“Navigate the process of filing a Corporate Insolvency Resolution Process (CIRP) application under Section 7 of the Insolvency and Bankruptcy Code, 2016, as a Financial Creditor. This step-by-step guide covers eligibility criteria, necessary forms, documents, and actions taken by the National Company Law Tribunal (NCLT). Understand the requirements for joint applications, nomination of a person, and details to be furnished with the CIRP application. Ensure a smooth initiation of the resolution process by following the comprehensive procedures outlined in this guide.”
Step-by-Step Guide: How to File a CIRP Application by a Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016.
Section 7 of the Insolvency and Bankruptcy Code, 2016 outlines the process for filing an Application by a Financial Creditor to initiate the Corporate Insolvency Resolution Process. Understanding the requirements and procedures involved in filing such an application is crucial for creditors seeking resolution in cases of default. This guide provides a comprehensive overview of the filing process, including the eligibility criteria, necessary forms, documents, and the subsequent actions taken by the National Company Law Tribunal (NCLT).
A) Filing of CIRP Application under IBC, 2016 by Financial Creditor
Pursuant to Section 7(1), Application may be filed to NCLT against a Corporate Debtor when a default has occurred by:
- Financial Creditor singly or
- Jointly with other Financial creditors or
- Any other person on behalf of the Financial creditor, as may be notified by the Central Government
Explanation of word “Jointly with other Financial Creditors”
1) For the financial creditors mentioned in clause (a) and (b) of Section 21(6A):
According to Proviso 1 of Section 7, application shall be filed Jointly by:
- Not less than 100 of such creditors in the same class or
- Not less than 10% of the total number of such creditors in the same class
Whichever is less
2) For financial creditors who are allottees under a real estate project:
According to Proviso 2 of Section 7, application shall be filed Jointly by:
- Not less than 100 of such allottees under the same real estate project or
- Not less than 10% of the total number of such allottees under the same real estate project
Whichever is less
Note
Default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.
Nomination of Person in Case of Joint Application by Financial Creditors:
Pursuant to Sub Rule 4 of Rule 4 of The Insolvency and Bankruptcy(Application to Adjudicating Authority) Rules, 2016, Joint Financial creditors may:
Nominate one amongst them to act on their behalf
B) Forms and Documents to be Furnished with CIRP Application under IBC, 2016
According to Section 7(2), Section 7(3) and Rule 4 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, CIRP Application shall be filed in Form 1 along with below mentioned information:-
-
- Record of the default recorded with the information utility or such other record or evidence of default as may be specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
- Name of the resolution professional proposed to act as an interim resolution professional and
- Any other information as may be specified by the Board in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
Meaning of the Terms Mentioned Above:
1. Record or Evidence of Default as May Be Specified:
Pursuant to Regulation 2A- Record or evidence of default by financial creditor of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Record or evidence of default to be furnished by Financial creditor means:
(a) Certified copy of entries in the relevant account in the bankers’ book as defined in clause (3) of section 2 of the Bankers’ Books Evidence Act, 1891 ;
(b)An order of a court or tribunal that has adjudicated upon the non-payment of a debt, where the period of appeal against such order has expired.
2. Any Other Information as May Be Specified by the Board:
(i) Pursuant to Sub Rule 2 of Rule 4 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, if Financial creditor under Sub Rule 1 is an assignee or transferee of a financial contract, then he shall furnish along with the application:
Copy of the assignment or transfer agreement and other relevant documentation to demonstrate the assignment or transfer
(ii) Pursuant to Regulation 2C- Submission of information along with application of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Financial creditor shall along with the application furnish its:
(a) Permanent Account Number; and
(b) Email-ID
Service of Copy of Application to Corporate Debtor and IBBI:
Pursuant to Sub Rule 3 of Rule 4 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, Financial creditor shall serve a copy of application to Registered office of the Corporate Debtor and IBBI before filing to NCLT by :
- Registered post or
- Speed post or
- By hand or
- By electronic means
C) Action by NCLT on Receipt of Application
Admission of Application:
Pursuant to Section 7(4) and Section 7(5) of the code, NCLT shall order the admission of CIRP application within 14 days of receipt if :-
- Default exists by Corporate debtor on Examination of the furnished records and
- Application filed is complete in all respects and
- No disciplinary proceedings pending against proposed Resolution Professional
Recording of Reasons on Non-ascertainment of Default within the Prescribed Time Limit:
Pursuant to Proviso of Section 7(4) of the code, NCLT shall record the reasons in writing for non ascertainment of default and passing of Admission or Rejection order within 14 days of receipt of CIRP Application.
Rejection of Application:
Pursuant to Section 7(5) of the code, NCLT may order rejection of CIRP Application if:
Any of the above conditions mentioned above not fulfilled.
Time Period to Rectify Defects in the Application:
Pursuant to Proviso of Section 7(5) of the code, NCLT shall give notice to the applicant to rectify Application defects within 7 days of receipt of notice before rejecting such an application.
Commencement of Corporate Insolvency Process:
Pursuant to Section 7(6) of the code, Corporate Insolvency Process shall commence from the date of admission of the application.
Conclusion:
Filing an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is a significant step for Financial Creditors in initiating the Corporate Insolvency Resolution Process. By adhering to the prescribed procedures and submitting the necessary forms and documents, creditors can ensure the smooth processing of their applications. It is important to understand the criteria for joint applications, the meaning of terms mentioned in the regulations, and the actions taken by the NCLT upon receipt of the application. This guide serves as a valuable resource for Financial Creditors navigating the process, helping them take the necessary steps towards resolving defaults and achieving the objectives of the Insolvency and Bankruptcy Code.
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