Insolvency and Bankruptcy Code – Processes and Authorities
Domain overview
Insolvency and Bankruptcy Code – Processes and Authorities tests CIRP initiation, the corporate insolvency resolution process, moratorium, committee of creditors, and the roles of NCLT, NCLAT, IBBI, and resolution professionals.
Core rules
- A financial creditor or operational creditor may initiate CIRP on default of at least Rs 1 crore. An operational creditor must first serve a demand notice; a financial creditor need not.
- NCLT must admit or reject the application within 14 days. Admission triggers a moratorium under section 14, a public announcement, and the appointment of an interim resolution professional.
- The committee of creditors consists of financial creditors; approval of a resolution plan requires 66% voting share.
- CIRP is 180 days, extendable by 90 days, with an outer limit of 330 days including legal proceedings.
- Section 12A withdrawal requires 90% CoC approval. Pre-packaged insolvency is available for MSMEs under Chapter III-A.
- Authorities: NCLT as adjudicating authority, NCLAT on appeal, Supreme Court, IBBI as regulator, and insolvency professionals.
Worked example
An operational creditor claims Rs 1.5 crore and serves a demand notice. The corporate debtor shows a genuine pre-existing dispute about quality. NCLT should reject the application at admission stage, because a genuine pre-existing dispute is a ground for rejection. The reasoning: the IBC is not a debt-collection forum; disputed operational debt does not establish default for CIRP.
Traps
Confusing the Rs 1 crore threshold with the old Rs 1 lakh limit; assuming a financial creditor must send a demand notice; using 75% instead of 66% for CoC approval; ignoring the moratorium's scope; treating the 330-day limit as purely directory.