Insolvency and Bankruptcy code is enabled through different authorities and professionals. All these work in a system where the implementation of the code is ensured for the benefit of the industry.
Important participants in the ecosystem are as follows
Insolvency and Bankruptcy Board (IBBI) -
IBBI is an apex body governing Insolvency and Bankruptcy Code consisting representatives from Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law. It is setting up the necessary infrastructure and accredits Insolvency Professionals (IPs) and Information Utilities (IUs).It manages and controls Insolvency Professionals, Agencies and Information Utilities set up under the Code for the efficient implementation of the provisions of the Act.
Insolvency Professionals (IPs)
IPs are licensed professionals registered with IBBI who act as Resolution Professional/ Liquidator/ Bankruptcy trustee in an insolvency resolution process. A Specialized category of officers is created to administer and enforce the resolution process, manage the affairs of the corporate debtor and share information with creditors to help them in decision-making. They are the persons who act as facilitator to resolve the situation amicable with the cooperation of debtors and creditors.
The adjudicating authority shall appoint an interim resolution professional within 14 days from the insolvency commencement date. On his appointment he will first understand the background of the case. This work at the primary level will help the IP to resolve the situation. He shall collect the information relating to the debtor’s assets, finances and operations, take its control and custody, receive and collate claims and constitute a committee of creditors. The personnel i.e. managers and employees of the corporate debtors shall extend cooperation to insolvency professional. He shall make efforts to preserve the value of corporate debtor’s property and manage the operations as a going concern. Within 7 days of the constitution of the committee of creditors, they should by a vote of 66% resolve to appoint an interim resolution professional as resolution professional or replace him by another one.
Some important duties and function of the Insolvency Professional:-
To make public announcement of insolvency process in English and local language newspaper.
To manage affair of the company as a going concern.
To collect information relating to the assets, finances and operation of corporate debtor for determining the financial position.
To collect all claims received from creditors and assess them.
To constitute a committee of creditors etc.
To appoint to registered valuers to evaluate the assets.
To coordinate with NCLT and IBBI.
Information Utilities -
Information Utilities would collect, store and distribute information related to the indebtedness of companies. A person registered with the Board as Information Utility i.e. a person to whom the creditors report the financial information of the debt owed to them by the debtors which include debt, liabilities and default.
Information utility will have data of the indebtedness of the insolvent company and also the nature of such debt like secured, unsecured etc. He will work as the custodian of information of all liabilities, debts etc of the company and he will help the IP to assess and evaluate the position.
Insolvency Professional Agencies -
Insolvency Professional Agencies (IPAs) are enrolling insolvency professionals as members. These agencies conduct an examination and certify these insolvency professionals as well as defines their code of conduct for their duties and performance.
Currently, there are three IPAs:
(i) ICSI Insolvency professional Agency
(ii) Indian Institute of Insolvency Professionals of ICAI
(iii) Insolvency professional Agency of Institute of cost Accountants of India
Adjudicating Authorities (AA) -
Adjudicating Authorities (AA) have the exclusive jurisdiction to deal with insolvency related matters.
National Company Law Tribunal (NCLT) is the AA for Corporate and LLP insolvency.
Debt Recovery Tribunal (DRT) would be AA for individual or partnership Firms Insolvency.
A person aggrieved by the order of the Adjudicating Authority under Part III of IBC (insolvency resolution and bankruptcy for individuals and partnership firms), viz. DRT, may prefer an appeal to the Debt Recovery Appellate Tribunal (“DRAT”) under Section 181. Thus, statutory forums in the form of NCLAT and DRAT have been designated as the appellate authority under IBC for redressal of grievances arising out of an order of the Adjudicating Authority under Part II and Part III of IBC respectively. Further, any person aggrieved by an order of the NCLAT or DRAT may file an appeal to the Supreme Court on a question of law arising out of such order.
Thus, IBC provides for a three-tier adjudicatory mechanism, for dealing with all issues that may arise in relation to the insolvency resolution and liquidation for corporate persons and insolvency resolution and bankruptcy for individuals and partnership firms, namely (i) NCLT/ DRT; (ii) the NCLAT/ DRAT (iii) the Supreme Court.
It shall be the National Company Law Tribunal (NCLT) having the territorial jurisdiction over the place where the registered office of the corporate person is located. Any insolvency resolution, liquidation or bankruptcy proceedings shall stand transferred to NCLT. Any person aggrieved by its order can prefer an appeal to the National Company Law Appellate Tribunal (NCLAT) within 30 days of the NCLT order, which in turn can be appealed to the Supreme Court within 45 days of NCLAT order on questions of law arising out of such order. If both the Appellate courts are satisfied about the sufficient cause they may extend the time for appeal by 15 days. No civil court shall have jurisdiction over the matters of NCLT.
Applicability of code
Applies to whole of India including J&K and Ladakh.
Persons covered:-
Company
Limit Liability Partnership
An individual
A Hindu Undivided Family
A Partnership
A Trust
Any other entity established under a statute, and includes a person resident outside the India.
Who can approach ?
Any person whose amount is due with the Company or LLP (minimum amount 1,00,00,000) can approach to NCLT (National Company Law Tribunal) under IBC (Insolvency and Bankruptcy Code) 2016 for Liquidation of that Company / LLP. Examples are written as following.
1. Financial/ Operational Creditors
2. Corporate Debtor
3. Corporate Applicant
4. An Employee: A person who was / is working in a Company / LLP may file a petition if his dues are 1,00,00,000 or more.
5. Service Provider: Any service provider who has given the services and raised the Invoice but unable to recover the dues may file a petition if his dues are 1,00,00,000 or more.
6. Goods Provider: Any Goods Provider who has delivered the goods and raised the Invoice but unable to recover the dues may file a petition if his dues are 1,00,00,000 or more.
Jurisdiction to file the application before NCLT
Jurisdiction as per the State in which Company (to whom we are filling a suit) is registered. As per that state connected NCLT shall be the jurisdiction to file the petition.