Eligible & Ineligible Persons For Filing CIRP Application Under IBC, 2016

Eligible And Ineligible Persons For Filing Corporate Insolvency Resolution Process (CIRP) Application Under Insolvency And Bankruptcy Code, 2016 (IBC 2016)

1.APPLICABILITY OF PART OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 FOR CORPORATE INSOLVENCY RESOLUTION

• Part 2 of the code shall apply to Insolvency and Liquidity matters of Corporate debtors.
• Further Chapter 2 of Part 2 of the Code explains the process of Corporate Insolvency Resolution.

Minimum limit for Applicability of this code 

• This code shall be applicable only if minimum amount of default is 1 lakh rupees.
• This limit may be extended upto 1 crore rupees by notification made by Central Government.
• Further, the above minimum limit of default may be extended upto 1 crore rupees by notification made by Central Government for matters related to matters relating to the pre-packaged insolvency resolution process of corporate debtors under Chapter III-A of the code.

2. PERSONS WHO MAY FILE APPLICATION FOR INITIATION OF INSOLVENCY PROCEEDINGS UNDER CHAPTER II OF PART II OF THE CODE    

Pursuant to Section 6 of the Code, Following persons may file an application to the Adjudicating Authority for initiation of corporate insolvency resolution process in case default committed by a corporate debtor:-

• Financial Creditor
• Operational Creditor
• Corporate Debtor

3. PERSONS WHO ARE NOT ENTITLED TO MAKE APPLICATION FOR INITIATION OF INSOLVENCY PROCEEDINGS 

Pursuant to Section 11 of the Code, Following persons shall not file an application for initiation of insolvency proceedings:-

(a) a Corporate debtor undergoing a corporate insolvency resolution process or a pre-packaged insolvency resolution process

(aa) a Financial creditor or an operational creditor of a corporate debtor undergoing a pre-packaged insolvency resolution process

(b) a Corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application or

(ba) a Corporate debtor in respect of whom a resolution plan has been approved under Chapter III-A, twelve months preceding the date of making of the application

(c) a Corporate debtor or a Financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter.

(d) a Corporate debtor in respect of whom a liquidation order has been made.

Note-

• Corporate debtor includes a corporate applicant in respect of such corporate debtor.
• This section shall not prevent a corporate debtor referred to in clauses (a) to (d) from initiating corporate insolvency resolution process against another corporate debtor.

4. MEANING OF THE IMPORTANT TERMS

1) Financial Creditor

Any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to.

2) Financial Debt

Means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes—

(a) Money borrowed against the payment of interest

(b) Any amount raised by acceptance under any acceptance credit facility or its de- materialized equivalent;

(c) Any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument

(d) Amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed

(e) Receivables sold or discounted other than any receivables sold on nonrecourse basis

(f) Any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing

Explanation-

Following amount shall be included in above clause-

(i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and

(ii) the expressions, “allottee” and “real estate project” shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016;]

(g) Any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account

(h) Any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution

(i) Amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause

3) Operational Creditor

A person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.

4) Operational Debt

Operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority.

5) Corporate Debtor

Corporate Debtor means a corporate person who owes a debt to any person.

6) Adjudicating Authority

Adjudicating Authority means National Company Law Tribunal (NCLT) constituted under section 408 of the Companies Act, 2013.