Insolvency and Bankruptcy Code, 2016 and Related Regulations
Scope and statutory map
This domain tests the corporate insolvency resolution process (CIRP), liquidation, regulation of insolvency professionals (IPs) and information utilities, and the treatment of financial and operational claims under the Insolvency and Bankruptcy Code, 2016. The NCLT is the adjudicating authority, NCLAT hears appeals, and the Supreme Court is the final appellate forum. The trigger is default of at least ₹1 lakh; a financial creditor files under s.7, an operational creditor under s.9, and a corporate applicant under s.10.
Core rules
- CIRP must be completed in 180 days, extendable by 90 days (maximum 270) under s.12.
- Admission triggers a moratorium under s.14, staying suits and prohibiting enforcement of security interests.
- The IRP takes control under s.17; the committee of creditors (CoC) decides by 66% for resolution plans and most key matters.
- A resolution plan approved under s.31 binds all stakeholders, including dissenting creditors and guarantors; s.29A bars ineligible applicants.
- If CIRP fails, liquidation follows. Section 53 sets the waterfall: costs, workmen and relinquishing secured creditors, employees, unsecured financial debts, government dues, other debts, preference and equity.
- Avoidance provisions (ss.43, 45, 49, 66) allow recovery of preferential, undervalued, extortionate and fraudulent transactions.
Financial debt means a disbursal against consideration for time value of money; operational debt means claims for goods, services or employment. Homebuyers are financial creditors. Bondholders and debenture trustees assert financial claims, which the IP verifies under the CIRP Regulations. A secured creditor in liquidation may either enforce its security under s.52 or relinquish it and rank in the s.53 waterfall.
Worked example
A bank has a ₹5 crore secured loan and a supplier is owed ₹50 lakh. The bank files s.7; NCLT admits. The supplier’s recovery suit is stayed by the moratorium. The CoC (bank plus any homebuyers) must approve a plan by 66%. If no plan is approved, liquidation follows. The bank may enforce security under s.52; if it relinquishes, it ranks with workmen dues under s.53(1)(b). The supplier, an operational creditor, ranks lower as “other debt” under s.53(1)(f).
Traps
The 270-day cap is often misstated as 330; CoC approval is 66%, not 75%; the ₹1 lakh threshold is not ₹10 lakh; and the s.14 moratorium does not extinguish criminal liability. Related-party preference look-back is two years, not one.