Procedure For Filing Application by Financial Creditor under IBC

MEANING OF  FINANCIAL CREDITOR

Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. 

HOW  THE FINANCIAL CREDITOR FILE APPLICATION TO NATIONAL COMPANY LAW TRIBUNAL (NCLT)?

The process for filing application by a financial creditor is defined under Section 7 of “The  Insolvency and Bankruptcy Code, 2016“

SECTION 7- Intimation of Corporate Insolvency process by Financial Creditor

(1) A financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate  insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.

(2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed.

(3) The financial creditor shall, along with the application furnish—

(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified;

(b) the name of the resolution professional proposed to act as an interim resolution professional; and

(c) any other information as may be specified by the Board.

(4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3).

(5) Where the Adjudicating Authority is satisfied that—

(a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or

(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application:

Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority.

(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5).

(7) The Adjudicating Authority shall communicate— (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be.

EXPLANATION

1. The minimum amount of the default should be one lakh rupees or more.

2. A 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.

3. The Financial creditor is required to file an application in Form 1 of Insolvency and Bankruptcy (Application to Adjudicating Authority, rules, 2016).

4. The Financial Creditor along with the application file a Demand Draft of Rs. 25,000/– in favour of ” Pay and Accounts Officer, Ministry of Corporate Affairs” payable at Delhi.

5. The Financial Creditor is required to propose the name of ‘Interim Resolution Professional’ at the time of filing Application.

6. Date Of Commencement of Corporate Insolvency Resolution Process- With effect from date of admission of application by NCLT.

List of documents required to be file by Financial Creditor under Section 7 of IBC- 

1. Application in Form 1 of Insolvency and Bankruptcy(Application to Adjudicating Authority, rules, 2016).

2. Demand Draft of Rs. 25,000/– in favour of ” Pay and Accounts Officer, Ministry of Corporate Affairs” payable at Delhi.

3. Written Consent of Insolvency Resolution Process in Form 2 of  Insolvency and Bankruptcy (Application to Adjudicating Authority, rules, 2016).

4. Verifying Affidavit by Financial Creditor in Form No.- NCLT 6.

TIME LIMIT FOR COMPLETION OF CORPORATE INSOLVENCY RESOLUTION PROCESS:-

CIRP must be completed with in 180 days from ‘insolvency commencement date’.  One time extension not exceeding 90 days can be granted. Committee of creditors by resolution passed at its meeting by 75% of voting power may instruct the Resolution Professional to seek extension of time. If the Adjudicating Authority is satisfied that CIRP cannot be completed with in 180 days , then it may grant extension upto 90 days.

DECLARATION BY NCLT:-

NCLT after admission of the application. shall by an order

1. Declare Moratorium

2. Cause a public announcement

3. Appoint an interim resolution professional.

* Moratorium– SECTION 14

The Adjudicating Authority shall by order prohibit the following, namely:—

1. The institution/continuation/proceedings of suits against the corporate debtor including execution of any judgment, decree or order in any court of law or any other authority.

2. Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest.

3. Any action under SARFAESI Act 2002;

4. Recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

5. Supply of essential goods or services to the corporate debtor  shall not be terminated or suspended or interrupted during moratorium period.

The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process.