(Civil Appeal NO. 8400 of 2017, Judgment on 19th September 2017)
- In this judgment, SC put an end to the dilemma of timelines with respect to various actions to be undertaken under the Insolvency and Bankruptcy Code “IB Code”, at the time of admission of application filed under 7, 9 and 10 of I B Code for the purpose of initiating Corporate Insolvency Resolution Process “CIRP”.
The basic idea of new law is that when an enterprise (individual, firm or corporation person) defaults, the control shifts to Committee of Creditors. They have specified time limit to evaluate proposals for rehabilitating the enterprise or take to liquidation. Decisions are required to be taken in a time bound manner so that there are greater chances that the enterprise is saved as a going concern and productive resources of economy can be put to best use.
Part II of Insolvency and Bankruptcy Code, 2016 (IBC, 2016) deals with insolvency resolution and liquidation for corporate persons. The actual work will be mostly handled by ‘resolution professional’ (who will be registered ‘insolvency professional’) under supervision of Adjudicating Authority (NCLT). At first instance, corporate insolvency process will be initiated. In most of the cases, this will be initiated by secured creditors or corporate person itself. In rare cases, the process will be initiated by other creditors.
- Insolvency professional will form a committee of creditors and with their concurrence, efforts will be made to evolve finalise plan to revive the corporate person. This process will last for 180 days, extendable by further maximum 90 days. During this period, efforts will be made to evolve a ‘resolution plan’ to rehabilitate the ailing corporate. A Fast Track Corporate Insolvency Resolution will be available to small corporate persons.
- If the efforts fail, the corporate person will be liquidated in time bound manner. NCLT will be Adjudicating Authority and NCLAT will be appellate authority for corporate persons.