The Insolvency and bankruptcy code, 2016 was notified and came into execution since December 2016. The code at its entry stage repealed the existing legislations which had become outdated and unfruitful with the passage of time. The code is not an easy legislation as the drafters have really worked hard to create a master piece legislation that can cater solutions to all sorts of disputes in a time bound manner.
In the previous article we discussed in detail about the genesis of the code, meaning of the terms “Insolvency” and “Bankruptcy”, the legislations prevailing prior to the code along with the list of overruled acts, the footstep of the code, territorial extent of the code, the objectives of the code, target audience of the code and the pillars of the code.
The insolvency and Bankruptcy code is crafted in such a way that is has inculcated in it significant provisions related to the insolvency or bankruptcy as existing in previous legislation under its ambit. Due to which the code has become detailed and a bit complicated.
The code has imbibed in it legal terminology on which the premises of the code is constructed. Therefor prior to diving straight into the code, it is of significance to have a quick glance over the legal terminology on which the whole premises of the act are constructed. Once the terminology is glanced the intent and the premises of the code would become clear and facilitate easy understanding of the code.
In this article we will discuss about the key terms used in the code which are a must to understand prior to directly jumping into the main contents of the acts.
Adjudicating Authority
- For corporate persons: National Company Law Tribunal (NCLT)
- For Individuals &Partnership Firms: Debt Recovery Tribunal (DRT)
Board
- Insolvency and Bankruptcy Board of India (IBBI)
Bench
- Bench of Adjudicating Authority
Bye Laws
- Bye Laws made by Insolvency Resolution Professionals (IRPs)
Charge
- Interest or lien created on the property or assets of any person or on any of its undertakings or on both, as security
- Charge includes mortgage
Chairperson
- Chairperson of the Board
Claim
- Right to payment or Right to remedy for breach of contract
Constitutional Documents
- In reference to Corporate Persons includes:
- For company: Memorandum of Association and Articles of Association
- For Limited Liability Partnership: Incorporation documents
Corporate Applicant
- The term encompasses the following persons:
- Corporate debtor
- Member/Partner of corporate debtor , who is authorized to make application
- Individual incharge of managing operations of corporate debtor
- Person having control and supervision over financial affairs of corporate debtor
Corporate Person
The term corporate person includes with its ambit the following persons:
- Company
- Limited Liability Partnership(LLP)
- Any other person incorporated with limited liability
It is important to note that the term corporate person excludes financial service providers from in its ambit.
Corporate Debtor
- Corporate person who owes debt to any person
Core Services
- Services rendered by Information utility (IU) for accepting, recording, authenticating, verifying and providing access to information stored by it to specified persons.
Creditor
- Person to whom debt is owed.
- The term includes the below mentioned:
- Financial Creditors
- Operational Creditors
- Secured Creditors
- Unsecured Creditors
- Decree Holders
Debt
- Liability or obligation in respect of claim, due from any person.
- The term debt includes both Financial and Operation debt with its umbrella.
Default
- Nonpayment of debt which had become due either wholly, partly or in installment and is payable but is nor paid by the debtor
Financial Creditor
- Person to whom financial debt is owed.
- Any person to whom a debt has been legally assigned or transferred shall be covered under the scope of financial creditor.
Financial Information
- Information related to financial aspects of a person.
- Code specifies categories of information to be counted as financial information
Financial Institutions
- The term includes the following under its umbrella:
- Scheduled Banks
- Financial Institutions – defined in Section 45-I of Reserve Bank of India Act ,1934
- Public Financial Institutions –defined in section 2(72) of Companies Act, 2013
- Any other as Central Government may by notification specify.
Financial Product
- The term includes the following under its scope:
- Securities
- Contract of insurance
- Deposits
- Credit arrangements
- Retirement benefit plans
- Small savings instruments
- Foreign currency contracts
Financial Service
- Detailed list of services specified in the code to be counted under the category of financial service
Financial Service Provider
Person engaged in the business of providing financial services on the basis of authorisation issued or registration granted from financial sector regulators
Financial Sector Regulator
- Authority or body constituted to regulate services or transaction of financial sector
- The term includes the following:
- Reserve Bank of India
- Securities and Exchange Board of India
- Insurance Regulatory and Development Authority of India
- Pension Fund Regulatory Authority
- Any other regulatory authority notified by Central Government
Insolvency Professional (IP)
- Person enrolled with Insolvency Professional agency as its member and registered with the board as insolvency professional
Insolvency Professional Agency (IPA)
- Any person registered with the board as insolvency professional agency
Information Utility (IU)
- Person registered with the board as information utility
Operational Creditor
- Person to whom operation debt is owed
- The term includes person to whom such debt has been legally assigned or transferred
Person
- The term includes the below mentioned:
- Individual
- Hindu Undivided Family
- Company
- Trust
- Partnership
- Limited Liability Partnership
- Any other entity constituted by statute
Property
- The term includes the following:
- Money
- Goods
- Actionable Claim
- Description of property situated in India or outside India
- Description of interest , arising out of or incidental to property
Resolution Applicant
- Person who submits a resolution plan to resolution professional on receipt of an invitation
Resolution Plan
- Plan proposed by resolution applicant for insolvency of corporate debtor
Resolution Professional
- Insolvency professional appointed to conduct the insolvency proceedings
Secured Creditor
- Creditor in favour of whom security interest is created
Transfer
The term covers the following transactions within its scope:
- Sale
- Purchase
- Exchange
- Mortgage
- Pledge
- Gift
- Loan
- Any other form of transfer
Having discussed the terminology used in the code, now it would become easy to dive into the code. The terms discussed above are important as they are of need to be understood as they are the building blocks on which the entire premises of the constructed code rests.
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