FAQs on the Insolvency and Bankruptcy Code

1. What is applicability of Bankruptcy code?

Provisions of Bankruptcy code are applicable to individuals, companies, limited liability partnerships and partnership firms.

2. What are the benefits of Bankruptcy code?

The new code will speed up the resolution process for stressed assets in the country. It attempts to simplify the process of insolvency and bankruptcy proceedings. Authority to decide insolvency applications within 180 days further, an extension of additional 90 days can be allowed. Sufficient provisions are made for Insolvency Regulator to exercise regulatory authority over insolvency professionals, insolvency professional agencies and informational utilities

3. What is Fast track Insolvency process under Bankruptcy Code?

Fast track process is available for Corporate- Debtor with low income and assets, Specified class of creditors and any other category notified by Govt. Under fast track process, 90 days’ time limit to complete whole process and further an extension of 45 days is allowed

4. Which are Adjudicating Authorities under Bankruptcy Code?

NCLT will be adjudicating authority for Corporates, while DRTs will be adjudicating authority for Individuals and Partnerships Firms. NCLAT will act as Appellate Authority.

5. Is punishment prescribed for defaulter under code?

The code prescribed stringent punishment to defaulter. It proposes upto five-year jail term to debtors for concealment of property and debars bankrupt individuals from holding any public office.

6. Who can initiate corporate insolvency process?

Financial creditor, operational creditor or corporate debtor can initiate corporate insolvency process.

Financial creditor can file application before Adjudicating Authority for initiation of insolvency process against Corporate Debtor along with proof of default and name of resolution professional to act as an interim resolution professional.

Operational creditor can initiate corporate insolvency process by giving 10-day notice to corporate-debtor.

The Corporate Debtor himself can initiate corporate insolvency process by making a reference to adjudicating authority.

7. What is time limit within which Adjudicating Authority shall reject application?

The Adjudicating Authority shall admit or reject application within 14 days of receipt of application.

8. When 'Interim resolution professional' is appointed?
 

Adjudicating authority shall appoint interim resolution profession within 14 days from insolvency commencement date.

9. Who will constitute Committee of creditors? How decisions will be taken once Committee of Creditors is constituted?

Interim resolution professional shall constitute committee of creditors after collating all claims against debtors and determining their financial position. All decisions are taken by 75% voting share of financial creditors. Resolution profession shall conduct the meeting of committee. Meeting may be conducted in person or through electronic means

10. When Adjudicating Authority can order liquidation and who shall act as liquidator?

Adjudicating Authority can order liquidation if:

- Resolution plan is not presented in given time
- Resolution plan is not as per rules
- Committee of creditors demands liquidation
- Debtor-company violates the terms of resolution plans

On passing of order of liquidation, resolution professionals shall act as liquidator.

11. Will workers dues get priority under code?

Yes. Workers' salaries for up to 24 months will get first priority in case of liquidation of assets of a company ahead of secured creditors.