IBBI Limited Insolvency flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

IBC default threshold

The minimum default amount for filing under Sections 7 and 9 of the IBC is Rs 1 crore, raised from Rs 1 lakh by notification in March 2020; the threshold applies to financial and operational creditors.

Section 7 applicant

A financial creditor, or a class of financial creditors, files an application to initiate CIRP against a corporate debtor before the NCLT, relying on financial debt and default.

Section 9 demand notice

An operational creditor must deliver a demand notice under Section 8 to the corporate debtor, which then has 10 days to pay or show a pre-existing dispute before an application under Section 9 can be admitted.

Pre-existing dispute defence

Under Mobilox Innovations v. Kirusa (SC 2017), a genuine pre-existing dispute about the operational debt, not a frivolous one, is a complete defence against admission of a Section 9 application.

Section 10 self-initiation

A corporate debtor may itself file for CIRP only if it has a special resolution or 3/4 partner approval, has not undergone CIRP in the preceding 3 years, and the application is not mala fide.

Section 14 moratorium

From the insolvency commencement date, the moratorium bars suits, execution, asset transfers, and enforcement of security interest, but it does not extinguish the debt or protect guarantors.

CIRP 330-day timeline

Section 12 requires the corporate insolvency resolution process to be completed within 330 days from the insolvency commencement date, including extensions and time spent in litigation.

Resolution plan approval threshold

A resolution plan must be approved by the Committee of Creditors with at least 66% of voting share under Section 30(4) before it is submitted to the NCLT for approval under Section 31.

Section 29A ineligibility

Section 29A bars a resolution applicant who is an undischarged insolvent, a wilful defaulter, disqualified, or a promoter of a corporate debtor that failed to resolve a stressed asset for over a year.

Section 53 waterfall

Liquidation proceeds are distributed in order: CIRP costs, workmen and secured creditors, employee wages, unsecured financial creditors, government dues, remaining debts, preference holders, then surplus.

Limitation Act applies

The Limitation Act, 1963 applies to IBC proceedings, as held in B.K. Educational Services v. Parag Gupta (SC 2018), so the default must be within limitation unless extended.

Liquidation value floor

Under Section 30(2), a resolution plan must pay operational creditors and dissenting financial creditors at least the liquidation value of their claims, failing which the NCLT cannot approve it.

Section 32A immunity

An approved resolution plan grants the corporate debtor and acquirers immunity from prosecution for pre-CIRP offences, subject to conditions and cooperation with any investigation.

Avoidance look-back periods

Preferential and undervalued transactions can be challenged within 2 years for related persons and 1 year for unrelated persons, counted backwards from the insolvency commencement date.

Fraudulent trading Section 66

The resolution professional or liquidator may apply to the NCLT to hold persons liable for carrying on business with intent to defraud creditors or for fraudulent trading during the look-back period.

Liquidation completion timeline

Under Section 34 and the Liquidation Process Regulations 2016, the liquidator must complete the process within one year, extendable with CoC or NCLT approval for recorded reasons.

PPIRP for MSMEs

The pre-packaged insolvency resolution process, introduced in 2021, applies to MSME corporate debtors, keeps the debtor in possession, and must be completed within 120 days with a base resolution plan.

Individual insolvency forum

Part III of the IBC routes individual and partnership insolvency to the DRT, with a fresh start, insolvency resolution, and bankruptcy stages; personal guarantors to corporate debtors are covered by 2019 regulations.

Insolvency professional registration

An individual becomes an insolvency professional by clearing the Limited Insolvency Examination with at least 60% and registering with IBBI, then joining an Insolvency Professional Agency.

Authorisation for assignment

An insolvency professional must hold a valid authorisation for assignment (AFA) from its IPA to accept fresh assignments; without it, new appointments cannot be taken.

CoC voting share

Financial creditors vote in the Committee of Creditors in proportion to their financial debt; ordinary decisions need 51%, while resolution plans and specified actions need 66%.

Information Utility role

An Information Utility registered under the IU Regulations 2016 stores financial information and authenticated default records, which serve as evidence of default in IBC proceedings.

Section 8 reply period

After receiving a demand notice, the corporate debtor has 10 days to pay the operational debt or show a pre-existing dispute; silence or non-payment allows the creditor to file under Section 9.

Withdrawal under Section 12A

CIRP can be withdrawn with approval of 90% of CoC voting share, and the NCLT may permit withdrawal, as clarified by the Supreme Court in Swiss Ribbons v. Union of India (2019).

Insolvency commencement date

The insolvency commencement date is the date on which the NCLT admits the application under Section 7, 9, or 10; the moratorium and CIRP timeline run from that date.

Interim resolution professional

The NCLT appoints an interim resolution professional on admission; the IRP takes control of the corporate debtor, collects claims, and constitutes the CoC within 30 days.

Claims submission window

Under the CIRP Regulations 2016, creditors submit claims to the IRP within the time stated in the public announcement, typically 14 days from the appointment of the IRP.

CoC constitution timeline

The interim resolution professional must constitute the Committee of Creditors within 30 days of the insolvency commencement date, based on claims received and verified.

Section 43 preference

A preferential transaction transfers property or interest to a creditor or person on account of a pre-existing debt, giving it a preference over other creditors during the look-back period.

Section 45 undervalued transaction

A transaction is undervalued if the corporate debtor transfers assets for consideration significantly lower than market value, or enters a transaction that unfairly benefits another party.

Section 66 fraudulent trading

Fraudulent trading occurs when business is carried on with intent to defraud creditors or for a fraudulent purpose; the NCLT may order contribution from those who knowingly participated.

Section 31 plan binding

Once the NCLT approves a resolution plan under Section 31, it binds the corporate debtor, employees, members, creditors, guarantors, and all stakeholders, and cannot be varied later.