OVERVIEW OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016
To whom shall the provisions of the Code apply:
The code of IBC comes into picture when the individual or corporate body fails to or realise that they cannot pay back the debt or the creditor. That’s when the code of insolvency and bankruptcy plays a very important role in carrying out the necessary steps required after a firm goes insolvent.
In the layman terms this code shall apply to :
Before the enactment of IBC 2016, there was no specific code to deal with insolvency and bankruptcy and it was dealt under other laws ex. Indian partnership Act 1932 etc.
Who shall be termed as Corporate Debtor:
The general meaning of debtor indicates to a person who owes debt or fund to the creditor .”According to Section 3(8) of IBC corporate debtor is a person that owes to any person”. There are several other terms used for the debtor that may be sundry debtor, or Corporate debtor when it comes to corporate firms the person that owes to the outsider that is a creditor or the shareholders that can be termed as a corporate debtor.
the services that are included in the term financial service:
Financial services have several contexts attached to it and when we talk about financial services in the context of a firm then the meaning that comes out is when any instrument of financial market is traded or when the company being the debtor lends money from the creditor that also becomes a financial service. When the company raises share ‘s and the shareholders buy it that also becomes financial service.
The services that are included in the financial service is :
hence any financial service that is done with the intension of exchanging any type of financial instrument to earn any return that can include in the category of financial service.
the threshold limit for making an application for insolvency and liquidation of corporate persons:
The code is very specific about the insolvency process that is it is time-bound and it demands the corporates or individual to complete the process within 180 days which can be extended for another 90 days. When any type of default occurs any person cannot go and apply to national company law tribunal (adjudicating authority for insolvency ) the code makes very specific and clear about the threshold limit that must be 1 lakh rupees or more any amount lesser than this the corporate debtor cannot be made liable for the default. Hence the threshold limit is made with the intension that there must not be applications made for the petty amount that is lesser than 1lakh rupees and it is understood that it can be recovered by the creditor easily. Therefore the creditor can claim the debtor or apply in front of NCLT when the amount is more than 1lakh rupees. But it is the discretion of the central government to prescribe the minimum amount when the default is of a higher amount which shall not be more than one crore rupees.
The Insolvency Resolution Professional:
The authority to appoint the resolution professional is vested with the committee of creditor’s in the first meeting of the committee of creditors which shall be held within seven days after the committee of creditors are framed. The committee by the majority of 66 % shall either appoint another resolution professional or appoint the interim professional as the resolution professional. To replace the interim resolution professional there shall be an application made before the adjudicating authority .if there is no decision taken by the committee of creditors regarding the resolution professional then NCLT shall direct the interim resolution professional to continue as resolution profession till there is any decision taken by the NCLT regarding the resolution professional.
