCY RESOLUTION [S. 55-58]

19. VOLUNTARY LIQUIDATION [S. 59-67]
• May be initiated by the corporate debtor even without existence of default.
• Declarations from majority of directors needed, to be verified by an affidavit of solvency and that the
company is not being liquidated to defraud any creditor.
• Special resolution of members needs to be passed within 4 weeks of declaration by directors requiring
the company to be liquidated and appointing an Insolvency Professional to act as a liquidator.
• If the company owes debt then resolution to be approved by creditors representing 2/3rd value of debt
within 7 days of the members resolution.
• RoC and the Board to be notified of the decision to voluntarily liquidate within 7 days of passing such
resolution and subsequent approval by the creditors.
• Liquidation process shall be deemed to have commence from date of passing resolution.
• Liquidator to make application to NCLT for dissolution when the affairs are wound up and assets have
been completely liquidated.
• NCLT to pass an order dissolving the corporate debtor from the date of such order
• Copy of such order to be forwarded to the RoC within 14 days from the date of order

20. Insolvency resolution process costs & liquidation costs
Secured creditors, if security has
been relinquished as specified in
section 52
Workmen’s dues (past 24
months)
Employees’ wages (past 12 months)
Financial debts to unsecured creditors
Government dues
Secured creditors
(residual amt. if the
creditor enforces his
securities)
Other remaining debts
Preference Shareholders
Equity Shareholders
or partners
LIQUIDATION WATERFALL [S. 53]

21. Stages of Proceedings
before SICA, 1985
Reference to
BIFR/Appeal to
AAIFR
Pending as on 1st Dec,
2016
Abatement of
Proceedings
Fresh Application
before NCLT/NCALT
under the Code within
180 days
Scheme of revival
sanctioned
No change
BIFR suggested
winding up
Initiated on or before
Dec 15, 2016
Any appeals
Remains with the
High Court
NCLT under the Code
No
Yes
No
Yes
STAGES OF PROCEEDING UNDER SICA, 1985
SHIFT FROM SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985
(SICA) TO THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (CODE)

22. SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITIES INTEREST ACT, 2002 V/S. INSOLVENCY AND
BANKRUPTCY CODE, 2016
One of the laws dealing with the recovery of facilities / loans through enforcement of security interest is
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
("SARFAESI"), pursuant to which the security interest may be enforced by the secured creditors such as
banks and financial institutions, without intervention of the Court.
IBC V/S. SARFAESI
• Section 14(1)(c) of IBC states that on commencement of insolvency resolution process ,NCLT shall, by
order, declare moratorium period during which all recovery proceedings get stayed including the
enforcement of security under the SARFAESI Act.
• Once the insolvency resolution period ends, the entity will be either put on revival, or under liquidation.
• In case of revival orders, the eligibility of the lender to exercise SARFAESI powers will depend on what
agreement has been made between the lenders in relation to revival of an entity.
• Upon a liquidation order being passed, the moratorium will be deemed to be lifted and the secured
creditors may enforce their security interests under SARFAESI.

23. The stages of filing insolvency resolution process vis-à-vis SARFAESI is enumerated below:
• Application for insolvency resolution process filed but not admitted: There will be no stay on
SARFAESI proceedings.
• Admission of resolution application: There will be stay on SARFAESI proceedings as may be ordered
by the NCLT.
• Resolution plan ordered by Adjudicating Authority: Pursuant to Section 31(1) of the Code, 2016,
the parties are bound to act in accordance with the resolution plan and terms specified therein.
• Commencement of liquidation proceedings: There will be no stay and security interests may be
enforced in accordance with Section 52 of the Insolvency and Bankruptcy Code, 2016. However, a secured
creditor can choose to relinquish his/her security interest and be part of the liquidation process in terms of
Section 53, in which case, the dues of the secured creditor will rank higher in preference of distribution; or
In view of the above, the provisions of SARFAESI stand diluted to the extent mentioned above. The Banks and
Financial Institutions will not be allowed to take any action under SARFAESI, for enforcement of security,
upon admission of the application for initiating the resolution process and until the period as may be decided
by the NCLT.
If no application for insolvency have been filed against the company, the Banks and Financial Institutions can
continue to enforce their security interest under SARFAESI. However, enforcement of security interest by the
consortium of secured creditors and lenders under Section 13 (9) of the SARFAESI Act, 2002 has been made
subject to the provisions of the Insolvency Code.

24.  Expanding the scope of Insolvency -
The Insolvency and Bankruptcy Code (Amendment) Act, 2018 widens the Code’s
implementation to include personal guarantors to corporate debtors and all kind of
firms such as proprietorship firms as well as partnership firms. Moreover, the Code also
envisages to include other individuals which leave the scope to add any other entity as
and when needed by the procedure.
 Making the definition of Resolution Applicant more specific –
The Amendment Act of 2018 has made the definition of Resolution Applicant more
specific to mean a person, who individually or jointly with any other person, submits a
resolution plan to the resolution professional pursuant to the invitation made by him.
Further, the Resolution Professional can only invite those Resolution Applicant who
fulfil such criteria as may be laid down by him with the approval of committee of
creditors, having regard to the complexity and scale of operations of the business of the
corporate debtor and such other conditions as may be specified by the Board, to submit
a resolution plan or plans.
Further, the Amendment Act of 2018 has listed down the specific eligibility criteria to
become a Resolution Applicant and has disabled the promoter, willful defaulter, etc
from being a Resolution Applicant.
SUBSEQUENT MAJOR AMENDMENTS

25. According to Section 29A of the Code, following persons shall not be eligible to be resolution
applicant, if such person or any other person acting jointly or in concert with such person –
a) is an undischarged insolvent
b) is a willful defaulter
c) - has an account which has been classified as non-performing asset (“NPA”);
-controls/manages a corporate debtor’s account which has been classified as NPA;
- Is a promoter of a corporate debtor whose account has been classified as NPA ; and
- At least 1 year has lapsed from the date of such classification till the date of commencement of the corporate
insolvency resolution process
- However, such person may submit a resolution plan, if such person makes payment of all overdue amounts with
interest thereon and charges relating to NPA accounts before submission of resolution plan;
d) has been convicted for any offence punishable with imprisonment- (i) for two years or more under any
Act specified under 12th Schedule; or (ii) for seven years or more under any other law. This shall not
apply to person after expiry of 2 years from the date of his release from imprisonment;
e) is disqualified to act as a director under Companies Act, 2013;
f) Is prohibited by SEBI from trading in securities or accessing the securities market;the person has been
a promoter or in the management or control of a corporate debtor in which a preferential transaction,
undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and
an order has been made by the adjudicating authority under the provisions of the Code;

26. g) is a promoter of a corporate debtor or manages/controls a corporate debtor in which a
preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent
transaction has taken place for which an order has been made by the NCLT;
h) a person who has been subject to the above listed disabilities under any law in a jurisdiction
outside India;
i) connected persons, i.e. persons connected to the person disqualified under any of the
aforementioned points, such as those who are promoters or in management of control of the
resolution applicant, or will be promoters or in management of control of the business of the
corporate debtor during the implementation of the resolution plan, the holding company,
subsidiary company, associate company or related party of the above referred persons –
exception has been carved out for scheduled banks, asset reconstruction companies registered
with RBI under Section 3 of the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, and alternative investment funds registered with
SEBI.
 Introduction of Other Creditors
An amendment in IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2018,
added a new category of creditor called other creditors to file enable them to file their proof of claims
against the Corporate Debtor during the Corporate Insolvency Resolution Process Period.
Other creditors means the creditor other than the financial creditor, operational creditor and
workmen and employees.

27. MAJOR HIGHLIGHTS OF INSOLVENCY AND BANKRUPTCY CODE
(AMENDMENT) ORDINANCE, 2018
Homebuyers/allottees in real estate project recognized as Financial
Creditors.
Special resolution by atleast 3/4th majority to be passed by members of
Corporate Debtor to themselves trigger insolvency resolution under the
Code.
To encourage resolution as opposed to liquidation, voting threshold
brought down to 66% from 75% for all major decision viz approval of
resolution plan, extension of CIRP Period etc.
Permits the applicants to withdraw the admitted insolvency application
with approval of 90% voting share of the CoC before Expression of
Interest is invited by RP.
To facilitate Corporate Debtor to continue as going concern during CIRP,
voting threshold for routine decision of CoC have been reduced from 75% to
51%.

28. Non-applicability of moratorium period to enforcement of guarantee in a
contract of guarantee to a corporate debtor.
NPA shall not disqualify the Resolution Applicant from bidding during
the three year grace period
MSME’s given special dispensation under the Code. The first benefit
is that promoters of MSMEs can bid for their companies as long as
they are not willful defaulters
Provisions of Limitation Act, 1963 has been made applicable to
proceedings/appeals before NCLT, NCLAT, DRT or DRAT
One year grace period is provided to the successful resolution applicant to
fulfill various statutory obligations required under different laws.

29. MSME UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016
Micro, Small and Medium Enterprises (“MSME”) which forms the backbone of Indian
economy as the largest employer, after the agricultural sector, has been made a major
beneficiary of Insolvency and Bankruptcy Code, 2016 by Insolvency and Bankruptcy
Code (Amendment) Ordinance, 2018. The Ordinance provides the following:
 Central Government is empowered, in public interest, to provide MSME special
dispensation under the Code. Central Government, by notification, may direct that
any of the provision of the Code shall not apply to MSME or shall apply to MSME
with such modification as may be specified in the notification;
 The immediate benefit is that the promoter of MSME is not be disqualified to bid for
his enterprise undergoing the CIRP provided he is not a wilful defaulter and does
attract other disqualifications not related to default.
 The Ordinance provides that a person who has given an enforceable guarantee to a
creditor of a MSME against which an application for insolvency resolution is made by
such creditor shall not be disqualified to bid for that MSME.

30. THANK YOU!