# Insolvency and Bankruptcy Code 2016 - CIRP Process Guide ## Overview The Insolvency and Bankruptcy Code, 2016 (IBC) provides a time-bound, creditor-driven insolvency resolution framework for corporate debtors. This guide covers the Corporate Insolvency Resolution Process (CIRP), NCLT procedures, and Committee of Creditors (CoC) operations. --- ## 1. Triggering CIRP ### Who Can Initiate? | Applicant | Section | Threshold | |-----------|---------|-----------| | Financial Creditor | Section 7 | Default of Rs. 1 crore or more | | Operational Creditor | Section 9 | Default of Rs. 1 crore or more | | Corporate Debtor | Section 10 | Default of Rs. 1 crore or more | *Note: Threshold raised from Rs. 1 lakh to Rs. 1 crore by notification dated 24.03.2020* ### Section 7 Application (Financial Creditor) **Required Documents:** 1. Application in Form 1 (CIRP Regulations) 2. Record of default from Information Utility OR other evidence 3. Financial contract (loan agreement, debentures, etc.) 4. Statement of account 5. List of other financial creditors (if known) 6. Authorization for filing 7. Affidavit verifying the application **Limitation Period:** 3 years from date of default (Article 137, Limitation Act) ### Section 9 Application (Operational Creditor) **Pre-filing Requirements:** 1. Issue demand notice under Section 8(1) in Form 3 2. Wait 10 days for payment or dispute notice 3. If no payment/dispute, proceed with Section 9 **Required Documents:** 1. Application in Form 5 2. Copy of demand notice and proof of delivery 3. Copy of invoice/contract 4. Affidavit confirming no dispute notice received 5. Evidence of debt and default 6. Certificate from financial institutions (bank statement) ### Section 10 Application (Corporate Debtor) **Required Documents:** 1. Application in Form 6 2. Special resolution of shareholders 3. Statement of affairs 4. List of creditors with amounts 5. List of ongoing litigations 6. Audited financial statements (2 years) --- ## 2. NCLT Admission Process ### Filing and Registration **Step 1: Filing** - File at NCLT Bench having territorial jurisdiction - Principal place of business or registered office determines jurisdiction - E-filing mandatory: https://efiling.nclt.gov.in **Step 2: Scrutiny** - Registry scrutinizes within 7 days - Defects to be cured within stipulated time - Case listed for admission hearing ### Admission Hearing **NCLT Must Determine:** 1. Whether default has occurred 2. Whether application is complete 3. Whether any disciplinary proceedings against proposed IRP 4. Whether application is within limitation **Timeline:** Section 7 applications to be disposed within 14 days of filing ### Admission Order Contents - Declaration of moratorium under Section 14 - Public announcement of CIRP - Appointment of Interim Resolution Professional (IRP) - Direction to submit claims --- ## 3. CIRP Timeline ### Statutory Timeline (Section 12) ``` Day 0: CIRP Commencement (Admission Order) | Day 1-7: IRP takes control, public announcement | Day 1-14: Claims submission begins | Day 30: First CoC meeting | Day 45: Appointment of RP by CoC (replacing IRP if needed) | Day 75: Information Memorandum to be issued | Day 105: RFRP issued (Request for Resolution Plans) | Day 135: Resolution plans received | Day 165: CoC approves resolution plan | Day 180: CIRP completion deadline | Day 180-330: Extension possible (max 330 days total) ``` ### Extension of Timeline **Single Extension:** CoC may request extension up to 90 days (total 270 days) **Further Extension:** NCLT may grant up to 60 more days in exceptional circumstances **Absolute Maximum:** 330 days from commencement date *Reference: Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019) - 330 days includes time for NCLT approval* --- ## 4. Moratorium (Section 14) ### Automatic Stay on: 1. Institution or continuation of suits/proceedings 2. Transferring, encumbering, alienating assets 3. Recovery actions against corporate debtor 4. Termination of essential contracts ### Moratorium Does NOT Apply To: - Criminal proceedings - Proceedings under Section 138 NI Act (cheque bounce) - Guarantor's liability - Regulatory proceedings by securities regulators - Transactions approved by CoC ### Duration - Begins on CIRP commencement - Ends on approval of resolution plan OR liquidation order --- ## 5. Resolution Professional (RP) Functions ### Key Responsibilities **Immediate Actions (Days 1-30):** 1. Take custody of assets and records 2. Issue public announcement inviting claims 3. Collate claims received 4. Constitute Committee of Creditors 5. Convene first CoC meeting **Ongoing Responsibilities:** 1. Manage operations of corporate debtor as going concern 2. Prepare Information Memorandum 3. Invite resolution plans 4. Present plans to CoC 5. File progress reports with NCLT ### Qualifications and Eligibility - Registered Insolvency Professional with IBBI - No relationship with corporate debtor (Section 79) - Must disclose relationships under Section 29A - Cannot be resolution applicant's related party --- ## 6. Committee of Creditors (CoC) ### Composition **Voting Members:** - Financial Creditors (each having minimum 1% voting share) - Authorized representative for class of financial creditors **Non-Voting Attendees:** - Operational Creditors (above threshold) - Members/Partners of corporate debtor - Resolution Professional ### Voting Rights Calculation ``` Voting Share = (Amount owed to creditor / Total financial debt) x 100 ``` **Example:** | Creditor | Amount (Cr.) | Voting % | |----------|--------------|----------| | Bank A | 500 | 50% | | Bank B | 300 | 30% | | Debenture holders | 200 | 20% | | **Total** | **1000** | **100%** | ### Voting Thresholds | Decision | Threshold Required | |----------|-------------------| | Approval of resolution plan | 66% | | Replacement of RP | 66% | | Legal proceedings | 66% | | Appointment of authorized rep | 66% | | Extending CIRP | 66% | | Day-to-day decisions | 51% | ### CoC Meetings **Frequency:** At least once in every 30 days **Notice Period:** 5 days (24 hours for emergency) **Quorum:** 33% of voting share **Mode:** Physical, video conferencing, or hybrid --- ## 7. Claims Process ### Timeline for Claims Submission - **Financial Creditors:** Within 14 days of public announcement - **Operational Creditors:** Within 14 days of public announcement - **Workmen/Employees:** Within 14 days of public announcement - **Other Creditors:** Within 14 days of public announcement ### Claims Forms | Creditor Type | Form | |---------------|------| | Financial Creditor | Form B | | Operational Creditor (other than workmen) | Form C | | Workmen and Employees | Form D | | Authorized Representative | Form E | ### Verification of Claims - RP to verify within 7 days of receipt - Reject or accept with reasons - Maintain list of creditors - Update claims as required --- ## 8. Resolution Plan Requirements ### Mandatory Contents (Section 30(2)) 1. Payment to operational creditors (minimum liquidation value) 2. Payment to dissenting financial creditors (minimum liquidation value) 3. Management of affairs post-resolution 4. Implementation and supervision mechanism 5. Sources of fund for the plan 6. Details of resolution applicant including Section 29A compliance ### Section 29A Ineligibility Criteria **Ineligible Resolution Applicants:** - Willful defaulters - Accounts classified as NPA for 1 year - Convicted for specified offenses - Disqualified directors - Prohibited under law - Guarantors for NPAs - Connected persons of above categories ### Evaluation by CoC **CoC Must Consider:** - Feasibility and viability - Manner of distribution - Compliance with IBC provisions - Impact on creditors and stakeholders - Resolution applicant's capability --- ## 9. NCLT Approval of Resolution Plan ### Filing for Approval - Within 7 days of CoC approval - Along with compliance certificate - CoC minutes and voting record ### NCLT Scrutiny (Section 31) **NCLT Must Satisfy:** 1. Resolution plan approved by 66% CoC 2. Plan meets Section 30(2) requirements 3. Resolution applicant not ineligible under Section 29A 4. Interests of all stakeholders considered 5. Plan does not contravene applicable laws ### Binding Effect - Approved plan binds corporate debtor and all stakeholders - Claims not part of plan stand extinguished - Guarantors bound by the plan (subject to recent amendments) --- ## 10. Liquidation ### Triggering Events (Section 33) 1. 66% CoC resolves to liquidate 2. No resolution plan received 3. NCLT rejects resolution plan 4. Contravention of resolution plan 5. Corporate debtor contravenes provisions ### Waterfall Mechanism (Section 53) Priority of distribution: 1. CIRP costs and liquidation costs 2. Secured creditors (workmen dues up to 24 months) 3. Workmen dues (exceeding 24 months) 4. Financial debts (unsecured) 5. Government dues (2 years) 6. Remaining debts 7. Preference shareholders 8. Equity shareholders --- ## 11. Key IBBI Regulations ### Primary Regulations 1. **IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016** 2. **IBBI (Liquidation Process) Regulations, 2016** 3. **IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017** 4. **IBBI (Information Utilities) Regulations, 2017** ### Recent Amendments (2024-2026) - Enhanced disclosure requirements for resolution applicants - Strengthened CoC oversight provisions - Revised forms for CIRP monitoring - Beneficial ownership declarations mandatory - Section 32A affidavit requirements --- ## 12. Important Judicial Precedents ### Landmark Supreme Court Decisions 1. **Swiss Ribbons Pvt. Ltd. v. Union of India** (2019) 4 SCC 17 - Upheld constitutional validity of IBC - CoC is the appropriate body for commercial decisions 2. **Essar Steel India Ltd. v. Satish Kumar Gupta** (2019) 20 SCC 1 - Distribution among creditors is CoC's commercial wisdom - NCLT has limited judicial review 3. **Vijay Kumar Jain v. Standard Chartered Bank** (2019) 20 SCC 455 - Confidentiality of resolution plans during CIRP - RP must provide information to CoC members 4. **Lalit Kumar Jain v. Union of India** (2021) 9 SCC 321 - Moratorium doesn't extend to guarantors - Personal guarantor insolvency proceeds independently 5. **Vidarbha Industries Power Ltd. v. Axis Bank Ltd.** (2022) - NCLT's power to admit applications is not discretionary --- ## 13. Practical Tips for CIRP ### For Financial Creditors - Ensure timely filing of claims with supporting documents - Participate actively in CoC meetings - Review resolution plans thoroughly - Record reasons for voting decisions ### For Corporate Debtors - Cooperate with RP - Provide complete information and records - Do not alienate assets during moratorium - Attend CoC meetings if permitted ### For Resolution Applicants - Obtain Section 29A compliance certificate - Submit comprehensive resolution plan - Provide evidence of funding capability - Be prepared for due diligence --- *Last Updated: March 2026* *Source: IBC 2016, IBBI Regulations, NCLT/NCLAT Judgments, Supreme Court Precedents* *Disclaimer: This is a reference guide. Consult legal counsel for specific cases.*