The Insolvency and Bankruptcy Code 2016 (IBC) is India's consolidated framework for resolving insolvency of companies, limited liability partnerships and individuals. IBC replaced the earlier fragmented regime (SICA, BIFR, winding up under Companies Act) with a time-bound, creditor-driven insolvency resolution process. Here is the complete guide for companies, promoters and creditors.
Who Can Trigger CIRP?
The Corporate Insolvency Resolution Process (CIRP) can be initiated by:
- Financial Creditor (bank, bond holder, financial institution) — on default of ₹1 crore or more
- Operational Creditor (supplier, employee, service provider) — on default of ₹1 crore or more (after 10-day demand notice)
- Corporate Debtor itself — voluntary initiation by the board
The minimum default threshold is currently ₹1 crore (raised from ₹1 lakh in 2020 to reduce frivolous applications).
The CIRP Process
- Application to NCLT: Filed at the National Company Law Tribunal (NCLT) bench with jurisdiction over the company's registered office
- IRP Appointment: NCLT admits the application and appoints an Interim Resolution Professional (IRP) within 14 days
- Moratorium: On admission, a moratorium is declared — all suits, executions and asset sales are stayed; company continues operations under IRP control
- Public Announcement: IRP makes a public announcement inviting claims from all creditors
- Committee of Creditors (CoC): Financial creditors form the CoC; they appoint a Resolution Professional (RP) to manage the company during CIRP
- Resolution Plan: RP invites resolution applicants (bidders); CoC evaluates plans; approved plan submitted to NCLT for approval
- Time Limit: CIRP must be completed within 180 days (extendable to 330 days in exceptional cases, including NCLT/NCLAT time)
Liquidation Under IBC
If no resolution plan is approved within the time limit, or if CoC votes for liquidation, the company goes into liquidation. A Liquidator is appointed by NCLT. The liquidation estate is distributed in a prescribed waterfall order: CIRP costs → secured creditors → unsalted employee dues → government dues → unsecured financial creditors → operational creditors → equity shareholders.
Protection for Promoters
Under Section 29A, certain persons are disqualified from submitting a resolution plan — including willful defaulters, NPA promoters, persons connected with the corporate debtor. The "Section 29A disqualification" has been extensively litigated and has significant implications for promoters trying to reclaim their companies in CIRP.
Conclusion
IBC has transformed insolvency resolution in India — moving from a debtor-friendly to a creditor-friendly system with strict timelines. SPOTON provides advisory on IBC proceedings including creditor claim filing, resolution plan compliance and NCLT representation support. Contact us for expert insolvency and restructuring advisory services.
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