INITIATION
OF CORPORATE INSOLVENCY RESOLUTION PROCESS BY FINANCIAL CREDITORS U/S 7 OF
INSOLVENCY AND BANKRUPTCY CODE, 2016
FINANCIAL
CREDITOR : SECTION 5(7)
“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;
FINANCIAL
DEBT : SECTION 5(8)
- “financial debt”
means a debt alongwith interest, if any, which is disbursed
against the consideration for the time value of money and
includes–
- money borrowed against the
payment of interest;
- any amount raised by
acceptance under any acceptance credit facility or its de- materialised
equivalent;
- any amount raised pursuant
to any note purchase facility or the issue of bonds, notes, debentures,
loan stock or any similar instrument;
- the amount of any liability
in respect of any lease or hire purchase contract which is deemed as a
finance or capital lease under the Indian Accounting Standards or such
other accounting standards as may be prescribed;
- receivables sold or
discounted other than any receivables sold on non-recourse basis;
- any amount raised under any
other transaction, including any forward sale or purchase agreement,
having the commercial effect of a borrowing;
[Explanation. -For the purposes of this
sub-clause, -
- any amount raised from an
allottee under a real estate project shall be deemed to be an amount
having the commercial effect of a borrowing; and
- the expressions,
“allottee” and “real estate project” shall have the meanings
respectively assigned to them in clauses (d) and (zn) of section 2 of
the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);]
g. any derivative transaction
entered into in connection with protection against or benefit from fluctuation
in any rate or price and for calculating the value of any derivative
transaction, only the market value of such transaction shall be taken into
account;
h. any counter-indemnity obligation
in respect of a guarantee, indemnity, bond, documentary letter of credit or any
other instrument issued by a bank or financial institution;
i.
the
amount of any liability in respect of any of the guarantee or indemnity for any
of the items referred to in sub-clause (a) to (h) of this clause;
PERSONS
WHO MAY INITIATE CORPORATE INSOLVENCY RESOLUTION PROCESS : SECTION 6
Where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor
itself may initiate corporate insolvency resolution process in
respect of such corporate debtor in the manner as provided under this Chapter.
INITIATION OF CORPORATE
INSOLVENCY RESOLUTION PROCESS BY FINANCIAL CREDITOR: SECTION 7
SECTION 7
(1)
A financial creditor either by itself or jointly with 1[other financial creditors, or any other person on
behalf of the financial creditor, as may be notified by the Central Government] may file an application for
initiating corporate insolvency resolution process against a corporate debtor
before the Adjudicating Authority when a default has occurred.
Proviso:
[Provided that for the financial creditors,
referred to in clauses (a) and (b) of sub- section (6A) of section 21, an application for initiation corporate
insolvency resolution process against the corporate debtor
shall be filed jointly by not less than one hundred of such
creditors in the same class or not less than ten per cent. of the total number
of such creditors in the same class, whichever is less:
Provided further that for financial creditors
who are allottees under a real estate project, an application for initiating corporate
insolvency resolution process
against the corporate debtor shall be filed jointly by not less than one hundred of
such allottees under the same real estate
project or not less than ten per cent. of the total number of such allottees
under the same real estate project, whichever is less:
Provided also that where an application for
initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first
or second provisos and has not been admitted by the Adjudicating Authority
before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act,
2020, such application shall be modified to comply with the requirements of the
first or second provisos as the case may be within
thirty days of the commencement of the said Act, failing
which the application shall be
deemed to be withdrawn before its admission.]
Explanation.
- For the purposes of this
sub-section, 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.
SECTION 7
(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.
SECTION 7
(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) t h e 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.
SECTION 7
(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):
[Provided that if
the Adjudicating Authority has not ascertained the existence of default and
passed an order under sub-section (5) within
such time, it shall record its reasons in writing for the same.]
SECTION 7
(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.
SECTION 7
(6)
The
corporate insolvency resolution process shall commence from the date of
admission of the application under sub-section
(5).
SECTION 7
(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.
Compiled By:
Team Apna IP Consultant
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