Insolvency and Bankruptcy Code, 2016 and the Regulatory Framework
What the exam tests here
The IBC domain examines whether you can route a fact pattern to the correct section, authority and timeline: is the applicant a financial or operational creditor, which trigger threshold applies, which forum hears the matter, and what voting share is needed at each CoC decision. Expect combined questions on the Code and the IBBI regulations made under it (CIRP, Liquidation Process, Insolvency Professionals, Information Utilities).
Core rules
- Threshold: a default of Rs. 1 crore or more (raised from Rs. 1 lakh by notification in March 2020) is required for Sections 7, 9 and 10 applications.
- Forum: the NCLT is the adjudicating authority for corporate persons; the NCLAT hears appeals, with a 30-day limitation and a further 15-day condonation window. DRT is the adjudicating authority for personal guarantors to corporate debtors.
- Process clocks: CIRP must be completed within 180 days, extendable by 90 days on a 66% CoC vote; the outer limit is 330 days including time spent in legal proceedings. Liquidation follows if no plan is approved in time.
- CoC mechanics: financial creditors vote by debt owed to voting members present; a related party of the corporate debtor is excluded from the CoC. Ordinary decisions need 51%, but plan approval, extension, RP replacement, and liquidation need 66%. Withdrawal under Section 12A needs 90%.
- Protections: Section 14 moratorium, Section 29A ineligibility of resolution applicants, and avoidance powers over preferential (Section 43), undervalued (Section 45) and fraudulent (Section 66) transactions.
- Waterfall: Section 53 orders CIRP/liquidation costs, secured creditors and workmen dues (24 months), other employees (12 months), financial creditors, government dues, then residual.
Worked example
An unpaid supplier is owed Rs. 1.4 crore. He must first serve a Section 8 demand notice giving the corporate debtor 10 days to pay or show an existing dispute. If neither happens, he files under Section 9 as an operational creditor. If instead a bank had lent the money, the bank would file directly under Section 7, with no demand notice and no dispute threshold.
Traps that cost marks
The 10-day Section 8 period is not a waiting period for Section 7 filings; a pre-existing dispute defeats a Section 9 petition even if the debt is real; a Section 10 application cannot be filed by a financial creditor; and the 330-day outer limit is not a fresh extension power.