Insolvency and Bankruptcy Code 2016 PDF

INSOLVENCY AND
BANKRUPTCY CODE
2016
(With Rules & Regulations)
(Updated Edition)
INSOLVENCY PROFESSIONALS AGENCY

(Section 8 Company registered under the Companies Act, 2013)
APRIL 2017
Price : Rs. 550/- (Postage extra)
© INSOLVENCY PROFESSIONALS AGENCY

All rights reserved. No part of this Publication may be translated or copied
in any form or by any means without the prior written permission of
The ICSI Insolvency Professionals Agency.
Disclaimer
Although due care and diligence have been taken in the publication of
this book, the ICSI Insolvency Professionals Agency shall not be
responsible for and loss or damage, resulting from any action taken
on the basis of the contents of this book. Any one wishing to act on the
basis of the material contained herein should do so after cross checking
with the original source.
Published by :
INSOLVENCY PROFESSIONALS AGENCY

1st Floor, ICSI House, 22, Institutional Area, Lodi Road
New Delhi 110 003
Phones : 011-4534 1094/64 Email : info@icsiipa.com
Printed at Chandu Press/1000/April, 2017
(ii)
The Insolvency and Bankruptcy Code, 2016 (the Code) provides for a
specialised forum to oversee insolvency and liquidation proceedings for
individuals, firms and corporates. It seeks to consolidate the existing
framework by creating a single law for insolvency and bankruptcy that will
provide for resolution of insolvency in a speedy and time-bound manner
and balance the interest of all the stakeholders.
The new insolvency law is creating a lot of excitement and anxiety in the
minds of professionals, as it throws both opportunities as well as
challenges. The notification of the Code and the Regulations/Rules made
thereunder have opened up a lot of opportunities for the professionals in
the area of Corporate Insolvency Resolution Process, Corporate Liquidation
Process, Individual Insolvency Resolution Process, Individual Bankruptcy
Process and Liquidation of a corporate debtor firm.
The Code establishes an Insolvency Regulator, the Insolvency and

Bankruptcy Board of India (IBBI) to exercise regulatory oversight over
Insolvency Professional Agencies and Information Utilities. IBBI has
delegated the task of monitoring and evaluating the insolvency
professionals registered with it to the Insolvency Professionals Agency.
The ICSI Insolvency Professionals Agency (ICSI IPA), a frontline regulator, is

a section 8 Company incorporated under the Companies Act, 2013 and is a
wholly owned subsidiary of The Institute of Company Secretaries of India
(ICSI). The Company is registered as an Insolvency Professional Agency
with Insolvency and Bankruptcy Board of India to enrol, regulate and monitor
the members practising as Insolvency Professionals (IPs) in accordance
with the provisions of Insolvency and Bankruptcy Code, 2016 read with
rules and regulations made thereunder. Eminent practising professionals
are enrolled with ICSI IPA.
The compilation of regulatory aspects of the Code by ICSI IPA covering the
rules, regulations and notifications issued thereunder including the recently
notified provisions related to Information Utilities and Voluntary Liquidation,
as well as the Bankruptcy Law Reform Committee Report, is a handy
reference for the insolvency professionals, other professionals, corporates,
students, researchers in understanding the new law.
(iii)
(iv)
CONTENTS
Sl. Topic Page

No. No.
1 Insolvency and Bankruptcy Code, 2016 1
2 Insolvency and Bankruptcy Board of India (Insolvency 160
Professional Agencies) Regulations, 2016
3 Insolvency and Bankruptcy Board of India (Model Bye- 172
Laws and Governing Board of Insolvency Professional
Agencies) Regulations, 2016
4 Insolvency and Bankruptcy Board of India (Insolvency 185
Professionals) Regulations, 2016
5 Insolvency And Bankruptcy Board Of India (Insolvency 203
Resolution Process For Corporate Persons) Regulations,
2016
6 Insolvency and Bankruptcy (Application to Adjudicating 236
Authority) Rules, 2016
7 Insolvency and Bankruptcy Board of India (Liquidation 257
Process) Regulations, 2016
8 Insolvency and Bankruptcy Board of India (Voluntary 304
Liquidation Process) Regulations, 2017
9 Insolvency and Bankruptcy Board of India (Information 344
Utilities) Regulations, 2017
10 Transfer of Pending Proceedings Rules, 2016 372
11 Notification on establishment of Insolvency and 374
Bankruptcy Board of India
12 Notification dated 05/08/2016 on Provisions of the 375
Insolvency and Bankruptcy Code, 2016
(v)
17 Notification on Sick Industrial Companies (Special 380
Provisions) Repeal Act, 2003
18. Notification dated 30/03/2017 on Provisions of the 381
16 The report on Bankruptcy Law Reforms Committee 382
NOTIFICATIONS RELATING TO NCLT
Sl. Topic Page

No. No.
1 Notification of NCLT and NCLAT 548

2 Location and Addresses of NCLT and its benches and NCLAT 549
3 Territorial Jurisdiction of the Benches 551
4 Division Bench entitlement to function as a Bench 553
5 Dress Code for NCLT 554
6 Checklist for Scrutiny of Petition, Application, Appeal/Reply 555
ORDERS BY INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
Sl. Topic Page

No. No.
1 In the matter of application of Mr. Gaurav Jain for grant of 559

certificate of registration
2. In the matter of application of Mr. Vimal Prakash Dubey for 563
grant of certificate of registration
(vi)
1
INSOLVENCY AND BANKRUPTCY CODE, 2016

Act 31 of 2016 Received the assent of the President on 28th May, 2016
An Act to consolidate and amend the laws relating to re-organisation and
insolvency resolution of corporate persons, partnership firms and individuals in
a time bound manner for maximisation of value of assets of such persons, to
promote entrepreneurship, availability of credit and balance the interests of all
the stakeholders including alteration in the order of priority of payment of
Government dues and to establish an Insolvency and Bankruptcy Board of
India, and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Sixty-seventh Year of the Republic of India as

follows :
PART I
PRELIMINARY
Short title, extent and commencement
1. (1) This Code may be called the Insolvency and Bankruptcy Code, 2016.
(2) It extends to the whole of India :
Provided that Part III of this Code shall not extend to the State of Jammu and Kashmir.
(3) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint :
Provided that different dates may be appointed for different provisions of
this Code and any reference in any such provision to the commencement of
this Code shall be construed as a reference to the commencement of that
provision.
Application
2. The provisions of this Code shall apply to –
(a) any company incorporated under the Companies Act, 2013 (18 of 2013) or
under any previous company law ;
(b) any other company governed by any special Act for the time being in
force, except in so far as the said provisions are inconsistent with the
provisions of such special Act ;
(c) any limited liability partnership incorporated under the Limited Liability
Partnership Act, 2008 (6 of 2009) ;
1
2 INSOLVENCY AND BANKRUPTCY CODE, 2016
(d) such other body incorporated under any law for the time being in force, as
the Central Government may, by notification, specify in this behalf ; and
(e) partnership firms and individuals,
in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as
the case may be.
Definitions
3. In this Code, unless the context otherwise requires, –
(1) ‘Board’ means the Insolvency and Bankruptcy Board of India established
under sub-section (1) of section 188 ;
(2) ‘Bench’ means a bench of the Adjudicating Authority ;
(3) “bye-laws” mean the bye-laws made by the insolvency professional
agency under section 205 ;
(4) ‘charge’ means an interest or lien created on the property or assets of any
person or any of its undertakings or both, as the case may be, as security
and includes a mortgage ;
(5) ‘Chairperson’ means the Chairperson of the Board ;
(6) “claim” means –
(a) a right to payment, whether or not such right is reduced to judgment,
fixed, disputed, undisputed, legal, equitable, secured or unsecured ;
(b) right to remedy for breach of contract under any law for the time
being in force, if such breach gives rise to a right to payment, whether
or not such right is reduced to judgment, fixed, matured, unmatured,
disputed, undisputed, secured or unsecured ;
(7) “corporate person” means a company as defined in clause (20) of section
2 of the Companies Act, 2013 (18 of 2013), a limited liability partnership, as
defined in clause (n) of sub-section (1) of section 2 of the Limited Liability
Partnership Act, 2008 (6 of 2009), or any other person incorporated with
limited liability under any law for the time being in force but shall not
include any financial service provider ;
(8) “corporate debtor” means a corporate person who owes a debt to any
person ;
(9) “core services” means services rendered by an information utility for –
(a) accepting electronic submission of financial information in such
form and manner as may be specified ;
INSOLVENCY AND BANKRUPTCY CODE, 2016 3
(b) safe and accurate recording of financial information ;

(c) authenticating and verifying the financial information submitted by
a person ; and
(d) providing access to information stored with the information utility to
persons as may be specified ;
(10) ‘creditor’ means any person to whom a debt is owed and includes a
financial creditor, an operational creditor, a secured creditor, an unsecured
creditor and a decree-holder ;
(11) ‘debt’ means a liability or obligation in respect of a claim which is due
from any person and includes a financial debt and operational debt ;
(12) “default” means non-payment of debt when whole or any part or
instalment of the amount of debt has become due and payable and is not
repaid by the debtor or the corporate debtor, as the case may be ;
(13) “financial information”, in relation to a person, means one or more of the
following categories of information, namely :
(a) records of the debt of the person ;
(b) records of liabilities when the person is solvent ;
(c) records of assets of person over which security interest has been
created ;
(d) records, if any, of instances of default by the person against any
debt ;
(e) records of the balance sheet and cash-flow statements of the person ;
and
(f) such other information as may be specified.
(14) “financial institution” means –
(a) a scheduled bank ;
(b) financial institution as defined in section 45-I of the Reserve Bank of
India Act, 1934 (2 of 1934) ;
(c) public financial institution as defined in clause (72) of section 2 of
the Companies Act, 2013 (18 of 2013) ; and
(d) such other institution as the Central Government may by notification
specify as a financial institution ;
(15) “financial product” means securities, contracts of insurance, deposits,
credit arrangements including loans and advances by banks and financial
institutions, retirement benefit plans, small savings instruments, foreign

currency contracts other than contracts to exchange one currency (whether
Indian or not) for another which are to be settled immediately, or any other
instrument as may be prescribed ;
(16) “financial service” includes any of the following services, namely : –
(a) accepting of deposits ;
(b) safeguarding and administering assets consisting of financial
products, belonging to another person, or agreeing to do so ;
(c) effecting contracts of insurance ;
(d) offering, managing or agreeing to manage assets consisting of
financial products belonging to another person ;
(e) rendering or agreeing, for consideration, to render advice on or
soliciting for the purposes of –
(i) buying, selling, or subscribing to, a financial product ;
(ii) availing a financial service ; or
(iii) exercising any right associated with a financial product or
financial service ;
(f) establishing or operating an investment scheme ;
(g) maintaining or transferring records of ownership of a financial
product ;
(h) underwriting the issuance or subscription of a financial product ; or
(i) selling, providing, or issuing stored value or payment instruments
or providing payment services ;
(17) “financial service provider” means a person engaged in the business of
providing financial services in terms of authorisation issued or registration
granted by a financial sector regulator ;
(18) “financial sector regulator” means an authority or body constituted under
any law for the time being in force to regulate services or transactions of
financial sector and includes the Reserve Bank of India, the Securities and
Exchange Board of India, the Insurance Regulatory and Development
Authority of India, the Pension Fund Regulatory Authority and such other
regulatory authorities as may be notified by the Central Government ;
(19) “insolvency professional” means a person enrolled under section 206
with an insolvency professional agency as its member and registered
with the Board as an insolvency professional under section 207 ;
(20) “insolvency professional agency” means any person registered with the
Board under section 201 as an insolvency professional agency ;
(21) “information utility” means a person who is registered with the Board as
an information utility under section 210 ;
(22) “notification” means a notification published in the Official Gazette, and
the terms “notified” and “notify” shall be construed accordingly ;
(23) ‘person’ includes –
(a) an individual ;
(b) a Hindu Undivided Family ;
(c) a company ;
(d) a trust ;
(e) a partnership ;
(f) a limited liability partnership ; and
(g) any other entity established under a statute,
and includes a person resident outside India ;
(24) “person resident in India” shall have the meaning as assigned to such
term in clause (v) of section 2 of the Foreign Exchange Management Act,
1999 (42 of 1999) ;
(25) “person resident outside India” means a person other than a person
resident in India ;
(26) ‘prescribed’ means prescribed by rules made by the Central
Government ;
(27) ‘property’ includes money, goods, actionable claims, land and every
description of property situated in India or outside India and every
description of interest including present or future or vested or contingent
interest arising out of, or incidental to, property ;
(28) ‘regulations’ means the regulations made by the Board under this Code ;
(29) ‘Schedule’ means the Schedule annexed to this Code ;
(30) “secured creditor” means a creditor in favour of whom security interest is
created ;
(31) “security interest” means right, title or interest or a claim to property, created
in favour of, or provided for a secured creditor by a transaction which
secures payment or performance of an obligation and includes mortgage,
charge, hypothecation, assignment and encumbrance or any other
agreement or arrangement securing payment or performance of any
obligation of any person :
Provided that security interest shall not include a performance

guarantee ;
(32) ‘specified’ means specified by regulations made by the Board under this
Code and the term ‘specify’ shall be construed accordingly ;
(33) ‘transaction’ includes a agreement or arrangement in writing for the transfer
of assets, or funds, goods or services, from or to the corporate debtor ;
(34) ‘transfer’ includes sale, purchase, exchange, mortgage, pledge, gift, loan
or any other form of transfer of right, title, possession or lien ;
(35) “transfer of property” means transfer of any property and includes a
transfer of any interest in the property and creation of any charge upon
such property ;
(36) ‘workman’ shall have the same meaning as assigned to it in clause (s) of
section 2 of the Industrial Disputes Act, 1947 (14 of 1947) ;
(37) words and expressions used but not defined in this Code but defined in
the Indian Contract Act, 1872 (9 of 1872), the Indian Partnership Act, 1932
(9 of 1932), the Securities Contact (Regulation) Act, 1956 (42 of 1956), the
Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery
of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), the
Limited Liability Partnership Act, 2008 (6 of 2009) and the Companies Act,
2013 (18 of 2013.), shall have the meanings respectively assigned to them
in those Acts.
PART II
INSOLVENCY RESOLUTION AND LIQUIDATION
FOR CORPORATE PERSONS
Chapter I
PRELIMINARY
Application of this Part

4. (1) This Part shall apply to matters relating to the insolvency and liquidation of
corporate debtors where the minimum amount of the default is one lakh rupees :
Provided that the Central Government may, by notification, specify the minimum
amount of default of higher value which shall not be more than one crore rupees.
Definitions
5. In this Part, unless the context otherwise requires, –
(1) “Adjudicating Authority”, for the purposes of this Part, means National
Company Law Tribunal constituted under section 408 of the Companies
Act, 2013 (18 of 2013) ;
(2) ‘auditor’ means a chartered accountant certified to practice as such by
the Institute of Chartered Accountants of India under section 6 of the
Chartered Accountants Act, 1949 (XXXVIII of 1949) ;
(3) ‘Chapter’ means a Chapter under this Part ;
(4) “constitutional document”, in relation to a corporate person, includes
articles of association, memorandum of association of a company and
incorporation document of a limited liability partnership ;
(5) “corporate applicant” means –
(a) corporate debtor ; or
(b) a member or partner of the corporate debtor who is authorised to
make an application for the corporate insolvency resolution process
under the constitutional document of the corporate debtor ; or
(c) an individual who is in-charge of managing the operations and
resources of the corporate debtor ; or
(d) a person who has the control and supervision over the financial
affairs of the corporate debtor ;
(6) ‘dispute’ includes a suit or arbitration proceedings relating to –
(a) the existence of the amount of debt ;
(b) the quality of goods or service ; or
(c) the breach of a representation or warranty ;
(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 ;
(8) “financial debt” means a debt along with interest, if any, which is disbursed
against the consideration for the time value of money and includes –
(a) money borrowed against the payment of interest ;
(b) any amount raised by acceptance under any acceptance credit facility
or its de-materialised equivalent ;
(c) any amount raised pursuant to any note purchase facility or the
issue of bonds, notes, debentures, loan stock or any similar
instrument ;
(d) 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 ;
(e) receivables sold or discounted other than any receivables sold on
non-recourse basis ;
(f) any amount raised under any other transaction, including any
forward sale or purchase agreement, having the commercial effect
of a borrowing ;
(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-clauses (a) to (h) of
this clause ;
(9) “financial position”, in relation to any person, means the financial
information of a person as on a certain date ;
(10) “information memorandum” means a memorandum prepared by
resolution professional under sub-section (1) of section 29 ;
(11) “initiation date” means the date on which a financial creditor, corporate
applicant or operational creditor, as the case may be, makes an application
to the Adjudicating Authority for initiating corporate insolvency resolution
process ;
(12) “insolvency commencement date” means the date of admission of an
application for initiating corporate insolvency resolution process by the
Adjudicating Authority under sections 7, 9 or section 10, as the case may
be ;
(13) “insolvency resolution process costs” means –
(a) the amount of any interim finance and the costs incurred in raising
such finance ;
(b) the fees payable to any person acting as a resolution professional ;
(c) any costs incurred by the resolution professional in running the

business of the corporate debtor as a going concern ;
(d) any costs incurred at the expense of the Government to facilitate the
insolvency resolution process ; and
(e) any other costs as may be specified by the Board ;
(14) “insolvency resolution process period” means the period of one hundred
and eighty days beginning from the insolvency commencement date and
ending on one hundred and eightieth day ;
(15) “interim finance” means any financial debt raised by the resolution
professional during the insolvency resolution process period ;
(16) “liquidation cost” means any cost incurred by the liquidator during the
period of liquidation subject to such regulations, as may be specified by
the Board ;
(17) “liquidation commencement date” means the date on which proceedings
for liquidation commence in accordance with section 33 or section 59, as
the case may be ;
(18) ‘liquidator’ means an insolvency professional appointed as a liquidator
in accordance with the provisions of Chapter III or Chapter V of this Part, as
the case may be ;
(19) ‘officer’ for the purposes of Chapter VII of this Part, means an officer who
is in default, as defined in clause (60) of section 2 of the Companies Act,
2013 (18 of 2013) or a designated partner as defined in clause (j) of section
2 of the Limited Liability Partnership Act, 2008 (6 of 2009), as the case may
be ;
(20) “operational creditor” means a person to whom an operational debt is
owed and includes any person to whom such debt has been legally
assigned or transferred ;
(21) “operational debt” means a claim in respect of the provision of goods or
services including employment or a debt in respect of the repayment of
dues arising under any law for the time being in force and payable to the
Central Government, any State Government or any local authority ;
(22) “personal guarantor” means an individual who is the surety in a contract
of guarantee to a corporate debtor ;
(23) ‘personnel’ includes the directors, managers, key managerial personnel,
designated partners and employees, if any, of the corporate debtor ;
(24) “related party”, in relation to a corporate debtor, means –

(a) a director or partner of the corporate debtor or a relative of a director
or partner of the corporate debtor ;
(b) a key managerial personnel of the corporate debtor or a relative of
a key managerial personnel of the corporate debtor ;
(c) a limited liability partnership or a partnership firm in which a
director, partner, or manager of the corporate debtor or his relative
is a partner ;
(d) a private company in which a director, partner or manager of the
corporate debtor is a director and holds along with his relatives,
more than two per cent of its share capital ;
(e) a public company in which a director, partner or manager of the
corporate debtor is a director and holds along with relatives, more
than two per cent of its paid-up share capital ;
(f) any body corporate whose Board of directors, managing director or
manager, in the ordinary course of business, acts on the advice,
directions or instructions of a director, partner or manager of the
corporate debtor ;
(g) any limited liability partnership or a partnership firm whose partners
or employees in the ordinary course of business, acts on the advice,
directions or instructions of a director, partner or manager of the
corporate debtor ;
(h) any person on whose advice, directions or instructions, a director,
partner or manager of the corporate debtor is accustomed to act ;
(i) a body corporate which is a holding, subsidiary or an associate
company of the corporate debtor, or a subsidiary of a holding
company to which the corporate debtor is a subsidiary ;
(j) any person who controls more than twenty per cent of voting rights
in the corporate debtor on account of ownership or a voting
agreement ;
(k) any person in whom the corporate debtor controls more than twenty
per cent of voting rights on account of ownership or a voting
agreement ;
(l) any person who can control the composition of the Board of directors
or corresponding governing body of the corporate debtor ;
(m) any person who is associated with the corporate debtor on account
of –
(i) participation in policy making processes of the corporate
debtor ; or
(ii) having more than two directors in common between the
corporate debtor and such person ; or
(iii) interchange of managerial personnel between the corporate
debtor and such person ; or
(iv) provision of essential technical information to, or from, the
corporate debtor ;
(25) “resolution applicant” means any person who submits a resolution plan to
the resolution professional ;
(26) “resolution plan” means a plan proposed by any person for insolvency
resolution of the corporate debtor as a going concern in accordance with Part II ;
(27) “resolution professional”, for the purposes of this Part, means an insolvency
professional appointed to conduct the corporate insolvency resolution process
and includes an interim resolution professional ; and
(28) “voting share” means the share of the voting rights of a single financial
creditor in the committee of creditors which is based on the proportion of the
financial debt owed to such financial creditor in relation to the financial debt
owed by the corporate debtor.
CHAPTER II
CORPORATE INSOLVENCY RESOLUTION PROCESS
Persons who may initiate corporate insolvency resolution process
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

7. (1) A financial creditor either by itself or jointly with other financial creditors may
file an application for initiating corporate insolvency resolution process against a
corporate debtor before the Adjudicating Authority when a default has occurred.
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.
(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.
(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) the 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.
(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).
(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.
(6) The corporate insolvency resolution process shall commence from the date of
admission of the application under sub-section (5).
(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.
Insolvency resolution by operational creditor

8. (1) An operational creditor may, on the occurrence of a default, deliver a demand
notice of unpaid operational debtor copy of an invoice demanding payment of
the amount involved in the default to the corporate debtor in such form and
manner as may be prescribed.
(2) The corporate debtor shall, within a period of ten days of the receipt of the
demand notice or copy of the invoice mentioned in sub-section (1) bring to the
notice of the operational creditor –
(a) existence of a dispute, if any, and record of the pendency of the suit or
arbitration proceedings filed before the receipt of such notice or invoice in
relation to such dispute ;
(b) the repayment of unpaid operational debt –
(i) by sending an attested copy of the record of electronic transfer of
the unpaid amount from the bank account of the corporate debtor ;
or
(ii) by sending an attested copy of record that the operational creditor
has encashed a cheque issued by the corporate debtor.
Explanation : For the purposes of this section, a “demand notice” means a notice
served by an operational creditor to the corporate debtor demanding repayment
of the operational debt in respect of which the default has occurred.
Application for initiation of corporate insolvency resolution process by

operational creditor
9. (1) After the expiry of the period of ten days from the date of delivery of the
notice or invoice demanding payment under sub-section (1) of section 8, if the
operational creditor does not receive payment from the corporate debtor or notice
of the dispute under sub-section (2) of section 8, the operational creditor may file
an application before the Adjudicating Authority for initiating a corporate
insolvency resolution process.
(2) The application under sub-section (1) shall be filed in such form and manner
and accompanied with such fee as may be prescribed.
(3) The operational creditor shall, along with the application furnish –
(a) a copy of the invoice demanding payment or demand notice delivered by
the operational creditor to the corporate debtor ;
(b) an affidavit to the effect that there is no notice given by the corporate
debtor relating to a dispute of the unpaid operational debt ;
(c) a copy of the certificate from the financial institutions maintaining accounts
of the operational creditor confirming that there is no payment of an unpaid
operational debt by the corporate debtor ; and
(d) such other information as may be specified.

(4) An operational creditor initiating a corporate insolvency resolution process
under this section, may propose a resolution professional to act as an interim
resolution professional.
application under sub-section (2), by an order –
(i) admit the application and communicate such decision to the operational
creditor and the corporate debtor if, –
(a) the application made under sub-section (2) is complete ;
(b) there is no repayment of the unpaid operational debt ;
(c) the invoice or notice for payment to the corporate debtor has been
delivered by the operational creditor ;
(d) no notice of dispute has been received by the operational creditor
or there is no record of dispute in the information utility ; and
(e) there is no disciplinary proceeding pending against any resolution
professional proposed under sub-section (4), if any.
(ii) reject the application and communicate such decision to the operational
creditor and the corporate debtor, if –
(a) the application made under sub-section (2) is incomplete ;
(b) there has been repayment of the unpaid operational debt ;
(c) the creditor has not delivered the invoice or notice for payment to
(d) notice of dispute has been received by the operational creditor or
there is a record of dispute in the information utility ; or
(e) any disciplinary proceeding is pending against any proposed
resolution professional :
Provided that Adjudicating Authority, shall before rejecting an application under
sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his
application within seven days of the date of receipt of such notice from the
admission of the application under sub-section (5) of this section.
Initiation of corporate insolvency resolution process by corporate applicant
10. (1) Where a corporate debtor has committed a default, a corporate applicant
thereof may file an application for initiating corporate insolvency resolution
process with the Adjudicating Authority.
(2) The application under sub-section (1) shall be filed in such form, containing
such particulars and in such manner and accompanied with such fee as may be
prescribed.
(3) The corporate applicant shall, along with the application furnish the information
relating to –
(a) its books of account and such other documents relating to such period as
may be specified ; and
(b) the resolution professional proposed to be appointed as an interim
(4) The Adjudicating Authority shall, within a period of fourteen days of the receipt
of the application, by an order –
(a) admit the application, if it is complete ; or
(b) reject the application, if it is incomplete :
Provided that Adjudicating Authority shall, before rejecting an application, give a
notice to the applicant to rectify the defects in his application within seven days
from the date of receipt of such notice from the Adjudicating Authority.
admission of the application under sub-section (4) of this section.
Persons not entitled to make application

11. The following persons shall not be entitled to make an application to initiate
corporate insolvency resolution process under this Chapter, namely :
(a) a corporate debtor undergoing a corporate insolvency resolution
process ; or
(b) a corporate debtor having completed corporate insolvency resolution
process twelve months preceding the date of making of the application ;
or
(c) a corporate debtor or a financial creditor who has violated any of the
terms of resolution plan which was approved twelve months before the
date of making of an application under this Chapter ; or
(d) a corporate debtor in respect of whom a liquidation order has been made.
Explanation : For the purposes of this section, a corporate debtor includes a
corporate applicant in respect of such corporate debtor.
Time-limit for completion of insolvency resolution process

12. (1) Subject to sub-section (2), the corporate insolvency resolution process shall
be completed within a period of one hundred and eighty days from the date of
admission of the application to initiate such process.
(2) The resolution professional shall file an application to the Adjudicating Authority
to extend the period of the corporate insolvency resolution process beyond one
hundred and eighty days, if instructed to do so by a resolution passed at a meeting
of the committee of creditors by a vote of seventy-five per cent of the voting
shares.
(3) On receipt of an application under sub-section (2), if the Adjudicating Authority
is satisfied that the subject-matter of the case is such that corporate insolvency
resolution process cannot be completed within one hundred and eighty days, it
may by order extend the duration of such process beyond one hundred and
eighty days by such further period as it thinks fit, but not exceeding ninety days :
Provided that any extension of the period of corporate insolvency resolution
process under this section shall not be granted more than once.
Declaration of moratorium and public announcement

13. (1) The Adjudicating Authority, after admission of the application under section
7 or section 9 or section 10, shall, by an order –
(a) declare a moratorium for the purposes referred to in section 14 ;
(b) cause a public announcement of the initiation of corporate insolvency
resolution process and call for the submission of claims under section
15 ; and
(c) appoint an interim resolution professional in the manner as laid down in
section 16.
(2) The public announcement referred to in clause (b) of sub-section (1) shall be
made immediately after the appointment of the interim resolution professional.
Moratorium
14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency
commencement date, the Adjudicating Authority shall by order declare
moratorium for prohibiting all of the following, namely :
(a) the institution of suits or continuation of pending suits or proceedings
against the corporate debtor including execution of any judgment, decree
or order in any court of law, tribunal, arbitration panel or other authority ;
(b) transferring, encumbering, alienating or disposing of by the corporate

debtor any of its assets or any legal right or beneficial interest therein ;
(c) any action to foreclose, recover or enforce any security interest created by
the corporate debtor in respect of its property including any action under
the Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (54 of 2002) ;
(d) the recovery of any property by an owner or lessor where such property is
occupied by or in the possession of the corporate debtor.
(2) The supply of essential goods or services to the corporate debtor as may be
specified shall not be terminated or suspended or interrupted during moratorium
period.
(3) The provisions of sub-section (1) shall not apply to such transactions as may
be notified by the Central Government in consultation with any financial sector
regulator.
(4) The order of moratorium shall have effect from the date of such order till the
completion of the corporate insolvency resolution process :
Provided that where at any time during the corporate insolvency resolution process
period, if the Adjudicating Authority approves the resolution plan under sub-
section (1) of section 31 or passes an order for liquidation of corporate debtor
under section 33, the moratorium shall cease to have effect from the date of such
approval or liquidation order, as the case may be.
Public announcement of corporate insolvency resolution process

15. (1) The public announcement of the corporate insolvency resolution process
under the order referred to in section 13 shall contain the following information,
namely :
(a) name and address of the corporate debtor under the corporate insolvency
resolution process ;
(b) name of the authority with which the corporate debtor is incorporated or
registered ;
(c) the last date for submission of claims ;
(d) details of the interim resolution professional who shall be vested with the
management of the corporate debtor and be responsible for receiving
claims ;
(e) penalties for false or misleading claims ; and
(f) the date on which the corporate insolvency resolution process shall close,
which shall be the one hundred and eightieth day from the date of the
admission of the application under sections 7, 9 or section 10, as the case
may be.
(2) The public announcement under this section shall be made in such manner
as may be specified.
Appointment and tenure of interim resolution professional

16. (1) The Adjudicating Authority shall appoint an interim resolution professional
within fourteen days from the insolvency commencement date.
(2) Where the application for corporate insolvency resolution process is made by
a financial creditor or the corporate debtor, as the case may be, the resolution
professional, as proposed respectively in the application under section 7 or section
10, shall be appointed as the interim resolution professional, if no disciplinary
proceedings are pending against him.
(3) Where the application for corporate insolvency resolution process is made by
an operational creditor and –
(a) no proposal for an interim resolution professional is made, the Adjudicating
Authority shall make a reference to the Board for the recommendation of
an insolvency professional who may act as an interim resolution
professional ;
(b) a proposal for an interim resolution professional is made under sub-
section (4) of section 9, the resolution professional as proposed, shall be
appointed as the interim resolution professional, if no disciplinary
proceedings are pending against him.
(4) The Board shall, within ten days of the receipt of a reference from the
Adjudicating Authority under sub-section (3), recommend the name of an
insolvency professional to the Adjudicating Authority against whom no disciplinary
proceedings are pending.
(5) The term of the interim resolution professional shall not exceed thirty days
from date of his appointment.
Management of affairs of corporate debtor by interim resolution professional

17. (1) From the date of appointment of the interim resolution professional, –
(a) the management of the affairs of the corporate debtor shall vest in the
interim resolution professional ;
(b) the powers of the Board of directors or the partners of the corporate debtor,
as the case may be, shall stand suspended and be exercised by the
interim resolution professional ;
(c) the officers and managers of the corporate debtor shall report to the interim
resolution professional and provide access to such documents and records
of the corporate debtor as may be required by the interim resolution
professional ;
(d) the financial institutions maintaining accounts of the corporate debtor
shall act on the instructions of the interim resolution professional in relation
to such accounts and furnish all information relating to the corporate debtor
available with them to the interim resolution professional.
(2) The interim resolution professional vested with the management of the
corporate debtor shall –
(a) act and execute in the name and on behalf of the corporate debtor all
deeds, receipts, and other documents, if any ;
(b) take such actions, in the manner and subject to such restrictions, as may
be specified by the Board ;
(c) have the authority to access the electronic records of corporate debtor
from information utility having financial information of the corporate
debtor ;
(d) have the authority to access the books of account, records and other
relevant documents of corporate debtor available with government
authorities, statutory auditors, accountants and such other persons as
may be specified.
Duties of interim resolution professional

18. The interim resolution professional shall perform the following duties,
namely :
(a) collect all information relating to the assets, finances and operations of
the corporate debtor for determining the financial position of the corporate
debtor, including information relating to –
(i) business operations for the previous two years ;
(ii) financial and operational payments for the previous two years ;
(iii) list of assets and liabilities as on the initiation date ; and
(iv) such other matters as may be specified ;
(b) receive and collate all the claims submitted by creditors to him, pursuant
to the public announcement made under sections 13 and 15 ;
(c) constitute a committee of creditors ;
(d) monitor the assets of the corporate debtor and manage its operations until
a resolution professional is appointed by the committee of creditors ;
(e) file information collected with the information utility, if necessary ; and
(f) take control and custody of any asset over which the corporate debtor has
ownership rights as recorded in the balance sheet of the corporate debtor,
or with information utility or the depository of securities or any other registry
that records the ownership of assets including –
(i) assets over which the corporate debtor has ownership rights which
may be located in a foreign country ;
(ii) assets that may or may not be in possession of the corporate debtor ;
(iii) tangible assets, whether movable or immovable ;
(iv) intangible assets including intellectual property ;
(v) securities including shares held in any subsidiary of the corporate
debtor, financial instruments, insurance policies ;
(vi) assets subject to the determination of ownership by a court or
authority ;
(g) to perform such other duties as may be specified by the Board.
Explanation : For the purposes of this sub-section, the term ‘assets’ shall not
include the following, namely :
(a) assets owned by a third party in possession of the corporate debtor held
under trust or under contractual arrangements including bailment ;
(b) assets of any Indian or foreign subsidiary of the corporate debtor ; and
(c) such other assets as may be notified by the Central Government in
consultation with any financial sector regulator.
Personnel to extend co-operation to interim resolution professional

19. (1) The personnel of the corporate debtor, its promoters or any other person
associated with the management of the corporate debtor shall extend all
assistance and cooperation to the interim resolution professional as may be
required by him in managing the affairs of the corporate debtor.
(2) Where any personnel of the corporate debtor, its promoter or any other person
required to assist or cooperate with the interim resolution professional does not
assist or cooperate, the interim resolution professional may make an application
to the Adjudicating Authority for necessary directions.
(3) The Adjudicating Authority, on receiving an application under sub-section (2),
shall by an order, direct such personnel or other person to comply with the
instructions of the resolution professional and to cooperate with him in collection
of information and management of the corporate debtor.
Management of operations of corporate debtor as going concern

20. (1) The interim resolution professional shall make every endeavour to protect
and preserve the value of the property of the corporate debtor and manage the
operations of the corporate debtor as a going concern.
(2) For the purposes of sub-section (1), the interim resolution professional shall
have the authority –
(a) to appoint accountants, legal or other professionals as may be necessary ;
(b) to enter into contracts on behalf of the corporate debtor or to amend or
modify the contracts or transactions which were entered into before the
commencement of corporate insolvency resolution process ;
(c) to raise interim finance provided that no security interest shall be created
over any encumbered property of the corporate debtor without the prior
consent of the creditors whose debt is secured over such encumbered
property :
Provided that no prior consent of the creditor shall be required where the
value of such property is not less than the amount equivalent to twice the
amount of the debt.
(d) to issue instructions to personnel of the corporate debtor as may be
necessary for keeping the corporate debtor as a going concern ; and
(e) to take all such actions as are necessary to keep the corporate debtor as
a going concern.
Committee of creditors
21. (1) The interim resolution professional shall after collation of all claims received
against the corporate debtor and determination of the financial position of the
corporate debtor, constitute a committee of creditors.
(2) The committee of creditors shall comprise all financial creditors of the corporate
debtor :
Provided that a related party to whom a corporate debtor owes a financial debt
shall not have any right of representation, participation or voting in a meeting of
the committee of creditors.
(3) Where the corporate debtor owes financial debts to two or more financial
creditors as part of a consortium or agreement, each such financial creditor shall
be part of the committee of creditors and their voting share shall be determined
on the basis of the financial debts owed to them.
(4) Where any person is a financial creditor as well as an operational creditor, –
(a) such person shall be a financial creditor to the extent of the financial debt
owed by the corporate debtor, and shall be included in the committee of
creditors, with voting share proportionate to the extent of financial debts
owed to such creditor ;
(b) such person shall be considered to be an operational creditor to the extent
of the operational debt owed by the corporate debtor to such creditor.
(5) Where an operational creditor has assigned or legally transferred any
operational debt to a financial creditor, the assignee or transferee shall be
considered as an operational creditor to the extent of such assignment or legal
transfer.
(6) Where the terms of the financial debt extended as part of a consortium
arrangement or syndicated facility or issued as securities provide for a single
trustee or agent to act for all financial creditors, each financial creditor may –
(a) authorise the trustee or agent to act on his behalf in the committee of
creditors to the extent of his voting share ;
(b) represent himself in the committee of creditors to the extent of his voting
share ;
(c) appoint an insolvency professional (other than the resolution professional)
at his own cost to represent himself in the committee of creditors to the
extent of his voting share ; or
(d) exercise his right to vote to the extent of his voting share with one or more
financial creditors jointly or severally.
(7) The Board may specify the manner of determining the voting share in respect
of financial debts issued as securities under sub-section (6) .
(8) All decisions of the committee of creditors shall be taken by a vote of not less
than seventy-five per cent of voting share of the financial creditors :
Provided that where a corporate debtor does not have any financial creditors, the
committee of creditors shall be constituted and comprise of such persons to

exercise such functions in such manner as may be specified by the Board.
(9) The committee of creditors shall have the right to require the resolution
professional to furnish any financial information in relation to the corporate debtor
at any time during the corporate insolvency resolution process.
(10) The resolution professional shall make available any financial information so
required by the committee of creditors under sub-section (9) within a period of
seven days of such requisition.
Appointment of resolution professional

22. (1) The first meeting of the committee of creditors shall be held within seven
days of the constitution of the committee of creditors.
(2) The committee of creditors, may, in the first meeting, by a majority vote of not
less than seventy-five per cent of the voting share of the financial creditors,
either resolve to appoint the interim resolution professional as a resolution
professional or to replace the interim resolution professional by another
(3) Where the committee of creditors resolves under sub-section (2) –
(a) to continue the interim resolution professional as resolution professional,
it shall communicate its decision to the interim resolution professional,
the corporate debtor and the Adjudicating Authority ; or
(b) to replace the interim resolution professional, it shall file an application
before the Adjudicating Authority for the appointment of the proposed
(4) The Adjudicating Authority shall forward the name of the resolution professional
proposed under clause (b) of sub-section (3) to the Board for its confirmation and
shall make such appointment after confirmation by the Board.
(5) Where the Board does not confirm the name of the proposed resolution
professional within ten days of the receipt of the name of the proposed resolution
professional, the Adjudicating Authority shall, by order, direct the interim resolution
professional to continue to function as the resolution professional until such time
as the Board confirms the appointment of the proposed resolution professional.
Resolution professional to conduct corporate insolvency resolution process

23. (1) Subject to section 27, the resolution professional shall conduct the entire
corporate insolvency resolution process and manage the operations of the
corporate debtor during the corporate insolvency resolution process period.
(2) The resolution professional shall exercise powers and perform duties as are
vested or conferred on the interim resolution professional under this Chapter.
(3) In case of any appointment of a resolution professional under sub-section (4)
of section 22, the interim resolution professional shall provide all the information,
documents and records pertaining to the corporate debtor in his possession and
knowledge to the resolution professional.
Meeting of committee of creditors

24. (1) The members of the committee of creditors may meet in person or by such
electronic means as may be specified.
(2) All meetings of the committee of creditors shall be conducted by the resolution
professional.
(3) The resolution professional shall give notice of each meeting of the committee
of creditors to –
(a) members of committee of creditors ;
(b) members of the suspended Board of directors or the partners of the
corporate persons, as the case may be ;
(c) operational creditors or their representatives if the amount of their
aggregate dues is not less than ten per cent of the debt.
(4) The directors, partners and one representative of operational creditors, as
referred to in sub-section (3), may attend the meetings of committee of creditors,
but shall not have any right to vote in such meetings :
Provided that the absence of any such direct or, partner or representative of operational
creditors, as the case may be, shall not invalidate proceedings of such meeting.
(5) Any creditor who is a member of the committee of creditors may appoint an
insolvency professional other than the resolution professional to represent such
creditor in a meeting of the committee of creditors :
Provided that the fees payable to such insolvency professional representing any
individual creditor will be borne by such creditor.
(6) Each creditor shall vote in accordance with the voting share assigned to him
based on the financial debts owed to such creditor.
(7) The resolution professional shall determine the voting share to be assigned to
each creditor in the manner specified by the Board.
(8) The meetings of the committee of creditors shall be conducted in such manner
as may be specified.
Duties of resolution professional

25. (1) It shall be the duty of the resolution professional to preserve and protect the
assets of the corporate debtor, including the continued business operations of
the corporate debtor.
(2) For the purposes of sub-section (1), the resolution professional shall undertake
the following actions, namely :
(a) take immediate custody and control of all the assets of the corporate
debtor, including the business records of the corporate debtor ;
(b) represent and act on behalf of the corporate debtor with third parties,
exercise rights for the benefit of the corporate debtor in judicial, quasi-
judicial or arbitration proceedings ;
(c) raise interim finances subject to the approval of the committee of creditors
under section 28 ;
(d) appoint accountants, legal or other professionals in the manner as
specified by Board ;
(e) maintain an updated list of claims ;
(f) convene and attend all meetings of the committee of creditors ;
(g) prepare the information memorandum in accordance with section 29 ;
(h) invite prospective lenders, investors, and any other persons to put forward
resolution plans ;
(i) present all resolution plans at the meetings of the committee of
creditors ;
(j) file application for avoidance of transactions in accordance with Chapter
III, if any ; and
(k) such other actions as may be specified by the Board.
Application for avoidance of transactions not to affect proceedings

26. The filing of an avoidance application under clause (j) of sub-section (2) of
section 25 by the resolution professional shall not affect the proceedings of the
corporate insolvency resolution process.
Replacement of resolution professional by committee of creditors

27. (1) Where, at any time during the corporate insolvency resolution process, the
committee of creditors is of the opinion that a resolution professional appointed
under section 22 is required to be replaced, it may replace him with another

resolution professional in the manner provided under this section.
(2) The committee of creditors may, at a meeting, by a vote of seventy-five per
cent of voting shares, propose to replace the resolution professional appointed
under section 22 with another resolution professional.
(3) The committee of creditors shall forward the name of the insolvency
professional proposed by them to the Adjudicating Authority.
(4) The Adjudicating Authority shall forward the name of the proposed resolution
professional to the Board for its confirmation and a resolution professional shall
be appointed in the same manner as laid down in section 16.
(5) Where any disciplinary proceedings are pending against the proposed
resolution professional under sub-section (3), the resolution professional
appointed under section 22 shall continue till the appointment of another resolution
professional under this section.
Approval of committee of creditors for certain actions

28. (1) Notwithstanding anything contained in any other law for the time being in
force, the resolution professional, during the corporate insolvency resolution
process, shall not take any of the following actions without the prior approval of
the committee of creditors namely :
(a) raise any interim finance in excess of the amount as may be decided by
the committee of creditors in their meeting ;
(b) create any security interest over the assets of the corporate debtor ;
(c) change the capital structure of the corporate debtor, including by way of
issuance of additional securities, creating a new class of securities or
buying back or redemption of issued securities in case the corporate
debtor is a company ;
(d) record any change in the ownership interest of the corporate debtor ;
(e) give instructions to financial institutions maintaining accounts of the
corporate debtor for a debit transaction from any such accounts in excess
of the amount as may be decided by the committee of creditors in their
meeting ;
(f) undertake any related party transaction ;
(g) amend any constitutional documents of the corporate debtor ;
(h) delegate its authority to any other person ;
(i) dispose of or permit the disposal of shares of any shareholder of the

corporate debtor or their nominees to third parties ;
(j) make any change in the management of the corporate debtor or its
subsidiary ;
(k) transfer rights or financial debts or operational debts under material
contracts otherwise than in the ordinary course of business ;
(l) make changes in the appointment or terms of contract of such personnel
as specified by the committee of creditors ; or
(m) make changes in the appointment or terms of contract of statutory auditors
or internal auditors of the corporate debtor.
(2) The resolution professional shall convene a meeting of the committee of
creditors and seek the vote of the creditors prior to taking any of the actions under
sub-section (1).
(3) No action under sub-section (1) shall be approved by the committee of creditors
unless approved by a vote of seventy-five per cent of the voting shares.
(4) Where any action under sub-section (1) is taken by the resolution professional
without seeking the approval of the committee of creditors in the manner as
required in this section, such action shall be void.
(5) The committee of creditors may report the actions of the resolution professional
under sub-section (4) to the Board for taking necessary actions against him under
this Code.
Preparation of information memorandum

29. (1) The resolution professional shall prepare an information memorandum in
such form and manner containing such relevant information as may be specified
by the Board for formulating a resolution plan.
(2) The resolution professional shall provide to the resolution applicant access to
all relevant information in physical and electronic form, provided such resolution
applicant undertakes –
(a) to comply with provisions of law for the time being in force relating to
confidentiality and insider trading ;
(b) to protect any intellectual property of the corporate debtor it may have
access to ; and
(c) not to share relevant information with third parties unless clauses (a) and
(b) of this sub-section are complied with.
Explanation : For the purposes of this section, “relevant information” means the
information required by the resolution applicant to make the resolution plan for
the corporate debtor, which shall include the financial position of the corporate
debtor, all information related to disputes by or against the corporate debtor and
any other matter pertaining to the corporate debtor as may be specified.
Submission of resolution plan

30. (1) A resolution applicant may submit a resolution plan to the resolution
professional prepared on the basis of the information memorandum.
(2) The resolution professional shall examine each resolution plan received by
him to confirm that each resolution plan –
(a) provides for the payment of insolvency resolution process costs in a
manner specified by the Board in priority to the repayment of other debts
of the corporate debtor ;
(b) provides for the repayment of the debts of operational creditors in such
manner as may be specified by the Board which shall not be less than the
amount to be paid to the operational creditors in the event of a liquidation
of the corporate debtor under section 53 ;
(c) provides for the management of the affairs of the corporate debtor after
approval of the resolution plan ;
(d) the implementation and supervision of the resolution plan ;
(e) does not contravene any of the provisions of the law for the time being in
force ;
(f) conforms to such other requirements as may be specified by the Board.
(3) The resolution professional shall present to the committee of creditors for its
approval such resolution plans which confirm the conditions referred to in sub-
section (2).
(4) The committee of creditors may approve a resolution plan by a vote of not less
than seventy-five per cent of voting share of the financial creditors.
(5) The resolution applicant may attend the meeting of the committee of creditors
in which the resolution plan of the applicant is considered :
Provided that the resolution applicant shall not have a right to vote at the meeting of
the committee of creditors unless such resolution applicant is also a financial creditor.
(6) The resolution professional shall submit the resolution plan as approved by
the committee of creditors to the Adjudicating Authority.
Approval of resolution plan

31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved
by the committee of creditors under sub-section (4) of section 30 meets the
requirements as referred to in sub-section (2) of section 30, it shall by order
approve the resolution plan which shall be binding on the corporate debtor and
its employees, members, creditors, guarantors and other stakeholders involved
in the resolution plan.
(2) Where the Adjudicating Authority is satisfied that the resolution plan does not
confirm to the requirements referred to in sub-section (1), it may, by an order,
reject the resolution plan.
(3) After the order of approval under sub-section (1), –
(a) the moratorium order passed by the Adjudicating Authority under section
14 shall cease to have effect ; and
(b) the resolution professional shall forward all records relating to the conduct
of the corporate insolvency resolution process and the resolution plan to
the Board to be recorded on its database.
Appeal
32. Any appeal from an order approving the resolution plan shall be in the
manner and on the grounds laid down in sub-section (3) of section 61.
CHAPTER III
LIQUIDATION PROCESS
Initiation of liquidation
33. (1) Where the Adjudicating Authority, –
(a) before the expiry of the insolvency resolution process period or the
maximum period permitted for completion of the corporate insolvency
resolution process under section 12 or the fast track corporate insolvency
resolution process under section 56, as the case may be, does not receive
a resolution plan under sub-section (6) of section 30 ; or
(b) rejects the resolution plan under section 31 for the non-compliance of the
requirements specified therein,
it shall –
(i) pass an order requiring the corporate debtor to be liquidated in the
manner as laid down in this Chapter ;
(ii) issue a public announcement stating that the corporate debtor is in

liquidation ; and
(iii) require such order to be sent to the authority with which the corporate
debtor is registered.
(2) Where the resolution professional, at any time during the corporate insolvency
resolution process but before confirmation of resolution plan, intimates the
Adjudicating Authority of the decision of the committee of creditors to liquidate
the corporate debtor, the Adjudicating Authority shall pass a liquidation order as
referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
(3) Where the resolution plan approved by the Adjudicating Authority is
contravened by the concerned corporate debtor, any person other than the
corporate debtor, whose interests are prejudicially affected by such contravention,
may make an application to the Adjudicating Authority for a liquidation order as
referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).
determines that the corporate debtor has contravened the provisions of the
resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i),
(ii) and (iii) of clause (b) of sub-section (1).
(5) Subject to section 52, when a liquidation order has been passed, no suit or
other legal proceeding shall be instituted by or against the corporate debtor :
Provided that a suit or other legal proceeding may be instituted by the liquidator,
on behalf of the corporate debtor, with the prior approval of the Adjudicating
Authority.
(6) The provisions of sub-section (5) shall not apply to legal proceedings in relation
to such transactions as may be notified by the Central Government in consultation
with any financial sector regulator.
(7) The order for liquidation under this section shall be deemed to be a notice of
discharge to the officers, employees and workmen of the corporate debtor, except
when the business of the corporate debtor is continued during the liquidation
process by the liquidator.
Appointment of liquidator and fee to be paid

34. (1) Where the Adjudicating Authority passes an order for liquidation of the
corporate debtor under section 33, the resolution professional appointed for the
corporate insolvency resolution process under Chapter II shall act as the liquidator
for the purposes of liquidation unless replaced by the Adjudicating Authority
under sub-section (4).
(2) On the appointment of a liquidator under this section, all powers of the Board
of directors, key managerial personnel and the partners of the corporate debtor,
as the case may be, shall cease to have effect and shall be vested in the liquidator.
(3) The personnel of the corporate debtor shall extend all assistance and
cooperation to the liquidator as may be required by him in managing the affairs
of the corporate debtor and provisions of section 19 shall apply in relation to
voluntary liquidation process as they apply in relation to liquidation process with
the substitution of references to the liquidator for references to the interim
(4) The Adjudicating Authority shall by order replace the resolution professional,
if –
(a) the resolution plan submitted by the resolution professional under section
30 was rejected for failure to meet the requirements mentioned in sub-
section (2) of section 30 ; or
(b) the Board recommends the replacement of a resolution professional to
the Adjudicating Authority for reasons to be recorded in writing.
(5) For the purposes of clause (a) of sub-section (4), the Adjudicating Authority
may direct the Board to propose the name of another insolvency professional to
be appointed as a liquidator.
(6) The Board shall propose the name of another insolvency professional within
ten days of the direction issued by the Adjudicating Authority under sub-section
(5).
(7) The Adjudicating Authority shall, on receipt of the proposal of the Board for the
appointment of an insolvency professional as liquidator, by an order appoint
such insolvency professional as the liquidator.
(8) An insolvency professional proposed to be appointed as a liquidator shall
charge such fee for the conduct of the liquidation proceedings and in such
proportion to the value of the liquidation estate assets, as may be specified by the
Board.
(9) The fees for the conduct of the liquidation proceedings under sub-section (8)
shall be paid to the liquidator from the proceeds of the liquidation estate under
section 53.
Powers and duties of liquidator

35. (1) Subject to the directions of the Adjudicating Authority, the liquidator shall
have the following powers and duties, namely :
(a) to verify claims of all the creditors ;

(b) to take into his custody or control all the assets, property, effects and
actionable claims of the corporate debtor ;
(c) to evaluate the assets and property of the corporate debtor in the manner
as may be specified by the Board and prepare a report ;
(d) to take such measures to protect and preserve the assets and properties
of the corporate debtor as he considers necessary ;
(e) to carry on the business of the corporate debtor for its beneficial liquidation
as he considers necessary ;
(f) subject to section 52, to sell the immovable and movable property and
actionable claims of the corporate debtor in liquidation by public auction or
private contract, with power to transfer such property to any person or body
corporate, or to sell the same in parcels in such manner as may be specified;
(g) to draw, accept, make and endorse any negotiable instruments including
bill of exchange, hundi or promissory note in the name and on behalf of
the corporate debtor, with the same effect with respect to the liability as if
such instruments were drawn, accepted, made or endorsed by or on
behalf of the corporate debtor in the ordinary course of its business ;
(h) to take out, in his official name, letter of administration to any deceased
contributory and to do in his official name any other act necessary for
obtaining payment of any money due and payable from a contributory or
his estate which cannot be ordinarily done in the name of the corporate
debtor, and in all such cases, the money due and payable shall, for the
purpose of enabling the liquidator to take out the letter of administration or
recover the money, be deemed to be due to the liquidator himself ;
(i) to obtain any professional assistance from any person or appoint any
professional, in discharge of his duties, obligations and responsibilities ;
(j) to invite and settle claims of creditors and claimants and distribute
proceeds in accordance with the provisions of this Code ;
(k) to institute or defend any suit, prosecution or other legal proceedings, civil
or criminal, in the name of on behalf of the corporate debtor ;
(l) to investigate the financial affairs of the corporate debtor to determine
undervalued or preferential transactions ;
(m) to take all such actions, steps, or to sign, execute and verify any paper,
deed, receipt document, application, petition, affidavit, bond or instrument
and for such purpose to use the common seal, if any, as may be necessary
for liquidation, distribution of assets and in discharge of his duties and
obligations and functions as liquidator ;
(n) to apply to the Adjudicating Authority for such orders or directions as may
be necessary for the liquidation of the corporate debtor and to report the
progress of the liquidation process in a manner as may be specified by
the Board ; and
(o) to perform such other functions as may be specified by the Board.
(2) The liquidator shall have the power to consult any of the stakeholders entitled
to a distribution of proceeds under section 53 :
Provided that any such consultation shall not be binding on the liquidator :
Provided further that the records of any such consultation shall be made available
to all other stakeholders not so consulted, in a manner specified by the Board.
Liquidation estate
36. (1) For the purposes of liquidation, the liquidator shall form an estate of the
assets mentioned in sub-section (3), which will be called the liquidation estate in
relation to the corporate debtor.
(2) The liquidator shall hold the liquidation estate as a fiduciary for the benefit of
all the creditors.
(3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation
estate assets which shall include the following :
(a) any assets over which the corporate debtor has ownership rights, including
all rights and interests therein as evidenced in the balance sheet of the
corporate debtor or an information utility or records in the registry or any
depository recording securities of the corporate debtor or by any other
means as may be specified by the Board, including shares held in any
subsidiary of the corporate debtor ;
(b) assets that may or may not be in possession of the corporate debtor
including but not limited to encumbered assets ;
(c) tangible assets, whether movable or immovable ;
(d) intangible assets including but not limited to intellectual property, securities
(including shares held in a subsidiary of the corporate debtor) and financial
instruments, insurance policies, contractual rights ;
(e) assets subject to the determination of ownership by the court or
authority ;
(f) any assets or their value recovered through proceedings for avoidance of
transactions in accordance with this Chapter ;
(g) any asset of the corporate debtor in respect of which a secured creditor
has relinquished security interest ;
(h) any other property belonging to or vested in the corporate debtor at the
insolvency commencement date ; and
(i) all proceeds of liquidation as and when they are realised.
(4) The following shall not be included in the liquidation estate assets and shall
not be used for recovery in the liquidation :
(a) assets owned by a third party which are in possession of the corporate
debtor, including –
(i) assets held in trust for any third party ;
(ii) bailment contracts ;
(iii) all sums due to any workman or employee from the provident fund,
the pension fund and the gratuity fund ;
(iv) other contractual arrangements which do not stipulate transfer of
title but only use of the assets ; and
(v) such other assets as may be notified by the Central Government in
consultation with any financial sector regulator ;
(b) assets in security collateral held by financial services providers and are
subject to netting and set-off in multi-lateral trading or clearing
transactions ;
(c) personal assets of any shareholder or partner of a corporate debtor as the
case may be provided such assets are not held on account of avoidance
transactions that may be avoided under this Chapter ;
(d) assets of any Indian or foreign subsidiary of the corporate debtor ; or
(e) any other assets as may be specified by the Board, including assets which
could be subject to set-off on account of mutual dealings between the
corporate debtor and any creditor.
Powers of liquidator to access information

37. (1) Notwithstanding anything contained in any other law for the time being
in force, the liquidator shall have the power to access any information systems
for the purpose of admission and proof of claims and identification of the
liquidation estate assets relating to the corporate debtor from the following
sources, namely :
(a) an information utility ;

(b) credit information systems regulated under any law for the time being in
force ;
(c) any agency of the Central, State or Local Government including any
registration authorities ;
(d) information systems for financial and non-financial liabilities regulated
under any law for the time being in force ;
(e) information systems for securities and assets posted as security interest
regulated under any law for the time being in force ;
(f) any database maintained by the Board ; and
(g) any other source as may be specified by the Board.
(2) The creditors may require the liquidator to provide them any financial
information relating to the corporate debtor in such manner as may be specified.
(3) The liquidator shall provide information referred to in sub-section (2) to such
creditors who have requested for such information within a period of seven days
from the date of such request or provide reasons for not providing such information.
Consolidation of claims
38. (1) The liquidator shall receive or collect the claims of creditors within a period
of thirty days from the date of the commencement of the liquidation process.
(2) A financial creditor may submit a claim to the liquidator by providing a record
of such claim with an information utility :
Provided that where the information relating to the claim is not recorded in the
information utility, the financial creditor may submit the claim in the same manner
as provided for the submission of claims for the operational creditor under sub-
section (3).
(3) An operational creditor may submit a claim to the liquidator in such form and
in such manner and along with such supporting documents required to prove the
claim as may be specified by the Board.
(4) A creditor who is partly a financial creditor and partly an operational creditor
shall submit claims to the liquidator to the extent of his financial debt in the
manner as provided in sub-section (2) and to the extent of his operational debt
under sub-section (3).
(5) A creditor may withdraw or vary his claim under this section within fourteen
days of its submission.
Verification of claims
39. (1) The liquidator shall verify the claims submitted under section 38 within
such time as specified by the Board.
(2) The liquidator may require any creditor or the corporate debtor or any other
person to produce any other document or evidence which he thinks necessary
for the purpose of verifying the whole or any part of the claim.
Admission or rejection of claims

40. (1) The liquidator may, after verification of claims under section 39, either
admit or reject the claim, in whole or in part, as the case may be :
Provided that where the liquidator rejects a claim, he shall record in writing the
reasons for such rejection.
(2) The liquidator shall communicate his decision of admission or rejection of
claims to the creditor and corporate debtor within seven days of such admission
or rejection of claims.
Determination of valuation of claims

41. The liquidator shall determine the value of claims admitted under section 40
in such manner as may be specified by the Board.
Appeal against the decision of liquidator

42. A creditor may appeal to the Adjudicating Authority against the decision of
the liquidator rejecting the claims within fourteen days of the receipt of such
decision.
Preferential transactions and relevant time

43. (1) Where the liquidator or the resolution professional, as the case may be, is
of the opinion that the corporate debtor has at a relevant time given a preference
in such transactions and in such manner as laid down in sub-section (2) to any
persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority
for avoidance of preferential transactions and for, one or more of the orders
referred to in section 44.
(2) A corporate debtor shall be deemed to have given a preference, if –
(a) there is a transfer of property or an interest thereof of the corporate debtor
for the benefit of a creditor or a surety or a guarantor for or on account of an
antecedent financial debt or operational debt or other liabilities owed by
the corporate debtor ; and
(b) the transfer under clause (a) has the effect of putting such creditor or a
surety or a guarantor in a beneficial position then it would have been in
the event of a distribution of assets being made in accordance with section
53.
(3) For the purposes of sub-section (2), a preference shall not include the following
transfers –
(a) transfer made in the ordinary course of the business or financial affairs of
the corporate debtor or the transferee ;
(b) any transfer creating a security interest in property acquired by the
corporate debtor to the extent that –
(i) such security interest secures new value and was given at the time
of or after the signing of a security agreement that contains a
description of such property as security interest and was used by
corporate debtor to acquire such property ; and
(ii) such transfer was registered with an information utility on or before
thirty days after the corporate debtor receives possession of such
property :
Provided that any transfer made in pursuance of the order of a court shall
not, preclude such transfer to be deemed as giving of preference by the
corporate debtor.
Explanation : For the purpose of sub-section (3) of this section, “new value” means
money or its worth in goods, services, or new credit, or release by the transferee
of property previously transferred to such transferee in a transaction that is neither
void nor voidable by the liquidator or the resolution professional under this Code,
including proceeds of such property, but does not include a financial debt or
operational debt substituted for existing financial debt or operational debt.
(4) A preference shall be deemed to be given at a relevant time, if –
(a) it is given to a related party (other than by reason only of being an
employee), during the period of two years preceding the insolvency
commencement date ; or
(b) a preference is given to a person other than a related party during the
period of one year preceding the insolvency commencement date.
Orders in case of preferential transactions

44. The Adjudicating Authority, may, on an application made by the resolution
professional or liquidator under sub-section (1) of section 43, by an order :
(a) require any property transferred in connection with the giving of the
preference to be vested in the corporate debtor ;
(b) require any property to be so vested if it represents the application either
of the proceeds of sale of property so transferred or of money so
transferred ;
(c) release or discharge (in whole or in part) of any security interest created
by the corporate debtor ;
(d) require any person to pay such sums in respect of benefits received by
him from the corporate debtor, such sums to the liquidator or the resolution
professional, as the Adjudicating Authority may direct ;
(e) direct any guarantor, whose financial debts or operational debts owed to
any person were released or discharged (in whole or in part) by the giving
of the preference, to be under such new or revived financial debts or
operational debts to that person as the Adjudicating Authority deems
appropriate ;
(f) direct for providing security or charge on any property for the discharge of
any financial debt or operational debt under the order, and such security
or charge to have the same priority as a security or charge released or
discharged wholly or in part by the giving of the preference ; and
(g) direct for providing the extent to which any person whose property is so
vested in the corporate debtor, or on whom financial debts or operational
debts are imposed by the order, are to be proved in the liquidation or the
corporate insolvency resolution process for financial debts or operational
debts which arose from, or were released or discharged wholly or in part
by the giving of the preference :
Provided that an order under this section shall not –
(a) affect any interest in property which was acquired from a person other
than the corporate debtor or any interest derived from such interest and
was acquired in good faith and for value ;
(b) require a person, who received a benefit from the preferential transaction
in good faith and for value to pay a sum to the liquidator or the resolution
professional.
Explanation I : For the purpose of this section, it is clarified that where a person,
who has acquired an interest in property from another person other than the
corporate debtor, or who has received a benefit from the preference or such
another person to whom the corporate debtor gave the preference, –
(i) had sufficient information of the initiation or commencement of insolvency

resolution process of the corporate debtor ;
(ii) is a related party,
it shall be presumed that the interest was acquired or the benefit was received
otherwise than in good faith unless the contrary is shown.
Explanation II : A person shall be deemed to have sufficient information or
opportunity to avail such information if a public announcement regarding the
corporate insolvency resolution process has been made under section 13.
Avoidance of undervalued transactions

45. (1) If the liquidator or the resolution professional, as the case may be, on an
examination of the transactions of the corporate debtor referred to in sub-section
(2) of section 43 determines that certain transactions were made during the
relevant period under section 46, which were undervalued, he shall make an
application to the Adjudicating Authority to declare such transactions as void and
reverse the effect of such transaction in accordance with this Chapter.
(2) A transaction shall be considered undervalued where the corporate debtor –
(a) makes a gift to a person ; or
(b) enters into a transaction with a person which involves the transfer of one
or more assets by the corporate debtor for a consideration the value of
which is significantly less than the value of the consideration provided by
the corporate debtor,
and such transaction has not taken place in the ordinary course of business of the
corporate debtor.
Relevant period for avoidable transactions

46. (1) In an application for avoiding a transaction at undervalue, the liquidator or
the resolution professional, as the case may be, shall demonstrate that –
(i) such transaction was made with any person within the period of one year
preceding the insolvency commencement date ; or
(ii) such transaction was made with a related party within the period of two
years preceding the insolvency commencement date.
(2) The Adjudicating Authority may require an independent expert to assess
evidence relating to the value of the transactions mentioned in this section.
Application by creditor in cases of undervalued transactions

47. (1) Where an undervalued transaction has taken place and the liquidator or
the resolution professional as the case may be, has not reported it to the
Adjudicating Authority, a creditor, member or a partner of a corporate debtor, as
the case may be, may make an application to the Adjudicating Authority to declare
such transactions void and reverse their effect in accordance with this Chapter.
(2) Where the Adjudicating Authority, after examination of the application made
under sub-section (1), is satisfied that –
(a) undervalued transactions had occurred ; and
(b) liquidator or the resolution professional, as the case may be, after having
sufficient information or opportunity to avail information of such transactions
did not report such transaction to the Adjudicating Authority,
it shall pass an order –
(a) restoring the position as it existed before such transactions and reversing
the effects thereof in the manner as laid down in section 45 and section
48 ;
(b) requiring the Board to initiate disciplinary proceedings against the
liquidator or the resolution professional as the case may be.
Order in cases of undervalued transactions

48. The order of the Adjudicating Authority under sub-section (1) of section 45
may provide for the following :
(a) require any property transferred as part of the transaction, to be vested in
(b) release or discharge (in whole or in part) any security interest granted by
(c) require any person to pay such sums, in respect of benefits received by
such person, to the liquidator or the resolution professional as the case
may be, as the Adjudicating Authority may direct ; or
(d) require the payment of such consideration for the transaction as may be
determined by an independent expert.
Transactions defrauding creditors

49. Where the corporate debtor has entered into an undervalued transaction
as referred to in sub-section (2) of section 45 and the Adjudicating Authority is
satisfied that such transaction was deliberately entered into by such corporate
debtor –
(a) for keeping assets of the corporate debtor beyond the reach of any person
who is entitled to make a claim against the corporate debtor ; or
(b) in order to adversely affect the interests of such a person in relation to the
claim,
the Adjudicating Authority shall make an order –
(i) restoring the position as it existed before such transaction as if the
transaction had not been entered into ; and
(ii) protecting the interests of persons who are victims of such transactions :
Provided that an order under this section –
(a) shall not affect any interest in property which was acquired from a person
other than the corporate debtor and was acquired in good faith, for value
and without notice of the relevant circumstances, or affect any interest
deriving from such an interest, and
(b) shall not require a person who received a benefit from the transaction in
good faith, for value and without notice of the relevant circumstances to
pay any sum unless he was a party to the transaction.
Extortionate credit transactions

50. (1) Where the corporate debtor has been a party to an extortionate credit
transaction involving the receipt of financial or operational debt during the period
within two years preceding the insolvency commencement date, the liquidator
or the resolution professional as the case may be, may make an application for
avoidance of such transaction to the Adjudicating Authority if the terms of such
transaction required exorbitant payments to be made by the corporate debtor.
(2) The Board may specify the circumstances in which a transactions which shall
be covered under sub-section (1).
Explanation : For the purpose of this section, it is clarified that any debt extended
by any person providing financial services which is in compliance with any law
for the time being in force in relation to such debt shall in no event be considered
as an extortionate credit transaction.
Orders of Adjudicating Authority in respect of extorionate credit transactions.
51. Where the Adjudicating Authority after examining the application made under
sub-section (1) of section 50 is satisfied that the terms of a credit transaction
required exorbitant payments to be made by the corporate debtor, it shall, by an

order –
(a) restore the position as it existed prior to such transaction ;
(b) set aside the whole or part of the debt created on account of the extortionate
credit transaction ;
(c) modify the terms of the transaction ;
(d) require any person who is, or was, a party to the transaction to repay any
amount received by such person ; or
(e) require any security interest that was created as part of the extortionate
credit transaction to be relinquished in favour of the liquidator or the
resolution professional, as the case may be.
Secured creditor in liquidation proceedings
52. (1) A secured creditor in the liquidation proceedings may –
(a) relinquish its security interest to the liquidation estate and receive proceeds
from the sale of assets by the liquidator in the manner specified in section
53 ; or
(b) realise its security interest in the manner specified in this section.
(2) Where the secured creditor realises security interest under clause (b) of sub-
section (1), he shall inform the liquidator of such security interest and identify the
asset subject to such security interest to be realised.
(3) Before any security interest is realised by the secured creditor under this
section, the liquidator shall verify such security interest and permit the secured
creditor to realise only such security interest, the existence of which may be
proved either –
(a) by the records of such security interest maintained by an information
utility ; or
(b) by such other means as may be specified by the Board.
(4) A secured creditor may enforce, realise, settle, compromise or deal with the
secured assets in accordance with such law as applicable to the security interest
being realised and to the secured creditor and apply the proceeds to recover the
debts due to it.
(5) If in the course of realising a secured asset, any secured creditor faces resistance
from the corporate debtor or any person connected therewith in taking possession
of, selling or otherwise disposing of the security, the secured creditor may make an
application to the Adjudicating Authority to facilitate the secured creditor to realise
such security interest in accordance with law for the time being in force.
(6) The Adjudicating Authority, on the receipt of an application from a secured

creditor under sub-section (5) may pass such order as may be necessary to
permit a secured creditor to realise security interest in accordance with law for
the time being in force.
(7) Where the enforcement of the security interest under sub-section (4) yields an
amount by way of proceeds which is in excess of the debts due to the secured
creditor, the secured creditor shall –
(a) account to the liquidator for such surplus ; and
(b) tender to the liquidator any surplus funds received from the enforcement
of such secured assets.
(8) The amount of insolvency resolution process costs, due from secured creditors
who realise their security interests in the manner provided in this section, shall
be deducted from the proceeds of any realisation by such secured creditors, and
they shall transfer such amounts to the liquidator to be included in the liquidation
estate.
(9) Where the proceeds of the realisation of the secured assets are not adequate
to repay debts owed to the secured creditor, the unpaid debts of such secured
creditor shall be paid by the liquidator in the manner specified in clause (e) of
sub-section (1) of section 53.
Distribution of assets
53. (1) Notwithstanding anything to the contrary contained in any law enacted
by the Parliament or any State Legislature for the time being in force, the proceeds
from the sale of the liquidation assets shall be distributed in the following order
of priority and within such period and in such manner as may be specified,
namely :
(a) the insolvency resolution process costs and the liquidation costs paid in
full ;
(b) the following debts which shall rank equally between and among the
following :
(i) workmen’s dues for the period of twenty-four months preceding the
liquidation commencement date ; and
(ii) debts owed to a secured creditor in the event such secured creditor
has relinquished security in the manner set out in section 52 ;
(c) wages and any unpaid dues owed to employees other than workmen for
the period of twelve months preceding the liquidation commencement
date ;
(d) financial debts owed to unsecured creditors ;

(e) the following dues shall rank equally between and among the
following :
(i) any amount due to the Central Government and the State
Government including the amount to be received on account of the
Consolidated Fund of India and the Consolidated Fund of a State, if
any, in respect of the whole or any part of the period of two years
preceding the liquidation commencement date ;
(ii) debts owed to a secured creditor for any amount unpaid following
the enforcement of security interest ;
(f) any remaining debts and dues ;
(g) preference shareholders, if any ; and
(h) equity shareholders or partners, as the case may be.
(2) Any contractual arrangements between recipients under sub-section (1) with
equal ranking, if disrupting the order of priority under that sub-section shall be
disregarded by the liquidator.
(3) The fees payable to the liquidator shall be deducted proportionately from the
proceeds payable to each class of recipients under sub-section (1), and the
proceeds to the relevant recipient shall be distributed after such deduction.
Explanation : For the purpose of this section –
(i) it is hereby clarified that at each stage of the distribution of proceeds in
respect of a class of recipients that rank equally, each of the debts will
either be paid in full, or will be paid in equal proportion within the same
class of recipients, if the proceeds are insufficient to meet the debts in
full ; and
(ii) the term “workmen’s dues” shall have the same meaning as assigned to
it in section 326 of the Companies Act, 2013 (18 of 2013).
Dissolution of corporate debtor

54. (1) Where the assets of the corporate debtor have been completely liquidated,
the liquidator shall make an application to the Adjudicating Authority for the
dissolution of such corporate debtor.
(2) The Adjudicating Authority shall on application filed by the liquidator under
sub-section (1) order that the corporate debtor shall be dissolved from the date of
that order and the corporate debtor shall be dissolved accordingly.
(3) A copy of an order under sub-section (2) shall within seven days from the date
of such order, be forwarded to the authority with which the corporate debtor is
registered.
Chapter IV
FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS
Fast track corporation insolvency resolution process

55. (1) A corporate insolvency resolution process carried out in accordance with
this Chapter shall be called as fast track corporate insolvency resolution process.
(2) An application for fast track corporate insolvency resolution process may be
made in respect of the following corporate debtors, namely :
(a) a corporate debtor with assets and income below a level as may be
notified by the Central Government ; or
(b) a corporate debtor with such class of creditors or such amount of debt as
may be notified by the Central Government ; or
(c) such other category of corporate persons as may be notified by the Central
Government.
Time period for completion of fast track corporate insolvency resolution

process
56. (1) Subject to the provisions of sub-section (3), the fast track corporate insolvency
resolution process shall be completed within a period of ninety days from the
insolvency commencement date.
(2) The resolution professional shall file an application to the Adjudicating Authority
to extend the period of the fast track corporate insolvency resolution process
beyond ninety days if instructed to do so by a resolution passed at a meeting of
the committee of creditors and supported by a vote of seventy-five per cent of the
voting share.
is satisfied that the subject-matter of the case is such that fast track corporate
insolvency resolution process cannot be completed within a period of ninety
days, it may, by order, extend the duration of such process beyond the said period
of ninety days by such further period, as it thinks fit, but not exceeding forty-five
days :
Provided that any extension of the fast track corporate insolvency resolution
process under this section shall not be granted more than once.
Manner of initiating fast track corporate insolvency resolution process

57. An application for fast track corporate insolvency resolution process may be
filed by a creditor or corporate debtor as the case may be, along with –
(a) the proof of the existence of default as evidenced by records available
with an information utility or such other means as may be specified by the
Board ; and
(b) such other information as may be specified by the Board to establish that
the corporate debtor is eligible for fast track corporate insolvency resolution
process.
Applicability of Chapter II to this Chapter

58. The process for conducting a corporate insolvency resolution process under
Chapter II and the provisions relating to offences and penalties under Chapter VII
shall apply to this Chapter as the context may require.
Chapter V
VOLUNTARY LIQUIDATION OF CORPORATE PERSONS
Voluntary liquidation of corporate persons

59. (1) A corporate person who intends to liquidate itself voluntarily and has not
committed any default may initiate voluntary liquidation proceedings under the
provisions of this Chapter.
(2) The voluntary liquidation of a corporate person under sub-section (1) shall
meet such conditions and procedural requirements as may be specified by the
Board.
(3) Without prejudice to sub-section (2), voluntary liquidation proceedings of a
corporate person registered as a company shall meet the following conditions,
namely :
(a) a declaration from majority of the directors of the company verified by an
affidavit stating that –
(i) they have made a full inquiry into the affairs of the company and
they have formed an opinion that either the company has no debt or
that it will be able to pay its debts in full from the proceeds of assets
to be sold in the voluntary liquidation ; and
(ii) the company is not being liquidated to defraud any person ;
(b) the declaration under sub-clause (a) shall be accompanied with the
following documents, namely :
(i) audited financial statements and record of business operations of
the company for the previous two years or for the period since its
incorporation, whichever is later ;
(ii) a report of the valuation of the assets of the company, if any prepared
by a registered valuer ;
(c) within four weeks of a declaration under sub-clause (a), there shall be –
(i) a special resolution of the members of the company in a general
meeting requiring the company to be liquidated voluntarily and
appointing an insolvency professional to act as the liquidator ; or
(ii) a resolution of the members of the company in a general meeting
requiring the company to be liquidated voluntarily as a result of
expiry of the period of its duration, if any, fixed by its articles or on the
occurrence of any event in respect of which the articles provide that
the company shall be dissolved, as the case may be and appointing
an insolvency professional to act as the liquidator :
Provided that the company owes any debt to any person, creditors representing
two-thirds in value of the debt of the company shall approve the resolution passed
under sub-clause (c) within seven days of such resolution.
(4) The company shall notify the Registrar of Companies and the Board about the
resolution under sub-section (3) to liquidate the company within seven days of
such resolution or the subsequent approval by the creditors, as the case may be.
(5) Subject to approval of the creditors under sub-section (3), the voluntary
liquidation proceedings in respect of a company shall be deemed to have
commenced from the date of passing of the resolution under sub-clause (c) of
sub-section (3).
(6) The provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply to
voluntary liquidation proceedings for corporate persons with such modifications
as may be necessary.
(7) Where the affairs of the corporate person have been completely wound up,
and its assets completely liquidated, the liquidator shall make an application to
the Adjudicating Authority for the dissolution of such corporate person.
(8) The Adjudicating Authority shall on an application filed by the liquidator under
sub-section (7), pass an order that the corporate debtor shall be dissolved from
the date of that order and the corporate debtor shall be dissolved accordingly.
(9) A copy of an order under sub-section (8) shall within fourteen days from the
date of such order, be forwarded to the authority with which the corporate person
is registered.
Chapter VI
ADJUDICATING AUTHORITY FOR CORPORATE PERSONS
Adjudicating Authority for corporate persons

60. (1) The Adjudicating Authority, in relation to insolvency resolution and
liquidation for corporate persons including corporate debtors and personal
guarantors thereof shall be the National Company Law Tribunal having territorial
jurisdiction over the place where the registered office of the corporate person is
located.
(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary
contained in this Code, where a corporate insolvency resolution process or
liquidation proceeding of a corporate debtor is pending before a National Company
Law Tribunal, an application relating to the insolvency resolution or bankruptcy of
a personal guarantor of such corporate debtor shall be filed before such National
Company Law Tribunal.
(3) An insolvency resolution process or bankruptcy proceeding of a personal
guarantor of the corporate debtor pending in any court or tribunal shall stand
transferred to the Adjudicating Authority dealing with insolvency resolution
process or liquidation proceeding of such corporate debtor.
(4) The National Company Law Tribunal shall be vested with all the powers of the
Debts Recovery Tribunal as contemplated under Part III of this Code for the purpose
of sub-section (2).
(5) Notwithstanding anything to the contrary contained in any other law for the
time being in force, the National Company Law Tribunal shall have jurisdiction to
entertain or dispose of –
(a) any application or proceeding by or against the corporate debtor or
corporate person ;
(b) any claim made by or against the corporate debtor or corporate person,
including claims by or against any of its subsidiaries situated in India ; and
(c) any question of priorities or any question of law or facts, arising out of or
in relation to the insolvency resolution or liquidation proceedings of the
corporate debtor or corporate person under this Code.
(6) Notwithstanding anything contained in the Limitation Act, 1963 (36 of 1963) or
in any other law for the time being in force, in computing the period of limitation
specified for any suit or application by or against a corporate debtor for which an
order of moratorium has been made under this Part, the period during which
such moratorium is in place shall be excluded.
Appeals and Appellate Authority

61. (1) Notwithstanding anything to the contrary contained under the Companies
Act, 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating
Authority under this part may prefer an appeal to the National Company Law
Appellate Tribunal.
(2) Every appeal under sub-section (1) shall be filed within thirty days before the
National Company Law Appellate Tribunal :
Provided that the National Company Law Appellate Tribunal may allow an appeal
to be filed after the expiry of the said period of thirty days if it is satisfied that there
was sufficient cause for not filing the appeal but such period shall not exceed
fifteen days.
(3) An appeal against an order approving a resolution plan under section 31 may
be filed on the following grounds, namely :
(i) the approved resolution plan is in contravention of the provisions of any
law for the time being in force ;
(ii) there has been material irregularity in exercise of the powers by the
resolution professional during the corporate insolvency resolution
period ;
(iii) the debts owed to operational creditors of the corporate debtor have not
been provided for in the resolution plan in the manner specified by the
Board ;
(iv) the insolvency resolution process costs have not been provided for
repayment in priority to all other debts ; or
(v) the resolution plan does not comply with any other criteria specified by
the Board.
(4) An appeal against a liquidation order passed under section 33 may be filed on
grounds of material irregularity or fraud committed in relation to such a liquidation
order.
Appeal to Supreme Court

62. (1) Any person aggrieved by an order of the National Company Law Appellate
Tribunal may file an appeal to the Supreme Court on a question of law arising out
of such order under this Code within forty-five days from the date of receipt of
such order.
(2) The Supreme Court may, if it is satisfied that a person was prevented by
sufficient cause from filing an appeal within forty-five days, allow the appeal to
be filed within a further period not exceeding fifteen days.
Civil court not to have jurisdiction

63. No civil court or authority shall have jurisdiction to entertain any suit or
proceedings in respect of any matter on which National Company Law Tribunal
or the National Company Law Appellate Tribunal has jurisdiction under this
Code.
Expeditious disposal of applications

64. (1) Where an application is not disposed of or an order is not passed within
the period specified in this Code, the National Company Law Tribunal or the
National Company Law Appellate Tribunal, as the case may be, shall record the
reasons for not doing so within the period so specified ; and the President of the
National Company Law Tribunal or the Chairperson of the National Company
Law Appellate Tribunal, as the case may be, may, after taking into account the
reasons so recorded, extend the period specified in the Act but not exceeding ten
days.
(2) No injunction shall be granted by any court, tribunal or authority in respect of
any action taken, or to be taken, in pursuance of any power conferred on the
National Company Law Tribunal or the National Company Law Appellate Tribunal
under this Code.
Fraudulent or malicious intiation of proceedings

65. (1) If, any person initiates the insolvency resolution process or liquidation
proceedings fraudulently or with malicious intent for any purpose other than for
the resolution of insolvency, or liquidation, as the case may be, the Adjudicating
Authority may impose upon such person a penalty which shall not be less than
one lakh rupees, but may extend to one crore rupees.
(2) If, any person initiates voluntary liquidation proceedings with the intent to defraud
any person, the Adjudicating Authority may impose upon such person a penalty
which shall not be less than one lakh rupees but may extend to one crore rupees.
Fraudulent trading or wrongful trading

66. (1) If during the corporate insolvency resolution process or a liquidation process,
it is found that any business of the corporate debtor has been carried on with
intent to defraud creditors of the corporate debtor or for any fraudulent purpose,
the Adjudicating Authority may on the application of the resolution professional
pass an order that any persons who were knowingly parties to the carrying on of
the business in such manner shall be liable to make such contributions to the
assets of the corporate debtor as it may deem fit.
(2) On an application made by a resolution professional during the corporate
insolvency resolution process, the Adjudicating Authority may by an order direct
that a director or partner of the corporate debtor, as the case may be, shall be
liable to make such contribution to the assets of the corporate debtor as it may
deem fit, if –
(a) before the insolvency commencement date, such director or partner knew
or ought to have known that there was no reasonable prospect of avoiding
the commencement of a corporate insolvency resolution process in
respect of such corporate debtor ; and
(b) such director or partner did not exercise due diligence in minimising the
potential loss to the creditors of the corporate debtor.
Explanation : For the purposes of this section a director or partner of the corporate
debtor, as the case may be, shall be deemed to have exercised due diligence if
such diligence was reasonably expected of a person carrying out the same
functions as are carried out by such director or partner, as the case may be, in
relation to the corporate debtor.
Proceedings under section 66
67. (1) Where the Adjudicating Authority has passed an order under sub-section
(1) or sub-section (2) of section 66, as the case may be, it may give such further
directions as it may deem appropriate for giving effect to the order, and in particular,
the Adjudicating Authority may –
(a) provide for the liability of any person under the order to be a charge on
any debt or obligation due from the corporate debtor to him, or on any
mortgage or charge or any interest in a mortgage or charge on assets of
the corporate debtor held by or vested in him, or any person on his behalf,
or any person claiming as assignee from or through the person liable or
any person acting on his behalf ; and
(b) from time-to-time, make such further directions as may be necessary for
enforcing any charge imposed under this section.
Explanation : For the purposes of this section, ‘assignee’ includes a person to
whom or in whose favour, by the directions of the person held liable under clause
(a) the debt, obligation, mortgage or charge was created, issued or transferred or
the interest created, but does not include an assignee for valuable consideration
given in good faith and without notice of any of the grounds on which the directions
have been made.
(2) Where the Adjudicating Authority has passed an order under sub-section (1) or
sub-section (2) of section 66, as the case may be, in relation to a person who is a
creditor of the corporate debtor, it may, by an order, direct that the whole or any
part of any debt owed by the corporate debtor to that person and any interest
thereon shall rank in the order of priority of payment under section 53 after all
other debts owed by the corporate debtor.
Chapter VII
OFFENCES AND PENALTIES
Punishment for concealment of property

68. Where any officer of the corporate debtor has, –
(i) within the twelve months immediately preceding the insolvency
commencement date, –
(a) wilfully concealed any property or part of such property of the
corporate debtor or concealed any debt due to, or from, the
corporate debtor, of the value of ten thousand rupees or more ; or
(b) fraudulently removed any part of the property of the corporate debtor
of the value of ten thousand rupees or more ; or
(c) wilfully concealed, destroyed, mutilated or falsified any book or paper
affecting or relating to the property of the corporate debtor or its
affairs, or
(d) wilfully made any false entry in any book or paper affecting or relating
to the property of the corporate debtor or its affairs ; or
(e) fraudulently parted with, altered or made any omission in any
document affecting or relating to the property of the corporate debtor
or its affairs ; or
(f) wilfully created any security interest over, transferred or disposed of
any property of the corporate debtor which has been obtained on
credit and has not been paid for unless such creation, transfer or
disposal was in the ordinary course of the business of the corporate
debtor ; or
(g) wilfully concealed the knowledge of the doing by others of any of

the acts mentioned in clauses (c), (d) or clause (e) ; or
(ii) at any time after the insolvency commencement date, committed any of
the acts mentioned in sub-clause (a) to (f) of clause (i) or has the knowledge
of the doing by others of any of the things mentioned in sub-clauses (c) to
(e) of clause (i) ; or
(iii) at any time after the insolvency commencement date, taken in pawn or
pledge, or otherwise received the property knowing it to be so secured,
transferred or disposed,
such officer shall be punishable with imprisonment for a term which shall not be
less than three years but which may extend to five years, or with fine, which shall
not be less than one lakh rupees, but may extend to one crore rupees, or with
both :
Provided that nothing in this section shall render a person liable to any punishment
under this section if he proves that he had no intent to defraud or to conceal the
state of affairs of the corporate debtor.
Punishment for transactions defrauding creditors
69. On or after the insolvency commencement date, if an officer of the corporate
debtor or the corporate debtor –
(a) has made or caused to be made any gift or transfer of, or charge on, or
has caused or connived in the execution of a decree or order against, the
property of the corporate debtor ;
(b) has concealed or removed any part of the property of the corporate debtor
within two months before the date of any unsatisfied judgment, decree or
order for payment of money obtained against the corporate debtor,
such officer of the corporate debtor or the corporate debtor, as the case may be,
shall be punishable with imprisonment for a term which shall not be less than
one year, but which may extend to five years, or with fine, which shall not be less
than one lakh rupees, but may extend to one crore rupees, or with both :
Provided that a person shall not be punishable under this section if the acts
mentioned in clause (a) were committed more than five years before the
insolvency commencement date ; or if he proves that, at the time of commission
of those acts, he had no intent to defraud the creditors of the corporate debtor.
Punishment for misconduct in course of corporate insolvency resolution

process
70. (1) On or after the insolvency commencement date, where an officer of the
corporate debtor –
(a) does not disclose to the resolution professional all the details of property
of the corporate debtor, and details of transactions thereof, or any such
other information as the resolution professional may require ; or
(b) does not deliver to the resolution professional all or part of the property of
the corporate debtor in his control or custody and which he is required to
deliver ; or
(c) does not deliver to the resolution professional all books and papers in his
control or custody belonging to the corporate debtor and which he is
required to deliver ; or
(d) fails to inform the resolution professional the information in his knowledge
that a debt has been falsely proved by any person during the corporate
insolvency resolution process ; or
(e) prevents the production of any book or paper affecting or relating to the
property or affairs of the corporate debtor ; or
(f) accounts for any part of the property of the corporate debtor by fictitious
losses or expenses, or if he has so attempted at any meeting of the creditors
of the corporate debtor within the twelve months immediately preceding
the insolvency commencement date,
he shall be punishable with imprisonment for a term which shall not be less than
three years, but which may extend to five years, or with fine, which shall not be
less than one lakh rupees, but may extend to one crore rupees, or with both :
Provided that nothing in this section shall render a person liable to any punishment
under this section if he proves that he had no intent to do so in relation to the state
of affairs of the corporate debtor.
(2) If an insolvency professional deliberately contravenes the provisions of this
Part he shall be punishable with imprisonment for a term which may extend to
six months, or with fine which shall not be less than one lakh rupees, but may
extend to five lakh rupees, or with both.
Punishment for falsification of books of corporate debtor

71. On and after the insolvency commencement date, where any person destroys,
mutilates, alters or falsifies any books, papers or securities, or makes or is in the
knowledge of making of any false or fraudulent entry in any register, books of account
or document belonging to the corporate debtor with intent to defraud or deceive any
person, he shall be punishable with imprisonment for a term which shall not be less
than three years, but which may extend to five years, or with fine which shall not be
less than one lakh rupees, but may extend to one crore rupees, or with both.
Punishment for wilful and material omissions from statements relating to

affairs of corporate debtor
72. Where an officer of the corporate debtor makes any material and wilful
omission in any statement relating to the affairs of the corporate debtor, he shall
be punishable with imprisonment for a term which shall not be less than three
years but which may extend to five years, or with fine which shall not be less than
one lakh rupees, but may extend to one crore rupees, or with both.
Punishment for false representations to creditors

73. Where any officer of the corporate debtor –
(a) on or after the insolvency commencement date, makes a false
representation or commits any fraud for the purpose of obtaining the
consent of the creditors of the corporate debtor or any of them to an
agreement with reference to the affairs of the corporate debtor, during the
corporate insolvency resolution process, or the liquidation process ;
(b) prior to the insolvency commencement date, has made any false
representation, or committed any fraud, for that purpose,
he shall be punishable with imprisonment for a term which shall not be less than
three years, but may extend to five years or with fine which shall not be less than
Punishment for contravention of moratorium or the resolution plan

74. (1) Where the corporate debtor or any of its officer violates the provisions of
section 14, any such officer who knowingly or wilfully committed or authorised or
permitted such contravention shall be punishable with imprisonment for a term
which shall not be less than three years, but may extend to five years or with fine
which shall not be less than one lakh rupees, but may extend to three lakh
rupees, or with both.
(2) Where any creditor violates the provisions of section 14, any person who
knowingly and wilfully authorised or permitted such contravention by a creditor
shall be punishable with imprisonment for a term which shall not be less than
one year, but may extend to five years, or with fine which shall not be less than
(3) Where the corporate debtor, any of its officers or creditors or any person on
whom the approved resolution plan is binding under section 31, knowingly and
wilfully contravenes any of the terms of such resolution plan or abets such
contravention, such corporate debtor, officer, creditor or person shall be punishable
with imprisonment of not less than one year, but may extend to five years, or with
fine which shall not be less than one lakh rupees, but may extend to one crore
rupees, or with both.
Punishment for false information furnished in application

75. Where any person furnishes information in the application made under section
7, which is false in material particulars, knowing it to be false or omits any
material fact, knowing it to be material, such person shall be punishable with fine
which shall not be less than one lakh rupees, but may extend to one crore
rupees.
Punishment for non-disclosure of dispute or repayment of debt by operational

creditor
76. Where –
(a) an operational creditor has wilfully or knowingly concealed in an
application under section 9 the fact that the corporate debtor had notified
him of a dispute in respect of the unpaid operational debt or the full and
final repayment of the unpaid operational debt ; or
(b) any person who knowingly and wilfully authorised or permitted such
concealment under clause (a),
such operational creditor or person, as the case may be, shall be punishable
with imprisonment for a term which shall not be less than one year but may
extend to five years or with fine which shall not be less than one lakh rupees but
may extend to one crore rupees, or with both.
Punishment for providing false information in application made by corporate

debtor
77. Where –
(a) a corporate debtor provides information in the application under section
10 which is false in material particulars, knowing it to be false and omits
any material fact, knowing it to be material ; or
(b) any person who knowingly and wilfully authorised or permitted the
furnishing of such information under sub-clause (a),
such corporate debtor or person, as the case may be, shall be punishable with
imprisonment for a term which shall not be less than three years, but which may
extend to five years or with fine which shall not be less than one lakh rupees, but
which may extend to one crore rupees, or with both.
Explanation : For the purposes of this section and sections 75 and 76, an application
shall be deemed to be false in material particulars in case the facts mentioned or

omitted in the application, if true, or not omitted from the application, as the case
may be, would have been sufficient to determine the existence of a default under
this Code.
PART III
INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS
AND PARTNERSHIP FIRMS
CHAPTER I
PRELIMINARY
Application
78. This Part shall apply to matters relating to fresh start, insolvency and bankruptcy
of individuals and partnership firms where the amount of the default is not less
than one thousand rupees :
Provided that the Central Government may, by notification, specify the minimum
amount of default of higher value which shall not be more than one lakh rupees.
Definitions
79. In this Part, unless the context otherwise requires, –
(1) “Adjudicating Authority” means the Debts Recovery Tribunal constituted
under sub-section (1) of section 3 of the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 (51 of 1993) ;
(2) ‘associate’ of the debtor means –
(a) a person who belongs to the immediate family of the debtor ;
(b) a person who is a relative of the debtor or a relative of the spouse of
the debtor ;
(c) a person who is in partnership with the debtor ;
(d) a person who is a spouse or a relative of any person with whom the
debtor is in partnership ;
(e) a person who is employer of the debtor or employee of the debtor ;
(f) a person who is a trustee of a trust in which the beneficiaries of the
trust include a debtor, or the terms of the trust confer a power on the
trustee which may be exercised for the benefit of the debtor ; and
(g) a company, where the debtor or the debtor along with his
associates, own more than fifty per cent of the share capital of the
company or control the appointment of the Board of directors of
the company.
Explanation : For the purposes of this sub-section, ‘relative’, with reference
to any person, means anyone who is related to another, if –
(i) they are members of a Hindu undivided family ;
(ii) one person is related to the other in such manner as may be
prescribed ;
(3) ‘bankrupt’ means –
(a) a debtor who has been adjudged as bankrupt by a bankruptcy order
under section 126 ;
(b) each of the partners of a firm, where a bankruptcy order under
section 126 has been made against a firm ; or
(c) any person adjudged as an undischarged insolvent ;
(4) ‘bankruptcy’ means the state of being bankrupt ;
(5) “bankruptcy debt”, in relation to a bankrupt, means –
(a) any debt owed by him as on the bankruptcy commencement date ;
(b) any debt for which he may become liable after bankruptcy
commencement date but before his discharge by reason of any
transaction entered into before the bankruptcy commencement
date ; and
(c) any interest which is a part of the debt under section 171 ;
(6) “bankruptcy commencement date” means the date on which a bankruptcy
order is passed by the Adjudicating Authority under section 126 ;
(7) “bankruptcy order” means an order passed by an Adjudicating Authority
under section 126 ;
(8) “bankruptcy process” means a process against a debtor under Chapters
IV and V of this Part ;
(9) “bankruptcy trustee” means the insolvency professional appointed as a
trustee for the estate of the bankrupt under section 125 ;
(10) ‘Chapter’ means a chapter under this Part ;
(11) “committee of creditors” means a committee constituted under section
134 ;
(12) ‘debtor’ includes a judgment-debtor ;

(13) “discharge order” means an order passed by the Adjudicating Authority
discharging the debtor under sections 92, 119 and section 138, as the
case may be ;
(14) “excluded assets” for the purposes of this part includes –
(a) unencumbered tools, books, vehicles and other equipment as are
necessary to the debtor or bankrupt for his personal use or for the
purpose of his employment, business or vocation,
(b) unencumbered furniture, household equipment and provisions as
are necessary for satisfying the basic domestic needs of the bankrupt
and his immediate family ;
(c) any unencumbered personal ornaments of such value, as may be
prescribed, of the debtor or his immediate family which cannot be
parted with, in accordance with religious usage ;
(d) any unencumbered life insurance policy or pension plan taken in
the name of debtor or his immediate family ; and
(e) an unencumbered single dwelling unit owned by the debtor of such
value as may be prescribed ;
(15) “excluded debt” means –
(a) liability to pay fine imposed by a court or tribunal ;
(b) liability to pay damages for negligence, nuisance or breach of a
statutory, contractual or other legal obligation ;
(c) liability to pay maintenance to any person under any law for the
time being in force ;
(d) liability in relation to a student loan ; and
(e) any other debt as may be prescribed ;
(16) ‘firm’ means a body of individuals carrying on business in partnership
whether or not registered under section 59 of the Indian Partnership Act,
1932 (9 to 1932) ;
(17) “immediate family” of the debtor means his spouse, dependent children
and dependent parents ;
(18) “partnership debt” means a debt for which all the partners in a firm are
jointly liable ;
(19) “qualifying debt” means amount due, which includes interest or any other
sum due in respect of the amounts owed under any contract, by the debtor
for a liquidated sum either immediately or at certain future time and does
not include –
(a) an excluded debt ;
(b) a debt to the extent it is secured ; and
(c) any debt which has been incurred three months prior to the date of
the application for fresh start process ;
(20) “repayment plan” means a plan prepared by the debtor in consultation
with the resolution professional under section 105 containing a proposal
to the committee of creditors for restructuring of his debts or affairs ;
(21) “resolution professional” means an insolvency professional appointed
under this part as a resolution professional for conducting the fresh start
process or insolvency resolution process ;
(22) “undischarged bankrupt” means a bankrupt who has not received a
discharge order under section 138.
Chapter II
FRESH START PROCESS
Eligibility for making an application

80. (1) A debtor, who is unable to pay his debt and fulfils the conditions specified
in sub-section (2), shall be entitled to make an application for a fresh start for
discharge of his qualifying debt under this Chapter.
(2) A debtor may apply, either personally or through a resolution professional, for
a fresh start under this Chapter in respect of his qualifying debts to the Adjudicating
Authority if –
(a) the gross annual income of the debtor does not exceed sixty thousand
rupees ;
(b) the aggregate value of the assets of the debtor does not exceed twenty
thousand rupees ;
(c) the aggregate value of the qualifying debts does not exceed thirty-five
thousand rupees ;
(d) he is not an undischarged bankrupt ;
(e) he does not own a dwelling unit, irrespective of whether it is encumbered
or not ;
(f) a fresh start process, insolvency resolution process or bankruptcy process

is not subsisting against him ; and
(g) no previous fresh start order under this Chapter has been made in relation
to him in the preceding twelve months of the date of the application for
fresh start.
Application for fresh start order

81. (1) When an application is filed under section 80 by a debtor, an interim-
moratorium shall commence on the date of filing of said application in relation to
all the debts and shall cease to have effect on the date of admission or rejection
of such application, as the case may be.
(2) During the interim-moratorium period, –
(i) any legal action or legal proceeding pending in respect of any of his debts
shall be deemed to have been stayed ; and
(ii) no creditor shall initiate any legal action or proceedings in respect of such
debt.
(3) The application under section 80 shall be in such form and manner and
accompanied by such fee, as may be prescribed.
(4) The application under sub-section (3) shall contain the following information
supported by an affidavit, namely :
(a) a list of all debts owed by the debtor as on the date of the said application
along with details relating to the amount of each debt, interest payable
thereon and the names of the creditors to whom each debt is owed ;
(b) the interest payable on the debts and the rate thereof stipulated in the
contract ;
(c) a list of security held in respect of any of the debts ;
(d) the financial information of the debtor and his immediate family up to two
years prior to the date of the application ;
(e) the particulars of the debtor’s personal details, as may be prescribed ;
(f) the reasons for making the application ;
(g) the particulars of any legal proceedings which, to the debtor’s knowledge
has been commenced against him ;
(h) the confirmation that no previous fresh start order under this Chapter has
been made in respect of the qualifying debts of the debtor in the preceding
twelve months of the date of the application.

82. (1) Where an application under section 80 is filed by the debtor through a
resolution professional, the Adjudicating Authority shall direct the Board within
seven days of the date of receipt of the application and shall seek confirmation
from the Board that there are no disciplinary proceedings against the resolution
professional who has submitted such application.
(2) The Board shall communicate to the Adjudicating Authority in writing either –
(a) confirmation of the appointment of the resolution professional who filed
an application under sub-section (1) ; or
(b) rejection of the appointment of the resolution professional who filed an
application under sub-section (1) and nominate a resolution professional
suitable for the fresh start process.
(3) Where an application under section 80 is filed by the debtor himself and not
through the resolution professional, the Adjudicating Authority shall direct the
Board within seven days of the date of the receipt of an application to nominate a
resolution professional for the fresh start process.
(4) The Board shall nominate a resolution professional within ten days of receiving
the direction issued by the Adjudicating Authority under sub-section (3).
(5) The Adjudicating Authority shall by order appoint the resolution professional
recommended or nominated by the Board under sub-section (2) or sub-section
(4), as the case may be.
(6) A resolution professional appointed by the Adjudicating Authority under sub-
section (5) shall be provided a copy of the application for fresh start.
Examination of application by resolution professional

83. (1) The resolution professional shall examine the application made under
section 80 within ten days of his appointment, and submit a report to the
Adjudicating Authority, either recommending acceptance or rejection of the
application.
(2) The report referred to in sub-section (1) shall contain the details of the amounts
mentioned in the application which in the opinion of the resolution professional
are –
(a) qualifying debts ; and
(b) liabilities eligible for discharge under sub-section (3) of section 92.
(3) The resolution professional may call for such further information or explanation
in connection with the application as may be required from the debtor or any
other person who, in the opinion of the resolution professional, may provide such
information.
(4) The debtor or any other person, as the case may be, shall furnish such
information or explanation within seven days of receipt of the request under sub-
section (3).
(5) The resolution professional shall presume that the debtor is unable to pay his
debts at the date of the application if –
(a) in his opinion the information supplied in the application indicates that
the debtor is unable to pay his debts and he has no reason to believe that
the information supplied is incorrect or incomplete ; and
(b) he has reason to believe that there is no change in the financial
circumstances of the debtor since the date of the application enabling the
debtor to pay his debts.
(6) The resolution professional shall reject the application, if in his opinion –
(a) the debtor does not satisfy the conditions specified under section 80 ; or
(b) the debts disclosed in the application by the debtor are not qualifying
debts ; or
(c) the debtor has deliberately made a false representation or omission in
the application or with respect to the documents or information submitted.
(7) The resolution professional shall record the reasons for recommending the
acceptance or rejection of the application in the report to the Adjudicating Authority
under sub-section (1) and shall give a copy of the report to the debtor.
Admission or rejection of application by Adjudicating Authority

84. (1) The Adjudicating Authority may within fourteen days from the date of
submission of the report by the resolution professional, pass an order either
admitting or rejecting the application made under sub-section (1) of section 81.
(2) The order passed under sub-section (1) accepting the application shall state
the amount which has been accepted as qualifying debts by the resolution
professional and other amounts eligible for discharge under section 92 for the
purposes of the fresh start order.
(3) A copy of the order passed by the Adjudicating Authority under sub-section (1)
along with a copy of the application shall be provided to the creditors mentioned
in the application within seven days of the passing of the order.
Effect of admission of application

85. (1) On the date of admission of the application, the moratorium period shall
commence in respect of all the debts.
(2) During the moratorium period –
(a) any pending legal action or legal proceeding in respect of any debt shall
be deemed to have been stayed ; and
(b) subject to the provisions of section 86, the creditors shall not initiate any
legal action or proceedings in respect of any debt.
(3) During the moratorium period, the debtor shall –
(a) not act as a director of any company, or directly or indirectly take part in
or be concerned in the promotion, formation or management of a
company ;
(b) not dispose of or alienate any of his assets ;
(c) inform his business partners that he is undergoing a fresh start process ;
(d) be required to inform prior to entering into any financial or commercial
transaction of such value as may be notified by the Central Government,
either individually or jointly, that he is undergoing a fresh start process ;
(e) disclose the name under which he enters into business transactions, if it
is different from the name in the application admitted under section 84 ;
(f) not travel outside India except with the permission of the Adjudicating
Authority.
(4) The moratorium ceases to have effect at the end of the period of one hundred
and eighty days beginning with the date of admission unless the order admitting
the application is revoked under sub-section (2) of section 91.
Objections by creditor and their examination by resolution professional

86. (1) Any creditor mentioned in the order of the Adjudicating Authority under
section 84 to whom a qualifying debt is owed may, within a period of ten days
from the date of receipt of the order under section 84, object only on the following
grounds, namely :
(a) inclusion of a debt as a qualifying debt ; or
(b) incorrectness of the details of the qualifying debt specified in the order
under section 84.
(2) A creditor may file an objection under sub-section (1) by way of an application
to the resolution professional.
(3) The application under sub-section (2) shall be supported by such information
and documents as may be prescribed.
(4) The resolution professional shall consider every objection made under this
section.
(5) The resolution professional shall examine the objections under sub-section
(2) and either accept or reject the objections, within ten days of the date of the
application.
(6) The resolution professional may examine any matter that appears to him to be
relevant to the making of a final list of qualifying debts for the purposes of section 92.
(7) On the basis of the examination under sub-section (5) or sub-section (6), the
resolution professional shall –
(a) prepare an amended list of qualifying debts for the purpose of the
discharge order ;
(b) make an application to the Adjudicating Authority for directions under
section 90 ; or
(c) take such other steps as he considers necessary in relation to the debtor.
Application against decision of resolution professional

87. (1) The debtor or the creditor who is aggrieved by the action taken by the
resolution professional under section 86 may, within ten days of such decision,
make an application to the Adjudicating Authority challenging such action on any
of the following grounds, namely :
(a) that the resolution professional has not given an opportunity to the debtor
or the creditor to make a representation ; or
(b) that the resolution professional colluded with the other party in arriving at
the decision ; or
(c) that the resolution professional has not complied with the requirements
of section 86.
(2) The Adjudicating Authority shall decide the application referred to in sub-
section (1) within fourteen days of such application, and make an order as it
deems fit.
(3) Where the application under sub-section (1) has been allowed by the
Adjudicating Authority, it shall forward its order to the Board and the Board may
take such action as may be required under Chapter VI of Part IV against the
General duties of debtor

88. The debtor shall –
(a) make available to the resolution professional all information relating to
his affairs, attend meetings and comply with the requests of the resolution
professional in relation to the fresh start process.
(b) inform the resolution professional as soon as reasonably possible of –
(i) any material error or omission in relation to the information or
document supplied to the resolution professional ; or
(ii) any change in financial circumstances after the date of application,
where such change has an impact on the fresh start process.
Replacement of resolution professional

89. (1) Where the debtor or the creditor is of the opinion that the resolution
professional appointed under section 82 is required to be replaced, he may
apply to the Adjudicating Authority for the replacement of such resolution
professional.
(2) The Adjudicating Authority shall within seven days of the receipt of the
application under sub-section (1) make a reference to the Board for replacement
of the resolution professional.
Adjudicating Authority under sub-section (2), recommend the name of an
insolvency professional to the Adjudicating Authority against whom no disciplinary
(4) The Adjudicating Authority shall appoint another resolution professional for
the purposes of the fresh start process on the basis of the recommendation by the
Board.
(5) The Adjudicating Authority may give directions to the resolution professional
replaced under sub-section (4) –
(a) to share all information with the new resolution professional in respect of
the fresh start process ; and
(b) to co-operate with the new resolution professional as may be required.
Directions for compliances of restrictions, etc.

90. (1) The resolution professional may apply to the Adjudicating Authority for any
of the following directions, namely :
(a) compliance of any restrictions referred to in sub-section (3) of section 85,

in case of non-compliance by the debtor ; or
(b) compliance of the duties of the debtor referred to in section 88, in case of
non-compliance by the debtor.
(2) The resolution professional may apply to the Adjudicating Authority for
directions in relation to any other matter under this Chapter for which no specific
provisions have been made.
Revocation of order admitting application
91. (1) The resolution professional may submit an application to the Adjudicating
Authority seeking revocation of its order made under section 84 on the following
grounds, namely :
(a) if due to any change in the financial circumstances of the debtor, the
debtor is ineligible for a fresh start process ; or
(b) non-compliance by the debtor of the restrictions imposed under sub-
(c) if the debtor has acted in a mala fide manner and has wilfully failed to
comply with the provisions of this Chapter.
application under sub-section (1), may by order admit or reject the application.
(3) On passing of the order admitting the application referred to in sub-section (1),
the moratorium and the fresh start process shall cease to have effect.
(4) A copy of the order passed by the Adjudicating Authority under this section
shall be provided to the Board for the purpose of recording an entry in the register
Discharge order
92. (1) The resolution professional shall prepare a final list of qualifying debts and
submit such list to the Adjudicating Authority at least seven days before the
moratorium period comes to an end.
(2) The Adjudicating Authority shall pass a discharge order at the end of the
moratorium period for discharge of the debtor from the qualifying debts mentioned
in the list under sub-section (1).
(3) Without prejudice to the provisions of sub-section (2), the Adjudicating Authority
shall discharge the debtor from the following liabilities, namely :
(a) penalties in respect of the qualifying debts from the date of application till
the date of the discharge order ;
(b) interest including penal interest in respect of the qualifying debts from the
date of application till the date of the discharge order ; and
(c) any other sums owed under any contract in respect of the qualifying
debts from the date of application till the date of the discharge order.
(4) The discharge order shall not discharge the debtor from any debt not included
in sub-section (2) and from any liability not included under sub-section (3).
(5) The discharge order shall be forwarded to the Board for the purpose of
recording an entry in the register referred to in section 196.
(6) A discharge order under sub-section (2) shall not discharge any other person
from any liability in respect of the qualifying debts.
Standard of conduct.
93. The resolution professional shall perform his functions and duties in
compliance with the code of conduct provided under section 208.
Chapter III
INSOLVENCY RESOLUTION PROCESS
Application by debtor to initiate insolvency resolution process

94. (1) A debtor who commits a default may apply, either personally or through a
resolution professional, to the Adjudicating Authority for initiating the insolvency
resolution process, by submitting an application.
(2) Where the debtor is a partner of a firm, such debtor shall not apply under this
Chapter to the Adjudicating Authority in respect of the firm unless all or a majority
of the partners of the firm file the application jointly.
(3) An application under sub-section (1) shall be submitted only in respect of
debts which are not excluded debts.
(4) A debtor shall not be entitled to make an application under sub-section (1) if he
is –
(a) an undischarged bankrupt ;
(b) undergoing a fresh start process ;
(c) undergoing an insolvency resolution process ; or
(d) undergoing a bankruptcy process.
(5) A debtor shall not be eligible to apply under sub-section (1) if an application under
this Chapter has been admitted in respect of the debtor during the period of twelve
months preceding the date of submission of the application under this section.
(6) The application referred to in sub-section (1) shall be in such form and manner
and accompanied with such fee as may be prescribed.
Application by creditor to initiate insolvency resolution process

95. (1) A creditor may apply either by himself, or jointly with other creditors, or
through a resolution professional to the Adjudicating Authority for initiating an
insolvency resolution process under this section by submitting an application.
(2) A creditor may apply under sub-section (1) in relation to any partnership debt
owed to him for initiating an insolvency resolution process against –
(a) any one or more partners of the firm ; or
(b) the firm.
(3) Where an application has been made against one partner in a firm, any other
application against another partner in the same firm shall be presented in or
transferred to the Adjudicating Authority in which the first mentioned application is
pending for adjudication and such Adjudicating Authority may give such directions
for consolidating the proceedings under the applications as it thinks just.
(4) An application under sub-section (1) shall be accompanied with details and
documents relating to –
(a) the debts owed by the debtor to the creditor or creditors submitting the
application for insolvency resolution process as on the date of
application ;
(b) the failure by the debtor to pay the debt within a period of fourteen days of
the service of the notice of demand ; and
(c) relevant evidence of such default or non-repayment of debt.
(5) The creditor shall also provide a copy of the application made under sub-
section (1) to the debtor.
and accompanied by such fee as may be prescribed.
(7) The details and documents required to be submitted under sub-section (4)
shall be such as may be specified.
Interim-moratorium
96. (1) When an application is filed under section 94 or section 95 –
(a) an interim-moratorium shall commence on the date of the application in
relation to all the debts and shall cease to have effect on the date of
admission of such application ; and
(b) during the interim-moratorium period –

(i) any legal action or proceeding pending in respect of any debt shall
be deemed to have been stayed ; and
(ii) the creditors of the debtor shall not initiate any legal action or
proceedings in respect of any debt.
(2) Where the application has been made in relation to a firm, the interim-
moratorium under sub-section (1) shall operate against all the partners of the firm
as on the date of the application.
regulator.
97. (1) If the application under section 94 or 95 is filed through a resolution
professional, the Adjudicating Authority shall direct the Board within seven days
of the date of the application to confirm that there are no disciplinary proceedings
pending against resolution professional.
(2) The Board shall within seven days of receipt of directions under sub-section (1)
communicate to the Adjudicating Authority in writing either –
(a) confirming the appointment of the resolution professional ; or
(b) rejecting the appointment of the resolution professional and nominating
another resolution professional for the insolvency resolution process.
(3) Where an application under section 94 or 95 is filed by the debtor or the
creditor himself, as the case may be, and not through the resolution professional,
the Adjudicating Authority shall direct the Board, within seven days of the filing of
such application, to nominate a resolution professional for the insolvency
resolution process.
(4) The Board shall nominate a resolution professional within ten days of receiving
the direction issued by the Adjudicating Authority under sub-section (3).
(5) The Adjudicating Authority shall by order appoint the resolution professional
recommended under sub-section (2) or as nominated by the Board under sub-
section (4).
(6) A resolution professional appointed by the Adjudicating Authority under sub-
section (5) shall be provided a copy of the application for insolvency resolution
process.
Replacement of resolution professional
98. (1) Where the debtor or the creditor is of the opinion that the resolution
professional appointed under section 97 is required to be replaced, he may

apply to the Adjudicating Authority for the replacement of the such resolution
professional.
application under sub-section (1) make a reference to the Board for replacement
of the resolution professional.
Adjudicating Authority under sub-section (2), recommend the name of the
resolution professional to the Adjudicating Authority against whom no disciplinary
(4) Without prejudice to the provisions contained in sub-section (1), the creditors
may apply to the Adjudicating Authority for replacement of the resolution
professional where it has been decided in the meeting of the creditors, to replace
the resolution professional with a new resolution professional for implementation
of the repayment plan.
(5) Where the Adjudicating Authority admits an application made under sub-
section (1) or sub-section (4), it shall direct the Board to confirm that there are no
disciplinary proceedings pending against the proposed resolution professional.
(6) The Board shall send a communication within ten days of receipt of the direction
under sub-section (5) either –
(a) confirming appointment of the nominated resolution professional ; or
(b) rejecting appointment of the nominated resolution professional and
recommend a new resolution professional.
(7) On the basis of the communication of the Board under sub-section (3) or sub-
section (6), the Adjudicating Authority shall pass an order appointing a new
(8) The Adjudicating Authority may give directions to the resolution professional
replaced under sub-section (7) –
(a) to share all information with the new resolution professional in respect of
the insolvency resolution process ; and
(b) to co-operate with the new resolution professional in such matters as
may be required.
Submission of report by resolution professional
99. (1) The resolution professional shall examine the application referred to in
section 94 or section 95, as the case may be, within ten days of his appointment,
and submit a report to the Adjudicating Authority recommending for approval or
rejection of the application.
(2) Where the application has been filed under section 95, the resolution
professional may require the debtor to prove repayment of the debt claimed as
unpaid by the creditor by furnishing –
(a) evidence of electronic transfer of the unpaid amount from the bank account
of the debtor ;
(b) evidence of encashment of a cheque issued by the debtor ; or
(c) a signed acknowledgment by the creditor accepting receipt of dues.
(3) Where the debt for which an application has been filed by a creditor is
registered with the information utility, the debtor shall not be entitled to dispute
the validity of such debt.
(4) For the purposes of examining an application, the resolution professional may
seek such further information or explanation in connection with the application
as may be required from the debtor or the creditor or any other person who, in the
opinion of the resolution professional, may provide such information.
(5) The person from whom information or explanation is sought under sub-section
(4) shall furnish such information or explanation within seven days of receipt of
the request.
(6) The resolution professional shall examine the application and ascertain that –
(a) the application satisfies the requirements set out in section 94 or 95 ;
(b) the applicant has provided information and given explanation sought by
the resolution professional under sub-section (4).
(7) After examination of the application under sub-section (6), he may recommend
acceptance or rejection of the application in his report.
(8) Where the resolution professional finds that the debtor is eligible for a fresh
start under Chapter II, the resolution professional shall submit a report
recommending that the application by the debtor under section 94 be treated as
an application under section 81 by the Adjudicating Authority.
(9) The resolution professional shall record the reasons for recommending the
acceptance or rejection of the application in the report under sub-section (7).
(10) The resolution professional shall give a copy of the report under sub-section
(7) to the debtor or the creditor, as the case may be.
Admission or rejection of application

100. (1) The Adjudicating Authority shall, within fourteen days from the date of
submission of the report under section 99 pass an order either admitting or
rejecting the application referred to in section 94 or 95, as the case may be.
(2) Where the Adjudicating Authority admits an application under sub-section (1),
it may, on the request of the resolution professional, issue instructions for the
purpose of conducting negotiations between the debtor and creditors and for
arriving at a repayment plan.
(3) The Adjudicating Authority shall provide a copy of the order passed under
sub-section (1) along with the report of the resolution professional and the
application referred to in section 94 or 95, as the case may be, to the creditors
within seven days from the date of the said order.
(4) If the application referred to in section 94 or 95, as the case may be, is rejected
by the Adjudicating Authority on the basis of report submitted by the resolution
professional that the application was made with the intention to defraud his
creditors or the resolution professional, the order under sub-section (1) shall
record that the creditor is entitled to file for a bankruptcy order under Chapter IV.
Moratorium
101. (1) When the application is admitted under section 100, a moratorium shall
commence in relation to all the debts and shall cease to have effect at the end of
the period of one hundred and eighty days beginning with the date of admission
of the application or on the date the Adjudicating Authority passes an order on the
repayment plan under section 114, whichever is earlier.
(2) During the moratorium period –
(a) any pending legal action or proceeding in respect of any debt shall be
deemed to have been stayed ;
(b) the creditors shall not initiate any legal action or legal proceedings in
respect of any debt ; and
(c) the debtor shall not transfer, alienate, encumber or dispose of any of his
assets or his legal rights or beneficial interest therein.
(3) Where an order admitting the application under section 96 has been made in
relation to a firm, the moratorium under sub-section (1) shall operate against all
the partners of the firm.
(4) The provisions of this section shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial sector
regulator.
Public notice and claims from creditors
102. (1) The Adjudicating Authority shall issue a public notice within seven days of
passing the order under section 100 inviting claims from all creditors within
twenty-one days of such issue.
(2) The notice under sub-section (1) shall include –

(a) details of the order admitting the application ;
(b) particulars of the resolution professional with whom the claims are to be
registered ; and
(c) the last date for submission of claims.
(3) The notice shall be –
(a) published in at least one English and one vernacular newspaper which is
in circulation in the state where the debtor resides ;
(b) affixed in the premises of the Adjudicating Authority ; and
(c) placed on the website of the Adjudicating Authority.
Resistering of claims by creditors
103. (1) The creditors shall register claims with the resolution professional by
sending details of the claims by way of electronic communications or through
courier, speed post or registered letter.
(2) In addition to the claims referred to in sub-section (1), the creditor shall provide
to the resolution professional, personal information and such particulars as may
be prescribed.
Preparation of list of creditors

104. (1) The resolution professional shall prepare a list of creditors on the basis
of –
(a) the information disclosed in the application filed by the debtor under section
94 or 95, as the case may be ;
(b) claims received by the resolution professional under section 102.
(2) The resolution professional shall prepare the list mentioned in sub-section (1)
within thirty days from the date of the notice.
Repayment plan
105. (1) The debtor shall prepare, in consultation with the resolution professional,
a repayment plan containing a proposal to the creditors for restructuring of his
debts or affairs.
(2) The repayment plan may authorise or require the resolution professional to –
(a) carry on the debtor’s business or trade on his behalf or in his name ; or
(b) realise the assets of the debtor ; or
(c) administer or dispose of any funds of the debtor.

(3) The repayment plan shall include the following, namely :
(a) justification for preparation of such repayment plan and reasons on the
basis of which the creditors may agree upon the plan ;
(b) provision for payment of fee to the resolution professional ;
(c) such other matters as may be specified.
Report of resolution professional on repayment plan

106. (1) The resolution professional shall submit the repayment plan under section
105 along with his report on such plan to the Adjudicating Authority within a
period of twenty-one days from the last date of submission of claims under
section 102.
(2) The report referred in sub-section (1) shall include that –
(a) the repayment plan is in compliance with the provisions of any law for the
time being in force ;
(b) the repayment plan has a reasonable prospect of being approved and
implemented ; and
(c) there is a necessity of summoning a meeting of the creditors, if required,
to consider the repayment plan :
Provided that where the resolution professional recommends that a meeting of
the creditors is not required to be summoned, reasons for the same shall be
provided.
(3) The report referred to in sub-section (2) shall also specify the date on which,
and the time and place at which, the meeting should be held if he is of the opinion
that a meeting of the creditors should be summoned.
(4) For the purposes of sub-section (3) –
(a) the date on which the meeting is to be held shall be not less than fourteen
days and not more than twenty-eight days from the date of submission of
report under sub-section (1) ;
(b) the resolution professional shall consider the convenience of creditors in
fixing the date and venue of the meeting of the creditors.
Summoning of meeting of creditors

107. (1) The resolution professional shall issue a notice calling the meeting of the
creditors at least fourteen days before the date fixed for such meeting.
(2) The resolution professional shall send the notice of the meeting to the list of
creditors prepared under section 104.
(3) The notice sent under sub-section (1) shall state the address of the Adjudicating
Authority to which the repayment plan and report of the resolution professional
on the repayment plan has been submitted and shall be accompanied by –
(a) a copy of the repayment plan ;
(b) a copy of the statement of affairs of the debtor ;
(c) a copy of the said report of the resolution professional ; and
(d) forms for proxy voting.
(4) The proxy voting, including electronic proxy voting shall take place in such
manner and form as may be specified.
Conduct of meeting of creditors

108. (1) The meeting of the creditors shall be conducted in accordance with the
provisions of this section and sections 109, 110 and 111.
(2) In the meeting of the creditors, the creditors may decide to approve, modify or
reject the repayment plan.
(3) The resolution professional shall ensure that if modifications are suggested by
the creditors, consent of the debtor shall be obtained for each modification.
(4) The resolution professional may for a sufficient cause adjourn the meeting of
the creditors for a period of not more than seven days at a time.
Voting rights in meeting of creditors

109. (1) A creditor shall be entitled to vote at every meeting of the creditors in
respect of the repayment plan in accordance with the voting share assigned to
him.
(3) A creditor shall not be entitled to vote in respect of a debt for an unliquidated
amount.
(4) A creditor shall not be entitled to vote in a meeting of the creditors if he –
(a) is not a creditor mentioned in the list of creditors under section 104 ; or
(b) is an associate of the debtor.
Rights of secured creditors in relation to repayment plan

110. (1) Secured creditors shall be entitled to participate and vote in the meetings
of the creditors.
(2) A secured creditor participating in the meetings of the creditors and voting in
relation to the repayment plan shall forfeit his right to enforce the security during
the period of the repayment plan in accordance with the terms of the repayment
plan.
(3) Where a secured creditor does not forfeit his right to enforce security, he shall
submit an affidavit to the resolution professional at the meeting of the creditors
stating –
(a) that the right to vote exercised by the secured creditor is only in respect of
the unsecured part of the debt ; and
(b) the estimated value of the unsecured part of the debt.
(4) In case a secured creditor participates in the voting on the repayment plan by
submitting an affidavit under sub-section (3), the secured and unsecured parts of
the debt shall be treated as separate debts.
(5) The concurrence of the secured creditor shall be obtained if he does not
participate in the voting on repayment plan but provision of the repayment plan
affects his right to enforce security.
Explanation : For the purposes of this section, “period of the repayment plan”
means the period from the date of the order passed under section 114 till the date
on which the notice is given by the resolution professional under section 117 or
report submitted by the resolution professional under section 118, as the case
may be.
Approval of repayment plan by creditors

111. The repayment plan or any modification to the repayment plan shall be
approved by a majority of more than three-fourth in value of the creditors present
in person or by proxy and voting on the resolution in a meeting of the creditors.
Report of meeting of creditors on repayment plan

112. (1) The resolution professional shall prepare a report of the meeting of the
creditors on repayment plan.
(2) The report under sub-section (1) shall contain –
(a) whether the repayment plan was approved or rejected and if approved,
the list the modifications, if any ;
(b) the resolutions which were proposed at the meeting and the decision on
such resolutions ;
(c) list of the creditors who were present or represented at the meeting, and
the voting records of each creditor for all meetings of the creditors ; and
(d) such other information as the resolution professional thinks appropriate
to make known to the Adjudicating Authority.
Notice of decisions taken at meeting of creditors

113. The resolution professional shall provide a copy of the report of the meeting
of creditors prepared under section 99 to –
(a) the debtor ;
(b) the creditors, including those who were not present at the meeting ; and
(c) the Adjudicating Authority.
Order of Adjudicating Authority on repayment plan

114. (1) The Adjudicating Authority shall by an order approve or reject the repayment
plan on the basis of the report of the meeting of the creditors submitted by the
resolution professional under section 112 :
Provided that where a meeting of creditors is not summoned, the Adjudicating
Authority shall pass an order on the basis of the report prepared by the resolution
professional under section 106.
(2) The order of the Adjudicating Authority approving the repayment plan may
also provide for directions for implementing the repayment plan.
(3) Where the Adjudicating Authority is of the opinion that the repayment plan
requires modification, it may direct the resolution professional to re-convene a
meeting of the creditors for reconsidering the repayment plan.
Effect of order of Adjudicating Authority on repayment plan

115. (1) Where the Adjudicating Authority has approved the repayment plan under
section 114, such repayment plan shall –
(a) take effect as if proposed by the debtor in the meeting ; and
(b) be binding on creditors mentioned in the repayment plan and the debtor.
(2) Where the Adjudicating Authority rejects the repayment plan under section
114, the debtor and the creditors shall be entitled to file an application for bankruptcy
under Chapter IV.
shall be provided to the Board, for the purpose of recording an entry in the register
Implementation and supervision of repayment plan

116. (1) The resolution professional appointed under section 97 or under section
98 shall supervise the implementation of the repayment plan.
(2) The resolution professional may apply to the Adjudicating Authority for
directions, if necessary, in relation to any particular matter arising under the
repayment plan.
(3) The Adjudicating Authority may issue directions to the resolution professional
on the basis of an application under sub-section (2).
Completion of repayment plan
117. (1) The resolution professional shall within fourteen days of the completion of
the repayment plan, forward to the persons who are bound by the repayment
plan under section 115 and the Adjudicating Authority, the following documents,
namely :
(a) a notice that the repayment plan has been fully implemented ; and
(b) a copy of a report by the resolution professional summarising all receipts
and payments made in pursuance of the repayment plan and extent of
the implementation of such plan as compared with the repayment plan
approved by the meeting of the creditors.
(2) The resolution professional may apply to the Adjudicating Authority to extend
the time mentioned in sub-section (1) for such further period not exceeding seven
days.
Repayment plan coming to end prematurely

118. (1) A repayment plan shall be deemed to have come to an end prematurely
if it has not been fully implemented in respect of all persons bound by it within the
period as mentioned in the repayment plan.
(2) Where a repayment plan comes to an end prematurely under this section, the
resolution professional shall submit a report to the Adjudicating Authority which
shall state –
(a) the receipts and payments made in pursuance of the repayment plan ;
(b) the reasons for premature end of the repayment plan ; and
(c) the details of the creditors whose claims have not been fully satisfied.
(3) The Adjudicating Authority shall pass an order on the basis of the report
submitted under sub-section (2) by the resolution professional that the repayment
plan has not been completely implemented.
(4) The debtor or the creditor, whose claims under repayment plan have not been
fully satisfied, shall be entitled to apply for a bankruptcy order under Chapter IV.
(5) The Adjudicating Authority shall forward to the persons bound by the repayment
plan under section 115, a copy of the –
(a) report submitted by the resolution professional to the Adjudicating Authority
under sub-section (2) ; and
(b) order passed by the Adjudicating Authority under sub-section (3).
(6) The Adjudicating Authority shall forward a copy of the order passed under
sub-section (4) to the Board, for the purpose of recording entries in the register
Discharge order
119. (1) On the basis of the repayment plan, the resolution professional shall apply
to the Adjudicating Authority for a discharge order in relation to the debts
mentioned in the repayment plan and the Adjudicating Authority may pass such
discharge order.
(2) The repayment plan may provide for –
(a) early discharge ; or
(b) discharge on complete implementation of the repayment plan.
(3) The discharge order shall be forwarded to the Board, for the purpose of
recording entries in the register referred to in section 196.
(4) The discharge order under sub-section (3) shall not discharge any other person
from any liability in respect of his debt.
Standard of conduct
120. The resolution professional shall perform his functions and duties in
compliance with the code of conduct provided under section 208.
CHAPTER IV
BANKRUPTCY ORDER FOR INDIVIDUALS AND PARTNERSHIP FIRMS
Application for bankruptcy

121. (1) An application for bankruptcy of a debtor may be made, by a creditor
individually or jointly with other creditors or by a debtor, to the Adjudicating Authority
in the following circumstances, namely ; –
(a) where an order has been passed by an Adjudicating Authority under sub-
(b) where an order has been passed by an Adjudicating Authority under sub-
(c) where an order has been passed by an Adjudicating Authority under sub-
section (3) of section 118.
(2) An application for bankruptcy shall be filed within a period of three months of
the date of the order passed by the Adjudicating Authority under the sections
referred to in sub-section (1).
(3) Where the debtor is a firm, the application under sub-section (1) may be filed
by any of its partners.
Application by debtor
122. (1) The application for bankruptcy by the debtor shall be accompanied by –
(a) the records of insolvency resolution process undertaken under Chapter III
of Part III ;
(b) the statement of affairs of the debtor in such form and manner as may be
prescribed, on the date of the application for bankruptcy ; and
(c) a copy of the order passed by the Adjudicating Authority under Chapter III
of Part III permitting the debtor to apply for bankruptcy.
(2) The debtor may propose an insolvency professional as the bankruptcy trustee
in the application for bankruptcy.
and accompanied by such fee as may be prescribed.
(4) An application for bankruptcy by the debtor shall not be withdrawn without the
leave of the Adjudicating Authority.
Application by creditor
123. (1) The application for bankruptcy by the creditor shall be accompanied by –
(a) the records of insolvency resolution process undertaken under Chapter III ;
(b) a copy of the order passed by the Adjudicating Authority under Chapter III
permitting the creditor to apply for bankruptcy ;
(c) details of the debts owed by the debtor to the creditor as on the date of the
application for bankruptcy ; and
(d) such other information as may be prescribed.
(2) An application under sub-section (1) made in respect of a debt which is secured,
shall be accompanied with –
(a) a statement by the creditor having the right to enforce the security that he
shall, in the event of a bankruptcy order being made, give up his security
for the benefit of all the creditors of the bankrupt ; or
(b) a statement by the creditor stating –
(i) that the application for bankruptcy is only in respect of the unsecured
part of the debt ; and
(ii) an estimated value of the unsecured part of the debt.
(3) If a secured creditor makes an application for bankruptcy and submits a
statement under clause (b) of sub-section (2), the secured and unsecured parts of
the debt shall be treated as separate debts.
(4) The creditor may propose an insolvency professional as the bankruptcy trustee
in the application for bankruptcy.
(5) An application for bankruptcy under sub-section (1), in case of a deceased
debtor, may be filed against his legal representatives.
(6) The application for bankruptcy shall be in such form and manner and
accompanied by such fee as may be prescribed.
(7) An application for bankruptcy by the creditor shall not be withdrawn without
the permission of the Adjudicating Authority.
Effect of application
124. (1) When an application is filed under section 122 or 123, –
(a) an interim-moratorium shall commence on the date of the making of the
application on all actions against the properties of the debtor in respect of
his debts and such moratorium shall cease to have effect on the
bankruptcy commencement date ; and
(b) during the interim-moratorium period –
(i) any pending legal action or legal proceeding against any property
of the debtor in respect of any of his debts shall be deemed to have
been stayed ;
(ii) the creditors of the debtor shall not be entitled to initiate any legal
action or legal proceedings against any property of the debtor in
respect of any of his debts.
(2) Where the application has been made in relation to a firm, the interim-
moratorium under sub-section (1) shall operate against all the partners of the firm
as on the date of the making of the application.
(3) The provisions of this section shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial sector
regulator.
Appointment of insolvency professional as bankruptcy trustee

125. (1) If an insolvency professional is proposed as the bankruptcy trustee in the
application for bankruptcy under section 122 or section 123, the Adjudicating
Authority shall direct the Board within seven days of receiving the application for
bankruptcy to confirm that there are no disciplinary proceedings pending against
such professional.
(2) The Board shall within ten days of the receipt of the direction under sub-
section (1) in writing either –
(a) confirm the appointment of the proposed insolvency professional as the
bankruptcy trustee for the bankruptcy process ; or
(b) reject the appointment of the proposed insolvency professional as the
bankruptcy trustee and nominate another bankruptcy trustee for the
bankruptcy process.
(3) Where a bankruptcy trustee is not proposed by the debtor or creditor under
section 122 or 123, the Adjudicating Authority shall direct the Board within seven
days of receiving the application to nominate a bankruptcy trustee for the
bankruptcy process.
(4) The Board shall nominate a bankruptcy trustee within ten days of receiving the
direction of the Adjudicating Authority under sub-section (3).
(5) The bankruptcy trustee confirmed or nominated under this section shall be
appointed as the bankruptcy trustee by the Adjudicating Authority in the bankruptcy
order under section 126.
Bankruptcy order
126. (1) The Adjudicating Authority shall pass a bankruptcy order within fourteen
days of receiving the confirmation or nomination of the bankruptcy trustee under
section 125.
(2) The Adjudicating Authority shall provide the following documents to bankrupt,
creditors and the bankruptcy trustee within seven days of the passing of the
bankruptcy order, namely :
(a) a copy of the application for bankruptcy ; and
(b) a copy of the bankruptcy order.
Validity of bankruptcy order

127. The bankruptcy order passed by the Adjudicating Authority under section
126 shall continue to have effect till the debtor is discharged under section 138.
Effect of bankruptcy order

128. (1) On the passing of the bankruptcy order under section 126, –
(a) the estate of the bankrupt shall vest in the bankruptcy trustee as provided
in section 154 ;
(b) the estate of the bankrupt shall be divided among his creditors ;
(c) subject to provisions of sub-section (2), a creditor of the bankrupt indebted
in respect of any debt claimed as a bankruptcy debt shall not –
(i) initiate any action against the property of the bankrupt in respect of
such debt ; or
(ii) commence any suit or other legal proceedings except with the leave
of the Adjudicating Authority and on such terms as the Adjudicating
Authority may impose.
(2) Subject to the provisions of section 123, the bankruptcy order shall not affect
the right of any secured creditor to realise or otherwise deal with his security
interest in the same manner as he would have been entitled if the bankruptcy
order had not been passed :
Provided that no secured creditor shall be entitled to any interest in respect of his
debt after the bankruptcy commencement date if he does not take any action to
realise his security within thirty days from the said date.
(3) Where a bankruptcy order under section 126 has been passed against a firm,
the order shall operate as if it were a bankruptcy order made against each of the
individuals who, on the date of the order, is a partner in the firm.
regulator.
Statement of financial position

129. (1) Where a bankruptcy order is passed on the application for bankruptcy by
a creditor under section 123, the bankrupt shall submit his statement of financial
position to the bankruptcy trustee within seven days from the bankruptcy
commencement date.
(2) The statement of financial position shall be submitted in the such form and
(3) Where the bankrupt is a firm, its partners on the date of the order shall submit
a joint statement of financial position of the firm, and each partner of the firm shall
submit a statement of his financial position.
(4) The bankruptcy trustee may require the bankrupt or any other person to submit
in writing further information explaining or modifying any matter contained in the
statement of financial position.
Public notice inviting claims from creditors
130. (1) The Adjudicating Authority shall –
(a) send notices within ten days of the bankruptcy commencement date, to
the creditors mentioned in –
(i) the statement of affairs submitted by the bankrupt under section
129 ; or
(ii) the application for bankruptcy submitted by the bankrupt under
section 122,
(b) issue a public notice inviting claims from creditors.
(2) The public notice under clause (b) of sub-section (1) shall include the last date
up to which the claims shall be submitted and such other matters and details as
may be prescribed and shall be –
(a) published in leading newspapers, one in English and another in
vernacular having sufficient circulation where the bankrupt resides ;
(b) affixed on the premises of the Adjudicating Authority ; and
(c) placed on the website of the Adjudicating Authority.
(3) The notice to the creditors referred to under clause (a) of sub-section (1) shall
include such matters and details as may be prescribed.
Registration of claims
131. (1) The creditors shall register claims with the bankruptcy trustee within seven
days of the publication of the public notice, by sending details of the claims to the
bankruptcy trustee in such manner as may be prescribed.
(2) The creditor, in addition to the details of his claims, shall provide such other
information and in such manner as may be prescribed.
Preparation of list of creditors

132. The bankruptcy trustee shall, within fourteen days from the bankruptcy
commencement date, prepare a list of creditors of the bankrupt on the basis of –
(a) the information disclosed by the bankrupt in the application for bankruptcy
filed by the bankrupt under section 118 and the statement of affairs filed
under section 125 ; and
(b) claims received by the bankruptcy trustee under sub-section (2) of section
130.
Summoning of meeting of creditors
133. (1) The bankruptcy trustee shall, within twenty-one days from the bankruptcy
commencement date, issue a notice for calling a meeting of the creditors, to
every creditor of the bankrupt as mentioned in the list prepared under section
132.
(2) The notices issued under sub-section (1) shall –
(a) state the date of the meeting of the creditors, which shall not be later than
twenty-one days from the bankruptcy commencement date ;
(b) be accompanied with forms of proxy voting ;
(c) specify the form and manner in which the proxy voting may take place.
(3) The proxy voting, including electronic proxy voting shall take place in such
manner and form as may be specified.
Conduct of meeting of creditors

134. (1) The bankruptcy trustee shall be the convener of the meeting of the creditors
summoned under section 133.
(2) The bankruptcy trustee shall decide the quorum for the meeting of the creditors,
and conduct the meeting only if the quorum is present.
(3) The following business shall be conducted in the meeting of the creditors in
which regard a resolution may be passed, namely :
(a) the establishment of a committee of creditors ;
(b) any other business that the bankruptcy trustee thinks fit to be transacted.
(4) The bankruptcy trustee shall cause the minutes of the meeting of the creditors
to be recorded, signed and retained as a part of the records of the bankruptcy
process.
(5) The bankruptcy trustee shall not adjourn the meeting of the creditors for any
purpose for more than seven days at a time.
Voting rights of creditors
135. (1) Every creditor mentioned in the list under section 132 or his proxy shall be
entitled to vote in respect of the resolutions in the meeting of the creditors in
accordance with the voting share assigned to him.
(3) A creditor shall not be entitled to vote in respect of a debt for an unliquidated
amount.
(4) The following creditors shall not be entitled to vote under this section, namely :
(a) creditors who are not mentioned in the list of creditors under section 132
and those who have not been given a notice by the bankruptcy trustee ;
(b) creditors who are associates of the bankrupt.
Administration and distribution of estate of bankrupt

136. The bankruptcy trustee shall conduct the administration and distribution of
the estate of the bankrupt in accordance with the provisions of Chapter V.
Completion of administration
137. (1) The bankruptcy trustee shall convene a meeting of the committee of
creditors on completion of the administration and distribution of the estate of the
bankrupt in accordance with the provisions of Chapter V.
(2) The bankruptcy trustee shall provide the committee of creditors with a report of
the administration of the estate of the bankrupt in the meeting of the said
committee.
(3) The committee of creditors shall approve the report submitted by the bankruptcy
trustee under sub-section (2) within seven days of the receipt of the report and
determine whether the bankruptcy trustee should be released under section 148.
(4) The bankruptcy trustee shall retain sufficient sums from the estate of the
bankrupt to meet the expenses of convening and conducting the meeting required
under this section during the administration of the estate.
Discharge order
138. (1) The bankruptcy trustee shall apply to the Adjudicating Authority for a
discharge order –
(a) on the expiry of one year from the bankruptcy commencement date ; or
(b) within seven days of the approval of the committee of creditors of the
completion of administration of the estates of the bankrupt under section
137, where such approval is obtained prior to the period mentioned in
clause (a).
(2) The Adjudicating Authority shall pass a discharge order on an application by
the bankruptcy trustee under sub-section (1).
(3) A copy of the discharge order shall be provided to the Board for the purpose of
recording an entry in the register referred to in section 196.
Effect of discharge
139. The discharge order under sub-section (2) of section 138 shall release the
bankrupt from all the bankruptcy debt :
Provided that discharge shall not –
(a) affect the functions of the bankruptcy trustee ; or
(b) affect the operation of the provisions of Chapters IV and V of Part III ; or
(c) release the bankrupt from any debt incurred by means of fraud or breach
of trust to which he was a party ; or
(d) discharge the bankrupt from any excluded debt.
Disqualification of bankrupt
140. (1) The bankrupt shall, from the bankruptcy commencement date, be subject
to the disqualifications mentioned in this section.
(2) In addition to any disqualification under any other law for the time being in
force, a bankrupt shall be disqualified from –
(a) being appointed or acting as a trustee or representative in respect of any
trust, estate or settlement ;
(b) being appointed or acting as a public servant ;
(c) being elected to any public office where the appointment to such office is
by election ; and
(d) being elected or sitting or voting as a member of any local authority.
(3) Any disqualification to which a bankrupt may be subject under this section
shall cease to have effect, if –
(a) the bankruptcy order against him is modified or recalled under section
142 ; or
(b) he is discharged under section 138.
Explanation : For the purposes of this section, the term “public servant” shall have
the same meaning as assigned to it in section 21 of the Indian Penal Code, 1860
(45 of 1860).
Restrictions on bankrupt
141. (1) A bankrupt, from the bankruptcy commencement date, shall –
(a) not act as a director of any company, or directly or indirectly take part in or
be concerned in the promotion, formation or management of a company ;
(b) without the previous sanction of the bankruptcy trustee, be prohibited

from creating any charge on his estate or taking any further debt ;
(c) be required to inform his business partners that he is undergoing a
bankruptcy process ;
(d) prior to entering into any financial or commercial transaction of such value
as may be prescribed, either individually or jointly, inform all the parties
involved in such transaction that he is undergoing a bankruptcy process ;
(e) without the previous sanction of the Adjudicating Authority, be
incompetent to maintain any legal action or proceedings in relation to the
bankruptcy debts ; and
(f) not be permitted to travel overseas without the permission of the
(2) Any restriction to which a bankrupt may be subject under this section shall
cease to have effect, if –
(a) the bankruptcy order against him is modified or recalled under section
142 ; or
(b) he is discharged under section 138.
Modification or recall of bankruptcy order

142. (1) The Adjudicating Authority may, on an application or suo motu, modify or
recall a bankruptcy order, whether or not the bankrupt is discharged, if it appears
to the Adjudicating Authority that –
(a) there exists an error apparent on the face of such order ; or
(b) both the bankruptcy debts and the expenses of the bankruptcy have, after
the making of the bankruptcy order, either been paid for or secured to the
satisfaction of the Adjudicating Authority.
(2) Where the Adjudicating Authority modifies or recalls the bankruptcy order
under this section, any sale or other disposition of property, payment made or
other things duly done by the bankruptcy trustee shall be valid except that the
property of the bankrupt shall vest in such person as the Adjudicating Authority
may appoint or, in default of any such appointment, revert to the bankrupt on such
terms as the Adjudicating Authority may direct.
shall be provided to the Board, for the purpose of recording an entry in the register
(4) The modification or recall of the order by the Adjudicating Authority under sub-
section (1) shall be binding on all creditors so far as it relates to any debts due to
them which form a part of the bankruptcy.
Standard of conduct
143. The bankruptcy trustee shall perform his functions and duties in compliance
with the code of conduct provided under section 208.
Fees of bankruptcy trustee

144. (1) A bankruptcy trustee appointed for conducting the bankruptcy process
shall charge such fees as may be specified in proportion to the value of the estate
of the bankrupt.
(2) The fees for the conduct of the bankruptcy process shall be paid to the
bankruptcy trustee from the distribution of the estate of the bankrupt in the manner
provided in section 178.
Replacement of bankruptcy trustee

145. (1) Where Committee of creditors is of the opinion that at any time during the
bankruptcy process, a bankruptcy trustee appointed under section 125 is required
to be replaced, it may replace him with another bankruptcy trustee in the manner
provided under this section.
(2) The Committee of creditors may, at a meeting, by a vote of seventy-five per
cent of voting share, propose to replace the bankruptcy trustee appointed under
section 125 with another bankruptcy trustee.
(3) The Committee of creditors may apply to the Adjudicating Authority for the
replacement of the bankruptcy trustee.
application under sub-section (3) direct the Board to recommend for replacement
of bankruptcy trustee.
(5) The Board shall, within ten days of the direction of the Adjudicating Authority
under sub-section (4), recommend a bankruptcy trustee for replacement against
whom no disciplinary proceedings are pending.
(6) The Adjudicating Authority shall, by an order, appoint the bankruptcy trustee
as recommended by the Board under sub-section (5) within fourteen days of
receiving such recommendation.
(7) The earlier bankruptcy trustee shall deliver possession of the estate of the
bankrupt to the bankruptcy trustee appointed under sub-section (6), on the date
of his appointment.
(8) The Adjudicating Authority may give directions to the earlier bankruptcy
trustee –
(a) to share all information with the new bankruptcy trustee in respect of the
bankruptcy process ; and
(b) to co-operate with the new bankruptcy trustee in such matters as may be
required.
(9) The earlier bankruptcy trustee replaced under this section shall be released in
accordance with the provisions of section 148.
(10) The bankruptcy trustee appointed under this section shall give a notice of his
appointment to the bankrupt within seven days of his appointment.
Resignation by bankruptcy trustee

146. (1) A bankruptcy trustee may resign if –
(a) he intends to cease practising as an insolvency professional ; or
(b) there is conflict of interest or change of personal circumstances which
preclude the further discharge of his duties as a bankruptcy trustee.
(2) The Adjudicating Authority shall, within seven days of the acceptance of the
resignation of the bankruptcy trustee, direct the Board for his replacement.
under sub-section (2) recommend another bankruptcy trustee as a replacement.
(4) The Adjudicating Authority shall appoint the bankruptcy trustee recommended by
the Board under sub-section (3) within fourteen days of receiving the recommendation.
(5) The replaced bankruptcy trustee shall deliver possession of the estate of the
of his appointment.
(6) The Adjudicating Authority may give directions to the bankruptcy trustee who
has resigned –
bankruptcy process ; and
required.
(7) The bankruptcy trustee appointed under this section shall give a notice of his
appointment to the committee of creditors and the bankrupt within seven days of
his appointment.
(8) The bankruptcy trustee replaced under this section shall be released in
accordance with the provisions of section 148.
Vacancy in office of bankruptcy trustee

147. (1) If a vacancy occurs in the office of the bankruptcy trustee for any reason
other than his replacement or resignation, the vacancy shall be filled in accordance
with the provisions of this section.
(2) In the event of the occurrence of vacancy referred to in sub-section (1), the
Adjudicating Authority shall direct the Board for replacement of a bankruptcy
trustee.
under sub-section (2), recommend a bankruptcy trustee as a replacement.
(4) The Adjudicating Authority shall appoint the bankruptcy trustee recommended
by the Board under sub-section (3) within fourteen days of receiving the
recommendation.
(5) The earlier bankruptcy trustee shall deliver possession of the estate of the
of his appointment.
(6) The Adjudicating Authority may give directions to the bankruptcy trustee who
has vacated the office –
bankruptcy ;
required.
(7) The bankruptcy trustee appointed under sub-section (4) shall give a notice of
his appointment to the committee of creditors and the bankrupt within seven
days of his appointment.
(8) The earlier bankruptcy trustee replaced under this section shall be released in
accordance with the provisions of section 148 :
Provided that this section shall not apply if the vacancy has occurred due to
temporary illness or temporary leave of the bankruptcy trustee.
Release of bankruptcy trustee

148. (1) A bankruptcy trustee shall be released from his office with effect from the
date on which the Adjudicating Authority passes an order appointing a new
bankruptcy trustee in the event of replacement, resignation or occurrence of
vacancy under sections 145, 146 or section 147, as the case may be.
(2) Notwithstanding the release under sub-section (1), the bankruptcy trustee
who has been so released, shall share all information with the new bankruptcy
trustee in respect of the bankruptcy process and co-operate with the new
bankruptcy trustee in such matters as may be required.
(3) A bankruptcy trustee who has completed the administration of the bankruptcy
process shall be released of his duties with effect from the date on which the
committee of creditors approves the report of the bankruptcy trustee under section
137.
CHAPTER V
ADMINISTRATION AND DISTRIBUTION OF THE ESTATE OF THE
BANKRUPT
Functions of bankruptcy trustee

149. The bankruptcy trustee shall perform the following functions in accordance
with the provisions of this Chapter –
(a) investigate the affairs of the bankrupt ;
(b) realise the estate of the bankrupt ; and
(c) distribute the estate of the bankrupt.
Duties of bankrupt towards bankruptcy trustee

150. (1) The bankrupt shall assist the bankruptcy trustee in carrying out his functions
under this Chapter by –
(a) giving to the bankruptcy trustee the information of his affairs ;
(b) attending on the bankruptcy trustee at such times as may be required ;
(c) giving notice to the bankruptcy trustee of any of the following events which
have occurred after the bankruptcy commencement date, –
(i) acquisition of any property by the bankrupt ;
(ii) devolution of any property upon the bankrupt ;
(iii) increase in the income of the bankrupt ;
(d) doing all other things as may be prescribed.
(2) The bankrupt shall give notice of the increase in income or acquisition or
devolution of property under clause (c) of sub-section (1) within seven days of
such increase, acquisition or devolution.
(3) The bankrupt shall continue to discharge the duties under sub-section (1) other
than the duties under clause (c) even after the discharge under section 138.
Rights of bankruptcy trustee

151. For the purpose of performing his functions under this Chapter, the bankruptcy
trustee may, by his official name –
(a) hold property of every description ;
(b) make contracts ;
(c) sue and be sued ;
(d) enter into engagements in respect of the estate of the bankrupt ;
(e) employ persons to assist him ;
(f) execute any power of attorney, deed or other instrument ; and
(g) do any other act which is necessary or expedient for the purposes of or in
connection with the exercise of his rights.
General powers of bankruptcy trustee

152. The bankruptcy trustee may while discharging his functions under this
Chapter, –
(a) sell any part of the estate of the bankrupt ;
(b) give receipts for any money received by him ;
(c) prove, rank, claim and draw a dividend in respect of such debts due to the
bankrupt as are comprised in his estate ;
(d) where any property comprised in the estate of the bankrupt is held by any
person by way of pledge or hypothecation, exercise the right of redemption
in respect of any such property subject to the relevant contract by giving
notice to the said person ;
(e) where any part of the estate of the bankrupt consists of securities in a
company or any other property which is transferable in the books of a
person, exercise the right to transfer the property to the same extent as the
bankrupt might have exercised it if he had not become bankrupt ; and
(f) deal with any property comprised in the estate of the bankrupt to which
the bankrupt is beneficially entitled in the same manner as he might have
dealt with it.
Approval of creditors for certain acts

153. The bankruptcy trustee for the purposes of this Chapter may after procuring
the approval of the committee of creditors, –
(a) carry on any business of the bankrupt as far as may be necessary for
winding it up beneficially ;
(b) bring, institute or defend any legal action or proceedings relating to the
property comprised in the estate of the bankrupt ;
(c) accept as consideration for the sale of any property a sum of money due
at a future time subject to certain stipulations such as security ;
(d) mortgage or pledge any property for the purpose of raising money for the
payment of the debts of the bankrupt ;
(e) where any right, option or other power forms part of the estate of the
bankrupt, make payments or incur liabilities with a view to obtaining, for
the benefit of the creditors, any property which is the subject of such right,
option or power ;
(f) refer to arbitration or compromise on such terms as may be agreed, any
debts subsisting or supposed to subsist between the bankrupt and any
person who may have incurred any liability to the bankrupt ;
(g) make compromise or other arrangement as may be considered expedient,
with the creditors ;
(h) make compromise or other arrangement as he may deem expedient
with respect to any claim arising out of or incidental to the bankrupt’s
estate ;
(i) appoint the bankrupt to –
(A) supervise the management of the estate of the bankrupt or any part
of it ;
(B) carry on his business for the benefit of his creditors ;
(C) assist the bankruptcy trustee in administering the estate of the
bankrupt.
Vesting of estate of bankrupt in bankruptcy trustee

154. (1) The estate of the bankrupt shall vest in the bankruptcy trustee immediately
from the date of his appointment.
(2) The vesting under sub-section (1) shall take effect without any conveyance,
assignment or transfer.
Estate of bankrupt
155. (1) The estate of the bankrupt shall include, –
(a) all property belonging to or vested in the bankrupt at the bankruptcy

commencement date ;
(b) the capacity to exercise and to initiate proceedings for exercising all such
powers in or over or in respect of property as might have been exercised
by the bankrupt for his own benefit at the bankruptcy commencement
date or before the date of the discharge order passed under section 138 ;
and
(c) all property which by virtue of any of the provisions of this Chapter is
comprised in the estate.
(2) The estate of the bankrupt shall not include –
(a) excluded assets ;
(b) property held by the bankrupt on trust for any other person ;
(c) all sums due to any workman or employee from the provident fund, the
pension fund and the gratuity fund ; and
(d) such assets as may be notified by the Central Government in consultation
with any financial sector regulator.
Delivery of property and documents to bankruptcy trustee

156. The bankrupt, his banker or agent or any other person having possession of
any property, books, papers or other records which bankruptcy trustee is required
to take possession for the purposes of the bankruptcy process shall deliver the
said property and documents to the bankruptcy trustee.
Acquisition of control by bankruptcy trustee

157. (1) The bankruptcy trustee shall take possession and control of all property,
books, papers and other records relating to the estate of the bankrupt or affairs of
the bankrupt which belong to him or are in his possession or under his control.
(2) Where any part of the estate of the bankrupt consists of things in actionable
claims, they shall be deemed to have been assigned to the bankruptcy trustee
without any notice of the assignment.
Restrictions on disposition of property

158. (1) Any disposition of property made by the debtor, during the period between
the date of filing of the application for bankruptcy and the bankruptcy
commencement date shall be void.
(2) Any disposition of property made under sub-section (1) shall not give rise to
any right against any person, in respect of such property, even if he has received
such property before the bankruptcy commencement date in –
(a) good faith ;
(b) for value ; and
(c) without notice of the filing of the application for bankruptcy.
(3) For the purposes of this section, the term “property” means all the property of
the debtor, whether or not it is comprised in the estate of the bankrupt, but shall
not include property held by the debtor in trust for any other person.
After-acquired property of bankrupt

159. (1) The bankruptcy trustee shall be entitled to claim for the estate of the
bankrupt, any after-acquired property by giving a notice to the bankrupt.
(2) A notice under sub-section (1) shall not be served in respect of –
(a) excluded assets ; or
(b) any property which is acquired by or devolves upon the bankrupt after a
discharge order is passed under section 138.
(3) The notice under sub-section (2) shall be given within fifteen days from the day
on which the acquisition or devolution of the after-acquired property comes to the
knowledge of the bankruptcy trustee.
(4) For the purposes of sub-section (3) –
(a) anything which comes to the knowledge of the bankruptcy trustee shall
be deemed to have come to the knowledge of the successor of the
bankruptcy trustee at the same time ; and
(b) anything which comes to the knowledge of a person before he is
appointed as a bankruptcy trustee shall be deemed to have come to his
knowledge on the date of his appointment as bankruptcy trustee.
(5) The bankruptcy trustee shall not be entitled, by virtue of this section, to claim
from any person who has acquired any right over after-acquired property, in
good faith, for value and without notice of the bankruptcy.
(6) A notice may be served after the expiry of the period under sub-section (3) only
with the approval of the Adjudicating Authority.
Explanation : For the purposes of this section, the term “after-acquired property”
means any property which has been acquired by or has devolved upon the
bankrupt after the bankruptcy commencement date.
Onerous property of bankrupt

160. (1) The bankruptcy trustee may, by giving notice to the bankrupt or any
person interested in the onerous property, disclaim any onerous property which
forms a part of the estate of the bankrupt.
(2) The bankruptcy trustee may give the notice under sub-section (1)
notwithstanding that he has taken possession of the onerous property,
endeavoured to sell it or has exercised rights of ownership in relation to it.
(3) A notice of disclaimer under sub-section (1) shall –
(a) determine, as from the date of such notice, the rights, interests and liabilities
of the bankrupt in respect of the onerous property disclaimed ;
(b) discharge the bankruptcy trustee from all personal liability in respect of the
onerous property as from the date of appointment of the bankruptcy trustee.
(4) A notice of disclaimer under sub-section (1) shall not be given in respect of the
property which has been claimed for the estate of the bankrupt under section 155
without the permission of the committee of creditors.
(5) A notice of disclaimer under sub-section (1) shall not affect the rights or liabilities
of any other person, and any person who sustains a loss or damage in
consequence of the operation of a disclaimer under this section shall be deemed
to be a creditor of the bankrupt to the extent of the loss or damage.
Explanation : For the purposes of this section, the term “onerous property”
means –
(i) any unprofitable contract ; and
(ii) any other property comprised in the estate of the bankrupt which is
unsaleable or not readily saleable, or is such that it may give rise to a
claim.
Notice to disclaim onerous property

161. (1) No notice of disclaimer under section 160 shall be necessary if –
(a) a person interested in the onerous property has applied in writing to the
bankruptcy trustee or his predecessor requiring him to decide whether
the onerous property should be disclaimed or not ; and
(b) a decision under clause (a) has not been taken by the bankruptcy trustee
within seven days of receipt of the notice.
(2) Any onerous property which cannot be disclaimed under sub-section (1) shall
be deemed to be part of the estate of the bankrupt.
Explanation : For the purposes of this section, an onerous property is said to be

disclaimed where notice in relation to that property has been given by the
bankruptcy trustee under section 160.
Disclaimer of leaseholds
162. (1) The bankruptcy trustee shall not be entitled to disclaim any leasehold
interest, unless a notice of disclaimer has been served on every interested person
and –
(a) no application objecting to the disclaimer by the interested person, has
been filed with respect to the leasehold interest, within fourteen days of
the date on which notice was served ; and
(b) where the application objecting to the disclaimer has been filed by the
interested person, the Adjudicating Authority has directed under section
163 that the disclaimer shall take effect.
(2) Where the Adjudicating Authority gives a direction under clause (b) of sub-
section (1), it may also make order with respect to fixtures, improvements by
tenant and other matters arising out of the lease as it may think fit.
Challenge against disclaimed property

163. (1) An application challenging the disclaimer may be made by the following
persons under this section to the Adjudicating Authority –
(a) any person who claims an interest in the disclaimed property ; or
(b) any person who is under any liability in respect of the disclaimed property ;
or
(c) where the disclaimed property is a dwelling house, any person who on
the date of application for bankruptcy was in occupation of or entitled to
occupy that dwelling house.
(2) The Adjudicating Authority may on an application under sub-section (1) make
an order for the vesting of the disclaimed property in, or for its delivery to any of
the persons mentioned in sub-section (1).
(3) The Adjudicating Authority shall not make an order in favour of a person who
has made an application under clause (b) of sub-section (1) except where it
appears to the Adjudicating Authority that it would be just to do so for the purpose
of compensating the person.
(4) The effect of an order under this section shall be taken into account while
assessing loss or damage sustained by any person in consequence of the
disclaimer under sub-section (5) of section 160.
(5) An order under sub-section (2) vesting property in any person need not be
completed by any consequence, assignment or transfer.
Undervalued transactions
164. (1) The bankruptcy trustee may apply to the Adjudicating Authority for an
order under this section in respect of an undervalued transaction between a
bankrupt and any person.
(2) The undervalued transaction referred to in sub-section (1) should have –
(a) been entered into during the period of two years ending on the filing of the
application for bankruptcy ; and
(b) caused bankruptcy process to be triggered.
(3) A transaction between a bankrupt and his associate entered into during the
period of two years preceding the date of making of the application for bankruptcy
shall be deemed to be an undervalued transaction under this section.
(4) On the application of the bankruptcy trustee under sub-section (1), the
Adjudicating Authority may –
(a) pass an order declaring an undervalued transaction void ;
(b) pass an order requiring any property transferred as a part of an
undervalued transaction to be vested with the bankruptcy trustee as a
part of the estate of the bankrupt ; and
(c) pass any other order it thinks fit for restoring the position to what it would
have been if the bankrupt had not entered into the undervalued transaction.
(5) The order under clause (a) of sub-section (4) shall not be passed if it is proved
by the bankrupt that the transaction was undertaken in the ordinary course of
business of the bankrupt :
Provided that the provisions of this sub-section shall not be applicable to
undervalued transaction entered into between a bankrupt and his associate
under sub-section (3) of this section.
(6) For the purposes of this section, a bankrupt enters into an undervalued
transaction with any person if –
(a) he makes a gift to that person ;
(b) no consideration has been received by that person from the bankrupt ;
(c) it is in consideration of marriage ; or
(d) it is for a consideration, the value of which in money or money’s worth is
significantly less than the value in money or money’s worth of the

consideration provided by the bankrupt.
Preference transactions
165. (1) The bankruptcy trustee may apply to the Adjudicating Authority for an
order under this section if a bankrupt has given a preference to any person.
(2) The transaction giving preference to an associate of the bankrupt under sub-
section (1) should have been entered into by the bankrupt with the associate
during the period of two years ending on the date of the application for bankruptcy.
(3) Any transaction giving preference not covered under sub-section (2) should
have been entered into by the bankrupt during the period of six months ending
on the date of the application for bankruptcy.
(4) The transaction giving preference under sub-section (2) or under sub-section
(3) should have caused the bankruptcy process to be triggered.
(5) On the application of the bankruptcy trustee under sub-section (1), the
Adjudicating Authority may –
(a) pass an order declaring a transaction giving preference void ;
(b) pass an order requiring any property transferred in respect of a transaction
giving preference to be vested with the bankruptcy trustee as a part of the
estate of the bankrupt ; and
(c) pass any other order it thinks fit for restoring the position to what it would
have been if the bankrupt had not entered into the transaction giving
preference.
(6) The Adjudicating Authority shall not pass an order under sub-section (5) unless
the bankrupt was influenced in his decision of giving preference to a person by a
desire to produce in relation to that person an effect under clause (b) of sub-
section (8).
(7) For the purpose of sub-section (6), if the person is an associate of the bankrupt,
(otherwise than by reason only of being his employee), at the time when the
preference was given, it shall be presumed that the bankrupt was influenced in
his decision under that sub-section.
(8) For the purposes of this section, a bankrupt shall be deemed to have entered
into a transaction giving preference to any person if –
(a) the person is the creditor or surety or guarantor for any debt of the bankrupt ;
and
(b) the bankrupt does anything or suffers anything to be done which has the
effect of putting that person into a position which, in the event of the debtor
becoming a bankrupt, will be better than the position he would have been
in, if that thing had not been done.
Effect of order
166. (1) Subject to the provision of sub-section (2), an order passed by the
Adjudicating Authority under section 164 or section 165 shall not, –
(a) give rise to a right against a person interested in the property which was
acquired in an undervalued transaction or a transaction giving preference,
whether or not he is the person with whom the bankrupt entered into such
transaction ; and
(b) require any person to pay a sum to the bankruptcy trustee in respect of the
benefit received from the undervalued transaction or a transaction giving
preference, whether or not he is the person with whom the bankrupt
entered into such transaction.
(2) The provision of sub-section (1) shall apply only if the interest was acquired or
the benefit was received –
(a) in good faith ;
(b) for value ;
(c) without notice that the bankrupt entered into the transaction at an
undervalue or for giving preference ;
(d) without notice that the bankrupt has filed an application for bankruptcy or
a bankruptcy order has been passed ; and
(e) by any person who at the time of acquiring the interest or receiving the
benefit was not an associate of the bankrupt.
(3) Any sum required to be paid to the bankruptcy trustee under sub-section (1)
shall be included in the estate of the bankrupt.
Extortionate credit transactions

167. (1) Subject to sub-section (6), on an application by the bankruptcy trustee, the
Adjudicating Authority may make an order under this section in respect of
extortionate credit transactions to which the bankrupt is or has been a party.
(2) The transactions under sub-section (1) should have been entered into by the
bankrupt during the period of two years ending on the bankruptcy commencement
date.
(3) An order of the Adjudicating Authority may –
(a) set aside the whole or part of any debt created by the transaction ;
(b) vary the terms of the transaction or vary the terms on which any security
for the purposes of the transaction is held ;
(c) require any person who has been paid by the bankrupt under any
transaction, to pay a sum to the bankruptcy trustee ;
(d) require any person to surrender to the bankruptcy trustee any property of
the bankrupt held as security for the purposes of the transaction.
(4) Any sum paid or any property surrendered to the bankruptcy trustee shall be
included in the estate of the bankrupt.
(5) For the purposes of this section, an extortionate credit transaction is a transaction
for or involving the provision of credit to the bankrupt by any person –
(a) on terms requiring the bankrupt to make exorbitant payments in respect
of the credit provided ; or
(b) which is unconscionable under the principles of law relating to contracts.
(6) Any debt extended by a person regulated for the provision of financial services
in compliance with the law in force in relation to such debt, shall not be considered
as an extortionate credit transaction under this section.
Obligations under contracts

168. (1) This section shall apply where a contract has been entered into by the
bankrupt with a person before the bankruptcy commencement date.
(2) Any party to a contract, other than the bankrupt under sub-section (1), may
apply to the Adjudicating Authority for –
(a) an order discharging the obligations of the applicant or the bankrupt under
the contract ; and
(b) payment of damages by the party or the bankrupt, for non-performance
of the contract or otherwise.
(3) Any damages payable by the bankrupt by virtue of an order under clause (b) of
sub-section (2) shall be provable as bankruptcy debt.
(4) When a bankrupt is a party to the contract under this section jointly with
another person, that person may sue or be sued in respect of the contract without
joinder of the bankrupt.
Continuance of proceedings on death of bankrupt
169. If a bankrupt dies, the bankruptcy proceedings shall, continue as if he were
alive.
Administration of estate of deceased bankrupt

170. (1) All the provisions of Chapter V relating to the administration and distribution
of the estate of the bankrupt shall, so far as the same are applicable, apply to the
administration of the estate of a deceased bankrupt.
(2) While administering the estate of a deceased bankrupt, the bankruptcy trustee
shall have regard to the claims by the legal representatives of the deceased
bankrupt to payment of the proper funeral and testamentary expenses incurred
by them.
(3) The claims under sub-section (2) shall rank equally to the secured creditors in
the priority provided under section 178.
(4) If, on the administration of the estate of a deceased bankrupt, any surplus
remains in the hands of the bankruptcy trustee after payment in full of all the
debts due from the deceased bankrupt, together with the costs of the administration
and interest as provided under section 178, such surplus shall be paid to the legal
representatives of the estate of the deceased bankrupt or dealt with in such
Proof of debt
171. (1) The bankruptcy trustee shall give notice to each of the creditors to submit
proof of debt within fourteen days of preparing the list of creditors under section
132.
(2) The proof of debt shall –
(a) require the creditor to give full particulars of debt, including the date on
which the debt was contracted and the value at which that person assesses
it ;
(b) require the creditor to give full particulars of the security, including the
date on which the security was given and the value at which that person
assesses it ;
(c) be in such form and manner as may be prescribed.
(3) In case the creditor is a decree holder against the bankrupt, a copy of the
decree shall be a valid proof of debt.
(4) Where a debt bears interest, that interest shall be provable as part of the debt
except insofar as it is owed in respect of any period after the bankruptcy
commencement date.
(5) The bankruptcy trustee shall estimate the value of any bankruptcy debt which
does not have a specific value.
(6) The value assigned by the bankruptcy trustee under sub-section (5) shall be
the amount provable by the concerned creditor.
(7) A creditor may prove for a debt where payment would have become due at a
date later than the bankruptcy commencement date as if it were owed presently
and may receive dividends in a manner as may be prescribed.
(8) Where the bankruptcy trustee serves a notice under sub-section (1) and the
person on whom the notice is served does not file a proof of security within thirty
days after the date of service of the notice, the bankruptcy trustee may, with leave
of the Adjudicating Authority, sell or dispose of any property that was subject to
the security, free of that security.
Proof of debt by secured creditors

172. (1) Where a secured creditor realises his security, he may produce proof of
the balance due to him.
(2) Where a secured creditor surrenders his security to the bankruptcy trustee for
the general benefit of the creditors, he may produce proof of his whole claim.
Mutual credit and set-off

173. (1) Where before the bankruptcy commencement date, there have been
mutual dealings between the bankrupt and any creditor, the bankruptcy trustee
shall –
(a) take an account of what is due from each party to the other in respect of
the mutual dealings and the sums due from one party shall be set-off
against the sums due from the other ; and
(b) only the balance shall be provable as a bankruptcy debt or as the amount
payable to the bankruptcy trustee as part of the estate of the bankrupt.
(2) Sums due from the bankrupt to another party shall not be included in the
account taken by the bankruptcy trustee under sub-section (1), if that other party
had notice at the time they became due that an application for bankruptcy relating
to the bankrupt was pending.
Distribution of interim dividend

174. (1) Whenever the bankruptcy trustee has sufficient funds in his hand, he may
declare and distribute interim dividend among the creditors in respect of the
bankruptcy debts which they have respectively proved.
(2) Where the bankruptcy trustee has declared any interim dividend, he shall give
notice of such dividend and the manner in which it is proposed to be distributed.
(3) In the calculation and distribution of the interim dividend, the bankruptcy
trustee shall make provision for –
(a) any bankruptcy debts which appear to him to be due to persons who, by
reason of the distance of their place of residence, may not have had
sufficient time to tender and establish their debts ; and
(b) any bankruptcy debts which are subject of claims which have not yet
been determined ;
(c) disputed proofs and claims ; and
(d) expenses necessary for the administration of the estate of the bankrupt.
Distribution of property
175. (1) The bankruptcy trustee may, with the approval of the committee of creditors,
divide in its existing form amongst the creditors, according to its estimated value,
any property in its existing form which from its peculiar nature or other special
circumstances cannot be readily or advantageously sold.
(2) An approval under sub-section (1) shall be sought by the bankruptcy trustee for
each transaction, and a person dealing with the bankruptcy trustee in good faith
and for value shall not be required to enquire whether any approval required
under sub-section (1) has been given.
(3) Where the bankruptcy trustee has done anything without the approval of the
committee of creditors, the committee may, for the purpose of enabling him to
meet his expenses out of the estate of the bankrupt, ratify the act of the bankruptcy
trustee.
(4) The committee of the creditors shall not ratify the act of the bankruptcy trustee
under sub-section (3) unless it is satisfied that the bankruptcy trustee acted in a
case of urgency and has sought its ratification without undue delay.
Final dividend
176. (1) Where the bankruptcy trustee has realised the entire estate of the bankrupt
or so much of it as could be realised in the opinion of the bankruptcy trustee, he
shall give notice –
(a) of his intention to declare a final dividend ; or
(b) that no dividend or further dividend shall be declared.
(2) The notice under sub-section (1) shall contain such particulars as may be
prescribed and shall require all claims against the estate of the bankrupt to be
established by a final date specified in the notice.
(3) The Adjudicating Authority may, on the application of any person interested in
the administration of the estate of the bankrupt, postpone the final date referred to
in sub-section (2).
(4) After the final date referred to in sub-section (2), the bankruptcy trustee shall –
(a) defray any outstanding expenses of the bankruptcy out of the estate of the
bankrupt ; and
(b) if he intends to declare a final dividend, declare and distribute that dividend
among the creditors who have proved their debts, without regard to the
claims of any other persons.
(5) If a surplus remains after payment in full with interest to all the creditors of the
bankrupt and the payment of the expenses of the bankruptcy, the bankrupt shall
be entitled to the surplus.
(6) Where a bankruptcy order has been passed in respect of one partner in a firm,
a creditor to whom the bankrupt is indebted jointly with the other partners in the
firm or any of them shall not receive any dividend out of the separate property of
the bankrupt until all the separate creditors have received the full amount of their
respective debts.
Claims of creditors
177. (1) A creditor who has not proved his debt before the declaration of any
dividend is not entitled to disturb, by reason that he has not participated in it, the
distribution of that dividend or any other dividend declared before his debt was
proved, but –
(a) when he has proved the debt, he shall be entitled to be paid any dividend
or dividends which he has failed to receive, out of any money for the time
being available for the payment of any further dividend ; and
(b) any dividend or dividends payable to him shall be paid before that money
is applied to the payment of any such further dividend.
(2) No action shall lie against the bankruptcy trustee for a dividend, but if the
bankruptcy trustee refuses to pay a dividend payable under sub-section (1), the
Adjudicating Authority may order him to –
(a) pay the dividend ; and
(b) pay, out of his own money –
(i) interest on the dividend ; and
(ii) the costs of the proceedings in which the order to pay has been made.
Priority of payment of debts

178. (1) Notwithstanding anything to the contrary contained in any law enacted
by the Parliament or the State Legislature for the time being in force, in the
distribution of the final dividend, the following debts shall be paid in priority to
all other debts –
(a) firstly, the costs and expenses incurred by the bankruptcy trustee for the
bankruptcy process in full ;
(b) secondly, –
(i) the workmen’s dues for the period of twenty-four months preceding
the bankruptcy commencement date ; and
(ii) debts owed to secured creditors ;
(c) thirdly, wages and any unpaid dues owed to employees, other than
workmen, of the bankrupt for the period of twelve months preceding the
bankruptcy commencement date ;
(d) fourthly, any amount due to the Central Government and the State
Government including the amount to be received on account of
consolidated Fund of India and the Consolidated Fund of a State, if any, in
respect of the whole or any part of the period of two years preceding the
bankruptcy commencement date ;
(e) lastly, all other debts and dues owed by the bankrupt including unsecured
debts.
(2) The debts in each class specified in sub-section (1) shall rank in the order
mentioned in that sub-section but debts of the same class shall rank equally
amongst themselves, and shall be paid in full, unless the estate of the bankrupt
is insufficient to meet them, in which case they shall abate in equal proportions
between themselves.
(3) Where any creditor has given any indemnity or has made any payment of
moneys by virtue of which any asset of the bankrupt has been recovered,
protected or preserved, the Adjudicating Authority may make such order as it
thinks just with respect to the distribution of such asset with a view to giving that
creditor an advantage over other creditors in consideration of the risks taken by
him in so doing.
(4) Unsecured creditors shall rank equally amongst themselves unless
contractually agreed to the contrary by such creditors.
(5) Any surplus remaining after the payment of the debts under sub-section (1)
shall be applied in paying interest on those debts in respect of the periods during
which they have been outstanding since the bankruptcy commencement date.
(6) Interest payments under sub-section (5) shall rank equally irrespective of the
nature of the debt.
(7) In the case of partners, the partnership property shall be applicable in the
first instance in payment of the partnership debts and the separate property of
each partner shall be applicable in the first instance in payment of his separate
debts.
(8) Where there is a surplus of the separate property of the partners, it shall be
dealt with as part of the partnership property ; and where there is a surplus of the
partnership property, it shall be dealt with as part of the respective separate
property in proportion to the rights and interests of each partner in the partnership
property.
CHAPTER VI
ADJUDICATING AUTHORITY FOR INDIVIDUALS AND PARTNERSHIP
FIRMS
Adjudicating Authority for individuals and partnership firms

179. (1) Subject to the provisions of section 60, the Adjudicating Authority, in relation
to insolvency matters of individuals and firms shall be the Debts Recovery Tribunal
having territorial jurisdiction over the place where the individual debtor actually
and voluntarily resides or carries on business or personally works for gain and
can entertain an application under this Code regarding such person.
(2) The Debts Recovery Tribunal shall, notwithstanding anything contained in any
other law for the time being in force, have jurisdiction to entertain or dispose of –
(a) any suit or proceeding by or against the individual debtor ;
(b) any claim made by or against the individual debtor ;
(c) any question of priorities or any other question whether of law or facts,
arising out of or in relation to insolvency and bankruptcy of the individual debtor
or firm under this Code.
(3) Notwithstanding anything contained in the Limitation Act, 1963 (14 of 1963) or
in any other law for the time being in force, in computing the period of limitation
specified for any suit or application in the name and on behalf of a debtor for
which an order of moratorium has been made under this Part, the period during
which such moratorium is in place shall be excluded.
Civil court not to have jurisdiction

180. (1) No civil court or authority shall have jurisdiction to entertain any suit or
proceedings in respect of any matter on which the Debts Recovery Tribunal or the
Debts Recovery Appellate Tribunal has jurisdiction under this Code.
(2) No injunction shall be granted by any court, tribunal or authority in respect of
any action taken, or to be taken, in pursuance of any power conferred on the
Debts Recovery Tribunal or the Debts Recovery Appellate Tribunal by or under this
Code.
Appeal to Debts Recovery Appellate Tribunal

181. (1) An appeal from an order of the Debts Recovery Tribunal under this Code
shall be filed within thirty days before the Debts Recovery Appellate Tribunal.
(2) The Debts Recovery Appellate Tribunal may, if it is satisfied that a person was
prevented by sufficient cause from filing an appeal within thirty days, allow the
appeal to be filed within a further period not exceeding fifteen days.
Appeal to Supreme Court

182. (1) An appeal from an order of the Debts Recovery Appellate Tribunal on a
question of law under this Code shall be filed within forty-five days before the
Supreme Court.
(2) The Supreme Court may, if it is satisfied that a person was prevented by
sufficient cause from filing an appeal within forty-five days, allow the appeal to
be filed within a further period not exceeding fifteen days.
Expeditious disposal of applications

183. Where an application is not disposed of or order is not passed within the
period specified in this Code, the Debts Recovery Tribunal or the Debts Recovery
Appellate Tribunal, as the case may be, shall record the reasons for not doing so
within the period so specified ; and the Chairperson of the Debts Recovery Appellate
Tribunal, after taking into account the reasons so recorded, extend the period
specified in this Code, but not exceeding ten days.
CHAPTER VII
OFFENCES AND PENALTIES
Punishment for false information, etc., by creditor in insolvency resolution

process.
184. (1) If a debtor or creditor provides information which is false in any material
particulars to the resolution professional, he shall be punishable with
imprisonment for a term which may extend to one year, or with fine which may
(2) If a creditor promises to vote in favour of the repayment plan dishonestly by
accepting any money, property or security from the debtor, he shall be punishable
with imprisonment for a term which may extend to two years, or with fine which
may extend to three times the amount or its equivalent of such money, property
or security accepted by such creditor, as the case may be, or with both :
Provided that where such amount is not quantifiable, the total amount of fine
shall not exceed five lakh rupees.
Punishment for contravention of provisions

185. If an insolvency professional deliberately contravenes the provisions of this
Part, he shall be punishable with imprisonment for a term which may extend to
six months, or with fine, which shall not be less than one lakh rupees, but may
Punishment for false information, concealment, etc., by bankrupt

186. If the bankrupt –
(a) knowingly makes a false representation or wilfully omits or conceals
any material information while making an application for bankruptcy
under section 122 or while providing any information during the
bankruptcy process, he shall be punishable with imprisonment which
may extend to six months, or with fine which may extend to five lakh
rupees, or with both ;
Explanation : For the purposes of clause (a), a false representation or
omission includes non-disclosure of the details of disposal of any property,
which but for the disposal, would be comprised in the estate of the
bankrupt, other than dispositions made in the ordinary course of business
carried on by the bankrupt ;
(b) fraudulently has failed to provide or deliberately withheld the production
of, destroyed, falsified or altered, his books of account, financial information
and other records under his custody or control, he shall be punishable
with imprisonment which may extend to one year, or with fine, which may
extend to five lakh rupees, or with both ;
(c) has contravened the restrictions under section 140 or the provisions of
section 141, he shall be punishable with imprisonment for a term which
may extend to six months, or with fine, which may extend to five lakh
rupees, or with both ;
(d) has failed to deliver the possession of any property comprised in the
estate of the bankrupt under his possession or control, which he is required
to deliver under section 156, he shall be punishable with imprisonment
for a term which may extend to six months, or with fine, which may extend
to five lakh rupees, or with both ;
(e) has failed to account, without any reasonable cause or satisfactory
explanation, for any loss incurred of any substantial part of his property
comprised in the estate of the bankrupt from the date which is twelve
months before the filing of the bankruptcy application, he shall be
punishable with imprisonment for a term which may extend to two years,
or with fine, which may extend to three times of the value of the loss, or
with both :
Provided that where such loss is not quantifiable, the total amount of fine
imposed shall not exceed five lakh rupees ;
(f) has absconded or attempts to absconds after the bankruptcy
commencement date, he shall be punishable with imprisonment for a
term which may extend to one year, or with fine, which may extend to five
lakh rupees, or with both.
Explanation : For the purposes of this clause, a bankrupt shall be deemed to have
absconded if he leaves, or attempts to leave the country without delivering the
possession of any property which he is required to deliver to the bankruptcy
trustee under section 156.
Punishment for certain actions

187. If a bankruptcy trustee, –
(a) has fraudulently misapplied, retained or accounted for any money or
property comprised in the estate of the bankrupt ; or
(b) has wilfully acted in a manner that the estate of the bankrupt has suffered
any loss in consequence of breach of any duty of the bankruptcy trustee in
carrying out his functions under section 149,
he shall be punishable with imprisonment for a term which may extend to three
years, or with fine, which shall not be less than three times the amount of the loss
caused, or likely to have been caused, to persons concerned on account of such
contravention, or with both :
Provided that where such loss or unlawful gain is not quantifiable, the total amount
of fine imposed shall not exceed five lakh rupees :
Provided further that the bankruptcy trustee shall not be liable under this section
if he seizes or disposes of any property which is not comprised in the estate of the
bankrupt and at that time had reasonable grounds to believe that he is entitled to
seize or dispose that property.
PART IV
REGULATION OF INSOLVENCY PROFESSIONALS, AGENCIES AND
INFORMATION UTILITIES
CHAPTER I
THE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
Establishment and incorporation of Board

188. (1) With effect from such date as the Central Government may, by notification,
appoint, there shall be established, for the purposes of this Code, a Board by the
name of the Insolvency and Bankruptcy Board of India.
(2) The Board shall be a body corporate by the name aforesaid, having perpetual
succession and a common seal, with power, subject to the provisions of this
Code, to acquire, hold and dispose of property, both movable and immovable,
and to contract, and shall, by the said name, sue or be sued.
(3) The head office of the Board shall be at such place in the National Capital
Region, as the Central Government may, by notification, specify.
Explanation : For the purposes of this section, the expression “National Capital
Region” shall have the same meaning as assigned to it in clause (f) of section 2 of
the National Capital Region Planning Board Act, 1985.
(4) The Board may establish offices at other places in India.
Constitution of Board
189. (1) The Board shall consist of the following members who shall be appointed
by the Central Government, namely :
(a) a Chairperson ;
(b) three members from amongst the officers of the Central Government not
below the rank of Joint Secretary or equivalent, one each to represent the
Ministry of Finance, the Ministry of Corporate Affairs and Ministry of Law,
ex officio ;
(c) one member to be nominated by the Reserve Bank of India, ex officio ;
(d) five other members to be nominated by the central Government, of whom
at least three shall be the whole-time members.
(2) The Chairperson and the other Members shall be persons of ability, integrity
and standing, who have shown capacity in dealing with problems relating to
insolvency or bankruptcy and have special knowledge and experience in the
field of law, finance, economics, accountancy or administration.
(3) The appointment of the Chairperson and the Members of the Board other than
the appointment of an ex officio member under this section shall be made after
obtaining the recommendation of a selection committee consisting of –
(a) Cabinet Secretary – Chairperson ;
(b) Secretary to the Government of India to be nominated by the Central
Government – Member ;
(c) Chairperson of the Insolvency and Bankruptcy Board of India (in case of
selection of members of the Board) – Member ;
(d) three experts of repute from the field of finance, law, management,
insolvency and related subjects, to be nominated by the Central
Government – Members.
(4) The term of office of the Chairperson and Members (other than ex officio
Members) shall be five years or till they attain the age of sixty-five years, whichever
is earlier, and they shall be eligible for reappointment.
(5) The salaries and allowances payable to, and other terms and conditions of
service of, the Chairperson and Members (other than the ex officio Members)
shall be such as may be prescribed.
Removal of Member from office

190. The Central Government may remove a Member from office if he –
(a) is an undischarged bankrupt as defined under Part III ;
(b) has become physically or mentally incapable of acting as a Member ;
(c) has been convicted of an offence, which in the opinion of the Central
Government involves moral turpitude ;
(d) has, so abused his position as to render his continuation in office detrimental
to the public interest :
Provided that no Member shall be removed under clause (d) unless he has been
given a reasonable opportunity of being heard in the matter.
Powers of Chairperson
191. Save as otherwise determined by regulations, the Chairperson shall have
powers of general superintendence and direction of the affairs of the Board and
may also exercise such other powers as may be delegated to him by the Board.
Meetings of Board
192. (1) The Board shall meet at such times and places, and observe such rules of
procedure in regard to the transaction of business at its meetings (including
quorum at such meetings) as may be determined by regulations.
(2) The Chairperson, or if, for any reason, the Chairperson is unable to attend any
meeting of the Board, any other Member chosen by the Members present at the
meeting shall preside at the meeting.
(3) All questions which come up before any meeting of the Board shall be decided
by a majority votes of the Members present and voting, and, in the event of an
equality of votes, the Chairperson, or in his absence, the person presiding, shall
have a second or casting vote.
Member not to participate in meetings in certain cases

193. Any Member, who is a director of a company and who as such director has
any direct or indirect pecuniary interest in any matter coming up for consideration
at a meeting of the Board, shall, as soon as possible after relevant circumstances
have come to his knowledge, disclose the nature of his interest at such meeting
and such disclosure shall be recorded in the proceedings of the Board, and the
Member shall not take any part in any deliberation or decision of the Board with
respect to that matter.
Vacancies, etc., not to invalidate proceedings of Board Officers and employees

of Board
194. (1) No act or proceeding of the Board shall be invalid merely by reason of –
(a) any vacancy in, or any defect in the constitution of, the Board ; or
(b) any defect in the appointment of a person acting as a member of the
Board ; or
(c) any irregularity in the procedure of the Board not affecting the merits of the
case.
(2) The Board may appoint such other officers and employees as it considers
necessary for the efficient discharge of its functions in such manner as may be
specified.
(3) The salaries and allowances payable to, and other terms and conditions of
service of, officers and employees of the Board appointed under sub-section (2)
shall be such as may be specified by regulations.
Power to designate financial sector regulator

195. Until the Board is established, the Central Government may by notification,
designate any financial sector regulator to exercise the powers and functions of
the Board under this Code.
CHAPTER II
POWERS AND FUNCTIONS OF THE BOARD
Powers and functions of Board

196. (1) The Board shall, subject to the general direction of the Central Government,
perform all or any of the following functions, namely :
(a) register insolvency professional agencies, insolvency professionals and
information utilities and renew, withdraw, suspend or cancel such
registrations ;
(b) specify the minimum eligibility requirements for registration of
insolvency professional agencies, insolvency professionals and
information utilities ;
(c) levy fee or other charges for the registration of insolvency professional
agencies, insolvency professionals and information utilities ;
(d) specify by regulations standards for the functioning of insolvency
professional agencies, insolvency professionals and information
utilities ;
(e) lay down by regulations the minimum curriculum for the examination of
the insolvency professionals for their enrolment as members of the
insolvency professional agencies ;
(f) carry out inspections and investigations on insolvency professional
agencies, insolvency professionals and information utilities and pass such
orders as may be required for compliance of the provisions of this Code
and the regulations issued hereunder ;
(g) monitor the performance of insolvency professional agencies, insolvency
professionals and information utilities and pass any directions as may be
required for compliance of the provisions of this Code and the regulations
issued hereunder ;
(h) call for any information and records from the insolvency professional
agencies, insolvency professionals and information utilities ;
(i) publish such information, data, research studies and other information as
may be specified by regulations ;
(j) specify by regulations the manner of collecting and storing data by the
information utilities and for providing access to such data ;
(k) collect and maintain records relating to insolvency and bankruptcy cases
and disseminate information relating to such cases ;
(l) constitute such committees as may be required including in particular the
committees laid down in section 197 ;
(m) promote transparency and best practices in its governance ;
(n) maintain websites and such other universally accessible repositories of
electronic information as may be necessary ;
(o) enter into memorandum of understanding with any other statutory
authorities ;
(p) issue necessary guidelines to the insolvency professional agencies,
insolvency professionals and information utilities ;
(q) specify mechanism for redressal of grievances against insolvency
professionals, insolvency professional agencies and information utilities
and pass orders relating to complaints filed against the aforesaid for
compliance of the provisions of this Code and the regulations issued
hereunder ;
(r) conduct periodic study, research and audit the functioning and
performance of to the insolvency professional agencies, insolvency
professionals and information utilities at such intervals as may be specified
by the Board ;
(s) specify mechanisms for issuing regulations, including the conduct of public
consultation processes before notification of any regulations ;
(t) make regulations and guidelines on matters relating to insolvency and
bankruptcy as may be required under this Code, including mechanism for
time bound disposal of the assets of the corporate debtor or debtor ; and
(u) perform such other functions as may be prescribed.
(2) The Board may make model bye-laws to be adopted by insolvency professional
agencies which may provide for –
(a) the minimum standards of professional competence of the members of
(b) the standards for professional and ethical conduct of the members of
(c) requirements for enrolment of persons as members of insolvency

professional agencies which shall be non-discriminatory ;
Explanation : For the purposes of this clause, the term “non-discriminatory”
means lack of discrimination on the grounds of religion, caste, gender or
place of birth and such other grounds as may be specified ;
(d) the manner of granting membership ;
(e) setting up of a governing Board for internal governance and management
of insolvency professional agency in accordance with the regulations
specified by the Board ;
(f) the information required to be submitted by members including the form
and the time for submitting such information ;
(g) the specific classes of persons to whom services shall be provided at
concessional rates or for no remuneration by members ;
(h) the grounds on which penalties may be levied upon the members of
insolvency professional agencies and the manner thereof ;
(i) a fair and transparent mechanism for redressal of grievances against the
members of insolvency professional agencies ;
(j) the grounds under which the insolvency professionals may be expelled
from the membership of insolvency professional agencies ;
(k) the quantum of fee and the manner of collecting fee for inducting persons
as its members ;
(l) the procedure for enrolment of persons as members of insolvency
professional agency ;
(m) the manner of conducting examination for enrolment of insolvency
professionals ;
(n) the manner of monitoring and reviewing the working of insolvency
professional who are members ;
(o) the duties and other activities to be performed by members ;
(p) the manner of conducting disciplinary proceedings against its members
and imposing penalties ;
(q) the manner of utilising the amount received as penalty imposed against
any insolvency professional.
(3) Notwithstanding anything contained in any other law for the time being in
force, while exercising the powers under this Code, the Board shall have the
same powers as are vested in a civil court under the Code of Civil Procedure,
1908 (5 of 1908), while trying a suit, in respect of the following matters, namely :
(i) the discovery and production of books of account and other documents,
at such place and such time as may be specified by the Board ;
(ii) summoning and enforcing the attendance of persons and examining
them on oath ;
(iii) inspection of any books, registers and other documents of any person at
any place ;
(iv) issuing of commissions for the examination of witnesses or documents.
Constitution of advisory committee, executive committee or other committee

197. The Board may, for the efficient discharge of its functions, may constitute advisory
and executive committees or such other committees, as it may deem fit, consisting of
a Chairperson and such other Members as may be specified by regulations.
Condonation of delay
198. Notwithstanding anything contained in this Code, where the Board does not
perform any act within the period specified under this Code, the relevant Adjudicating
Authority may, for reasons to be recorded in writing, condone the delay.
CHAPTER III
INSOLVENCY PROFESSIONAL AGENCIES
No person to function as insolvency professional agency without valid

certificate of registration
199. Save as otherwise provided in this Code, no person shall carry on his business
as insolvency professional agencies under this Code and enrol insolvency
professionals as its members except under an in accordance with a certificate of
registration issued in this behalf by the Board.
Principles governing registration of insolvency professional agency

200. The Board shall have regard to the following principles while registering
the insolvency professional agencies under this Code, namely :
(a) to promote the professional development of and regulation of insolvency
professionals ;
(b) to promote the services of competent insolvency professionals to cater
to the needs of debtors, creditors and such other persons as may be
specified ;
(c) to promote good professional and ethical conduct amongst insolvency

professionals ;
(d) to protect the interests of debtors, creditors and such other persons as
may be specified ;
(e) to promote the growth of insolvency professional agencies for the effective
resolution of insolvency and bankruptcy processes under this Code.
Registration of insolvency professional agency

201. (1) Every application for registration shall be made to the Board in such form
and manner, containing such particulars, and accompanied by such fee, as may
be specified by regulations :
Provided that every application received by the Board shall be acknowledged
within seven days of its receipt.
(2) On receipt of the application under sub-section (1), the Board may, on being
satisfied that the application conforms with all requirements specified under
sub-section (1), grant a certificate of registration to the applicant or else, reject, by
order, such application :
Provided that no order rejecting the application shall be made without giving an
opportunity of being heard to the applicant :
Provided further that every order so made shall be communicated to the applicant
within a period of fifteen days.
(3) The Board may issue a certificate of registration to the applicant in such form
and manner and subject to such terms and conditions as may be specified.
(4) The Board may renew the certificate of registration from time-to-time in such
manner and on payment of such fee as may be specified.
(5) The Board may, by order, suspend or cancel the certificate of registration granted
to an insolvency professional agency on any of the following grounds, namely :
(a) that it has obtained registration by making a false statement or
misrepresentation or by any other unlawful means ;
(b) that it has failed to comply with the requirements of the regulations made
by the Board or bye-laws made by the insolvency professional agency ;
(c) that it has contravened any of the provisions of the Act or the rules or the
regulations made thereunder ;
(d) on any other ground as may be specified by regulations :
Provided that no order shall be made under this sub-section unless the insolvency
professional agency concerned has been given a reasonable opportunity of
being heard :
Provided further that no such order shall be passed by any member except
whole-time members of the Board.
Appeal to National Company Law Appellate Tribunal

202. Any insolvency professional agency which is aggrieved by the order of the
Board made under section 201 may prefer an appeal to the National Company
Law Appellate Tribunal in such form, within such period, and in such manner, as
may be specified by regulations.
Governing Board of insolvency professional agency

203. The Board may, for the purposes of ensuring that every insolvency
professional agency takes into account the objectives sought to be achieved
under this Code, make regulations to specify –
(a) the setting up of a governing Board of an insolvency professional
agency ;
(b) the minimum number of independent members to be on the governing
Board of the insolvency professional agency ; and
(c) the number of the insolvency professionals being its members who shall
be on the governing Board of the insolvency professional agency.
Functions of insolvency professional agencies

204. An insolvency professional agency shall perform the following functions,
namely :
(a) grant membership to persons who fulfil all requirements set out in its
bye-laws on payment of membership fee ;
(b) lay down standards of professional conduct for its members ;
(c) monitor the performance of its members ;
(d) safeguard the rights, privileges and interests of insolvency professionals
who are its members ;
(e) suspend or cancel the membership of insolvency professionals who are
its members on the grounds set out in its bye-laws ;
(f) redress the grievances of consumers against insolvency professionals
who are its members ; and
(g) publish information about its functions, list of its members, performance
of its members and such other information as may be specified by
regulations.
Insolvency professional agencies to make bye-laws

205. Subject to the provisions of this Code and any rules or regulations made
thereunder and after obtaining the approval of the Board, every insolvency
professional agency shall make bye-laws consistent with the model bye-laws
specified by the Board under sub-section (2) of section 196.
CHAPTER IV
INSOLVENCY PROFESSIONALS
Enrolled and registered persons to act as insolvency professionals

206. No person shall render his services as insolvency professional under this
Code without being enrolled as a member of an insolvency professional agency
and registered with the Board.
Registration of insolvency professionals

207. (1) Every insolvency professional shall, after obtaining the membership of
any insolvency professional agency, register himself with the Board within such
time, in such manner and on payment of such fee, as may be specified by
regulations.
(2) The Board may specify the categories of professionals or persons possessing
such qualifications and experience in the field of finance, law, management,
insolvency or such other field, as it deems fit.
Functions and obligations of insolvency professionals.

208. (1) Where any insolvency resolution, fresh start, liquidation or bankruptcy
process has been initiated, it shall be the function of an insolvency professional
to take such actions as may be necessary, in the following matters, namely :
(a) a fresh start order process under Chapter II of Part III ;
(b) individual insolvency resolution process under Chapter III of Part III ;
(c) corporate insolvency resolution process under Chapter II of Part II ;
(d) individual bankruptcy process under Chapter IV of Part III ; and
(e) liquidation of a corporate debtor firm under Chapter III of Part II.
(2) Every insolvency professional shall abide by the following code of conduct :
(a) to take reasonable care and diligence while performing his duties ;
(b) to comply with all requirements and terms and conditions specified in
the bye-laws of the insolvency professional agency of which he is a
member ;
(c) to allow the insolvency professional agency to inspect his records ;
(d) to submit a copy of the records of every proceeding before the Adjudicating
Authority to the Board as well as to the insolvency professional agency of
which he is a member ; and
(e) to perform his functions in such manner and subject to such conditions as
may be specified.
CHAPTER V
INFORMATION UTILITIES
No person to function as information utility without certificate of

registration
209. Save as otherwise provided in this Code, no person shall carry on its business
as information utility under this Code without a certificate of registration issued in
that behalf by the Board.
Registration of information utility

210. (1) Every application for registration shall be made to the Board in such form
and manner, containing such particulars, and accompanied by such fee, as may
be specified by regulations :
Provided that every application received by the Board shall be acknowledged
(2) On receipt of the application under sub-section (1), the Board may, on being
satisfied that the application conforms to all requirements specified under sub-
section (1), grant a certificate of registration to the applicant or else, reject, by
order, such application.
(3) The Board may issue a certificate of registration to the applicant in such form
and manner and subject to such terms and conditions as may be specified.
(4) The Board may renew the certificate of registration from time-to-time in such
manner and on payment of such fee as may be specified by regulations.
(5) The Board may, by order, suspend or cancel the certificate of registration
granted to an information utility on any of the following grounds, namely :
(a) that it has obtained registration by making a false statement or

misrepresentation or any other unlawful means ;
(b) that it has failed to comply with the requirements of the regulations made
by the Board ;
(c) that it has contravened any of the provisions of the Act or the rules or the
regulations made thereunder ;
(d) on any other ground as may be specified by regulations :
Provided that no order shall be made under this sub-section unless the information
utility concerned has been given a reasonable opportunity of being heard :
Provided further that no such order shall be passed by any member except
whole-time members of the Board.
Appeal to National Company Law Appellate Tribunal

211. Any information utility which is aggrieved by the order of the Board made
under section 210 may prefer an appeal to the National Company Law Appellate
Tribunal in such form, within such period, and in such manner, as may be specified
by regulations.
Governing Board of information utility

212. The Board may, for ensuring that an information utility takes into account the
objectives sought to be achieved under this Code, require every information
utility to set up a governing Board, with such number of independent members,
as may be specified by regulations.
Core services, etc., of information utilities

213. An information utility shall provide such services as may be specified including
core services to any person if such person complies with the terms and conditions
as may be specified by regulations.
Obligations of information utility

214. For the purposes of providing core services to any person, every information
utility shall –
(a) create and store financial information in a universally accessible format ;
(b) accept electronic submissions of financial information from persons who
are under obligations to submit financial information under sub-section
(1) of section 215, in such form and manner as may be specified by
regulations ;
(c) accept, in specified form and manner, electronic submissions of financial

information from persons who intend to submit such information ;
(d) meet such minimum service quality standards as may be specified by
regulations ;
(e) get the information received from various persons authenticated by all
concerned parties before storing such information ;
(f) provide access to the financial information stored by it to any person who
intends to access such information in such manner as may be specified
by regulations ;
(g) publish such statistical information as may be specified by regulations ;
(h) have inter-operatability with other information utilities.
Procedure for submission, etc., of financial information

215. (1) Any person who intends to submit financial information to the information
utility or access the information from the information utility shall pay such fee
and submit information in such form and manner as may be specified by
regulations.
(2) A financial creditor shall submit financial information and information relating
to assets in relation to which any security interest has been created, in such form
and manner as may be specified by regulations.
(3) An operational creditor may submit financial information to the information
utility in such form and manner as may be specified.
Rights and obligations of persons submitting financial information
216. (1) A person who intends to update or modify or rectify errors in the financial
information submitted under section 215, he may make an application to the
information utility for such purpose stating reasons therefor, in such manner and
within such time, as may be specified.
(2) A person who submits financial information to an information utility shall not
provide such information to any other person, except to such extent, under such
circumstances, and in such manner, as may be specified.
CHAPTER VI
INSPECTION AND INVESTIGATION
Complaints against insolvency professional agency or its member or

information utility
217. Any person aggrieved by the functioning of an insolvency professional
agency or insolvency professional or an information utility may file a complaint to
the Board in such form, within such time and in such manner as may be specified.
Investigation of insolvency professional agency or its member or information

utility
218. (1) Where the Board, on receipt of a complaint under section 217 or has
reasonable grounds to believe that any insolvency professional agency or
insolvency professional or an information utility has contravened any of the
provisions of the Code or the rules or regulations made or directions issued by
the Board thereunder, it may, at any time by an order in writing, direct any person
or persons to act as an investigating authority to conduct an inspection or
investigation of the insolvency professional agency or insolvency professional or
an information utility.
(2) The inspection or investigation carried out under sub-section (1) of this section
shall be conducted within such time and in such manner as may be specified by
regulations.
(3) The Investigating Authority may, in the course of such inspection or
investigation, require any other person who is likely to have any relevant
document, record or information to furnish the same, and such person shall be
bound to furnish such document, record or information :
Provided that the Investigating Authority shall provide detailed reasons to such
person before requiring him to furnish such document, record or information.
(4) The Investigating Authority may, in the course of its inspection or
investigation, enter any building or place where they may have reasons to
believe that any such document, record or information relating to the subject-
matter of the inquiry may be found and may seize any such document, record
or information or take extracts or copies therefrom, subject to the provisions
of section 100 of the Code of Criminal Procedure, 1973 (2 of 1974), insofar as
they may be applicable.
(5) The Investigating Authority shall keep in its custody the books, registers, other
documents and records seized under this section for such period not later than
the conclusion of the investigation as it considers necessary and thereafter shall
return the same to the concerned person from whose custody or power they
were seized :
Provided that the Investigating Authority may, before returning such books,
registers, other documents and record as aforesaid, place identification marks
on them or any part thereof.
(6) A detailed report of inspection or investigation shall be submitted to the Board
by the Investigating Authority.
Show cause notice to insolvency professional agency or its member or

information utility
219. The Board may, upon completion of an inspection or investigation under
section 218, issue a show cause notice to such insolvency professional agency or
insolvency professional or information utility, and carry out inspection of such
insolvency professional agency or insolvency professional or information utility in
such manner, giving such time for giving reply, as may be specified by regulations.
Appointment of disciplinary committee

220. (1) The Board shall constitute a disciplinary committee to consider the reports
of the Investigating Authority submitted under sub-section (6) of section 218 :
Provided that the members of the disciplinary committee shall consist of whole-
time members of the Board only.
(2) On the examination of the report of the Investigating Authority, if the disciplinary
committee is satisfied that sufficient cause exists, it may impose penalty as
specified in sub-section (3) or suspend or cancel the registration of the insolvency
professional or, suspend or cancel the registration of insolvency professional
agency or information utility as the case may be.
(3) Where any insolvency professional agency or insolvency professional or an
information utility has contravened any provision of this Code or rules or
regulations made thereunder, the disciplinary committee may impose penalty
which shall be –
(i) three times the amount of the loss caused, or likely to have been caused,
to persons concerned on account of such contravention ; or
(ii) three times the amount of the unlawful gain made on account of such
contravention,
whichever is higher :
Provided that where such loss or unlawful gain is not quantifiable, the total amount
of the penalty imposed shall not exceed more than one crore rupees.
(4) Notwithstanding anything contained in sub-section (3), the Board may direct
any person who has made unlawful gain or averted loss by indulging in any
activity in contravention of this Code, or the rules or regulations made thereunder,
to disgorge an amount equivalent to such unlawful gain or aversion of loss.
(5) The Board may take such action as may be required to provide restitution to
the person who suffered loss on account of any contravention from the amount
so disgorged, if the person who suffered such loss is identifiable and the loss so
suffered is directly attributable to such person.
(6) The Board may make regulations to specify –
(a) the procedure for claiming restitution under sub-section (5) ;
(b) the period within which such restitution may be claimed ; and
(c) the manner in which restitution of amount may be made.
CHAPTER VII
FINANCE, ACCOUNTS AND AUDIT
Grants by Central Government

221. The Central Government may, after due appropriation made by Parliament
by law in this behalf, make to the Board grants of such sums of money as that
Government may think fit for being utilised for the purposes of this Code.
Board’s fund
222. (1) There shall be constituted a fund to be called the Fund of the Insolvency
and Bankruptcy Board and there shall be credited thereto –
(a) all grants, fees and charges received by the Board under this Code ;
(b) all sums received by the Board from such other sources as may be decided
upon by the Central Government ;
(c) such other funds as may be specified by the Board or prescribed by the
Central Government.
(2) The Fund shall be applied for meeting –
(a) the salaries, allowances and other remuneration of the Members, officers
and other employees of the Board ;
(b) the expenses of the Board in the discharge of its functions under section
196 ;
(c) the expenses on objects and for purposes authorised by this Code ;
(d) such other purposes as may be prescribed.
Accounts and audit

223. (1) The Board shall maintain proper accounts and other relevant records and
prepare an annual statement of accounts in such form as may be prescribed by
the Central Government in consultation with the Comptroller and Auditor-General
of India.
(2) The accounts of the Board shall be audited by the Comptroller and Auditor-
General of India at such intervals as may be specified by him and any expenditure
incurred in connection with such audit shall be payable by the Board to the
Comptroller and Auditor-General of India.
(3) The Comptroller and Auditor-General of India and any other person appointed
by him in connection with the audit of the accounts of the Board shall have the
same rights and privileges and authority in connection with such audit as the
Comptroller and Auditor-General generally has in connection with the audit of
the Government accounts and, in particular, shall have the right to demand the
production of books, accounts, connected vouchers and other documents and
papers and to inspect any of the offices of the Board.
(4) The accounts of the Board as certified by the Comptroller and Auditor-General
of India or any other person appointed by him in this behalf together with the
audit report thereon shall be forwarded annually to the Central Government and
that Government shall cause the same to be laid before each House of Parliament.
PART V
MISCELLANEOUS
Insolvency and Bankruptcy Fund
224. (1) There shall be formed a fund to be called the Insolvency and Bankruptcy
Fund (hereafter in this section referred to as the “Fund”) for the purposes of
insolvency resolution, liquidation and bankruptcy of persons under the Code.
(2) There shall be credited to the Fund the following amounts, namely –
(a) the grants made by the Central Government for the purposes of the
Fund ;
(b) the amount deposited by persons as contribution to the Fund ;
(c) the amount received in the Fund from any other source ; and
(d) the interest or other income received out of the investment made from the
Fund.
(3) A person who has contributed any amount to the Fund may, in the event of
proceedings initiated in respect of such person under this Code before an
Adjudicating Authority, make an application to such Adjudicating Authority for
withdrawal of funds not exceeding the amount contributed by it, for making
payments to workmen, protecting the assets of such persons, meeting the
incidental costs during the proceedings or such other purposes as may be
prescribed.
(4) The Central Government shall, by notification, appoint an administrator to
administer the fund in such manner as may be prescribed.
Power of Central Government to issue directions

225. (1) Without prejudice to the foregoing provisions of this Code, the Board
shall, in exercise of its powers or the performance of its functions under this
Code, be bound by such directions on questions of policy as the Central
Government may give in writing to it from time-to-time :
Provided that the Board shall, as far as practicable, be given an opportunity to
express its views before any direction is given under this sub-section.
(2) The decision of the Central Government as to whether a question is one of
policy or not shall be final.
Power of Central Government to supersede Board

226. (1) If at any time the Central Government is of opinion –
(a) that on account of grave emergency, the Board is unable to discharge the
functions and duties imposed on it by or under the provisions of this Code ;
or
(b) that the Board has persistently not complied with any direction issued by
the Central Government under this Code or in the discharge of the functions
and duties imposed on it by or under the provisions of this Code and as a
result of such non-compliance the financial position of the Board or the
administration of the Board has deteriorated ; or
(c) that circumstances exist which render it necessary in the public interest
so to do,
the Central Government may, by notification, supersede the Board for such period,
not exceeding six months, as may be specified in the notification.
(2) Upon the publication of a notification under sub-section (1) superseding the
Board, –
(a) all the members shall, as from the date of supersession, vacate their
offices as such ;
(b) all the powers, functions and duties which may, by or under the provisions
of this Code, be exercised or discharged by or on behalf of the Board, shall
until the Board is reconstituted under sub-section (3), be exercised and
discharged by such person or persons as the Central Government may
direct ; and
(c) all property owned or controlled by the Board shall, until the Board is
reconstituted under sub-section (3), vest in the Central Government.
(3) On the expiration of the period of supersession specified in the notification
issued under sub-section (1), the Central Government may reconstitute the Board
by a fresh appointment and in such case any person or persons who vacated
their offices under clause (a) of sub-section (2), shall not be deemed disqualified
for appointment :
Provided that the Central Government may, at any time, before the expiration of
the period of supersession, take action under this sub-section.
(4) The Central Government shall cause a notification issued under sub-section
(1) and a full report of any action taken under this section and the circumstances
leading to such action to be laid before each House of Parliament at the earliest.
Power of Central Government to notify financial service providers, etc.

227. Notwithstanding anything to the contrary examined in this Code or any
other law for the time being in force, the Central Government may, if it considers
necessary, in consultation with the appropriate financial sector regulators, notify
financial service providers or categories of financial service providers for the
purpose of their insolvency and liquidation proceedings, which may be conducted
under this Code, in such manner as may be prescribed.
Budget
228. The Board shall prepare, in such form and at such time in each financial
year as may be prescribed, its budget for the next financial year, showing the
estimated receipts and expenditure of the Board and forward the same to the
Central Government.
Annual report
229. (1) The Board shall prepare, in such form and at such time in each financial
year as may be prescribed, its annual report, giving a full account of its activities
during the previous financial year, and submit a copy thereof to the Central
Government.
(2) A copy of the report received under sub-section (1) shall be laid, as soon as
may be after it is received, before each House of Parliament.
Delegation
230. The Board may, by general or special order in writing delegate to any
member or officer of the Board subject to such conditions, if any, as may be
specified in the order, such of its powers and functions under this Code (except
the powers under section 240 as it may deem necessary.
Bar of jurisdiction.
231. No civil court shall have jurisdiction in respect of any matter in which the
Adjudicating Authority is empowered by, or under, this Code to pass any order
and no injunction shall be granted by any court or other authority in respect of any
action taken or to be taken in pursuance of any order passed by such Adjudicating
Authority under this Code.
Members, officers and employees of Board to be public servants

232. The Chairperson, Members, officers and other employees of the Board
shall be deemed, when acting or purporting to act in pursuance of any of the
provisions of this Code, to be public servants within the meaning of section 21 of
the Indian Penal Code, 1860.
Protection of action taken in good faith

233. No suit, prosecution or other legal proceeding shall lie against the
Government or any officer of the Government, or the Chairperson, Member,
officer or other employee of the Board or an insolvency professional or liquidator
for anything which is in done or intended to be done in good faith under this Code
or the rules or regulations made thereunder.
Agreements with foreign countries

234. (1) The Central Government may enter into an agreement with the Government
of any country outside India for enforcing the provisions of this Code.
(2) The Central Government may, by notification in the Official Gazette, direct that
the application of provisions of this Code in relation to assets or property of
corporate debtor or debtor, including a personal guarantor of a corporate debtor,
as the case may be, situated at any place in a country outside India with which
reciprocal arrangements have been made, shall be subject to such conditions as
may be specified.
Letter of request to a country outside India in certain cases

235. (1) Notwithstanding anything contained in this Code or any law for the time
being in force if, in the course of insolvency resolution process, or liquidation or

bankruptcy proceedings, as the case may be, under this Code, the resolution
professional, liquidator or bankruptcy trustee, as the case may be, is of the opinion
that assets of the corporate debtor or debtor, including a personal guarantor of a
corporate debtor, are situated in a country outside India with which reciprocal
arrangements have been made under section 234, he may make an application
to the Adjudicating Authority that evidence or action relating to such assets is
required in connection with such process or proceeding.
(2) The Adjudicating Authority on receipt of an application under sub-section (1)
and, on being satisfied that evidence or action relating to assets under sub-
section (1) is required in connection with insolvency resolution process or
liquidation or bankruptcy proceeding, may issue a letter of request to a court or
an authority of such country competent to deal with such request.
Trial of offences by Special Court

236. (1) Notwithstanding anything in the Code of Criminal Procedure, 1973,
offences under this Code shall be tried by the Special Court established under
Chapter XXVIII of the Companies Act, 2013.
(2) No court shall take cognisance of any offence punishable under this Act, save
on a complaint made by the Board or the Central Government or any person
authorised by the Central Government in this behalf.
(3) The provisions of the Code of Criminal Procedure, 1973 shall apply to the
proceedings before a Special Court and for the purposes of the said provisions, the
Special Court shall be deemed to be a Court of Sessions and the person conducting
a prosecution before a Special Court shall be deemed to be a Public Prosecutor.
(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973
(2 of 1974), in case of a complaint under sub-section (2), the presence of the
person authorised by the Central Government or the Board before the Court
trying the offences shall not be necessary unless the Court requires his personal
attendance at the trial.
Appeal and revision

237. The High Court may exercise, so far as may be applicable, all the powers
conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on
a High Court, as if a Special Court within the local limits of the jurisdiction of the
High Court were a Court of Sessions trying cases within the local limits of the
jurisdiction of the High Court.
Provisions of this Code to override other laws

238. The provisions of this Code shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time being in force or
any instrument having effect by virtue of any such law.
Power to make rules

239. (1) The Central Government may, by notification, make rules for carrying out
the provisions of this Code.
(2) Without prejudice to the generality of the provisions of sub-section (1), the
Central Government may make rules for any of the following matters, namely :
(a) any other instrument which shall be a financial product under clause (15)
of section 3 ;
(b) other accounting standards which shall be a financial debt under clause
(d) of sub-section (8) of section 5 ;
(c) the form, the manner and the fee for making application before the
Adjudicating Authority for initiating corporate insolvency resolution process
by financial creditor under sub-section (2) of section 7 ;
(d) the form and manner in which demand notice may be made and the
manner of delivery thereof to the corporate debtor under sub-section (1) of
section 8 ;
(e) the form, the manner and the fee for making application before the
by operational creditor under sub-section (2) of section 9 ;
(f) the form, the manner and the fee for making application before the
by corporate applicant under sub-section (2) of section 10 ;
(g) the persons who shall be relative under clause (ii) of the Explanation to
sub-section (1) of section 79 ;
(h) the value of unencumbered single dwelling unit owned by the debtor
under clause (e) of sub-section (13) of section 79 ;
(i) the value under clause (c), and any other debt under clause (f), of sub-
section (14) of section 79 ;
(j) the form, the manner and the fee for making application for fresh start
order under sub-section (3) of section 81 ;
(k) the particulars of the debtor’s personal details under clause (e) of sub-
(l) the information and documents to support application under sub-section

(3) of section 86 ;
(m) the form, the manner and the fee for making application for initiating the
insolvency resolution process by the debtor under sub-section (6) of
section 94 ;
(n) the form, the manner and the fee for making application for initiating the
insolvency resolution process by the creditor under sub-section (6) of
section 95 ;
(o) the particulars to be provided by the creditor to the resolution professional
(p) the form and the manner for making application for bankruptcy by the
debtor under clause (b) of sub-section (1) of section 122 ;
(q) the form and the manner of the statement of affairs of the debtor under
(r) the other information under clause (d) of sub-section (1) of section 123 ;
(s) the form, the manner and the fee for making application for bankruptcy
(t) the form and the manner in which statement of financial position shall be
submitted under sub-section (2) of section 129 ;
(u) the matters and the details which shall be included in the public notice
(v) the matters and the details which shall be included in the notice to the
creditors under sub-section (3) of section 130 ;
(w) the manner of sending details of the claims to the bankruptcy trustee and
other information under sub-sections (1) and (2) of section 131 ;
(x) the value of financial or commercial transaction under clause (d) of sub-
(y) the other things to be done by a bankrupt to assist bankruptcy trustee in
carrying out his functions under clause (d) of sub-section (1) of section 150 ;
(z) the manner of dealing with the surplus under sub-section (4) of section
170 ;
(za) the form and the manner of proof of debt under clause (c) of sub-section
(2) of section 171 ;
(zb) the manner of receiving dividends under sub-section (7) of section 171 ;
(zc) the particulars which the notice shall contain under sub-section (2) of
section 176 ;
(zd) the salaries and allowances payable to, and other terms and conditions
of service of, the Chairperson and Members of the Board under sub-
(ze) the other functions of the Board under clause (u) of sub-section (1) of
section 196 ;
(zf) the other funds under clause (c) of sub-section (1) of section 222 ;
(zg) the other purposes for which the fund shall be applied under clause (d) of
(zh) the form in which annual statement of accounts shall be prepared under
(zi) the purpose for which application for withdrawal of funds may be made
(zj) the manner of administering the fund under sub-section (4) of section 224 ;
(zk) the manner of conducting insolvency and liquidation proceedings under
section 227 ;
(zl) the form and the time for preparing budget by the Board under section
228 ;
(zm) the form and the time for preparing annual report under sub-section (1) of
section 229 ;
(zn) the time up to which a person appointed to any office shall continue to
hold such office under clause (vi) of sub-section (2) of section 243.
Power to make regulations

240. (1) The Board may, by notification, make regulations consistent with this
Code and the rules made thereunder, to carry out the provisions of this Code.
(2) In particular, and without prejudice to the generality of the foregoing power,
such regulations may provide for all or any of the following matters, namely :
(a) the form and the manner of accepting electronic submission of financial
information under sub-clause (a) of clause (9) of section 3 ;
(b) the persons to whom access to information stored with the information
utility may be provided under sub-clause (d) of clause (9) of section 3 ;
(c) the other information under sub-clause (f) of clause (13) of section 3 ;
(d) the other costs under clause (e) of sub-section (13) of section 5 ;
(e) the cost incurred by the liquidator during the period of liquidation which
shall be liquidation cost under sub-section (16) of section 5 ;
(f) the other record or evidence of default under clause (a), and any other
information under clause (c), of sub-section (3) of section 7 ;
(g) the other information under clause (d) of sub-section (3) of section 9 ;
(h) the period under clause (a) of sub-section (3) of section 10 ;
(i) the supply of essential goods or services to the corporate debtor under
(j) the manner of making public announcement under sub-section (2) of
section 15 ;
(k) the manner of taking action and the restrictions thereof under clause (b) of
(l) the other persons under clause (d) of sub-section (2) of section 17 ;
(m) the other matters under clause (d) of sub-section (2) of section 17 ;
(n) the other matters under sub-clause (iv) of clause (a), and the other duties
to be performed by the interim resolution professional under clause (g), of
section 18 ;
(o) the persons who shall comprise the committee of creditors, the functions
to be exercised such committee and the manner in which functions shall
be exercised under the proviso to sub-section (8) of section 21 ;
(p) the other electronic means by which the members of the committee of
creditors may meet under sub-section (1) of section 24 ;
(q) the manner of assigning voting share to each creditor under sub-section
(7) of section 24 ;
(r) the manner of conducting the meetings of the committee of creditors
(s) the manner of appointing accountants, lawyers and other advisors under
clause (d) of sub-section (2) of section 25 ;
(t) the other actions under clause (k) of sub-section (2) of section 25 ;
(u) the form and the manner in which an information memorandum shall be
prepared by the resolution professional sub-section (1) of section 29 ;
(v) the other matter pertaining to the corporate debtor under the Explanation
to sub-section (2) of section 29 ;
(w) the manner of making payment of insolvency resolution process costs
under clause (a), the manner of repayment of debts of operational creditors
under clause (b), and the other requirements to which a resolution plan
shall conform to under clause (d), of sub-section (2) of section 30 ;
(x) the fee for the conduct of the liquidation proceedings and proportion to
the value of the liquidation estate assets under sub-section (8) of section
34 ;
(y) the manner of evaluating the assets and property of the corporate debtor
under clause (c), the manner of selling property in parcels under clause (f),
the manner of reporting progress of the liquidation process under clause
(n), and the other functions to be performed under clause (o), of sub-
(z) the manner of making the records available to other stakeholders under
(za) the other means under clause (a) of sub-section (3) of section 36 ;
(zb) the other assets under clause (e) of sub-section (4) of section 36 ;
(zc) the other source under clause (g) of sub-section (1) of section 37 ;
(zd) the manner of providing financial information relating to the corporate
debtor under sub-section (2) of section 37 ;
(ze) the form, the manner and the supporting documents to be submitted by
operational creditor to prove the claim under sub-section (3) of section
38 ;
(zf) the time within which the liquidator shall verify the claims under sub-
(zg) the manner of determining the value of claims under section 41 ;
(zh) the manner of relinquishing security interest to the liquidation estate and
receiving proceeds from the sale of assets by the liquidator under clause
(a), and the manner of realising security interest under clause (b) of sub-
(zi) the other means under clause (b) of sub-section (3) of section 52 ;
(zj) the manner in which secured creditor shall be paid by the liquidator under
(zk) the period and the manner of distribution of proceeds of sale under sub-
(zl) the other means under clause (a) and the other information under clause
(b) of section 57 ;
(zm) the conditions and procedural requirements under sub-section (2) of
section 59 ;
(zn) the details and the documents required to be submitted under sub-section
(7) of section 95 ;
(zo) the other matters under clause (c) of sub-section (3) of section 105 ;
(zp) the manner and form of proxy voting under sub-section (4) of section
107 ;
(zq) the manner of assigning voting share to creditor under sub-section (2) of
section 109 ;
(zr) the manner and form of proxy voting under sub-section (3) of section
133 ;
(zs) the fee to be charged under sub-section (1) of section 144 ;
(zt) the appointment of other officers and employees under sub-section (2),
and the salaries and allowances payable to, and other terms and
conditions of service of, such officers and employees of the Board under
sub-section (3), of section 194 ;
(zu) the other information under clause (i) of sub-section (1) of section 196 ;
(zv) the intervals in which the periodic study, research and audit of the
functioning and performance of the insolvency professional agencies,
insolvency professionals and information utilities under clause (r), and
mechanism for disposal of assets under clause (t), of sub-section (1) of
section 196 ;
(zw) the place and the time for discovery and production of books of account
and other documents under clause (i) of sub-section (3) of section 196 ;
(zx) the other committees to be constituted by the Board and the other
members of such committees under section 197 ;
(zy) the other persons under clause (b) and clause (d) of section 200 ;
(zz) the form and the manner of application for registration, the particulars to
be contained therein and the fee it shall accompany under sub-section (1)
of section 201 ;
(zza) the form and manner of issuing a certificate of registration and the terms
and conditions thereof, under sub-section (3) of section 201 ;
(zzb) the manner of renewal of the certificate of registration and the fee therefor,
(zzc) the other ground under clause (d) of sub-section (5) of section 201 ;
(zzd) the form of appeal to the National Company Law Appellate Tribunal, the
period within which it shall be filed under section 202 ;
(zze) the other information under clause (g) of section 204 ;
(zzf) the other grounds under Explanation to section 196 ;
(zzg) the setting up of a governing Board for its internal governance and
management under clause (e), the curriculum under clause (l), the manner
of conducting examination under clause (m), of section 196 ;
(zzh) the time within which, the manner in which, and the fee for registration of
insolvency professional under sub-section (1) of section 207 ;
(zzi) the categories of professionals or persons, the qualifications and
experience and the fields under sub-section (2) of section 207 ;
(zzj) the manner and the conditions subject to which the insolvency
professional shall perform his function under clause (f) of sub-section (2)
of section 208 ;
(zzk) the form and manner in which, and the fee for registration of information
utility under sub-section (1) of section 210 ;
(zzl) the form and manner for issuing certificate of registration and the terms
and conditions thereof, under sub-section (3) of section 210 ;
(zzm) the manner of renewal of the certificate of registration and the fee therefor,
(zzn) the other ground under clause (d) of sub-section (5) of section 210 ;
(zzo) the form, the period and the manner of filling appeal to the National
Company Law Appellate Tribunal under section 211 ;
(zzp) the number of independent members under section 212 ;
(zzq) the services to be provided by information utility and the terms and
conditions under section 213 ;
(zzr) the form and manner of accepting electronic submissions of financial
information under clause (b) and clause (c) of section 214 ;
(zzs) the minimum service quality standards under clause (d) of section 214 ;
(zzt) the information to be accessed and the manner of accessing such
information under clause (f) of section 214 ;
(zzu) the statistical information to be published under clause (g) of section
214 ;
(zzv) the form, the fee and the manner for submitting or accessing information
(zzw) the form and manner for submitting financial information and information
relating to assets under sub-section (2) of section 215 ;
(zzx) the manner and the time within which financial information may be
updated or modified or rectified under section 216 ;
(zzy) the form, manner and time of filing complaint under section 217 ;
(zzz) the time and manner of carrying out inspection or investigation under
(zzza) the manner of carrying out inspection of insolvency professional agency
or insolvency professional or information utility and the time for giving
reply under section 219 ;
(zzzb) the procedure for claiming restitution under sub-section (6), the period
within which such restitution may be claimed and the manner in which
restitution of amount may be made under sub-section (7) of section 220 ;
(zzzc) the other funds of clause (c) of sub-section (1) of section 222.
Rules and regulations to be laid before Parliament

241. Every rule and every regulation made under this Code shall be laid, as soon
as may be after it is made, before each House of Parliament, while it is in session,
for a total period of thirty days which may be comprised in one session or in two
or more successive sessions, and if, before the expiry of the session immediately
following the session or the successive sessions aforesaid, both Houses agree
in making any modification in the rule or regulation or both Houses agree that the
rule or regulation should not be made, the rule or regulation shall thereafter have
effect only in such modified form or be of no effect, as the case may be ; so,
however, that any such modification or annulment shall be without prejudice to
the validity of anything previously done under that rule or regulation.
Power to remove difficulties

242. (1) If any difficulty arises in giving effect to the provisions of this Code, the
Central Government may, by order, published in the Official Gazette, make such
provisions not inconsistent with the provisions of this Code as may appear to be
necessary for removing the difficulty :
Provided that no order shall be made under this section after the expiry of five
years from the commencement of this Code.
(2) Every order made under this section shall be laid, as soon as may be after it is
made, before each House of Parliament.
Repeal of certain enactments and savings

243. (1) The Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency
Act, 1920 are hereby repealed.
(2) Notwithstanding the repeal under sub-sections (1), –
(i) all proceedings pending under and relating to the Presidency Towns
Insolvency Act, 1909, and the Provincial Insolvency Act, 1920 immediately
before the commencement of this Code shall continue to be governed
under the aforementioned Acts and be heard and disposed of by the
concerned courts or tribunals, as if the aforementioned Acts have not
been repealed ;
(ii) any order, rule, notification, regulation, appointment, conveyance,
mortgage, deed, document or agreement made, fee directed, resolution
passed, direction given, proceeding taken, instrument executed or issued,
or thing done under or in pursuance of any repealed enactment shall, if in
force at the commencement of this Code, continue to be in force, and
shall have effect as if the aforementioned Acts have not been repealed ;
(iii) anything done or any action taken or purported to have been done or
taken, including any rule, notification, inspection, order or notice made or
issued or any appointment or declaration made or any operation
undertaken or any direction given or any proceeding taken or any penalty,
punishment, forfeiture or fine imposed under the repealed enactments
shall be deemed valid ;
(iv) any principle or rule of law, or established jurisdiction, form or course of
pleading, practice or procedure or existing usage, custom, privilege,
restriction or exemption shall not be affected, notwithstanding that the
same respectively may have been in any manner affirmed or recognised
or derived by, in, or from, the repealed enactments ;
(v) any prosecution instituted under the repealed enactments and pending
immediately before the commencement of this Code before any court or
tribunal shall, subject to the provisions of this Code, continue to be heard

and disposed of by the concerned court or tribunal ;
(vi) any person appointed to any office under or by virtue of any repealed
enactment shall continue to hold such office until such time as may be
prescribed ; and
(vii) any jurisdiction, custom, liability, right, title, privilege, restriction, exemption,
usage, practice, procedure or other matter or thing not in existence or in
force shall not be revised or restored.
(3) The mention of particular matters in sub-section (2) shall not be held to prejudice
the general application of section 6 of the General Clauses Act, 1897 (10 of 1897)
with regard to the effect of repeal of the repealed enactments or provisions of the
enactments mentioned in the Schedule.
Transitional provisions
244. (1) Until the Board is constituted or a financial sector regulator is designated
under section 195, as the case may be, the powers and functions of the Board or
such designated financial sector regulator, including its power to make regulations,
shall be exercised by the Central Government.
(2) Without prejudice to the generality of the power under sub-section (1), the
Central Government may by regulations provide for the following matters :
(a) recognition of persons, categories of professionals and persons having
such qualifications and experience in the field of finance, law, management
or insolvency as it deems necessary, as insolvency professionals and
insolvency professional agencies under this Code ;
(b) recognition of persons with technological, statistical, and data protection
capability as it deems necessary, as information utilities under this Code ;
and
(c) conduct of the corporate insolvency resolution process, insolvency
resolution process, liquidation process, fresh start process and bankruptcy
process under this Code.
Amendments of Act 9 of 1932

245. The Indian Partnership Act, 1932 shall be amended in the manner specified
in the First schedule.
246. The Central Excise Act, 1944 shall be amended in the manner specified in
the Second Schedule.

247. The Income-tax Act, 1961 shall be amended in the manner specified in the
Third Schedule.

248. The Customs Act, 1962 shall be amended in the manner specified in the
Fourth Schedule.

249. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993
shall be amended in the manner specified in the Fifth Schedule.

250. The Finance Act, 1994 shall be amended in the manner specified in the Sixth
Schedule.

251. The Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 shall be amended in the manner specified in the
Seventh Schedule.

252. The Sick Industrial Companies (Special Provisions) Repeal Act, 2003 shall
be amended in the manner specified in the Eighth Schedule.

253. The Payment and Settlement Systems Act, 2007 shall be amended in the
manner specified in the Ninth Schedule.

254. The Limited Liability Partnership Act, 2008 shall be amended in the manner
specified in the Tenth Schedule.

255. The Companies Act, 2013 shall be amended in the manner specified in the
Eleventh Schedule.
THE FIRST SCHEDULE
(see section 245)
Amendment to the Indian Partnership Act, 1932
(9 of 1932)
1. In section 41, clause (a) shall be omitted.
THE SECOND SCHEDULE
(see section 246)
Amendment to the Central Excise Act, 1944
(1 of 1944)
1. In section 11E, for the words, figures and brackets “and the Securitisation and
Reconstruction of Financial Assets and the Enforcement of Security Interest Act,
2002 (54 of 2002) “, the words, figures and brackets “the Securitisation and
Reconstruction of Financial Assets and the Enforcement of Security Interest Act,
2002 (54 of 2002) and the Insolvency and Bankruptcy Code, 2016” shall be
substituted.
THE THIRD SCHEDULE
(see section 247)
Amendment to the Income-tax Act, 1961

(43 of 1961)
In sub-section (6) of section 178, after the words “for the time being in force”, the
words and figures “except the provisions of the Insolvency and Bankruptcy Code,
2016” shall be inserted.
THE FOURTH SCHEDULE
(see section 248)
Amendment to the Customs Act, 1962

(52 of 1962)
In section 142A, for the words and figures “and the Securitisation and Reconstruction
of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of
2002)”, the words and figures “the Securitisation and Reconstruction of Financial
Assets and the Enforcement of Security Interest Act, 2002 and the Insolvency and
Bankruptcy Code, 2016” shall be substituted.
THE FIFTH SCHEDULE
(see section 249)
Amendment to the Recovery of Debts Due to Banks and

Financial Institutions Act, 1993
(51 of 1993)
1. In the long title, after the words “financial institutions”, the words,“insolvency
resolution and bankruptcy of individuals and partnership firms” shall be inserted,
namely :
2. In section 1, –
(a) in sub-section (1), for the words “Due to Banks and Financial Institutions”
the words “and Bankruptcy” shall be substituted ;
(b) in sub-section (4), for the words “ The provision of this Code”, the words
“Save as otherwise provided, the provisions of this Code”, shall be
substituted.
3. In section 3, after sub-section (1), the following sub-section shall be inserted,
namely :
“(1A) The Central Government shall by notification establish such number of Debts
Recovery Tribunals and its Benches as it may consider necessary, to exercise the
jurisdiction, powers and authority of the Adjudicating Authority conferred on such
Tribunal by or under the Insolvency and Bankruptcy Code, 2016.”.
4. In section 8, after sub-section (1), the following sub-section shall be inserted,
namely :
“(1A) The Central Government shall, by notification, establish such number of
Debts Recovery Appellate Tribunals to exercise jurisdiction, powers and
authority to entertain appeal against the order made by the Adjudicating
Authority under Part III of the Insolvency and Bankruptcy Code, 2016.”.
(i) after sub-section (1), the following sub-section shall be inserted,
namely :
“(1A) Without prejudice to sub-section (1), –
(a) the Tribunal shall exercise, on and from the date to be appointed by
the Central Government, the jurisdiction, powers and authority to
entertain and decide applications under Part III of Insolvency and
Bankruptcy Code, 2016.
(b) the Tribunal shall have circuit sittings in all district headquarters.” ;
(ii) after sub-section (2), the following sub-section shall be inserted,
namely :
“(2A) Without prejudice to sub-section (2), the Appellate Tribunal shall
exercise, on and from the date to be appointed by the Central Government,
the jurisdiction, powers and authority to entertain appeals against the
order made by the Adjudicating Authority under Part III of the Insolvency
and Bankruptcy Code, 2016.”.
6. After section 19, the following section shall be inserted, namely :
“19A. The application made to Tribunal for exercising the powers of the
Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 shall
be dealt with in the manner as provided under that Code.”.
7. In section 20, in sub-section (4), after the word, brackets and figure “sub-
section (1) “, the words, brackets and figures “or under sub-section (1) of section
181 of the Insolvency and Bankruptcy Code, 2016” shall be inserted.
THE SIXTH SCHEDULE
(see section 250 )
Amendment to the Finance Act, 1994

(32 of 1994)
In section 88, for the words and figures “and the Securitisation and Reconstruction
of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of
2002)”, the words and figures “the Securitisation and Reconstruction of Financial
Assets and the Enforcement of Security Interest Act, 2002 and the Insolvency and
Bankruptcy Code, 2016” shall be substituted.
THE SEVENTH SCHEDULE
(see section 251)
Amendment to the Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002
(54 of 2002)
In section 13, in sub-section (9), for the words “In the case of”, the words and
figures “Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in
the case of” shall be substituted.
THE EIGHTH SCHEDULE
(see section 252)
Amendment to the Sick Industrial Companies (Special Provisions) Repeal Act,

2003
(1 of 2004)
In section 4, for sub-clause (b), the following sub-clause shall be substituted,

namely –
“(b) On such date as may be notified by the Central Government in this behalf,
any appeal preferred to the Appellate Authority or any reference made or
inquiry pending to or before the Board or any proceeding of whatever nature
pending before the Appellate Authority or the Board under the Sick Industrial
Companies (Special Provisions) Act, 1985 (1 of 1986) shall stand abated :
Provided that a company in respect of which such appeal or reference or
inquiry stands abated under this clause may make reference to the
National Company Law Tribunal under the Insolvency and Bankruptcy
Code, 2016 within one hundred and eighty days from the commencement
of the Insolvency and Bankruptcy Code, 2016 in accordance with the
provisions of the Insolvency and Bankruptcy Code, 2016 :
Provided further that no fees shall be payable for making such reference
under Insolvency and Bankruptcy Code, 2016 by a company whose appeal
or reference or inquiry stands abated under this clause.”.
THE NINTH SCHEDULE
(see section 253)
Amendment to the Payment and Settlement Systems Act, 2007

(51 of 2007)
1. In section 23, in sub-sections (4), (5) and (6), after the words and figures “the
Banking Regulation Act, 1949 (10 of 1949)” “the Companies Act, 2013 (18 of 2013)”,
the words and figures “or the Insolvency and Bankruptcy Code, 2016” shall be
inserted.
2. In section 23A, in sub-section (3), after the words and figures “the Companies
Act, 2013”, the words and figures “or the Insolvency and Bankruptcy Code, 2016”
shall be inserted.
THE TENTH SCHEDULE
(see section 254)
Amendment to the Limited Liability Partnership Act, 2008 (6 of 2009)
In section 64, clause (c) shall be omitted.
THE ELEVENTH SCHEDULE
(See section 255)
Amendments to the Companies Act, 2013 (18 of 2013)

(a) for clause (23), the following clause shall be substituted, namely :
‘(23) “company liquidator” means a person appointed by the Tribunal as
the Company Liquidator in accordance with the provisions of section
275 for the winding up of a company under this Act ;’ ;
(b) after clause (94), the following clause shall be inserted, namely :
‘(94A) “winding up” means winding up under this Act or liquidation
under the Insolvency and Bankruptcy Code, 2016, as applicable.’.
2. In section 8, in sub-section (9), for the words “the Rehabilitation and Insolvency
Fund formed under section 269”, the words “Insolvency and Bankruptcy Fund
formed under section 224 of the Insolvency and Bankruptcy Code, 2016” shall be
substituted.
3. In section 66, in sub-section (8), for the words, brackets and figures “ is unable,
within the meaning of sub-section (2) of section 271, to pay the amount of his debt
or claim,”, the words and figures “commits a default, within the meaning of
section 6 of the Insolvency and Bankruptcy Code, 2016, in respect of the amount
of his debt or claim,” shall be substituted.
4. In sections 77, in sub-section (3), after the words “the liquidator”, the words
and figures “appointed under this Act or the Insolvency and Bankruptcy Code,
2016, as the case may be,” shall be inserted.
5. In section 117 in sub-section (3), in clause (f), for the word and figures “section
304”, the words and figures “section 59 of the Insolvency and Bankruptcy Code,
2016” shall be substituted.
6. In section 224, in sub-section (2), after the words “wound up under this Act”,
the words and figures “or under the Insolvency and Bankruptcy Code, 2016” shall
be inserted.
6A. In section 230, –

(a) in sub-section (1), after the word “liquidator”, the words “appointed under
this Act or under the Insolvency and Bankruptcy Code, 2016, as the case
may be,” shall be inserted ;
(b) in sub-section (6), after the word “on the liquidator”, the words “appointed
under this Act or under the Insolvency and Bankruptcy Code, 2016, as the
case may be,” shall be inserted ;
7. In section 249, in sub-section (1), for clause (e), the following clause shall be
substituted, namely :
“(e) is being wound up under Chapter XX of this Act or under the Insolvency
and Bankruptcy Code, 2016.”.
8. Sections 253 to 269 shall be omitted.
9. For section 270, the following section shall be substituted, namely :
“270. Winding up by Tribunal. – The provisions of Part I shall apply to the
winding up of a company by the Tribunal under this Act.”.
“271. Circumstances in which company may be wound up by Tribunal. – A
company may, on a petition under section 272, be wound up by the Tribunal, –
(a) if the company has, by special resolution, resolved that the company be
wound up by the Tribunal ;
(b) if the company has acted against the interests of the sovereignty and
integrity of India, the security of the State, friendly relations with foreign
States, public order, decency or morality ;
(c) if on an application made by the Registrar or any other person authorised
by the Central Government by notification under this Act, the Tribunal is of
the opinion that the affairs of the company have been conducted in a
fraudulent manner or the company was formed for fraudulent and unlawful
purpose or the persons concerned in the formation or management of its
affairs have been guilty of fraud, misfeasance or misconduct in connection
therewith and that it is proper that the company be wound up ;
(d) if the company has made a default in filing with the Registrar its financial
statements or annual returns for immediately preceding five consecutive
financial years ; or
(e) if the Tribunal is of the opinion that it is just and equitable that the company
should be wound up.”.
“272. Petition for winding up. – (1) Subject to the provisions of this section, a
petition to the Tribunal for the winding up of a company shall be presented by –
(a) the company ;
(b) any contributory or contributories ;
(c) all or any of the persons specified in clauses (a) and (b) ;
(d) the Registrar ;
(e) any person authorised by the Central Government in that behalf ; or
(f) in a case falling under clause (b) of section 271, by the Central Government
or a State Government.
(2) A contributory shall be entitled to present a petition for the winding up of a
company, notwithstanding that he may be the holder of fully paid-up shares,
or that the company may have no assets at all or may have no surplus assets
left for distribution among the shareholders after the satisfaction of its liabilities,
and shares in respect of which he is a contributory or some of them were
either originally allotted to him or have been held by him, and registered in his
name, for at least six months during the eighteen months immediately before
the commencement of the winding up or have devolved on him through the
death of a former holder.
(3) The Registrar shall be entitled to present a petition for winding up under
section 271, except on the grounds specified in clause (a) or clause (e) of that
sub-section :
Provided that the Registrar shall obtain the previous sanction of the Central
Government to the presentation of a petition :
Provided further that the Central Government shall not accord its sanction
unless the company has been given a reasonable opportunity of making
representations.
(4) A petition presented by the company for winding up before the Tribunal
shall be admitted only if accompanied by a statement of affairs in such form
and in such manner as may be prescribed.
(5) A copy of the petition made under this section shall also be filed with the
Registrar and the Registrar shall, without prejudice to any other provisions,
submit his views to the Tribunal within sixty days of receipt of such petition.”.
(a) for sub-section (2), the following sub-section shall be substituted, namely :
“(2) The provisional liquidator or the company liquidator, as the case
may, shall be appointed by the Tribunal from amongst the insolvency
professionals registered under the Insolvency and Bankruptcy Code,
2016 ;” ;
(b) sub-section (4) shall be omitted.
“280. Jurisdiction of Tribunal.– The Tribunal shall, notwithstanding anything
contained in any other law for the time being in force, have jurisdiction to
entertain, or dispose of, –
(a) any suit or proceeding by or against the company ;
(b) any claim made by or against the company, including claims by or against
any of its branches in India ;
(c) any application made under section 233 ;
(d) any question of priorities or any other question whatsoever, whether of
law or facts, including those relating to assets, business, actions, rights,
entitlements, privileges, benefits, duties, responsibilities, obligations or in
any matter arising out of, or in relation to winding up of the company,
whether such suit or proceeding has been instituted, or is instituted, or such
claim or question has arisen or arises or such application has been made or is
made or such scheme has been submitted, or is submitted, before or after the
order for the winding up of the company is made.”.
15. Section 289 shall be omitted.
15A. The heading “Part II. –Voluntary winding up” shall be omitted.
16. Sections 304 to 323 shall be omitted.
17. Section 325 shall be omitted.
“326. Overriding preferential payments.– (1) In the winding up of a
company under this Act, the following debts shall be paid in priority to all other
debts :
(a) workmen’s dues ; and
(b) where a secured creditor has realised a secured asset, so much of the
debts due to such secured creditor as could not be realised by him or the
amount of the workmen’s portion in his security (if payable under the law),
whichever is less, pari passu with the workmen’s dues :
Provided that in case of the winding up of a company, the sums referred to in
sub-clauses (i) and (ii) of clause (b) of the Explanation, which are payable for a
period of two years preceding the winding up order or such other period as
may be prescribed, shall be paid in priority to all other debts (including debts
due to secured creditors), within a period of thirty days of sale of assets and
shall be subject to such charge over the security of secured creditors as may
be prescribed.
(2) The debts payable under the proviso to sub-section (1) shall be paid in full
before any payment is made to secured creditors and thereafter debts payable
under that sub-section shall be paid in full, unless the assets are insufficient to
meet them, in which case they shall abate in equal proportions.
Explanation : For the purposes of this section, and section 327 –
(a) “workmen’’, in relation to a company, means the employees of the
company, being workmen within the meaning of clause (s) of section 2 of
the Industrial Disputes Act, 1947 (14 of 1947) ;
(b) “workmen’s dues’’, in relation to a company, means the aggregate of the
following sums due from the company to its workmen, namely :
(i) all wages or salary including wages payable for time or piece work
and salary earned wholly or in part by way of commission of any
workman in respect of services rendered to the company and any
compensation payable to any workman under any of the provisions
of the Industrial Disputes Act, 1947 (14 of 1947) ;
(ii) all accrued holiday remuneration becoming payable to any
workman or, in the case of his death, to any other person in his right
on the termination of his employment before or by the effect of the
winding up order or resolution ;
(iii) unless the company is being wound up voluntarily merely for the
purposes of reconstruction or amalgamation with another company
or unless the company has, at the commencement of the winding
up, under such a contract with insurers as is mentioned in section
14 of the Workmen’s Compensation Act, 1923 (19 of 1923), rights
capable of being transferred to and vested in the workmen, all
amount due in respect of any compensation or liability for
compensation under the said Act in respect of the death or
disablement of any workman of the company ;
(iv) all sums due to any workman from the provident fund, the pension
fund, the gratuity fund or any other fund for the welfare of the
workmen, maintained by the company ;
(c) “workmen’s portion’’, in relation to the security of any secured creditor of
a company, means the amount which bears to the value of the security
the same proportion as the amount of the workmen’s dues bears to the
aggregate of the amount of workmen’s dues and the amount of the debts
due to the secured creditors.
Illustration
The value of the security of a secured creditor of a company is Rs. 1,00,000.
The total amount of the workmen’s dues is Rs. 1,00,000. The amount of the
debts due from the company to its secured creditors is Rs.3,00,000. The
aggregate of the amount of workmen’s dues and the amount of debts due to
secured creditors is Rs. 4,00,000. The workmen’s portion of the security is,
therefore, one-fourth of the value of the security, that is Rs. 25,000.”.
(a) after sub-section (6), the following sub-section shall be inserted, namely :
“(7) Sections 326 and 327 shall not be applicable in the event of liquidation
under the Insolvency and Bankruptcy Code, 2016.” ;
(b) in the Explanation, for clause (c), the following clause shall be substituted,
namely :
‘(c) the expression “relevant date” means in the case of a company
being wound up by the Tribunal, the date of appointment or first
appointment of a provisional liquidator, or if no such appointment
was made, the date of the winding up order, unless, in either case,
the company had commenced to be wound up voluntarily before
that date under the Insolvency and Bankruptcy Code, 2016 ;’.
“329. Transfers not in good faith to be void. – Any transfer of property,
movable or immovable, or any delivery of goods, made by a company, not
being a transfer or delivery made in the ordinary course of its business or in
favour of a purchaser or encumbrancer in good faith and for valuable
consideration, if made within a period of one year before the presentation of a
petition for winding up by the Tribunal under this Act shall be void against the
Company Liquidator.”.
“334. Transfer, etc., after commencement of winding up to be void.– In the

case of a winding up by the Tribunal, any disposition of the property including
actionable claims, of the company and any transfer of shares in the company
or alteration in the status of its members, made after the commencement of
the winding up shall, unless the Tribunal otherwise orders, be void.”.
22. In section 336, in sub-section (1), in the opening paragraph, for the words
“whether by the Tribunal or voluntarily, or which is subsequently ordered to be
wound up by the Tribunal or which subsequently passes a resolution for voluntary
winding up”, the words “by the Tribunal under this Act or which is subsequently
ordered to be wound up by the Tribunal under this Act” shall be substituted.
23. In section 337, for the words “or which subsequently passes a resolution for
voluntary winding up,”, the words “under this Act”, shall be substituted.
24. In section 342, sub-sections (2), (5) and (4) shall be omitted.
25. In section 343, for sub-section (1), the following sub-section shall be substituted,
namely –
“(1) The company Liquidator may, with the sanction of the Tribunal, when the
company is being wound up by the Tribunal, –
(i) pay any class of creditors in full ;
(ii) make any compromise or arrangement with creditors or persons claiming
to be creditors, or having or alleging themselves to have any claim, present
or future, certain or contingent, against the company, or whereby the
company may be rendered liable ; or
(iii) compromise any call or liability to call, debt, and liability capable of
resulting in a debt, and any claim, present or future, certain or contingent,
ascertained or sounding only in damages, subsisting or alleged to subsist
between the company and a contributory or alleged contributory or other
debtor or person apprehending liability to the company, and all questions
in any way relating to or affecting the assets or liabilities or the winding up
of the company, on such terms as may be agreed, and take any security
for the discharge of any such call, debt, liability or claim, and give a
complete discharge in respect thereof.”.
namely –
“(1) When the affairs of a company have been completely wound up and it is
about to be dissolved, the books and papers of such company and those of
the company liquidator may be disposed of in such manner as the Tribunal
directs.”.
namely –
“(1) If the winding up of a company is not concluded within one year after its
commencement, the Company Liquidator shall, unless he is exempted from
so doing, either wholly or in part by the Central Government, within two months
of the expiry of such year and thereafter until the winding up is concluded, at
intervals of not more than one year or at such shorter intervals, if any, as may
be prescribed, file a statement in such form containing such particulars as
may be prescribed, duly audited, by a person qualified to act as auditor of the
company, with respect to the proceedings in, and position of, the liquidation,
with the Tribunal :
Provided that no such audit as is referred to in this sub-section shall be
necessary where the provisions of section 294 apply ;”.
“357. Commencement of winding up by Tribunal.– The winding up of a
company by the Tribunal under this Act shall be deemed to commence at the
time of the presentation of the petition for the winding up.”.
29. In section 370, in the proviso, after the words “obtained for the winding up the
company”, the words “in accordance with the provisions of this Act or of the
Insolvency and Bankruptcy Code, 2016” shall be inserted.
30. In section 372, after the words “The provisions of this Act”, the words “or of the
Insolvency and Bankruptcy Code, 2016, as the case may be,” shall be inserted.
namely :
“(4) The Central Government shall, by notification, establish such number of
Benches of the Tribunal, as it may consider necessary, to exercise the jurisdiction,
powers and authority of the Adjudicating Authority conferred on such Tribunal
by or under Part II of the Insolvency and Bankruptcy Code, 2016.”.
(i) in sub-section (1), after the words, “other provisions of this Act”, the words
“or of the Insolvency and Bankruptcy Code, 2016” shall be inserted ;
(ii) in sub-section (2), after the words, “under this Act”, the words “or under
the Insolvency and Bankruptcy Code, 2016” shall be inserted.
namely :
“(1) The Tribunal may, in any proceedings for winding up of a company under
this Act or in any proceedings under the Insolvency and Bankruptcy Code,
2016, in order to take into custody or under its control all property, books of
account or other documents, request, in writing, the Chief Metropolitan
Magistrate, Chief Judicial Magistrate or the District Collector within whose
jurisdiction any such property, books of account or other documents of such
company under this Act or of corporate persons under the said Code, are
situated or found, to take possession thereof, and the Chief Metropolitan
Magistrate, Chief Judicial Magistrate or the District Collector, as the case may
be, shall, on such request being made to him, –
(a) take possession of such property, books of account or other documents ;
and
(b) cause the same to be entrusted to the Tribunal or other persons authorised
by it.”.
“434. Transfer of certain pending proceedings.– (1) On such date as may
be notified by the Central Government in this behalf, –
(a) all matters, proceedings or cases pending before the Board of Company
Law Administration (herein in this section referred to as the Company Law
Board) constituted under sub-section (1) of section 10E of the Companies
Act, 1956 (1 of 1956), immediately before such date shall stand transferred
to the Tribunal and the Tribunal shall dispose of such matters, proceedings
or cases in accordance with the provisions of this Act ;
(b) any person aggrieved by any decision or order of the Company Law
Board made before such date may file an appeal to the High Court within
sixty days from the date of communication of the decision or order of the
Company Law Board to him on any question of law arising out of such
order :
Provided that the High Court may if it is satisfied that the appellant was
prevented by sufficient cause from filing an appeal within the said period,
allow it to be filed within a further period not exceeding sixty days ; and
(c) all proceedings under the Companies Act, 1956 (1 of 1956), including
proceedings relating to arbitration, compromise, arrangements and
reconstruction and winding up of companies, pending immediately before
such date before any District Court or High Court, shall stand transferred to
the Tribunal and the Tribunal may proceed to deal with such proceedings
from the stage before their transfer :
Provided that only such proceedings relating to the winding up of

companies shall be transferred to the Tribunal that are at a stage as may
be prescribed by the Central Government.
namely :
“(2) In particular, and without prejudice to the generality of the foregoing power,
such rules may provide for all or any of the following matters, namely :
(i) as to the mode of proceedings to be held for winding up of a company by
the Tribunal under this Act ;
(ii) for the holding of meetings of creditors and members in connection with
proceedings under section 230 ;
(iii) for giving effect to the provisions of this Act as to the reduction of the
capital ;
(iv) generally for all applications to be made to the Tribunal under the provisions
of this Act ;
(v) the holding and conducting of meetings to ascertain the wishes of creditors
and contributories ;
(vi) the settling of lists of contributories and the rectifying of the register of
members where required, and collecting and applying the assets ;
(vii) the payment, delivery, conveyance, surrender or transfer of money,
property, books or papers to the liquidator ;
(viii) the making of calls ; and
(ix) the fixing of a time within which debts and claims shall be proved.”.
36. In Schedule V, in Part II, in section III, for clause (b), the following clause shall
be substituted, namely :
“(b) where the company –
(i) is a newly incorporated company, for a period of seven years from
the date of its incorporation, or
(ii) is a sick company, for whom a scheme of revival or rehabilitation
has been ordered by the Board for Industrial and Financial
Reconstruction for a period of five years from the date of sanction of
scheme of revival, or
(iii) is a company in relation to which a resolution plan has been
approved by the National Company Law Tribunal under the

Insolvency and Bankruptcy Code, 2016 for a period of five years
from the date of such approval,
it may pay remuneration up to two times the amount permissible under section
II.”
160
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

NOTIFICATION
New Delhi, the 21st November, 2016
Insolvency and Bankruptcy Board of India

(Insolvency Professional Agencies) Regulations,
2016
IBBI/2016-17/GN/REG002. – In exercise of the powers conferred by sections 196,
201, 202, 219, and 220 read with section 240 of the Insolvency and Bankruptcy
Code, 2016 (31 of 2016), the Board hereby makes the following Regulations to
provide a framework for regulation of insolvency professional agencies in terms
hereof, namely –
CHAPTER I
PRELIMINARY
Short title and commencement
1. (1) These Regulations may be called the Insolvency and Bankruptcy Board of
India (Insolvency Professional Agencies) Regulations, 2016.
(2) These Regulations shall come into force on the date of their publication in the
Official Gazette.
Definitions
2. (1) In these Regulations, unless the context otherwise requires, –
(a) “Code” means the Insolvency and Bankruptcy Code, 2016 ;
(b) ”control” shall have the same meaning as assigned to it in section 2(27) of
the Companies Act, 2013 ;
(c) “certificate of registration” means a certificate of registration granted or
renewed by the Board under these Regulations ;
(d) ”net worth” shall have the same meaning as assigned to it under section
2(57) of the Companies Act, 2013.
(2) Unless the context otherwise requires, words and expressions used and not
defined in these Regulations, shall have the meanings assigned to them in the Code.
160
IBBI (IPAs) REGULATIONS, 2016 161
CHAPTER II
REGISTRATION
Eligibility for registration
3. No person shall be eligible to be registered as an insolvency professional
agency unless it is a company registered under section 8 of the Companies Act,
2013, and –
(a) its sole object is to carry on the functions of an insolvency professional
agency under the Code ;
(b) it has bye-laws and governance structure in accordance with the
Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing
Board of Insolvency Professional Agencies), 2016 ;
(c) it has a minimum net worth of ten crore rupees ;
(d) it has a paid-up share capital of five crore rupees,
(e) it is not under the control of person(s) resident outside India,
(f) not more than 49 per cent of its share capital is held, directly or indirectly,
by persons resident outside India ; and
(g) it is not a subsidiary of a body corporate through more than one layer:
Explanation : “layer” in relation to a body corporate means its subsidiary ;
(h) itself, its promoters, its directors and persons holding more than 10% of its
share capital are fit and proper persons.
Explanation : For determining whether a person is fit and proper under these
Regulations, the Board may take account of any consideration as it deems fit,
including but not limited to the following criteria –
(i) integrity, reputation and character,
(ii) absence of convictions and restraint orders, and
(iii) competence including financial solvency and net worth.
Application for registration or renewal thereof

4. (1) A company eligible for registration as an insolvency professional agency,
may make an application to the Board in Form A of the Schedule to these
regulations, along with a non-refundable application fee of ten lakh rupees.
(2) An insolvency professional agency who has been granted registration under
regulation 5, may six months before the expiry of such registration, make an
162 IBBI (IPAs) REGULATIONS, 2016
application for renewal in Form A of the Schedule to these Regulations, along

with a non-refundable application fee of five lakh rupees.
(3) The Board shall acknowledge an application made under this regulation
(4) The Board shall examine the application, and give an opportunity to the
applicant to remove the deficiencies, if any, in the application.
(5) The Board may require the applicant to submit, within reasonable time,
additional documents, information or clarification that it deems fit.
(6) The Board may require the applicant to appear, within reasonable time, before
the Board in person, or through its authorised representative for clarifications
required for processing the application.
Grant of certificate of registration

5. (1) If the Board is satisfied, after such inspection or inquiry as it deems necessary
and having regard to the principles specified in section 200 of the Code, that the
applicant :
(a) is eligible under regulation 3 ;
(b) has adequate infrastructure to perform its functions under the Code ;
(c) has in its employment, persons having adequate professional and other
relevant experience, to enable it to perform its functions under the Code ;
and
(d) has complied with the conditions of the certificate of registration, if he has
submitted an application for renewal under regulation 4(2),
it may grant or renew a certificate of registration to the applicant to carry on the
activities of an insolvency professional agency in Form B of the Schedule to these
Regulations, within sixty days of receipt of the application, excluding the time
given by the Board for removing the deficiencies, or presenting additional
documents, information or clarification, or appearing in person, as the case may
be.
(2) The registration shall be subject to the conditions that the insolvency
professional agency shall –
(a) abide by the Code, rules, regulations, and guidelines thereunder and its
bye-laws ;
(b) at all times after the grant of the certificate continue to satisfy the
requirements under sub-regulation (1) ;
(c) pay a fee of five lakh rupees to the Board, payable every year after the
year in which the certificate is granted or renewed ;
(d) seek approval of the Board when a person, other than a statutory body,
seeks to hold more than ten per cent, directly or indirectly, of the share
capital of the insolvency professional agency ;
(e) take adequate steps for redressal of grievances ; and
(f) abide by such other conditions as may be specified.
(3) The certificate of registration shall be valid for a period of five years from the
date of issue.
Procedure for rejecting application

6. (1) If, after considering an application made under regulation 4, the Board is of
the prima facie opinion the registration ought not be granted or renewed, or be
granted or renewed with additional conditions, it shall communicate the reasons
for forming such an opinion and give the applicant an opportunity to explain why
its application should be accepted, within fifteen days of the receipt of the
communication from the Board, to enable it to form a final opinion.
(2) The communication under sub-regulation (1) shall be made to the applicant
within forty five days of receipt of the application, excluding the time given by the
Board for removing the deficiencies, presenting additional documents, information
or clarifications, or appearing in person, as the case may be.
(3) After considering the explanation, if any, given by the applicant under sub-
regulation (1), the Board shall communicate its decision to –
(a) accept the application, along with the certificate of registration, or
(b) reject the application by an order, giving reasons thereof
within thirty days of receipt of explanation.
(4) The order rejecting an application for renewal of registration shall require the
insolvency professional agency to –
(a) discharge pending obligations ;
(b) continue its functions till such time as may be specified, to enable the enrolment
of its members with another insolvency professional agency ; and
(c) comply with any other directions as considered appropriate.
CHAPTER III
SURRENDER OR CANCELLATION OF REGISTRATION
Surrender of registration
7. (1) An insolvency professional agency may submit an application for surrender
of a certificate of registration to the Board, providing –
(a) the reasons for such surrender ;
(b) the details of all the pending or on-going engagements under the code of
the insolvency professionals enrolled with it ;
(c) details of its pending or on-going activities ; and
(d) the manner in which it seeks to wind up its affairs as an insolvency
professional agency.
(2) The Board shall within seven days of receipt of the application, publish a
notice of receipt of such application on its website and invite objections to the
surrender of registration, to be submitted within fourteen days of the publication
of the notice.
(3) After considering the application and the objections submitted under sub-
regulation (2), if any, the Board may within thirty days from the last date of
submission of objections, approve the application for surrender of registration
subject to such conditions as it deems fit.
(4) The approval under sub-regulation (3) may require the insolvency professional
agency to –
(a) discharge any pending obligations ; or
(b) continue its functions till such time as may be specified, to enable the
enrolment of its members with another insolvency professional agency.
(5) The Board, after being satisfied that the requirements of sub-regulation (4)
have been complied with, shall publish a notice on its website stating that the
surrender of registration by the insolvency professional agency has
taken effect.
Disciplinary proceedings
8. (1) Based on the findings of an inspection or investigation, or on material
otherwise available on record, if the Board is of the prima facie opinion that
sufficient cause exists to take actions permissible under section 220, it shall
issue a show cause notice to the insolvency professional agency.
(2) The show cause notice shall be in writing, and shall state –
(a) the provisions of the Code under which it has been issued ;
(b) the details of the alleged facts ;
(c) the details of the evidence in support of the alleged facts ;
(d) the provisions of the Code, rules, regulations or guidelines thereunder
allegedly violated, or the manner in which the public interest is allegedly
affected ;
(e) the actions or directions that the Board proposes to take or issue if the
allegations are established ;
(f) the manner in which the insolvency professional agency is required to
respond to the show cause notice ;
(g) consequences of failure to respond to the show cause notice ; and
(h) procedure to be followed for disposal of the show cause notice.
(3) The show- cause notice shall enclose copies of relevant documents and
extracts of relevant portions from the report of investigation or inspection, or other
records.
(4) A show cause notice issued shall be served on the insolvency professional
agency in the following manner –
(a) by sending it to the insolvency professional agency at its the registered
office, by registered post with acknowledgement due ; or
(b) by an appropriate electronic means to the email address provided by the
insolvency professional agency to the Board.
(5) The Board shall constitute a Disciplinary Committee for disposal of the show
cause notice.
(6) The Disciplinary Committee shall dispose of the show cause notice assigned
under sub-regulation (5) by a reasoned order in adherence to principles of natural
justice.
(7) The Disciplinary Committee shall endeavour to dispose of the show cause
notice within a period of six months of the assignment.
(8) The Disciplinary Committee shall consider the submissions, if any, made by
the insolvency professional agency.
(9) After considering the relevant material facts and circumstances and material
on record, the Disciplinary Committee shall dispose of the show cause notice by
a reasoned order.
(10) The order in disposal of a show cause notice may provide for –
(a) no action ;
(b) warning ;
(c) any of the actions under section 220(2) to (4) ; or
(d) a reference to the Board to take any action under section 220(5).
(11) The order passed under sub-regulation (10) shall not become effective until
thirty days have elapsed from the date of issue of the order unless the Disciplinary
Committee states otherwise in the order along with the reason for the same.
(12) The order passed under sub-regulation (10) shall be issued to the insolvency
professional agency immediately, and published on the website of the Board.
(13) If the order passed under sub-regulation (10) suspends or cancels the
registration of the insolvency professional agency, the Disciplinary Committee
shall require the insolvency professional agency to –
(a) discharge pending obligations ;
(b) continue its functions till such time as may be specified, to enable the
enrolment of its members with another insolvency professional agency ;
and
Appeal
9. An appeal may be preferred under section 202 of the Code, within a period of
thirty days of receipt the impugned order in the manner prescribed in Part III of the
National Company Law Tribunal Rules, 2016.
CHAPTER IV
IN-PRINCIPLE APPROVAL
Grant of in-principle approval
10. (1) Any person who seeks to establish an insolvency professional agency
may make an application for an in-principle approval, demonstrating that the
conditions in sub-regulation (2) are satisfied, along with a non-refundable
application fee of ten lakh rupees.
(2) If the Board is satisfied, after such inspection or inquiry as it deems necessary,
that :
(a) the applicant is a fit and proper person ; and
(b) the proposed or existing company which may receive registration would
be able to meet the requirements for grant of registration under regulation
5(1),
it may grant in-principle approval which shall be valid for a period not exceeding
one year and be subject to such conditions as it deems fit.
(3) During the validity of in-principle approval, the company referred to sub-
regulation 2(b) may make an application for a certificate of registration as an
insolvency professional agency to the Board in accordance with Regulation 4(1),
but shall not be required to pay the application fees for registration.
SCHEDULE
FORM A
APPLICATION FOR CERTIFICATE OF REGISTRATION

[Under regulation 4 of the Insolvency and Bankruptcy Board of India
(Insolvency Professional Agencies) Regulations, 2016]
To
The Chairperson
The Insolvency and Bankruptcy Board of India
[Insert address]
From
[Name and address]
Subject : Application for grant or renewal of certificate of registration as insolvency
Madam/Sir,
1. I, being duly authorised for the purpose, hereby apply on behalf of [name and
address of the applicant] for
(a) grant of certificate of registration as insolvency professional agency,
or
(b) renewal of certificate of registration as insolvency professional agency,
and enclose a copy of the Board resolution authorising me to make this application
and correspond with the Board in this respect.
2. Copies of the memorandum of association, articles of association and the
bye-laws, as applicable, of the applicant are enclosed.
3. I, on behalf of [insert name], affirm that the applicant is eligible to be registered

as an insolvency professional agency.
4. I, on behalf of [insert name], hereby affirm that –
(a) all information contained in this application is true and correct in all material
respects,
(b) no material information relevant for the purpose of this application has
been suppressed, and
(c) registration granted or renewed in pursuance of this application may be
cancelled summarily if any information submitted is found to be false or
misleading in material respects at any stage.
5. If granted registration, I, on behalf of [insert name], undertake to comply with
the requirements of the Code, the rules, regulations or guidelines issued
thereunder, and such other conditions and terms as may be contained in the
certificate of registration or be specified or imposed by the Board subsequently.
Yours faithfully,
Sd/-
Authorized Signatory
(Name)
(Designation)
Date :
Place :
ANNEXURE TO FORM A
PART I
GENERAL
1. Name of the applicant.
2. Address of registered office and principal place of business of the applicant.
3. Corporate Identification Number (CIN).
4. PAN.
5. Name, designation and contact details of the person authorized to make this
application and correspond with the Board in this respect.
PART II
MEMORANDUM OF ASSOCIATION, ARTICLES OF ASSOCIATION AND BYE-
LAWS
6. Please state if the memorandum of association, articles of association and bye-
laws provide for all matters as required in, and are consistent with the Insolvency
and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency
Professional Agencies) Regulations, 2016, and the Insolvency and Bankruptcy Board
of India (Insolvency Professional Agencies) Regulations, 2016. (Yes/No)
7. Please specify the clause number of the provisions of the bye-laws which are
in addition to the provisions of the model bye-laws specified in the Insolvency
and Bankruptcy Board of India (Model Bye-Laws and Governing Board of
Insolvency Professional Agencies) Regulations, 2016 (if any).
PART III
SHAREHOLDING AND FINANCIAL STRENGTH
8. Please provide details of the persons holding more than 10 per cent, directly or
indirectly, of the share capital of the applicant.
Sl. Name and address PAN/Passport No and Percentage of shareholding in the
No. of the country of issue/company applicant company and/or
shareholder registration number holding company
9. Do persons resident outside India in aggregate hold more than 49% of the
share capital of the applicant? Please provide details.
10. Who exercises control over the applicant ? Please provide details.
11. Do persons resident outside India exercise control over the management or
policy decisions of the applicant ? If so, please provide details.
12. Please provide audited financial statements of :
(a) a company holding more than 10 per cent of the share capital of the
applicant (if any),
(b) a company who is in control of the applicant (if any),
(c) promoter company (if any),
(d) the applicant,
of the last three years or from the date of incorporation of the company, whichever
is less.
13. Please provide any other information to demonstrate that the persons holding
more than 10 per cent of the share capital of the company, and the promoters of
the company are fit and proper persons.
PART IV
DIRECTORS AND EMPLOYEES
14. Please state the details of the applicant’s Board of directors :
Sl. No. Name and address of the director DIN and Details of any pending or
PAN concluded criminal proceedings
against the directors
15. Please provide any other information to demonstrate that the directors are fit
and proper persons.
16. Please provide number of employees, categorywise.
PART V
INFRASTRUCTURE
17. Please state the infrastructure the applicant currently has and proposes to
have to enable it to discharge its functions as an insolvency professional agency,
including :
(a) the number and locations of offices,
(b) infrastructure in respect of enrolment, monitoring, grievance redressal
and disciplinary proceedings,
(c) IT and other computer facilities, and
(d) library and training facilities.
PART VI
COMPLIANCE
[For applications for renewal of registration]
18. Please provide details of the insolvency professional agency’s compliance
with the conditions of its certificate of registration.
19. Please provide details of the insolvency professional agency’s compliance
with the Board’s requirements in respect of reporting.
20. Please provide details of any grievance redressal proceedings instituted
against the insolvency professional agency or by it under its bye-laws, any
regulations of the Board or the Code.
Please provide any other details you consider relevant in support of the application.
Sd/-
(Name)
(Designation)
Date :
Place :
SCHEDULE
FORM B
Certificate of Registration No. ...........
The Insolvency and Bankruptcy Board of India hereby grants/renews this certificate
of registration to/of .............................................. [ insert
name and address] to act as an insolvency professional agency in accordance
with the Insolvency and Bankruptcy Code, 2016.
The certificate of registration shall be valid from [insert start date] to [insert end
date] and may be renewed.
Sd/-
(Name and Designation)
(For and on behalf of Insolvency and Bankruptcy Board of India)
Place :
Date :
172

NOTIFICATION
Insolvency and Bankruptcy Board of India (Model

Bye-Laws and Governing Board of Insolvency
Professional Agencies) Regulations, 2016
203 and 205 read with section 240 of the Insolvency and Bankruptcy Code, 2016
(31 of 2016), the Insolvency and Bankruptcy Board of India hereby makes the
following Regulations, namely –
CHAPTER I
PRELIMINARY

India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies)
Regulations, 2016.
Official Gazette.
Definitions
2. (1) In these Regulations, unless the context otherwise requires –
(a) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016) ;
(b) “Governing Board” means the Board of directors, as defined under section
2(10) of Companies Act, 2013 (18 of 2013), of the company registered as an
insolvency professional agency ;
(c) “model bye-laws” means the model bye-laws as contained in the Schedule
to these Regulations.
(2) Unless the context otherwise requires, words and expressions used and
not defined in these Regulations shall have the meanings assigned to them in the
Code.
172
IBBI (MODEL BYE-LAWS AND GOVERNING BOARD OF IPAs) REGULATIONS, 2016 173
CHAPTER II
BYE-LAWS
Insolvency professional agencies to have Bye-Laws
3. (1) A company shall submit to the Board its bye-laws along with the application
for its registration as an insolvency professional agency.
(2) The bye-laws shall provide for all matters specified in the model bye-laws.
(3) The bye-laws shall at all times be consistent with the model bye-laws.
(4) The insolvency professional agency shall publish its bye-laws, the composition
of all committees formed, and all policies created under the bye-laws on its
website.
Amendment of Bye-Laws
4. (1) The Governing Board may amend the bye-laws by a resolution passed by
votes in favour being not less than three times the number of the votes, if any, cast
against the resolution, by the directors.
(2) A resolution passed in accordance with sub-regulation (1) shall be filed with
the Board within seven days from the date of its passing, for its approval.
(3) The amendments to the bye-laws shall come into effect on the seventh day of
the receipt of the approval, unless otherwise specified by the Board.
(4) The insolvency professional agency shall file a printed copy of the amended
bye-laws with the Board within fifteen days from the date when such amendment
is made effective.
CHAPTER III
GOVERNING BOARD
Composition of the Governing Board
5. (1) The Governing Board shall have a minimum of seven directors.
(2) More than half of the directors shall be persons resident in India at
the time of their appointment, and at all times during their tenure as directors.
(3) Not more than one-fourth of the directors shall be insolvency professionals.
(4) More than half of the directors shall be independent directors at the time of
their appointment, and at all times during their tenure as directors :
Provided that no meeting of the Governing Board shall be held without the
presence of at least one independent director.
174 IBBI (MODEL BYE-LAWS AND GOVERNING BOARD OF IPAs) REGULATIONS, 2016
(5) An independent director shall be an individual –

(a) who is a person of ability and integrity ;
(b) who has expertise in the field of finance, law, management or insolvency.
(c) who is not an insolvency professional ;
(d) who is not a relative of the directors of the Governing Board ;
(e) who had or has no pecuniary relationship with the insolvency professional
agency, or any of its directors, or any of its shareholders holding more
than ten percent of its share capital, during the two immediately preceding
financial years or during the current financial year ;
(f) who is not a shareholder of the insolvency professional agency ;
(g) who is not a member of a governing council of any of the shareholders
holding more than ten percent of the share capital of the insolvency
professional agency ; and
(6) The directors shall elect an independent director as the Chairperson of the
Governing Board.
Explanation : For the purposes of this Regulation, any fraction contained in –
(a) ‘more than half’ shall be rounded off to the next higher number ; and
(b) ‘not more than one-fourth’ shall be rounded down to the next lower
number.
SCHEDULE
MODEL BYE-LAWS OF AN INSOLVENCY PROFESSIONAL AGENCY
[Under regulation 3 read with regulation 2(1)(c)]
I. General
1. The name of the Insolvency Professional Agency is “____” (hereinafter referred
to as the ‘Agency’).
2. The Agency is registered as a company under section 8 of the Companies Act,
2013 with its registered office situated at ______ [provide full address].
3. These bye-laws may not be amended, except in accordance with the Insolvency
and Bankruptcy Board of India (Model Bye-Laws and Governing Board of
Insolvency Professional Agencies) Regulations, 2016.
II. Definitions
4. (1) In these bye-laws, unless the context otherwise requires –
(a) “certificate of membership” means the certificate of membership of the

Agency granted under bye-law 10 ;
(b) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016) ;
(c) “Governing Board” means the Board of directors of the Agency as defined
under section 2(10) of Companies Act, 2013 (18 of 2013) ;
(d) “professional member” means an insolvency professional who has been
enrolled as such, in accordance with Part VI of these bye-laws ;
(e) “relative” shall have the same meaning as assigned to it in section 2(77)
of the Companies Act, 2013.
defined in these bye-laws shall have the meanings assigned to them in the
Code.
III. Objectives
5. (1) The Agency shall carry on the functions of the insolvency professional
agency under the Code, and functions incidental thereto.
(2) The Agency shall not carry on any function other than those specified in sub-
clause (1), or which is inconsistent with the discharge of its functions as an
insolvency professional agency.
IV. Duties of the agency

6. (1) The Agency shall maintain high ethical and professional standards in the
regulation of its professional members.
(2) The Agency shall -
(a) ensure compliance with the Code and rules, regulations and guidelines
issued thereunder governing the conduct of insolvency professional
agencies and insolvency professionals ;
(b) employ fair, reasonable, just, and non-discriminatory practices for the
enrolment and regulation of its professional members ;
(c) be accountable to the Board in relation to all bye-laws and directions
issued to its professional members ;
(d) develop the profession of insolvency professionals ;
(e) promote continuous professional development of its professional
members ;
(f) continuously improve upon its internal regulations and guidelines to
ensure that high standards of professional and ethical conduct are

maintained by its professional members ; and
(g) provide information about its activities to the Board.
V. Committees of the agency
Advisory Committee of Professional Members

7. (1) The Governing Board may form an Advisory Committee of professional
members of the Agency to advise it on any matters pertaining to –
(a) the development of the profession ;
(b) standards of professional and ethical conduct ; and
(c) best practices in respect of insolvency resolution, liquidation and
bankruptcy.
(2) The Advisory Committee may meet at such places and times as the Governing
Board may provide.
Other Committees of the Agency
8. (1) The Governing Board shall constitute –
(a) one or more Membership Committee(s) consisting of such members as it
deems fit ;
(b) a Monitoring Committee consisting of such members as it deems fit ;
(c) one or more Grievance Redressal Committee(s), with not less than three
members, at least one of whom shall be a professional member of the
Agency ;
(d) one or more Disciplinary Committee(s) consisting of at least one member
nominated by the Board.
(2) The Chairperson of each of these Committees shall be an independent director
of the Agency.
VI. Professional membership
Eligibility for Enrolment
9. No individual shall be enrolled as a professional member if he is not eligible
to be registered as an insolvency professional with the Board :
Provided that the Governing Board may provide additional eligibility requirements
for enrolment :
Provided further that such additional requirements shall not discriminate on the
grounds of religion, race, caste, gender, place of birth or professional affiliation.
Process of Enrolment as Professional Member

10. (1) An individual may apply for enrolment as a professional member by
submitting an application in such form, in such manner and with such fees as
may be specified by the Agency.
(2) The Agency shall examine the application in accordance with the applicable
provisions of the Code, and rules, regulations and guidelines thereunder.
(3) On examination of the application, the Agency shall give an opportunity to the
(4) The Agency may require an applicant to submit additional documents,
information or clarification that it deems fit, within reasonable time.
(5) The Agency may reject an application if the applicant does not satisfy the
criteria for enrolment or does not remove the deficiencies or submit additional
documents or information to its satisfaction, for reasons recorded in
writing.
(6) The rejection of the application shall be communicated to the applicant stating
the reasons for such rejection, within thirty days of the receipt of the application,
excluding the time given for removing the deficiencies or presenting additional
documents or clarification by the Agency, as the case may be.
(7) The acceptance of the application shall be communicated to the applicant,
along with a certificate of membership in Form A of the Annexure to these bye-
laws.
(8) An applicant aggrieved of a decision rejecting his application may appeal to
the Membership Committee of the Agency within thirty days from the receipt of
such decision.
(9) The Membership Committee shall pass an order disposing of the appeal in
the manner it deems expedient, within thirty days of the receipt of the appeal.
Professional Membership Fee

11. The Agency may require the professional members to pay a fixed sum of
money as its annual membership fee.
Register of Professional Members

12. (1) The Agency shall maintain a register of its professional members, containing
their –
(a) name ;
(b) proof of identity ;
(c) contact details ;

(d) address ;
(e) date of enrolment and professional membership number ;
(f) date of registration with the Board and registration number ;
(g) details of grievances pending against him with the Agency ;
(h) details of disciplinary proceedings pending against him with the Agency ;
and
(i) details of orders passed against him by the Board or Disciplinary
Committee of the Agency.
(2) The records relating to a professional member shall be made available for
inspection to –
(a) the Board,
(b) the Adjudicating Authority,
(c) the committee of creditors in a corporate insolvency resolution process
where the professional member has been appointed as an interim
resolution professional, or
(d) any other person who has obtained the consent of the member for such
inspection.
VII. Duties of members

13. (1) In the performance of his functions, a professional member shall –
(a) act in good faith in discharge of his duties as an insolvency professional ;
(b) endeavour to maximise the value of assets of the debtor ;
(c) discharge his functions with utmost integrity and objectivity ;
(d) be independent and impartial ;
(e) discharge his functions with the highest standards of professional
competence and professional ethics ;
(f) continuously upgrade his professional expertise ;
(g) perform duties as quickly and efficiently as reasonable, subject to the
timelines under the Code ;
(h) comply with applicable laws in the performance of his functions ; and
(i) maintain confidentiality of information obtained in the course of his

professional activities unless required to disclose such information by law.
14. The Agency shall have a code of conduct that shall be consistent with, and
that shall provide for all matters in the Code of Conduct as specified in the Insolvency
and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016.
VIII. Monitoring of members

15. The Agency shall have a monitoring policy to monitor the professional activities
and conduct of professional members for their adherence to the provisions of the
Code, rules, regulations and guidelines issued thereunder, these bye-laws, the code
of conduct and directions given by the Governing Board.
16. A professional member shall submit information, including records of ongoing
and concluded engagements as an insolvency professional, in the manner and
format specified by the Agency, at least twice a year.
17. The Monitoring Committee shall review the information and records submitted
by the professional members in accordance with the monitoring policy.
18. The monitoring policy shall provide for the following –
(a) the frequency of monitoring ;
(b) the manner and format of submission or collection of information and
records of the professional members, including by way of inspection ;
(c) the obligations of professional members to comply with the monitoring
policy ;
(d) the use, analysis and storage of information and records ;
(e) evaluation of performance of members ; and
(f) any other matters that may be specified by the Governing Board.
19. The monitoring policy shall –
(a) have due regard for the privacy of members,
(b) provide for confidentiality of information received, except when disclosure
of information is required by the Board or by law, and
(c) be non-discriminatory.
20. The Agency shall submit a report to the Board in the manner specified by the
Board with information collected during monitoring, including information
pertaining to -
(a) the details of the appointments made under the Code,

(b) the transactions conducted with stakeholders during the period of his
appointment ;
(c) the transactions conducted with third parties during the period of his
appointment ; and
(d) the outcome of each appointment.
IX. Grievance redressal mechanism

21. (1) The Agency shall have a grievance redressal policy providing the procedure
for receiving, processing, redressing and disclosing grievances against the
Agency or any professional member of the Agency by-
(a) any professional member of the Agency ;
(b) any person who has engaged the services of the concerned professional
members of the Agency ; or
(c) any other person or class of persons as may be provided by the Governing
Board.
(2) The grievance redressal committee, after examining the grievance, may-
(a) dismiss the grievance if it is devoid of merit ; or
(b) initiate a mediation between parties for redressal of grievance.
(3) The grievance redressal committee shall refer the matter to the Disciplinary
Committee, wherever the grievance warrants disciplinary action.
22. The grievance redressal policy shall provide for –
(a) the format and manner for filing grievances ;
(b) maximum time and format for acknowledging receipt of a grievance ;
(c) maximum time for the disposal of the grievance by way of dismissal,
reference to the Disciplinary Committee or the initiation of mediation ;
(d) details of the mediation mechanism ;
(e) provision of a report of the grievance and mediation proceedings to the
parties to the grievance upon dismissal or resolution of the grievance ;
(f) action to be taken in case of malicious or false complaints ;
(g) maintenance of a register of grievances made and resolutions arrived
at ; and
(h) periodic review of the grievance redressal mechanism.
X. Disciplinary proceedings
23. The Agency may initiate disciplinary proceedings by issuing a show-cause
notice against professional members –
(a) based on a reference made by the Grievances Redressal Committee ;
(b) based on monitoring of professional members ;
(c) following the directions given by the Board or any court of law ; or
(d) suo moto, based on any information received by it.
24. (1) The Agency shall have a Disciplinary Policy, which shall provide for the
following –
(a) the manner in which the Disciplinary Committee may ascertain facts ;
(b) the issue of show-cause notice based on the facts ;
(c) disposal of show-cause notice by a reasoned order, following principles
of natural justice ;
(d) timelines for different stages of disposal of show cause notice ; and
(e) rights and obligations of the parties to the proceedings.
(2) The orders that may be passed by the Disciplinary Committee shall include –
(a) expulsion of the professional member ;
(b) suspension of the professional member for a certain period of time ;
(c) admonishment of the professional member ;
(d) imposition of monetary penalty ;
(e) reference of the matter to the Board, which may include, in appropriate
cases, recommendation of the amount of restitution or compensation that
may be enforced by the Board ; and
(f) directions relating to costs.
(3) The Disciplinary Committee may pass an order for expulsion of a professional
member if it has found that the professional member has committed –
(a) an offence under any law for the time being in force, punishable with
imprisonment for a term exceeding six months, or an offence involving
moral turpitude ;
(b) a gross violation of the Code, rules, regulations and guidelines issued
thereunder, bye-laws or directions given by the Governing Board which
renders him not a fit and proper person to continue acting as an
insolvency professional.
Explanation : The violations referred to in sub-clause (b) include –
(i) making a false representation or indulging in fraud for the purpose of
obtaining creditors’ approval under section 28, 31, 111 or 153 of the Code ;
(ii) contravening provisions of the Code in a manner which is actionable in
accordance with sections 70(2) or 185 of the Code ;
(iii) knowingly or wilfully committing or authorising or permitting contravention
of section 14, 96, 101 or 124 of the Code ;
(iv) contravening provisions of the Code inviting action in accordance with
section 71 or 187 of the Code ;
(v) aiding or abetting any activity which is actionable in accordance with
Chapter VII of Part II or Chapter VII of Part III of the Code,
(vi) providing unequal or differential treatment to the disadvantage of a party
which cannot be justified with reference to the interests of the insolvency
resolution, liquidation or bankruptcy process ; or
(vii) in any other case it deems fit.
(4) Any order passed by the Disciplinary Committee shall be placed on the website
of the Agency within seven days from passing of the said order, and a copy of the
order shall be provided to each of the parties to the proceeding.
(5) Monetary penalty received by the Agency under the orders of the Disciplinary
Committee shall be credited to the Insolvency and Bankruptcy Fund constituted
under section 224 of the Code.
25. (1) The Governing Board shall constitute an Appellate Panel consisting of one
independent director of the Agency, one member from amongst the persons of
eminence having experience in the field of law, and one member nominated by
the Board.
(2) Any person aggrieved of an order of the Disciplinary Committee may prefer an
appeal before the Appellate Panel within thirty days from the receipt of a copy of
the final order.
(3) The Appellate Panel shall dispose of the appeal in the manner it deems
expedient, within thirty days of the receipt of the appeal.
XI. Surrender of professional membership and expulsion from professional

membership
Temporary Surrender of Professional Membership

26. (1) A professional member shall make an application for temporary surrender
of his membership of the Agency at least thirty days before he–
(a) becomes a person not resident in India ;
(b) takes up employment ; or
(c) starts any business, except as specifically permitted under the Code of
Conduct ;
and upon acceptance of such temporary surrender and on completion of thirty
days from the date of application for temporary surrender, the name of the
professional member shall be temporarily struck from the registers of the Agency,
and the same shall be intimated to the Board.
(2) No application for temporary surrender of professional membership of the
Agency shall be accepted if –
(a) there is a grievance or disciplinary proceeding pending against the
professional member before the Agency or the Board, and he has not
given an undertaking to cooperate in such proceeding ; or
(b) the professional member has been appointed as a resolution
professional, liquidator or bankruptcy trustee for a process under the Code,
and the appointment of another insolvency professional may be
detrimental to such process.
(3) A professional member may make an application to revive his temporarily
surrendered membership when the conditions for temporary surrender as
provided in sub-clause (1) cease to be applicable, and upon acceptance of the
application for revival, the name of the professional member shall be re-inserted
in the register of the Agency, and the same shall be intimated to the Board.
Surrender of Professional Membership

27. (1) A professional member who wishes to surrender his membership of the
Agency may do so by submitting an application for surrender of his membership.
(2) Upon acceptance of such surrender of his membership, and completion of
thirty days from the date of such acceptance, the name of the professional member
shall be struck from the registers of the Agency, and the same shall be intimated
to the Board.
28. Any fee that is due to the Agency from a professional member surrendering
his membership shall be cleared prior to his name being struck from the registers
of the Agency.
29. The Agency may refuse to accept the surrender of membership by any
professional member if –
(a) there is any grievance or disciplinary proceeding pending against the
professional member before the Agency or the Board ; or
(b) the professional member has been appointed as a resolution
professional, liquidator or bankruptcy trustee for a process under the Code,
and the appointment of another insolvency professional may be
detrimental to such process.
Expulsion from Professional Membership.
30. A professional member shall be expelled by the Agency –
(a) if he becomes ineligible to be enrolled under bye-law 9 ;
(b) on expiry of thirty days from the order of the Disciplinary Committee, unless
set aside or stayed by the Appellate Panel ;
(c) upon non-payment of professional membership fee despite at least two
notices served in writing ;
(d) upon the cancellation of his certificate of registration by the Board ;
(e) upon the order of any court of law.
ANNEXURE
FORM A
CERTIFICATE OF PROFESSIONAL MEMBERSHIP
(Under bye-law 10 of the Agency’s bye-laws)
No. ..................
1. This is to certify that [insert name] residing at [insert address] is enrolled as a
professional member of [insert name of insolvency professional agency] with
professional membership no. [insert number].
2. This certificate shall be valid from [insert date].
Sd/-
For and on behalf of [name of insolvency professional agency]
Place :
Date :
185

NOTIFICATION
New Delhi, the 23rd November, 2016

(Insolvency Professionals) Regulations, 2016
No. IBBI/2016-17/GN/REG003. – In exercise of the powers conferred by sections
196, 207 and 208 read with section 240 of the Insolvency and Bankruptcy Code,
2016 (31 of 2016), the Board hereby makes the following Regulations, namely-
CHAPTER I
GENERAL
India (Insolvency Professionals) Regulations, 2016.
(2) These Regulations shall come into force on 29th November, 2016.
Definitions
2. (1) In these Regulations, unless the context otherwise requires –
(a) “Bar Council” means a Bar Council constituted under the Advocates Act,
1961 (25 of 1961) ;
(b) “certificate of registration” means a certificate of registration granted by
the Board under section 207 of the Code read with these Regulations ;
(c) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016) ;
(d) “Institute of Chartered Accountants of India” means the Institute constituted
under the Chartered Accountants Act, 1949 (38 of 1949) ;
(e) “Institute of Cost Accountants of India” means the Institute constituted
under the Cost and Works Accountants Act, 1959 (23 of 1959) ;
(f) “Institute of Company Secretaries of India” means the Institute constituted
under the Institute of the Company Secretaries Act, 1980 (56 of 1980) ; and
(g) “professional member” means an individual who has been enrolled as a
member of an insolvency professional agency ;
185
186 IBBI (INSOLVENCY PROFESSIONALS) REGULATIONS, 2016
defined in these Regulations, shall have the meanings assigned to them in the
Code.
CHAPTER II
INSOLVENCY EXAMINATIONS
3. (1) The Board shall, either on its own or through a designated agency, conduct
a ‘National Insolvency Examination’ in such a manner and at such frequency, as
may be specified, to test the knowledge and practical skills of individuals in the
areas of insolvency, bankruptcy and allied subjects.
(2) The Board shall, either on its own or through a designated agency, conduct a
‘Limited Insolvency Examination’ to test the knowledge and application of
knowledge of individuals in the areas of insolvency, bankruptcy and allied
subjects.
(3) The syllabus, format and frequency of the ‘Limited Insolvency Examination’,
including qualifying marks, shall be published on the website of the Board at
least one month before the examination.
CHAPTER III
REGISTRATION OF INSOLVENCY PROFESSIONALS
Eligibility
4. No individual shall be eligible to be registered as an insolvency professional
if he –
(a) is a minor ;
(b) is not a person resident in India ;
(c) does not have the qualification and experience specified in regulation 5
or regulation 9, as the case may be ;
(d) has been convicted by any competent court for an offence punishable
with imprisonment for a term exceeding six months or for an offence
involving moral turpitude, and a period of five years has not elapsed
from the date of expiry of the sentence :
Provided that if a person has been convicted of any offence and sentenced
in respect thereof to imprisonment for a period of seven years or more, he
shall not be eligible to be registered ;
(e) he is an undischarged insolvent, or has applied to be adjudicated as an
insolvent ;
(f) he has been declared to be of unsound mind ; or
(g) he is not a fit and proper person.
IBBI (INSOLVENCY PROFESSIONALS) REGULATIONS, 2016 187
Explanation : For determining whether an individual is fit and proper under these
Regulations, the Board may take account of any consideration as it deems fit,
including but not limited to the following criteria –
(iii) competence, including financial solvency and net worth.
Qualifications and experience
5. Subject to the other provisions of these Regulations, an individual shall be
eligible for registration, if he –
(a) has passed the National Insolvency Examination ;
(b) has passed the Limited Insolvency Examination, and has fifteen years of
experience in management, after he received a Bachelor’s degree from a
university established or recognised by law ; or
(c) has passed the Limited Insolvency Examination and has ten years of
experience as –
(i) a chartered accountant enrolled as a member of the Institute of
Chartered Accountants of India,
(ii) a company secretary enrolled as a member of the Institute of
Company Secretaries of India,
(iii) a cost accountant enrolled as a member of the Institute of Cost
Accountants of India, or
(iv) an advocate enrolled with a Bar Council.
Application for certificate of registration

6. (1) An individual enrolled with an insolvency professional agency as a
professional member may make an application to the Board in Form A of the
Second Schedule to these Regulations, along with a non-refundable application
fee of ten thousand rupees to the Board.
(2) The Board shall acknowledge an application made under this regulation
additional documents, information or clarification that it deems fit.
(4) The Board may require the applicant to appear, within reasonable time, before
the Board in person, or through his authorised representative for clarifications
required for processing the application.
Certificate of registration
that the applicant is eligible under these Regulations, it may grant a certificate of
registration to the applicant to carry on the activities of an insolvency professional
in Form B of the Second Schedule to these Regulations, within sixty days of receipt
of the application, excluding the time given by the Board for presenting additional
documents, information or clarification, or appearing in person, as the case may
be.
(2) The registration shall be subject to the conditions that the insolvency
professional shall –
(a) at all times abide by the Code, rules, regulations, and guidelines
thereunder and the bye-laws of the insolvency professional agency with
which he is enrolled ;
(b) at all times continue to satisfy the requirements under regulation 4 ;
(c) pay a fee of ten thousand rupees to the Board, every five years after the
year in which the certificate is granted ;
(d) not render services as an insolvency professional unless he becomes a
partner or director of an insolvency professional entity recognised by the
Board under regulation 13, if he is not a citizen of India ;
(e) take prior permission of the Board for shifting his professional membership
from one insolvency professional agency to another, after receiving no
objection from both the concerned insolvency professional agencies ;
(f) take adequate steps for redressal of grievances ;
(g) maintain records of all assignments undertaken by him under the Code
for at least three years from the completion of such assignment ;
(h) abide by the Code of Conduct specified in the First Schedule to these
Regulations ; and
(i) abide by such other conditions as may be imposed by the Board.
Refusal to grant certificate

8. (1) If, after considering an application made under regulation 6, the Board is of
the prima facie opinion that the registration ought not be granted, it shall
communicate the reasons for forming such an opinion and give the applicant an
opportunity to explain why his application should be accepted, within fifteen
days of the receipt of the communication from the Board, to enable it to form a
final opinion.
(2) The communication under sub-regulation (1) shall be made to the applicant
within forty five days of receipt of the application, excluding the time given by the
Board for presenting additional documents, information or clarifications, or
appearing in person, as the case may be.
(a) accept the application, along with the certificate of registration, or
(b) reject the application by an order, giving reasons thereof,
within thirty days of receipt of the explanation.
Registration for a limited period

9. (1) Notwithstanding any of the provisions of regulation 5, an individual shall be
eligible to be registered for a limited period as an insolvency professional if he –
(a) has been ‘in practice’ for fifteen years as –
(i) a chartered accountant enrolled as a member of the Institute of
Chartered Accountants of India,
(ii) a company secretary enrolled as a member of the Institute of
Company Secretaries of India,
(iii) a cost accountant enrolled as a member of the Institute of Cost
Accountants of India, or
(iv) an advocate enrolled with a Bar Council ; and
(b) submits an application for registration in Form A of the Second Schedule
to these Regulations to the insolvency professional agency with which he
is enrolled on or before 31st December, 2016 along with a non-refundable
application fee of five thousand rupees which shall be collected by such
insolvency professional agency on behalf of the Board.
(2) The insolvency professional agency shall submit to the Board the fee collected
and the details of the applications received under sub-regulation (1)(b).
(3) An individual referred to sub-regulation (1) shall be registered for a limited
period upon submission of the details and fee to the Board under sub-regulation
(2), which shall be valid for a period of six months from the date of such submission.
(4) An insolvency professional registered under sub-regulation (3) shall not
undertake any assignment as an insolvency professional after the expiry of his
registration :
Provided that he may complete the pending assignments undertaken before the
expiry of his registration, and his registration shall be deemed to be valid for this
limited purpose.
CHAPTER IV
TEMPORARY SURRENDER AND DISCIPLINARY PROCEEDINGS
Temporary surrender
10. (1) An insolvency professional agency shall inform the Board if any of its
professional members has temporarily surrendered his certificate of membership
or revived his certificate of membership after temporary surrender, not later than
seven days from approval of the application for temporary surrender or revival,
as the case may be.
(2) The Board shall take note of the information received under sub-regulation (1).
Disciplinary proceedings
11. (1) Based on the findings of an inspection or investigation, or on material
issue a show cause notice to the insolvency professional.
(2) The show cause notice shall be in writing, and shall state –
(a) the provisions of the Code under which it has been issued ;
(b) the details of the alleged facts ;
(c) the details of the evidence in support of the alleged facts ;
(d) the provisions of the Code, rules, regulations and guidelines thereunder
allegedly violated, or the manner in which the public interest is allegedly
affected ;
allegations are established ;
(f) the manner in which the insolvency professional is required to respond to
the show cause notice ;
(g) consequences of failure to respond to the show cause notice ; and
(h) procedure to be followed for disposal of the show cause notice.
(3) The show cause notice shall enclose copies of documents relied upon and
extracts of relevant portions from the report of investigation or inspection, or other
records.
(4) A show cause notice issued shall be served on the insolvency professional in
the following manner –
(a) by sending it to the insolvency professional, at the address provided by
him or provided by the insolvency professional agency with which he is
enrolled, by registered post with acknowledgement due ; or
(b) by an appropriate electronic means to the email address of the insolvency
professional, provided by him or provided by the insolvency professional
agency with which he is enrolled.
(5) The Board shall constitute a Disciplinary Committee for disposal of the show
cause notice.
(6) The Disciplinary Committee shall endeavour to dispose of the show cause
notice within a period of six months of the assignment.
(7) The Disciplinary Committee shall dispose of the show cause notice assigned
under sub-regulation (5) by a reasoned order in adherence to principles of natural
justice, and after considering the submissions, if any, made by the insolvency
professional, the relevant material facts and circumstances, and the material on
record.
(8) The order disposing of a show cause notice may provide for-
(a) no action ;
(b) warning ;
(c) any of the actions under section 220(2) to (4) ; or
thirty days have elapsed from the date of issue of the order unless the Disciplinary
Committee states otherwise in the order along with the reason for the same.
(10) The order passed under sub-regulation (7) shall be issued to the insolvency
professional, with a copy issued to the insolvency professional agency with
which he is enrolled immediately, and be published on the website of the Board.
CHAPTER V
RECOGNITION OF INSOLVENCY PROFESSIONAL ENTITIES
Recognition of Insolvency Professional Entities

12. (1) A limited liability partnership, a registered partnership firm or a company
may be recognised as an insolvency professional entity if –
(a) a majority of the partners of the limited liability partnership or registered

partnership firm are registered as insolvency professionals ; or
(b) a majority of the whole-time directors of the company are registered as
insolvency professionals,
as the case may be.
(2) A person eligible under sub-regulation (1) may make an application for
recognition as an insolvency professional entity to the Board in Form C of the
Second Schedule to these Regulations.
that the applicant is eligible under these Regulations, it may grant a certificate of
recognition as an insolvency professional entity in Form D of the Second Schedule
to these Regulations.
(2) The recognition shall be subject to the conditions that the insolvency
professional entity shall –
(a) at all times continue to satisfy the requirements under regulation 12 ;
(b) inform the Board, within seven days, when an insolvency professional
ceases to be its director or partner, as the case may be,
(c) inform the Board, within seven days, when an insolvency professional
joins as its director or partner, as the case may be, and
(d) abide by such other conditions as may be specified.
(3) An insolvency professional entity shall be jointly and severally liable for all
acts or omissions of its partners or directors as insolvency professionals committed
during such partnership or directorship.
14. Where the Board is of the opinion that sufficient cause exists for de-recognition
of an insolvency professional entity, it may do so by passing a reasoned order.
FIRST SCHEDULE
[Under Regulation 7(2)(h)]
CODE OF CONDUCT FOR INSOLVENCY PROFESSIONALS

Integrity and objectivity
1. An insolvency professional must maintain integrity by being honest,
straightforward, and forthright in all professional relationships.
2. An insolvency professional must not misrepresent any facts or situations and
should refrain from being involved in any action that would bring disrepute to the
profession.
3. An insolvency professional must act with objectivity in his professional dealings

by ensuring that his decisions are made without the presence of any bias, conflict
of interest, coercion, or undue influence of any party, whether directly connected
to the insolvency proceedings or not.
4. An insolvency professional appointed as an interim resolution professional,
resolution professional, liquidator, or bankruptcy trustee should not himself acquire,
directly or indirectly, any of the assets of the debtor, nor knowingly permit any
relative to do so.
Independence and impartiality

5. An insolvency professional must maintain complete independence in his
professional relationships and should conduct the insolvency resolution,
liquidation or bankruptcy process, as the case may be, independent of external
influences.
6. In cases where the insolvency professional is dealing with assets of a debtor
during liquidation or bankruptcy process, he must ensure that he or his relatives
do not knowingly acquire any such assets, whether directly or indirectly unless it
is shown that there was no impairment of objectivity, independence or impartiality
in the liquidation or bankruptcy process and the approval of the Board has been
obtained in the matter.
7. An insolvency professional shall not take up an assignment under the Code if
he, any of his relatives, any of the partners or directors of the insolvency
professional entity of which he is a partner or director, or the insolvency professional
entity of which he is a partner or director is not independent, in terms of the
Regulations related to the processes under the Code, in relation to the corporate
person/debtor and its related parties.
8. An insolvency professional shall disclose the existence of any pecuniary or
personal relationship with any of the stakeholders entitled to distribution under
section 53 or 178 of the Code, and the concerned corporate person/debtor as
soon as he becomes aware of it, by making a declaration of the same to the
applicant, committee of creditors, and the person proposing appointment, as
applicable.
9. An insolvency professional shall not influence the decision or the work of the
committee of creditors or debtor, or other stakeholders under the Code, so as to
make any undue or unlawful gains for himself or his related parties, or cause
any undue preference for any other persons for undue or unlawful gains and
shall not adopt any illegal or improper means to achieve any mala fide
objectives.
Professional competence
10. An insolvency professional must maintain and upgrade his professional
knowledge and skills to render competent professional service.
Representation of correct facts and correcting misapprehensions

11. An insolvency professional must inform such persons under the Code as may
be required, of a misapprehension or wrongful consideration of a fact of which
he becomes aware, as soon as may be practicable.
12. An insolvency professional must not conceal any material information or
knowingly make a misleading statement to the Board, the Adjudicating Authority
or any stakeholder, as applicable.
Timeliness
13. An insolvency professional must adhere to the time limits prescribed in the
Code and the rules, regulations and guidelines thereunder for insolvency
resolution, liquidation or bankruptcy process, as the case may be, and must
carefully plan his actions, and promptly communicate with all stakeholders
involved for the timely discharge of his duties.
14. An insolvency professional must not act with mala fide or be negligent while
performing his functions and duties under the Code.
Information management
15. An insolvency professional must make efforts to ensure that all communication
to the stakeholders, whether in the form of notices, reports, updates, directions,
or clarifications, is made well in advance and in a manner which is simple, clear,
and easily understood by the recipients.
16. An insolvency professional must ensure that he maintains written
contemporaneous records for any decision taken, the reasons for taking the
decision, and the information and evidence in support of such decision. This
shall be maintained so as to sufficiently enable a reasonable person to take a
view on the appropriateness of his decisions and actions.
17. An insolvency professional must not make any private communication with
any of the stakeholders unless required by the Code, rules, regulations and
guidelines thereunder, or orders of the Adjudicating Authority.
18. An insolvency professional must appear, co-operate and be available for
inspections and investigations carried out by the Board, any person authorised
by the Board or the insolvency professional agency with which he is enrolled.
19. An insolvency professional must provide all information and records as may
be required by the Board or the insolvency professional agency with which he is

enrolled.
20. An insolvency professional must be available and provide information for
any periodic study, research and audit conducted by the Board.
Confidentiality
21. An insolvency professional must ensure that confidentiality of the information
relating to the insolvency resolution process, liquidation or bankruptcy process,
as the case may be, is maintained at all times. However, this shall not prevent
him from disclosing any information with the consent of the relevant parties or
required by law.
Occupation, employability and restrictions

22. An insolvency professional must refrain from accepting too many assignments,
if he is unlikely to be able to devote adequate time to each of his assignments.
23. An insolvency professional must not engage in any employment, except
when he has temporarily surrendered his certificate of membership with the
insolvency professional agency with which he is registered.
24. An insolvency professional must not conduct business which in the opinion
of the Board is inconsistent with the reputation of the profession.
Remuneration and costs

25. An insolvency professional must provide services for remuneration which is
charged in a transparent manner, is a reasonable reflection of the work necessarily
and properly undertaken, and is not inconsistent with the applicable regulations.
26. An insolvency professional shall not accept any fees or charges other than
those which are disclosed to and approved by the persons fixing his remuneration.
27. An insolvency professional shall disclose all costs towards the insolvency
resolution process costs, liquidation costs, or costs of the bankruptcy process, as
applicable, to all relevant stakeholders, and must endeavour to ensure that such
costs are not unreasonable.
Gifts and hospitality

28. An insolvency professional, or his relative must not accept gifts or hospitality
which undermines or affects his independence as an insolvency professional.
29. An insolvency professional shall not offer gifts or hospitality or a financial or
any other advantage to a public servant or any other person, intending to obtain
or retain work for himself, or to obtain or retain an advantage in the conduct of
profession for himself.
SECOND SCHEDULE
FORM A
[Under regulation 6 or regulation 9 of the Insolvency and Bankruptcy Board of

India (Insolvency Professionals) Regulations, 2016]
To
The Chairperson
Subject : Application for registration as an insolvency professional/insolvency
professional for limited period
Sir/Madam,
I, having been enrolled as a professional member with the (please write the
name of the insolvency professional agency), hereby apply for registration as
(a) an insolvency professional
(b) an insolvency professional for limited period (strike off which is not
applicable)
under section 207 of the Insolvency and Bankruptcy Code, 2016 read with
regulation 6 or regulation 9 of the Insolvency and Bankruptcy Board of India
(Insolvency Professionals) Regulations, 2016.
My details are as under :
A. Personal details
1. Title (Mr/Mrs/Ms) :
2. Name :
3. Father’s Name :
4. Date of Birth :
5. Place of Birth :
6. PAN No. :
7. AADHAAR No. :
8. Passport No. :
9. Address for Correspondence :
10. Permanent Address :
11. E-Mail Address :

12. Mobile No. :
B. Educational, professional and insolvency examination qualifications
1. Educational qualifications
[Please provide educational qualifications from Bachelor’s degree onwards]
Educational Year of Marks (%) Grade/Class University/ Remarks,
qualification Passing College if any
2. Professional qualifications
Professional Institute/Professional Membership No. Date of enrolment Remarks,
qualification Body (if applicable) if any
3. Insolvency qualifications
3.1 Have you passed Limited Insolvency Examination? (Yes/No)
3.2 Have you passed National Insolvency Examination? (Yes/No)
C. Work experience
1. Are you presently in practice/employment? (Yes/No)
2. Number of years in practice (in years and months) :
3. If in practice, address for professional correspondence :
4. Number of years in employment (in years and months) :
5. Experience Details (from the date of enrolment as Advocate/Chartered
Accountant/Company Secretary/Cost Accountant/Bachelors’ Degree)
Sl. From To Employment/ If employed, If in practice, Area of work
No. Date Date Practice Name of practice as
Employer Advocate/
and Chartered
Designation Accountant/
Company
Secretary/
Cost
Accountant
D. Insolvency professional agency

1. Please give details of the insolvency professional agency with which you
are enrolled as a professional member.
2. Please state your professional membership number.
E. Additional information
1. Have you ever been convicted for an offence? Yes/No.
If yes, please give details.
2. Are any criminal proceedings pending against you? (Yes/No)
3. Have you ever been declared as an undischarged insolvent, or applied to
be declared so? (Yes/No)
4. Please provide any additional information that may be relevant for your
application.
F. Attachments
1. Copy of proof of residence.
2. Copies of documents in support of educational qualifications, professional
qualification and insolvency examination qualifications.
3. Copies of documents demonstrating practice as -
(i) a chartered accountant enrolled with the Institute of Chartered
Accountants of India ;
(ii) a company secretary enrolled with the Institute of Company
Secretaries of India ;
(iii) a cost accountant enrolled with the Institute of Cost Accountants of
India ; or
(iv) an advocate enrolled with the Bar Council of any State in India ;
4. Copies of certificate of employment from the employer(s), specifying the
period of such employment.
5. Financial statement/Income Tax Returns for the last three years.
6. Copy of certificate of professional membership with an insolvency
7. Passport-size photo.
8. Evidence of deposit/payment of five thousand rupees/ten thousand rupees,
as applicable.
G. AFFIRMATIONS
1. Copies of documents, as listed in section F of this application form have
been attached/uploaded. The documents attached/uploaded are ……
I undertake to furnish any additional information as and when called for.
2. I am not disqualified from being registered as an insolvency professional
under the Insolvency and Bankruptcy Board of India (Insolvency
Professionals) Regulations, 2016.
3. This application and the information furnished by me along with this
application is true and complete. If found false or misleading at any stage,
my registration/registration for limited period shall be summarily
cancelled.
4. I hereby undertake to comply with the requirements of the Insolvency and
Bankruptcy Code, 2016, the rules, regulations and guidelines issued
thereunder, the bye-laws of the insolvency professional agency with which
I am enrolled, and the resolutions passed and directions given by the
Board and the Governing Board of such insolvency professional agency.
5. The applicable fee has been paid.
Name and Signature of applicant
Place :
Date :
VERIFICATION BY THE INSOLVENCY PROFESSIONAL AGENCY
We have verified the above details submitted by ..................... who is our
professional member with professional membership No. ..................... and confirm
these to be true and correct. We recommend registration of ..................... as an
insolvency professional.
(Name and Signature)
Authorised Representative of the Insolvency Professional Agency
Seal of the Insolvency Professional Agency
Place :
Date :
SECOND SCHEDULE
FORM B

CERTIFICATE OF REGISTRATION
IP REGISTRATION NO. ............

(Insolvency Professionals) Regulations, 2016]
1. In exercise of the powers conferred by Regulation 7 of the Insolvency and
Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 the Board
hereby grants a certificate of registration to [insert name], to act as an insolvency
professional in accordance with these Regulations.
2. This certificate shall be valid from [insert start date].
Sd/-
For and on behalf of Insolvency and Bankruptcy Board of India
Place :
Date :
SECOND SCHEDULE
FORM C

To
The Chairperson
Sub. : Application for recognition as an insolvency professional entity
Sir/Madam,
1. I, being duly authorized for the purpose, hereby apply on behalf of [name and
address of the applicant] for recognition as an insolvency professional entity
under the Insolvency and Bankruptcy Board of India (Insolvency Professionals)
Regulations, 2016, and enclose proof that I am authorized to make this application
and correspond with the Board in this respect.
2. I, on behalf of [insert name], affirm that the applicant is eligible to be recognised

as an insolvency professional entity.
3. I, on behalf of [insert name], hereby affirm that –
(i) all information contained in this application is true and correct in all material
respects,
(ii) no material information relevant for the purpose of this application has
(iii) recognition granted in pursuance of this application may be cancelled
summarily if any information submitted herein is found to be false or
misleading in material respects at any stage.
4. If granted recognition, I, on behalf of [insert name], undertake to comply with
the requirements of the Code, the rules, regulations or guidelines issued
thereunder, and such other terms and conditions as may be imposed by the
Board while granting the certificate of recognition or subsequently.
Yours faithfully,
Authorised Signatory
(Name)
(Designation)
Place :
Date :
ANNEXURE TO FORM C
PART I
GENERAL
1. Name of the applicant :
2. Address of registered office and principal place of business of the applicant :
3. Corporate Identification Number (CIN)/Certificate of Registration :
4. PAN :
5. Name, designation and contact details of the person authorized to make
this application and correspond with the Board in this respect :
PART II
DIRECTORS/PARTNERS
1. Please state the details of all directors/partners of the applicant :
Sl. Name and address of DIN PAN Registration No. as an Professional
No. the director/partner insolvency professional membership
No.
Yours faithfully,
Authorised Signatory
(Name)
(Designation)
Place :
Date :
SECOND SCHEDULE
FORM D
CERTIFICATE OF RECOGNITION
INSOLVENCY PROFESSIONAL ENTITY RECOGNITION NO. .......

1. In exercise of the powers conferred by Regulation 13 of the Insolvency and
Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 the Board
hereby grants a certificate recognising [insert name], as an insolvency professional
entity.
2. This certificate of recognition shall be valid from [insert start date].
Sd/-
For and on behalf of Insolvency and Bankruptcy Board of India
Place :
Date :
203

NOTIFICATION
New Delhi, the 30th November, 2016

(Insolvency Resolution Process for Corporate
Persons) Regulations, 2016
IBBI/2016-17/GN/REG004 : In exercise of the powers conferred under sections 5,
7, 9, 14, 15, 17, 18, 21, 24, 25, 29, 30, 196 and 208 read with section 240 of the
Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Insolvency and Bankruptcy
Board of India hereby makes the following Regulations, namely –
CHAPTER I
PRELIMINARY

India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
(2) These Regulations shall come into force on 1st December, 2016.
(3) These Regulations shall apply to the corporate insolvency resolution process.
Definitions.
2. (1) In these Regulations, unless the context otherwise requires-
(a) “applicant” means the person(s) filing an application under sections 7, 9

or 10, as the case may be ;
(b) “Code” means the Insolvency and Bankruptcy Code, 2016 ;
(c) “Code of Conduct” means the code of conduct for insolvency professionals
as set out in the Insolvency and Bankruptcy Board of India (Insolvency
Professionals) Regulations, 2016 ;
(d) “committee” means a committee of creditors established under section

21 ;
(e) “corporate insolvency resolution process” means the insolvency resolution

process for corporate persons under Chapter II of Part II of the Code ;
203
204 IBBI (CIRP) REGULATIONS, 2016
(f) “dissenting financial creditors” means the financial creditors who voted
against the resolution plan approved by the committee ;
(g) “electronic form” shall have the meaning assigned to it in the Information
Technology Act, 2000 (21 of 2000) ;
(h) “electronic means” mean an authorized and secured computer
programme which is capable of producing confirmation of sending
communication to the participant entitled to receive such communication
at the last electronic mail address provided by such participant and keeping
record of such communication ;
(i) “identification number” means the Limited Liability Partnership
Identification Number or the Corporate Identity Number, as the case may
be ;
(j) “insolvency professional entity” means an entity recognised as such under
the Insolvency and Bankruptcy Board of India (Insolvency Professionals)
Regulations, 2016 ;
(k) “liquidation value” means the amount determined in accordance with
Regulation 35 ;
(l) “participant” means a person entitled to attend a meeting of the committee
under section 24 or any other person authorised by the committee to
attend the meeting ;
(m) “registered valuer” means a person registered as such in accordance
with the Companies Act, 2013 (18 of 2013) and rules made thereunder ;
(n) “Schedule” means the schedule to these Regulations ;
(o) “section” means section of the Code ;
(p) “video conferencing or other audio and visual means” means such audio
and visual facility which enables the participants in a meeting to
communicate concurrently with one another and to participate effectively
in the meeting.
defined in these Regulations, but defined in the Code, shall have the meanings
assigned to them in the Code.
CHAPTER II
GENERAL
Eligibility for resolution professional

3. (1) An insolvency professional shall be eligible to be appointed as a resolution
IBBI (CIRP) REGULATIONS, 2016 205
professional for a corporate insolvency resolution process of a corporate debtor

if he, and all partners and directors of the insolvency professional entity of which
he is a partner or director, are independent of the corporate debtor.
Explanation : A person shall be considered independent of the corporate debtor,
if he :
(a) is eligible to be appointed as an independent director on the Board of the
corporate debtor under section 149 of the Companies Act, 2013 (18 of
2013), where the corporate debtor is a company ;
(b) is not a related party of the corporate debtor ; or
(c) is not an employee or proprietor or a partner :
(i) of a firm of auditors or company secretaries in practice or cost auditors
of the corporate debtor ; or
(ii) of a legal or a consulting firm, that has or had any transaction with
the corporate debtor amounting to ten per cent or more of the gross
turnover of such firm,
in the last three financial years.
(2) A resolution professional shall make disclosures at the time of his appointment
and thereafter in accordance with the code of conduct.
(3) A resolution professional, who is a director or a partner of an insolvency
professional entity, shall not continue as a resolution professional in a corporate
insolvency resolution process if the insolvency professional entity or any other
partner or director of such insolvency professional entity represents any of the
other stakeholders in the same corporate insolvency resolution process.
Access to books
4. (1) Without prejudice to section 17(2)(d), the interim resolution professional
may access the books of account, records and other relevant documents and
information, to the extent relevant for discharging his duties under the Code, of
the corporate debtor held with –
(a) depositories of securities ;
(b) professional advisors of the corporate debtor ;
(c) information utilities ;
(d) other registries that records the ownership of assets ;
(e) members, promoters, partners, board of directors and joint venture
partners of the corporate debtor ; and
(f) contractual counterparties of the corporate debtor.
Extortionate credit transaction

5. A transaction shall be considered extortionate under section 50(2) where the
terms :
(1) require the corporate debtor to make exorbitant payments in respect of
the credit provided ; or
(2) are unconscionable under the principles of law relating to contracts.
CHAPTER III
PUBLIC ANNOUNCEMENT
Public announcement
6. (1) An insolvency professional shall make a public announcement immediately
on his appointment as an interim resolution professional.
Explanation : ‘Immediately’ means not later than three days from the date of his
appointment.
(2) The public announcement referred to in sub-regulation (1) shall :
(a) be in Form A of the Schedule ;
(b) be published –
(i) in one English and one regional language newspaper with wide
circulation at the location of the registered office and principal office,
if any, of the corporate debtor and any other location where in the
opinion of the interim resolution professional, the corporate debtor
conducts material business operations ;
(ii) on the website, if any, of the corporate debtor ; and
(iii) on the website, if any, designated by the Board for the purpose,
(c) provide the last date for submission of proofs of claim, which shall be
fourteen days from the date of appointment of the interim resolution
professional.
(3) The applicant shall bear the expenses of the public announcement which
may be reimbursed by the committee to the extent it ratifies them.
Clarification – The expenses on the public announcement shall not form part of
insolvency resolution process costs.
CHAPTER IV
PROOF OF CLAIMS
Claims by operational creditors

7. (1) A person claiming to be an operational creditor, other than workman or
employee of the corporate debtor, shall submit proof of claim to the interim
resolution professional in person, by post or by electronic means in Form B of the
Schedule :
Provided that such person may submit supplementary documents or clarifications
in support of the claim before the constitution of the committee.
(2) The existence of debt due to the operational creditor under this Regulation
may be proved on the basis of –
(a) the records available with an information utility, if any ; or
(b) other relevant documents, including -
(i) a contract for the supply of goods and services with corporate
debtor ;
(ii) an invoice demanding payment for the goods and services supplied
to the corporate debtor ;
(iii) an order of a court or tribunal that has adjudicated upon the non-
payment of a debt, if any ; or
(iv) financial accounts.
Claims by financial creditors

8. (1) A person claiming to be a financial creditor of the corporate debtor shall
submit proof of claim to the interim resolution professional in electronic form in
Form C of the Schedule :
in support of the claim before the constitution of the committee.
(2) The existence of debt due to the financial creditor may be proved on the basis
of –
(a) the records available with an information utility, if any ; or
(i) a financial contract supported by financial statements as evidence
of the debt ;
207
(ii) a record evidencing that the amounts committed by the financial

creditor to the corporate debtor under a facility has been drawn by
(iii) financial statements showing that the debt has not been repaid ; or
(iv) an order of a court or tribunal that has adjudicated upon the non-
payment of a debt, if any.
Claims by workmen and employees

9. (1) A person claiming to be a workman or an employee of the corporate debtor
shall submit proof of claim to the interim resolution professional in person, by
post or by electronic means in Form D of the Schedule :
in support of the claim, on his own or if required by the interim resolution
professional, before the constitution of the committee.
(2) Where there are dues to numerous workmen or employees of the corporate
debtor, an authorised representative may submit one proof of claim for all such
dues on their behalf in Form E of the Schedule.
(3) The existence of dues to workmen or employees may be proved by them,
individually or collectively on the basis of -
(a) records available with an information utility, if any ; or
(i) a proof of employment such as contract of employment for the period
for which such workman or employee is claiming dues ;
(ii) evidence of notice demanding payment of unpaid dues and any
documentary or other proof that payment has not been made ; or
payment of a dues, if any.
Substantiation of claims
10. The interim resolution professional or the resolution professional, as the case
may be, may call for such other evidence or clarification as he deems fit from a
creditor for substantiating the whole or part of its claim.
Cost of proof
11. A creditor shall bear the cost of proving the debt due to such creditor.
Submission of proof of claims

12. (1) Subject to sub-regulation (2), a creditor shall submit proof of claim on or
before the last date mentioned in the public announcement.
(2) A creditor, who failed to submit proof of claim within the time stipulated in the
public announcement, may submit such proof to the interim resolution
professional or the resolution professional, as the case may be, till the approval
of a resolution plan by the committee.
(3) Where the creditor in sub-regulation (2) is a financial creditor, it shall be included
in the committee from the date of admission of such claim :
Provided that such inclusion shall not affect the validity of any decision taken by
the committee prior to such inclusion.
Verification of claims
13. (1) The interim resolution professional or the resolution professional, as the
case may be, shall verify every claim, as on the insolvency commencement
date, within seven days from the last date of the receipt of the claims, and
thereupon maintain a list of creditors containing names of creditors along with
the amount claimed by them, the amount of their claims admitted and the security
interest, if any, in respect of such claims, and update it.
(2) The list of creditors shall be –
(a) available for inspection by the persons who submitted proofs of claim ;
(b) available for inspection by members, partners, directors and guarantors
of the corporate debtor ;
(c) displayed on the website, if any, of the corporate debtor ;
(d) filed with the Adjudicating Authority ; and
(e) presented at the first meeting of the committee.
Determination of amount of claim

14. (1) Where the amount claimed by a creditor is not precise due to any
contingency or other reason, the interim resolution professional or the resolution
professional, as the case may be, shall make the best estimate of the amount of
the claim based on the information available with him.
(2) The interim resolution professional or the resolution professional, as the case
may be, shall revise the amounts of claims admitted, including the estimates of
claims made under sub-regulation (1), as soon as may be practicable, when he
comes across additional information warranting such revision.
Debt in foreign currency

15. The claims denominated in foreign currency shall be valued in Indian currency
at the official exchange rate as on the insolvency commencement date.
Explanation : “official exchange rate” is the reference rate published by the Reserve
Bank of India or derived from such reference rates.
CHAPTER V
COMMITTEE OF CREDITORS
Committee with only operational creditors

16. (1) Where the corporate debtor has no financial debt or where all financial
creditors are related parties of the corporate debtor, the committee shall be set up
in accordance with this Regulation.
(2) The committee formed under this Regulation shall consist of members as
under -
(a) eighteen largest operational creditors by value :
Provided that if the number of operational creditors is less than eighteen,
the committee shall include all such operational creditors ;
(b) one representative elected by all workmen other than those workmen
included under sub-clause (a) ; and
(c) one representative elected by all employees other than those employees
included under sub-clause (a).
(3) A member of the committee formed under this regulation shall have voting
rights in proportion of the debt due to such creditor or debt represented by such
representative, as the case may be, to the total debt.
Explanation : For the purposes of this sub-regulation, ‘total debt’ is the sum of –
(a) the amount of debt due to the creditors listed in sub-regulation 2(a) ;
(b) the amount of the aggregate debt due to workmen under sub-regulation
2(b) ; and
(c) the amount of the aggregate debt due to employees under sub-regulation
2(c).
(4) A committee formed under this regulation and its members shall have the
same rights, powers, duties and obligations as a committee comprising financial
creditors and its members, as the case may be.
First meeting of the committee

17. (1) The interim resolution professional shall file a report certifying constitution
of the committee to the Adjudicating Authority on or before the expiry of thirty
days from the date of his appointment.
(2) The interim resolution professional shall convene the first meeting of the
committee within seven days of filing the report under this Regulation.
CHAPTER VI
MEETINGS OF THE COMMITTEE
Meetings of the committee

18. A resolution professional may convene a meeting of the committee as and
when he considers necessary, and shall convene a meeting if a request to that
effect is made by members of the committee representing thirty three per cent of
the voting rights.
Notice for meetings of the committee

19. (1) Subject to this Regulation, a meeting of the committee shall be called by
giving not less than seven days’ notice in writing to every participant, at the
address it has provided to the resolution professional and such notice may be
sent by hand delivery, or by post but in any event, be served on every participant
by electronic means in accordance with Regulation 20.
(2) The committee may reduce the notice period from seven days to such other
period of not less than twenty four hours, as it deems fit.
Service of notice by electronic means

20. (1) A notice by electronic means may be sent to the participants through e-
mail as a text or as an attachment to e-mail or as a notification providing electronic
link or Uniform Resource Locator for accessing such notice.
(2) The subject line in e-mail shall state the name of the corporate debtor, the
place, if any, the time and the date on which the meeting is scheduled.
(3) If notice is sent in the form of a non-editable attachment to an e-mail, such
attachment shall be in the Portable Document Format or in a non-editable format
together with a ‘link or instructions’ for recipient for downloading relevant version
of the software.
(4) When notice or notifications of availability of notice are sent by an e-mail, the
resolution professional shall ensure that it uses a system which produces
confirmation of the total number of recipients e-mailed and a record of each

recipient to whom the notice has been sent and copy of such record and any
notices of any failed transmissions and subsequent re-sending shall be retained
as ‘‘proof of sending’’.
(5) The obligation of the resolution professional shall be satisfied when he
transmits the e-mail and he shall not be held responsible for a failure in
transmission beyond its control.
(6) The notice made available on the electronic link or Uniform Resource Locator
shall be readable, and the recipient should be able to obtain and retain copies
and the resolution professional shall give the complete Uniform Resource Locator
or address of the website and full details of how to access the document or
information.
(7) If a participant, other than a member of the committee, fails to provide or
update the relevant e-mail address to the resolution professional, the non-receipt
of such notice by such participant of any meeting shall not invalidate the decisions
taken at such meeting.
Contents of the notice for meeting

21. (1) The notice shall inform the participants of the venue, the time and date of
the meeting and of the option available to them to participate through video
conferencing or other audio and visual means, and shall also provide all the
necessary information to enable participation through video conferencing or
other audio and visual means.
(2) The notice of the meeting shall provide that a participant may attend and vote
in the meeting either in person or through an authorised representative :
Provided that such participant shall inform the resolution professional, in advance
of the meeting, of the identity of the authorised representative who will attend
and vote at the meeting on its behalf.
(3) The notice of the meeting shall –
(a) contain an agenda of the meeting with the following-
(i) a list of the matters to be discussed at the meeting ;
(ii) a list of the issues to be voted upon at the meeting ; and
(iii) copies of all documents relevant to the matters to be discussed and
the issues to be voted upon at the meeting ; and
(b) state that a vote of the members of the committee shall not be taken at the
meeting unless all members are present at such meeting.
(4) The notice of the meeting shall –

(a) state the process and manner for voting by electronic means and the time
schedule, including the time period during which the votes may be cast :
(b) provide the login ID and the details of a facility for generating password
and for keeping security and casting of vote in a secure manner ; and
(c) provide contact details of the person who will address the queries
connected with the electronic voting.
Quorum at the meeting

22. (1) A meeting of the committee shall be quorate if members of the committee
representing at least thirty three percent of the voting rights are present either in
person or by video conferencing or other audio and visual means :
Provided that the committee may modify the percentage of voting rights required
for quorum in respect of any future meetings of the committee.
(2) Where a meeting of the committee could not be held for want of quorum,
unless the committee has previously decided otherwise, the meeting shall
automatically stand adjourned at the same time and place on the next day.
(3) In the event a meeting of the committee is adjourned in accordance with sub-
regulation (2), the adjourned meeting shall be quorate with the members of the
committee attending the meeting.
Participation through video conferencing

23. (1) The notice convening the meetings of the committee shall provide the
participants an option to attend the meeting through video conferencing or other
audio and visual means in accordance with this Regulation.
(2) The resolution professional shall make necessary arrangements to ensure
uninterrupted and clear video or audio and visual connection.
(3) The resolution professional shall take due and reasonable care –
(a) to safeguard the integrity of the meeting by ensuring sufficient security
and identification procedures ;
(b) to ensure availability of proper video conferencing or other audio and
visual equipment or facilities for providing transmission of the communi-
cations for effective participation of the participants at the meeting ;
(c) to record proceedings and prepare the minutes of the meeting ;
(d) to store for safekeeping and marking the physical recording(s) or other
electronic recording mechanism as part of the records of the corporate
debtor ;
(e) to ensure that no person other than the intended participants attends or
has access to the proceedings of the meeting through video conferencing
or other audio and visual means ; and
(f) to ensure that participants attending the meeting through audio and visual
means are able to hear and see, if applicable, the other participants clearly
during the course of the meeting :
Provided that the persons, who are differently abled, may make request to the
resolution professional to allow a person to accompany him at the meeting.
(4) Where a meeting is conducted through video conferencing or other audio and
visual means, the scheduled venue of the meeting as set forth in the notice
convening the meeting, which shall be in India, shall be deemed to be the place
of the said meeting and all recordings of the proceedings at the meeting shall be
deemed to be made at such place.
Conduct of meeting
24. (1) The resolution professional shall act as the chairperson of the meeting of
the committee.
(2) At the commencement of a meeting, the resolution professional shall take a
roll call when every participant attending through video conferencing or other
audio and visual means shall state, for the record, the following, –
(a) his name ;
(b) whether he is attending in the capacity of a member of the committee or
any other participant ;
(c) whether he is representing a member or group of members ;
(d) the location from where he is participating ;
(e) that he has received the agenda and all the relevant material for the
meeting ; and
(f) that no one other than him is attending or has access to the proceedings
of the meeting at the location of that person.
(3) After the roll call, the resolution professional shall inform the participants of the
names of all persons who are present for the meeting and confirm if the required
quorum is complete.
(4) The resolution professional shall ensure that the required quorum is present
throughout the meeting.
(5) From the commencement of the meeting till its conclusion, no person other
than the participants and any other person whose presence is required by the
resolution professional shall be allowed access to the place where meeting is
held or to the video conferencing or other audio and visual facility, without the
permission of the resolution professional.
(6) The resolution professional shall ensure that minutes are made in relation to
each meeting of the committee and such minutes shall disclose the particulars of
the participants who attended the meeting in person, through video conferencing,
or other audio and visual means.
(7) The resolution professional shall circulate the minutes of the meeting to all
participants by electronic means within forty eight hours of the said meeting.
CHAPTER VII
VOTING BY THE COMMITTEE
Voting by the committee

25. (1) The actions listed in section 28(1) shall be considered in meetings of the
committee.
(2) Any action other than those listed in section 28(1) requiring approval of the
committee may be considered in meetings of the committee.
(3) Where all members are present in a meeting, the resolution professional shall
take a vote of the members of the committee on any item listed for voting after
discussion on the same.
(4) At the conclusion of a vote at the meeting, the resolution professional shall
announce the decision taken on items along with the names of the members of
the committee who voted for or against the decision, or abstained from voting.
(5) If all members are not present at a meeting, a vote shall not be taken at such
meeting and the resolution professional shall –
(a) circulate the minutes of the meeting by electronic means to all
members of the committee within forty eight hours of the conclusion of
the meeting ; and
(b) seek a vote on the matters listed for voting in the meeting, by electronic
voting system where the voting shall be kept open for twenty-four hours
from the circulation of the minutes.
Voting through electronic means

26. (1) The resolution professional shall provide each member of the committee
the means to exercise its vote by either electronic means or through electronic
voting system in accordance with the provisions of this regulation.
Explanation : For the purposes of these regulations –
(a) the expressions ‘‘voting by electronic means’’ or ‘‘electronic voting system’’
means a ’’secured system” based process of display of electronic ballots,
recording of votes of the members of the committee and the number of
votes polled in favour or against, such that the voting exercised by way of
electronic means gets registered and counted in an electronic registry in
a centralized server with adequate cyber security ;
(b) the expression ‘‘secured system’’ means computer hardware, software,
and procedure that -
(i) are reasonably secure from unauthorized access and misuse ;
(ii) provide a reasonable level of reliability and correct operation ;
(iii) are reasonably suited to perform the intended functions ; and
(iv) adhere to generally accepted security procedures.
(2) Once a vote on a resolution is cast by a member of the committee, such
member shall not be allowed to change it subsequently.
(3) At the end of the voting period, the voting portal shall forthwith be blocked.
(4) At the conclusion of a vote held under this regulation, the resolution professional
shall announce and make a written record of the summary of the decision taken
on a relevant agenda item along with the names of the members of the committee
who voted for or against the decision, or abstained from voting.
(5) The resolution professional shall circulate a copy of the record made under
sub-regulation (4) to all participants by electronic means within twenty four hours
of the conclusion of the voting.
CHAPTER VIII
CONDUCT OF CORPORATE INSOLVENCY RESOLUTION PROCESS
Appointment of registered valuers

27. The interim resolution professional shall within seven days of his appointment,
appoint two registered valuers to determine the liquidation value of the corporate
debtor in accordance with regulation 35 :
216
Provided that the following persons shall not be appointed as registered valuers :
(a) a relative of the interim resolution professional ;
(b) a related party of the corporate debtor ;
(c) an auditor of the corporate debtor in the five years preceding the insolvency
commencement date ; or
(d) a partner or director of the insolvency professional entity.
Transfer of debt due to creditors

28. (1) In the event a creditor assigns or transfers the debt due to such creditor to
any other person during the insolvency resolution process period, both parties
shall provide the interim resolution professional or the resolution professional,
as the case may be, the terms of such assignment or transfer and the identity of
the assignee or transferee.
(2) The resolution professional shall notify each participant and the Adjudicating
Authority of any resultant change in the committee within two days of such change.
Sale of assets outside the ordinary course of business

29. (1) The resolution professional may sell unencumbered asset(s) of the
corporate debtor, other than in the ordinary course of business, if he is of the
opinion that such a sale is necessary for a better realisation of value under the
facts and circumstances of the case :
Provided that the book value of all assets sold during corporate insolvency
resolution process period in aggregate under this sub-regulation shall not exceed
ten per cent of the total claims admitted by the interim resolution professional.
(2) A sale of assets under this regulation shall require the approval of the
committee.
(3) A bona fide purchaser of assets sold under this regulation shall have a free
and marketable title to such assets notwithstanding the terms of the constitutional
documents of the corporate debtor, shareholders’ agreement, joint venture
agreement or other document of a similar nature.
Assistance of local district administration

30. The interim resolution professional or the resolution professional, as the
case may be, may make an application to the Adjudicating Authority for an order
seeking the assistance of the local district administration in discharging his duties
under the Code or these Regulations.
CHAPTER IX
INSOLVENCY RESOLUTION PROCESS COSTS
Insolvency resolution process costs

31. “Insolvency resolution process costs” under section 5(13)(e) shall mean-
(a) amounts due to suppliers of essential goods and services under regulation
32 ;
(b) amounts due to a person whose rights are prejudicially affected on
account of the moratorium imposed under section 14(1)(d) ;
(c) expenses incurred on or by the interim resolution professional to the
extent ratified under regulation 33 ;
(d) expenses incurred on or by the resolution professional fixed under
regulation 34 ; and
(e) other costs directly relating to the corporate insolvency resolution process
and approved by the committee.
Essential supplies
32. The essential goods and services referred to in section 14(2) shall mean-
(1) electricity ;
(2) water ;
(3) telecommunication services ; and
(4) information technology services,
to the extent these are not a direct input to the output produced or supplied by the
corporate debtor.
Illustration – Water supplied to a corporate debtor will be essential supplies for
drinking and sanitation purposes, and not for generation of hydro-electricity.
Costs of the interim resolution professional

33. (1) The applicant shall fix the expenses to be incurred on or by the interim
(2) The Adjudicating Authority shall fix expenses where the applicant has not
fixed expenses under sub-regulation (1).
(3) The applicant shall bear the expenses which shall be reimbursed by the
committee to the extent it ratifies.
218
(4) The amount of expenses ratified by the committee shall be treated as insolvency
resolution process costs.
Explanation : For the purposes of this Regulation, “expenses” mean the fee to be
paid to the interim resolution professional and other expenses, including the cost
of engaging professional advisors, to be incurred by the interim resolution
professional.
Resolution professional costs

34. The committee shall fix the expenses to be incurred on or by the resolution
professional and the expenses shall constitute insolvency resolution process
costs.
Explanation : For the purposes of this Regulation, “expenses” mean the fee to be
paid to the resolution professional and other expenses, including the cost of
engaging professional advisors, to be incurred by the resolution professional.
CHAPTER X
RESOLUTION PLAN
Liquidation value
35. (1) Liquidation value is the estimated realizable value of the assets of the
corporate debtor if the corporate debtor were to be liquidated on the insolvency
commencement date.
(2) Liquidation value shall be determined in the following manner :
(a) the two registered valuers appointed under regulation 27 shall submit to
the interim resolution professional or the resolution professional, as the
case may be, an estimate of the liquidation value computed in accordance
with internationally accepted valuation standards, after physical verification
of the inventory and fixed assets of the corporate debtor ;
(b) if in the opinion of the interim resolution professional or the resolution
professional, as the case may be, the two estimates are significantly
different, he may appoint another registered valuer who shall submit an
estimate computed in the same manner ; and
(c) the average of the two closest estimates shall be considered the liquidation
value.
(3) The resolution professional shall provide the liquidation value to the committee
in electronic form.
Information memorandum
36. (1) Subject to sub-regulation (4), the interim resolution professional or the
resolution professional, as the case may be, shall submit an information
memorandum in electronic form to each member of the committee and any
potential resolution applicant containing-
(a) at least the matters listed in paragraphs (a) to (i) of sub-regulation (2),
before its first meeting ; and
(b) matters listed in paragraphs (j) to (l) of sub-regulation (2), within fourteen
days of the first meeting.
(2) The information memorandum shall contain the following details of the
corporate debtor –
(a) assets and liabilities, as on the insolvency commencement date, classified
into appropriate categories for easy identification, with estimated values
assigned to each category ;
(b) the latest annual financial statements ;
(c) audited financial statements of the corporate debtor for the last two
financial years and provisional financial statements for the current financial
year made up to a date not earlier than fourteen days from the date of the
application ;
(d) a list of creditors containing the names of creditors, the amounts claimed
by them, the amount of their claims admitted and the security interest, if
any, in respect of such claims ;
(e) particulars of a debt due from or to the corporate debtor with respect to
related parties ;
(f) details of guarantees that have been given in relation to the debts of the
corporate debtor by other persons, specifying which of the guarantors is a
related party ;
(g) the names and addresses of the members or partners holding at least
one per cent stake in the corporate debtor along with the size of stake ;
(h) details of all material litigation and an ongoing investigation or proceeding
initiated by Government and statutory authorities ;
(i) the number of workers and employees and liabilities of the corporate
debtor towards them ;
(j) the liquidation value ;
(k) the liquidation value due to operational creditors ; and

(l) other information, which the resolution professional deems relevant to
the committee.
(3) A member of the committee may request the resolution professional for further
information of the nature described in this regulation and the resolution
professional shall provide such information to all members within reasonable
time if such information has a bearing on the resolution plan.
(4) The interim resolution professional or the resolution professional, as the case
may be, shall share the information memorandum after receiving an undertaking
from a member of the committee or a potential resolution applicant to the effect
that such member or resolution applicant shall maintain confidentiality of the
information and shall not use such information to cause an undue gain or undue
loss to itself or any other person and comply with the requirements under section
29(2).
Resolution plan
37. (1) A resolution plan may provide for the measures required for implementing
it, including but not limited to the following –
(a) transfer of all or part of the assets of the corporate debtor to one or more
persons ;
(b) sale of all or part of the assets whether subject to any security interest or
not ;
(c) the substantial acquisition of shares of the corporate debtor, or the merger
or consolidation of the corporate debtor with one or more persons ;
(d) satisfaction or modification of any security interest ;
(e) curing or waiving of any breach of the terms of any debt due from the
corporate debtor ;
(f) reduction in the amount payable to the creditors ;
(g) extension of a maturity date or a change in interest rate or other terms of
a debt due from the corporate debtor ;
(h) amendment of the constitutional documents of the corporate debtor ;
(i) issuance of securities of the corporate debtor, for cash, property, securities,
or in exchange for claims or interests, or other appropriate purpose ; and
(j) obtaining necessary approvals from the Central and State Governments
and other authorities.
Mandatory contents of the resolution plan

38. (1) A resolution plan shall identify specific sources of funds that will be used to
pay the –
(a) insolvency resolution process costs and provide that the insolvency
resolution process costs will be paid in priority to any other creditor ;
(b) liquidation value due to operational creditors and provide for such payment
in priority to any financial creditor which shall in any event be made before
the expiry of thirty days after the approval of a resolution plan by the
Adjudicating Authority ; and
(c) liquidation value due to dissenting financial creditors and provide that
such payment is made before any recoveries are made by the financial
creditors who voted in favour of the resolution plan.
(2) A resolution plan shall provide :
(a) the term of the plan and its implementation schedule ;
(b) the management and control of the business of the corporate debtor
during its term ; and
(c) adequate means for supervising its implementation.
Approval of resolution plan

39. (1) A resolution applicant shall endeavour to submit a resolution plan prepared
in accordance with the Code and these Regulations to the resolution professional,
thirty days before expiry of the maximum period permitted under section 12 for
the completion of the corporate insolvency resolution process.
(2) The resolution professional shall present all resolution plans that meet the
requirements of the Code and these Regulations to the committee for its
consideration.
(3) The committee may approve any resolution plan with such modifications as it
deems fit.
(4) The resolution professional shall submit the resolution plan approved by the
committee to the Adjudicating Authority with the certification that :
(a) the contents of the resolution plan meet all the requirements of the Code
and the Regulations ; and
(b) the resolution plan has been approved by the committee.
(5) The resolution professional shall forthwith send a copy of the order of the
Adjudicating Authority approving or rejecting a resolution plan to the participants
and the resolution applicant.
(6) A provision in a resolution plan which would otherwise require the consent
of the members or partners of the corporate debtor, as the case may be,
under the terms of the constitutional documents of the corporate debtor,
shareholders’ agreement, joint venture agreement or other document of a
similar nature, shall take effect notwithstanding that such consent has not
been obtained.
(7) No proceedings shall be initiated against the interim resolution professional

or the resolution professional, as the case may be, for any actions of the corporate
debtor, prior to the insolvency commencement date.
(8) A person in-charge of the management or control of the business and

operations of the corporate debtor after a resolution plan is approved by the
Adjudicating Authority, may make an application to the Adjudicating Authority for
an order seeking the assistance of the local district administration in implementing
the terms of a resolution plan.
Extension of the corporate insolvency resolution process period

40. (1) The committee may instruct the resolution professional to make an
application to the Adjudicating Authority under section 12 to extend the insolvency
resolution process period.
(2) The resolution professional shall, on receiving an instruction from the committee
under this Regulation, make an application to the Adjudicating Authority for such
extension.
SCHEDULE
FORM A
PUBLIC ANNOUNCEMENT
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016]
For the attention of the creditors of [Name of Corporate Debtor]
Relevant particulars
1. Name of corporate debtor
2. Date of incorporation of corporate debtor
3. Authority under which corporate debtor
isincorporated / registered
4. Corporate identity number / limited liability
identification number of corporate debtor
5. Address of the registered office and principal
office (if any) of corporate debtor
6. Insolvency commencement date in respect of
corporate debtor
7. Estimated date of closure of insolvency
resolution process
8. Name, address, email address and the
registration number of the interim resolution
professional
9. Last date for submission of claims
Notice is hereby given that the National Company Law Tribunal has ordered the
commencement of a corporate insolvency resolution process against the [name
of the corporate debtor] on [insolvency commencement date].
The creditors of [name of the corporate debtor], are hereby called upon to submit
a proof of their claims on or before [insert the date falling fourteen days from the
appointment of the interim resolution professional] to the interim resolution
professional at the address mentioned against item 8.
The financial creditors shall submit their proof of claims by electronic means only.
The operational creditors, including workmen and employees, may submit the
proof of claims by in person, by post or electronic means.
Submission of false or misleading proofs of claim shall attract penalties.

Name and Signature of Interim Resolution Professional :
Date and Place :
SCHEDULE
FORM B
PROOF OF CLAIM BY OPERATIONAL CREDITORS EXCEPT WORKMEN
AND EMPLOYEES
[Date]
To
The Interim Resolution Professional / Resolution Professional
[Name of the Insolvency Resolution Professional / Resolution Professional]
[Address as set out in public announcement]
From
[Name and address of the operational creditor]
Subject : Submission of proof of claim.
Madam/Sir,
[Name of the operational creditor], hereby submits this proof of claim in respect of
the corporate insolvency resolution process in the case of [name of corporate
debtor]. The details for the same are set out below :
Particulars
1. Name of operational creditor
2. Identification number of operational creditor (if
an incorporated body provide identification
number and proof of incorporation. If a
partnership or individual provide identification
records of all the partners or the individual)
3. Address and email address of operational
creditor for correspondence
4. Total amount of claim (including any interest as
at the insolvency commencement date)
5. Details of documents by reference to which the

debt can be substantiated.
6. Details of any dispute as well as the record of
pendency or order of suit or arbitration
proceedings
7. Details of how and when debt incurred
8. Details of any mutual credit, mutual debts, or
other mutual dealings between the corporate
debtor and the creditor which may be set-off
against the claim
9. Details of any retention of title arrangements in
respect of goods or properties to which the claim
refers
10. Details of the bank account to which the amount
of the claim or any part thereof can betransferred
pursuant to a resolution plan
11. List of documents attached to this proof of claim
in order to prove the existence and non-payment
of claim due to the operational creditor
Signature of operational creditor or person authorised to act on his behalf
[Please enclose the authority if this is being submitted on behalf of an
operational creditor]
Name in block letters
Position with or in relation to creditor
Address of person signing
*PAN number, passport, Aadhaar Card or the identity card issued by the Election
Commission of India
AFFIDAVIT
I, [name of deponent], currently residing at [insert address], do solemnly affirm
and state as follows:
1. [Name of corporate debtor], the corporate debtor was, at the insolvency
commencement date, being the __________ day of __________ 20__,
justly and truly indebted to me in the sum of Rs. [insert amount of claim].
2. In respect of my claim of the said sum or any part thereof, I have relied on
the documents specified below:
[Please list the documents relied on as evidence of claim]
3. The said documents are true, valid and genuine to the best of my
knowledge, information and belief.
4. In respect of the said sum or any part thereof, I have not nor has any
person, by my order, to my knowledge or belief, for my use, had or received
any manner of satisfaction or security whatsoever, save and except the
following:
[Please state details of any mutual credit, mutual debts, or other mutual
dealings between the corporate debtor and the creditor which may be
set-off against the claim.]
Solemnly, affirmed at [insert place] on _________________ day, the
__________day of__________ 20_____
Before me,
Notary / Oath Commissioner
Deponent’s signature
VERIFICATION
I, the Deponent hereinabove, do hereby verify and affirm that the contents of
paragraph ___ to __of this affidavit are true and correct to my knowledge and
belief and no material facts have been concealed therefrom.
Verified at ______ on this _____ day of ____ 201__
SCHEDULE
FORM C
PROOF OF CLAIM BY FINANCIAL CREDITORS
[Under Regulation 8 of the Insolvency and Bankruptcy Board of India
[Date]
To
The Interim Resolution Professional / Resolution Professional,

From
[Name and address of the registered office and principal office of the financial
creditor]
Madam/Sir,
[Name of the financial creditor], hereby submits this proof of claim in respect of
the corporate insolvency resolution process in the case of [name of corporate
debtor]. The details for the same are set out below:
Particulars
1. Name of financial creditor
2. Identification number of financial creditor (if an
incorporated body provide identification number
and proof of incorporation. If a partnership or
individual provide identification records* of all
the partners or the individual)
3. Address and email address of financial creditor
for correspondence.
debt can be substantiated
6. Details of how and when debt incurred
against the claim
8. Details of any security held, the value of the
security, and the date it was given
of the claim or any part thereof can be transferred
pursuant to a resolution plan

Signature of financial creditor or person authorised to act on his behalf
*PAN number, passport, Aadhaar Card or the identity card issued by the Election
Commission of India.
AFFIDAVIT
following :
Solemnly, affirmed at [insert place] on _________________ day, the __________
day of __________ 20_____
Before me,
Notary/Oath Commissioner
VERIFICATION
SCHEDULE
FORM D
PROOF OF CLAIM BY A WORKMAN OR AN EMPLOYEE

[Under Regulation 9 of the Insolvency and Bankruptcy
[Date]
To
The Interim Resolution Professional / Resolution Professional
From
[Name and address of the workman / employee]
Madam/Sir,
[Name of the workman / employee], hereby submits this proof of claim in respect
of the corporate insolvency resolution process in the case of [name of corporate
debtor]. The details for the same are set out below:
Particulars
1. Name of workman / employee
2. Pan number, passport, the identity card issued
by the election commission of india or aadhaar
card of workman / employee
3. Address and email address (if any) of workman/
employee for correspondence

claim can be substantiated.
6. Details of any dispute as well as the record of
pendency or order of suit or arbitration
proceedings
7. Details of how and when claim arose
against the claim
of the claim or any part thereof can be
transferred pursuant to a resolution plan
Signature of workman / employee or person authorised to act on his behalf
AFFIDAVIT
following:
Solemnly, affirmed at [insert place] on _________________ day, the
__________day of__________ 20_____
Before me,
VERIFICATION
SCHEDULE
FORM E
PROOF OF CLAIM SUBMITTED BY AUTHORISED REPRESENTATIVE OF
WORKMEN AND EMPLOYEES
[Under Regulation 9 of the Insolvency and Bankruptcy
[Date]
To
The Interim Resolution Professional / Resolution Professional,
From
[Name and address of the duly authorised representative of the workmen /
employees]
Subject: Submission of proofs of claim.

Madam/Sir,
I, [name of authorised representative of the workmen / employees], currently
residing at [address of authorised representative of the workmen / employees],
on behalf of the workmen and employees employed by the above named
corporate debtor and listed in Annexure A, solemnly affirm and say:
1. That the above named corporate debtor was, at the insolvency
commencement date, being the __________________ day of ______ 20
___, justly truly indebted to the several persons whose names, addresses,
and descriptions appear in the Annexure A below in amounts severally set
against their names in such Annexure A for wages, remuneration and other
amounts due to them respectively as workmen or/ and employees in the
employment of the corporate debtor in respect of services rendered by
them respectively to the corporate debtor during such periods as are set out
against their respective names in the said Annexure A.
2. That for which said sums or any part thereof, they have not, nor has any of
them, had or received any manner of satisfaction or security whatsoever,
save and except the following:
Deponent
ANNEXURE
1. Details of Employees/Workmen
Sl. Name of Identification number Total amount Period over
No. Employee/ (pan number, passport due (Rs.) which amount
workman or aadhaar card) due
1.
2.
3.
4.
2. Particulars of how debt was incurred by the corporate debtor, including
particulars of any dispute as well as the record of pendency of suit or arbitration
proceedings (if any).
3. Particulars of any mutual credit, mutual debts, or other mutual dealings between
the corporate debtor and the creditor which may be set-off against the claim.
Attachments:
(a) Documents relied as evidence as proof of debt and as proofs of non-
payment of debt.
(b) Affidavit in the form set out in this Form E.
AFFIDAVIT
[PLEASE SUBMIT IF APPLICATION SUBMITTED BY AUTHORISED REPRESENTATIVE
ON BEHALF OF WORKMEN / EMPLOYEES]
following:
day of __________ 20_____
Before me,
VERIFICATION
236
MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION
New Delhi the 30th November 2016
Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules, 2016
G.S.R. 1108(E). – In exercise of the powers conferred by clauses (c), (d), (e) and (f) of
sub-section (1) of section 239 read with sections 7, 8, 9 and 10 of the Insolvency
and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby makes
the following Rules, namely-

1. (1) These rules may be called the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016.
(2) They shall come into force from the 1st day of December, 2016.
Application
2. These Rules shall apply to matters relating to the corporate insolvency resolution
process.
Definitions
3. (1) In these Rules, unless the context otherwise requires, –
(a) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016) ;
(b) “corporate insolvency resolution process” means the insolvency resolution
process for corporate persons under Chapter II of Part II of the Code ;
(c) “credit information company” shall have the meaning as assigned to it
under the Credit Information Companies (Regulation) Act, 2005 (30 of
2005) ;
(d) “financial contract” means a contract between a corporate debtor and a
financial creditor setting out the terms of the financial debt, including the
tenure of the debt, interest payable and date of repayment ;
(e) “Form” means a Form appended to these rules ;
(f) “identification number” means the limited liability partnership identification
number or the corporate identity number, as the case may be, of the
corporate person ;
236
I&B (APPLICATION TO ADJUDICATING AUTHORITY) RULES, 2016 237
(g) “Schedule” means the Schedule appended to these rules.

(2) All the words and expressions used herein and not defined shall have the
meanings respectively assigned to them under the Code.
Application by financial creditor

4. (1) A financial creditor, either by itself or jointly, shall make an application for
initiating the corporate insolvency resolution process against a corporate debtor
under section 7 of the Code in Form 1, accompanied with documents and records
required therein and as specified in the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
(2) Where the applicant under sub-rule (1) is an assignee or transferee of a financial
contract, the application shall be accompanied with a copy of the assignment or
transfer agreement and other relevant documentation to demonstrate the
assignment or transfer.
(3) The applicant shall dispatch forthwith, a copy of the application filed with the
Adjudicating Authority, by registered post or speed post to the registered office of
(4) In case the application is made jointly by financial creditors, they may nominate
one amongst them to act on their behalf.
Demand notice by operational creditor

5. (1) An operational creditor shall deliver to the corporate debtor, the following
documents, namely.-
(a) a demand notice in Form 3 ; or
(b) a copy of an invoice attached with a notice in Form 4.
(2) The demand notice or the copy of the invoice demanding payment referred to
in sub-section (2) of section 8 of the Code, may be delivered to the corporate
debtor,
(a) at the registered office by hand, registered post or speed post with
acknowledgement due ; or
(b) by electronic mail service to a whole time director or designated partner
or key managerial personnel, if any, of the corporate debtor.
(3) A copy of demand notice or invoice demanding payment served under this
rule by an operational creditor shall also be filed with an information utility, if any.
Application by operational creditor

6. (1) An operational creditor, shall make an application for initiating the corporate
238 I&B (APPLICATION TO ADJUDICATING AUTHORITY) RULES, 2016
insolvency resolution process against a corporate debtor under section 9 of the

Code in Form 5, accompanied with documents and records required therein and
as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.
(2) The applicant under sub-rule (1) shall dispatch forthwith, a copy of the
application filed with the Adjudicating Authority, by registered post or speed post
to the registered office of the corporate debtor.
Application by corporate applicant

7. (1) A corporate applicant, shall make an application for initiating the corporate
insolvency resolution process against a corporate debtor under section 10 of the
Code in Form 6, accompanied with documents and records required therein and
as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016.
(2) The applicant under sub-rule (1) shall dispatch forthwith, a copy of the
application filed with the Adjudicating Authority, by registered post or speed post
to the registered office of the corporate debtor.
Withdrawal of application
8. The Adjudicating Authority may permit withdrawal of the application made
under rule 4, 6 or 7, as the case may be, on a request made by the applicant
before its admission.
Interim resolution professional

9. (1) The applicant, wherever he is required to propose or proposes to appoint an
insolvency resolution professional, shall obtain a written communication in Form
2 from the insolvency professional for appointment as an interim resolution
professional and enclose it with the application made under rule 4, 6 or 7, as the
case may be.
(2) The application under sub-rule (1) shall be accompanied by a certificate
confirming the eligibility of the proposed insolvency professional for appointment
as a resolution professional in accordance with the Insolvency and Bankruptcy
Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,
2016.
Filing of application and application fee

10. (1) Till such time the rules of procedure for conduct of proceedings under the
Code are notified, the application made under sub-section (1) of section 7, sub-
section (1) of section 9 or sub-section (1) of section 10 of the Code shall be filed
before the Adjudicating Authority in accordance with rules 20, 21, 22, 23, 24 and
26 of Part III of the National Company Law Tribunal Rules, 2016.
(2) An applicant under these rules shall immediately after becoming aware,
notify the Adjudicating Authority of any winding-up petition presented against the
corporate debtor.
(3) The application shall be accompanied by such fee as specified in the Schedule.
(4) The application and accompanying documents shall be filed in electronic
form, as and when such facility is made available and as prescribed by the
Adjudicating Authority :
Provided that till such facility is made available, the applicant may submit the
accompanying documents, and wherever they are bulky, in electronic form, in
scanned, legible portable document format in a data storage device such as a
compact disc or a USB flash drive acceptable to the Adjudicating Authority.
FORM 1
(See sub-rule (1) of rule 4)
APPLICATION BY FINANCIAL CREDITOR(S) TO INITIATE CORPORATE INSOLVENCY
RESOLUTION PROCESS UNDER THE CODE
[Under section 7 of the Insolvency and Bankruptcy Code, 2016
read with Rule 4 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016]
To, [Date]
The National Company Law Tribunal
[Address]
From,
[Names and addresses of the registered offices of the financial creditors]
In the matter of [name of the corporate debtor]
Subject: Application to initiate corporate insolvency resolution process in the
matter of [name of the corporate debtor] under the Insolvency and Bankruptcy
Code, 2016.
Madam/Sir,
[Names of the financial creditor(s)], hereby submit this application to initiate a
corporate insolvency resolution process in the matter of [name of corporate debtor].
The details for the purpose of this application are set out below:
Part-I
PARTICULARS OF APPLICANT (PLEASE PROVIDE FOR EACH FINANCIAL
CREDITOR MAKING THE APPLICATION)
1. NAME OF FINANCIAL CREDITOR
2. DATE OF INCORPORATION OF FINANCIAL
CREDITOR
3. IDENTIFICATION NUMBER OF FINANCIAL
CREDITOR
4. ADDRESS OF THE REGISTERED OFFICE OF
THE FINANCIAL CREDITOR
5. NAME AND ADDRESS OF THE PERSON
AUTHORISED TO SUBMIT APPLICATION ON
ITS BEHALF (ENCLOSE AUTHORISATION)
6. NAME AND ADDRESS OF PERSON RESIDENT
IN INDIA AUTHORISED TO ACCEPT THE
SERVICE OF PROCESS ON ITS BEHALF
(ENCLOSE AUTHORISATION)
Part-II
PARTICULARS OF THE CORPORATE DEBTOR
1. NAME OF THE CORPORATE DEBTOR
2. IDENTIFICATION NUMBER OF CORPORATE
DEBTOR
3. DATE OF INCORPORATION OF CORPORATE
DEBTOR
4. NOMINAL SHARE CAPITAL AND THE PAID-
UP SHARE CAPITAL OF THE CORPORATE
DEBTOR AND/OR DETAILS OF GUARANTEE
CLAUSE AS PER
MEMORANDUM OF ASSOCIATION
(ASAPPLICABLE)
THE CORPORATE DEBTOR
Part-III
PARTICULARS OF THE PROPOSED INTERIM RESOLUTION PROFESSIONAL
1. NAME, ADDRESS, EMAIL ADDRESS AND
THEREGISTRATION NUMBER OF THE
PROPOSED INTERIM RESOLUTION
PROFESSIONAL
Part - IV
PARTICULARS OF FINANCIAL DEBT
1. TOTAL AMOUNT OF DEBT GRANTED
DATE(S) OF DISBURSEMENT
2. AMOUNT CLAIMED TO BE IN DEFAULT AND
THE DATE ON WHICH THE DEFAULT
OCCURRED (ATTACH THE WORKINGS FOR
COMPUTATION OFAMOUNT AND DAYS OF
DEFAULT IN TABULAR FORM)
Part-V
PARTICULARS OF FINANCIAL DEBT
[DOCUMENTS, RECORDS AND EVIDENCE OF DEFAULT]
1. PARTICULARS OF SECURITY HELD, IF ANY, THE DATE OF ITS CREATION, ITS
ESTIMATED VALUE AS PER THECREDITOR. ATTACH A COPY OF A CERTIFICATE
OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES
(IF THE CORPORATE DEBTOR IS A COMPANY)
2. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL
ADJUDICATING ON THE DEFAULT, IF ANY (ATTACH A COPY OF THE ORDER)
3. RECORD OF DEFAULT WITH THE INFORMATION UTILITY, IF ANY(ATTACH A
COPY OF SUCH RECORD)
4. DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER
OF ADMINISTRATION, OR COURTDECREE (AS MAY BE APPLICABLE), UNDER
THE INDIAN SUCCESSION ACT, 1925 (10 OF 1925) (ATTACH A COPY)
5. THE LATEST AND COMPLETE COPY OF THE FINANCIAL CONTRACT
REFLECTING ALL AMENDMENTS AND WAIVERSTO DATE (ATTACH A COPY)
6. A RECORD OF DEFAULT AS AVAILABLE WITH ANY CREDIT INFORMATION
COMPANY (ATTACH A COPY)
7. COPIES OF ENTRIES IN A BANKERS BOOK IN ACCORDANCE WITH THE

BANKERS BOOKS EVIDENCE ACT, 1891 (18 OF 1891) (ATTACH A COPY)
8. LIST OF OTHER DOCUMENTS ATTACHED TO THIS APPLICATION IN ORDER
TO PROVE THE EXISTENCE OF FINANCIAL DEBT, THE AMOUNT AND DATE
OF DEFAULT
I, hereby certify that, to the best of my knowledge, [name of proposed insolvency

professional], is fully qualified and permitted to act as an insolvency professional
in accordance with the Insolvency and Bankruptcy Code, 2016 and the associated
rules and regulations.
[Name of the financial creditor] has paid the requisite fee for this application
through [state means of payment] on [date].
Yours sincerely,
Signature of person authorised to act on behalf of the financial creditor
Position with or in relation to the financial creditor
Instructions
Please attach the following to this application:
Annex I Copies of all documents referred to in this application.
Annex II Written communication by the proposed interim resolution
professional as set out in Form 2.
Annex III Proof that the specified application fee has been paid.
Annex IV Where the application is made jointly, the particulars specified in
this form shall be furnished in respect of all the joint applicants
along with a copy of authorisation to the financial creditor to file and
act on this application on behalf of all the applicants.
FORM 2
[Under rule 9 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016]
WRITTEN COMMUNICATION BY PROPOSED INTERIM
RESOLUTION PROFESSIONAL
[Date]
To,
[Address]
From,
[Name and address of the registered office of the proposed interim resolution
professional]
Subject: Written communication in connection with an application to initiate
corporate insolvency resolution process in respect of [name of the corporate
debtor]
Madam/Sir,
I, [name of proposed interim resolution professional], an insolvency professional
registered with [name of insolvency professional agency] having registration number
[registration number] have been proposed as the interim resolution professional
by [name of applicant financial creditor] in connection with the proposed corporate
insolvency resolution process of [name of the corporate debtor].
In accordance with rule 9 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016, I hereby:
(i) agree to accept appointment as the interim resolution professional if an
order admitting the present application is passed;
(ii) state that the registration number allotted to me by the Board is [insert
registration number] and that I am currently qualified to practice as an
insolvency professional;
(iii) disclose that I am currently serving as an interim resolution professional/
resolution professional/liquidator in [insert number of proceedings]
proceedings;
(iv) certify that there are no disciplinary proceedings pending against me

with the Board or [name of the insolvency professional agency he is a
member of];
(v) affirm that I am eligible to be appointed as a resolution professional in
respect of the corporate debtor in accordance with the provisions of the
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016;
(vi) make the following disclosures in accordance with the code of conduct
for insolvency professionals as set out in the Insolvency and Bankruptcy
Board of India (Insolvency Professionals) Regulations, 2016;
(Signature of the insolvency professional)
(Name in block letters)
(Name of insolvency professional entity, if applicable)
[Optional certification, if required by the applicant making an application
under these Rules]
I, hereby, certify that the facts averred by the applicant in the present application
are true, accurate and complete and a default has occurred in respect of the
relevant corporate debtor. I have reached this conclusion based on the following
facts and/or opinion:-
[Please give details].
(Signature of the insolvency professional)
(Name in block letters)
(Name of insolvency professional entity, if applicable)
FORM 3
(See clause (a) of sub-rule (1) of rule 5)
FORM OF DEMAND NOTICE / INVOICE DEMANDING PAYMENT UNDER THE
INSOLVENCY AND BANKRUPTCY CODE, 2016
[Date]
To,
[Name and address of the registered office of the corporate debtor]
From,
[Name and address of the registered office of the operational creditor]
Subject: Demand notice/invoice demanding payment in respect of unpaid
operational debt due from [corporate debtor] under the Code.
Madam/Sir,
1. This letter is a demand notice/invoice demanding payment of an unpaid
operational debt due from [name of corporate debtor].
2. Please find particulars of the unpaid operational debt below:
PARTICULARS OF OPERATIONAL DEBT

1. TOTAL AMOUNT OF DEBT,DETAILS OF
TRANSACTIONS ON ACCOUNT OF WHICH
DEBT FELL DUE, AND THE DATE FROM
WHICH SUCH DEBT FELL DUE
COMPUTATION OFDEFAULT IN TABULAR
FORM)
3. PARTICULARS OF SECURITY HELD, IF ANY,
THE DATEOF ITS CREATION, ITS ESTIMATED
VALUE AS PER THE CREDITOR.ATTACH A
COPY OF A CERTIFICATE OF REGISTRATION
OF CHARGE ISSUED BY THE REGISTRAR OF
COMPANIES (IF THE CORPORATE DEBTOR
IS A COMPANY)
4. DETAILS OF RETENTION OF TITLE
ARRANGEMENTS (IF ANY) IN RESPECT OF
GOODS TO WHICH THE OPERATIONAL
DEBT REFERS
5. RECORD OF DEFAULT WITH THE
INFORMATION UTILITY (IF ANY)
6. PROVISION OF LAW, CONTRACT OR
OTHER DOCUMENT UNDER WHICH DEBT
HAS BECOME DUE
7. LIST OF DOCUMENTS ATTACHED TO
THIS APPLICATION IN ORDER TO PROVE

THE EXISTENCE OF OPERATIONAL DEBT
AND THE AMOUNT IN DEFAULT
3. If you dispute the existence or amount of unpaid operational debt (in default)
please provide the undersigned, within ten days of the receipt of this letter, of the
pendency of the suit or arbitration proceedings in relation to such dispute filed
before the receipt of this letter/notice.
4. If you believe that the debt has been repaid before the receipt of this letter,
please demonstrate such repayment by sending to us, within ten days of receipt
of this letter, the following:
(a) an attested copy of the record of electronic transfer of the unpaid amount
from the bank account of the corporate debtor; or
(b) an attested copy of any record that [name of the operational creditor] has
received the payment.
5. The undersigned, hereby, attaches a certificate from an information utility
confirming that no record of a dispute raised in relation to the relevant operational
debt has been filed by any person at any information utility. (if applicable)
6. The undersigned request you to unconditionally repay the unpaid operational
debt (in default) in full within ten days from the receipt of this letter failing which
we shall initiate a corporate insolvency resolution process in respect of [name of
corporate debtor].
Yours sincerely,
Signature of person authorised to act on behalf of the operational creditor
Position with or in relation to the operational creditor
Instructions
1. Please serve a copy of this form on the corporate debtor, ten days in
advance of filing an application under section 9 of the Code.
2. Please append a copy of such served notice to the application made by
the operational creditor to the Adjudicating Authority.
Form 4
(See clause (b) of sub-rule(1) of rule 5)
FORM OF NOTICE WITH WHICH INVOICE DEMANDING PAYMENT IS TO BE
ATTACHED
[Under Rule 5 of the Insolvency and Bankruptcy
[Date]
To,
[Name and address of registered office of the corporate debtor]
From,
Subject: Notice attached to invoice demanding payment
Madam/Sir,
[Name of operational creditor], hereby provides notice for repayment of the unpaid
amount of INR [insert amount] that is in default as reflected in the invoice attached
to this notice.
In the event you do not repay the debt due to us within ten days of receipt of this
notice, we may file an application before the Adjudicating Authority for initiating
a corporate insolvency resolution process under section 9 of the Code.
Yours sincerely,
FORM 5
APPLICATION BY OPERATIONAL CREDITOR TO INITIATE CORPORATE
INSOLVENCY RESOLUTION PROCESS UNDER THE CODE.
[Date]
To,
[Address]
From,
[Name and address for correspondence of the operational creditor]
Subject: Application to initiate corporate insolvency resolution process in respect
of [name of the corporate debtor] under the Insolvency and Bankruptcy Code,
2016.
Madam/Sir,
[Name of the operational creditor], hereby submits this application to initiate a
corporate insolvency resolution process in the case of [name of corporate debtor].
The details for the purpose of this application are set out below:
Part - I
PARTICULARS OF APPLICANT
1. NAME OF OPERATIONAL CREDITOR
2. IDENTIFICATION NUMBER OF
OPERATIONAL CREDITOR (IF ANY)
3. ADDRESS FOR CORRESPONDENCE OF
THE OPERATIONAL CREDITOR
Part - II
PARTICULARS OF CORPORATE DEBTOR
1. NAME OF THE CORPORATE DEBTOR
2. IDENTIFICATION NUMBER OF
CORPORATE DEBTOR
3. DATE OF INCORPORATION OF
CORPORATE DEBTOR
UPSHARE CAPITAL OF THE CORPORATE
CLAUSE AS PER MEMORANDUM OF

ASSOCIATION (AS APPLICABLE)
THE CORPORATE DEBTOR
6. NAME, ADDRESS AND AUTHORITY OF
PERSON SUBMITTING APPLICATION ON
BEHALF OF OPERATIONAL CREDITOR
IN INDIA AUTHORISED TO ACCEPT THE
Part-III
PARTICULARS OF THE PROPOSED INTERIM RESOLUTION PROFESSIONAL
[IF PROPOSED]
THE REGISTRATION NUMBER OF THE
PROPOSED INSOLVENCY PROFESSIONAL
Part-IV
1. TOTAL AMOUNT OF DEBT,DETAILS OF
TRANSACTIONS ON ACCOUNT OF WHICH
DEBT FELL DUE, AND THE DATE FROM
WHICH SUCH DEBT FELL DUE
COMPUTATION OF AMOUNT AND DATES
OF DEFAULT IN TABULAR FORM)
Part-V
[DOCUMENTS, RECORDS AND EVIDENCE OF DEFAULT]
1. PARTICULARS OF SECURITY HELD, IF ANY, THE DATE OF ITS CREATION, ITS
ESTIMATED VALUE AS PER THECREDITOR.ATTACH A COPY OF A CERTIFICATE
OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES
(IF THE CORPORATE DEBTOR IS A COMPANY)
2. DETAILS OF RESERVATION / RETENTION OF TITLE ARRANGEMENTS (IF ANY)
IN RESPECT OF GOODS TO WHICHTHE OPERATIONAL DEBT REFERS
3. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL
ADJUDICATING ON THE DEFAULT, IFANY(ATTACH A COPY OF THE ORDER)
4. RECORD OF DEFAULT WITH THE INFORMATION UTILITY, IF ANY(ATTACH A
COPY OF SUCH RECORD)
5. DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER
OF ADMINISTRATION, OR COURTDECREE (AS MAY BE APPLICABLE), UNDER
THE INDIAN SUCCESSION ACT, 1925 (10 OF 1925) (ATTACH A COPY)
6. PROVISION OF LAW, CONTRACT OR OTHER DOCUMENT UNDER WHICH
OPERATIONAL DEBT HAS BECOME DUE
7. A STATEMENT OF BANK ACCOUNT WHERE DEPOSITS ARE MADE OR CREDITS
RECEIVED NORMALLY BY THE OPERATIONAL CREDITOR IN RESPECT OF THE
DEBT OF THE CORPORATE DEBTOR (ATTACH A COPY)
8. LIST OF OTHER DOCUMENTS ATTACHED TO THIS APPLICATION IN ORDER
TO PROVE THE EXISTENCE OFOPERATIONAL DEBT AND THE AMOUNT IN
DEFAULT
I, [Name of the operational creditor / person authorised to act on behalf of the
operational creditor] hereby certify that, to the best of my knowledge, [name of
proposed insolvency professional], is fully qualified and permitted to act as an
insolvency professional in accordance with the Code and the rules and
regulations made thereunder. [WHERE APPLICABLE]
[Name of the operational creditor] has paid the requisite fee for this application
Yours sincerely,

Instructions
Annex I Copy of the invoice / demand notice as in Form 3 of the Insolvency
and Bankruptcy (Application to Adjudicating Authority) Rules, 2016
served on the corporate debtor.
Annex II Copies of all documents referred to in this application.
Annex III Copy of the relevant accounts from the banks/financial institutions
maintaining accounts of the operational creditor confirming that
there is no payment of the relevant unpaid operational debt by the
operational debtor, if available.
Annex IV Affidavit in support of the application in accordance with the
Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016.
Annex V Written communication by the proposed interim resolution
professional as set out in Form 2 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016. [ WHERE
APPLICABLE]
Annex VI Proof that the specified application fee has been paid.
Note: Where workmen/employees are operational creditors, the application
may be made either in an individual capacity or in a joint capacity by one of them
who is duly authorised for the purpose.
FORM 6
[See sub-rule(1) of rule 7)
APPLICATION BY CORPORATE APPLICANT TO INITIATE CORPORATE INSOLVENCY
RESOLUTION PROCESS UNDER THE CODE.
[Date]
To,
[Address] From,
[Name and address for correspondence of the corporate applicant]
Subject: Application to initiate corporate insolvency resolution process in respect
of [name of the corporate debtor] under the Code.
Madam/Sir,
We, hereby submit this application to initiate a corporate insolvency resolution
process in respect of [name of corporate debtor]. The details for the purpose of
this application are set out below:
Part-I
PARTICULARS OF THE CORPORATE APPLICANT
1. NAME ADDRESS, EMAIL ADDRESS,
IDENTIFICATION NUMBER AND ADDRESS
FOR COMMUNICATION OF THE
CORPORATE APPLICANT
2. NAME ADDRESS, EMAIL ADDRESS,
IDENTIFICATION NUMBER AND ADDRESS
OF THE REGISTERED OFFICE OF CORPORATE
DEBTOR
3. NAMES AND ADDRESSES OF ALL
DIRECTORS, PROMOTERS, DESIGNATED
PARTNERS OF THE CORPORATE DEBTOR (AS
APPLICABLE)
DEBTOR
UP SHARECAPITAL OF THE CORPORATE
CLAUSE AS PER MEMORANDUM OF
ASSOCIATION (AS APPLICABLE)
6. NAME, ADDRESS AND AUTHORITY OF
PERSON SUBMITTING APPLICATION ON
BEHALF OF CORPORATE APPLICANT

IN INDIAAUTHORISED TO ACCEPT THE
8. DOCUMENTATION TO SHOW THAT THE
CORPORATE APPLICANT IS AUTHORISED
TO INITIATE THE CORPORATE INSOLVENCY
RESOLUTION PROCESS
Part - II
PARTICULARS OF PROPOSED INTERIM RESOLUTION PROFESSIONAL
THE REGISTRATION NUMBER OF THE
PROPOSED INTERIM RESOLUTION
PROFESSIONAL
Part - III
PARTICULARS OF FINANCIAL / OPERATIONAL DEBT
[CREDITOR WISE, AS APPLICABLE]
1. NAME(S) OF FINANCIAL /
OPERATIONAL CREDITOR(S)
2. ADDRESS OF CORRESPONDENCE OF THE
FINANCIAL /OPERATIONAL CREDITOR(S)
3. TOTAL DEBT RAISED AND AMOUNT IN
DEFAULT
4. DATE WHEN THE FINANCIAL /
OPERATIONAL DEBTWAS INCURRED
5. PARTICULARS OF SECURITY HELD, IF ANY,
THE DATEOF ITS CREATION, ITS ESTIMATED
VALUE AS PER THE CREDITOR.ATTACH A
COPY OF A CERTIFICATE OF REGISTRATION
OF CHARGE ISSUED BY THE REGISTRAR OF
COMPANIES (IF THE CORPORATE DEBTOR
IS A COMPANY)
6. DETAILS OF RETENTION OF TITLE

ARRANGEMENTS (IF ANY) IN RESPECT OF
GOODS TO WHICH THE OPERATIONAL
DEBT REFERS
7. RECORD OF DEFAULT WITH THE
INFORMATION UTILITY, IF ANY
8. LIST OF DOCUMENTS ATTACHED TO
THIS APPLICATION IN ORDER TO PROVE
THE EXISTENCE OF FINANCIAL /
OPERATIONAL DEBT AND THE AMOUNT IN
DEFAULT
I, certify that, to the best of my knowledge, [name of proposed insolvency
professional], is fully qualified and permitted to act as an insolvency professional
in accordance with the Code and the associated rules and regulations.
[Name of the corporate applicant] has paid the requisite fee for this application
Yours sincerely,
Signature of person authorised to act on behalf of the corporate applicant
Position with or in relation to the corporate applicant
Instructions
Annex I In case of financial debt, record of default obtained through the
information utility or all documents listed in serial number 8 of
part –III of this application.
Annex II In case of operational debt, (i) copy of invoice / demand notice
served by an operational creditor on the corporate debtor and (ii)
record of default obtained through the information utility or all
documents listed in serial number 8 of part-III of this application.
Annex III Written communication by the proposed interim resolution
professional as set out in Form 2 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016.
Annex IV Copy of the relevant books of accounts of the corporate debtor

evidencing the default to creditors.
Annex V Copies of audited financial statements of the corporate debtor for
the last two financial years and the provisional financial statements
for the current financial year made upto a date not earlier than
fourteen days from the date of the application.
Annex VI A statement of affairs made up to a date not earlier than fourteen
days from the date of application including the following document,
namely:-
(a) a list of the corporate debtor’s assets and liabilities, divided
into such categories as are appropriate for easy identification,
with estimated values assigned to each category;
(b) in the case of any property on which a claim against the
corporate debtor is wholly or partly secured, particulars of the
claim and its amount, and of how and when the security was
created;
(c) the names and addresses of the financial creditors and
operational creditors of the corporate debtor, with the amounts
due to each of them;
(d) particulars of any debts owed by or to the corporate debtor to
or by persons connected with it;
(e) whether any, and if so what, guarantees have been given in
relation to the debts of the corporate debtor by other persons,
specifying which, if any, of the guarantors is a related party to
the corporate debtor and the corporate applicant; and
(f) the names and addresses of the members and partners of the
corporate debtor, as the case may be, with details of their
respective shareholdings.
Annex VII A copy of:
(a) relevant extract of any constitutional document or shareholders’
agreement that records the authority of the corporate applicant
to make this application, where the corporate applicant is a
member or partner of the corporate debtor; or
(b) relevant extract of an employment agreement, constitutional
document or fillings made to the Registrar of Companies
confirming the authority of the corporate applicant to make

this application, where the corporate applicant is an individual
in charge of managing the operations and resources of the
corporate debtor or has control and supervision over the
financial affairs of the corporate debtor.
Annex VIII Affidavit in support of the application in accordance with the
Insolvency and Bankruptcy (Application to Adjudicating Authority)
Rules, 2016.
Annex IX Proof that the specified application fee has been paid.
SCHEDULE
[See sub-rule (3) of rule 10]
S. Applicant Fee payable
No. (in Rs.)
1. Application by financial creditor (whether solely or jointly) 25000
2. Application by operational creditor 2000
3. Application by corporate debtor 25000
257

NOTIFICATION
New Delhi, the 15th December, 2016

(LIQUIDATION PROCESS) REGULATIONS, 2016
33, 34, 35, 37, 38, 39, 40, 41, 43, 45, 49, 50, 51, 52, 54, 196 and 208 read with
section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Board
hereby makes the following Regulations, namely –
CHAPTER I
PRELIMINARY
1. Short title and commencement

(1) These Regulations may be called the Insolvency and Bankruptcy Board of
India (Liquidation Process) Regulations, 2016.
Official Gazette.
(3) These Regulations shall apply to the liquidation process under Chapter III of
Part II of the Insolvency and Bankruptcy Code, 2016.
2. Definitions
(1) In these Regulations, unless the context otherwise requires-
(a) “books of the corporate debtor” means
(i) the books of account and the financial statements as defined in
section 2(13) and 2(40) of the Companies Act, 2013,
(ii) the books of account as referred to in section 34 of the Limited
Liability Partnership Act, 2008, or
(iii) the books of accounts as specified under the applicable law,
as the case may be;
(b) “Code” means the Insolvency and Bankruptcy Code, 2016;
(c) “contributory” means a member of the company, a partner of the limited
257
258 IBBI (LIQUIDATION PROCESS) REGULATIONS, 2016
liability partnership, and any other person liable to contribute towards the
assets of the corporate debtor in the event of its liquidation;
(d) “electronic means” mean an authorized and secured computer
programme which is capable of producing confirmation of sending
communication to the participant entitled to receive such communication
at the last electronic mail address provided by such participant and keeping
record of such communication;
(e) “identification number” means the Limited Liability Partnership
Identification Number or the Corporate Identity Number, as the case may
be;
(f) “Preliminary Report” means the report prepared in accordance with
Regulation 13;
(g) “Progress Report” means the quarterly report prepared in accordance
with Regulation 15;
(h) “registered valuer” means a person registered as such in accordance
with the Companies Act, 2013 (18 of 2013) and rules made thereunder;
(i) “Schedule” means a schedule to these Regulations;
(j) “section” means section of the Code; and
(k) “stakeholders” means the stakeholders entitled to distribution of proceeds
under section 53.
CHAPTER II
APPOINTMENT AND REMUNERATION OF LIQUIDATOR
3. Eligibility for appointment as liquidator

(1) An insolvency professional shall be eligible to be appointed as a liquidator if
he, and every partner or director of the insolvency professional entity of which he
is a partner or director, is independent of the corporate debtor.
Explanation – A person shall be considered independent of the corporate debtor,
if he –
(a) is eligible to be appointed as an independent director on the board of the
corporate debtor under section 149 of the Companies Act, 2013 (18 of
2013), where the corporate debtor is a company;
IBBI (LIQUIDATION PROCESS) REGULATIONS, 2016 259
(b) is not a related party of the corporate debtor; or

(c) has not been an employee or proprietor or a partner:
(i) of a firm of auditors or company secretaries or cost auditors of the
corporate debtor; or
the corporate debtor contributing ten per cent or more of the gross
turnover of such firm, in the last three financial years.
(2) A liquidator shall disclose the existence of any pecuniary or personal
relationship with the concerned corporate debtor or any of its stakeholders as
soon as he becomes aware of it, to the Board and the Adjudicating Authority.
(3) An insolvency professional shall not continue as a liquidator if the insolvency
professional entity of which he is a director or partner, or any other partner or
director of such insolvency professional entity represents any other stakeholder
in the same liquidation process.
4. Liquidator’s fee
(1) The fee payable to the liquidator shall form part of the liquidation cost.
(2) The liquidator shall be entitled to such fee and in such manner as has been
decided by the committee of creditors before a liquidation order is passed under
sections 33(1)(a) or 33(2).
(3) In all cases other than those covered under sub-regulation (2), the liquidator
shall be entitled to a fee as a percentage of the amount realized net of other
liquidation costs, and of the amount distributed, as under :
Amount of Realisation/ Percentage of fee on the amount realized/
Distribution (In rupees) distributed
in the in the in the Thereafter
first six next six next
months months one year
Amount of Realisation (exclusive of liquidation costs)
On the first 1 crore 5.00 3.75 2.50 1.88
On the next 9 crore 3.75 2.80 1.88 1.41
On the next 40 crore 2.50 1.88 1.25 0.94
On the next 50 crore 1.25 0.94 0.68 0.51
On further sums realized 0.25 0.19 0.13 0.10
Amount Distributed to Stakeholders

On the first 1 crore 2.50 1.88 1.25 0.94
On the next 9 crore 1.88 1.40 0.94 0.71
On the next 40 crore 1.25 0.94 0.63 0.47
On the next 50 crore 0.63 0.48 0.34 0.25
On further sums 0.13 0.10 0.06 0.05
distributed
(4) The liquidator shall be entitled to receive half of the fee payable on realization
under sub-regulation (3) only after such realized amount is distributed.
CHAPTER III
POWERS AND FUNCTIONS OF LIQUIDATOR
5. Reporting
(1) The liquidator shall prepare and submit:
(a) a preliminary report;
(b) an asset memorandum;
(c) progress report(s);
(d) sale report(s);
(e) minutes of consultation with stakeholders; and
(f) the final report prior to dissolution
to the Adjudicating Authority in the manner specified under these Regulations.
(2) The liquidator shall preserve a physical as well as an electronic copy of the
reports and minutes referred to in sub-regulation (1) for eight years after the
dissolution of the corporate debtor.
(3) Subject to other provisions of these Regulations, the liquidator shall make the
reports and minutes referred to sub-regulation (1) available to a stakeholder in
either electronic or physical form, on receipt of
(a) an application in writing;
(b) costs of making such reports and minutes available to it; and
(c) an undertaking from the stakeholder that it shall maintain confidentiality of
such reports and minutes and shall not use these to cause an undue gain or
undue loss to itself or any other person.
6. Registers and books of account

(1) Where the books of account of the corporate debtor are incomplete on the
liquidation commencement date, the liquidator shall have them completed and
brought up-to-date, with all convenient speed, as soon as the order for liquidation
is passed.
(2) The liquidator shall maintain the following registers and books, as may be
applicable, in relation to the liquidation of the corporate debtor, and shall preserve
them for a period of eight years after the dissolution of the corporate debtor-
(a) Cash Book;
(b) Ledger;
(c) Bank Ledger;
(d) Register of Fixed Assets and Inventories;
(e) Securities and Investment Register;
(f) Register of Book Debts and Outstanding Debts;
(g) Tenants Ledger;
(h) Suits Register;
(i) Decree Register;
(j) Register of Claims and Dividends;
(k) Contributories Ledger;
(l) Distributions Register;
(m) Fee Register;
(n) Suspense Register;
(o) Documents Register;
(p) Books Register;
(q) Register of unclaimed dividends and undistributed properties deposited
in accordance with Regulation 45; and
(r) such other books or registers as may be necessary to account for
transactions entered into by him in relation to the corporate debtor.
(3) The registers and books under sub-regulation (2) may be maintained in the
forms indicated in Schedule III, with such modifications as the liquidator may
deem fit in the facts and circumstances of the liquidation process.
(4) The liquidator shall keep receipts for all payments made or expenses incurred
by him.
7. Appointment of professionals
(1) A liquidator may appoint professionals to assist him in the discharge of his
duties, obligations and functions for a reasonable remuneration and such
remuneration shall form part of the liquidation cost.
(2) The liquidator shall not appoint a professional under sub-regulation (1) who is
his relative, is a related party of the corporate debtor or has served as an auditor
to the corporate debtor in the five years preceding the liquidation commencement
date.
(3) A professional appointed or proposed to be appointed under sub-regulation
(1) shall disclose the existence of any pecuniary or personal relationship with any
of the stakeholders, or the concerned corporate debtor as soon as he becomes
aware of it, to the liquidator.
8. Consultation with stakeholders

(1) The stakeholders consulted under section 35(2) shall extend all assistance
and cooperation to the liquidator to complete the liquidation of the corporate
debtor.
(2) The liquidator shall maintain the particulars of any consultation with the
stakeholders made under this Regulation, as specified in Form A of Schedule II.
9. Personnel to extend cooperation to liquidator

(1) The liquidator may make an application to the Adjudicating Authority for a
direction that a person who-
(a) is or has been an officer, auditor, employee, promoter or partner of the
corporate debtor;
(b) was the interim resolution professional, resolution professional or the
previous liquidator of the corporate debtor; or
(c) has possession of any of the properties of the corporate debtor;
shall cooperate with him in the collection of information necessary for the conduct
of the liquidation.
(2) An application may be made under this Regulation only after the liquidator
has made reasonable efforts to obtain the information from such person and
failed to obtain it.
10. Disclaimer of onerous property

(1) Where any part of the property of a corporate debtor consists of-
(a) land of any tenure, burdened with onerous covenants;
(b) shares or stocks in companies;
(c) any other property which is not saleable or is not readily saleable by
reason of the possessor thereof being bound either to the performance of
any onerous act or to the payment of any sum of money; or
(d) unprofitable contracts;
the liquidator may, notwithstanding that he has endeavored to sell or has taken
possession of the property or exercised any act of ownership in relation thereto
or done anything in pursuance of the contract, make an application to the
Adjudicating Authority within six months from the liquidation commencement
date, or such extended period as may be allowed by the Adjudicating Authority,
to disclaim the property or contract.
(2) The liquidator shall not make an application under sub-regulation (1) if a
person interested in the property or contract inquired in writing whether he will
make an application to have such property disclaimed, and he did not
communicate his intention to do so within one month from receipt of such inquiry.
(3) The liquidator shall serve a notice to persons interested in the onerous property
or contract at least seven days before making an application for disclaimer to the
Adjudicating Authority:
Explanation: A person is interested in the onerous property or contract if he-
(a) is entitled to the benefit or subject to the burden of the contract ; or
(b) claims an interest in a disclaimed property or is under a liability not
discharged in respect of a disclaimed property.
(4) Subject to the order of the Adjudicating Authority approving such disclaimer,
the disclaimer shall operate to determine, from the date of disclaimer, the rights,
interest and liabilities of the corporate debtor in or in respect of the property or
contract disclaimed, but shall not, except so far as is necessary for the purpose of
releasing the corporate debtor and the property of the corporate from liability,
affect the rights, interest or liabilities of any other person.
(5) A person affected by the disclaimer under this Regulation shall be deemed to
be a creditor of the corporate debtor for the amount of the compensation or
damages payable in respect of such effect, and may accordingly be payable as
a debt in liquidation under section 53(1)(f).
11. Extortionate credit transactions

A transaction shall be considered an extortionate credit transaction under section
50(2) where the terms-
(1) require the corporate debtor to make exorbitant payments in respect of the
credit provided; or
(2) are unconscionable under the principles of law relating to contracts.
CHAPTER IV
GENERAL
12. Public announcement by liquidator
(1) The liquidator shall make a public announcement in Form B of Schedule II
within five days from his appointment.
(2) The public announcement shall-
(a) call upon stakeholders to submit their claims as on the liquidation
commencement date; and
(b) provide the last date for submission of claim, which shall be thirty days
from the liquidation commencement date.
(3) The announcement shall be published-
(a) in one English and one regional language newspaper with wide circulation
at the location of the registered office and principal office, if any, of the
corporate debtor and any other location where in the opinion of the
liquidator, the corporate debtor conducts material business operations;
(b) on the website, if any, of the corporate debtor; and
(c) on the website, if any, designated by the Board for this purpose.
13. Preliminary report

The liquidator shall submit a Preliminary Report to the Adjudicating Authority
within seventy-five days from the liquidation commencement date, detailing-
(a) the capital structure of the corporate debtor;
(b) the estimates of its assets and liabilities as on the liquidation
commencement date based on the books of the corporate debtor:
Provided that if the liquidator has reasons to believe, to be recorded in
writing, that the books of the corporate debtor are not reliable, he shall
also provide such estimates based on reliable records and data otherwise
available to him;
(c) whether, he intends to make any further inquiry in to any matter relating to
the promotion, formation or failure of the corporate debtor or the conduct
of the business thereof; and
(d) the proposed plan of action for carrying out the liquidation, including the
timeline within which he proposes to carry it out and the estimated
liquidation costs.
14. Early dissolution

Any time after the preparation of the Preliminary Report, if it appears to the liquidator
that-
(a) the realizable properties of the corporate debtor are insufficient to cover
the cost of the liquidation process; and
(b) the affairs of the corporate debtor do not require any further investigation;
he may apply to the Adjudicating Authority for early dissolution of the corporate
debtor and for necessary directions in respect of such dissolution.
15. Progress reports

(1) The liquidator shall submit Progress Reports to the Adjudicating Authority as
under-
(a) the first Progress Report within fifteen days after the end of the quarter in
which he is appointed;
(b) subsequent Progress Report(s) within fifteen days after the end of every
quarter during which he acts as liquidator; and
Provided that if an insolvency professional ceases to act as a liquidator
during the liquidation process, he shall file a Progress Report for the quarter
up to the date of his so ceasing to act, within fifteen days of such cessation.
(2) A Progress Report shall provide all information relevant to liquidation for the
quarter, including-
(a) appointment, tenure of appointment and cessation of appointment of
professionals;
(b) a statement indicating progress in liquidation, including-
(i) settlement of list of stakeholders,
(ii) details of any property that remain to be sold and realized,
(iii) distribution made to the stakeholders, and
(iv) distribution of unsold property made to the stakeholders;

(c) details of fee or remuneration, including-
(i) the fee due to and received by the liquidator together with a
description of the activities carried out by him,
(ii) the remuneration or fee paid to professionals appointed by the
liquidator together with a description of activities carried out by
them,
(iii) other expenses incurred by the liquidator, whether paid or not;
(d) developments in any material litigation, by or against the corporate debtor;
(e) filing of, and developments in applications for avoidance of transactions
in accordance with Chapter III of Part II of the Code; and
(f) changes, if any, in estimated liquidation costs.
(3) A Progress Report shall enclose an account maintained by the liquidator
showing-
(a) his receipts and payments during the quarter; and
(b) the cumulative amount of his receipts and payments since the liquidation
commencement date.
(4) A Progress Report shall enclose a statement indicating any material change in
expected realization of any property proposed to be sold, along with the basis for
such change:
Provided that this statement shall not be accessible to any person during the
course of liquidation, unless permitted by the Adjudicating Authority.
(5) The Progress Report for the fourth quarter of the financial year shall enclose
audited accounts of the liquidator’s receipts and payments for the financial year:
Provided that in case an insolvency professional ceases to act as liquidator, the
audited accounts of his receipts and payments for that part of the financial year
during which he has acted as liquidator, shall be enclosed with the Progress
Report to be filed after cessation of his appointment.
Illustration: An insolvency professional becomes a liquidator on 13th February,
2017, and ceases to act as liquidator on 12th February, 2019. He shall submit
Progress Reports as under:
Report Period covered in the Quarter Last Date of Submission

No. of Report
1 13th February - 31st March, 2017 15th April, 2017
2 April - June, 2017 15th July, 2017
3 July - September, 2017 15th October, 2017
4 October - December, 2017 15th January, 2018

5 January - March, 2018 15th April, 2018
6 April - June, 2018 15th July, 2018
7 July - September, 2018 15th October, 2018

8 October - December, 2018 15th January, 2019
9 January - 12th February, 2019 27th February, 2019
He shall submit the audited accounts of his receipts and payments as under:
Audited Period covered in the Year Last Date of
Account No. Submission
1 13th February - 31st March, 2017 15th April, 2017
2 April - March, 2018 15th April, 2018

3 April - 12th February, 2019 27th February, 2019
CHAPTER V
CLAIMS
16. Proof of claim

A person, who claims to be a stakeholder, shall prove his claim for debt or dues
to him, including interest, if any, as on the liquidation commencement date.
17. Claims by operational creditors

(1) A person claiming to be an operational creditor of the corporate debtor, other
than a workman or employee, shall submit proof of claim to the liquidator in
person, by post or by electronic means in Form C of Schedule II.
(2) The existence of debt due to an operational creditor under this Regulation may
be proved on the basis of –
(a) the records available with an information utility, if any; or
(b) other relevant documents which adequately establish the debt, including
any or all of the following -
(i) a contract for the supply of goods and services with corporate debtor;
(ii) an invoice demanding payment for the goods and services supplied
to the corporate debtor;
payment of a debt, if any; and
(iv) financial accounts.
18. Claims by financial creditors

(1) A person claiming to be a financial creditor of the corporate debtor shall submit
proof of claim to the liquidator in electronic means in Form D of Schedule II.
of –
(a) the records available in an information utility, if any; or
any or all of the following-
of the debt;
creditor to the corporate debtor under a facility has been drawn by
the corporate debtor;
(iii) financial statements showing that the debt has not been repaid; and
19. Claims by workmen and employees

(1) A person claiming to be a workman or an employee of the corporate debtor
shall submit proof of claim to the liquidator in person, by post or by electronic
means in Form E of Schedule II.
debtor, an authorized representative may submit one proof of claim for all such
dues on their behalf in Form F of Schedule II.
individually or collectively, on the basis of –
(a) records available in an information utility, if any; or

(b) other relevant documents which adequately establish the dues, including
for which such workman or employee is claiming dues;
(ii) evidence of notice demanding payment of unpaid amount and any
documentary or other proof that payment has not been made; and
payment of dues, if any.
(4) The liquidator may admit the claims of a workman or an employee on the
basis of the books of account of the corporate debtor if such workman or employee
has not made a claim.
20. Claims by other stakeholders

(1) A person, claiming to be a stakeholder other than those under Regulations
17(1), 18(1), or 19(1), shall submit proof of claim to the liquidator in person, by post
or by electronic means in Form G of Schedule II.
(2) The existence of the claim of the stakeholder may be proved on the basis of -
(a) the records available in an information utility, if any, or
(b) other relevant documents which adequately establish the claim, including
any or all of the following-
(i) documentary evidence of notice demanding payment of unpaid
amount or bank statements of the claimant showing that the claim
has not been paid and an affidavit that the documentary evidence
and bank statements are true, valid and genuine;
(ii) documentary or electronic evidence of his shareholding; and
(iii) an order of a court, tribunal or other authority that has adjudicated
upon the non-payment of a claim, if any.
21. Proving security interest

The existence of a security interest may be proved by a secured creditor on the
basis of-
(a) the records available in an information utility, if any;
(b) certificate of registration of charge issued by the Registrar of Companies; or
(c) proof of registration of charge with the Central Registry of Securitisation

Asset Reconstruction and Security Interest of India.
22. Production of bills of exchange and promissory notes

Where a person seeks to prove a debt in respect of a bill of exchange, promissory
note or other negotiable instrument or security of a like nature for which the
corporate debtor is liable, such bill of exchange, note, instrument or security, as
the case may be, shall be produced before the liquidator before the claim is
admitted.
23. Substantiation of claims

The liquidator may call for such other evidence or clarification as he deems fit
from a claimant for substantiating the whole or part of its claim.
24. Cost of proof

(1) A claimant shall bear the cost of proving its claim.
(2) Costs incurred by the liquidator for verification and determination of a claim
shall form part of liquidation cost:
Provided that if a claim or part of the claim is found to be false, the liquidator shall
endeavor to recover the costs incurred for verification and determination of claim
from such claimant, and shall provide the details of the claimant to the Board.
25. Determination of quantum of claim

Where the amount claimed by a claimant is not precise due to any contingency
or any other reason, the liquidator shall make the best estimate of the amount of
the claim based on the information available with him.
26. Debt in foreign currency

The claims denominated in foreign currency shall be valued in Indian currency at
the official exchange rate as on the liquidation commencement date.
Explanation- “The official exchange rate” is the reference rate published by the
Reserve Bank of India or derived from such reference rates.
27. Periodical payments

In the case of rent, interest and such other payments of a periodical nature, a
person may claim only for any amounts due and unpaid up to the liquidation
commencement date.
28. Debt payable at future time

(1) A person may prove for a claim whose payment was not yet due on the
liquidation commencement date and is entitled to distribution in the same manner
as any other stakeholder.
(2) Subject to any contract to the contrary, where a stakeholder has proved for a
claim under sub-regulation (1) , and the debt has not fallen due before distribution,
he is entitled to distribution of the admitted claim reduced as follows-
X/ (1+r)n
where-
(a) “X” is the value of the admitted claim;
(b) “r” is the closing yield rate (%) of government securities of the maturity of “n”
on the date of distribution as published by the Reserve Bank of India; and
(c) “n” is the period beginning with the date of distribution and ending with
the date on which the payment of the debt would otherwise be due,
expressed in years and months in a decimalized form.
29. Mutual credits and set-off

Where there are mutual dealings between the corporate debtor and another
party, the sums due from one party shall be set off against the sums due from the
other to arrive at the net amount payable to the corporate debtor or to the other
party.
Illustration: X owes Rs. 100 to the corporate debtor. The corporate debtor owes
Rs. 70 to X. After set off, Rs. 30 is payable by X to the corporate debtor.
30. Verification of claims

The liquidator shall verify the claims submitted within thirty days from the last
date for receipt of claims and may either admit or reject the claim, in whole or in
part, as the case may be.
31. List of stakeholders

(1) The liquidator shall prepare a list of stakeholders, category-wise, on the basis
of proofs of claims submitted and accepted under these Regulations, with-
(a) the amounts of claim admitted, if applicable,
(b) the extent to which the debts or dues are secured or unsecured, if
applicable,
(c) the details of the stakeholders, and

(d) the proofs admitted or rejected in part, and the proofs wholly rejected.
(2) The liquidator shall file the list of stakeholders with the Adjudicating Authority
within forty-five days from the last date for receipt of claims, and the filing of the
list shall be announced to the public in the manner specified in Regulation 12(3).
(3) The liquidator may apply to the Adjudicating Authority to modify an entry in the
list of stakeholders filed with the Adjudicating Authority, when he comes across
additional information warranting such modification, and shall modify the entry
in the manner directed by the Adjudicating Authority.
(4) The liquidator shall modify an entry in the list of stakeholders filed with the
Adjudicating Authority, in the manner directed by the Adjudicating Authority while
disposing off an appeal preferred under section 42.
(5) The list of stakeholders, as modified from time to time, shall be-
(a) available for inspection by the persons who submitted proofs of claim;
of the corporate debtor;
(c) displayed on the website, if any, of the corporate debtor.
CHAPTER VI
REALISATION OF ASSETS
32. Manner of sale

The liquidator may
(a) sell an asset on a standalone basis; or
(b) sell
(i) the assets in a slump sale,
(ii) a set of assets collectively, or
(iii) the assets in parcels.
33. Mode of sale

(1) The liquidator shall ordinarily sell the assets of the corporate debtor through an
auction in the manner specified in Schedule I.
(2) The liquidator may sell the assets of the corporate debtor by means of private
sale in the manner specified in Schedule I when-
(a) the asset is perishable;

(b) the asset is likely to deteriorate in value significantly if not sold immediately;
(c) the asset is sold at a price higher than the reserve price of a failed auction; or
(d) the prior permission of the Adjudicating Authority has been obtained for
such sale:
Provided that the liquidator shall not sell the assets, without prior permission of
the Adjudicating Authority, by way of private sale to-
(a) a related party of the corporate debtor;
(b) his related party; or
(c) any professional appointed by him.
(3) The liquidator shall not proceed with the sale of an asset if he has reason to
believe that there is any collusion between the buyers, or the corporate debtor’s
related parties and buyers, or the creditors and the buyer, and shall submit a
report to the Adjudicating Authority in this regard, seeking appropriate orders
against the colluding parties.
34. Asset memorandum

(1) On forming the liquidation estate under section 36, the liquidator shall prepare
an asset memorandum in accordance with this Regulation within seventy-five
days from the liquidation commencement date.
(2) The asset memorandum shall provide the following details in respect of the
assets which are intended to be realized by way of sale-
(a) value of the asset, valued in accordance with Regulation 35;
(b) value of set of assets or assets in parcels or assets in a slump sale, as the
case may be, valued in accordance with Regulation 35, if intended to be
sold as specified in Regulation 32(b);
(c) intended manner of sale in accordance with Regulation 32, and reasons
for the same;
(d) the intended mode of sale and reasons for the same in accordance with
Regulation 33;
(e) expected amount of realization from sale; and
(f) any other information that may be relevant for the sale of the asset.
(3) The asset memorandum shall provide the following details in respect of each
of the assets other than those referred to in sub-regulation (2)-
(a) value of the asset;

(b) intended manner and mode of realization, and reasons for the same;
(c) expected amount of realization; and
(d) any other information that may be relevant for the realization of the asset.
(4) The liquidator shall file the asset memorandum along with the preliminary
report to the Adjudicating Authority.
(5) The asset memorandum shall not be accessible to any person during the
course of liquidation, unless permitted by the Adjudicating Authority.
35. Valuation of assets intended to be sold

(1) The liquidator shall appoint at least two registered valuers to value the assets
as required under Regulation 34(2).
(2) The provisions of Regulation 7 shall apply mutatis mutandis to registered
valuers appointed under sub-regulation (1).
(3) The registered valuers appointed under sub-regulation (1) shall independently
submit to the liquidator the estimates of the realizable value of the asset(s)
computed in accordance with internationally accepted valuation standards, after
physical verification of the assets of the corporate debtor.
(4) The average of the estimates received under sub-regulation (3) shall be
considered the value of the assets.
36. Asset sale report

On sale of an asset, the liquidator shall prepare an asset sale report in respect of
said asset, to be enclosed with the Progress Reports, containing -
(a) the realized value;
(b) cost of realization, if any;
(c) the manner and mode of sale;
(d) if the value realized is less than the value in the asset memorandum, the
reasons for the same;
(e) the person to whom the sale is made; and
(f) any other details of the sale.
37. Realization of security interest by secured creditor

(1) A secured creditor who seeks to realize its security interest under section 52
shall intimate the liquidator of the price at which he proposes to realize its secured
asset.
(2) The liquidator shall inform the secured creditor within twenty one days of receipt
of the intimation under sub-regulation (1) if a person is willing to buy the secured
asset before the expiry of thirty days from the date of intimation under sub-regulation
(1), at a price higher than the price intimated under sub-regulation (1).
(3) Where the liquidator informs the secured creditor of a person willing to buy the
secured asset under sub¬regulation (2), the secured creditor shall sell the asset
to such person.
(4) If the liquidator does not inform the secured creditor in accordance with sub-
regulation (2), or the person does not buy the secured asset in accordance with
sub-regulation (2), the secured creditor may realize the secured asset in the
manner it deems fit, but at least at the price intimated under sub-regulation (1).
(5) Where the secured asset is realized under sub-regulation (3), the secured
creditor shall bear the cost of identification of the buyer under sub-regulation (2).
(6) Where the secured asset is realized under sub-regulation (4), the liquidator
shall bear the cost of incurred to identify the buyer under sub-regulation (2).
(7) The provisions of this Regulation shall not apply if the secured creditor enforces
his security interest under the Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 or the Recovery of Debts and
Bankruptcy Act, 1993.
38. Distribution of unsold assets

(1) The liquidator may, with the permission of the Adjudicating Authority, distribute
amongst the stakeholders, an asset that cannot be readily or advantageously
sold due to its peculiar nature or other special circumstances.
(2) The application seeking permission of the Adjudicating Authority under sub-
regulation (1) shall-
(a) identify the asset;
(b) provide a value of the asset;
(c) detail the efforts made to sell the asset, if any; and
(d) provide reasons for such distribution.
39. Recovery of monies due

The liquidator shall endeavor to recover and realize all assets of and dues to the
corporate debtor in a time-bound manner for maximization of value for the
stakeholders.
40. Liquidator to realize uncalled capital or unpaid capital contribution

(1) The liquidator shall realize any amount due from any contributory to the
corporate debtor.
(2) Notwithstanding any charge or encumbrance on the uncalled capital of the
corporate debtor, the liquidator shall be entitled to call and realize the uncalled
capital of the corporate debtor and to collect the arrears, if any, due on calls made
prior to the liquidation, by providing a notice to the contributory to make the
payments within fifteen days from the receipt of the notice, but shall hold all
moneys so realized subject to the rights, if any, of the holder of any such charge
or encumbrance.
(3) No distribution shall be made to a contributory, unless he makes his contribution
to the uncalled or unpaid capital as required in the constitutional documents of
Explanation: For the purpose of this chapter and Schedule I, ‘assets’ include an
asset, all assets, a set of assets or parcel of assets, as the case may be, which are
being sold.
CHAPTER VII
PROCEEDS OF LIQUIDATION AND DISTRIBUTION OF PROCEEDS
41. All money to be paid in to bank account

(1) The liquidator shall open a bank account in the name of the corporate debtor
followed by the words ‘in liquidation’, in a scheduled bank, for the receipt of all
moneys due to the corporate debtor.
(2) The liquidator shall deposit in the bank account opened under sub-regulation
(1) all moneys, including cheques and demand drafts received by him as the
liquidator of the corporate debtor, and the realizations of each day shall be
deposited into the bank account without any deduction not later than the next
working day.
(3) The liquidator may maintain a cash of one lakh rupees or such higher amount
as may be permitted by the Adjudicating Authority to meet liquidation costs.
(4) All payments out of the account by the liquidator above five thousand rupees
shall be made by cheques drawn or online banking transactions against the
bank account.
42. Distribution
(1) Subject to the provisions of section 53, the liquidator shall not commence
distribution before the list of stakeholders and the asset memorandum has been
filed with the Adjudicating Authority.
(2) The liquidator shall distribute the proceeds from realization within six months
from the receipt of the amount to the stakeholders.
(3) The insolvency resolution process costs, if any, and the liquidation costs shall
be deducted before such distribution is made.
43. Return of money

A stakeholder shall forthwith return any monies received by him in distribution,
which he was not entitled to at the time of distribution, or subsequently became
not entitled to.
44. Completion of liquidation

(1) The liquidator shall liquidate the corporate debtor within a period of two years.
(2) If the liquidator fails to liquidate the corporate debtor within two years, he shall
make an application to the Adjudicating Authority to continue such liquidation,
along with a report explaining why the liquidation has not been completed and
specifying the additional time that shall be required for liquidation.
45. Final report prior to dissolution

(1) When the corporate debtor is liquidated, the liquidator shall make an account
of the liquidation, showing how it has been conducted and how the corporate
debtor’s assets have been liquidated.
(2) If the liquidation cost exceeds the estimated liquidation cost provided in the
Preliminary Report, the liquidator shall explain the reasons for the same.
(3) The final report shall form part of the application for the dissolution of the
corporate debtor to the Adjudicating Authority to be made under section 54.
46. Unclaimed proceeds of liquidation or undistributed assets

(1) Before the order of dissolution is passed under section 54(2), the liquidator
shall apply to the Adjudicating Authority for an order to pay into the Companies
Liquidation Account in the Public Account of India any unclaimed proceeds of
liquidation or undistributed assets or any other balance payable to the stakeholders
in his hands on the date of the order of dissolution.
(2) Any liquidator who retains any money which should have been paid by him
into the Companies Liquidation Account under this Regulation shall pay interest
on the amount retained at the rate of twelve per cent per annum, and also pay
such penalty as may be determined by the Board.
(3) The liquidator shall, when making any payment referred to in sub-regulation
(1), furnish to the authority with which the corporate debtor is registered, and the
Board, a statement setting forth the nature of the sums included, the names and
last known addresses of the stakeholders entitled to participate therein, the amount
to which each is entitled to and the nature of their claim.
(4) The liquidator shall be entitled to a receipt from the Reserve Bank of India for
any money paid to it under sub-regulation (2), and such receipt shall be an
effectual discharge of the liquidator in respect thereof.
(5) A person claiming to be entitled to any money paid into the Companies
Liquidation Account may apply to the Board for an order for payment of the
money claimed; which may, if satisfied that such person is entitled to the whole
or any part of the money claimed, make an order for the payment to that person
of the sum due to him, after taking such security from him as it may think fit.
(6) Any money paid into the Companies Liquidation Account in pursuance of this
Regulation, which remains unclaimed thereafter for a period of fifteen years,
shall be transferred to the general revenue account of the Central Government.
SCHEDULE I
MODE OF SALE
(Under Regulation 33 of the Insolvency and Bankruptcy Board ofIndia
(Liquidation Process) Regulations, 2016)
1. AUCTION
(1) Where an asset is to be sold through auction, a liquidator shall do so the in the
manner specified herein.
(2) The liquidator shall prepare a marketing strategy, with the help of marketing
professionals, if required, for sale of the asset. The strategy may include-
(a) releasing advertisements;
(b) preparing information sheets for the asset;
(c) preparing a notice of sale; and
(d) liaising with agents.
(3) The liquidator shall prepare terms and conditions of sale, including reserve
price, earnest money deposit as well as pre-bid qualifications, if any.
(4) The reserve price shall be the value of the asset arrived at in accordance with
Regulation 34. Such valuation shall not be more than six months old. However, in
the event that an auction fails at such price, the liquidator may reduce the reserve
price up to seventy-five per cent of such value to conduct subsequent auctions.
(5) The liquidator shall make a public announcement of an auction in the manner
specified in Regulation 12(3);
Provided that the liquidator may apply to Adjudicating Authority to dispense with
the requirement of Regulation 12(3)(a) keeping in view the value of the asset
intended to be sold by auction.
(6) The liquidator shall provide all assistance necessary for the conduct of due
diligence by interested buyers.
(7) The liquidator shall sell the assets through an electronic auction on an online
portal, if any, designated by the Board, where the interested buyers can register,
bid and receive confirmation of the acceptance of their bid online.
(8) If the liquidator is of the opinion that a physical auction is likely to maximize the
realization from the sale of assets and is in the best interests of the creditors, he
may sell assets through a physical auction after obtaining the permission of the
Adjudicating Authority. The liquidator may engage the services of qualified
professional auctioneers specializing in auctioning such assets for this purpose.
(9) An auction shall be transparent, and the highest bid at any given point shall be
visible to the other bidders.
(10) If the liquidator is of the opinion that an auction where bid amounts are not
visible is likely to maximize realizations from the sale of assets and is in the best
interests of the creditors, he may apply, in writing, to the Adjudicating Authority for
its permission to conduct an auction in such manner.
(11) If required, the liquidator may conduct multiple rounds of auctions to maximize
the realization from the sale of the assets, and to promote the best interests of the
creditors.
(12) On the close of the auction, the highest bidder shall be invited to provide
balance sale consideration within fifteen days of the date when he is invited to
provide the balance sale consideration. On payment of the full amount, the sale
shall stand completed, the liquidator shall execute certificate of sale or sale deed
to transfer such assets and the assets shall be delivered to him in the manner
specified in the terms of sale.
2. PRIVATE SALE
(1) Where an asset is to be sold through private sale, a liquidator shall conduct the
sale in the manner specified herein.
(2) The liquidator shall prepare a strategy to approach interested buyers for assets
to be sold by private sale.
(3) Private sale may be conducted through directly liaising with potential buyers
or their agents, through retail shops, or through any other means that is likely to
maximize the realizations from the sale of assets.
(4) The sale shall stand completed in accordance with the terms of sale.
(5) Thereafter, the assets shall be delivered to the purchaser, on receipt of full
consideration for the assets, in the manner specified in the terms of sale.
SCHEDULE II
FORM A
PROFORMA FOR REPORTING CONSULTATIONS WITH STAKEHOLDERS
(Under Regulation 8 of the Insolvency and Bankruptcy Board of India
Separate proforma to be used for each stakeholder or group of
homogenous stakeholders
NAME AND REGISTRATION NO. OF LIQUIDATOR:
NAME OF CORPORATE DEBTOR BEING
LIQUIDATED:
LIQUIDATION CASE NO:
NAME OF THE STAKEHOLDER:
DATE OF CONSULTATION (IF HELD IN PERSON):
NUMBER AND DATES OF COMMUNICATIONS
RECEIVED FROM STAKEHOLDER:
SUMMARY OF CONSULTATION:
SCHEDULE II
FORM B
PUBLIC ANNOUNCEMENT
(Regulation 12 of the Insolvency and Bankruptcy (Liquidation Process)
Regulations, 2016)
FOR THE ATTENTION OF THE STAKEHOLDERS OF [Name of Corporate
Debtor]
1. NAME OF CORPORATE DEBTOR

DEBTOR
3. AUTHORITY UNDER WHICH CORPORATE
DEBTOR IS INCORPORATED/ REGISTERED
4. CORPORATE IDENTITY NUMBER / LIMITED
LIABILITY IDENTITY NUMBER OF CORPORATE
DEBTOR
5. ADDRESS OF THE REGISTERED OFFICE AND
PRINCIPAL OFFICE (IF ANY) OF CORPORATE
DEBTOR
6. DATE OF CLOSURE OF INSOLVENCY
RESOLUTION PROCESS
7. LIQUIDATION COMMENCEMENT DATE OF
CORPORATE DEBTOR
8. NAME, ADDRESS, EMAIL ADDRESS,
TELEPHONE NUMBER AND THE
REGISTRATION NUMBER OF THE LIQUIDATOR
9. LAST DATE FOR SUBMISSION OF CLAIMS
Notice is hereby given that the Hon’ble National Company Law Tribunal (Name of
Bench) has ordered the commencement of liquidation of the [name of the corporate
debtor] on [date of passing of order of liquidation under section 33 of the Code],
The stakeholders of [name of the corporate debtor] are hereby called upon to
submit a proof of their claims, on or before [insert the date falling thirty days after
the liquidation commencement date], to the liquidator at the address mentioned
against item 8.
All other stakeholders may submit the proof of claims in person, by post or by
electronic means.
Name and Signature of the Liquidator:
Date and Place:
SCHEDULE II
FORM C
PROOF OF CLAIM BY OPERATIONAL CREDITORS EXCEPT WORKMEN AND
EMPLOYEES
[Date]
To
The Liquidator
[Name of the Liquidator]
[Address as set out in the public announcement]
From
Subject : Submission of proof of claim in respect of the liquidation of [name of
corporate debtor] under the Insolvency and Bankruptcy Code, 2016.
Madam/Sir,
[Name of the operational creditor] hereby submits this proof of claim in respect of
the liquidation of [name of corporate debtor]. The details for the same are set out
below:
(IF AN INCORPORATED BODY PROVIDE
IDENTIFICATION NUMBER
AND PROOF OF INCORPORATION, IF A
PARTNERSHIP OR INDIVIDUAL PROVIDE
IDENTIFICATION RECORDS OF ALL THE
PARTNERS OR THE INDIVIDUAL)
2. ADDRESS OF OPERATIONAL CREDITOR FOR
CORRESPONDENCE
3. TOTAL AMOUNT OF CLAIM, INCLUDING ANY PRINCIPAL
INTEREST, AS AT LIQUIDATION INTEREST
COMMENCEMENT DATE AND DETAILS OF TOTAL CLAIM
NATURE OF CLAIM
4. DETAILS OF DOCUMENTS BY REFERENCE TO
WHICH THE DEBT CAN BE SUBSTANTIATED
5. DETAILS OF ANY DISPUTE AS WELL AS THE

RECORD OF PENDENCY OF SUIT OR
ARBITRATION PROCEEDINGS
6. DETAILS OF HOW AND WHEN DEBT
INCURRED
7. DETAILS OF ANY MUTUAL CREDIT, MUTUAL
DEBTS, OR OTHER MUTUAL DEALINGS
BETWEEN THE CORPORATE DEBTOR AND
THE OPERATIONAL CREDITOR WHICH MAY
BE SET-OFF AGAINST THE CLAIM
8. DETAILS OF ANY RETENTION OF TITLE IN
RESPECT OF GOODS OR PROPERTIES TO
WHICH THE DEBT REFERS OR ANY OTHER
SECURITY
9. DETAILS OF ANY ASSIGNMENT OR TRANSFER
OF DEBT IN HIS FAVOUR
10. DETAILS OF THE BANK ACCOUNT TO WHICH
THE OPERATIONAL CREDITOR’S SHARE OF
THE PROCEEDS OF LIQUIDATION CAN BE
TRANSFERRED
11. LIST OUT AND ATTACH THE DOCUMENTS (i)
RELIED ON IN SUPPORT OF THE CLAIM. (ii)
(iii)
Signature of operational creditor or person authorised to act on his behalf
(Please enclose the authority if this is being submitted on behalf of the
operational creditor)
Name in BLOCK LETTERS
*PAN, Passport, AADHAAR Card or the identity card issued by the Election
AFFIDAVIT
I, [name of deponent], currently residing at [address of deponent], do solemnly
affirm and state as follows :
1. The above named corporate debtor was, at liquidation commencement date,

that is, the __________ day of __________ 20______ and still is, justly and truly
indebted to me [or to me and [insert name of copartners], my co-partners in trade,
or, as the case may be] in the sum of Rs. __________ for _____ [please state
consideration].
2. In respect of my claim of the said sum or any part thereof, I have relied on and
[Please list the documents relied on as evidence of debt.]
3. The said documents are true, valid and genuine to the best of my knowledge,
information and belief.
4. In respect of the said sum or any part thereof, I have not, nor have my partners
or any of them, nor has any person, by my/our order, to my/our knowledge or
belief, for my/ our use, had or received any manner of satisfaction or security
whatsoever, save and except the following:
[Please state details of any mutual credit, mutual debts, or other mutual dealings
between the corporate debtor and the operational creditor which may be set-off
against the claim.]
Solemnly, affirmed at _____________________ on _________________ day,
the __________day of__________ 20_____
Before me,
Notary / Oath Commissioner
VERIFICATION
I, the Deponent hereinabove, do hereby verify and affirm that the contents of para
to of this affidavit are true and correct to my knowledge and belief. Nothing is
false and nothing material has been concealed therefrom.
Verified at ______ on this ______ day of 201__
Deponent's signature
SCHEDULE II
FORM D
[Date]
To
The Liquidator
From
creditor]
Subject: Submission of proof of claim in respect of the liquidation of [name of
corporate debtor] under the insolvency and Bankruptcy code, 2016.
Madam/Sir,
[Name of the financial creditor] hereby submits this proof of claim in respect of the
liquidation of [name of corporate debtor]. The details for the same are set out
below:
IDENTIFICATION NUMBER AND PROOF OF
INCORPORATION, IF A PARTNERSHIP OR
INDIVIDUAL PROVIDE IDENTIFICATION
RECORDS* OF ALL THE PARTNERS OR THE
INDIVIDUAL)
2. ADDRESS AND EMAIL OF FINANCIAL
CREDITOR FOR CORRESPONDENCE.
3. TOTAL AMOUNT OF CLAIM, INCLUDING ANY PRINCIPAL :
INTEREST, AS AT THE LIQUIDATION INTEREST :
COMMENCEMENT DATE AND DETAILS OF TOTAL CLAIM :
NATURE OF CLAIM (WHETHER TERM LOAN,
SECURED, UNSECURED)
WHICH THE DEBT CAN BE SUBSTANTIATED
5. DETAILS OF ANY ORDER OF A COURT OF
TRIBUNAL THAT HAS ADJUDICATED ON THE
NON-PAYMENT OF DEBT
INCURRED

THE FINANCIAL CREDITOR WHICH MAY BE
SET-OFF AGAINST THE CLAIM
8. DETAILS OF ANY SECURITY HELD, THE VALUE
OF THE SECURITY, AND THE DATE IT WAS
GIVEN
THE FINANCIAL CREDITOR’S SHARE OF THE
PROCEEDS OF LIQUIDATION CAN BE
TRANSFERRED
(iii)
Signature of financial creditor or person authorised to act on his behalf
(please enclose the authority if this is being submitted on behalf a financial
creditor)
AFFIDAVIT
affirm and state as follows:
1. The above named corporate debtor was, at the liquidation commencement
date, that is, the __________ day of __________ 20____ and still is, justly and
truly indebted to me [or to me and [insert name of copartners], my co-partners in
trade, or, as the case may be] in the sum of Rs. __________ for ……..[please
state consideration].
2. In respect of my claim of the said sum or any part thereof, I have relied on the
documents specified below:
[Please list the documents relied on as evidence of debt and of non-payment.]

between the corporate debtor and the financial creditor which may be set-off
against the claim.]
the __________day of__________ 20_____
Before me,
Notary / Oath Commissioner.
Deponent’s signature.
VERIFICATION
to of this affidavit are true and correct to my knowledge and belief. Nothing is
false and nothing material has been concealed therefrom.
Verified _____ at on _____ this day _____ of 201__
Deponent's signature.
SCHEDULE II
FORM E
PROOF OF CLAIM BY A WORKMAN OR EMPLOYEE
(Under Regulation 19 of the Insolvency and Bankruptcy (Liquidation Process)
Regulations, 2016)
[Date]
To
The Liquidator
From
Subject : Submission of proof of claim in respect of liquidation of (Name of corporate

debtor) under the Insolvency and Bankruptcy Code, 2016.
Madam/Sir,
of the liquidation of [name of corporate debtor]. The details for the same are set
out below:
1. NAME OF WORKMAN/EMPLOYEE
2. PAN, PASSPORT, THE IDENTITY CARD ISSUED
BY THE ELECTION COMMISSION OF INDIA
OR AADHAAR CARD OF WORKMAN /
EMPLOYEE
3. ADDRESS AND EMAIL ADDRESS (IF ANY) OF
WORKMAN / EMPLOYEE FOR
CORRESPONDENCE
4. TOTAL AMOUNT OF CLAIM
(INCLUDING ANY INTEREST AS AT THE
LIQUIDATION COMMENCEMENT DATE)
WHICH THE DEBT CAN BE SUBSTANTIATED.
RECORD OF PENDENCY OR ORDER OF SUIT
OR ARBITRATION PROCEEDINGS
7. DETAILS OF HOW AND WHEN CLAIM AROSE
THE WORKMAN / EMPLOYEE WHICH MAY
THE WORKMAN / EMPLOYEE’S SHARE OF
TRANSFERRED
(iii)
Signature of workman / employee or person authorised to act on his behalf

AFFIDAVIT
5. [Name of corporate debtor], the corporate debtor was, at the liquidation
commencement date, that is, the __________ day of __________ 20__,
following:
dealings between the corporate debtor and the workman / employee
which may be set-off against the claim.]
day of__________ 20_____
Before me,
Notary/ Oath Commissioner
VERIFICATION
paragraph to of this affidavit are true and correct to my knowledge and belief and
no material facts have been concealed therefrom.
Verified at _______ on this ________ day of 201_

SCHEDULE II
FORM F
PROOF OF CLAIM BY AUTHORISED REPRESENTATIVE OF WORKMEN OR
EMPLOYEES
[Date]
To
The Liquidator
From
[Name and address of the authorised representative of workmen/ employees]
Madam/Sir,
I, [name of duly authorised representative of the workmen/ employees] currently
residing at [address of duly authorised representative of the workmen/
employees], on behalf of the workmen and employees employed by the above
named corporate debtor, solemnly affirm and say:
1. That the abovenamed corporate debtor was, on the liquidation
commencement date, that is, the ______ day of ______ 20__ and still is,
justly truly indebted to the several persons whose names, addresses,
and descriptions appear in the Annexure below in amounts severally set
against their names in such Annexure for wages, remuneration and other
amounts due to them respectively as workmen or/ and employees in the
employ of the corporate debtor in respect of services rendered by them
respectively to the corporate debtor during such periods as are set out
against their respective names in the said Annexure.
them, had or received any manner of satisfaction or security whatsoever,
save and except the following:
[Please state details of any mutual credits, mutual debts, or other mutual
dealings between the corporate debtor and the workmen / employees
which may be set-off against the claim]
Signature :
ANNEXURE
1. Details of Employees/ Workmen
Sl. NAME IDENTIFICATION TOTAL PERIOD DETAILS
NO. OF NUMBER (PAN/, AMOUNT OVER OF EVIDENCE
EMPLOYEE/ PASSPORT DUE AND WHICH OF DEBT
WORKMEN NUMBER/, DETAILS AMOUNT INCLUDING
AADHAAR NO. / ON DUE EMPLOYMENT
ID CARD ISSUED NATURE CONTRACTS
BY THE ELECTION OF AND OTHER
COMMISSION CLAIM PROOFS
AND EMPLOYEE
ID NO., IF ANY
1.
2.
3.
4.
5.
2. Particulars of how dues were incurred by the corporate debtor, including
particulars of any dispute as well as the record of pendency of suit or
arbitration proceedings.
3. Particulars of any mutual credit, mutual debts, or other mutual dealings
between the corporate debtor and the workmen / employee which may
be set-off against the claim.
4. Please list out and attach the documents relied on to prove the claim.
AFFIDAVIT
I, [insert full name, address and occupation of deponent] do solemnly affirm and
state as follows:
1. The above named corporate debtor was, at the liquidation
commencement date that is, the __________ day of __________ 20__
and still is, justly and truly indebted to the workmen and employees in the
sum of Rs. __________ for _____ [please state the nature and duration of
employment].
[Please list the documents relied on as evidence of proof]
4. In respect of the said sum or any part thereof, the workmen / employees
have not, nor has any person, by my order, to my knowledge or belief, for
my use, had or has received any manner of satisfaction or security
dealings between the corporate debtor and the workmen / employees
which may be set-off against the claim.]
the __________day of__________ 20_____
Before me,
VERIFICATION
___ to __of this affidavit are true and correct to my knowledge and belief. Nothing
is false and nothing material has been concealed therefrom.
Verified at _______ on this _______ day of _______ 201___
SCHEDULE II
FORM G
PROOF OF CLAIM BY ANY OTHER STAKEHOLDER
(Under Regulation 20 of the Insolvency and Bankruptcy Board ofIndia
[Date]
To
The Liquidator
From
[Name and address of the other stakeholder]
Madam/Sir,
[Name of the other stakeholder] hereby submits this proof of claim in respect of
the liquidation in the case of [name of corporate debtor]. The details for the same
are set out below:
1. NAME OF OTHER STAKEHOLDER
INCORPORATION. IF A PARTNERSHIP OR
INDIVIDUAL)
2. ADDRESS AND EMAIL OF THE OTHER
STAKEHOLDER FOR CORRESPONDENCE.
3. TOTAL AMOUNT OF CLAIM, INCLUDING ANY PRINCIPAL CLAIM :
INTEREST AS AT LIQUIDATION INTEREST :
COMMENCEMENT AND DETAILS OF TOTAL CLAIM :
NATURE OF CLAIM
WHICH THE CLAIM CAN BE SUBSTANTIATED
BETWEEN THE CORPORATE DEBTOR AND THE
OTHER STAKEHOLDER WHICH MAY BE SET-
OFF AGAINST THE CLAIM

WHICH THE CLAIM REFERS
THE OTHER STAKEHOLDER’S SHARE OF THE
TRANSFERRED
(iii)
Signature of other stakeholder or person authorised to act on his behalf
(Please enclose the authority if this is being submitted on behalf of the other
stakeholder)
* PAN, Passport, AADHAAR Card or the identity card issued by the Election
AFFIDAVIT
I, [insert full name, address and occupation of deponent to be given] do solemnly
1. The above named corporate debtor was, at the liquidation
commencement date, that is, the __________ day of __________ 20__
and still is, justly and truly indebted to me [or to me and [insert name of
copartner], my co-partners in trade, or, as the case may be,] in the sum of
Rs. __________ for _____ [please state consideration].
[Please list the documents relied on as evidence of proof.]
4. In respect of the said sum or any part thereof, I have not, nor have my
partners or any of them, nor has any person, by my/our order, to my/our
knowledge or belief, for my/ our use, had or received any manner of
satisfaction or security whatsoever, save and except the following:
dealings between the corporate debtor and the other stakeholder which
may be set-off against the claim]
the __________day of__________ 20_____
Before me,
VERIFICATION
___ to __of this affidavit are true and correct to my knowledge and belief. Nothing
Verified at ______ on this ______ day of ______ 201__
SCHEDULE III
The formats contained in this Schedule are indicative in nature, and the
liquidator may make such modifications to them as he deems fit in the
facts and circumstances of the liquidation.
CASH BOOK
Name of Corporate Debtor (in liquidation)
Date Parti- Ledger Receipt Payments Balance
culars Folio
No. Vou- Cash Bank Total Vou- Cash Bank Total Cash Bank Total
cher cher
No. No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Under 'particulars', the head of account to which the entry relates should be
indicated so that the entry may be posted under the proper head in the General
Ledger.
GENERAL LEDGER
Name of Corporate Debtor ................................. (in liquidation)
.................................(Head of account)
Date Particulars Dr. Cr. Balance
(Rs.) (Rs.) (Rs.)
1 2 3 4 5
Instructions:
1. A General Ledger should be maintained with such heads of account as the
liquidator may think necessary and appropriate. The following heads of account
may be found suitable:
(1) Asset account
(2) Investments account
(3) Book Debts & Outstandings account
(4) Calls
(5) Rents Collected
(6) Interest on Securities and Deposits
(7) Advances received
(8) Miscellaneous receipts payments
(9) Establishment
(10) Legal charges
(11) Rents, Rates and Taxes
(12) Fees and Commission account
(13) Other expenses
(14) Suspense account
(15) Secured creditors

(16) Dividend account.
2. The entries in the General Ledger should be posted from the Cash Book.
3. The total of the debit balances and the total of the credit balances of the several
heads of account in the General Ledger should agree, after taking into
consideration the cash and bank balances as shown in the Cash Book. The totals
should be tallied once a month.
BANK LEDGER
Corporate debtor’s (in liquidation) account with the Scheduled Bank

Date Particulars Deposits Withdrawals Balance
Challan Rs. Cheque Rs.
Number Number
1 2 3 4 5 6 7
1.
2.
REGISTER OF ASSETS
Sl. Description Date of Serial Date Date of Amount Remarks
No. of assets taking number of realization
possession of Sales sale
Register
1 2 3 4 5 6 7 8
1.
2.
Instructions:
1. All the assets of the corporate debtor except the liquidator’s investments in
securities and outstandings to be realized should be entered in this Register.
SECURITIES AND INVESTMENTS REGISTER

Sl. Petition Date Nature Amount Dividend or Date of Remarks
No. number of and Invested interest disposal
and invest- parti- (Rs.) received
name ment culars with date
of the of of receipt
corporate security (Rs.)
debtor in which
invest-
ment is
made
1 2 3 4 5 6 7 8
1.
2.
REGISTER OF BOOK DEBTS AND OUTSTANDINGS

Sl. Name Parti- Amount Date Amount Action Date Reference Remarks
No. and culars due of realised taken of to Suits
address of (Rs.) bar (Rs.) realis- Register
of debt by ation
debtor limi-
tation
1 2 3 4 5 6 7 8 9 10
1.
2.
Instructions:
1. All debts due to the corporate debtor, both secured and unsecured, including
amounts due for arrears of calls made prior to the liquidation, should be entered
in this Register.
TENANTS LEDGER
1. Description of property:
2. Name and address of tenant:
3. Date of tenancy:
4. Period of tenancy:
5. Rent (monthly or annual):
6. Special terms, if any:
7. Arrears on date of taking charge of property:
8. Advance received, if any:
Month Demand Realisation Balance Remarks

Amount (Rs.) Date Amount (Rs.) Amount (Rs.)
1 2 3 4 5 6
January
February
SUITS REGISTER
Sl. Number Name Name Amount Date Dates
No. of and and of claim of filing of
suit address address hearing
or of plaintiff/ of
appeal appellant defendant/
and and his respondent
court advocate and his
advocate
1 2 3 4 5 6 7
1.
2.
Date of Nature Amount Costs Reference Remarks

decree or of decreed decreed to Decree
final order relief Register
granted
8 9 10 11 12 13
1.
2.
Instructions:
1. Applications made by or against the corporate debtor which are in the nature of
suits should also be entered in this Register.
DECREE REGISTER
Number Name Amount Date Action Amount Date Reference
of suit and Decreed of taken realized of to Suits
or address (Rs.) decree (Rs.) reali- Register
appeal of sation
and judgment
court debtor
1 2 3 4 5 6 7 8
1.
2.
Instructions:
1. The purpose of the Register is to enable the liquidator to keep watch on the
progress of the realization of decrees in favour of the corporate debtor in his
charge.
2. Every decree or order for payment of money or delivery of property in favour of
the corporate debtor including an order for payment of costs whether made in a
suit, appeal or application, should be entered in this Register.
REGISTER OF CLAIMS AND DISTRIBUTIONS

Claims Distributions declared and paid Remarks
Claims
Sl. Name Amount Nature Amount Whether Date
No. and claimed of claim admitted ordinary
Address (Rs.) (Rs.) (Rs) or
of preferential
creditor
1 2 3 4 5 6 7
1.
2.
Distributions declared and paid

Amount Date Rate Amount Date Rate Amount Date and Remarks
(Rs.) and (Rs.) and (Rs-) mode
Mode mode of
of of payment
Payment payment
8 9 10 11 12 13 14 15 16
1.
2.
Instructions:
1. Only claims admitted either wholly or in part should be entered in this Register.
2. The page on the left side should be reserved for claims and the page on the
right side for Distributions.
CONTRIBUTORY’S LEDGER
Sl. Name Number Calls Remarks Returns of share Remarks
No. and of capital
address shares First 2nd call/ Date Date Amo-
of or call 3rd call of of unt
contri- extent return pay- paid
butory of Date Amo- (Repeat ment (Rs.)
interest of unt columns
held, call paid as
and and and under
amount amo- date first
paid unt of call)
thereon called pay-
ment
1 2 3 4 5 6 to 9 10 11 12 13 14
1.
2.
Instructions:
Only contributories settled on the list of stakeholders should be entered in this
Register and they should be entered in the same order as in the list.
DISTRIBUTIONS REGISTER
Date on which distribution is made:
Total amount payable in this round of distribution:
Date Number on list of Particulars Receipts Payments
stakeholders
1 2 3 4 5
1.
2.
Instructions:
1. Separate pages should be set apart for preferential and ordinary distributions.
2. The payments should be entered as and when they are made. Any amount
which is returned unpaid should be re-entered in the account under ‘Receipts’.
3. The number in column 2 should be the number of the stakeholders in the list of
stakeholders as finally settled.
4. The total amount of unclaimed distribution payable into the Public Account of
India, and the amount paid into the Bank with the date of payment, should be
shown at the end of the account.
FEE REGISTER
Amount realized Amount Fee payable Fee, if any Total fee Date of
on which fee distributed on the payable payable payment
are payable on which amounts otherwise
fee are in the two under order
payable preceding of
columns Adjudicating
Authority
1 2 3 4 5 6
1.
2.
Instructions:
1. There should be a fresh opening for each year.
2. The fees due to the liquidator should be entered in the Register as soon as the
audit of the account for a quarter is completed.
SUSPENSE REGISTER
Date Particulars Debit (Rs.) Credit (Rs.) Balance (Rs.)
1 2 3 4 5
1.
2.
Instructions:
1. Advances made by the liquidator to any person should be entered in this
Register.
2. There should be a separate opening for each person.
DOCUMENTS REGISTER
Sl. Description Date of From Reference number How Remarks
No. of document receipt whom of shelf in which disposed
received document is kept of
1 2 3 4 5 6 7
1.
2.
Instruction: All documents of title like title-deeds, shares, promissory notes, etc.,
should be entered in this Register.
BOOKS REGISTER
Date From whom Serial Description Shelf How Remarks
received Number of books, number disposed
including of
files
1 2 3 4 5 6 7
1.
2.
Instruction: All books and files of the corporate debtor which come into the hands
of the liquidator should be entered in this Register.
REGISTER OF UNCLAIMED DIVIDENDS AND UNDISTRIBUTED ASSETS

DEPOSITED
Sl. Name of Whether Number on Date of Rate of Total
No. person Creditor list of declaration dividend amount
entitled to or stakeholders of dividend or return payable
the dividend Contributory or return (Rs.)
or return
1 2 3 4 5 6 7
1.
2.
304

NOTIFICATION
New Delhi, the 31st March, 2017

(VOLUNTARY LIQUIDATION PROCESS)
REGULATIONS, 2017
IBBI/2016-17/GN/REG010. - In exercise of the powers conferred by sections 59,
196 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016
(31 of 2016), the Board hereby makes the following Regulations, namely –
CHAPTER I
PRELIMINARY
1. Short title and commencement.

India (Voluntary Liquidation Process) Regulations, 2017.
(2) These Regulations shall come into force on 1st April, 2017.
(3) These Regulations shall apply to the voluntary liquidation of corporate persons
under Chapter V of Part II of the Insolvency and Bankruptcy Code, 2016.
2. Definitions.
(1) In these Regulations, unless the context otherwise requires –
(a) “Code” means the Insolvency and Bankruptcy Code, 2016 ;
(b) “contributory” means a member of a company, partner of a limited liability
partnership, and any other person liable to contribute towards the assets
of the corporate person in the event of its liquidation ;
(c) “liquidation commencement date” means the date on which the
proceedings for voluntary liquidation commence as per section 59(5) and
regulation 3(4) ;
(d) “Registrar” shall have the same meaning assigned to it under section
2(75) of the Companies Act, 2013 or section 2(1)(s) of the Limited Liability
Partnership Act, 2008 or the authority administering the Act under which
the corporate person is incorporated, as applicable ;
(e) “section” means a section of the Code ; and
304
IBBI (VOLUNTARY LIQUIDATION PROCESS) REGULATIONS, 2017 305
(f) “stakeholders” mean the stakeholders entitled to proceeds from the sale
of liquidation assets under section 53.
(2) The term liquidation in these Regulations refers to voluntary liquidation.
CHAPTER II
COMMENCEMENT OF LIQUIDATION
Initiation of liquidation
3. (1) Without prejudice to section 59(2), liquidation proceedings of a corporate
person shall meet the following conditions, namely :
(a) a declaration from majority of
(i) the designated partners, if a corporate person is a limited liability
partnership,
(ii) individuals constituting the governing body in case of other corporate
persons,
as the case may be, verified by an affidavit stating that –
(i) they have made a full inquiry into the affairs of the corporate person
and they have formed an opinion that either the corporate person
has no debt or that it will be able to pay its debts in full from the
proceeds of assets to be sold in the liquidation ; and
(ii) the corporate person is not being liquidated to defraud any person ;
(b) the declaration under sub-clause (a) shall be accompanied with the
following documents, namely :
(i) audited financial statements and record of business operations of
the corporate person for the previous two years or for the period
since its incorporation, whichever is later ;
(ii) a report of the valuation of the assets of the corporate person, if any
prepared by a registered valuer ;
(c) within four weeks of a declaration under sub-clause (a), there shall
be –
(i) a resolution passed by a special majority of the partners or
contributories, as the case may be, of the corporate person requiring
306 IBBI (VOLUNTARY LIQUIDATION PROCESS) REGULATIONS, 2017
the corporate person to be liquidated and appointing an insolvency

professional to act as the liquidator ; or
(ii) a resolution of the partners or contributories, as the case may be,
requiring the corporate person to be liquidated as a result of expiry
of the period of its duration, if any, fixed by its constitutional
documents or on the occurrence of any event in respect of which
the constitutional documents provide that the corporate person shall
be dissolved, as the case may be, and appointing an insolvency
professional to act as the liquidator :
Provided that the corporate person owes any debt to any person, creditors
representing two-thirds in value of the debt of the corporate person shall approve
the resolution passed under sub-clause (c) within seven days of such resolution.
(2) The corporate person shall notify the Registrar and the Board about the resolution
under sub-regulation (1) to liquidate the corporate person within seven days of
such resolution or the subsequent approval by the creditors, as the case may be.
(3) Subject to approval of the creditors under sub-regulation (1), the liquidation
proceedings in respect of a corporate person shall be deemed to have commenced
from the date of passing of the resolution under sub-clause (c) of sub-regulation (1) :
Explanation : For the purposes of sub-regulations (1) to (3), corporate person
means a corporate person other than a company.
(4) The declaration under sub-regulation (1)(a) or under section 59(3)(a) shall list
each debt of the corporate person as on that date and state that the corporate
person will be able to pay all its debts in full from the proceeds of assets to be
sold in the liquidation .
4. Effect of liquidation.
(1) The corporate person shall from the liquidation commencement date cease to
carry on its business except as far as required for the beneficial winding up of its
business.
(2) Notwithstanding the provisions of sub-section (1), the corporate person shall
continue to exist until it is dissolved under section 59(8).
CHAPTER III
APPOINTMENT AND REMUNERATION OF LIQUIDATOR
5. Appointment of liquidator.
(1) An insolvency professional shall not be appointed by a corporate person if he
is not eligible under regulation 6.
(2) The resolution passed under regulation 3(2)(c) or under section 59(3)(c), as the
case may be, shall contain the terms and conditions of the appointment of the
liquidator, including the remuneration payable to him.
6. Eligibility for appointment as liquidator.

(1) An insolvency professional shall be eligible to be appointed as a liquidator if
he, and every partner or director of the insolvency professional entity of which he
is a partner or director is independent of the corporate person :
Explanation : A person shall be considered independent of the corporate person,
if he –
(a) is eligible to be appointed as an independent director on the board of the
corporate person under section 149 of the Companies Act, 2013 (18 of
2013), where the corporate person is a company ;
(b) is not a related party of the corporate person ; or
(c) has not been an employee or proprietor or a partner –
(i) of a firm of auditors or company secretaries or cost auditors of the
corporate person ; or
the corporate person contributing ten per cent or more of the gross
turnover of such firm, at any time in the last three years.
(2) An insolvency professional shall not be eligible to be appointed as a liquidator
if he, or the insolvency professional entity of which he is a partner or director is
under a restraint order of the Board.
(3) A liquidator shall disclose the existence of any pecuniary or personal
relationship with the concerned corporate person or any of its stakeholders as
soon as he becomes aware of it, to the Board and the Registrar.
(4) An insolvency professional shall not continue as a liquidator if the insolvency
professional entity of which he is a director or partner, or any other partner or
director of such insolvency professional entity represents any other stakeholder
in the same liquidation.
7. Liquidator’s remuneration.
The remuneration payable to the liquidator shall form part of the liquidation cost.
CHAPTER IV
POWERS AND FUNCTIONS OF THE LIQUIDATOR
8. Reporting.
(1) The liquidator shall prepare and submit –
(a) Preliminary Report ;
(b) Annual Status Report ;
(c) Minutes of consultations with stakeholders ; and
(d) Final Report
in the manner specified under these Regulations.
(2) Subject to other provisions of these Regulations, the liquidator shall make the
reports and minutes referred to sub-regulation (1) available to a stakeholder in
either electronic or physical form, on receipt of –
(a) an application in writing ;
(b) cost of making such reports available to it ; and
(c) an undertaking from the stakeholder that it shall maintain confidentiality
of such reports and shall not use these to cause an undue gain or undue
loss to itself or any other person.
9. Preliminary report.
(1) The liquidator shall submit a Preliminary Report to the corporate person within
forty five days from the liquidation commencement date, detailing –
(a) the capital structure of the corporate person ;
(b) the estimates of its assets and liabilities as on the liquidation
commencement date based on the books of the corporate person :
Provided that if the liquidator has reasons to believe, to be recorded in
writing, that the books of the corporate person are not reliable, he shall
also provide such estimates based on reliable records and data otherwise
available to him ;
(c) Whether he intends to make any further inquiry in to any matter relating to
the promotion, formation or failure of the corporate person or the conduct
of the business thereof ; and
(d) the proposed plan of action for carrying out the liquidation, including the
timeline within which he proposes to carry it out and the estimated
liquidation costs.
10. Registers and books of account.

(1) Where the books of account of the corporate person are incomplete on the
liquidation commencement date, the liquidator shall have them completed and
brought up-to-date, with all convenient speed.
(2) The liquidator shall maintain the following registers and books, as may be
applicable, in relation to the liquidation of the corporate debtor :
(a) Cash book ;
(b) Ledger ;
(c) Bank ledger ;
(d) Register of fixed assets and inventories ;
(e) Securities and investment register ;
(f) Register of book debts and outstanding debts ;
(g) Tenants ledger ;
(h) Suits register ;
(i) Decree register ;
(j) Register of claims and dividends ;
(k) Contributories ledger ;
(l) Distributions register ;
(m) Fee register ;
(n) Suspense register ;
(o) Documents register ;
(p) Books register ;
(q) Register of unclaimed dividends and undistributed properties deposited
in accordance with Regulation 39 ; and
(r) such other books or registers as may be necessary to account for
transactions entered into by him in relation to the corporate debtor.
(3) The registers and books under sub-regulation (2) may be maintained in the
forms indicated in Schedule II, with such modifications as the liquidator may
deem fit in the facts and circumstances of the liquidation.
(4) The liquidator shall keep receipts for all payments made or expenses incurred
by him.
11. Engagement of professionals.

(1) A liquidator may engage professionals to assist him in the discharge of his
duties, obligations and functions for a reasonable remuneration and such
remuneration shall form part of the liquidation cost.
(2) The liquidator shall not engage a professional under sub-regulation (1) who is
his relative, is a related party of the corporate person or has served as an auditor
to the corporate person at any time during the five years preceding the liquidation
commencement date.
(3) A professional engaged or proposed to be engaged under sub-regulation (1)
shall disclose the existence of any pecuniary or personal relationship with any of
the stakeholders, or the corporate person as soon as he becomes aware of it, to
the liquidator.
12. Consultation with stakeholders.

(1) The stakeholders consulted under section 35(2) shall extend all assistance
and cooperation to the liquidator to complete the liquidation of the corporate
person.
(2) The liquidator shall maintain the particulars of any consultation with the
stakeholders made under this Regulation.
13. Extortionate credit transactions.

A transaction shall be considered an extortionate credit transaction under section
50(2) where the terms –
(a) require the corporate person to make exorbitant payments in respect of
the credit provided ; or
(b) are unconscionable under the principles of law relating to contracts.
14. Public announcement by the liquidator.

(1) The liquidator shall make a public announcement in Form A of Schedule I
within five days from his appointment.
(2) The public announcement shall –
(a) call upon stakeholders to submit their claims as on the liquidation
commencement date ; and
(b) provide the last date for submission of claim, which shall be thirty days
from the liquidation commencement date.
(3) The announcement shall be published –
(a) in one English and one regional language newspaper with wide
circulation at the location of the registered office and principal office, if

any, of the corporate person and any other location where in the opinion
of the liquidator, the corporate person conducts material business
operations ;
(b) on the website, if any, of the corporate person ; and
(c) on the website, if any, designated by the Board for this purpose.
CHAPTER V
CLAIMS
15. Proof of claim.

A person, who claims to be a stakeholder, shall prove his claim for debt or dues
to him, including interest, if any, as on the liquidation commencement date.
16. Claims by operational creditors.

(1) A person claiming to be an operational creditor of the corporate person, other
than a workman or employee, shall submit proof of claim to the liquidator in
person, by post or by electronic means in Form B of Schedule I.
(2) The existence of debt due to an operational creditor under this Regulation may
be proved on the basis of –
(a) the records available with an information utility ; or
any of the following –
(i) a contract for the supply of goods or services with corporate person,
supported by an invoice demanding payment for the goods and
services supplied to the corporate person ;
(ii) an order of a court or tribunal that has adjudicated upon the non-
payment of a debt, if any ; and
(iii) financial accounts of the corporate person.
17. Claims by financial creditors.

(1) A person claiming to be a financial creditor of the corporate person shall
submit proof of claim to the liquidator in electronic means in Form C of Schedule
I.
of –
(a) the records available in an information utility ; or
of the debt ;
creditor to the corporate person under a facility has been drawn by
the corporate person ;
(iii) financial statements showing that the debt has not been repaid ;
and
18. Claims by workmen and employees.

(1) A person claiming to be a workman or an employee of the corporate person
shall submit proof of claim to the liquidator in person, by post or by electronic
means in Form D of Schedule I.
person, an authorised representative may submit one proof of claim for all such
dues on their behalf in Form E of Schedule I.
individually or collectively, on the basis of-
(a) records available in an information utility ; or
(b) other relevant documents which adequately establish the dues, including
any or all of the following –
for which such workman or employee is claiming dues ;
(ii) evidence of notice demanding payment of unpaid amount and any
documentary or other proof that payment has not been made ; and
payment of dues, if any.
(4) The liquidator shall admit the claims of a workman or an employee on the
basis of the books of account of the corporate person if such workman or
employee has not made a claim.
19. Claims by other stakeholders.

(1) A person, claiming to be a stakeholder other than those under regulations 16,
17 or 18 shall submit proof of claim to the liquidator in person, by post or by

electronic means in Form F of Schedule I.
(2) The existence of the claim of the stakeholder may be proved on the basis of –
(a) the records available in an information utility ; or
(b) other relevant documents which adequately establish the claim, including
any or all of the following –
(i) documentary evidence of notice demanding payment of unpaid
amount or bank statements of the claimant showing that the claim
has not been paid and an affidavit that the documentary evidence
and bank statements are true, valid and genuine ;
(ii) documentary or electronic evidence of his shareholding ; and
(iii) an order of a court, tribunal or other authority that has adjudicated
upon the non-payment of a claim, if any.
20. Proving security interest.

The existence of a security interest may be proved by a secured creditor on the
basis of –
(a) the records available in an information utility ;
(b) certificate of registration of charge issued by the Registrar of Companies ;
(c) proof of registration of charge with the Central Registry of Securitisation
Asset Reconstruction and Security Interest of India ; or
(d) other relevant documents which adequately establish the security interest.
21. Production of bills of exchange and promissory notes.

Where a person seeks to prove a debt in respect of a bill of exchange, promissory
note or other negotiable instrument or security of a like nature for which the
corporate person is liable, such bill of exchange, note, instrument or security, as
the case may be, shall be produced before the liquidator before the claim is
admitted.
22. Substantiation of claims.

The liquidator may call for such other evidence or clarification as he deems fit
from a claimant for substantiating the whole or part of its claim.
23. Cost of proof.

(1) A claimant shall bear the cost of proving its claim.
(2) Costs incurred by the liquidator for verification and determination of a claim
shall form part of liquidation cost :
Provided that if a claim or part of the claim is found to be false, the liquidator
shall endeavor to recover the costs incurred for verification and determination of
claim from such claimant, and shall provide the details of the claimant to the Board.
24. Determination of quantum of claim.

Where the amount claimed by a claimant is not precise due to any contingency
or any other reason, the liquidator shall make the best estimate of the amount of
the claim, based on consultation with the claimant and the corporate person and
the information available with him.
25. Debt in foreign currency.

The claims denominated in foreign currency shall be valued in Indian currency at
the official exchange rate as on the liquidation commencement date.
Explanation – “The official exchange rate” is the reference rate published by the
Reserve Bank of India or derived from such reference rates.
26. Periodical payments.

In the case of rent, interest and such other payments of a periodical nature, a
person may claim only for any amounts due and unpaid up to the liquidation
commencement date.
27. Debt payable at future time.

(1) A person may prove for a claim whose payment was not yet due on the
liquidation commencement date and is entitled to distribution in the same manner
as any other stakeholder.
(2) Subject to any contract to the contrary, where a stakeholder has proved for a
claim under sub-regulation (1), and the debt has not fallen due before distribution,
he is entitled to distribution of the admitted claim reduced as follows –
X/ (1+r)n
where -
(a) “X” is the value of the admitted claim ;
(b) “r” is the closing yield rate (%) of government securities of the maturity of “n”
on the date of distribution as published by the Reserve Bank of India ; and
(c) “n” is the period beginning with the date of distribution and ending with
the date on which the payment of the debt would otherwise be due,
expressed in years and months in a decimalized form.
28. Mutual credits and set-off.

Where there are mutual dealings between the corporate person and another party,
the sums due from one party shall be set off against the sums due from the other to
arrive at the net amount payable to the corporate person or to the other party.
Illustration : X owes Rs.100 to the corporate person. The corporate person owes
Rs.70 to X. After set off, Rs.30 is payable by X to the corporate person.
29. Verification of claims

(1) The liquidator shall verify the claims submitted within thirty days from the last
date for receipt of claims and may either admit or reject the claim, in whole or in
part, as the case may be, as per section 40 of the Code.
(2) A creditor may appeal to the Adjudicating Authority against the decision of the
liquidator as per section 42 of the Code.
30. List of stakeholders.

(1) The liquidator shall prepare a list of stakeholders on the basis of proofs of
claims submitted and accepted under these Regulations, with –
(a) the amounts of claim admitted, if applicable,
(b) the extent to which the debts or dues are secured or unsecured, if
applicable,
(c) the details of the stakeholders, and
(d) the proofs admitted or rejected in part, and the proofs wholly rejected.
(2) The liquidator shall prepare the list of stakeholders within forty-five days from
the last date for receipt of claims.
(3) The list of stakeholders, as modified from time-to-time, shall be-
(a) available for inspection by the persons who submitted proofs of claim ;
of the corporate person ;
(c) displayed on the website, if any, of the corporate person ;
(d) displayed on the website, if any, designated by the Board for this purpose.
CHAPTER VI
REALISATION OF ASSETS
31. Manner of sale.

The liquidator may value and sell the assets of the corporate person in the manner
and mode approved by the corporate person in compliance with provisions, if

any, in the applicable statute.
Explanation : “assets” include an asset, all assets, a set of assets or parcel of
assets, as the case may be, in relation to sale of assets.
32. Recovery of monies due.

The liquidator shall endeavor to recover and realise all assets of and dues to the
corporate person in a time-bound manner for maximisation of value for the
stakeholders.
33. Liquidator to realise uncalled capital or unpaid capital contribution.

(1) The liquidator shall realise any amount due from any contributory to the
corporate person.
(2) Notwithstanding any charge or encumbrance on the uncalled capital of the
corporate person, the liquidator shall be entitled to call and realise the uncalled
capital of the corporate person and to collect the arrears if any due on calls made
prior to the liquidation commencement date, by providing a notice to the
contributory to make the payments within fifteen days from the receipt of the
notice, but shall hold all moneys so realised subject to the rights, if any, of the
holder of any such charge or encumbrance.
(3) No distribution shall be made to a contributory, unless he makes his contribution
to the uncalled or unpaid capital as required in the constitutional documents of
the corporate person.
CHAPTER VII
PROCEEDS OF LIQUIDATION AND DISTRIBUTION OF PROCEEDS
34. All money to be paid into bank account.

(1) The liquidator shall open a bank account in the name of the corporate person
followed by the words ‘in voluntary liquidation’, in a scheduled bank, for the
receipt of all moneys due to the corporate person.
(2) The liquidator shall pay to the credit of the bank account opened under sub-
regulation (1) all moneys, including cheques and demand drafts received by him
as the liquidator of the corporate person, and the realizations of each day shall be
deposited into the bank account without any deduction not later than the next
working day.
(3) The money in the credit of the bank account shall not be used except in
accordance with section 53(1).
(4) All payments out of the account by the liquidator above five thousand rupees
shall be made by cheques drawn or online banking transactions against the

bank account.
35. Distribution.
(1) The liquidator shall distribute the proceeds from realization within six months
from the receipt of the amount to the stakeholders.
(2) The liquidation costs shall be deducted before such distribution is made.
(3) The liquidator may, with the approval of the corporate person, distribute amongst
the stakeholders, an asset that cannot be readily or advantageously sold due to
its peculiar nature or other special circumstances.
36. Return of money.

A stakeholder shall forthwith return any monies received by him in distribution,
which he was not entitled to at the time of distribution, or subsequently became
not entitled to.
37. Completion of liquidation.

(1) The liquidator shall endeavor to complete the liquidation process of the
corporate person within twelve months from the liquidation commencement
date.
(2) In the event of the liquidation process continuing for more than twelve months,
the liquidator shall –
(a) hold a meeting of the contributories of the corporate person within fifteen
days from the end of the twelve months from the liquidation
commencement date, and at the end every succeeding twelve months till
dissolution of the corporate person ; and
(b) shall present an Annual Status Report(s) indicating progress in liquidation,
including –
(i) settlement of list of stakeholders,
(ii) details of any assets that remains to be sold and realised,
(iii) distribution made to the stakeholders, and
(iv) distribution of unsold assets made to the stakeholders ;
(v) developments in any material litigation, by or against the corporate
person ; and
(vi) filing of, and developments in applications for avoidance of
transactions in accordance with Chapter III of Part II of the Code.
(3) The Annual Status Report shall enclose the audited accounts of the liquidation
showing the receipts and payments pertaining to liquidation since the liquidation
commencement date.
38. Final report.

(1) On completion of the liquidation process, the liquidator shall prepare the Final
report consisting of –
(a) audited accounts of the liquidation, showing receipts and payments
pertaining to liquidation since the liquidation commencement date ; and
(b) a statement demonstrating that –
(i) the assets of the corporate person has been disposed of ;
(ii) the debt of the corporate person has been discharged to the
satisfaction of the creditors ;
(iii) no litigation is pending against the corporate person or sufficient
provision has been made to meet the obligations arising from any
pending litigation.
(c) a sale statement in respect of all assets containing –
(i) the realised value ;
(ii) cost of realisation, if any ;
(iii) the manner and mode of sale ;
(iv) an explanation for the shortfall, if the value realised is less than the
value assigned by the registered valuer in the report of the valuation
of assets under section 59(3)(b)(ii) or Regulation 3(1)(b)(ii), as the
case may be ;
(v) the person to whom the sale is made ; and
(vi) any other relevant details of the sale.
(2) The liquidator shall send the Final Report forthwith, to the Registrar and the
Board.
(3) The liquidator shall submit the Final Report to the Adjudicating Authority along
with the application under section 59(7).
39. Unclaimed proceeds of liquidation or undistributed assets.

(1) Before the order of dissolution is passed under section 59(8), the liquidator
shall apply to the Adjudicating Authority for an order to pay into the Companies
Liquidation Account in the Public Account of India any unclaimed proceeds of

liquidation or undistributed assets or any other balance payable to the stakeholders
in his hands on the date of the order of dissolution.
(2) Any liquidator who retains any money which should have been paid by him
into the Companies Liquidation Account under this Regulation shall pay interest
on the amount retained at the rate of twelve per cent per annum, and also pay
such penalty as may be determined by the Board.
(3) The liquidator shall, when making any payment referred to in sub-regulation
(1), furnish to the Registrar and the Board, a statement setting forth the nature of
the sums included, the names and last known addresses of the stakeholders
entitled to participate therein, the amount to which each is entitled to and the
nature of their claim.
(4) The liquidator shall be entitled to a receipt from the Reserve Bank of India for
any money paid to it under sub-regulation (2), and such receipt shall be an
effectual discharge of the liquidator in respect thereof.
(5) A person claiming to be entitled to any money paid into the Companies
Liquidation Account may apply to the Board for an order for payment of the
money claimed ; which may, if satisfied that such person is entitled to the whole
or any part of the money claimed, make an order for the payment to that person
of the sum due to him, after taking such security from him as it may think fit.
(6) Any money paid into the Companies Liquidation Account in pursuance of this
Regulation, which remains unclaimed thereafter for a period of fifteen years shall
be transferred to the general revenue account of the Central Government.
40. Detection of Fraud or Insolvency

(1) Where the liquidator is of the opinion that the liquidation is being done to
defraud a person, he shall make an application to the Adjudicatory Authority to
suspend the process of liquidation and pass any such orders as it deems fit.
(2) Where the liquidator is of the opinion that the corporate person will not be able
to pay its debts in full from the proceeds of assets to be sold in the liquidation, he
shall make an application to the Adjudicating Authority to suspend the process of
liquidation and pass any such orders as it deems fit.
41. Preservation of records.

The liquidator shall preserve a physical or an electronic copy of the reports,
registers and books of account referred to in Regulations 8 and 10 for at least
eight years after the dissolution of the corporate person, either with himself or
with an information utility.
SCHEDULE I
FORM A
PUBLIC ANNOUNCEMENT
(Regulation 14 of the Insolvency and Bankruptcy Board of India
(Voluntary Liquidation Process) Regulations, 2017)
FOR THE ATTENTION OF THE STAKEHOLDERS OF
[Name of Corporate person]
1. NAME OF CORPORATE PERSON

PERSON
3. AUTHORITY UNDER WHICH CORPORATE

PERSON IS INCORPORATED / REGISTERED
4. CORPORATE IDENTITY NUMBER / LIMITED

LIABILITY IDENTITY NUMBER OF CORPORATE
PERSON
5. ADDRESS OF THE REGISTERED OFFICE AND

PRINCIPAL OFFICE (IF ANY) OF CORPORATE
PERSON
6. LIQUIDATION COMMENCEMENT DATE OF

CORPORATE PERSON
7. NAME, ADDRESS, E-MAIL ADDRESS,

TELEPHONE NUMBER AND THE
REGISTRATION NUMBER OF THE LIQUIDATOR
8. LAST DATE FOR SUBMISSION OF CLAIMS
Notice is hereby given that the [name of the corporate person] has commenced
voluntary liquidation on [liquidation commencement date].
The stakeholders of [name of the corporate person] are hereby called upon to
submit a proof of their claims, on or before [insert the date falling thirty days after
the liquidation commencement date], to the liquidator at the address mentioned
against item 7.
All other stakeholders may submit the proof of claims in person, by post or by
electronic means.

Name and Signature of the Liquidator:
Date and Place:
FORM B
PROOF OF CLAIM BY OPERATIONAL CREDITORS EXCEPT WORKMEN
AND EMPLOYEES
[Date]
To
The Liquidator
From
Subject: Submission of proof of claim in respect of the voluntary liquidation of
[name of corporate person] under the Insolvency and Bankruptcy Code, 2016.
Madam/Sir,
[Name of the operational creditor] hereby submits this proof of claim in respect of
the voluntary liquidation of [name of corporate person]. The details for the same
are set out below:
INDIVIDUAL)
2. ADDRESS OF OPERATIONAL CREDITOR FOR

CORRESPONDENCE
3. TOTAL AMOUNT OF CLAIM, INCLUDING ANY

INTEREST, AS AT VOLUNTARY LIQUIDATION
PROCESS COMMENCEMENT DATE AND
DETAILS OF NATURE OF CLAIM

RECORD OF PENDENCY OF SUIT OR
ARBITRATION PROCEEDINGS

INCURRED

BETWEEN THE CORPORATE PERSON AND
THE OPERATIONAL CREDITOR WHICH MAY

WHICH THE DEBT REFERS OR ANY OTHER
SECURITY


THE OPERATIONAL CREDITOR’S SHARE OF
TRANSFERRED
10. LIST OUT AND ATTACH THE DOCUMENTS

RELIED ON IN SUPPORT OF THE CLAIM.
Signature of operational creditor or person

authorised to act on his behalf
(Please enclose the authority if this is being
submitted on behalf of the operational creditor)
AFFIDAVIT
1. The above named corporate person was, at liquidation commencement date,
that is, the .......... day of .................... 20.......... and still is, justly and truly indebted
to me [or to me and [insert name of co-partners], my co-partners in trade, or, as
the case may be] for a sum of Rs. .............................. for .......... [please state
consideration],
2. In respect of my claim of the said sum or any part thereof, I have relied on and
the documents specified below :
[Please list out the documents relied on as evidence of debt.]
between the corporate person and the operational creditor which may be set-off
against the claim.]
Solemnly, affirmed at .................... on ........................................ day, the .......... day
.......... of .......... 20....
Before me,
Notary / Oath Commissioner Deponent’s signature
VERIFICATION
para .......... to .......... of this affidavit are true and correct to my knowledge and
belief. Nothing is false and nothing material has been concealed therefrom.
Verified at .......... on this .................... day of .................... 201....
FORM C
[Date]
To
The Liquidator
From
creditor]
Subject : Submission of proof of claim in respect of the voluntary liquidation of
Madam/sir,
[Name of the financial creditor] hereby submits this proof of claim in respect of the
voluntary liquidation of [name of corporate person]. The details for the same are
set out below:
INDIVIDUAL)
2. ADDRESS AND E-MAIL OF FINANCIAL

CREDITOR FOR CORRESPONDENCE .

INTEREST, AS AT THE LIQUIDATION
COMMENCEMENT DATE AND DETAILS OF
NATURE OF CLAIM (WHETHER TERM LOAN,
SECURED, UNSECURED)
4. DETAILS OF ANY ORDER OF A COURT OF

TRIBUNAL THAT HAS ADJUDICATED ON THE

NON-PAYMENT OF DEBT

INCURRED
THE FINANCIAL CREDITOR WHICH MAY BE
7. DETAILS OF ANY SECURITY HELD, THE VALUE

OF THE SECURITY, AND THE DATE IT WAS
GIVEN

THE FINANCIAL CREDITOR’S SHARE OF THE
TRANSFERRED
10. LIST OUT AND ATTACH THE DOCUMENTS BY
REFERENCE TO WHICH THE DEBT CAN BE
SUBSTANTIATED AND IN SUPPORT OF THE
CLAIM.
Signature of financial creditor or person

(please enclose the authority if this is being
submitted on behalf a financial creditor)
AFFIDAVIT
1. The above named corporate person was, at the voluntary liquidation

commencement date, that is, the ................... day ................... of ................... 20.....
and still is, justly and truly indebted to me [or to me and [insert name of co-
partners], my co-partners in trade, or, as the case may be] for a sum of
Rs.................... for .................... [please state consideration],
[Please list the documents relied on as evidence of debt and of non-payment.]
between the corporate person and the financial creditor which may be set-off
against the claim.]
Solemnly, affirmed at ................... on ................... day, the ................... day of
...................20.....
Before me,
VERIFICATION
..... to ...... of this affidavit are true and correct to my knowledge and belief.
Nothing is false and nothing material has been concealed there from.
Verified at ...................on this ................... day of ................... 201..... .
FORM D
PROOF OF CLAIM BY A WORKMAN OR EMPLOYEE
(Under Regulation 18(1) of the Insolvency and Bankruptcy Board of India
[Date]
To
The Liquidator
From
Subject: Submission of proof of claim in respect of voluntary liquidation of (Name
of corporate person) under the Insolvency and Bankruptcy Code, 2016.
Madam/sir,
of the voluntary liquidation of [name of corporate person]. The details for the
same are set out below:
1. NAME OF WORKMAN / EMPLOYEE
2. PAN, PASSPORT, THE IDENTITY CARD ISSUED

BY THE ELECTION COMMISSION OF INDIA
OR AADHAAR CARD OF WORKMAN /
EMPLOYEE
3. ADDRESS AND E-MAIL ADDRESS (IF ANY) OF

WORKMAN / EMPLOYEE FOR
CORRESPONDENCE
4. TOTAL AMOUNT OF CLAIM

(INCLUDING ANY INTEREST AS AT THE
VOLUNTARY LIQUIDATION
COMMENCEMENT DATE)

RECORD OF PENDENCY OR ORDER OF SUIT
OR ARBITRATION PROCEEDINGS

THE WORKMAN / EMPLOYEE WHICH MAY

THE WORKMAN / EMPLOYEE’S SHARE OF THE
TRANSFERRED

REFERENCE TO WHICH THE DEBT CAN BE
SUBSTANTIATED AND RELIED ON IN SUPPORT
OF THE CLAIM.
Signature of workman / employee or person

[Please enclose the authority if this is being
submitted on behalf of an operational creditor]
AFFIDAVIT
1. [Name of corporate person], the corporate person was, at the liquidation
commencement date, that is, the ................ day of ................ 20......, justly and truly
indebted to me for a sum of Rs. [insert amount of claim],
documents specified below :
The said documents are true, valid and genuine to the best of my knowledge,
3. In respect of the said sum or any part thereof, I have not nor has any person, by
my order, to my knowledge or belief, for my use, had or received any manner of

satisfaction or security whatsoever, save and except the following:
between the corporate person and the workman / employee which may be set-
off against the claim.]
Solemnly, affirmed at [insert place] on................ day, the ................ day of 20......
Before me,
Notary/ Oath Commissioner
VERIFICATION
paragraph ....... to ......... of this affidavit are true and correct to my knowledge and
belief and no material facts have been concealed there from.
Verified at ................ on this ................ day of ................ 201....
FORM E
PROOF OF CLAIM BY AUTHORISED REPRESENTATIVE OF WORKMEN OR
EMPLOYEES
(Under Regulation 18(2) of the Insolvency and Bankruptcy Board of
India (Voluntary Liquidation Process) Regulations, 2017)
[Date]
To
The Liquidator
From
[Name and address of the authorised representative of workmen/ employees]
Subject : Submission of proof of claim in respect of the voluntary liquidation of
Madam/Sir,
I, [name of duly authorised representative of the workmen/ employees] currently
residing at [address of duly authorised representative of the workmen/
employees], on behalf of the workmen and employees employed by the above
named corporate person, solemnly affirm and say:
1. That the abovenamed corporate person was, on the voluntary liquidation
commencement date, that is, the ................ day of ................ 20........ and still is,
justly truly indebted to the several persons whose names, addresses, and
descriptions appear in the Annexure below for amounts severally set against
their names in such Annexure for wages, remuneration and other amounts due
to them respectively as workmen or/ and employees in the employ of the
corporate person in respect of services rendered by them respectively to the
corporate person during such periods as are set out against their respective
names in the said Annexure.
them, had or received any manner of satisfaction or security whatsoever, save
and except the following:
[Please state details of any mutual credits, mutual debts, or other mutual dealings
between the corporate person and the workmen / employees which may be set-
Signature :
Annexure
1. Particulars of how dues were incurred by the corporate person, including

particulars of any dispute as well as the record of pendency of suit or
arbitration proceedings.
2. Particulars of any mutual credit, mutual debts, or other mutual dealings
between the corporate person and the workmen / employee which may
be set-off against the claim.
3. Please list out and attach the documents relied on to prove the claim.
1. Details of Employees/ Workmen
Sl. NAME IDENTIFICATION TOTAL PERIOD DETAILS
NO. OF NUMBER (PAN/, AMOUNT OVER OF EVIDENCE
EMPLOYEE/ PASSPORT DUE AND WHICH OF DEBT
WORKMEN NUMBER/, DETAILS AMOUNT INCLUDING
AADHAAR NO. / ON DUE EMPLOYMENT
ID CARD ISSUED NATURE CONTRACTS
BY THE ELECTION OF AND OTHER
COMMISSION CLAIM PROOFS
AND EMPLOYEE
ID NO., IF ANY
1.
2.
3.
AFFIDAVIT
I, [insert full name, address and occupation of deponent] do solemnly affirm and
state as follows:
1. The above named corporate person was, at the liquidation commencement
date that is, the .................... day of .................... 20.......... and still is, justly and truly
indebted to the workmen and employees for a sum of Rs. .................... for ..........
[please state the nature and duration of employment],
[Please list the documents relied on as evidence of proof]
4. In respect of the said sum or any part thereof, the workmen / employees have
not, nor has any person, by my order, to my knowledge or belief, for my use, had
or has received any manner of satisfaction or security whatsoever, save and
except the following:
between the corporate person and the workmen / employees which may be set-
Solemnly, affirmed at .......... on .......... day, the .......... day of .......... 20....
Before me,
VERIFICATION
...... to ..... of this affidavit are true and correct to my knowledge and belief. Nothing
Verified at ..........on this .......... day of .......... 201....
FORM F
PROOF OF CLAIM BY ANY OTHER STAKEHOLDER

[Date]
To
The Liquidator
From
[Name and address of the other stakeholder]
Subject: Submission of proof of claim in respect of the voluntary liquidation of
Madam/Sir,
[Name of the stakeholder] hereby submits this proof of claim in respect of the
liquidation in the case of [name of corporate person]. The details for the same are
set out below:
1. NAME OF STAKE-HOLDER
INCORPORATION. IF A PARTNERSHIP OR
INDIVIDUAL)
2. ADDRESS AND E-MAIL OF THE STAKEHOLDER

FOR CORRESPONDENCE.
INTEREST AS AT LIQUIDATION
COMMENCEMENT AND DETAILS OF NATURE
OF CLAIM

THE OTHER STAKEHOLDER WHICH MAY BE
WHICH THE CLAIM REFERS

THE OTHER STAKEHOLDER’S SHARE OF THE
TRANSFERRED
REFERENCE TO WHICH THE CLAIM CAN BE
SUBSTANTIATED OR WHICH CAN BE RELIED
UPON IN SUPPORT OF THE CLAIM.
Signature of stakeholder or person authorised

to act on his behalf
(Please enclose the authority if this is being
submitted on behalf of the other stakeholder)
AFFIDAVIT
I, [insert full name, address and occupation of deponent to be given] do solemnly
1. The above named corporate person was, at the liquidation commencement
date, that is, the __________ day of __________ 20__ and still is, justly and truly
indebted to me [or to me and [insert name of co-partner], my co-partners in trade,
or, as the case may be,] for a sum of Rs. __________ for _____ [please state
consideration].
[Please list the documents relied on as evidence of proof.]
between the corporate person and the other stakeholder which may be set-off
against the claim.]
Solemnly, affirmed at .......... on .......... day, the .......... day of .......... 20....
Before me,
VERIFICATION
.... to ..... of this affidavit are true and correct to my knowledge and belief. Nothing
Verified at ..........on this .......... day of .......... 201....
SCHEDULE II
The formats contained in this Schedule are indicative in nature, and the liquidator
may make such modifications to them as he deems fit in view of the facts and
circumstances of the liquidation.
CASH BOOK
Name of Corporate Debtor ........................ (in liquidation)
Date Parti- Ledger Receipt Payments Balance
culars Folio
No. Vou- Cash Bank Total Vou- Cash Bank Total Cash Bank Total
cher cher
No. No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Under column ‘particulars’, the head of account to which the entry relates to
should be indicated so that the entry may be posted under the proper head in the
General Ledger.
GENERAL LEDGER
Name of Corporate Debtor ................................. (in liquidation)
.................................(Head of account)
Date Particulars Dr. Cr. Balance
(Rs.) (Rs.) (Rs.)
1 2 3 4 5
Instructions:
1. A General Ledger should be maintained with such heads of account as
the liquidator may think necessary and appropriate. The following heads
of account may be found suitable:
(1) Asset account
(2) Investments account
(3) Book Debts and Outstandings account
(4) Calls
(5) Rent Collected/rent receivable
(6) Interest on Securities and Deposits
(7) Advances received
(8) Miscellaneous receipts payments
(9) Establishment
(10) Legal charges
(11) Rents, Rates and Taxes payable
(12) Fees and Commission account
(13) Other expenses
(14) Suspense account
(15) Secured creditors
(16) Dividend account.
2. The entries in the General Ledger should be posted from the Cash Book.
3. The total of the debit balances and the total of the credit balances of the
several heads of account in the General Ledger should agree, after taking
into consideration the cash and bank balances as shown in the Cash
Book. The totals should be tallied once a month.
BANK LEDGER
Corporate person’s (in voluntary liquidation) account with the Scheduled Bank
Date Particulars Deposits Withdrawals Balance
Challan Rs. Cheque Rs. Rs.
Number Number
1 2 3 4 5 6 7
1.
2.
REGISTER OF ASSETS
Sl. Description Date of Serial Date Date of Amount Remarks
No. of assets taking number of realization
possession of Sales sale
Register
1 2 3 4 5 6 7 8
1.
2.
Instructions:
1. All the assets of the corporate person except the liquidator’s investments in
securities and outstanding to be realized should be entered in this Register.
SECURITIES AND INVESTMENTS REGISTER

Sl. Petition Date Nature Amount Dividend or Date of Remarks
No. number of and Invested interest disposal
and invest- parti- (Rs.) received
name ment culars with date
of the of of receipt
corporate security (Rs.)
person in which
invest-
ment is
made
1 2 3 4 5 6 7 8
1.
2.
REGISTER OF BOOK DEBTS AND OUTSTANDINGS

Sl. Name Parti- Amount Date Amount Action Date Reference Remarks
No. and culars due of realised taken of to Suits
address of (Rs.) bar (Rs.) realis- Register
of debt by ation
debtor limi-
tation
1 2 3 4 5 6 7 8 9 10
1.
2.
Instructions:
1. All debts due to the corporate person, both secured and unsecured, including
amounts due for arrears of calls made prior to the liquidation, should be entered
in this Register.
TENANTS LEDGER
1. Description of assets:
2. Name and address of tenant:
3. Date of tenancy:
4. Period of tenancy:
5. Rent (monthly or annual):
6. Special terms, if any:
7. Arrears on date of taking charge of assets:
8. Advance received, if any:
Month Demand Realisation Balance Remarks
Amount (Rs.) Date Amount (Rs.) Amount (Rs.)
1 2 3 4 5 6
January
February
SUITS REGISTER
Sl. Number Name Name Amount Date Dates
No. of and and of claim of filing of
suit address address hearing
or of plaintiff/ of
appeal appellant defendant/
and and his respondent
court advocate and his
advocate
1 2 3 4 5 6 7
1.
2.
Date of Nature Amount Costs Reference Remarks

decree or of decreed decreed to Decree
final order relief Register
granted
8 9 10 11 12 13
1.
2.
Instructions:
1. Applications made by or against the corporate person which are in the nature
of suits should also be entered in this Register.
DECREE REGISTER
Number Name Amount Date Action Amount Date Reference
of suit and Decreed of taken realized of to Suits
or address (Rs.) decree (Rs.) reali- Register
appeal of sation
and judgment
court debtor
1 2 3 4 5 6 7 8
1.
2.
Instructions:
1. The purpose of the Register is to enable the liquidator to keep watch on the
progress of the realization of decrees in favor of the corporate person in his
charge.
2. Every decree or order for payment of money or delivery of assets in favor of the
corporate person including an order for payment of costs whether made in a suit,
appeal or application, should be entered in this Register.
REGISTER OF CLAIMS AND DISTRIBUTIONS

Claims
Sl. Name Amount Nature Amount Whether Date
No. and claimed of claim admitted ordinary
Address (Rs.) (Rs.) (Rs) or
of preferential
creditor
1 2 3 4 5 6 7
1.
2.
Distributions declared and paid

Amount Date Rate Amount Date Rate Amount Date and Remarks
(Rs.) and (Rs.) and (Rs-) mode
Mode mode of
of of payment
Payment payment
8 9 10 11 12 13 14 15 16
1.
2.
Instructions:
1. Only claims admitted either wholly or in part should be entered in this Register.
2. The page on the left side should be reserved for claims and the page on the
right side for Distributions.
CONTRIBUTORY’S LEDGER
Sl. Name Number Calls Remarks Returns of share Remarks
No. and of capital
address shares First 2nd call/ Date Date Amo-
of or call 3rd call of of unt
contri- extent return pay- paid
butory of Date Amo- (Repeat ment (Rs.)
interest of unt columns
held, call paid as
and and and under
amount amo- date first
paid unt of call)
thereon called pay-
ment
1 2 3 4 5 6 to 9 10 11 12 13 14
1.
2.
Instructions:
Only contributories settled on the list should be entered in this Register and they
should be entered in the same order as in the list.
DISTRIBUTIONS REGISTER
Date on which distribution is made:
Total amount payable in this round of distribution:
Date Number on list of Particulars Receipts Payments
stakeholders
1 2 3 4 5
1.
2.
Instructions:
1. Separate pages should be set apart for preferential and ordinary distributions.
2. The payments should be entered as and when they are made. Any amount
which is returned unpaid should be re-entered in the account under ‘Receipts’.
3. The number in column 2 should be the number of the stakeholders in the list of
stakeholders as finally settled.
4. The total amount of unclaimed distribution payable into the Public Account of
India, and the amount paid into the Bank with the date of payment, should be
shown at the end of the account.
FEE REGISTER
Amount realized Amount Fee payable Total fee Date of
on which fee distributed on the payable payment
are payable on which amounts
fee are in the two
payable preceding
columns
1 2 3 4 5
1.
2.
Instructions:
1. There should be a fresh opening for each year.
2. The fees due to the liquidator should be entered in the Register as soon as the
audit of the account for a quarter is completed.
SUSPENSE REGISTER
Date Particulars Debit (Rs.) Credit (Rs.) Balance (Rs.)
1 2 3 4 5
1.
2.
Instructions:
1. Advances made by the liquidator to any person should be entered in this
Register.
2. There should be a separate opening for each person.
DOCUMENTS REGISTER
Sl. Description Date of From Reference number How Remarks
No. of document receipt whom of shelf in which disposed
received document is kept of
1 2 3 4 5 6 7
1.
2.
Instruction: All documents of title like title-deeds, shares, promissory notes, etc.,
should be entered in this Register.
BOOKS REGISTER
Date From whom Serial Description Shelf How Remarks
received Number of books, number disposed
including of
files
1 2 3 4 5 6 7
1.
2.
Instruction : All books and files of the corporate debtor which come into the hands
of the liquidator should be entered in this Register.
REGISTER OF UNCLAIMED DIVIDENDS AND UNDISTRIBUTED ASSETS

DEPOSITED
Sl. Name of Whether Number on Date of Rate of Total
No. person Creditor list of declaration dividend amount
entitled to or stakeholders of dividend or return payable
the dividend Contributory or return (Rs.)
or return
1 2 3 4 5 6 7
1.
2.
344

NOTIFICATION
New Delhi, the 31st March, 2017

(INFORMATION UTILITIES) REGULATIONS, 2017
IBBI/2016-17/GN/REG009 – In exercise of the powers conferred by sections 196,
209, 210, 211, 212, 213, 214, 215, 216 read with section 240 of the Insolvency and
Bankruptcy Code, 2016 (31 of 2016), the Board hereby makes the following
Regulations to provide a framework for registration and regulation of information
utilities in terms hereof, namely –
CHAPTER I
PRELIMINARY
1. Short title and commencement.

India (Information Utilities) Regulations, 2017.
(2) These Regulations shall come into force on 1st April, 2017.
2. Definitions.
(1) In these Regulations, unless the context otherwise requires-
(a) “Application Programming Interface” means a mechanism that allows a
system or service to access data or functionality provided by another
system or service;
(b) “certificate of registration” means a certificate of registration granted or
renewed by the Board under section 210 read with these Regulations
and the terms “registration” and “renewal” shall be construed
accordingly;
(c) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016) and
includes the rules, regulations, guidelines and directions issued thereunder;
(d) “control” shall have the meaning assigned to it under section 2(27) of
the Companies Act, 2013 (18 of 2013);
(e) “Governing Board” means the Board of Directors, as defined under section
2(10) of the Companies Act, 2013 (18 of 2013), of the company registered
as an information utility;
344
IBBI (INFORMATION UTILITIES) REGULATIONS, 2017 345
(f) “host bank” means the financial institution hosting the repayment account;
(g) “independent director” shall have the meaning assigned to it under
section 149(6) of the Companies Act, 2013 (18 of 2013);
(h) “information” means financial information as defined in section 3(13);
(i) “key managerial personnel” shall have the meaning assigned to it under
section 2(51) of the Companies Act, 2013 (18 of 2013);
(j) “net worth” shall have the meaning assigned to it under section 2(57) of
the Companies Act, 2013 (18 of 2013);
(k) “outsourcing” means contracting out services to a third party;
(l) “public company” shall have the meaning assigned to it under section
2(71) of the Companies Act, 2013 (18 of 2013);
(m) “repayment account” means the bank account to which a debtor is
obliged to repay its debt, as recorded in an information utility;
(n) “section” means a section of the Code;
(o) “secure systems” shall have the meaning assigned to it in section 2(1)(ze)
of the Information Technology Act, 2000 (21 of 2000);
(p) “Schedule” means schedule attached to these Regulations;
(q) “submission of information” includes updating of information, as the
context may require;
(r) “Technical Standards” means the standards laid down by the Board
through guidelines issued under Regulation 13, from time-to-time; and
(s) “user” means a person who avails of the services of an information utility.
defined in these Regulations, shall have the meanings assigned to them in the
Code.
CHAPTER II
REGISTRATION
3. Eligibility for registration.

No person shall be eligible to be registered as an information utility unless it is
a public company and –
(a) its sole object is to provide core services and other services under
these Regulations, and discharge such functions as may be necessary
for providing these services;
346 IBBI (INFORMATION UTILITIES) REGULATIONS, 2017
(b) its shareholding and governance is in accordance with Chapter III;

(c) its bye-laws are in accordance with Chapter IV;
(d) it has a minimum net worth of fifty crore rupees;
(e) it is not under the control of person(s) resident outside India;
(f) not more than 49 per cent of its total voting power or its paid-up equity
share capital is held, directly or indirectly, by persons resident outside
India;
(g) the person itself, its promoters, its directors, its key managerial personnel,
and persons holding more than 5 per cent, directly or indirectly, of its
paid-up equity share capital or its total voting power, are fit and proper
persons :
Explanation : For determining whether a person is fit and proper under these
Regulations, the Board may take account of relevant considerations,
including –
(ii) absence of conviction by a court for an offence :
Provided that a person may be considered ‘fit and proper’ if he has
been sentenced to imprisonment for a period of less than six months;
Provided that a person shall not be considered ‘fit and proper’ if he has
been sentenced to imprisonment for a period (a) of not less than six
months, but less than seven years and a period of five years has not
elapsed from the date of expiry of the sentence, or (b) of seven years or
more.
(iii) absence of restraint order, in force, issued by a financial sector regulator
or the Adjudicating Authority, and
(iv) financial solvency.
4. Application for registration or renewal thereof.

(1) A person eligible for registration as an information utility may make an
application to the Board in Form A of the Schedule, along with a non-refundable
application fee of five lakh rupees.
(2) An information utility seeking renewal of registration shall, at least six months
before the expiry of its registration, make an application for renewal in Form A of
the Schedule, along with a non-refundable application fee of five lakh rupees.
(3) The Board shall acknowledge an application made under this Regulation
5. Disposal of application.
(1) The Board shall examine the application, and give an opportunity to the
additional documents or clarification that it deems fit.
(3) The Board may require the applicant to appear, within reasonable time,
before the Board in person, or through its authorised representative for
clarifications required for processing the application.
that the applicant –
(a) is eligible under regulation 3;
(b) has the technical competence and financial capacity required to function
as an information utility;
(c) has adequate infrastructure to provide services in accordance with the
Code;
(d) has in its employment, persons having adequate professional and other
relevant experience, to provide services in accordance with the Code;
and
(e) has complied with the conditions of the certificate of registration, if he
has submitted an application for renewal under regulation 4(2)
it may grant or renew a certificate of registration to the applicant as an information
utility in Form B of the Schedule, within sixty days of receipt of the application,
excluding the time given by the Board for removing the deficiencies, or presenting
additional documents or clarifications, or appearing in person, as the case may be.
(5) If, after considering an application made under regulation 4, the Board is of
the prima facie opinion that the registration ought not to be granted or ought not
to be renewed, or be granted or renewed with additional conditions, it shall
communicate the reasons for forming such an opinion within forty-five days of
receipt of the application, excluding the time given by the Board for removing
the deficiencies, presenting additional documents or clarifications, or appearing
in person, as the case may be.
(6) The applicant shall submit an explanation as to why its application should be
accepted within fifteen days of the receipt of the communication under sub-
regulation (5), to enable the Board to form a final opinion.
(a) accept the application, along with the certificate of registration; or

(b) reject the application by an order, giving reasons thereof within thirty
days of receipt of explanation.
(8) The order rejecting an application for renewal of registration shall require the
information utility to –
(a) discharge any pending obligations;
(b) continue its functions till such time as may be directed, to enable its
users to transfer information stored with it to another information utility;
and
6. Conditions of registration.
(1) The certificate of registration shall be valid for a period of five years from the
date of issue.
(2) The certificate of registration shall be subject to the conditions that the
information utility shall –
(a) abide by the Code;
(b) abide by its bye-laws;
(c) at all times after the grant of the certificate continue to satisfy the
requirements under regulation 5(4);
(d) pay a fee of fifty lakh rupees to the Board, within fifteen days of receipt
of intimation of registration or renewal from the Board, as applicable;
(e) pay an annual fee of fifty lakh rupees to the Board, within fifteen days
from the end of every year from the date of grant or renewal of the
certificate of registration, as applicable;
(f) seek prior approval of the Board for –
(i) the acquisition of shares or voting power by a person, which taken
together with paid-up equity shares or voting power, if any, held
by such person, entitles him to hold more than five per cent, directly
or indirectly, of the paid-up equity share capital or total voting
power;
(ii) a change of control;
(iii) a merger, amalgamation or restructuring;
(iv) sale, disposal, or acquisition of the whole, or substantially the whole,
of its undertaking;
(v) voluntary liquidation, dissolution, or any similar action involving

the discontinuation of its business.
(g) intimate the Board if a person holding more than five per cent, directly or
indirectly, of its paid-up equity share capital or total voting power ceases
to hold at least five per cent, directly or indirectly, of its paid-up equity
share capital or total voting power, within fifteen days from such cessation;
(h) take adequate steps for redressal of grievances;
(i) take over information stored with other information utilities on the
directions of and in the manner directed by the Board, and provide core
services to their users; and
(j) abide by such other conditions as may be stipulated by the Board.
7. In-principle approval.
(1) Any person who seeks to establish an information utility may make an
application for an in-principle approval, demonstrating that the conditions in
sub-regulation (2) are satisfied, along with a non-refundable application fee of
five lakh rupees.
that –
(a) the applicant is a fit and proper person; and
(b) the proposed or existing company which may receive registration would
be able to meet the eligibility criteria under Regulation 3,
it may grant in-principle approval which shall be valid for a period not exceeding
one year and be subject to such conditions as it deems fit.
(3) During the validity of in-principle approval, the company referred to in sub-
regulation 2(b) may make an application for a certificate of registration as an
information utility to the Board in accordance with Regulation 4, but shall not be
required to pay the application fee for registration.
CHAPTER III
SHAREHOLDING AND GOVERNANCE
8. Shareholding.
(1) No person shall at any time, directly or indirectly, either by itself or together
with persons acting in concert, acquire or hold more than ten per cent of the
paid-up equity share capital or total voting power of an information utility :
Provided that the following persons may, directly or indirectly, either by
themselves or together in concert, acquire or hold up to twenty-five percent of

the paid-up equity share capital or total voting power of an information utility :
(a) government company;
(b) stock exchange;
(c) depository;
(d) bank;
(e) insurance company; and
(f) public financial institution.
(2) Notwithstanding anything to the contrary contained in sub-regulation (1), a
person resident in India may, directly or indirectly, either by itself or together
with persons acting in concert, hold up to fifty-one percent of the paid-up equity
share capital or total voting power of an information utility till the expiry of three
years from the date of its registration, or such period as may be extended by the
Board.
(3) The provisions of this Regulation shall not apply to the holding of shares or
voting power by the Central Government or a State Government.
9. Composition of the Governing Board.

(1) More than half of the directors of an information utility shall be independent
directors at the time of their appointment, and at all times during their tenure as
directors :
Provided that no meeting of the Governing Board shall be held without the
presence of at least one independent director.
(2) The directors shall elect an independent director as the Chairperson of the
Governing Board:
Explanation – For the purposes of this Regulation, any fraction contained in
‘more than half’ shall be rounded off to the next higher number.
10. Regulatory Committee.

(1) An information utility may constitute a Regulatory Committee from amongst
the independent directors.
(2) The Regulatory Committee, if constituted, shall oversee the information utility’s
compliance with the Code.
(3) The compliance officer shall report to the Regulatory Committee, wherever
constituted.
11. Compliance officer.

(1) An information utility shall designate or appoint a compliance officer who
shall be responsible for ensuring compliance with the provisions of the Code
applicable to the information utility, in letter and spirit.
(2) The compliance officer shall, immediately and independently, report to the
Board any non-compliance of any provision of the Code observed by him.
(3) The compliance officer shall submit a compliance certificate to the Board
annually, verifying that the information utility has complied with the requirements
of the Code, and has redressed customer grievances.
(4) The Governing Board shall appoint or remove a compliance officer only by
means of a resolution passed at its meeting.
12. Grievance Redressal Policy.

(1) An information utility shall have a Grievance Redressal Policy to deal with
any grievance from –
(a) any user; or
(b) any other person or class of persons as may be provided by the
Governing Board in respect of its services.
(2) The Grievance Redressal Policy shall provide for –
(a) the constitution of a Grievance Redressal Committee;
(b) the functions of the Grievance Redressal Committee;
(c) the format and manner for filing grievances;
(d) maximum time and format for acknowledging receipt of a grievance;
(e) maximum time for the disposal of the grievance by way of dismissal,
resolution or the initiation of mediation;
(f) details of the mediation mechanism;
(g) provision of a report of the grievance and mediation proceedings to the
parties to the grievance upon dismissal or resolution of the grievance;
(h) action to be taken in case of malicious or false complaints;
(i) maintenance of a register of grievances received and resolutions arrived
at;
(j) disclosure of receipt and disposal of grievances to the public in the form
and manner directed by the Board;
(k) periodic reporting of the receipt and disposal of grievances to the
Governing Board; and
(l) periodic review of the Grievance Redressal Mechanism by the Governing

Board.
CHAPTER IV
TECHNICAL STANDARDS AND BYE-LAWS
13. Technical Standards.

(1) The Board may lay down Technical Standards, through guidelines, for the
performance of core services and other services under these Regulations.
(2) Without prejudice to the generality of sub-regulation (1), the Board may lay down
Technical Standards for all or any of the following matters, namely :
(a) the Application Programming Interface;
(b) standard terms of service;
(c) registration of users;
(d) unique identifier for each record and each user;
(e) submission of information;
(f) identification and verification of persons;
(g) authentication of information;
(h) verification of information;
(i) data integrity;
(j) consent framework for providing access to information to third parties;
(k) security of the system;
(l) security of information;
(m) risk management framework;
(n) porting of information;
(o) exchange or transfer of information between information utilities;
(p) inter-operability among information utilities;
(q) preservation of information; and
(r) purging of information.
14. Technical Committee.

The Board shall lay down the Technical Standards based on the
recommendations of a Technical Committee constituted by it.
(1) The Technical Committee shall comprise of at least three members who
have special knowledge and experience in the field of law, finance, economics,
information technology or data management.
(2) The Board may invite the Chief Executive Officers or managing directors of
information utilities to attend the meetings of the Technical Committee.
15. Bye-laws of information utilities.

(1) An information utility, for the conduct of its operations, shall have bye-laws
consistent with the Code.
(2) The bye-laws shall be consistent with, and provide for all matters contained
in the Technical Standards, if any.
(3) Without prejudice to the generality of sub-regulation (1), the bye-laws shall
provide for –
(a) the manner and process of providing core services and other services
under these Regulations;
(b) risk management;
(c) rights of users; and
(d) grievance redressal.
(4) The bye-laws of the information utility, as amended from time-to-time, shall
be published on its website.
16. Amendment to bye-laws.

(1) The Governing Board may amend the bye-laws of the information utility by a
resolution passed by votes in favour being not less than three times the number
of the votes, if any, cast against the resolution, by the directors.
(2) A resolution passed in accordance with sub-regulation (1) shall be filed with
the Board within seven days from the date of its passing, for its approval.
(3) The amendments to the bye-laws shall come into effect on the seventh day
of the receipt of the approval under sub-regulation (2), unless otherwise directed
by the Board.
(4) The information utility shall file a printed copy of the amended bye-laws with
the Board within fifteen days from the date when such amendment is made
effective.
(5) Notwithstanding anything to the contrary contained in this Regulation,
the Board may direct an information utility to amend any provision in its bye-
laws.
CHAPTER V
CORE SERVICES
17. Provision of services.

(1) An information utility shall provide –
(a) core services;
(b) other services under these Regulations; in accordance with the Code.
(2) An information utility may provide services incidental to the services under
sub-regulation (1), with the permission of the Board.
(3) An information utility shall comply with the applicable Technical Standards,
while providing services.
18. Registration of users.

(1) A person shall register itself with an information utility for-
(a) submitting information to; or
(b) accessing information stored with any of the information utilities.
(2) The information utility shall verify the identity of the person under sub-
regulation (1) and grant registration.
(3) Upon registration of a person under sub-regulation (2), the information utility
shall intimate it of its unique identifier.
(4) A person registered once with an information utility shall not register itself
with any information utility again.
(5) An information utility shall provide a registered user a functionality to enable
its authorised representatives to carry on the activities in sub-regulation (1) on its
behalf.
(6) An information utility shall –
(a) maintain a list of the
(i) registered users;
(ii) the unique identifiers of the registered users; and
(iii) the unique identifiers assigned to the debts under regulation 20.
(b) make the list under clause (a) available to all information utilities
and the Board.
19. Use of different information utilities.

(1) A registered user may submit information to any information utility.
(2) Different parties to the same transaction may use different information utilities
to submit, or access information in respect of the same transaction:
Illustration : A debt transaction has creditor A and debtor B. A may submit
information about the debt to information utility X, while B may submit information
about the same debt to information utility Y.
(3) A user may access information stored with an information utility through any
information utility.
20. Acceptance and receipt of information.

(1) An information utility shall accept information submitted by a user in Form C
of the Schedule.
(2) On receipt of the information submitted under sub-regulation (1), the
information utility shall –
(a) assign a unique identifier to the information, including records of debt;
(b) acknowledge its receipt, and notify the user of-
(i) the unique identifier of the information;
(ii) the terms and conditions of authentication and verification of
information; and
(iii) the manner in which the information may be accessed by other parties.
21. Information of default.

(1) On receipt of information of default, an information utility shall expeditiously
undertake the processes of authentication and verification of the information.
(2) On completion of the processes of authentication and verification under sub-
regulation (1), the information utility shall communicate the information of default,
and the status of authentication to registered users who are-
(a) creditors of the debtor who has defaulted;
(b) parties and sureties, if any, to the debt in respect of which the information
of default has been received.
22. Storage of information.

(1) An information utility shall store all information in a facility located in India.
(2) The facility under sub-regulation (1) shall be governed by the laws of India.
23. Access to information.

(1) An information utility shall allow the following persons to access information
stored with it –
(a) the user which has submitted the information;

(b) all the parties to the debt and the host bank, if any, if the information is
of the categories in section 3 (13) (a), (c) and (d);
(c) the corporate person and its auditor, if the information is of the categories
in section 3(13)(b) and (e);
(d) the insolvency professional, to the extent provided in the Code;
(e) the Adjudicating Authority;
(f) the Board;
(g) any person authorised to access the information under any other law; and
(h) any other person who the persons referred to in (a), (b) or (c) have
consented to share the information with.
(2) An information utility shall in all cases enable the user to view –
(a) the date the information was last updated;
(b) the status of authentication; and
(c) the status of verification while providing access to the information.
(3) An information utility shall provide information to the Adjudicating Authority
and Board free of charge.
24. Accessing information stored with other information utilities.

(1) An information utility shall provide a functionality to enable users to access
information stored with any information utility, which they are entitled to access.
(2) The functionality under sub-regulation (1) shall enable other information utilities
to provide access to information to the user directly.
(3) The functionality shall ensure privacy and confidentiality of information.
25. Annual statement.

(1) An information utility shall provide every user an annual statement of all
information pertaining to the user, free of charge.
(2) An information utility shall provide the user a functionality to mark information
as erroneous and correct it.
26. Porting information from registries.

(1) An information utility may import information from such registries as may be
notified by the Board from time-to-time.
(2) An information utility shall render the core services under section 3 (9) (b), (c)
and (d) in accordance with these Regulations for the information imported under
sub-regulation (1).
27. Duties of the user.

(1) A user shall expeditiously update the information submitted by it to an
information utility.
(2) A user shall expeditiously correct information as soon as it finds it erroneous,
stating the reasons, if any.
CHAPTER VI
DUTIES OF INFORMATION UTILITIES
28. General duties.

(1) An information utility shall provide services with due and reasonable care,
skill and diligence.
(2) An information utility shall hold the information as a custodian.
29. Non-discrimination.
An information utility shall provide services without discrimination in any manner.
Explanation : An information utility shall not deny its services to any person on
the basis of –
(a) place of residence or business; or
(b) type of personality, whether natural or artificial.
30. Other duties.

(1) An information utility shall –
(a) provide services to a user based on its explicit consent;
(b) guarantee protection of the rights of users;
(c) establish adequate procedures and facilities to ensure that its records
are protected against loss or destruction;
(d) adopt secure systems for information flows;
(e) protect its data processing systems against unauthorised access,
alteration, destruction, disclosure or dissemination of information; and
(f) transfer all the information submitted by a user, and stored with it to
another information utility on the request of the user.
(2) An information utility shall not –
(a) outsource the provision of core services to a third-party service

provider;
(b) use the information stored with it for any purpose other than providing
services under these Regulations, without the prior approval of the Board;
(c) seek data or details of users except as required for the provision of the
services under these Regulations.
31. Insurance.
An information utility shall make adequate arrangements, including insurance,
for indemnifying the users for losses that may be caused to them by any wrongful
act, negligence or default of the information utility, its employees or any other
person whose services are used for the provision of services under these
Regulations.
32. Fee.
(1) The information utility shall –
(a) charge uniform fee for providing the same service to different users;
(b) disclose the fee structure for provision of services on its website; and
(c) disclose any proposed increase in the fees for the provision of services
on its website at least three months before the increase in fees is
effected.
(2) The fee charged for –
(a) providing services shall be a reasonable reflection of the service provided;
and
(b) providing access to information shall not exceed the fee charged for
submission of information to the information utility.
33. Risk management.

An information utility shall establish an appropriate risk management framework
in accordance with the Technical Standards, if any, which provides for matters,
including –
(a) reliable, recoverable and secure systems;
(b) provision of core services during disasters and emergencies; and
(c) business continuity plans which shall include disaster recovery sites.
34. Audit of information technology framework.

(1) An information utility shall appoint an external auditor having relevant
qualifications to audit its information technology framework, interface and data

processing systems every year.
(2) The auditor appointed under sub-regulation (1) shall submit a report to the
Governing Board.
(3) The information utility shall submit the report received under sub-regulation
(2), along with the comments of the Governing Board, if any, to the Board within
one month from the receipt of the report from the external auditor.
35. Preservation Policy.

(1) An information utility shall have a Preservation Policy providing for the form,
manner and duration of preservation of –
(a) information stored with it; and
(b) details of the transactions of the information utility with each user in
respect of the information stored with it.
(2) The Preservation Policy shall be consistent with the Technical Standards, if
any.
36. Provision of information to the Board.

(1) An information utility shall provide such information as may be required by
the Board.
(2) Without prejudice to the provisions of sub-regulation (1), an information utility
shall provide a report to the Board annually, in the manner directed by the
Board, stating the –
(a) number and types of records collected;
(b) number and types of users registered;
(c) number and types of unique debts recorded;
(d) number and types of security interests recorded;
(e) volume of debts recorded;
(f) volume of secured debts recorded;
(g) number of instances and types of defaults recorded;
(h) number and types of disputes recorded;
(i) number of times information was accessed by the Adjudicating Authority
and Board; and
(j) any other information as may be directed by the Board.
37. Inspection.
(1) Without prejudice to the provisions of sections 217-220, the Board shall inspect
an information utility with such periodicity as may be considered necessary.
(2) An information utility shall extend all assistance and co-operation to the
Board to carry out an inspection under sub-regulation (1).
CHAPTER VII
SERVICES TO INSOLVENCY PROFESSIONALS
38. Storing information submitted by insolvency professionals.

(1) An insolvency professional may submit reports, registers and minutes in
respect of any insolvency resolution, liquidation or bankruptcy proceedings to
an information utility for storage.
(2) The information utility shall not provide access to the reports, registers and
minutes submitted under sub-regulation (1) to any person other than the concerned
insolvency professional, the Board or the Adjudicating Authority.
(3) The information utility shall discharge the duties specified in Chapter VI in
respect of the reports, registers and minutes submitted under sub-regulation (1).
CHAPTER VIII
SURRENDER OR CANCELLATION OF REGISTRATION
39. Exit management plan.

(1) An information utility shall, at all times, have an exit management plan which
shall include –
(a) mechanisms to enable users to transfer information to other information
utilities expeditiously;
(b) mechanisms for preservation and transfer of information; and
(c) timelines and cost estimates of implementing the exit management
plan.
(2) An information utility shall not amend its exit management plan without the
prior approval of the Board.
40. Surrender of registration.

(1) An information utility may submit an application for surrender of its certificate
of registration to the Board, providing –
(a) the reasons for such surrender;
(b) details of its pending and on-going activities; and

(c) details of how the exit management plan shall be implemented.
(2) The Board shall within seven days of receipt of the application, publish a
notice of receipt of such application on its website and invite objections to the
surrender of registration to be submitted within fourteen days of the publication
of the notice.
(3) After considering the application and the objections received, if any, the
Board may, within thirty days from the last date for submission of objections,
approve the application for surrender of registration subject to such conditions
as it deems fit.
(4) The approval under sub-regulation (3) may require the information utility to –
(a) discharge any pending obligations; or
(b) continue such functions till such time as may be directed.
(5) The Board, after being satisfied that the requirements of sub-regulation (4)
have been complied with, shall publish a notice on its website stating that the
surrender of registration by the information utility has taken effect.
41. Disciplinary proceedings.

(1) Based on the findings of an inspection or investigation, or on material
issue a show-cause notice to the information utility.
(2) The show-cause notice shall be in writing and shall state –
(a) the provisions of the Code under which it has been issued;
(b) the details of the alleged facts;
(c) the details of the evidence in support of the alleged facts;
(d) the provisions of the Code allegedly violated, or the manner in which
the public interest has allegedly been affected;
allegations are established;
(f) the manner in which the information utility is required to respond to the
show-cause notice;
(g) consequences of failure to respond to the show-cause notice within the
given time; and
(h) procedure to be followed for disposal of the show-cause notice.
(3) The show-cause notice shall enclose copies of relevant documents and
extracts of relevant portions from the report of investigation or inspection, or
other records.
(4) A show-cause notice issued shall be served on the information utility in the
following manner –
(a) by sending it to the information utility at its registered office, by registered
post with acknowledgement due; and
(b) by an appropriate electronic means to the email address provided by
the information utility to the Board.
(5) The Disciplinary Committee shall dispose of the show-cause notice by a
reasoned order in adherence to principles of natural justice.
(6) The Disciplinary Committee shall endeavor to dispose of the show-cause
notice within a period of six months of the issue of the show-cause notice.
(7) The order in disposal of a show-cause notice may provide for-
(a) no action;
(b) warning;
(c) any of the actions under section 220(2) to (4); or
thirty days have elapsed from the date of issue of the order, unless the
Disciplinary Committee states otherwise in the order along with the reasons
for the same.
(9) The order passed under sub-regulation (7) shall be issued to the information
utility immediately, and be published on the website of the Board.
If the order passed under sub-regulation (7) suspends or cancels the registration
of the information utility, the Disciplinary Committee may require the information
utility to –
(a) discharge pending obligations;
(b) continue its functions till such time as may be directed, only to enable
users to transfer information stored with it to another information utility;
and
(c) comply with any other directions.
42. Appeal.
An appeal may be preferred under section 211, within a period of thirty days of
receipt of the order, in the manner prescribed in Part III of the National Company
Law Tribunal Rules, 2016.
SCHEDULE
FORM A
APPLICATION FOR CERTIFICATE OF REGISTRATION
(Information Utilities) Regulations, 2017)
To
The Chairperson
The Insolvency and Bankruptcy Board of India
[Insert address]
From
[Name and address]
Subject: Application for grant or renewal of certificate of registration as information
utility
Madam/Sir,
1. I, being duly authorized for the purpose, hereby apply on behalf of [name and
address of the applicant] for
(a) grant of certificate of registration as information utility, or
(b) renewal of certificate of registration as information utility,
and enclose a copy of the board resolution authorizing me to make this application
to and correspond with the Board in this respect.
2. A copy of
(a) the memorandum of association,
(b) the articles of association,
(c) the bye-laws,
(d) the business plan and
(e) the exit management plan of the applicant is enclosed.
3. I, on behalf of [insert name], affirm that the applicant is eligible to be registered
as an information utility.
4. I, on behalf of [insert name], hereby affirm that -
(a) all information contained in this application is true and correct in all material
respects,
(b) no material information relevant for the purpose of this application has
(c) registration granted or renewed in pursuance of this application may be
cancelled summarily if any information submitted is found to be false
or misleading in material respects at any stage.
5. If granted registration, I, on behalf of [insert name], undertake to comply with
the requirements of the Code, the rules, regulations, guidelines or directions
issued thereunder, and such other conditions and terms as may be contained in
the certificate of registration or be specified or imposed by the Board subsequently.
Yours faithfully,
Sd/-
(Name)
(Designation)
Date :
Place :
ANNEXURE TO FORM A
PART I
GENERAL
1. Name of the applicant.
2. Address of registered office and principal place of business of the applicant.
3. Corporate Identity Number (CIN).
4. PAN.
5. Name, designation and contact details of the person authorized to make
this application and correspond with the Board in this respect.
PART II
MEMORANDUM OF ASSOCIATION, ARTICLES OF ASSOCIATION AND
BYE-LAWS
6. Please state if the memorandum of association, articles of association
and bye-laws provide for all matters as required in, and are consistent
with the Insolvency and Bankruptcy Board of India (Information Utilities)
Regulations, 2017 and the Code.
PART III
SHAREHOLDING AND FINANCIAL STRENGTH
7. Please provide details of the persons holding more than 5%, directly or
indirectly, of the paid-up equity share capital or total voting power of the
applicant.
Sl.No. Name and PAN / Passport No. Percentage of
address of and country of shareholding in the
the issue/ company applicant company and/
shareholder registration number or holding company
8. Do persons resident outside India in aggregate hold more than 49% of

the paid-up equity share capital or total voting power of the applicant?
Please provide details.
9. Who exercises control over the applicant? Please provide details.
10. Do persons resident outside India exercise control over the applicant? If
so, please provide details.
11. Please provide audited financial statements of:
(a) a company holding more than 5% of the paid-up equity share capital
or total voting power of the applicant (if any),
(b) a company who is in control of the applicant (if any),
(c) promoter company (if any),
(d) the applicant company itself,
of the last three years or from the date of incorporation of the company,
whichever is less.
PART IV
DIRECTORS AND EMPLOYEES
12. Please provide the details of the applicant’s Board of Directors, key
managerial personnel and compliance officer, if any:
Sl. No. Name and address of the director DIN and PAN
13. Please provide number of employees, category-wise.
PART V
INFRASTRUCTURE
14. Please provide the details of infrastructure the applicant currently has and
proposes to have to enable it to discharge its functions as an information
utility, including-
a. Technology
b. Data Security
c. Facilities for hosting the data center
d. Grievance redressal and disciplinary proceedings
e. Any further plan for additional/ improved infrastructure to be
indicated.
PART VI
BUSINESS PLAN
15. Please provide a summary of the applicant’s Business Plan.
16. Please provide the time frame in which the applicant will be able to provide
the services of an information utility from the date of registration.
PART VII
EXIT MANAGEMENT PLAN
17. Please provide a summary of the applicant’s Exit Management Plan,
including the manner in which users will be enabled to transfer their
information to other utilities.
PART VIII
FIT AND PROPER CRITERIA
18. Please provide information to demonstrate that the persons holding more
than 5% of the paid-up equity share capital or total voting power of the
company, the promoters, the key managerial personnel, the directors of
the applicant and the applicant are fit and proper persons.
Sl. Name Relati DIN/ Details Details of Is the Details Any

No onship CIN/ of restraining person pertaining other
to the PAN conviction orders, an undis- to the inform
appli- orders, if if any, insolvent character, ation
cant any, against or reputation
against the bankrupt? and
the person If yes, integrity
person please of the
provide person
details
PART IX
COMPLIANCE
[For applications for renewal of registration]
19. Please provide details of the information utility’s compliance with the
conditions of its certificate of registration.
20. Please provide details of the information utility’s compliance with the
Code, rules, regulations, guidelines and directions thereunder, during the
period of registration.
Please provide any other details you consider relevant in support of the
application.
Sd/-
(Name)
(Designation)
Date :
Place :
Form B

Certificate of Registration No. _
The Insolvency and Bankruptcy Board of India hereby grants / renews this /the
certificate of registration to / of ................ [insert name and address] to act as an

information utility in accordance with the Insolvency and Bankruptcy Code, 2016.
The certificate of registration is valid from [insert start date] to [insert end date] and
may be renewed.
Sd/-
(For and on behalf of Insolvency and Bankruptcy Board of India)
Place :
Date :
FORM C
Information may be accepted in this form with such modifications as the information
utility deems fit.
A. Details relating to Creation of Debt

Details of the user submitting information
1. Full Name
(Please provide your First Name, Middle Name and Last Name)
2. Relationship of the person submitting information to the Debt

(Debtor/Creditor/Debenture Trustee/Guarantor/ please specify
any other)
3. Unique Identifier as registered with an Information Utility
4. Date of Birth/ Date of incorporation
5. Full Address
6. Telephone No.
7. Mobile No.
8. Email ID
9. Fax No.
10. Signature
Details of Other Parties to the Debt (Apart from the person submitting the
debt)
Details of Parties (please add as many parties as may be applicable)
11. Relationship of the party to the debt

(Debtor/Creditor/Debenture Trustee/Guarantor/ please specify
any other)
12. Full Name

(Please provide your First Name, Middle Name and Last Name)
13. Unique Identifier as registered with an Information Utility, if any
14. Date of Birth/ Date of incorporation
15. Full address
16. Telephone No.
17. Mobile No.
18. Email ID
19. Fax No.
Details of the Debt
20. Unique identifier of the debt, in case the debt has previously
been recorded in any Information Utility
21. Loan Agreement Number / Loan Account Number
22. Date of Loan Agreement
23. Nature of the Debt (Operational/Financial)
24. Currency of the Debt
25. Date of disbursement of the debt
26. Date of maturity of the debt
27. Date of expiry of the debt
28. Date of Renewal of the Debt
29. Amount of debt owed on the date of creation
30. Amount of debt owed currently

31. Rate of Interest (as updated from time to time)
32. Security on Debt (If yes, please fill Section B dealing with Details
relating to Creation of Security on Debt)
33. Host bank and Repayment Account number, if any
34. Details of repayment schedule of the debt, if any
35. Details of terms of demand loan, if any
36. Details of confirmed balance, if any
37. List out Documents Attached as Proof:

A. Copy of the Loan Agreement (as revived from time to time)
B. Repayment Schedule (If in possession of the submitter)
C. Balance Confirmation
D. Balance Sheet and Cash Flow Statements (If the submitter
is the Debtor)
E. Any other document relating to creation of debt/change in
terms of the debt
B. Details relating to Creation of Security on Debt (If not applicable, please

write NA)
38. Security Interest Type(Mortgage/charge/hypothecati on/assi
gnment/pledge etc.)
39. Asset Type(Movable, immovable, intangible)
40. Type of Security (Vehicle, inventory, receivable, equipment, Plot

etc.)
41. Joint Security Interest (Yes or No)
42. Number of Security Interest Holders
43. Security Interest ID (As per CERSAI)
44. Description of the security (Number, Identification Marks etc.)
45. Date of Creation of Security Interest
46. Date of Modification of Security Interest

47. Final amount secured
48. Value of Security
49. Date of Valuation
50. List out documents attached as proof:
A. Copy of the Security Deed

B. Copy of the Valuation Report
C. Proof of Registration with CERSAI
D. Copy of the Certificate of Registration of Charge
E. Any other document relating to creation of security
C. Details relating to Default of Debt (If not applicable, please write NA)
Details of the Default
51. Date of Default
52. Days past due
53. Total amount due and default amount
54. Date and amount of last payment
55. Suit filed or not
56. Documents attached as proof of default

372 COMPANIES (TRANSFER OF PENDING PROCEEDINGS) RULES, 2016

NOTIFICATION
New Delhi, the 7th December, 2016

G.S.R. 1119(E).— In exercise of the powers conferred under sub-sections (1) and
(2) of section 434 of the Companies Act, 2013 (18 of 2013) read with sub-section (1)
of section 239 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter
referred to as the Code), the Central Government hereby makes the following
rules, namely:—
1. Short title and Commencement. - (1) These rules may be called the Companies
(Transfer of Pending Proceedings) Rules, 2016.
(2) They shall come into force with effect from the 15th December, 2016, except
rule 4, which shall come into force from 1st April, 2017.
2. Definitions.- (1) In these rules, unless the context otherwise requires-
(a) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016);’
(b) “Tribunal” means the National Company Law Tribunal constituted under
section 408 of the Companies Act, 2013.
(2) Words and expressions used in these rules and not defined, but defined in the
Companies Act, 1956 (1 of 1956) (herein referred to as the Act), the Companies
Act, 2013 (18 of 2013) or the Companies (Court) Rules, 1959 or the Code shall have
the meanings respectively assigned to them in the respective Act or rules or the
Code, as the case may be.
3. Transfer of pending proceedings relating to cases other than Winding up.
– All proceedings under the Act, including proceedings relating to arbitration,
compromise, arrangements and reconstruction, other than proceedings relating
to winding up on the date of coming into force of these rules shall stand transferred
to the Benches of the Tribunal exercising respective territorial jurisdiction:
Provided that all those proceedings which are reserved for orders for allowing or
otherwise of such proceedings shall not be transferred.
4. Pending proceeding relating to Voluntary Winding up : All applications and
petitions relating to voluntary winding up of companies pending before a High
Court on the date of commencement of this rule, shall continue with and dealt
with by the High Court in accordance with provisions of the Act.
5. Transfer of pending proceedings of Winding up on the ground of inability
to pay debts. – (1) All petitions relating to winding up under clause (e) of section
COMPANIES (TRANSFER OF PENDING PROCEEDINGS) RULES, 2016 373
433 of the Act on the ground of inability to pay its debts pending before a High
Court, and where the petition has not been served on the respondent as required
under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the
Bench of the Tribunal established under sub-section (4) of section 419 of the Act,
exercising territorial jurisdiction and such petitions shall be treated as applications
under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in
accordance with Part II of the Code:
Provided that the petitioner shall submit all information, other than information
forming part of the records transferred in accordance with Rule 7, required for
admission of the petition under sections 7, 8 or 9 of the Code, as the case may be,
including details of the proposed insolvency professional to the Tribunal within
sixty days from date of this notification, failing which the petition shall abate.
(2) All cases where opinion has been forwarded by Board for Industrial and
Financial Reconstruction, for winding up of a company to a High Court and where
no appeal is pending, the proceedings for winding up initiated under the Act,
pursuant to section 20 of the Sick Industrial Companies (Special Provisions) Act,
1985 shall continue to be dealt with by such High Court in accordance with the
provisions of the Act.
6. Transfer of pending proceedings of Winding up matters on the grounds
other than inability to pay debts. – All petitions filed under clauses (a) and (f) of
section 433 of the Companies Act, 1956 pending before a High Court and where
the petition has not been served on the respondent as required under rule 26 of
the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal
exercising territorial jurisdiction and such petitions shall be treated as petitions
under the provisions of the Companies Act, 2013 (18 of 2013).
7. Transfer of Records. – Pursuant to the transfer of cases as per these rules the
relevant records shall also be transferred by the respective High Courts to the
National Company Law Tribunal Benches having jurisdiction forthwith over the
cases so transferred.
8. Fees not to be paid. – Notwithstanding anything contained in the National
Company Law Tribunal Rules, 2016, no fee shall be payable in respect of any
proceedings transferred to the Tribunal in accordance with these rules.
[F. NO. 1/5/2016- CL-V]
AMARDEEP SINGH BHATIA, Jt. Secy.
374 NOTIFICATION ON THE PROVISIONS OF THE CODE

NOTIFICATION
New Delhi, the 1st October, 2016

S.O. 3110(E). -In exercise of the powers conferred by sub-section (1) and (3) of
section 188 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central
Government hereby appoints 01st October, 2016 as the date of establishment of
Insolvency and Bankruptcy Board of India. The head office of the Insolvency and
Bankruptcy Board of India shall be at New Delhi.
[F. No. 30/2/2016-Insolvency Section]
NOTIFICATION
New Delhi, the 1st October, 2016
S.O. 3111(E). – In exercise of the powers conferred by section 189 of the Insolvency
and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby appoints
Sh. Madhu Sudan Sahoo, as Chairperson of the Insolvency and Bankruptcy Board
of India with effect from 1st October, 2016 i.e. date of assumption of the charge for
a period of five years or upto sixty-five years of age or until further orders, whichever
is the earlier.
[F. NO. 30/2/2016-Insolvency Section]
NOTIFICATION ON THE PROVISIONS OF THE CODE 375

NOTIFICATION
New Delhi, the 5th August, 2016

S.0.2618(E). – In exercise of the powers conferred by the proviso to sub-section
(3) of section 1 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the
Central Government hereby appoints the 5th of August, 2016 as the date on which
the provisions of sections 188 to 194 (both inclusive) of the said Code shall come
into force.
[F.No. 30/7/2016-Insolvency Section]

NOTIFICATION
New Delhi, the 19th August, 2016

S.O. 2746(E). – In exercise of the powers conferred by sub-section (3) of section
1 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government
hereby appoints the 19th August, 2016 as the date on which the provisions of
following sections of the said Code shall come into force:–
(1) section 3 -
(i) clause (1);
(ii) clause (5);
(iii) clause (22);
(iv) clause (26);
(v) clause (28);
(vi) clause (37);
(2) section 221;
(3) section 222;
(4) section 225;
(5) section 226;
(6) section 230;
(7) section 232;
(8) section 233;
(9) sub-section (1) and clause (zd) of sub-section (2) of section 239;
(10) sub-section (1) and clause (zt) of sub-section (2) of section 240;
(11) section 241; and
(12) section 242.

NOTIFICATION

hereby appoints the 1st November, 2016 as the date on which the provisions of
the following sections of the said code shall come into force:–
(1) section 3 -
(i) clause (2) to clause (4);
(ii) clause (6) to clause (21);
(iii) clause (23) to clause (25);
(iv) clause (27);
(v) clause (29) to clause (36);
(2) section 196;
(3) section 197;
(4) section 223;
(5) sub-section (2) of section 239-
(i) clause (ze) to (zh);
(ii) clause (zl) to (zm);
(i) clause (a) to (zm);
(ii) clause (zu) to (zzzc);
(7) section 244;
(8) section 246 to section 248 [both inclusive];
(10) section 252.

NOTIFICATION

hereby appoints the 15th November, 2016 as the date on which the provisions of
the following sections of the said Code shall come into force:–
(i) clause (c);
(ii) clause (e);
(3) sub-section (2) of section 208;
(5) section 251;
(6) section 253;
(8) section 255.

NOTIFICATION
S.O. 3594(E). – In exercise of the powers conferred by sub-section (3) of section 1
of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government
hereby appoints the 1st December, 2016 as the date on which the provisions of
the following sections of the said Code shall come into force :
(1) clause (a) to clause (d) of section 2 (except with regard to voluntary
liquidation or Bankruptcy) ;
(2) section 4 to section 32 [both inclusive] ;
(3) section 60 to section 77 [both inclusive] ;
(4) section 198 ;
(5) section 231 ;
(6) section 236 to section 238 [both inclusive] ; and
(7) clause (a) to clause (f) of sub-section (2) of section 239.
380 SICA REPEAL NOTIFICATION
MINISTRY OF FINANCE
(Department of Financial Services)
NOTIFICATION
S.O. 3568(E). – In exercise of powers conferred by clause (b) of section 4 of the
Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1 of 2004), the
Central Government hereby notifies the 1st day of December, 2016, as the date for
the purposes of clause (b) of section 4 of the said Act.

NOTIFICATION
New Delhi, the 30th March 2017
S.O. 1005(E) – In exercise of the powers conferred by sub-section (3) of section 1
of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government
hereby appoints the 1st April, 2017 as the date on which the provisions of the
following sections of the said Code shall come into force :
(1) section 59 ;
(2) section 209 to section 215 (both inclusive) ;
(3) sub-section (1) of section 216 ; and
(4) section 234 and section 235.
[F. No. 30/7/2016-Insolvency Section]

382
THE REPORT OF THE BANKRUPTCY LAW REFORMS

COMMITTEE VOLUME I: RATIONALE AND DESIGN
November 2015
1. Acknowledgements
As Chairman of the Committee on bankruptcy law reforms, I have had the privilege
of overseeing the design and drafting of a new legal framework for resolving
matters of insolvency and bankruptcy. This is a matter of critical importance: India
is one of the youngest republics in the world, with a high concentration of the
most dynamic entrepreneurs. Yet these game changers and growth drivers are
crippled by an environment that takes some of the longest times and highest
costs by world standards to resolve any problems that arise while repaying dues
on debt. This problem leads to grave consequences: India has some of the
lowest credit compared to the size of the economy. This is a troublesome state to
be in, particularly for a young emerging economy with the entrepreneurial
dynamism of India.
Such dynamism not only needs reforms, but reforms done urgently. The Committee
was seized of this, and focused on a two-phase mandate over its tenure. The first
phase was to examine the existing bankruptcy framework, and whether there
were policy and legal changes that could yield immediate effect. The focus here
was on the problems of insolvency and bankruptcy under the Companies Act,
2013. The outcome of the deliberations of the Committee led to the Interim Report
of the Committee that was put out for public comments at the end of February,
2015 (Ministry of Finance, 2015). The team at the Vidhi Centre for Legal Policy, led
by Debanshu Mukherjee, did a wonderful job to deliver the richly detailed report
within the hard limitations on time.
The Committee then embarked on the second phase of its mandate. Here, the
task was to create a uniform framework that would cover matters of insolvency
and bankruptcy of all legal entities and individuals, save those entities with a
dominantly financial function. This shifted the mandate to a much wider problem
that included micro, small and medium enterprises, sole proprietorships and
individuals. This also meant demands on a much wider and deeper base of
knowledge, on both matters of the economics of the problem as well as the legal
framework. Fortunately for the Committee, we had ample help from various
sources to tackle both of these issues.
A sub-group of the Committee including Aparna Ravi, Sudarshan Sen, Susan
382
BLRC REPORT 383
Thomas, Madhukar Umarji and Bahram Vakil led the charge, devoting immense
time to con-tribute the knowledge of their experience, distil research inputs and
the wisdom of various market participants into our deliberations. Research
contributions and real world knowledge on the economics and the legal
framework were gathered from the many policy papers, workshops and a
conference that was conducted during the period of the Committee’s working.
These discussions captured knowledge of the intricacies of the insolvency and
bankruptcy processes on the ground in India today, and engaged with economists,
lawyers and the financial market participants from banks, the asset reconstruction
companies and fund managers. This knowledge base was used to think about
how the insolvency process should be redesigned.
The Committee is thankful for conversations with Raghuram Rajan of Reserve
Bank of India, Amitabh Kant of Department of Industrial Policy and Promotion,
S. K. Amarnath of ARCIL, Sanjay Banerjee of the University of Nottingham, Clive
Barnard, Kevin Pullen, John Whiteoak and Soumya Rao of Herbert Smith Freehills
LLP, Sumant Batra of Kesar Dass B. and Associates, Sharad Bhatia and Saugata
Bhattacharya of Axis Bank, Ashwin Bishnoi and Tarang Shashisekhar of Khaitan
& Co., A. K. Choudhary of the Reserve Bank of India, Bhagwan Chowdhry of
University of California Los Angeles, Janak Dalal and Sridhar Srinivasan of
Deutsche Bank, Maneesha Dhir of Dhir & Dhir Associates, Amardeep Singh
Bhatia and Puneet Duggal of the Ministry of Corporate Affairs, Diwakar Gupta
now of Asian Development Bank, Sapan Gupta of Bajaj Financial Services Ltd.,
Jayesh H of Juris Corp., Monika Halan of The Mint, Saurabh Jaywant, Gaurav
Kumar and Irfan Mohammed of IFMR Capital, Teresa John, Rahul Matthan,
Harsh Pais and Upasana Rao of Trilegal, Shaktikanta Das, Ajay Tyagi, C. K. G.
Nair and Manoj Joshi of the Department of Economic Affairs, Pramod Kabra,
Vikram Nirula and Santhanam Rajgopalan of India Value Fund Associates, Chief
Justice Sanjay Kaul of the Madras High Court, K. P. Krishnan of the Dept. of Land
Resources, Sankar Krishnan and Nikhil Shah of Alvarez & Marshal, P. K. Malhotra,
S. D. Kelkar and M. M. Pathak of State Bank of India, Rajiv Mehrishi then of the
Ministry of Finance, Debanshu Mukherjee and Arghya Sengupta of Vidhi Centre
for Legal Policy, Badri Narayan of Third Eye Capital, Venky Panchepagesan of
IIM Bangalore, Suyash Rai, Shubho Roy and Bhargavi Zaveri of the Macro /
Finance Group at NIPFP, Raghuram Rajan of the Reserve Bank of India, A. K.
Ralhan of CERSAI, Shailendra Singh and Ravinder of the Dept. of Industrial Policy
and Promotion, M. S. Sahoo of Competition Commission of India, U. K. Sinha of
SEBI, S. Ramann of the Comptroller and Auditor General, Justice Srikrishna,
Surendra Nath Tripathi of the Ministry of MSME, Mahesh Uttamchandani and
Sagar Shiv Shankar of the World Bank, Harsh Vardhan of Bain Capital, Mukulita
Vijayawargiya at the Ministry of Law and Justice, Dina Wadia of J. Sagar
Associates and Pradeep K. Yadav of the University of Oklahoma.
384 BLRC REPORT
A critical input were the policy papers and policy notes produced by Anjali
Anchayil, Debanshu Mukherjee and Priyadarshini Thyagarajan of Vidhi Centre
for Legal Policy, Anirudh Burman, Pratik Dutta, and Shubho Roy of the Macro /
Finance group at NIPFP, Saurabh Jayawant of IFMR Capital, K. P. Krishnan of the
Dept. of Land Resources, Venky Panchapagesan and Madalsa Venkatesan of IIM
Bangalore, S. Ramann of the Comptroller and Auditor General of India, Renuka
Sane of the Indian Statistical Institute Delhi, Aparna Ravi of the Centre for Law and
Policy Research, Richa Roy of AZB Partners, Rajeswari Sengupta of the Indira
Gandhi Institute for Development Research and Anjali Sharma of the Finance
Research Group at IGIDR.
The Committee would like to acknowledge the benefit of suggestions from
various experts outside of India, including Kristin van Zweiten of the University
of Oxford, Clive Barnard and Kevin Pullen of Herbert Smith Freehills LLP, Pramod
Rao of Citigroup, and during meetings supported by the British High Commission
and organised by Angela Lynch, Anita Nandi and Frederick Packham of the City
of London. The Committee is also thankful to the British High Commission, the
City of London, and the India-UK Financial Partnership chaired by Uday Kotak
and Sir Gerry Grimstone for their support of the research which fed into this
work.
All this yielded a rich accumulation of knowledge and information that has
been synthesised into the two volumes that form the report of the Committee.
This was translated into drafts for the two volumes by a team of young economists
and lawyers, who came together driven by their conviction about the need of a
robust insolvency and bankruptcy legal framework for India. The Committee
owes tremendous thanks to the ceaseless enthusiasm and tireless efforts of
Debanshu Mukherjee, Anirudh Burman, Ashika Dabholkar, Pratik Dutta, Shreya
Garg, Richa Roy, Renuka Sane, Rajeswari Sengupta, Suharsh Sinha, Anjali
Sharma, Priyadarshini Thyagarajan, and Shivangi Tyagi. Shubho Roy provided
the principles of quality drafting of law, and Chirag Anand and Nikhil Saboo
provided the support of technology to facilitate their work in designing and
drafting the structure and form presented in the reports of the committee. The
Committee is also grateful for the diligent work of Ms. Mukulita Vijayawargiya
and her team at the Legislative Department of the Ministry of Law and Justice
for further building on these drafts.
Finally, I would like to thank the silent and efficient administrative support from
the team at the Ministry of Finance. Without the efforts of C.K.G. Nair, Gaurav
Masaldan, Praveen Trivedi, Mrityunjay Jha, A. K. Sinha, and Revant Gupta, our
work would have been a lot less smooth and a lot more tiresome.
The drafting of a single, comprehensive, and internally consistent bankruptcy
BLRC REPORT 385
law was a complex undertaking, with few precedents in India’s history. Without
the immense efforts of all the persons named above, it could not have been done
at the required level of quality. I am grateful for the selfless dedication to the
project that came from everyone who came in contact with it.
Dr. T. K. Viswanathan
386 BLRC REPORT
2. Executive summary
Difficulties of the present arrangements

The limited liability company is a contract between equity and debt. As long as
debt obligations are met, equity owners have complete control, and creditors
have no say in how the business is run. When default takes place, control is
supposed to transfer to the creditors; equity owners have no say.
This is not how companies in India work today. For many decades, creditors have
had low power when faced with default. Promoters stay in control of the company
even after default. Only one element of a bankruptcy framework has been put
into place: to a limited extent, banks are able to repossess fixed assets which
were pledged with them.
While the existing framework for secured credit has given rights to banks, some
of the most important lenders in society are not banks. They are the dispersed
mass of households and financial firms who buy corporate bonds. The lack of
power in the hands of a bondholder has been one (though not the only) reason
why the corporate bond market has not worked. This, in turn, has far reaching
ramifications such as the difficulties of infrastructure financing.
Under these conditions, the recovery rates obtained in India are among the
lowest in the world. When default takes place, broadly speaking, lenders seem
to recover 20% of the value of debt, on an NPV basis.
When creditors know that they have weak rights resulting in a low recovery rate,
they are averse to lend. Hence, lending in India is concentrated in a few large
companies that have a low probability of failure. Further, secured credit dominates,
as creditors rights are partially present only in this case. Lenders have an emphasis
on secured credit. In this case, credit analysis is relatively easy: It only requires
taking a view on the market value of the collateral. As a consequence, credit
analysis as a sophisticated analysis of the business prospects of a firm has
shriveled.
Both these phenomena are unsatisfactory. In many settings, debt is an efficient tool
for corporate finance; there needs to be much more debt in the financing of Indian
firms. E.g. long-dated corporate bonds are essential for most infrastructure projects.
The lack of lending without collateral, and the lack of lending based on the prospects
of the firm, has emphasised debt financing of asset-heavy industries. However,
some of the most important industries for India’s rapid growth are those which are
more labour intensive. These industries have been starved of credit.
BLRC REPORT 387
Problem statement
While lending to limited liability companies is particularly important, lending also
takes place to individuals, sole proprietorships, partnerships, limited liability
partnerships, etc. A comprehensive and consistent treatment of bankruptcy and
insolvency for all these is an essential ingredient of India’s rise into a mature
market economy. The draft ‘Indian Financial Code’, by Justice Srikrishna’s Financial
Sector Legislative Reforms Commission, covers the failure of financial firms. The
present Committee has taken up the task of drafting a single unified framework
which deals with bankruptcy and insolvency by persons other than financial
firms.
At present, there are multiple contradictory elements in the legal arrangements.
The Committee has chosen the strategy of repealing many existing laws on
bankruptcy and insolvency, and writing a clean modern law which is a simple,
coherent, and effective answer to the problems under Indian conditions.
The key economic question in the bankruptcy process

When a firm (referred to as the corporate debtor in the draft law) defaults, the
question arises about what is to be done. Many possibilities can be envisioned.
One possibility is to take the firm into liquidation. Another possibility is to negotiate
a debt restructuring, where the creditors accept a reduction of debt on an NPV
basis, and hope that the negotiated value exceeds the liquidation value. Another
possibility is to sell the firm as a going concern and use the proceeds to pay
creditors. Many hybrid structures of these broad categories can be envisioned.
The Committee believes that there is only one correct forum for evaluating such
possibilities, and making a decision: a creditors committee, where all financial
creditors have votes in proportion to the magnitude of debt that they hold. In the
past, laws in India have brought arms of the government (legislature, executive
or judiciary) into this question. This has been strictly avoided by the Committee.
The appropriate disposition of a defaulting firm is a business decision, and only
the creditors should make it.
The Insolvency Resolution Process (IRP)

For some firms, the right answer after default is to take the firm into liquidation.
But there may be many situations in which a viable mechanism can be found
through which the firm is protected as a going concern. To the extent that this can
be done, the costs imposed upon society go down, as liquidation involves the
destruction of the organisational capital of the firm.
Currently, the Companies Act 2013 permits the following parties to file an
application before NCLT for a declaration that company is sick- (a) the company,
388 BLRC REPORT
(b) any secured creditor, (c) the Central Government, (d) the Reserve Bank of India,
(e) State Government, (f) public financial institution, (g) a State level institution, (h)
a scheduled bank. Even under the SARFAESI, 2002, debt enforcement rights are
available for secured creditors only. However, the Committee proposes that any
creditor, whether financial or operational, should be able to initiate the insolvency
resolution process (IRP) under the proposed code. It may be noted that operational
creditors will include workmen and employees whose past payments are due.
The Committee also recommends that a resolution plan must necessarily provide
for certain protections for operational creditors. This will empower the workmen
and employees to initiate insolvency proceedings, settle their dues fast and
move on to some other job instead of waiting for their dues for years together as
is the case under the existing regime.
The strategy proposed by the Committee runs as follows, when default takes
place an Insolvency Resolution Process (IRP) can be initiated and run for as long
as 180 days. The IRP is overseen by an ‘Insolvency Professional’ (IP) who is given
substantial powers.
The IP makes sure that assets are not stolen from the company, and initiates a
careful check of the transactions of the company for the last two years, to look for
illegal diversion of assets. Such diversion of assets would induce criminal charges.
While the IRP is in process, the law enshrines a ‘calm period’ where creditors
stay their claims. This gives a better chance for the firm to survive as a going
concern. For the 180 days for which the IRP is in operation, the creditors committee
will analyse the company, hear rival proposals, and make up its mind about what
has to be done.
When 75% of the creditors agree on a revival plan, this plan would be binding on
all the remaining creditors. If, in 180 days, no revival plan achieves support of
75% of the creditors, the firm goes into liquidation.
In limited circumstances, if 75 % of the creditors committee decides that the
complexity of a case requires more time for a resolution plan to be finalised, a
one-time extension of the 180 day period for up to 90 days is possible with the
prior approval of the adjudicator. This is starkly different from certain present
arrangements which permit the debtor / promoter to seek extensions beyond
any limit.
This approach has many strengths:
• Asset stripping by promoters is controlled after and before default.
• The promoters can make a proposal that involves buying back the
company for a certain price, alongside a certain debt restructuring.
BLRC REPORT 389
• Others in the economy can make proposals to buy the company at a

certain price, alongside a certain debt restructuring.
• All parties knows that if no deal is struck within the stipulated period, the
company will go into liquidation. This will help avoid delaying tactics. The
inability of promoters to steal from the company, owing to the supervision
of the IP, also helps reduce the incentive to have a slow lingering death.
• The role of the adjudicator will be on process issues: To ensure that all
financial creditors were indeed on the creditors committee, and that 75%
of the creditors do indeed support the resolution plan.
Liquidation
Firms go into liquidation through one of two paths. Sometimes, the creditors
committee can quickly decide that the right path is to go into liquidation.
Alternatively, 180 days can go by and no one plan is able to obtain the required
supermajority in the creditors committee. In this case also, liquidation is triggered.
Liquidation will be led by a regulated insolvency professional, the liquidator. In
this process, the assets of the company are held in trust. The rights of secured
creditors are respected: they have the choice of taking their collateral and selling
it on their own. The recoveries that are obtained are paid out to the various
claimants through a well- defined waterfall.
The Committee has recommended to keep the right of the Central and State
Government in the distribution waterfall in liquidation at a priority below the
unsecured financial creditors in addition to all kinds of secured creditors for
promoting the availability of credit and developing a market for unsecured
financing (including the development of bond markets). In the long run, this would
increase the availability of finance, reduce the cost of capital, promote
entrepreneurship and lead to faster economic growth. The government also will
be the beneficiary of this process as economic growth will increase revenues.
Further, efficiency enhancement and consequent greater value capture through
the proposed insolvency regime will bring in additional gains to both the economy
and the exchequer.
Bankruptcy and insolvency for persons

Firms can be liquidated, but individuals cannot. Many concepts in the IRP, such as
obtaining a new owner with a revival plan, are not applicable for individuals.
Hence, a simplified process is envisaged for default by individuals. This includes
a concept of a ‘Fresh Start’ where specified loans of a limited class of borrowers
can be waived, but this information about individual bankruptcy will reflect in the
records of the individual.
390 BLRC REPORT
Speed is of essence
Speed is of essence for the working of the bankruptcy code, for two reasons. First,
while the ‘calm period’ can help keep an organisation afloat, without the full
clarity of ownership and control, significant decisions cannot be made. Without
effective leadership, the firm will tend to atrophy and fail. The longer the delay,
the more likely it is that liquidation will be the only answer. Second, the liquidation
value tends to go down with time as many assets suffer from a high economic
rate of depreciation.
From the viewpoint of creditors, a good realisation can generally be obtained if
the firm is sold as a going concern. Hence, when delays induce liquidation, there
is value destruction. Further, even in liquidation, the realisation is lower when
there are delays. Hence, delays cause value destruction. Thus, achieving a high
recovery rate is primarily about identifying and combating the sources of delay.
This same idea is found in FSLRC’s treatment of the failure of financial firms. The
most important objective in designing a legal framework for dealing with firm
failure is the need for speed.
Identifying and addressing the sources of delay

Before the IRP can commence, all parties need an accurate and undisputed set of
facts about existing credit, collateral that has been pledged, etc. Under the present
arrangements, considerable time can be lost before all parties obtain this
information. Disputes about these facts can take up years to resolve in court. The
objective of an IRP that is completed in no more than 180 days can be lost owing
to these problems.
Hence, the Committee envisions a competitive industry of ‘information utilities’
who hold an array of information about all firms at all times. When the IRP
commences, within less than a day, undisputed and complete information would
become available to all persons involved in the IRP and thus address this source
of delay.
The second important source of delays lies in the adjudicatory mechanisms. In
order to address this, the Committee recommends that the National Company
Law Tribunals (for corporate debtors) and Debt Recovery Tribunals (for individuals
and partnership firms) be provided with all the necessary resources to help them
in realising the objectives of the Code.
The need for a regulator

Globally, insolvency professionals (IPs) are an important component of a well-
functioning insolvency and bankruptcy system. This requires the construction of
BLRC REPORT 391
a regulated industry. The Committee envisions the establishment of multiple

private self-regulatory IP agencies functioning under the oversight of a regulator.
These IP agencies would oversee the functioning of IPs and help in the
development of the industry.
Information utilities would be a competitive industry. Their oversight would also
require a regulator.
Many procedural details about the working of the bankruptcy process should not
be encoded into the primary law, as they need to evolve rapidly based on
experience and based on changes in the economy. The draft law envisages
regulations which spell out these details. These regulations would be drafted by
a regulator.
Finally, there are certain statistical system functions which would also be performed
by a regulator.
The Committee recommends the establishment of an Insolvency and Bankruptcy
Board of India (referred to as the Board/Regulator in this report) which would
perform the abovementioned functions.
From ideas to implementation

The Committee has drafted a Volume 1, which is a committee report showing
rationale and arguments, and a Volume 2 which is a draft law. The legislative
track of the implementation will comprise taking this draft law through the
consultative process, and public debate, prior to its being tabled in Parliament.
The Committee recognises that setting up the institutions contemplated in this
report may require some time. Therefore, the Committee recommends that until
such time as the regulator is not established, its powers and functions may be
exercised by the Central Government. This can be addressed by providing for
appropriate transitional provisions in the Code.
Domestic versus international perspective

The Committee has taken up, and attempted to comprehensively solve, the
question of bankruptcy and insolvency insofar as it is a purely domestic question.
This is an important first milestone for India.
The next frontier lies in addressing cross-border issues. This includes Indian
financial firms having claims upon defaulting firms which are global, or global
financial persons having claims upon Indian defaulting firms.
Some important elements of internationalisation - foreign holders of corporate
bonds issued in India, or borrowing abroad by an Indian firm - are dealt with by
the present report. However, there are many other elements of cross-border
392 BLRC REPORT
insolvency which are not addressed by this report. Examples of these problems
include thousands of Indian firms have become multinationals, and Indian
financial investors that lend to overseas persons.
The Committee proposes to take up this work in the next stage of its deliberations.
Conclusion
The failure of some business plans is integral to the process of the market economy.
When business failure takes place, the best outcome for society is to have a rapid
re-negotiation between the financiers, to finance the going concern using a new
arrangement of liabilities and with a new management team. If this cannot be
done, the best outcome for society is a rapid liquidation. When such arrangements
can be put into place, the market process of creative destruction will work smoothly,
with greater competitive vigor and greater competition.
India is in the process of laying the foundations of a mature market economy. This
involves well drafted modern laws, that replace the laws of the preceding 100
years, and high performance organisations which enforce these new laws. The
Committee has endeavored to provide one critical building block of this process,
with a modern insolvency and bankruptcy code, and the design of associated
institutional infrastructure which reduces delays and transaction costs.
We hope that the implementation of this report will increase GDP growth in India
by fostering the emergence of a modern credit market, and particularly the
corporate bond market. GDP growth will accelerate when more credit is available
to new firms including firms which lack tangible capital. While many other things
need to be done in achieving a sound system of finance and firms, this is one
critical building block of that edifice.
BLRC REPORT 393
3. Economic thinking
3.1 Why reforms?

Financial sector reforms have given a transformation of the equity, currency and
commodity markets. However, despite considerable policy efforts, the credit
markets continue to malfunction (Banerji et al., 2012; Sane and Thomas, 2012;
Rajan, 2008; Percy Mistry Committee Report, 2007). One key factor that holds
back the credit market is the mechanism for resolving insolvency, or the failure of
a borrower (debtor) to make good on repayment promises to the lender (creditor).
The existing laws have several problems and are enforced poorly.
Table 3.1 shows that numerous government committees have worked on this
subject, for many decades. The present project builds on their work and thinking.
There is, however, a key difference between this project and its predecessors. In
the past, bankruptcy reforms had involved treating the broad landscape of the
bankruptcy process as given, and undertaking certain incremental changes. The
present Committee has the mandate of comprehensive reform, covering all
aspects of bankruptcy of individuals and non- financial firms. Here the term “non-
financial firms” includes but is not restricted to limited liability corporations. The
only element which is not covered in the present work is the recent work of the
Financial Sector Legislative Reforms Commission (FSLRC), which has a
comprehensive solution for the failure of financial firms.
In this chapter, we go back to the basics to understand the problem of resolving
insolvency, and from there to design an approach to solve it in India. Section 3.2
articulates economic principles for a sound set of arrangements of bankruptcy
and insolvency resolution. In Section 3.3, we describe the working of present
arrangements in India, and the difficulties faced with these present arrangements.
Section 3.5 shows the benefits for India from undertaking bankruptcy and
insolvency reform.
Table 3.1: Government committees on bankruptcy reforms
Year Committee Outcome
1964 24th Law Commission Amendments to the Provincial
Insolvency Act, 1920.
1981 Tiwari Committee (Department SICA, 1985.
of Company Affairs)
1991 Narasimham Committee I (RBI) RDDBFI Act, 1993.
394 BLRC REPORT
1998 Narasimham Committee II (RBI) SARFAESI Act, 2002.

1999 Justice Eradi Committee (GO I) Companies (Amendment) Act, 2002,
Proposed repeal of SICA.
2001 L. N. Mitra Committee (RBI) Proposed a comprehensive bankruptcy
code.
2005 Irani Committee (RBI) Enforcement of Securities Interest and
Recovery of Debts Bill, 2011. (With
amendments to RDDBFI and SARFAESI).
2008 Raghuram Rajan Committee Proposed improvements to credit
(Planning Commission) infrastructure.
2013 Financial Sector Legislative Re- Draft Indian Financial Code which
forms Commission (Ministry of includes a ‘Resolution Corporation’ for
Finance) resolving distressed financial firms.
3.2 The role that insolvency and bankruptcy plays in debt financing
Creditors put money into debt investments today in return for the promise of fixed
future cash flows. But the returns expected on these investments are still uncertain
because at the time of repayment, the seller (debtor) may make repayments as
promised, or he may default and does not make the payment. When this happens,
the debtor is considered insolvent. Other than cases of outright fraud, the debtor
may be insolvent because of
• Financial failure – a persistent mismatch between payments by the
enterprise and receivables into the enterprise, even though the business
model is generating revenues, or
• Business failure – which is a breakdown in the business model of the
enterprise, and it is unable to generate sufficient revenues to meet
payments.
Often, an enterprise may be a successful business model while still failing to
repay its creditors. A sound bankruptcy process is one that helps creditors and
debtors realise and agree on whether the entity is facing financial failure and
business failure. This is important to allow both parties to realise the maximum
value of the business in the insolvency.
As an example, consider a risky business venture which is financed using Rs.50
of equity and Rs.50 of debt. Once the project is built out, it proves to have a net
present value, or NPV, of future cash flows of Rs.40 only. A sound bankruptcy
process would work as follows. The equity value of the enterprise would be
BLRC REPORT 395
wiped out and the existing shareholders would lose control. If a new equity
investor can be found who is willing to pay Rs.40, this could be paid to the debt
investors. At Rs.40, they would face a relatively small loss of Rs.10 and get an
80% recovery rate. The new equity shareholder would get a debt-free enterprise
with an NPV of future cash flows worth Rs.40.
The above steps describe a creditors and debtors agreeing on a financial
rearrangement to preserve the economic value of the business. In the conventional
understanding, the enterprise in the above example would be treated as a ‘failed
business model’ and be closed down. The value that could have been earned of
keeping it as a going concern is lost. Through a financial rearrangement, the
enterprise remains a going concern.
Such outcomes are particularly important for enterprises that provide services
and have little built up assets which can be sold by the creditor to recover value.
For example, the procedure in the above example was used after many telecom
firms, worldwide, bid values which were too high for spectrum allocation. Sound
bankruptcy processes induced a financial rearrangement, but the business models
of the firms ran uninterruptedly through the entire rearrangement, preserving
economic value for their creditors despite defaulting on promised payment.
3.2.1 Assessing viability

The economic problem presented above is called the assessment of viability of
an enterprise or a project. An enterprise that is facing financial failure is considered
a viable enterprise: there is a possible financial rearrangement that can earn the
creditors a higher economic value than shutting down the enterprise. On the
other hand, where the cost of the financial arrangement required to keep the
enterprise going will be higher than the NPV of future expected cash flows. In this
case, the enterprise is considered unviable or bankrupt and is better shut down
as soon as possible.
However, the assessment of viability is difficult. There is no fixed or unique
approach to answer this question. In an ideal environment, the assessment will
be the outcome of a collective decision. Here, creditors and debtor will negotiate
a potential new financial arrangement. Each of them will balance all available
information, including all future possibilities of the economic environment under
which the enterprise will operate, as well as all alternative investment
opportunities available to the creditors as well as the debtor.
In the negotiation, the debtor is likely to request that creditors restructure their
liabilities so as to ease the liquidity stress of future repayments. The proposal
may contain the need for fresh financing, either from existing creditors or from
new financiers. In exchange, the debtor may offer to reorganise the operations of
396 BLRC REPORT
the enterprise by giving up some rights in management or to change the size of

operations. Creditors will evaluate the proposal and offer modifications on their
own. If both sides see the possibility of value in the enterprise, these negotiations
will settle on a new financial arrangement. On the other hand, if they cannot
agree on a solution, it will be optimal for the creditors to sell the assets available
and shut down the enterprise.
3.2.2 Conflicts in creditor-debtor negotiation

The outcome of such a negotiation is optimal when the interests of the debtor and
creditors are aligned to maximise economic value of the enterprise. However,
there are several elements in the negotiation that increase rather than prevent
conflict between the two.
One conflict arises because the asymmetry of information between the creditor
and the debtor. Since the debtor will always have more information about the
enterprise than the creditor, they tend to have the upper-hand in the negotiation.
Another conflict arises in the approach of the creditors and debtor to preserving
the time value of their own investment. The creditor has the incentive to close out
her investment quickly so as to avail of alternative investment opportunities. The
debtor has the incentive to hold on to the assets, either to benefit from potentially
higher returns by deploying the assets in more risky ventures or to benefit by
stripping asset value.
Conflicts tend to be exacerbated when there are multiple levels and types of
liabilities in an enterprise. In addition to the conflict between creditor and debtor,
there can be conflict between different types of creditors as well. Enterprises
have financial creditors by way of loan and debt contracts as well as operational
creditors such as employees, rental obligations, utilities payments and trade
credit. When the debtor contracts these liabilities, there is an understanding
about a priority structure of payout to the claims. While this will not be disputed
when the debtor is solvent, multiple claims will give rise to conflict during
insolvency.
3.2.3 What can a sound bankruptcy law achieve?

Improved handling of conflicts between creditors and the debtor
The previous section lays out the types of conflicts between creditors and the
debtor. The role of the law, in a formal bankruptcy process, is to lay down rules of
procedure into which the conflict is channeled, and results in a solution. A sound
legal framework provides procedural certainty about the process of negotiation,
in such a way as to reduce problems of common property and reduce information
asymmetry for all economic participants.
BLRC REPORT 397
Avoid destruction of value

A sound legal process also provides flexibility for parties to arrive at the most
efficient solution to maximise value during negotiations. If the enterprise is
insolvent, the payment failure implies a loss which must be borne by some of the
parties involved. From the viewpoint of the economy, some firms undoubtedly
need to be closed down. But many firms possess useful organisational capital.
Across a restructuring of liabilities, and in the hands of a new management team
and a new set of owners, some of this organisational capital can be protected.
The objective of the bankruptcy process is to create a platform for negotiation
between creditors and external financiers which can create the possibility of
such rearrangements.
Drawing the line between malfeasance and business failure
Under a weak insolvency regime, the stereotype of “rich promoters of defaulting
entities” generates two strands of thinking: (a) the idea that all default involves
malfeasance and (b) The idea that promoters should be held personally financially
responsible for defaults of the firms that they control. However, the following
perspectives are useful in the context of enterprises:
1. Some business plans will always go wrong. In a growing economy, firms
make risky plans of which some plans will fail, and will induce default. If
default is equated to malfeasance, then this can hamper risk taking by
firms. This is an undesirable outcome, as risk taking by firms is the
wellspring of economic growth. Bankruptcy law must enshrine business
failure as a normal and legitimate part of the working of the market
economy.
2. Limited liability corporations are an important mechanism that fosters
risk taking. Historically, limited liability corporations were created with
the objective of taking risk. If liability was unlimited, fewer risky projects
would be undertaken. With limited liability, shareholders have the ability
to walk away, allowing for greater exploration of alternative business
models. Since exploration benefits society through risk taking, it is
important to protect the concept of limited liability, which bankruptcy law
must aim to do.
3. Control of a company is not divine right. When a firm defaults on its debt,
control of the company should shift to the creditors. In the absence of swift
and decisive mechanisms for achieving this, management teams and
shareholders retain control after default. Bankruptcy law must address
this.
4. The illegitimate transfer of wealth out of companies by controlling
398 BLRC REPORT
shareholders is malfeasance. When a company is sound, corporate

governance ensures that the benefits obtained by every share are equal.
When a company approaches default, managers may anticipate this
ahead of time and illicit transfers of cash may take place. The bankruptcy
process must be designed with a particular focus on blocking such
behavior, which is undoubtedly malfeasance.
Above all, bankruptcy law must give honest debtors a second chance, and penalise
those who act with mala fide intentions in default.
Clearly allocate losses in macroeconomic downturns
Bankruptcy reforms are particularly important in avoiding extreme problems in a
business cycle downturn or a financial crisis. A business cycle downturn or a
financial crisis will lead to certain firms failing. With a sound bankruptcy
framework, these losses are clearly allocated to some people. Loss allocation
could take place through taxes, inflation, currency depreciation, expropriation, or
wage or consumption suppression. These could fall upon foreign creditors, small
business owners, savers, workers, owners of financial and non-financial assets,
importers, exporters. In turn, this creates predictability about the allocation of the
losses.
Without this predictability, events of downturns and crisis lead to greater instability
in the economy. The sectors or groups that fear such loss allocation will politically
mobilise to place the losses upon someone else. Responses to this uncertainty
can include capital flight, reduced investment because of increased saving, shorter
credit lending and higher interest rates.This political economy is eliminated by
the creation of two institutional mechanisms: the bankruptcy Code proposed by
this Committee and the Resolution Corporation which covers the losses of potential
failure of all financial firms recommended by the FSLRC. The predictability
generated by these two institutional arrangements will increase the robustness
of the economy when faced with a downturn. In turn, downturns will become
shorter and shallower. The ability of the economy to sustain high levels of credit,
safely, will be enhanced and the economy can move on faster after a downturn
or a crisis.
3.3 Present arrangements in India

The present structure of the bankruptcy and insolvency process in India is elaborate
and multi-layered (Sharma and Thomas, 2015). The legislative process is covered
over multiple laws, and adjudication takes place in multiple fora. For example,
Sengupta and Sharma, 2015 notes that while the Companies Act, 1956, contains
the main legal provisions for corporate insolvency, the legislative framework is
completed through three major laws, two ancillary laws and one special provision.
BLRC REPORT 399
Individual bankruptcy and insolvency

The Presidency Towns Insolvency Act, 1909, covers the insolvency of individuals
and of partnerships and associations of individuals in the three erstwhile
Presidency towns of Chennai, Kolkata and Mumbai. The 1861 Indian High Courts
Act led to the setting up of the High Court system in place of the Presidency towns
Supreme Courts, which also has jurisdiction over insolvency related matters in
the Presidency towns.
The Provincial Insolvency Act 1920, is the insolvency law for individuals in areas
other than the Presidency towns, deals with insolvency of individuals, including
individuals as proprietors. Section 3(1) of the Provincial Insolvency Act, 1920,
allows the State Government to empower subordinate courts to hear insolvency
petitions, with district courts acting as the court of appeal.
Corporate bankruptcy and insolvency
Companies are registered under the Companies Act, 2013. Limited liability
partnerships are registered under the Limited Liability Partnership Act, 2008. The
Micro, Small and Medium Enterprise Development Act, 2006, registers MSMEs
but does not yet have provisions for resolving insolvency and bankruptcy.
Partnership firms are registered under the Indian Partnerships Act, 1932, which is
administered by the Ministry of Corporate Affairs. But, like for sole proprietorships,
insolvency and bankruptcy resolution of partnership firms is treated the same as
under individual insolvency and bankruptcy law.
The present bankruptcy and insolvency framework is knit together from debt
recovery laws as well as collective action laws to resolve insolvency and
bankruptcy (Ravi, 2015).
Debt recovery
A civil court of relevant jurisdiction is the basic mechanism that is available to any
creditor for debt recovery. If the loan is backed by security, this is enforced as a
contract under the law.
The Recovery of Debt Due to Banks and Financial Institutions Act (RDDBFI Act) 1993
gives banks and a specified set of financial institutions greater powers to recover
collateral at default. The law provides for the establishment of special Debt
Recovery Tribunals (DRTs) to enforce debt recovery by these institutions only. The
law also provides for the Debt Recovery Appellate Tribunals (DRATs) as the appellate
forum.
Under certain specified conditions, the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act (SARFAESI) 2002 enables
400 BLRC REPORT
secured creditors to take possession of collateral without requiring the involvement

of a court or tribunal. This law provides for actions by secured creditors to take
precedence over a reference by a debtor to BIFR. The DRT is the forum for appeals
against such recovery.
Collective resolution of bankruptcy and insolvency
Companies Act 2013 contains provisions for rescue and rehabilitation of all
registered entities in Chapter XIX, and Liquidation in Chapter XX. However, these
provisions have not been notified.
The law for rescue and rehabilitation remains the Sick Industrial Companies
(Special Provisions) Act (SICA), 1985, although it applies exclusively to industrial
companies. Under SICA, a specialised Board of Industrial and Financial
Reconstruction (BIFR) assesses the viability of the industrial company. Once it has
been assessed to be unviable, BIFR refers the company to the High Court for
liquidation. The SICA was repealed in 2003, but the repealing act could not be
notified as the National Company Law Tribunal proposed by a 2002 amendment
to the Companies Act, 1956 got entangled in litigation.
The current legal framework for bankruptcy resolution (called winding up of a
company on inability to pay debt) continues to be the Companies Act 1956,
pending provisions in Companies Act 2013 which are yet to be notified.
Out-of-court mechanisms set up after 2000 for banks to restructure loan contracts
with debtors include Corporate Debt Restructuring (CDR) and more recently, the
Joint Lending Forum and the Strategic Debt Restructuring Forum (Ministry of Finance,
2015).
3.3.1 Difficulties of the present arrangement

The current state of the bankruptcy process for firms is a highly fragmented
framework. Powers of the creditor and the debtor under insolvency are provided
for under different Acts. Given the conflicts between creditors and debtors in the
resolution of insolvency as described in Section 3.2.2, the chances for consistency
and efficiency in resolution are low when rights are separately defined. It is
problematic that these different laws are implemented in different judicial fora.
Cases that are decided at the tribunal/BIFR often come for review to the High
Courts. This gives rise to two types of problems in implementation of the resolution
framework. The first is the lack of clarity of jurisdiction. In a situation where one
forum decides on matters relating to the rights of the creditor, while another
decides on those relating to the rights of the debtor, the decisions are readily
appealed against and either stayed or overturned in a higher court. Ideally, if
economic value is indeed to be preserved, there must be a single forum that
BLRC REPORT 401
hears both sides of the case and make a judgement based on both. A second
problem exacerbates the problems of multiple judicial fora. The fora entrusted
with adjudicating on matters relating to insolvency and bankruptcy may not have
the business or financial expertise, information or bandwidth to decide on such
matters. This leads to delays and extensions in arriving at an outcome, and
increases the vulnerability to appeals of the outcome.
The uncertainty that these problems gives rise to shows up in case law on matters
of insolvency and bankruptcy in India. Judicial precedent is set by “case law”
which helps flesh out the statutory laws. These may also, in some cases,
pronounce new substantive law where the statute and precedent are silent.
(Ravi, 2015) reviews judgments of the High Courts on BIFR cases, the DRTs and
DRATs, as well as a review of important judgments of the Supreme Court that
have had a significant impact on the interpretation of existing insolvency
legislation. The judgments reviewed are those after June 2002 when the SARFAESI
Act came into effect. It is illustrative of both debtor and creditor led process of
corporate insolvency, and reveals a matrix of fragmented and contrary outcomes,
rather than coherent and consistent, being set as precedents.
In such an environment of legislative and judicial uncertainty, the outcomes on
insolvency and bankruptcy are poor. World Bank (2014) reports that the average
time to resolve insolvency is four years in India, compared to 0.8 years in Singapore
and 1 year in London. Sengupta and Sharma, 2015 compare the number of new
cases that file for corporate insolvency in the U.K., which has a robust insolvency
law, to the status of cases registered at the BIFR under SICA, 1985, as well as those
filed for liquidation under Companies Act, 1956. They compare this with the
number of cases files in the UK, and find a significantly higher turnover in the
cases that are filed and cleared through the insolvency process in the UK. If we
are to bring financing patterns back on track with the global norm, we must
create a legal framework to make debt contracts credible channels of financing.
This calls for a deeper redesign of the entire resolution process, rather than
working on strengthening any single piece of it. India is not unusual in requiring
this. In all countries, bankruptcy laws undergo significant changes over the period
of two decades or more. For example, the insolvency resolution framework in the
UK is the Insolvency Act of 1986, which was substantially modified with the
Insolvency Act of 2000, and the Enterprise Act of 2002. The first Act for bankruptcy
resolution in the US that lasted for a significant time was the Bankruptcy Act of
1989. This was followed by the Act of 1938, the Reform Act of 1978, the Act of 1984,
the Act of 1994, a related consumer protection Act of 2005. Singapore proposed
a bankruptcy reform in 2013, while there are significant changes that are being
proposed in the US and the Italian bankruptcy framework this year in 2015. Several
402 BLRC REPORT
of these are structural reforms with fundamental implications on resolving

insolvency.
Box 3.1: The present legislative framework for bankruptcy and insolvency
• Individual bankruptcy and insolvency is legislated under two acts: the
Presidency Towns Insolvency Act, 1909, and the Provincial Insolvency
Act, 1920.
High courts have the jurisdiction over insolvency related matters in the
erstwhile Presidency towns of Chennai, Kolkata and Mumbai. Subordinate
courts hear cases of individual insolvency in all other areas, with the
district court being the court of appeal.
• Corporate bankruptcy and insolvency is covered in a complex of multiple
laws, some for collective action and some for debt recovery. These are:
1. Companies Act, 2013 - Chapter on collective insolvency resolution
by way of restructuring, rehabilitation, or reorganisation of entities
registered under the Act. Adjudication is by the NCLT. This chapter
has not been notified.
2. Companies Act, 1956 - deals with winding up of companies.
No separate provisions for restructuring except through Mergers &
Acquisitions (M&A) and voluntary compromise.
Adjudication is under the jurisdiction of the High Court.
3. SICA, 1985 - deals with restructuring of distressed ‘industrial’ firms.
Under this Act, the Board of Industrial and Financial Reconstruction
(BIFR) assesses the viability of the industrial company, and refers an
unviable company to the High Court for liquidation.
SICA 1985 stands repealed, but the repealing enactment is yet to be
notified.
Principles for a new Code
What are the principles on which to base a new design of bankruptcy and
insolvency resolution? One useful benchmark is the UNCITRAL Legislative Guide
on Insolvency, which states the following objectives for a collective insolvency
resolution regime (UNCITRAL, 2005):
1. Provision of certainty in the market to promote efficiency and growth.
2. Maximisation of value of assets.
3. Striking a balance between liquidation and reorganisation.
BLRC REPORT 403
4. Ensuring equitable treatment of similarly situated creditors.

5. Provision of timely, efficient and impartial resolution of insolvency.
6. Preservation of the insolvency estate to allow equitable distribution to
creditors.
7. Ensuring a transparent and predictable insolvency law that contains
incentives for gathering and dispensing information.
8. Recognition of existing creditor rights and establishment of clear rules for
ranking priority of claims.
9. Establishment of a framework for cross-border insolvency.
These principles are derived from three core features that most well developed
bankruptcy and insolvency resolution regimes share: a linear process that both
creditors and debtors follow when insolvency is triggered; a collective mechanism
for resolving insolvency within a framework of equity and fairness to all
stakeholders to preserve economic value in the process; a time bound process
either ends in keeping the firm as a going enterprise, or liquidates and distributes
the assets to the various stakeholders. These features are common across
widespread differences in structure and content, present either through statutory
provisions or their implementation in practice (Mukherjee, Thyagarajan, and
Anchayil, 2015; Ravi, 2015; Sengupta and Sharma, 2015).
These features ensure certainty in the process, starting from what constitutes
insolvency, and the processes to be followed to resolve the insolvency, or the
process to resolve bankruptcy once it has been determined. Done correctly, such
a framework can incentivise all stakeholders to behave rationally in negotiations
towards determination of viability, or in bankruptcy resolution. In turn, this will
lead to shorter times to recovery and better recovery under insolvency, and a
greater certainty about creditors rights in developing a corporate debt market.
3.4 Features of the proposed Code

The Committee deliberated on the objectives and the design for a new insolvency
and bankruptcy framework.
3.4.1 Objectives
The Committee set the following as objectives desired from implementing a new
Code to resolve insolvency and bankruptcy:
1. Low time to resolution.
2. Low loss in recovery.
404 BLRC REPORT
3. Higher levels of debt financing across a wide variety of debt instruments.

The performance of the new Code in implementation will be based on measures
of the above outcomes.
3.4.2 Principles driving the design

The Committee chose the following principles to design the new insolvency and
bankruptcy resolution framework:
I. The Code will facilitate the assessment of viability of the enterprise at a
very early stage.
1. The law must explicitly state that the viability of the enterprise is a
matter of business, and that matters of business can only be
negotiated between creditors and debtor. While viability is assessed
as a negotiation between creditors and debtor, the final decision
has to be an agreement among creditors who are the financiers
willing to bear the loss in the insolvency.
2. The legislature and the courts must control the process of resolution,
but not be burdened to make business decisions.
3. The law must set up a calm period for insolvency resolution where
the debtor can negotiate in the assessment of viability without fear
of debt recovery enforcement by creditors.
4. The law must appoint a resolution professional as the manager of
the resolution period, so that the creditors can negotiate the
assessment of viability with the confidence that the debtors will not
take any action to erode the value of the enterprise.
The professional will have the power and responsibility to monitor and
manage the operations and assets of the enterprise. The professional will
manage the resolution process of negotiation to ensure balance of power
between the creditors and debtor, and protect the rights of all creditors.
The professional will ensure the reduction of asymmetry of information
between creditors and debtor in the resolution process.
II. The Code will enable symmetry of information between creditors and
debtors.
5. The law must ensure that information that is essential for the
insolvency and the bankruptcy resolution process is created and
available when it is required.
6. The law must ensure that access to this information is made available
BLRC REPORT 405
to all creditors to the enterprise, either directly or through the

regulated professional.
7. The law must enable access to this information to third parties who
can participate in the resolution process, through the regulated
professional.
III. The Code will ensure a time-bound process to better preserve economic
value.
8. The law must ensure that time value of money is preserved, and
that delaying tactics in these negotiations will not extend the time
set for negotiations at the start.
IV. The Code will ensure a collective process.
9. The law must ensure that all key stakeholders will participate to
collectively assess viability.
The law must ensure that all creditors who have the capability and the
willingness to restructure their liabilities must be part of the negotiation
process. The liabilities of all creditors who are not part of the negotiation
process must also be met in any negotiated solution.
V. The Code will respect the rights of all creditors equally.
10. The law must be impartial to the type of creditor in counting their
weight in the vote on the final solution in resolving insolvency.
VI. The Code must ensure that, when the negotiations fail to establish viability,
the outcome of bankruptcy must be binding.
11. The law must order the liquidation of an enterprise which has been
found unviable. This outcome of the negotiations should be protected
against all appeals other than for very exceptional cases.
VII. The Code must ensure clarity of priority, and that the rights of all
stakeholders are upheld in resolving bankruptcy.
12. The law must clearly lay out the priority of distributions in bankruptcy
to all stakeholders. The priority must be designed so as to incentivise
all stakeholders to participate in the cycle of building enterprises
with confidence.
13. While the law must incentivise collective action in resolving
bankruptcy, there must be a greater flexibility to allow individual
action in resolution and recovery during bankruptcy compared with
the phase of insolvency resolution.
406 BLRC REPORT
3.4.3 Design of the proposed Code

A unified Code
The Committee recommends that there be a single Code to resolve insolvency
for all companies, limited liability partnerships, partnership firms and individuals.
In order to ensure legal clarity, the Committee recommends that provisions in all
existing law that deals with insolvency of registered entities be removed and
replaced by this Code.
This has two distinct advantages in improving the insolvency and bankruptcy
framework in India. The first is that all the provisions in one Code will allow for
higher legal clarity when there arises any question of insolvency or bankruptcy.
The second is that a common insolvency and bankruptcy framework for individual
and enterprise will enable more coherent policies when the two interact. For
example, it is common practice that Indian banks take a personal guarantee
from the firm’s promoter when they enter into a loan with the firm. At present,
there are a separate set of provisions that guide recovery on the loan to the firm
and on the personal guarantee to the promoter. Under a common Code, the
resolution can be synchronous, less costly and help more efficient recovery.
Insolvency trigger that place least cost on the adjudicating authority
The Committee recommends that both the debtor and creditors must have the
ability to trigger insolvency. In either case, the key principle driving the form of the
trigger is for least cost of determination on the bankruptcy and insolvency
Adjudicator. The Committee recommends that the debtor can trigger the process
after default using detailed disclosure about the state of the entity, accompanied
by a Statement of Truth. The creditor can trigger using evidence of a default. Any
misrepresentation in the trigger can result in severe monetary penalties for the
creditors, and may also result in criminal penalties for debtors.
A strong base of information utilities to support efficient implementation
The Committee recognises that asymmetry of information is a critical barrier to
fair negotiations, or ensuring swiftness of the process. The Committee
recommends the creation of a regulated information utility that will make available
all relevant information to all stakeholders in resolving insolvency and bankruptcy.
Role of the Adjudicator focused on matters of procedure
The Committee recommends that the role of the Adjudicator needs to be carefully
laid out so as to both minimise undue burden on the judiciary while simultaneously
ensure the fairness and efficiency of insolvency resolution.
This is done through two sets of recommendations from the Committee. The
BLRC REPORT 407
Committee recommends that the Adjudicator will focus on ensuring that all parties
adhere to the process of the Code. For matters of business, the Committee
recommends that Adjudicator will delegate the task of assessing viability to a
regulated Insolvency Professional (Burman and Roy, 2015). The Adjudicator will
be more directly involved in the resolution process once it is determined that the
debt is unviable and that the entity or individual is bankrupt.
A regulated industry of insolvency professionals
The Committee recommends that an industry of regulated professionals be
enabled under the Code (Burman and Roy, 2015). These Insolvency Professionals
will be delegated the task of monitoring and managing matters of business by
the Adjudicator, so that both creditors and the debtor can take comfort that
economic value is not eroded by actions taken by the other. The role of the
professional is also critical to ensure a robust separation of the Adjudicator’s role
into ensuring adherence to the process of the law rather than on matters of
business, while strengthening the efficiency of the process.
A regulator to ensure malleability and efficiency
The Committee recognises that it is not possible, at present, to fully design every
last procedural detail about the working of the bankruptcy process. Further, the
changing institutional environment in India will imply that many procedural details
will need to rapidly evolve in the future. Hence, the Committee has taken the
strategy of establishing a regulator to be called the Insolvency and Bankruptcy
Board which will be given clear regulation-making powers about certain elements
of procedural detail. The Code will be careful to not engage in excessive delegation
of legislative power. In each case where regulation-making power is given to the
Board, there will be a clear statement of objectives, which would create a natural
accountability mechanism in the future.
The Board will establish an information system through which data about the
performance of the bankruptcy process will be continuously collected. The data
so collected may be used to identify areas where regulations need refinement,
and will generate evidence about the extent to which modifications of the
regulations result in improvements of the bankruptcy process.
The Committee envisages two regulated industries: an industry of information
utilities, and an industry of insolvency professionals. In these areas, the Board
will perform legislative, executive and quasi-judicial functions.
All in all, the Committee visualises that the Board will perform four functions:
(a) Regulation of information utilities;
(b) Regulation of insolvency professionals and insolvency professional
agencies;
408 BLRC REPORT
(c) Regulation-making in specific areas about procedural detail in the

insolvency and bankruptcy process and
(d) data collection, research and performance evaluation.
Resolution phase I: A calm period for insolvency resolution
The Committee recommends two phases of resolution, once a procedure of
default resolution has been triggered. The first phase is a collective negotiation to
rationally to assess the viability of the debt. The Committee recommends that the
assessment must be ensured a calm period where the interests of the creditors
can be protected, without disrupting the running of the enterprise.
This calm period is implemented in two orders passed by the Adjudicator. One is
an order passing a moratorium on all recovery actions or filing of new claims
against the enterprise. The other is by putting in place an insolvency professional
who has the powers to take over the management and operations of the enterprise.
Resolution phase II: Bankruptcy as an outcome of insolvency resolution
The Committee recommends that bankruptcy is an outcome of resolving
insolvency. If the debtor and creditors agree to change the terms of their contract
during the negotiations to keep the enterprise as a going concern, then the
enterprise is viable, and the insolvency resolution process is closed. If the
negotiations fail to deliver a solution, then the enterprise is unviable, and is
deemed bankrupt. The Code then specifies that bankruptcy resolution is
immediately triggered.
Swift and efficient bankruptcy resolution
Since bankruptcy comes as an outcome of transparent and supervised
negotiations, the Committee recommends that the liquidation is protected against
appeals to stay for all but exceptional cases of fraud. In continuation of the principle
of not burdening the judiciary unduly, the process will be managed by a regulated
Insolvency Professional called the Liquidator. The Adjudicator will have oversight
over the process, as well as the role of adjudicating on matters of conflicts in the
distribution of the recoveries, or any other appeal during the process.
3.5 How India will benefit from reforms of the bankruptcy process
A better functioning bankruptcy process would yield benefits in numerous
directions:
Misplaced emphasis on secured credit At present, many lenders are comfortable
giving loans against (some) collateral. The concept of looking at the cash flows of
a company and giving loans against that is largely absent. This has created an
emphasis on debt financing for firms who have fixed assets. Many important
BLRC REPORT 409
business opportunities, which do not have much tangible capital, tend to face
financing constraints.
Value destruction in corporate distress when a firm has secured credit, and
fails on its obligations, the present framework (SARFAESI) emphasises secured
creditors taking control of the assets which were pledged to them. This tends to
disrupt the working of the company. The present frameworks do not allow for the
possibility of protecting the firm as a going concern while protecting the cash
flows of secured creditors.
Poor environment for credit While SARFAESI has given rights to creditors on
secured credit, the overall recovery rates remain low particularly when measured
on an NPV basis. This creates a bias in favour of lending to a small set of very safe
borrowers, and an emphasis on using more equity financing which is expensive.
This makes many projects unviable. Better access to credit for new entrepreneurs
will create greater economic dynamism by increasing competition.
Industrial disease The lack of rapid resolution of corporate distress leads to slow
multi-year processes of industrial disease. Bankruptcy reform would allow a
faster process through which society would put capital and labour to work in a
business, and rapidly change course when that business did not work. This will
foster more risk taking and better use of capital. The capital and labour that is
blocked in industrial disease will be reduced.
Problems of infrastructure developers The example above (of firms being
protected as a going concern, with equity capital being wiped out, and being sold
at a lower firm value to a new equity shareholder) applies to many situations in
the field of infrastructure in India today.
Failure of auctions At present, in many public sector settings, auctions tend to go
wrong because some bidders propose values which are too low. The bidders
know that in the absence of an efficient bankruptcy process, they will not be
displaced from their concession agreement, and they will have the ability to
renegotiate terms from a position of strength. An efficient bankruptcy code would
yield a better answer: When a project gets into trouble, it would be resolved using
the formal bankruptcy process.
Corporate bond market development The natural financing strategy in all
countries is for large companies (e.g. the top 500 firms) to obtain all their debt
financing from the bond market. This channel has been choked off in India, partly
owing to the fact that corporate bond holders obtain particularly bad recovery
rates under the present arrangements. Bankruptcy reform would yield higher
recovery rates for corporate bond holders, and remove one barrier that impedes
the corporate bond market. It is important to emphasise, however, that this is not
the only barrier which holds back the corporate bond market.
410 BLRC REPORT
4. Institutional infrastructure
4.1 Insolvency and Bankruptcy Board of India

4.1.1 The case for a regulator
The case for the establishment of the Insolvency and Bankruptcy Board of India
(referred to as the Board) rests on four strands of work that are required to be
done.
Malleability
The insolvency and bankruptcy process must, at all times, be stated precisely so
that all participants are confident in their expectations. This requires detailed
rules of procedure. At the same time, India faces an important issue of malleability.
Alongside the evolution of the Indian economy, and as experience is obtained in
the early years of the new law, there is a role to modify many of the details of the
process.
Legal precision can be obtained by encoding all procedural details into the primary
law. However, this implies that every modification requires amending the law in
Parliament. This may introduce delays in the process of adapting the law in
response to changing conditions. Alternatively, malleability can be obtained by
encoding high level principles into the primary law, and creating a regulator
which is given the power to write regulations which express questions of detail.
On the issue of malleability, there is a legislative function (issuing regulations).
However, there is no executive or quasi-judicial function.
Two regulated industries
The framework envisaged by the Committee involves two regulated industries:
information utilities and insolvency professionals and agencies. In each of these
areas, there is a role for a regulator (akin to the Securities and Exchanges Board
of India, SEBI) which combines legislative, executive and quasi-judicial functions,
and hasa close engagement with the working of the industry. This profile of work
is best placed in a regulator rather than in a department of government.
Statistical system
Fine grained data about the working of the bankruptcy process in India needs to
be captured, released into the public domain. This task can also be placed upon
the regulator. This data should, in turn, be used as an input for the work of the
regulator on drafting of regulations about details of the bankruptcy process, and
the regulation of information utilities and of insolvency professionals.
BLRC REPORT 411
4.1.2 Establishing the Insolvency Regulator

As with all regulators, the Committee believes that the Code and the delegated
legislation made under it must address two sets of questions with respect to the
functioning of the Board. Thus the drafting instructions in this chapter relate both
to the Code and the delegated legislation thereunder.
On substantive content, the questions are:
1. What are the objectives of the Board?
2. What are the functions of the Board?
3. What powers would it have in order to pursue these obj ectives and
functions?
4. How can accountability be achieved?
On regulatory governance, the following are the questions:
1. What is the governance arrangement in terms of the composition and the
management of the Board?
2. How will the legislative function of the Board work?
3. How will the executive function of the Board work?
4. How will the quasi-judicial function of the Board work?
5. What is the framework for penalties which will be utilised when orders
are issued?
6. What will be the forum/process for appeals against the regulation making
process or appeals against the orders of the Board?
7. How will the Board be financed? How will oversight of the budget come
about?
Clarity on these questions is required in order to draft a law that induces a high
performance agency. We now turn to these questions. The strategy adopted here
draws upon the best practices for the working of regulators, along the lines that
have been designed in Srikrishna, 2013.
4.1.3 Objectives of the regulator
The objective of the Board is to utilise all legislative, executive and quasi-judicial
functions so as to achieve a well functioning bankruptcy process in India. This
would include features of:
1. High recovery rates in an NPV sense;
412 BLRC REPORT
2. Low delays from start to end;

Box 4.1 : Drafting instructions for the research and
advisory functions of the Board
1. The Board will develop standardised process for collecting, storing
and retrieving records on bankruptcy and insolvency resolution.
2. The Board will have the power to require that information be
submitted into these systems. All information filings will be
electronic only.
3. The Board will form independent advisory councils for ongoing
discussions on issues related to bankruptcy and insolvency
resolution, which will recommend policy actions for improving
the functioning of the bankruptcy and insolvency resolution system.
3. Sound coverage of the widest possible class of claims e.g. bank loans,
corporate bonds, etc.;
4. A perception in the minds of persons in the economy that India has a swift
and competent bankruptcy process.
4.1.4 Functions of the regulator
The functions of the Board lie in four areas:
1. At various points in the remainder of this report, and at various points in
the proposed draft law, procedural details are to be specified by the
regulations. It is the responsibility of the Board to create the intellectual
capabilities for understanding these questions, and operating a formal
regulation-making process that results in high quality regulations. Through
this, malleability in the operation of the bankruptcy and insolvency process
will be achieved.
2. With regard to the two regulated industries (information utilities and
insolvency professionals/agencies), the Board will have legislative,
executive and quasi-judicial functions.
3. The Board will create and publicly release a fine-grained database about
the working of every bankruptcy and insolvency transaction in the country.
This will include case histories of every transaction, and the working of
each insolvency professional.
4.1.5 Statistical and research functions
Comprehensive case the Board will be the record-keeper of all cases of insolvency
and bankruptcy resolution. histories will be maintained for all cases, and
BLRC REPORT 413
comprehensive information about the working of insolvency professionals will be

maintained. Towards this, the Board will create systems for data collection, storage
and retrieval. The Board will have the power to require filings of information. Subject
to confidentiality requirements, the Board will make this data available for research
activities, with the aim that this will feed back into the discussion on policy on the
legal framework for bankruptcy and insolvency over time. This will then build fact
based motivation for ongoing reforms to this framework that will keep track of the
changes in the economic and business environment.
Box 4.2: Drafting instructions on the availability of closed insolvency
and bankruptcy records of legal entities
1. The records of insolvency and bankruptcy of all legal entities covered
under the Code will be maintained and recorded by the Board after the
cases are closed.
2. The Board will make available a part of this information to the public as
a record of the state of insolvency and bankruptcy in India. The format
and content of the public information may be specified by the Board by
regulations, and will at least include the following:
(a) The date on which information is first entered;
(b) The name of the presiding member of the Tribunal;
(c) Information about the debtor;
(d) Information about the financial creditors of the debtor;
(e) The type of process: insolvency or liquidation;
(f) The start date of the proceeding;
(g) The end date of the proceeding;
(h) The current status of the proceeding;
(i) The details of the insolvency professional;
(j) The solution for an insolvency resolution case; and
(k) The details of the liquidation outcome.
One of the bottlenecks to understanding the state of insolvency and bankruptcy
resolution in India has been a pervasive lack of information even about historical
cases. The basic information about the event of default of any generic firm is not
readily accessible, let alone instances of insolvency or bankruptcy resolution.
Given the current fragmented legal framework, this is scattered across multiple
tribunals and courts, with no centralised point of access.
414 BLRC REPORT
The Committee visualises that an important output from the new Code will be
that all records of insolvency and bankruptcy events will be stored and maintained
to be used as a measure of the state of insolvency and bankruptcy resolution in
India.
Once the cases handled by the adjudicator are closed, the Committee
recommends that the full documentation of the cases are transferred for use,
storage and maintenance to the Board .This will be critical for the Board in its role
as the supervisor of the industry of insolvency professionals, as well as the
regulator for the overall insolvency and bankruptcy processes in the country.
The Committee recommends that the content as well as the manner of access
about these records be specified by the Board. Further, the Committee states that
the access to these records should be made publicly available, with clear channels
and formats through which it can be accessed. Drafting instructions for the
availability of records of past cases are presented in Box 4.2.
4.1.6 Accountability mechanisms
Accountability of the regulator will be achieved through the following elements:
1. The rule of law. The establishment of sound processes for the legislative,
executive and quasi-judicial functions will establish an environment of
the rule of law, which creates accountability in and of itself.
The formal steps required of the regulation-making process will create
checks and balances and avoid the abuse of power.
2. Judicial review of the orders of the regulator will create checks and
balances.
3. Reporting of statistical information, in particular about the four objectives
defined in Section 4.1.3, will create accountability.
In performing its reporting function, the Board should periodically report to the
government and to the public on suitable measures (such as the time taken for
granting an approval, measurement of efficiency of internal administration
systems, costs imposed on regulated entities and rates of successful prosecution
for violation of laws) that demonstrate the fulfillment of Regulatory objectives or
the assessment of the Board’s performance. To this effect, the Board will set up
measurement systems for assessing its own performance. This will create greater
transparency and accountability in the Board’s functioning. The measurement of
activities of the Board also needs to be tied with the financial resources spent by
the Board to carry out those activities.
BLRC REPORT 415
Box 4.3: Drafting instructions for rules on performance

reporting by the Board
The allocation of resources by the Board is intrinsically tied to the performance
of the Board. Therefore the Committee recommends the following principles
for the measurement of the Board’s performance and financial reporting:
1. The Board should create two annual reports:
(a) Audited report which is comparable to traditional financial
reporting; and
(b) Performance report which incorporates global best practice
systems of measuring the efficiency of the regulatory system.
2. The performance report should use modern systems of measuring
each activity of the Board as objectively as possible.
3. Performance systems must require the Board to create and publish
performance targets.
4. All performance measures must be published in the annual report.
5. Performance measurement system should be reviewed every three
years to incorporate global best practices.
6. Every three years, an expert review of the overall working of India’s
insolvency and bankruptcy process should take place.
4.1.7 Governance arrangement

The Committee believes that there are sound reasons for favouring financial and
operational independence in regulatory agencies. It allows the regulator to create
capacity and capability to perform its functions. It also reduces the scope for
political interference in the actual transactions of the regulator. With this in mind,
the Committee recommends that the Board be set up as a statutory body.
4.1.8 Process for legislative functions
Regulation-making must follow a structured process that allows all stake-holders
to be fully informed of and participate in the regulation-making process. The
Committee has therefore identified the process that the Board should follow
while making regulations and the mechanisms for the judicial review of legislative
powers exercised by regulators.
416 BLRC REPORT
Box 4.4 : Drafting instructions for the provisions on the

structure of the Board
1. The Code will set out the legal entity, form and organisational structure
of the Board.
2. The Code will define the composition of the Board and the roles and
responsibilities of the Board. The Code will set out the process for
selection of the board of the Board. This will be done to ensure that the
board is comprised of experts who are selected in a transparent manner.
3. The Code or delegated legislation may define the terms of appointment
of the members of the Board including conditions of service, duration of
employment, terms of resignation, removal and suspension of such
members.
4. Rules made under the Code may define the minimum standards for the
functioning of the Board. This may include principles governing conduct
of board meetings, frequency of board meetings, method of taking and
recording decisions, legitimacy of decisions and conflicts of interest.
5. A mechanism for monitoring the compliance of the Board may be laid
down in rules made under the Code. This will be through a special
committee of the board, a review committee.
6. The process for setting up advisory councils to advise the Board will
also need to be prescribed. This will include the composition, and
functions of such councils.
The Code or delegated legislation made under the Code must determine the
process to be followed for the formulation of regulations, starting with the manner
in which the drafting of regulations is to be initiated. The Committee recommends
that the regulation-making process should be directly overseen by the board of
the Board. Effective public participation in the regulation-making process is
necessary to ensure that subsidiary legislation are responsive to the actual
requirements of the economy. It will also help to check and improve the
information and analysis done by the Board. The Committee recommends that
the process to be followed to carry out consultations and receive public comments
should be prescribed by rules framed under the Code. The expected overall
impact is that regulations will become more responsive to the needs of the
financial system.
In a system of principles-based provisions that are to be interpreted and applied
by the Board, there is a genuine need for clarifications and explanations. This
would require the Board to have the power to publish general guidelines to
BLRC REPORT 417
insolvency professionals and information utilities explaining laws and regulations.

The Committee believes that allowing the Board to publish guidelines of this
nature will constitute an important step in reducing uncertainty about the approach
that the Board may take. The mechanism of publishing guidelines should not be
used to (in effect) to make regulations without complying with the procedural
requirements laid down for regulation-making. For this reason, guidelines will
be deemed to be clarificatory in nature. Violations of guidelines alone will not
empower the Regulator to initiate enforcement action against regulated entities.
4.1.9 Process for executive functions
The executive function includes inspections, investigations, enforcement of orders
and processing of complaints. The exercise of supervision and monitoring powers
is fundamental to effective enforcement. The Committee believes that the overall
approach of the Code should be to provide for strong executive powers, balanced
with greater transparency and accountability, to prevent abuse. This will reduce
allegations of possible bias and scope of arbitrariness to the minimum.
It is also important to ensure that there is no overlap in the legislative and executive
functions of the Board. The executive should not be allowed to issue instructions
of a general nature to all regulated entities or a class of regulated entities. Such
instructions should only be possible after the full regulation-making process has
been followed.
Box 4.5: Issuing regulations and public consultations by the Board
1. The process for issuing regulations may be set out in rules made under
the Code. This will include:
(a) The process for issuing regulations, the details to be captured in
the regulations and a cost-benefit analysis;
(b) The process for public consultation, specifying a designated time
for receiving comments from the public;
(c) The process for incorporating public comments in regulation
making; and
(d) The process for issuing final regulations.
2. There must be a process for emergency regulation making where the
Board may be temporarily exempted from some of the requirements of
the due process of regulation making. This will include the conditions,
as well the process and time lines for the Board to comply with when
issuing regulations in such cases.
418 BLRC REPORT
4.1.10 Process for quasi-judicial function

In exercise of their supervisory and enforcement powers, regulators need to
assess whether or not regulated entities have adequately complied with the
provisions of the law and in case of any detected breach, they have the power to
impose appropriate penalties. These wide ranging executive powers given to
regulators necessarily need to be balanced with proper systems governing the
application of administrative law. Therefore, the Committee recommends that
the exercise of quasi-judicial (administrative law) functions by the Board needs to
be carried out within the bounds of a sound legal framework that ensures the
separation of administrative law powers from other powers of the Regulator.
The Committee recognises that actions taken by regulators can impose significant
penalties and burden on regulated entities. Therefore, the rule of law requires
that a clear judicial process be available to persons who seek to challenge
regulatory actions.
Box 4.7: Drafting instructions for rules on the exercise of
executive functions by the Board
The Code will define the process for exercise of the executive functions of the
Board. These include the process for:
1. Disposal of applications;
2. Grant of approvals, including licensing or registration;
3. Inspections, which may be routine or special;
4. Investigation of violations of regulations;
5. Proving violation of regulations to the judicial officers (by leading
evidence);
6. In the case of successful prosecution before the administrative law
department, suggesting enforcement actions; and
7. Compounding of offences with the involvement of the administrative
law department.
Box 4.8: Drafting instructions for rules on the exercise of

administrative law functions by the Board
1. The Board will designate one of its members as an administrative law
member.
2. The Board may create a special class of officers called administrative
law officers.
BLRC REPORT 419
3. The Code will define the process to be followed by the Board to exercise
its administrative law function including the process to be followed in
investigations.
4. The Board may, through regulations. lay down the procedure to be
followed for the discharge of administrative law functions by the Board.
4.1.11 Framework for penalties
When the Board is convinced that the accused is guilty of a violation, he needs a
framework through which punishments can be imposed. The Code provides that
the Board may impose monetary penalties or cancel or suspend the registration
of the insolvency professional, insolvency professional agency or information
utility as the case may be.
4.1.12 Appeals against actions of the regulator
The Committee deliberated on which forum would be better equipped to decide
appeals from the Board’s orders. The Committee concluded that appeals from
the Board’s orders should lie before the NCLAT. An aggrieved party should have
a statutory right to appeal to the Supreme Court from the order of the NCLAT.
4.1.13 Obtaining resources and spending them
Insolvency and bankruptcy regulation, especially for individuals, is likely to be a
resource intensive function. The Board should be equipped with the capability
and the resources required to perform a wide range of functions and is responsible
for building and maintaining the credibility of the bankruptcy and insolvency
resolution process. There is need for financial independence which allows the
Board to have the required flexibility and human resources that are more difficult
to achieve within a traditional government setup. This will enable the Board to
hold assets independently and to develop its own recruitment criteria and
processes, which are necessary for mobilising required human resources.
The Committee believes that as a good practice the Board should fund itself from
the fees collected from its regulated entities. However, the industry of regulated
professionals and entities focused on bankruptcy and insolvency will develop
over time, while the Board will require to perform its supervisory functions from
the start. As a result, there will be a period in which the Board will need to be
funded by the government.
In the light of this, the Committee recommends that the Board be funded through
a mix of government support and fees collected from regulated entities for the
first five years after it comes into being.
The Committee also believes that government involvement in the financial matters
420 BLRC REPORT
of the Board should be minimal. Government must only control the salary and
perquisites of the members of the Board.
Section 4.1.3 has defined the four objectives of the Board. Under the oversight of
the board, each of these should be numerically measured. The budget process
for each year should consist of a process between the management and the
board, where the board proposes a set of targets and the management estimates
the scale of expenditure required to achieve these targets.
Box 4.9: Judicial review of the administrative law
functions of the Board
1. The substantive content of regulations should not be subjected to judicial
review.
2. Process violations in the issuance of regulations should be the subject
of appeal.
3. Orders against regulated persons (either information utilities or
insolvency professionals) should be subject to appeal.
4. This appeal should lie before National Company Law Appellate Tribunal
(NCLAT).
Box 4.10: Finances of the Board

1. The Board will be funded through a mix of fees levied on the IPs and IUs
and Central Government grants. However, apart from this, the
involvement of the Central Government in the financial matters of the
Board should be minimal.
2. The Board will specify, through regulations, the scale of fees it will levy
and collect as well as the manner of collection.
3. The Board should base its budget, on performance of the Board for the
previous year in fulfilling its objectives, and the desired targets for the
coming year.
4.2 The Bankruptcy and Insolvency Adjudicator

Resolution under the Code involves two different phases, for both firms or
individuals. The first phase is where insolvency is resolved, and is referred to as
the Insolvency Resolution Process or IRP. If a solution is not reached within a
specified time, the second phase of resolving bankruptcy or insolvency is triggered.
It referred to as liquidation for entities and bankruptcy for individuals. In both
these phases, insolvency professionals are involved in managing the processes
although their roles differ from one phase to another. The Code provides various
BLRC REPORT 421
powers to the insolvency professional at each stage which can be used subject
to approval from the adjudicator. The adjudicator is akin to a bankruptcy judge
whose main objective is to ensure that the insolvency or bankruptcy resolution is
being performed within the framework laid down by the law. Chapters 5 and 6
explain this entire process in detail, along with the role of the adjudicator. The
following section describes the institutional arrangement necessary for the proper
functioning of this adjudication institution.
4.2.1 Tribunals
Jurisdiction on firm insolvency and liquidation Under Companies Act, 2013,
the National Company Law Tribunal (NCLT) has jurisdiction over the winding up
and liquidation of companies. NCLAT has been vested with the appellate
jurisdiction over NCLT. Similarly, the Limited Liability Partnership Act, 2008 also
confers jurisdiction to NCLT for dissolution and winding up of limited liability
partnerships, while appellate jurisdiction is vested with NCLAT. The Committee
recommends continuing with this existing institutional arrangement. NCLT should
have jurisdiction over adjudications arising out of firm insolvency and liquidation,
while NCLAT will have appellate jurisdiction on the same.
Jurisdiction on individual insolvency and bankruptcy Current Indian laws on
individual insolvency are archaic and do not treat individual insolvency at par
with corporate insolvency in this regard. Jurisdiction over these matters are vested
with High Courts (for Calcutta, Madras and Bombay) or District Courts (for the rest
of India).
In the proposed Code, the goals of bankruptcy laws for individuals overlap
considerably with the goals of corporate insolvency and liquidation. Therefore,
there are economies of scale in having the same judicial institution adjudicating
the resolution process for firms and individuals. However, unlike firm insolvency
and liquidation, the physical infrastructure of the adjudication institutions for
individual insolvency need to be much more wide spread across the entire
country to facilitate access to justice for the common Indian. Currently, NCLT is a
work in progress and it may take some time for NCLT benches to have a wide
scale presence at national level. In contrast, at present Debt Recovery Tribunal
(DRT) benches have much wider presence across the country. There-fore, the
Committee recommends that DRT should be vested with the jurisdiction over
individual insolvency and bankruptcy matters.
Jurisdiction on insolvency regulator The Code establishes an insolvency
regulator (the Board) for regulating insolvency professionals, insolvency
professional agencies and information utilities. This regulator may have an
administrative law wing to perform the quasi-judicial functions of the regulator.
These orders are envisaged to be in the nature of regulatory orders vis-a-vis
422 BLRC REPORT
regulated entities. Aggrieved persons should be able to appeal against such

orders. A statutory right to appeal is consequently necessary for this purpose. The
Committee recommends that the NCLAT should have appellate jurisdiction over
orders passed by the insolvency regulator.
4.2.2 Territorial jurisdiction
The jurisdiction of NCLT and DRT could be determined based on the place where
the cause of action arose or the location of the debtor. The current Indian law on
corporate bankruptcy has caused much confusion on this issue. Under the
Companies Act, the location of the registered office of the debtor company
determines which company court will have jurisdiction. In contrast, under the
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002, the DRT within whose jurisdiction the cause of action arises,
wholly or in part, may also have jurisdiction. Since a part of the cause of action
arises at the location of the bank branch where the loan transaction had taken
place, the DRT which has jurisdiction over the bank branch is an eligible forum for
an original application by the bank. This has lead to much cross-litigation and
conflicting orders between the company court and the DRT. To avoid this confusion
it is essential that in corporate bankruptcy matters the jurisdiction of the NCLT
should be determined according to the location of the registered office of the
debtor firm. In individual insolvency matters, the jurisdiction of the DRT must be
determined according to the place where the debtor actually and voluntarily
resides or carries on business or personally works for gain.
The proposed Code envisages the NCLT as an exclusive forum for firm insolvency
and liquidation adjudication, while DRT is envisaged as an exclusive forum for
individual insolvency and bankruptcy adjudication.
The jurisdiction of any civil court or authority should be specifically barred where
NCLT or DRT has jurisdiction. No injunction can be granted by any court or authority
in respect of any action that the NCLT/NCLAT or DRT/DRAT is empowered to take
under the Code.
Further, following from current law, once a liquidation or bankruptcy order has
been made, leave of the NCLT or DRT would be necessary to proceed with any
pending suit or proceeding or to file any fresh suit or proceeding by or against the
debtor firm or individual. This will ensure the sanctity of the liquidation or
bankruptcy process. The NCLT or DRT should also have jurisdiction to entertain
and dispose of any pending or fresh suit or legal proceeding by or against the
debtor company or individual; question of priorities or any other question, whether
of law or facts, in relation to the liquidation or bankruptcy. By bringing all litigations
that may have a monetary impact on the economic value of debtor firm or
BLRC REPORT 423
individual’s assets within the jurisdiction of the NCLT, the liquidation or bankruptcy
process will be made streamlined and efficient. However, proceedings before
the Supreme Court or the High Court must not be within the purview of this
clause.
Box 4.11: Drafting instructions on jurisdiction of the Tribunals
1. The DRT having territorial jurisdiction over the place where an individual
actually and voluntarily resides or carries on business or personally
works for gain can entertain an application under this Code regarding
such individual.
2. The NCLT having territorial jurisdiction over the place where the
registered office of a firm is located can entertain an application under
this Code regarding such firm.
3. No civil court or authority will have jurisdiction to entertain any suit or
proceedings in respect of any matter on which the NCLT/NCLAT or DRT/
DRAT has jurisdiction.
4. No injunction must be granted by any court or authority in respect of any
action taken or to be taken by the NCLT/NCLAT or DRT/DRAT pursuant
to the Code.
5. Once a bankruptcy order has been made, the DRT will have jurisdiction
to entertain or dispose of:
(a) any suit or proceeding by or against the individual debtor;
(b) any claim made by or against the individual debtor;
(c) any question of priorities or any other question whatsoever,
whether of law or facts, arising out of or in relation to bankruptcy
of the individual debtor.
6. Once a liquidation order has been made, the NCLT will have jurisdiction
to entertain or dispose of:
(a) any suit or proceeding by or against the firm;
(b) any claim made by or against the firm, including claims by or
against any of its branches in India;
(c) any question of priorities or any other question whatsoever,
whether of law or facts, arising out of or in relation to the firm.
7. The NCLAT will have jurisdiction to hear appeals arising from an order
passed by the insolvency regulator.
424 BLRC REPORT
8. An appeal from an order of the insolvency regulator under this Code

must be filed within forty five days before the NCLAT.
9. The NCLAT may, if it is satisfied that a person was prevented by sufficient
cause from filing an appeal within forty five days, allow the appeal to be
filed within a further period not exceeding fifteen days.
4.2.3 Procedural rules
The Central Government must issue procedural rules governing the proceedings
before the NCLT and the DRT. These rules should also include provision for charging
fees. The scale of fees may be decided taking into account the budgetary
requirements of the institution without compromising with the ease of accessibility
to the adjudication system. A procedure committee with representation from the
users of the adjudication mechanism should review the functioning of these
rules and provide feedback to the tribunals every year based on which the Central
Government may consider improving them. The President, the Presiding Officer
or the Chairperson, as the case may be, may also issue practice directions to
supplement the working of the rules of their respective tribunal. Ideally, with time,
these practice directions should be incorporated into the rules to make the rules
more comprehensive and detailed.
Delegated legislation relating to the NCLT and the DRT may provide for some
procedural matters aimed at improving the transparency and accountability of
the tribunals. These include allowing audio-visual recording of all proceedings,
publishing of records of the proceedings and all other necessary information.
4.2.4 Essential features
In this section, the Committee lays down best practices, which may be followed
by the NCLT and the DRT (“Tribunals”) to ensure efficient case management and
adjudication. These may be codified through suitable delegated legislation.
Maximising efficiency of the Tribunals would require maximum use of technology
and minimum human intervention. This should start with the filing process itself.
Currently, most courts and tribunals have a physical paper-based filing system.
Even those which have moved to ‘e-filing’ have merely computerised the present
processes.1 Consequently, a lot of time is wasted at the registry at the filing stage
because of formatting defects, errors in payment of fees etc. Instead of
computerising the present filing process, the Tribunals should re-engineer the
1. Simply computerising the existing processes of courts will not give us better functioning
courts. Projects must start with the mandate of building a world class court, not a mandate of
computerising the court. See, Datta and Shah, 2015
BLRC REPORT 425
entire filing process with a view to making it a paperless system. Essentially, this
would require an e-filing software which will provide a web-based format for the
drafting and filing of petitions and applications before the tribunal along with
features for online payment of the necessary fees. The web-based e-filing formats
should be continuously updated to improve standardisation of the petitions and
applications filed as well as impose strict page or word limits to ensure better
drafting quality of the pleadings.2 Softcopies of the necessary annexures could
also be uploaded through the e-filing system.3
On final submission of any petition or application through the e-filing system, a
text- searchable portable document format of the petition or application should
be generated along with a unique case number. The ultimate objective of the e-
filing system should be to allow parties to file their petitions, applications and
supporting documents online 24x7 from any location without any physical
interaction with the tribunal and its staff. Figure 4.1 and Figure 4.2 show the log-in
pages of the e-filing systems of the Dubai International Financial Centre (DIFC)
court and the Federal Court of Australia respectively.
2. Limitations on number of pages and words that can be used in pleadings are found in
procedural rules of foreign courts. For example, see Rules 28.1(e), 32(a)(7) United States
Supreme Court, 2013
3. In US, most bankruptcy courts permit or require documents to be filed electronically, except
those filed by pro se debtors. See, Sobel, 2007 ; in Australia, the County Court of Victoria
allows for e-filing of most documents via electronic submission. The County Court Rules of
Procedure in Civil Proceedings 2008 expressly provide for the same. For details, see, County
Court of Victoria, 2014
426 BLRC REPORT
Figure 4.1: DIFC Court log-in page

After filing of a matter, the status, relevant documentation, schedules of hearings
etc. should be automatically managed by a case management software. No
matter should be placed before the judge unless the predefined prerequisites
are satisfied. For example, judicial time should not be used unless pleadings
necessary for the judicial hearing are complete.4 The Tribunal administration
must ensure this with the aid of the case management system.
The rules of the Tribunal should also provide for pre-hearing conferences to help
ascertain if all the prerequisites for a judicial hearing have been met.5 A judicial
hearing should focus on the exact disagreement on facts and the legal arguments
mentioned in the pleadings.6
4. The Supreme Court has observed that ‘pleadings are foundation of the claims of parties. Civil
litigation is largely based on documents. It is the bounden duty and obligation of the trial judge
to carefully scrutinize, check and verify the pleadings and the documents filed by the parties.
This must be done immediately after civil suits are filed.’ See, Supreme Court of India, n.d.
5. Reportedly, the Law Ministry is considering introduction of the system of pre-trial hearings
on the lines of the UK and the US pursuant to deliberations of the National Mission for Justice
Delivery and Legal Reforms. See, Press Trust of India, 2015
6. The Supreme Court has suggested that ‘at the time of filing of the plaint, the trial court should
prepare complete schedule and fix dates for all the stages of the suit, right from filing of the
written statement till pronouncement of judgment and the courts should strictly adhere to the
said dates and the said time table as far as possible. If any interlocutory application is filed then
the same be disposed of in between the said dates of hearings fixed in the said suit itself so that
the date fixed for the main suit may not be disturbed. ’ See, Supreme Court of India, n.d.
7. In US, many appellate judges require their law clerks to prepare a memorandum on each
case (a ‘bench memo’) for the judge to review before hearing oral arguments. In some circuits,
the law clerk for one judge may prepare a memorandum to be circulated among the three
judges on the panel prior to oral argument. The judges will study the memos in advance of
oral argument. See, Sobel, 2007; the US laws specifically allow each bankruptcy judge to
appoint a secretary, a law clerk, and such additional assistants as the Director of the
Administrative Office of the United States Courts determines to be necessary. See 28 USC §
156, Law Revision Counsel, 2015
BLRC REPORT 427
Figure 4.2: Federal Court of Australia log-in page

Each judge should have a dedicated research team to adequately brief the judge
for each hearing.7 The Tribunal should enable hearing through video conferencing
mechanism.8 This will allow parties to present their cases from a hearing center
at a city before a bench sitting in another city.
Oral arguments should be time bound and confined to the pleadings only.9 The
procedural rules of the Tribunal may also provide for only paper based hearing in
appropriate circumstances.10 A matter taken up for final hearing must be finished
off and not left part heard. Every judicial hearing must be audio-visually recorded
and published.11 Every order of the tribunal must be immediately made available
8. As an example, the Federal Court of Australia has online courtrooms which are used by
Judges and Registrars to assist with the management and hearing of some matters before
them. Such matters include ex parte applications for substituted service in bankruptcy
proceedings and applications for examination summonses; however eCourtroom may also
be used for the purpose of the giving of directions and other orders, in general Federal Law
matters. The eCourtroom is integrated with eLodgment, providing parties with a link between
eCourtroom and eLodgment to facilitate the electronic filing of documents. For details, see,
Federal Court of Australia, 2015
9. Procedural rules of some foreign courts allow the time for oral hearing to be pre-fixed.
Longer arguments can be allowed only on filing of a motion reasonably in advance. See Rule
34(b), United States Supreme Court, 2013
10. Right of hearing need not always include right to ‘oral’ hearing. Advanced common law
jurisdictionsallow for dispensing with oral hearing in certain matters. For example, see Rule
34(a)(2), United States Supreme Court, 2013 ; also see Rule 32, Lord Chancellor, 2014.
11. Most jurisdictions have started moving towards audio-visual recording of court proceedings.
The High Court of Australia publishes audio-visual recordings of full court hearings; UK Supreme
Court publishes audio-visual recording of all current and decided cases; US Supreme Court
publishes audio recordings of proceedings before it. For details, see, Stepniak, 2012 ; recently,
in India, Calcutta High Court for the first time allowed audio-visual recording of a court
proceeding. See, High Court at Calcutta, n.d.
428 BLRC REPORT
online. After the final disposal of a matter, all petitions, applications and orders
pertaining to that matter must be made available online on a single web-page
publicly accessible free of charge. All such web-pages must be arranged in a
systematic manner to allow anyone to search for a specific matter by is unique
number, parties’ name etc. Figure 4.3 shows the summary page of a recently
decided matter before the UK Supreme Court.
Figure 4.3: UK Supreme Court case details web page format

The Tribunal must develop a case-load forecasting model. The financial budgeting
of the Tribunal must be based on the forecasted case-load. Based on the
estimates, resources need to be allocated in advance to ensure that the disposal
rate of the tribunal is not hampered due to resource constraint. However, potential
tendencies of mismanagement of judicial budget should also be curbed by making
the tribunal administration accountable for the expenditure. To enhance
accountability the law must require the tribunal to publish an annual report at the
end of every financial year. The rules of annual reporting must require an audited
financial statement of the tribunal along with a performance report. The
performance report must clearly show the level of performance achieved by the
tribunal against the targets under various parameters during the assessment
year against the budget spent. All performance statistics like pendency rate,
disposal rate etc must be published and the entire data set must be made available
in proper format. Every instance of matters not being disposed off within a
reasonable time frame must also be reported.
BLRC REPORT 429
4.3 Bankruptcy and Insolvency Information Utilities

Before the process of resolution can begin, an essential step required is to correctly
establish the facts about what are the assets available, who the claimants are,
and what contracts are in force. Traditionally, this has involved paper based
processes, and comes with its own problems, such as the need to ensure that
the documents are in hand are true copies. Advances in technology and
computational power of recent decades have created an opportunity to
dramatically reduce the cost and complexity of managing information. In turn,
this allows using the information to eliminate delays and frictions in resolving
insolvency and bankruptcy: drastically reducing delays and reducing costs.
India has been a late starter in building the institutional infrastructure for a liberal
democracy and a market economy. At many steps in this journey, progress has
been made by ‘leapfrogging’ - utilising contemporary computer technology to
design aspects of the government and of the economy which were not feasible
at the time when mainstream solutions in advanced countries fell into place.
Examples of this include electronic voting and the Aadhaar system (Shah, 2006;
Claessens, Glaessner, and Klingebiel, 2001). The Committee believes a similar
‘leapfrogging’ opportunity exists in the field of insolvency and bankruptcy. There
is a possibility to go to the top decile of countries of the world, by utilising computer
technology, and often doing things in ways which are not seen even in advanced
countries as of 2015.
This section focuses on this ‘information infrastructure’ for a sound insolvency
and bankruptcy resolution process. In many cases, the initiatives proposed here
have value over and above this process. In the following text, we note these other
benefits in passing and for sake of completeness, while primarily focusing on the
requirements for a high quality resolution of insolvency and bankruptcy. The
attempt of this section is to create an information infrastructure which will put
India in the ranks of the top decile of the world by way of information management
both before and after insolvency is underway.
4.3.1 Bankruptcy and insolvency information utilities
The information infrastructure required for the insolvency and bankruptcy process
that is proposed in this report consists of two sets of rules: rules that govern
information submission and rules that govern information access and release
during insolvency. The operations of the process require a class of “bankruptcy
and insolvency information utilities” (referred to as IUs): firms which stand ready
to receive information filings that are required under this Code, and stand ready
to deliver information when requested. As a caveat, it must be added that the
provisions relating to IUs contained in the Code are enabling provisions to facilitate
the development of an industry of IUs that will happen over time.
430 BLRC REPORT
The Board will license and regulate the working of the IUs. There is the possibility
of a market failure developing in the form of market power where a small number
of firms reap monopoly profits. Hence, this is intended to be an open competitive
industry with exactly one tariff (the price charged upon the person submitting
information). If the first set of pioneers earn a particularly high return on equity,
nothing should prevent additional players from entering the business.
Interconnection regulation would ensure interoperability between multiple
players, all of whom would support the identical APIs for electronic access. This
pro-competitive environment would ensure that supernormal profits will not arise.
In the course of resolving insolvency and bankruptcy, many players would access
information from these IUs. They would use a standard API to obtain information
from multiple utilities, thus assembling the full information set upon demand. The
charges imposed here would only be the telecom charges.12
From the viewpoint of the end-use of information, centralisation of information is
desirable. At the same time, centralisation involves problems associated with
the elevated profit, and low quality work, of monopolies. The Committee has
chosen the strategy of information that is distributed across multiple utilities. A
full view of any one case (e.g. one firm bankruptcy) will be assembled in real time
by querying all the IUs that exist. Queries will take place at a negligible cost.
Competition will drive down the user charge for filing.13
IUs are essential for the process of filing information. However, they are not
central to the large scale decentralised process of accessing and utilising this
information. Further dissemination or processing or value added services would
come about through a variety of access mechanisms which can include the
media, information companies and research organisations. All such entities would
be able to easily access data from all IUs at telecom charges, and then resell or
redistribute this information, with or without value added. The access of these
entities are subject to rules of privacy specified by the Regulator.
Drafting instructions for rules governing the industry of IUs are placed at Box 4.13.
12. Persons involved in the insolvency process attach a very high value upon comprehensive
information. Hence, they will always run a query on each information utility, in order to
assemble the full picture. This raises the possibility of a small information utility charging very
high prices for access to information. Hence, the Committee favours a tariff structure where
revenues are obtained through a simple flat tariff structure at the point of mandatory submission
of data to a information utility chosen by the entity that is doing the submission.
13. Distributed information utilities have many other interesting implications. As an example,
it may be cheaper to require filers to submit information to two distinct information utilities, and
thus reduce the costs of high availability and disaster recovery at any one utility.
BLRC REPORT 431
Box 4.13: Drafting instructions for rules governing bankruptcy and

insolvency information utilities
1. The Board will license entities who will perform the role of information
utilities.
2. All information utilities will satisfy the following characteristics:
(a) They will accept electronic submission of data from persons who
are obliged, under the Code, to submit information.
(b) A fee will be charged for the submission of data.
(c) The Board will regulate interconnection to ensure free entry, and
interoperability, between all information utilities.
(d) All information utilities will exhibit identical APIs for submission of
information and access to database.
(e) The Board will prescribe minimum service quality standards
including uptime, disaster recovery, latency, etc.
(f) The price charged for information access will be the cost of
transmission of the information.
(g) No restrictions will be placed upon the use of information that is
given out by information utilities, subject to applicable laws.
4. The Board will regularly run sample studies to assess the accuracy and
completeness of information obtained from information utilities, and
take remedial steps when the level of gaps and errors is large enough
to materially hamper the insolvency resolution process.
5. The Board will specify statistical information which must be regularly
released by all information utilities.
4.3.2 Information requirements for insolvency and bankruptcy resolution
The Committee debated on what categories of information must be available to
all participants in order to ensure that a resolution process is swift and efficient.
While all information is important, certain parts of the information becomes critical
at different parts of the resolution process. For example, in order to trigger a case
of insolvency against an entity, the creditor will need to demonstrate proof of (a)
having a liability against the entity, and (b) the entity having failed on a promised
payment. Without this evidence, the adjudicator will refuse to register the
insolvency case, or defer the matter until the insolvency can be proved. If, on the
other hand, the record of the liability is readily accessible from a registered IU,
and the instance of default is also recorded within, the time taken and the cost to
432 BLRC REPORT
trigger the case of insolvency can be reduced. Thus, it is important to identify

what are the information requirements that are critical to a swift resolution of
insolvency and bankruptcy, and who can access the information at what point of
the process.
The Committee defined categories of information as follows:
1. Reliable and readily accessible records of liabilities of a solvent entity.
2. Clear evidence of the instance of default.
3. Records of assets that are pledged as collateral against secured credit
contracts.
4. Reliable and readily accessible records that comprise the balance sheet
and cash-flow statements of the entity.
4.3.3 Information about the liabilities of a solvent entity
A solvent entity has a certain structure of liabilities. The terms of all contracted
liabilities are relevant for valuing liabilities. As an example, the presence of debt,
and the terms on which the debt is contracted, is relevant for the pricing of equity.
While the identities of counterparties should remain private, the existence of all
financial contracts along with the terms and conditions, is relevant for all financial
analysis related to the health and status of the entity.
Liabilities fall into two broad sets: liabilities based on financial contracts, and
liabilities based on operational contracts. Financial contracts involve an exchange
of funds between the entity and a counterparty which is a financial firm or
intermediary. This can cover a broad array of types of liabilities: loan contracts
secured by physical assets that can be centrally registered; loan contracts secured
by floating charge on operational cash flows; loan contracts that are unsecured;
debt securities that are secured by physical assets, cash flow or are unsecured.
Operational contracts typically involve an exchange of goods and services for
cash. For an enterprise, the latter includes payables for purchase of raw-materials,
other inputs or services, taxation and statutory liabilities, and wages and benefits
to employees.
Given the importance of such information to the access to finance for enterprise,
several efforts have been implemented over the last decade, particularly with the
development of technology, such as the MCA21 at the Registrar of Companies,
which acts as a repository of balance sheet information. However, despite
mandating disclosure and making non-compliance a criminal offence, existing
information registration systems have not had good compliance records. One
reason for a lack of compliance is the lack of sound enforcement. An advantage
of the information systems in the Bankruptcy and Insolvency process is that the
BLRC REPORT 433
Code places the information as a critical lever in the hands of the debtor or the
creditor. The Code specifies that if the Adjudicator is able to locate the record of
the liability and of default with the registered IUs, a financial creditor needs no
other proof to establish that a default has taken place.
The Committee recommends that the IUs should include records of all financial
liabilities, secured and unsecured, and proposes a two part framework:
1. Centralised databases about the full set of liabilities of all entities that are
entered into by financial firms. These will be obtained through filings of
contracts and securities from the financial firms and intermediaries.
2. Public disclosure norms about the liabilities by the IU will vary depending
upon whether the entity has listed securities or not. This will be as follows:
(a) For all entities that have at least one listed security, there will be
public disclosure of the terms and conditions of these contracts, but
not identities of the sources of financing. The reasoning for this is
that investors are likely to require information about the full structure
of liabilities in order to value the listed security.
(b) For entities that do not have even one listed security, access to the
terms and conditions of these contracts will be made available
even but in a limited manner.
Access to information about all contracts will be available to all existing financial
firms and intermediaries which are creditors to the entity. It can also be temporarily
enabled by the entity to a financial firm which is a potential creditor.
This mechanism ensures comprehensive capture of the activities of financial
firms in establishing the liabilities of all entities. For listed entities only, anonymised
information about the contracts that make up the liabilities will be available in the
public domain at all times. This will assist the valuation of all securities issued by
these entities, and acts as an incentive for all financial firms to file the records of
their liability. So that entities that are not listed can also benefit from superior
valuation, the Code enables access to this information in the IU to both existing
creditors as well as potential creditors to the entity.
The second set of liabilities are operational liabilities, which are more difficult to
centrally capture given that the counterparties are a wide and heterogeneous
set. In the state of insolvency, the record of all liabilities in the IUs become critical
to creditors in assessing the complexity of the resolution required. Various private
players, including potential strategic acquirers or distressed asset funds, would
constantly monitor entities that are facing stress, and prepare to make proposals
to the committee of creditors in the event that an insolvency is triggered. Easy
434 BLRC REPORT
access to this information is vital in ensuring that there is adequate interest by

various kinds of financial firms in coming up to the committee of creditors with
proposals.
It is not easy to set up mandates for the holders of operational liabilities to file the
records of their liabilities, unlike the case of financial creditors. However, their
incentives to file liabilities are even stronger when the entity approaches
insolvency. The Code provides that the electronic filing of their transactions can
act as easily accessible proof of claims using the Adjudicator will accept the
application by the creditor to trigger an insolvency resolution process. With a
competitive industry of IUs, even operational liabilities can be readily recorded
as long as the cost of the filing can be balanced against the certainty of being
counted in the priority of payment if the entity falls into bankruptcy. The need for a
variety of IU offering services at different costs for different users becomes one
more reason why the Board must ensure that the industry of the IUs remains
competitive (Box 4.13).
Drafting instructions for regulations that may enable the ongoing tracking of the
transactions that make up the financial liabilities of all entities, while they are
going concerns, are placed in Box 4.14.
4.3.4 Information about operational creditors
While the Committee considered that it is fair to empower the operational creditor
to trigger the resolution processes, the difficulty lies in the implementation of an
efficient mechanism to enable such creditors to do so. The Committee considered
that one approach could be for the operational creditor to present an undisputed
invoice demanding payment or notice delivered by such creditor to the debtor as
a document as joint proof of an existing liability and a default by the debtor on this
liability. This is similar to the statutory demand of the U.K. as described in Box
4.15.
In a similar manner in India, the operational creditor can serve a notice to the
debtor demanding payment of debt within specified number of days and confirm
that debtor has not disputed the demand. .
This can be filed online at a regulated IU using the unique identifier of the registered
entity that is available on the registration authority, such as the Registrar of
Companies for entities under Companies Act 2013. For an individual, these may
be done through credit information systems on individuals such as credit bureaus.
Below a threshold value of the bill specified by the Board, the filing system can be
set up to serve the invoice or notice electronically to the entity. Once the invoice or
notice is served, the debtor should be given a certain period of time in which to
respond either by disputing it in a court, or pay up the amount of the invoice or
BLRC REPORT 435
notice. The debtor will have the responsibility to file the information about the
court case, or the repayment record in response to the invoice or notice within the
specified amount of time. If the debtor does not file either response within the
specified period, and the creditor files for insolvency resolution, the debtor may
be charged a monetary penalty by the Adjudicator. However, if the debtor disputes
the claim in court, until the outcome of this case is decided, the creditor may not
be able to trigger insolvency on the entity. This process will act as a deterrent for
frivolous claims from creditors, as well as act as a barrier for some types of
creditors to initiate insolvency resolution.
A debtor, who is filing for insolvency resolution, must file a comprehensive list of
all operational liabilities over the previous two years into a registered IU. This
includes liabilities for purchase of goods or services, and will result in the
Adjudicator charging a penalty to the debtor if new liabilities with clear evidence
surface during the insolvency resolution process.
Box 4.14: Drafting instructions for the Code and the regulations
thereunder for information capture about the liabilities
of financial creditors
1. Financial firms who are the counterparties to, or the arrangers of the
transaction where a registered entity obtains financing on its balance
sheet, must do an electronic filing about the transaction to a registered
IU. The format and period within which the filing must be done will be
specified by the Board, and must be co-signed with the counterparty to
the contract.
2. The electronic filing must be done at the initiation of the transaction, at
any and all subsequent modifications, and at the closeout of the
transaction. The form for the modifications will be specified by the Board.
This will ensure that the information about the liability remains current
at all times.
3. The filing must be consistently done: all subsequent information about
the transactions must be filed at all the databases where the initial filing
was done. At all times, it should be possible to query the database(s)
and obtain the full picture of the liabilities of all entities on any day.
4. If the filing does not satisfy regulatory specifications, the IU will have to
remove the record, and send notices to both counterparties about the
failure in filing within 24 hours.
5. The class of transactions which require filings by financial firms will be
specified in regulations.
436 BLRC REPORT
6. For all entities who have even one listed security, this data should be
publicly accessible. The full set of outstanding contracts, in their updated
form, which make up the liabilities of all listed entities should be available
to any financier of the entity. The content of the information that is to be
made available and the manner of access will be specified by the Board.
7. The liabilities of an entity that does have not even one listed security,
while all this information is present with registered IUs, will not be publicly
accessible as long as the entity is solvent. The information will be
available to existing creditors of the entity where the content and manner
of access will be specified by the Board. The entity will also be able to
allow temporary access to any financial firm with whom it is in discussion
for a credit transaction. The manner of the access will be specified in
regulations.
8. The information that is publicly released should not show the identities
of the persons who are supplying financing; what should be shown is
only the terms and conditions of the financial contract.
Box 4.15: Statutory demand as evidence to initiate a

bankruptcy proceeding in the U.K.
If a creditor in the UK wants to initiate a bankruptcy proceeding and needs to
produce a clear evidence that she lias an undisputed amount due, she files a
statutory demand on the debtor.
• This done through a standardised demand form titled Form 6.07:
Creditor’s Bankruptcy Petition on Failure to Comply with a Statutory
Demand for a Liquidated Sum Payable Immediately which is available
from The Insolvency Sen’ice of the U.K. Government.
• These can be presented to the debtor, either in person, through
registered post or through a solicitor.
• On receiving a statutory demand, the debtor has the right to dispute it
in the Bankruptcy court within a specified period (say 21 days).
• If the debtor does not do so, this demand can be used as a basis for
initiating a bankruptcy or insolvency.
• If the debtor does dispute it, she lias to then be party to the case for
deciding the status of the statutory demand.
BLRC REPORT 437
Box 4.16: Drafting instructions for the Code and regulations for
information capture about liabilities of operational creditors
1. An operational creditor in India wants to initiate insolvency resolution
with a clear evidence that she has an undisputed amount due files a
record of undisputed bill against the debtor. The fonn and manner of the
fding will be specified by the Regulator.
2. For bills above a threshold value specified in Regulation, the record
must contain informa-tion about the liability and evidence of having
been served to the debtor.
3. For bills below a threshold value specified in Regulation, the IU will
serve the bill to the debtor at a nominal cost.
4. On receiving the bill, the debtor can either
(a) File a dispute case with the Adjudicator, where she is then party to
the case for deciding the status of the bill, or,
(b) Make the due payment to the Adjudicator who will pay the creditor
and send an order to the IU to remove the record of undisputed
bill
within a period specified in regulations.
5. If the debtor does not do neither, the record can be treated as an
undisputed bill and used as a basis for initiating a bankruptcy or
insolvency.
4.3.5 Information of default or restructuring

A critical gap in the existing information infrastructure is the lack of information
about default. Unlike existing definitions of default today which is substituted by
definitions of non-performing assets, the Committee took the view that the sooner
the stress was known to the creditor community, the more swift would be the
resolution of insolvency. Thus, it is important that the event of default is visible to
creditors as soon as it takes place. In order to ensure this, the Committee was of
the view to draw upon the transmission of cash flows to securities holders to
provide the event of default.
For entities that issue securities such as equity, bonds, preference shares, the
Committee believes that a single electronic mechanism should exist, through
which all cash flows to the holders of their securities are transmitted in a frictionless
manner. The logical place where this work should take place is in the depositories,
who maintain the title on all securities (equity or debt). For ordinary solvent entities,
438 BLRC REPORT
this would remove transactions costs from the process of delivering cash flows to
all owners of securities.
This system has numerous advantages for the securities markets as a whole,
and for corporate bonds in particular. For all investors, it gives a frictionless
mechanism for transmission of cash flows from issuers to beneficiaries. It
removes the possibility of issuers who selectively default on payments to powerful
investors while reneging on less powerful investors. It eliminates the delays
associated with establishing the fact that default took place when a bondholder
desires to force the entity into the insolvency resolution process: the depositories
would be able to rapidly produce definitive proof that the required amount of
cash was not sent to them on the appointed date.
With this framework in place, the event of default to the creditors then becomes a
failure of transmission of the promised cash flow into the account. The depository
can forward the information about the failure to the IU in a manner specified by
the Board, and the IU records it as a failure against the relevant liability. Since
financial creditors can query and observe the record of a failed payment against
any of the liabilities of the entity, the diligent financial creditor can take appropriate
action. This may be in the form of seeking information from the management, or
starting a negotiation to understand the state of health of the entity.The Committee
also considered the importance of making public information about default, which
could be addressed through three elements.
When an entity has even one listed security, the event of default on a loan or a
bond is a material disclosure that should be available to all security holders. For
example, when a bank has a borrower where the exposure exceeds 0.1% of the
total assets of the bank, default ought to be released by bank to the investing
public. Another approach could be a public signal from the depository itself.
Since all cash flows from issuers would be processed by depositories, a depository
seeing inadequate cash coming into it when compared with the obligations on a
bond could publicly announce default.
4.3.6 Information about secured assets
Information about secured assets become even more important if the resolution
leads to an outcome of liquidation. In liquidation, lenders with secured assets are
most likely to want to retrieve their security and carry out debt recovery by
themselves so as to minimise the cost of the liquidation and maximise their loss
given enterprise default. The Committee believes that secured lenders to an
enterprise will be incentivised under the provisions of the Code to ensure that
accurate records are filed with the IU. Since the records can be easily verified
from the IUs, the Liquidator can easily release the security to the creditor. On the
other hand, if the creditor has not filed the record, this imposes an additional cost
BLRC REPORT 439
on the Liquidator, who will have to verify both the assets as well as the claims of
the creditor. The Code or delegated legislation thereunder will provide that
creditors who fail to register their secured assets will have to separately pay the
verification charges and costs of the Liquidator and the Adjudicator. These will not
be included in the costs of the liquidation resolution process.
As with the registration of the liabilities in Box 4.14, the documentation, format
and the manner in which the record of the secured asset needs to be filed may be
specified by the Board. For example, at the time of submission, the Board can
specify that the record must be signed off by both counterparties to the transaction.
If both counterparties have not signed within 48 hours of the security being filed,
the Board will specify that the record be rejected by the IU. The Committee believes
that a similar approach can be adopted for all manner of secured assets, whether
it is physical collateral or floating charge against receivables. In the case of the
latter, the secured asset will be recorded as cash flows expected during the term
of the contract.
Leveraging the existing Information Systems
As a consequence of policy recommendations on the need for better systems of
information management for credit markets (Rajan, 2008), as well as the rapid
advance of technology in financial systems in India, there are pockets of information
management firms that can be useful bases on which to start the bankruptcy and
insolvency information utilities.
For example, there have been several efforts on building registries for secured
assets. For example, a fully electronic registry provides for registration of charges
on secured assets headed by the Registrar of Companies (RoC). State governments
run land registries that serve as a source of information for land as collateral and
other state registries for registration of certain kinds of motor vehicles. The Central
Registry of Securitisation Asset Reconstruction and Security Interest of India
(CERSAI) was established under the SARFAESI Act, 2002, which registers a category
of security interests to financial credit contracts that are secured by an underlying
asset. In a recent report, (Umarji, 2013) has proposed a more comprehensive
range of categories of secured assets that can be registered at CERSAI. Once this
becomes operational, CERSAI could be an important part of the IUs for swifter
liquidation under the Code. The securities markets depositories have information
about all securitised debt contracts.
The Committee considered that the existing systems serve as the starting point
for access to filings on secured assets during the insolvency resolution process,
once these systems register with the Board as a IU. However, at present several
of these systems have developed under different laws and regulatory agencies,
which may mandate a different manner and type of disclosure made into these
440 BLRC REPORT
systems. These mandates also involve restrictions on access to all parties who
may be involved in an insolvency and bankruptcy resolution case. An enabling
framework may require amending respective laws to enable access of the
information to the relevant parties during the resolution processes under the
Code.
4.3.7 Rules about privacy of information in an IU
There is a tension between legitimate concerns about privacy, and the gains to
society from more open release of information. The position of the Committee on
these questions favours partial public access to information about liabilities
without identities at all times for listed entities, temporary access enabled by
permission about liabilities without identities for unlisted entities, and complete
release of information to participants of the insolvency resolution process when
the process commences.
4.3.8 Rules on revealing creditor identities
Through the systems proposed in Section 4.3.3, IUs would have comprehensive
information about who the financial creditors of the entity are (whether for loans
or bonds), and the terms and conditions associated with all elements of debt
from financial firms.
For a subset of firms (firms with at least one listed security), a subset of the
information (the terms associated with all liabilities, but not the identities of the
owners) would be publicly released at all times.
The insolvency resolution process can come about at the instance of the debtor
entity, or it can be triggered by a creditor. When a resolution professional takes
the case, she must have complete access to the identities of lenders (or
bondholders) and the terms at which all credit has been given to the firm so that
she can propose the creditors committee to the adjudicator. Similarly, if an entity
goes into liquidation, access to the similar information about the financial creditors
and a larger access to the operational creditors must be made available to the
liquidator. The mechanism and the rules to certify the access of a given insolvency
professional will be specified by the Board.
4.3.9 Open industry-standard APIs
Application Programming Interfaces (“APIs”) are the mechanism by which a user
system accesses a resource. Once an API has been designed and placed into
the public domain, a large industry of software developers can create innovative
applications by having access to the resource through published APIs.
As an example, consider an IU which accepts a certain kind of data filing and
supports querying for that information. The public would have access to the full
BLRC REPORT 441
documentation to the APIs through which these operations are done. This would
make possible third party software development without requiring any
coordination, permission, empanelment or authorisation by the IU.
As an example, accounting or back office software running at user organisations
would be able to use these APIs to submit information to a registered IU. The
software would submit cryptographic credentials, in order to identify the legal
person for whom information is being submitted. The software would submit
proof of having paid the requisite user charges. After this, the software would
submit a parcel of data. The IU would perform hygiene checks upon the data,
confirm receipt, and give the sender a token of proof that this data was indeed
received.
When data access is required, users (e.g. the software running on the laptops
belonging to insolvency professionals) will query all IUs in existence and
assemble a full picture.
APIs are best designed by loose coalitions of technologists. As an example, the
APIs that underlie the Internet are drafted by the Internet Engineering Task Force
(IETF) which is neither a government organisation nor a for- profit corporation nor
a industry association (Hoffman, 2012). Similar structures need to be created to
design, and oversee the evolution of, the open standards envisaged for IUs.
4.3.10 An information-rich environment
Asymmetric information has the ability to undermine the resolution of insolvency
and bankruptcy. In addition, while a country may (in principle) offer information
access to persons involved in the resolution, there may be a long drawn process
for obtaining all the relevant information and establishing its veracity. The previous
sections lay the foundations for the working of infrastructure with the creation of
information utilities, databases about liabilities, and centralisation of cash flows
associated with all liabilities, as the critical elements of information access that
can improve the efficiency of the resolution of insolvency and bankruptcy in India.
The elements of the law of this section are aimed at transforming the information
infrastructure surrounding the process to resolve insolvency and bankruptcy. The
following key elements are put into place:
1. A competitive industry of IUs would exist (Box 4.13).
2. At all times, for all entities, IUs (put together) would have comprehensive
information about the transactions which make up the liability structure of
any given entity (Box 4.14). In the case of a loan, they would have the
record of the identity of the lender(s). In the case of a bond, they would
have a record of the ISIN of the bond, and the depositories would have the
442 BLRC REPORT
record of the bondholders at all times. IUs would have records of the
terms and conditions of all loans and bonds issued by all firms.
3. For entities which have at least one listed security (either debt or equity), at
all times, the terms and conditions of all loans and all bonds would be
visible to the public.
4. For entities which do not have even one listed security, at all times, the
terms and conditions of all loans and all bonds would be visible to their
existing creditors. Further, any potential creditor would be enabled access
to this information by the entity.
5. Cash flows associated with all securities (whether equity or debt) would
go from firms to depositories, who would send this cash onwards to
beneficial owners with the minimum possible delay.
6. Information about default would come out through three channels:
requirements of disclosure by listed firms, listed banks and depositories .
7. When the insolvency resolution process or the liquidation process is
triggered, the IUs and the depositories would submit a packet of information
to the insolvency professional appointed by the adjudicator. This
information would include the identities of all creditors and the terms and
conditions of all liabilities, as well as assets registered.
8. While all this information would be distributed at multiple distinct IUs,
there would be a set of standard APIs through which software at the
command of all end-users would be able to marshal all this information
on demand. This would yield the full benefits of obtaining information
from one central database, without the difficulties induced by centralisation.
This would create an information-rich environment that will significantly reduce
practical frictions that has, and would otherwise, bedevil the resolution of
insolvency and bankruptcy in India.
4.3.11 Analogies with FSLRC’s treatment of resolution
In recent years, the work on financial sector reforms has emphasised the
‘resolution’ capability. A Resolution Corporation has been proposed by the Financial
Sector Legislative Reforms Commission (FSLRC), which will intervene in the working
of financial firms when they are distressed but still solvent (Srikrishna, 2013).
In the international experience, the importance of resolution rose sharply after the
failures of Bear Stearns and Lehman Brothers in 2008. In both these cases, handling
their failure was difficult owing to the complex information about obligations and
contracts of the failing firms and the subsidiaries of the failing firms.
BLRC REPORT 443
After the global financial crisis, a key response by policy makers worldwide in
improving resolution capabilities is that of improving information infrastructure.
The US Treasury has built an ‘Office for Finance Research’ (OFR) which holds a
comprehensive live database about the activities of all financial firms. In the
future, when a financial firm may approach failure, this database will yield
complete and up to date information about liabilities, exposures and
counterparties.
FSLRC has proposed that a statutory Financial Stability and Development Council
(FSDC) be tasked with systemic risk regulation. This will be a council of regulators
chaired by the Finance Minister. FSDC will contain a database, named the ‘Financial
Data Management Centre’ (FDMC) which will be a comprehensive database
about the activities of all financial firms. This database will be used by the
Resolution Corporation in its ordinary activities, and FSDC when faced with systemic
crises.
There is an analogy between the FSLRC proposal about FDMC, and the proposals
embedded above on strengthening information infrastructure. In both cases, the
creation and management of live databases is the route to reducing uncertainty
and delay in the insolvency resolution process. FSLRC has recommended a
statutory database, the FDMC, which is a shared data facility for all financial
agencies. The proposal here is somewhat different in having a industry of multiple
competing information utilities. However, in both cases, the end result is the
same: complete facts in electronic form with negligible delay, when required in
the insolvency process.
4.4 The Insolvency Professionals

Insolvency professionals play a vital role in the insolvency and bankruptcy
resolution process as envisaged by the Committee and as detailed in chapters 5
and 6. As mentioned in these chapters, insolvency and bankruptcy resolution
under the Code will proceed in two phases, for registered entities as well as for
individuals. The first phase of the insolvency and bankruptcy process is the period
of insolvency resolution during which insolvency is assessed and a solution is
reached within a stipulated time period. In case a solution is not reached within
the specified time limit, the second phase of the process begins wherein the
entity is declared bankrupt. At this point a registered entity enters into Liquidation
whereas a individual enters into bankruptcy resolution.
This entire insolvency and bankruptcy process is managed by a regulated and
licensed professional namely the Insolvency Professional or an IP, appointed by
the adjudicator. In an insolvency and bankruptcy resolution process driven by the
law there are judicial decisions being taken by the adjudicator. But there are also
444 BLRC REPORT
checks and accounting as well as conduct of due process that are carried out by
the IPs. Insolvency professionals form a crucial pillar upon which rests the
effective, timely functioning as well as credibility of the entire edifice of the
insolvency and bankruptcy resolution process.
An IP may hold any of the following roles under the Code:
1. Resolution professional (RP) to resolve insolvency for a firm or an individual;
2. Bankruptcy Trustee in an individual bankruptcy process;
3. Liquidator in a firm liquidation process;
In administering the resolution outcomes, the role of the IP encompasses a wide
range of functions, which include adhering to procedure of the law, as well as
accounting and finance related functions. The latter include the identification of
the assets and liabilities of the defaulting debtor, its management during the
insolvency proceedings if it is an enterprise, preparation of the resolution proposal,
implementation of the solution for individual resolution, the construction,
negotiation and mediation of deals as well as distribution of the realisation
proceeds under bankruptcy resolution. In performing these tasks, an IP acts as
an agent of the adjudicator. In a way the adjudicator depends on the specialized
skills and expertise of the IPs to carry out these tasks in an efficient and professional
manner.
The role of the IPs is thus vital to the efficient operation of the insolvency and
bankruptcy resolution process. A well functioning system of resolution driven by
IPs enables the adjudicator to delegate more and more powers and duties to the
professionals. This creates the positive externality of better utilisation of judicial
time. The worse the performance of IPs, the more the adjudicator may need to
personally supervise the process, which in turn my cause inordinate delays.
Consumers in a well functioning market for IPs are likely to have greater trust in
the overall insolvency resolution system. On the other hand, poor quality services,
and recurring instances of malpractice and fraud, erode consumer trust.
The following sections describe the mandates for the IPs and delineate a
framework for regulating IPs.
Box 4.17: Mandates for IPs
1. An IP will act independently, objectively, and with impartiality;
2. An IP will carry outs his tasks diligently;
3. An IP will treat the assets of the debtor with honesty, and transparency;
4. An IP will avoid all possible conflicts of interest and if he comes to know
BLRC REPORT 445
of any such conflict, he will disclose the same immediately to the creditor
committee;
5. An IP will maintain confidentiality of information acquired as a result of
professional relationships;
6. An IP will act in a fiduciary capacity towards the debtor, and the creditors
as a whole, when appointed in any capacity in an insolvency and
bankruptcy resolution proceeding;
7. An IP will not commit fraud or abuse, or exert undue influence on, or on
behalf of his clients.
4.4.1 Mandates for IPs
In the case of insolvency resolution, a failure of the process may result from two
main sources: collusion between the parties involved and poor quality of
execution of the process itself. Hence, it is important that the professionals
responsible for implementing the insolvency resolution process adhere to certain
minimum standards so as to prevent failures of the process and enhance credibility
of the system as a whole.
In India today, there are professionals and intermediaries that offer services to
resolve financial distress of both registered entities as well as individuals. These
include lawyers, accountants and auditors, valuers and specialist resolution
managers. However, given the critical role that the Code envisages for these
entities in the resolution process, the Committee believes that the Board should
set minimum standards for the selection of these professionals, along with their
licensing, appointment, functioning and conduct under the Code.
To this end, the Code empowers the Board to lay down the minimum professional
standards and the code of conduct to be followed to by IPs at each stage of the
insolvency and bankruptcy resolution process. Mandates for IPs, which may be
prescribed through delegated legislation are described in Box 4.17 .
4.4.2 Entry Requirements for IPs
Well designed entry barriers benefit both customers and service providers.
Minimum qualifications and professional standards enable those authorised
to carry on such professions with the ability to charge a better price for their
services.
Entry barriers in any regulated profession may be categorised into licensing,
registration, certification and accreditation. Granting license to start practicing a
profession is a core function of a regulator. Licensing ensures that it is unlawful to
perform certain activities without meeting the specified criteria. Occupational
446 BLRC REPORT
licensing may raise the average skill levels in the profession, thereby improving
the quality of services.
While individual professionals are usually required to register with the relevant
regulatory body by filing specified information before carrying out a certain activity,
certification is a voluntary mechanism whereby professionals may apply to be
certified as competent by a relevant regulatory body upon suitable demonstration
of competence. Certification, in turn, is different from accreditation where
professionals may apply for a formal recognition of their competence by a
professional body or an industry association. The criteria and process of
accreditation depends entirely on the professional body.
Box 4.18 - Entry Requirements for IPs
The Committee recommends that the regulatory framework imposing entry
barriers on IPs be based on registration:
1. Any person or individual who wants to practice as an IP will need to
obtain membership of an approved, professional IP agency. Once the
IP is the member of a professional IP agency, he will need to apply to
be registered with the Regulator.
2. No one will be allowed to perform the activities that an IP may perform,
without being registered with the Regulator.
3. Only “fit and proper” individuals who clear the IP exam and satisfy an
IP agency’s entry requirements will be issued membership certificates.
4. An individual who acts as an IP at a time when he is not qualified to do
so is liable to imprisonment or a fine, or to both.
Entry requirements for IPs are described in Box 4.18 . These can be prescribed by
the Board.
4.4.3 IP Regulatory Structure
There is concern that starting with a strong regulatory regime may be inimical to
the development of the IP profession. The Committee deliberated on the question
of regulation versus development. The Indian experience on self-regulating
professional bodies (such as Institute of Chartered Accountants of India (ICAI), Bar
Council of India and Institute of Company Secretaries (ICSI)) has been reasonably
positive in the development of their respective professions and professional
standards. However, the experience on their role in regulating and disciplining
their members has been mixed. In comparison, financial regulators (such as SEBI
and RBI) have had greater success in preventing systemic market abuse and in
promoting consumer protection.
BLRC REPORT 447
Thus, the Committee believes that a new model of “regulated self regulation” is
optimal for the IP profession. This means creating a two tier structure of regulation.
The Regulator will enable the creation of a competitive market for IP agencies
under it. This is unlike the current structure of professional agencies which have
a legal monopoly over their respective domains. The IP agencies under the
Board will, within the regulatory framework defined, act as self-regulating
professional bodies that will focus on developing the IP profession for their role
under the Code. They will induct IPs as their members, develop professional
standards and code of ethics under the Code, audit the functioning of their
members, discipline them and take actions against them if necessary. These
actions will be within the standards that the Board will define. The Board will have
oversight on the functioning of these agencies and will monitor their performance
as regulatory authorities for their members under the Code. If these agencies are
found lacking in this role, the Board will take away their registration to act as IP
agencies.
4.4.4 The role of the IP agencies
The IP agencies will be formed according to the guidelines laid out by the Board.
The agencies must be given legal powers to ensure they are financially
autonomous. This must be done by ensuring that the agencies have the power to
collect fees from their members for supporting their operations. The Committee
is also of the opinion that the regulatory structure be so designed such that
competition is promoted amongst the multiple IP agencies to help achieve
efficiency gains. Greater competition among the IP agencies will in turn lead to
better standards and rules and better enforcement.
Within this framework, regulation must ensure that IPs are competent to perform
the variety of tasks they may be hired for and also that IPs are fair and impartial,
and conflicts of interest are minimised. To this end, the Committee recommends
that the professional IP agencies establish rules and standards for their members
through bye-laws, create and update relevant entry barriers, and have
mechanisms in place to enforce their rules and standards effectively.
The Code specifies the necessary regulatory governance processes to be followed
by the professional IP agencies in carrying out the following functions:
1. Regulatory functions - drafting detailed standards and codes of conduct
through bye-laws, that are made public and are binding on all members;
2. Executive functions - monitoring, inspecting and investigating members
on a regular basis, and gathering information on their performance, with
the over arching objective of preventing frivolous behavior and
malfeasance in the conduct of IP duties;
448 BLRC REPORT
3. Quasi-judicial functions - addressing grievances of aggrieved parties,

hearing complaints against members and taking suitable actions.
Through these three types of functions, a clear and well-defined statutory
framework enabling the IP agencies to enforce their rules on all members can be
established. There is a need for clear separation of these functions, and in
performing these functions, the IP agencies must at all times follow the regulations
and guidelines laid out by the Board.
The Committee recognises that there are existing professional agencies or
self-regulated organisations (SROs) that will want to be licensed as IP agencies.
The Committee observes that while this may be permitted, existing SROs applying
for the IP registration must satisfy all criteria and entry requirements laid out by
the Board. All professional IP agencies must abide by the two main objectives of
ensuring quality and ensuring fidelity in their members carrying out their functions
as IPs under the Code.
Regulatory functions of IP agencies
The primary function of the professional IP agencies is to set minimum standards
of behaviour expected from all IPs. The process for framing of bye- laws is outlined
in Box 4.19
Box 4.19: Framing of bye-laws by IP agencies
1. An IP agency will make detailed bye-laws governing the conduct of its
member IPs, during the insolvency and bankruptcy resolution process.
2. The bye-laws of an IP agency must adhere to the objectives and
principles as laid out by the Board.
3. The board of an IP agency will approve draft of every bye-law proposed
to be made by that agency.
4. The IP agency will make an application to the Board for approval of
every proposed bye-law.
5. The application must contain:
(a) A draft of the proposed bye-law; and
(b) A statement setting out the objectives of the proposed bye-law
and the issue the proposed bye-law seeks to address.
6. In the event of modifications proposed by the Board, the IP agency after
making the necessary changes, will get the final version of the bye-law
approved both by the board of agency and by the Board.
BLRC REPORT 449
7. Upon receipt of the Board’s approval, the IP agency will publish the bye-
law along with the date on which such bye-law takes effect.
8. IP agencies will exercise minimal discretion in framing bye-laws,
especially in the process of granting licenses to IPs.
Multiple regulatory instruments with similar outcomes might have different
regulation- making processes thereby resulting in undesired confusion among
the parties affected. Hence the Committee recommends that the IP agencies
should be empowered to issue only bye-laws. The Committee believes that the
process of framing bye-laws should be directly overseen by the board of the IP
agency, to ensure that issues that require regulatory intervention are discussed
and approved at the highest level within the agency’s organization. Further, once
a bye-law is formulated by an IP agency, it should be sent to the Board for
approval.
In a system governed by the rule of law, no action should be judged against
unknown standards. Hence, before the IP agencies can carry out any supervision
or adjudication function, they have the responsibility to lay down, in clear and
unambiguous terms, the behaviour they expect from member IPs. In doing so,
the agencies need to follow a standardised, and structured framework such that
all stake-holders are fully informed of the process which in turn would help
establish credibility and confidence in the overall IP system.
Thus, IP agencies specify bye-laws governing specific areas of IP conduct. These
are described in Box 4.20.
Executive functions of IP agencies
A major responsibility of the IP agencies involves the exercise of executive
functions. This includes inspections, investigations, enforcement of orders and
processing of complaints. The exercise of supervision and monitoring powers is
fundamental to the effective enforcement of bye-laws by an authorised IP agency.
The Committee observes that all professional IP agencies should have adequate
governance and monitoring mechanisms and should follow a structured process
for supervising the conduct of IPs at regular intervals, and enforcing their rules
and standards through the bye-laws.
Box 4.20: Bye-laws governing IPs
IP Agencies will use bye-laws to:
1. Specify that IPs licensed by them are ‘fit and proper’.
2. Explain what constitutes ‘fit and proper’.
450 BLRC REPORT
3. Explain how member IPs are expected to comply with each of the
obligations stated in Box 4.24. Agencies may also make standards of
conduct over and above the obligations stated in Box 4.24.
4. Lay out all standards of conduct expected from IPs in clear and
unambiguous terms through a detailed manual prepared by each IP
agency. In doing this, each agency must adhere to the broad guidelines
laid out by the Regulator.
5. Define the minimum qualification criteria and experience requirements
for granting membership to IPs over and above the entry-level exam.
6. Require all IPs to furnish professional indemnity insurance and
insolvency bond against fraud or defalcation.
7. Set clear standards governing the relationships between IPs and
members of the debtor company and creditors.
8. Require all IPs to furnish information about their performance at regular
intervals;
9. Impose limits on remuneration that IPs may charge for providing
insolvency and bankruptcy resolution services;
10. Require IPs to provide services at concessional rates or for no
remuneration for specific classes of persons;
11. Specify sanctioning of non-compliant IPs. Each agency will set
unambiguous benchmarks for non-compliance, and lay down a clear
mechanism for awarding and enforcing penalties.
12. Specify the conditions under which an IP might lose his professional
license and be expelled from the agency.
There is also a need for IP agencies to exercise strong executive powers balanced
with greater transparency and accountability. Executive functions of IP agencies
are described in Box 4.21. Their powers of investigation and enforcement should
be carried out in the least arbitrary and most effective manner.
Quasi-judicial functions of IP agencies
In exercise of their supervisory powers, IP agencies need to assess whether or
not an IP has adequately complied with the provisions of the bye-laws. In case of
any detected breach, the agency has the power to impose appropriate penalties.
The Committee therefore recommends that each professional IP agency will
have an independent quasi-judicial wing that will be responsible for hearing
complaints against IPs of that specific agency. In their quasi-judicial jurisdiction,
BLRC REPORT 451
IP agencies will have the power to impose penalties for non-compliance on IPs
and will perform this function impartially. Quasi-judicial functions of IP agencies
are described in Box 4.22.
Box 4.21: Executive functions of IP agencies
Each professional IP agency will carry out some general executive functions
on a routine basis. These include:
1. Having its own internal mechanisms to ensure that all IPs adhere to its
standards and code of conduct.
2. Conducting an entry-level IP exam. Different IP agencies can conduct
their own exams as long as these are within the broad guidelines laid
out by the Regulator.
3. Granting IP membership certificates to applicants who clear the entry-
level exam, as well as satisfy agency-specific entry-requirements.
4. Submitting names and other details as required by the Regulator, in
the database maintained by the Board.
5. Evaluating and updating the syllabus and requirements from the
examinations from time to time, to ensure that these remain abreast of
contemporary market requirements.
6. Organising regular training sessions and conducting exams for existing
member IPs, at least at the frequency specified by the Board, to ensure
they are up to date with the changing market conditions and industry
requirements.
7. Conducting regular inspections and audits on member IPs wherein
inspections will be treated as an instrument for checking compliance
with the Code, and also for providing inputs for corrective action.
8. Obliging IPs to co-operate with such inspections.
9. Requiring randomly chosen IPs to be audited by independent third-
parties on a periodic basis.
10. Finishing all investigations and audits in a time-bound manner and
carrying them out with least disruption to the function or reputation of
the overall IP industry.
11. Proving violation of regulations to the judicial wing of the agency by
leading evidence.
452 BLRC REPORT
Box 4.22: Drafting instructions for regulations setting out the

quasi-judicial functions of IP agencies
1. Each IP agency will put in place an effective system of handling complaints
and grievances against IPs from aggrieved parties such that the system
of grievance redressal is transparent and publicly accessible.
2. Each agency will put in place a transparent and impartial system for
imposing penalties on member IPs.
3. IP agencies will have the flexibility to impose a graduated system of
penalties, where minor non-compliances will result in monetary fines,
and major violations will result in expulsion from the agency, leading to
the member losing his/her IP membership and registration.
4. Each agency will publish the list of disciplinary actions taken against its
members on its own websites. In the event of an IP getting de-registered
the relevant IP agency will update his details accordingly in the database
maintained by the Board.
thereunder role of the Board in regulating IP agencies
1. The Board will define the criteria for fit and proper entities to be registered
as IP agencies.
2. The Board will set the minimum standards of functioning for IP agencies.
3. The Board will clearly define the roles and responsibilities of the IP
agencies in regulating their member IPs. This will include:
(a) The minimum requirements for registering IPs;
(b) The minimum standards of functioning of IPs and their code of
ethics;
(c) The minimum standards to be followed for auditing and monitoring
the functioning of member IPs;
(d) The process for hearing and investigating complaints against the
members IPs; and
(e) The process for imposing sanctions, including the types of offenses
and the penalties imposed for each type of offense.
4. The Board will receive performance reports by IP agencies on their
functioning.
BLRC REPORT 453
5. The Board will specify the kind of information about the function of IP
agencies that is required to be furnished, the form and manner in which
the information is to be provided and the frequency in which the agencies
are required to submit these reports to the Board.
6. The Board will require an IP agency to release statistics about all the
complaints that it has processed. The number of complaints must be
reported as number of complaints per unit IP and as per unit insolvency
resolution. The number of complaints must also be reported per billion
rupees of NPV recovered. In addition, there must be data for the number
of complaints where the IP was found guilty by the IP Agency.
7. The Board will monitor and audit the functioning of the IP agencies. The
Board will carry out inspections and review the executive and quasi-
judicial functions of the IP agency.
8. The Board will hear complaints against IP agencies, investigate these
complaints and impose sanctions and penalties on them, including
monetary penalties and de-licensing. It will draft regulations clearly defining
the offenses and the types of sanctions/penalties that might be imposed.
9. In case the Board deregisters an IP agency, it will define the process by
which the members of that agency can become members of another IP
agency.
4.4.5 The role of the Board with regard to IP agencies and IPs
The Board will frame regulations governing the executive and the quasi-judicial
functions of the IP agencies with regard to their member IPs. These are described
in Box 4.22.
However, there is an additional role of the Board which comes in the form of the
Board being the point of hearing complaints against IPs who are involved in a
case of insolvency or bankruptcy resolution. There are three places in the Code at
which the complaints against an IP may come before the Regulator:
1. A complaint during an insolvency resolution process or bankruptcy
resolution, seeking a removal of the IP.
2. A complaint may be raised against an IP on a case from which he has
been discharged in his role as an RP either after insolvency is resolved or
it has moved to liquidation.
3. The Board may find that a given IP has a statistically large number of
recorded complaints or has records of poor performance in insolvency or
bankruptcy resolution.
454 BLRC REPORT
5. Process for legal entities
Chapter 3 identifies that the objective of the bankruptcy reform is to improve the
following set of outcomes:- lower time to resolution and lower loss given default
by a legal entity, to reach a higher level of debt in enterprise financing, which
comes from all sources and not just secured credit.
In their deliberations, the Committee identified both a lack of clarity in the law as
well as problems of implementation. The Code proposed by the Committee aims
to reduce both. A central assumption is that rational creditors and debtors want to
maximise economic value, and are willing to negotiate to realise this value. The
legal framework comes into force to resolve conflict in these negotiations, either
between the creditors and debtor or between different creditors. With conflict,
each party acts to ensure their rights are upheld as an immediate response,
which inevitably affects the affect economic value of an entity adversely. The
proposed Code aims to create a legal framework that shifts the incentive of either
party from actions of individual recovery to collective action to realise as high an
economic value as possible of the entity under default.
Elements of the design

There are some key elements that evolved during the Committee discussions.
These are listed below.
Consolidation into a single Code

The Code provides resolution for all entities other than those with a dominantly
financial function which are covered in the Indian Financial Code proposed by
the Srikrishna, 2013. The Code applies to all creditors, whether they are domestic
or international in origin.
A calm period for negotiations

The Code provides for the creation of a calm period for creditors and debtors to
negotiate the viability of the entity. In the calm period a regulated insolvency
professional controls the assets under the supervision of an adjudicating authority.
The regulated insolvency professional manages the entity. During insolvency
resolution, there is a time bound moratorium against debt recovery actions and
any new cases filed. During bankruptcy resolution, the assets are in a trust
managed by a regulated insolvency professional. This helps assure creditors
and debtor that assets are protected while they negotiate.
BLRC REPORT 455
An adjudicating authority ensures adherence to the process

At all points, the adherence to the process and compliance with all applicable
laws is controlled by the adjudicating authority. The adjudicating authority gives
powers to the insolvency professional to take appropriate action against the
directors and management of the entity, with recommendations from the creditors
committee. All material actions and events during the process are recorded at
the adjudicating authority. The adjudicating authority can assess and penalise
frivolous applications. The adjudicator hears allegations of violations and fraud
while the process is on. The adjudicating authority will adjudicate on fraud,
particularly during the process resolving bankruptcy. Appeals/actions against
the behaviour of the insolvency professional are directed to the Regulator/
Adjudicator.
Managed by a regulated professional

An insolvency professional who is registered by the Bankruptcy and Insolvency
Board (Section 4.4) is explicitly appointed by the Adjudicator during the bankruptcy
and insolvency resolution process. This person is called the Resolution
Professional when she manages the insolvency resolution process, and Liquidator
when she manages the process during liquidation. This professional is given the
power by the Adjudicator to effectively run and manage the entity (when it is a
going concern), and the assets of the entity at all times during the process of
insolvency and bankruptcy resolution. The Code gives the power of registering
these professionals to the Regulator who in turn creates regulations for
qualifications, reporting, and performance monitoring. The Regulator is also in
charge of hearing appeals against these registered insolvency professionals,
and can take enforcement action against them.
Business decisions by a creditor committee

All decisions on matters of business will be taken by a committee of the financial
creditors. This includes evaluating proposals to keep the entity as a going concern,
including decisions about the sale of business or units, retiring or restructuring
debt. The debtor will be a non-voting member on the creditors committee, and
will be invited to all meetings. The voting of the creditors committee will be by
majority, where the majority requires more than 75 percent of the vote by weight.
Insolvency Resolution through managed, time-bound negotiations

The first phase of the insolvency and bankruptcy process is the period of the
Insolvency Resolution Process, or IRP. The assessment of insolvency is through
documentary proof, triggered either by the debtor or the creditor. The Resolution
Professional is appointed by the Adjudicator, on recommendation either by the
456 BLRC REPORT
creditor, the debtor or the Regulator. When the negotiations conclude on a solution
to keep the entity as a going concern, the Adjudicator will close the case of
insolvency. If there is no agreement on a solution, or if there is a solution that
contravenes any applicable law or does not meet the criteria prescribed in the
Code, the Adjudicator orders that the entity is bankrupt, and orders the start of
bankruptcy resolution, which is period of Liquidation.
No prescriptions on solutions to resolve the insolvency

The choice of the solution to keep the entity as a going concern will be voted on
by the creditors committee. There are no constraints on the proposals that the
Resolution Professional can present to the creditors committee. Other than the
majority vote of the creditors committee, the Resolution Professional needs to
confirm to the Adjudicator that the final solution complies with three additional
requirements. The first is that the solution must explicitly require the repayment of
any interim finance and costs of the insolvency resolution process will be paid in
priority to other payments. Secondly, the plan must explicitly include payment to
all creditors not on the creditors committee, within a reasonable period after the
solution is implemented. Lastly, the plan should comply with existing laws
governing the actions of the entity while implementing the solutions.
An irreversible, time-bound liquidation with defined payout prioritisation

If creditors cannot agree on a solution within a defined time, the Adjudicator
automatically passes a liquidation order on the entity with accompanying orders:
to appoint a Liquidator on recommendation of the Regulator; to move assets into
a liquidation trust, which is managed by the Liquidator; to change the name of the
entity in the registration records to include the phrase “in-liquidation” to the original
name. The board of this entity in liquidation is replaced by the creditors committee.
In this setting, there is clear accountability on the Liquidator, who is free to
maximise the value of assets in the most efficient manner of disposal. All
realisations from these sales go to the liquidation trust, and are distributed to
creditors according to waterfall defined in the Code. In the waterfall, after the
costs of the insolvency resolution process and liquidation, secured creditors
share the highest priority along with a defined period of workmen dues. All
distributions will be net of liquidator’s fees which will be deducted proportionately
from each stage of the payout in order to incentivise the liquidator to ensure
recovery to each class of recipient. The liquidation process is an irreversible
process from within a fixed period after the liquidation order is passed. An appeal
to stay the liquidation will not be considered by the Adjudicator.
The Committee believes that with the insolvency institutions described in Chapter
4, the implementation of the proposed Code are likely to achieve the objectives
BLRC REPORT 457
laid out in Section 3.4. The details of this proposed Code are presented in the
following sections.
Box 5.1 : Applicability of the Code

1. The Code will cover all individuals, companies, LLPs, partnerships
firms and other legal entities registered in India as may be notified,
except for those with a dominantly financial function. These are
covered under the Indian Financial Code, proposed by the Financial
Sector Legislative Reforms Commission.
2. The Code requires that the provisions and laws related to resolving
insolvency and bankruptcy for all these legal entities must be
repealed, and replaced by the provisions under this Code.
5.1 A single Code for all legal entities

The Committee recommends that there is a single Code to resolve insolvency for
all legal entities. The Code will not cover entities that have a dominantly financial
function, whose resolution is covered by the Resolution Corporation in the draft
Indian Financial Code, proposed by the Financial Sector Legislative Reforms
Commission. In order to ensure legal clarity, the Committee recommends that
provisions in existing law that deals with insolvency of all registered entities be
replaced by this Code (companies and limited liability partnerships to begin
with). Then, all questions related to insolvency of any legal entity in India will find
an answer in a single Code.
5.2 The calm period of the Insolvency Resolution Process, IRP

As described in Section 3.2.2, several conflicts arise between the debtor and
creditors when the debtor defaults on payments. While it is optimal for both
parties to negotiate to maximise value, the difference in their objectives lead
them to take individual action to protect their investments. The Code provides
legal recourse to both the debtor and the creditor for a calm period where these
negotiations can take place in an orderly, non-conflicted manner, managed by a
neutral third party professional.
The Insolvency Resolution Process, or IRP, is the period during which viability is
assessed in the Code proposed by the Committee.
5.2.1 Who can trigger the IRP?
The Committee considers that both the debtor and the creditors should have the
power to trigger insolvency resolution. However, the manner in which the two
parties can trigger the IRP will differ. The trigger for each party is such that it
creates an even balance of power for the negotiations in the IRP.
458 BLRC REPORT
Since debtors have the advantage of better information, and the IRP offers a calm
period for creditors and debtors to meet as equals in negotiations, the Code puts
the onus on debtors to reduce the information asymmetry as a part of triggering
the IRP. Thus, the debtor can be the management or the majority shareholder,
who has access to the degree of information that is required by the Code.
In the case of the creditors, the Code places the power of the outcome of
negotiations with creditors, where a majority decide on whether the entity can
continue as a going concern or must be liquidated. Therefore, the Code requires
that the creditor can only trigger the IRP on clear evidence of default.
Box 5.2 - Trigger for IRP

1. The IRP can be triggered by either the debtor or the creditors by submitting
documentation specified in the Code to the adjudicating authority.
2. For the debtor to trigger the IRP, she must be able to submit all the
documentation that is defined in the Code, and may be specified by the
Regulator above this.
3. The Code differentiates two categories of creditors: financial creditors
where the liability to the debtor arises from a solely financial transaction,
and operational creditors where the liability to the debtor arises in the
form of future payments in exchange for goods or services already
delivered. In cases where a creditor has both a solely financial transaction
as well as an operational transaction with the entity, the creditor will be
considered a financial creditor to the extent of the financial debt and an
operational creditor to the extent of the operational debt is more than
half the full liability it has with the debtor.
4. The Code will require different documentation for a debtor, a financial
creditor, and an operational creditor to trigger the IRP. These are listed
Box 5.3 under what the Adjudicator will accept as requirements to trigger
the IRP.
Here, the Code differentiates between financial creditors and operational creditors.
Financial creditors are those whose relationship with the entity is a pure financial
contract, such as a loan or a debt security. Operational creditors are those whose
liability from the entity comes from a transaction on operations. Thus, the
wholesale vendor of spare parts whose spark plugs are kept in inventory by the
car mechanic and who gets paid only after the spark plugs are sold is an
operational creditor. Similarly, the lessor that the entity rents out space from is an
operational creditor to whom the entity owes monthly rent on a three-year lease.
The Code also provides for cases where a creditor has both a solely financial
BLRC REPORT 459
transaction as well as an operational transaction with the entity. In such a case,

the creditor can be considered a financial creditor to the extent of the financial
debt and an operational creditor to the extent of the operational debt.
While both types of creditors can trigger the IRP under the Code, the evidence
presented to trigger varies. Since financial creditors have electronic records of
the liabilities filed in the Information Utilities of Section 4.3, incontrovertible event
of default on any financial credit contract can be readily verifiable by accessing
this system. The evidence submitted of default by the debtor to the operational
creditor may be in either electronic or physical form, since all operational creditors
may or may not have electronic filings of the debtors liability. Till such time that
the Information Utilities are ubiquitous, financial creditors may establish default
in a manner similar to operational creditors.
5.2.2 How can the IRP be triggered?
In most other jurisdictions, the trigger to start insolvency resolution procedures
against an entity requires evidence that is based on a test of insolvency. The
outcome of the tests are taken by the adjudicating authority as evidence to consider
the entity to be insolvent.
The Committee observes that there is no standardised, indisputable way to
establish insolvency. Several jurisdiction have balance sheet tests as one element
to determine insolvency. Another is the presentation of reasoned arguments for
why the entity should be considered insolvent. These too are based on
performance in balance sheets and cash-flow statements of the entity. The
balance sheet test is vulnerable to the quality of accounting standards. India
suffers from having both a low average standard of accounting quality as well a
wide variation across single entities. Therefore, the Code does not prescribe
fixed balance sheet variables or parameters as critical to triggering insolvency.
The proposed Code assumes that, under situations of stress in the entity, the
debtor and creditors have already have gone through negotiations to reach a
solution to keep the entity as a going concern. The IRP is considered as a last
course effort to resolve conflicts in the negotiations. Then triggering the IRP can
be assumed to be a considered step, after deliberation and preparation. Thus,
the Code specifies that insolvency can be triggered when the application for
insolvency resolution to the adjudicating authority is accompanied by appropriate
documentation. The documentation requirement to trigger insolvency differs for
debtors and creditors.
The Code requires that the documentation that the debtor provides with the
application to trigger the IRP must help reduce the information asymmetry faced
by creditors. The debtor must include statements of the audited balance sheet of
460 BLRC REPORT
the entity at the time of application, with all assets and liabilities, as well as the
audited balance sheet for the two years prior to the application, and the cash-
flow status of the entity during the same period. The Code also requires that these
documents are submitted with a “Statement of Truth” document signed by the
debtor applicant. The Code requires that the debtor propose a registered Insolvency
Professional to manage the IRP.
An application from a creditor must have a record of the liability and evidence of
the entity having defaulted on payments. The Committee recommends different
documenta-tion requirements depending upon the type of creditor, either financial
or operational. A financial creditor must submit a record of default by the entity as
recorded in a registered Information Utility (referred to as the IU) as described in
Section 4.3 (or on the basis of other evidence). The default can be to any financial
creditor to the entity, and not restricted to the creditor who triggers the IRP. The
Code requires that the financial creditor propose a registered Insolvency
Professional to manage the IRP. Operational creditors must present an “undisputed
bill” which may be filed at a registered information utility as requirement to trigger
the IRP. The Code does not require the operational creditor to propose a registered
Insolvency Professional to manage the IRP. If a professional is not proposed by
the operational creditor, and the IRP is successfully triggered, the Code requires
the Adjudicator to approach the Regulator for a registered Insolvency Professional
for the case.
When the Adjudicator receives the application, she confirms the validity ofthe
documents before the case can be registered by confirming the documentation
in the information utility if applicable. In case the debtor triggers the IRP, the list of
documentation provided by the debtor is checked against the required list. The
proposal for the RP is forwarded to the Regulator for validation. If both the
documentation and the proposed RP checks out as required within the time
specified in regulations, the Adjudicator registers the IRP.
In case the financial creditor triggers the IRP, the Adjudicator verifies the default
from the information utility (if the default has been filed with an information utility,
tit such be incontrovertible evidence of the existence of a default) or otherwise
confirms the existence of default through the additional evidence adduced by the
financial creditor, and puts forward the proposal for the RP to the Regulator for
validation. In case the operational creditor triggers the IRP, the Adjudicator verifies
the documentation. Simultaneously, the Adjudicator requests the Regulator for
an RP. If either step cannot be verified, or the process verification exceeds the
specified amount of time, then the Adjudicator rejects the application, with a
reasoned order for the rejection. The order rejecting the application cannot be
appealed against. Instead, application has to be made afresh. Once the documents
BLRC REPORT 461
are verified within a specified amount of time, the Adjudicator will trigger the IRP
and register the IRP by issuing an order. The order will contain a unique ID that
will be issued for the case by which all reports and records that are generated
during the IRP will be stored, and accessed.
Box 5.3: Drafting instructions for how the IRP can be triggered.
1. The Adjudicating authority will accept the application to start an IRP
under the following conditions:
(a) If the application contains the required documentation; and
(b) If these can be verified by the Adjudicator.
If there are gaps in the documentation or challenges while verifying
the submitted material, the Adjudicator will reject the application
and not register the IRP.
2. The documentation required depends upon who triggers and varies
as follows:
(a) If the debtor has applied, the application contains:
i. Audited record of business operations for the previous
two years. If such information has been filed at a registered
information utility, then the documentation must be
consistent with the filling at the Information Utility;
ii. Audited record of financial and operations payments for
the previous two years.
If such information has been filed at a registered
information utility then the documentation must be
consistent with the filling at the Information Utility;
iii. Audited statement of list of assets and list of liabilities at
the time of application for the IRP. If such information has
been filed at a registered information utility then the
documentation must be consistent with the filling at the
Information Utility;
iv. A signed Statement of Truth document;
v. A proposed Resolution Professional; and
vi. Any other documentation specified by the Regulator.
(b) If the financial creditor has applied, the application contains:
462 BLRC REPORT
i. Record of existing liability with the debtor and where

applicable, information of such liability as filed at a
registered information utility;
ii. Record of default from credit contract and where
applicable, information of such default as filed at a
registered information utility ;
iii. A proposed Resolution Professional; and
iv. Any other documentation specified by the Regulator.
(c) If an operational creditor has applied, the application contains:
i. Record of an undisputed bill against the entity, and where
applicable, information of such undisputed as filed at a
registered information utility.
3. The Adjudicator will seek verification from the Regulator about the
Insolvency Professional proposed by the debtor or the financial
creditor before registering the IRP.
4. The Regulator can issue regulations to add to the documentation
that is required to trigger IRP from time to time.
5. If the Adjudicator cannot verify the required documentation or the
credentials of the Insolvency Professional within a specified period, the
application will be rejected with a reasoned order. The Code does not
allow an appeal against the rejection of the IRP application. A fresh
application can be made to trigger the IRP, without any restrictions.
5.3 Process flow of the IRP

The registration of the case for the IRP acts as the first public announcement
about the entity being in stress.
Box 5.4 : Drafting instructions for the maximum period allowed for
the IRP at registration
1. The Code will define a default maximum IRP period within which to
conclude the negotia-tions to find a solution to the insolvency of the
entity. The period does not include the date of registration of the IRP.
2. The Code permits that the maximum period of insolvency resolution can
be less than the default maximum period for special cases that are
defined under the Fast-track IRP as defined in Section 5.4. However these
can not be longer than the default maximum IRP period.
BLRC REPORT 463
3. At the successful trigger of an IRP, the registered case is recorded with a

unique case number as well as the date beyond which the IRP will be
considered closed.
The Code defines a default maximum time allowed as the duration of the calm
period to be 180 days. The period is calculated from the start of the IRP, not
including the date of registration. The Committee had discussions with the stressed
asset managers at financial firms as well as asset reconstruction specialists,
who suggested that 180 days is a reasonable time to evaluate a stressed entity
and propose a solution to keep it as a going concern, for even the more complex
cases of insolvency. In the event 75% of the committee of creditors vote that a
debtor’s information is especially opaque or the resolution is complex, they may
apply to the Adjudicating Authority for a single extension of another 90 days. A
debtor or a smaller number of creditors shall in no event be entitled to ask for an
extension of the IRP period.
Often, for cases of smaller entities with simpler liability structures, questions of
insolvency can be resolved in a much shorter time than the default maximum IRP
period. Thus, the default maximum IRP period is an upper threshold: the RP can
submit to the Adjudicator that the insolvency has been resolved at anytime within
the default maximum period. The Committee acknowledges the need to set the
maximum period for special cases, such as small and medium entities, to be
lower than the default maximum set in the Code to cover any entity. These are
provided for separately in the Code as Fast-track IRPs. These are described in
Section 5.4.
At the registration of the IRP, the Adjudicator assigns a unique case number and
the maximum date after which the IRP is considered closed, which is calculated
depending upon the type of the IRP.
Once the case is registered, there are three distinct parts to the IRP: the steps at
the start, the period in between managed by the Resolution Professional (referred
to as the RP) and the steps at the close of the IRP.
5.3.1 Steps at the start of the IRP
In order to ensure that the resolution can proceed in an orderly manner, it is
important for the Adjudicator to put in place an environment of a “calm period”
with a definite time of closure, that will assure both the debtor and creditors of a
time-bound and level field in their negotiations to assess viability.
The first steps that the Adjudicator takes is put in place an order for a moratorium
on debt recovery actions and any existing or new law suits being filed in other
courts, a public announcement to collect claims of liabilities, the appointment of
an interim RP and the creation of a creditor committee.
464 BLRC REPORT
Box 5.5: Drafting instructions for the moratorium order at

the start of the IRP
1. The Adjudicator will issue an order for a moratorium from the time that
the IRP case is registered against the debtor entity.
2. The moratorium will cover all debt recovery cases by existing financial
creditors or operational creditors, and new cases filed to establish fresh
claims after the start of the IRP.
3. The moratorium will be come to an end under one of the following
conditions:
(a) the Adjudicator receives a submission from the RP with a signed
statement from the creditors with an agreement to keep the entity
as a going concern;
(b) the period of the IRP reaches the default maximum period days; or
1. Moratorium on debt recovery action

The motivation behind the moratorium is that it is value maximising for the entity
to continue operations even as viability is being assessed during the IRP. There
should be no additional stress on the business after the public announcement of
the IRP. The order for the moratorium during the IRP imposes a stay not just on
debt recovery actions, but also any claims or expected claims from old lawsuits,
or on new lawsuits, for any manner of recovery from the entity.
The moratorium will be active for the period over which the IRP is active.
2. Public announcement of IRP and collection of claims

The Adjudicator issues an order for the public announcement of the IRP. The
announcement will include a location where all creditors can file claims of liability
against the entity, as specified in regulations. The manner of filing must afford the
opportunity to all creditors to submit their claim to be considered while resolving
insolvency, and be counted in the priority of claims during liquidation if the
negotiations fail.
The announcement for the filing of liabilities must be carried out in a manner as
specified by the Regulator. For example, regulations will be issued which define
the information that must accompany a liability claim, such as the name of the
claimant, address at which they can be reached, the size and nature of the
liability. The Regulator will also define the format in which it must be submitted,
and the penalties that will be imposed on false or misleading claims. The
announcement will include the date up to which the claims can be filed.
BLRC REPORT 465
The information will be collected and maintained by the interim RP, appointed by
the Adjudicator.
3. Appoint an interim Resolution Professional

The Adjudicator appoints an interim RP at the start of the IRP. The interim RP has
the following responsibilities: the collection of claims, the collection of information
about the entity from the debtor in the case of a creditor triggered IRP, the creation
of the creditor committee and taking over the management of the operations and
monitoring the assets of the entity in IRP.
Box 5.6: Drafting instructions for the public announcement for filing
creditor claims at the start of the IRP
1. The Adjudicator will issue an order for public announcement of the IRP.
This announce-ment must at least include:
(a) Name of the entity;
(b) Address of the entity;
(c) Name of the registration authority; and
(d) Date by which the IRP will be automatically closed.
2. This announcement will be available at defined locations as specified
by the Regulator, as well as at the website of the Adjudicator.
3. The office of the Adjudicator will also issue a public announcement
calling for the submission of claims against the entity. This announcement
will have the following details.
(a) The date on which the window for submissions will be closed;
(b) The details of the information that is required to be submitted, and
the fonnat in which it is to be submitted
(c) The details of the interim RP who will be responsible for collecting
such claims;
(d) The penalties for submitting false or misleading claims.
4. The filings of the liabilities will be collected and compiled by the interim
RP appointed by the Adjudicator.
How is the interim RP selected? If the IRP has been triggered by the debtor or
financial creditor, the interim RP appointed will be the IP proposed in the
application. If no RP has been proposed, then the Adjudicator will apply to the
Regulator to provide an interim RP for the case. The appointment process will be
as specified by the Regulator.
466 BLRC REPORT
In order to assure the creditors that the assets of the entity will be protected, the
Adjudicator will give the interim RP the power to run the entity as a going concern.
This includes the power to take over management of the business and the property
of the entity, as well as to bring in working capital and fresh funds by granting
security over the property of the entity if required. The term of the fresh financing
sourced will be constrained to be within the term for which the IP will be the
interim RP. The costs of the financing will be counted as IRP costs.
The Adjudicator will also give the interim RP the responsibility of collecting and
collating liability claims. This includes access to the electronic records of liabilities
of the entity that are filed in a registered IU. The information about the financial
creditors will be used to form the creditors committee.
Finally, where the IRP has been triggered by a creditor, the Adjudicator will give
the interim RP the responsibility of collecting the information about the entity that
is equivalent to the information that would be present in a debtor triggered IRP.
This involves getting access to the information, and filing it in a registered IU if
required. If the debtor does not respond to the requests for the information, the
interim RP can file a complaint with the Adjudicating Authority.
4. Creation of the creditors committee

The creditors committee will have the power to decide the final solution by majority
vote in the negotiations. The majority vote requires more than or equal to 75
percent of the creditors committee by weight of the total financial liabilities. The
majority vote will also involve a cram down option on any dissenting creditors
once the majority vote is obtained. The Adjudicator enables the RP to clarify
matters of business from the creditors committee during the course of the IRP. For
example, if the RP needs to raise fresh financing during the IRP, she may seek
approval from the creditors committee rather than the Adjudicator. The list of
these matters which fall in the responsibility of the creditors committee will be
specified in the Code.
Box 5.7 : Drafting instructions for appointing the intrim RP at the

start of the IRP
1. The Adjudicator will pass an order appointing an interim RP at the start of
the IRP.
2. The interim RP will either be the registered Insolvency Professional
proposed in the IRP application of the debtor or the financial creditor, or
proposed by the Regulator if the IRP application does not propose an RP.
3. The interim RP lias the responsibility to collect and collate the information
BLRC REPORT 467
about the creditors, both financial and operational. The Adjudicator will
enable access for the interim RP into the IU records of the entity for this
purpose.
4. The interim RP lias the responsibility to collect and collate the information
about the assets, finances and operations of the entity to the same depth
as will be available to the Adjudicator under a debtor triggered IRP. The
Adjudicator will enable access for the interim RP into the records of the
entity at the relevant IUs for this purpose.
5. If the debtor is non-cooperative, the interim RP can appeal to the
Adjudicator against the management. The Code specifies that the
Adjudicator will issue an order to the debtor for release of the information.
If the debtor continues to be non-cooperative, the Adjudicator will issue
an order to the RP to replace management, and impose a monetary
penalty as specified in regulations.
6. The interim RP is given the power to do all the tilings that are necessary
for the entity to continue as a going concern. This includes taking over
the management of the business and the assets of the entity, appointing
accountants and legal staff to verily liabilities and assets and issue legal
notices if required.
7. The interim RP has the power to raise fresh finances to keep the entity as
a going concern. The tenn of the financing is restricted to the period till
the creditors committee is formed. The cost of financing actions of the
interim RP will be considered as the cost of the IRP.
The Committee deliberated on who should be on the creditors committee, given
the power of the creditors committee to ultimately keep the entity as a going
concern or liquidate it. The Committee reasoned that members of the creditors
committee have to be creditors both with the capability to assess viability, as well
as to be willing to modify terms of existing liabilities in negotiations. Typically,
operational creditors are neither able to decide on matters regarding the
insolvency of the entity, nor willing to take the risk of postponing payments for
better future prospects for the entity. The Committee concluded that, for the process
to be rapid and efficient, the Code will provide that the creditors committee should
be restricted to only the financial creditors.
Then, in order to create the creditors committee, all financial creditors of the entity
have to be identified. This information is expected to be readily available in the
registered IUs described in Section 4.3. The Adjudicator gives the interim RP the
power to access information about the financial creditors of the entity in the IUs or
any other registry or database where information regarding creditors will be
468 BLRC REPORT
recorded. The interim RP has the power to obtain information from the debtor to
validate the set and weight of the financial creditors if required. The definition of
a financial creditor will be stated in the Code. The calculation of the weight of the
financial creditor will be specified in regulations.
Box 5.8: Drafting instructions for creating the creditors committee at the
start of the IRP
1. The creditors committee will contain all the financial creditors to the
entity. (See Box .2 for the definition of the financial creditor.)
2. The debtor must be invited to all meetings of creditors committee as a
non-voting member. He can be present for discussions on matters of
business, but does not have a vote in deciding any outcome.
3. A member of the creditor committee may designate an Insolvency
Professional to represent them in the creditors committee, whose fees
will be paid directly by the creditor and not be included in the costs of the
IRP.
4. The interim RP will identity the set of all financial creditors from the
information utilities, and submit the proposed creditors committee to the
Adjudicator within fifteen days from the start of the IRP. A failure to do this
within the stipulated period will be taken as a failure to adhere to the
processes of the IRP.
5. The final choice of solution to keep the entity as a going concern, or
whether it should be liquidated, will be decided by majority vote in the
creditors committee. The majority vote will be more than or equal to 75
percent of the votes of the creditors committee by weight of their liability.
If a creditor chooses not to participate in the vote, the votes and the
majority will be counted without their vote.
6. The creditors committee also has the responsibility to take decisions on
questions relating the matters of business raised by the RP during the
IRP which affects the economic value of the entity.
7. The interim RP will continue to be the RP for the remainder of the IRP,
unless the creditors committee applies to the Adjudicator to appoint a
fresh RP.
Once the verification has been completed, the interim RP will apply to the
Adjudicator to send notices to the financial creditors informing them about their
voting rights, duties and responsibilities on the creditor committee for the IRP
case. The creditors have to acknowledge the receipts of these notices. A creditor
can appoint an insolvency professional as their representative on the creditors
BLRC REPORT 469
committee. However, the fees of this professional will be borne by the creditor
and not counted as part of the IRP costs.
The voting right of each creditor will be the weight of their liability in the total
liability of the entity from financial creditors. The calculation for these weights will
need to take into account all the contractual agreements between the creditor
and debtor, so that the weight is the net of all these positions. The rules to calculate
the weights of the creditors will be specified by the Regulator. If a creditor chooses
not to participate in the negotiations, despite having been so informed, the vote of
creditors committee will be calculated without the vote of this creditor.
The Committee concludes that the debtor will be present at all the meetings of
the creditors committees, but can have no voting rights. Thus, the debtor becomes
a non-voting member on the creditors committee.
5.3.2 The role of the Resolution Professional
The first phase of the IRP is completed when the creditors committee is formed,
and the window to submit claims is closed. The creditors committee can apply to
the Adjudicator to appoint a new RP to replace the interim RP. The RP must be
chosen by a majority vote in the creditors committee for the Adjudicator to accept
the application.
With a creditor committee in place, the RP has a wider role, in addition to monitoring
and supervising the entity, and controlling its assets. In carrying out this role, if
there are questions of business that arise, she can call on the creditors committee
to give clarification or guidance on how she can proceed. For example, if there is
evidence of fraudulent practice in the existing management, the RP can hire legal
services to prepare a case of fraud against the management. She has the power
to convene the creditors committee, present the evidence before them and ask
for a vote to ratify a proposed change in the management, as well as to proceed
to bring the case of fraud for adjudication to the Bankruptcy and Insolvency
Adjudicator.
The RP becomes the manager of the negotiation between the debtor and the
creditors in assessing the viability of the entity. In this role, she has the
responsibility of managing all information so that debtors and creditors are equally
informed about the business in the negotiations. Finally, she is responsible for
inviting and collecting proposals of solutions to keep the entity going. In this role,
she is responsible for managing the process through which to invite proposals
from the overall financial market, rather than just the creditors and debtor. The
Committee discussed that this could include other potential market participants,
such as other financial institutions, asset reconstruction companies, foreign
financiers, strategic investors, other firms and minority shareholders in the entity.
470 BLRC REPORT
Part of the task of the RP is to ensure as much equality of information about the
entity to all participants in the negotiations as is possible.
Thus, the RP needs to ensure several features in the IRP, giving first priority to the
need to preserve time value and equality in negotiations in the process.
1. The RP must provide the most updated information about the entity as
accurately as is reasonably possible to this range of solution providers. In
order to do this, the RP has to be able to verify claims to liabilities as well
as the assets disclosed by the entity. The RP has the power to appoint
whatever outside resources that she may require in order to carry out this
task, including accounting and consulting services.
2. The information collected on the entity is used to compile an information
memorandum, which is signed off by the debtor and the creditors
committee, based on which solutions can be offered to resolve the
insolvency. In order for the market to provide solutions to keep the entity
as a going concern, the information memorandum must be made available
to potential financiers within a reasonable period of time from her
appointment to the IRP. If the information is not comprehensive, the RP
must put out the information memorandum with a degree of completeness
of the information that she is willing to certify.
For example, as part of the information memorandum, the RP must clearly
state the expected shortfall in the coverage of the liabilities and assets of
the entity presented in the information memorandum. Here, the asset
and liabilities include those that the RP can ascertain and verify from the
accounts of the entity, the records in the information system, the liabilities
submitted at the start of the IRP, or any other source as may be specified
by the Regulator.
3. Once the information memorandum is created, the RP must make sure
that it is readily available to whoever is interested to bid a solution for the
IRP. She has to inform the market (a) that she is the RP in charge of this
case, (b) about a transparent mechanism through which interested third
parties can access the information memorandum, (c) about the time frame
within which possible solutions must be presented and (d) with a channel
through which solutions can be submitted for evaluation. The Code does
not specify details of the manner or the mechanism in which this should
be done, but rather emphasises that it must be done in a time-bound
manner and that it is accessible to all possible interested parties.
Finally, the RP is responsible for calling the creditors committee to evaluate the
submitted proposals. She has a role to play in discussing and ranking the proposals
BLRC REPORT 471
in terms of how to maximise enterprise value. As a first stage filter, she must
ensure that all the proposals have clarity on how the IRP costs and the liabilities
of the operational creditors will be treated and that all parts of the proposed
solutions are consistent with the relevant laws and regulations. But she must
leave the choice of final solution to selection by the majority vote from the creditors
committee.
Fees charged by the RP

The Committee is of the view that there should be no constraints on RP fees. In a
competitive market for the insolvency professionals, the fees for managing the
insolvency resolution process will converge to the fair market value for the size of
the entity involved. While the market is evolving, the Code tries to ensure that
there is as much transparency about the behaviour and the performance of
individual insolvency professionals that the professional, creditors and debtors
are incentivised to behave optimally. For example, the fees charged by the
professional is collected as part of the records of the IRP, which is maintained in
a public database by the Regulator. Since this will be recorded and disseminated
for all professionals across all resolution cases, the potential customers can
compare fees across professionals, along with all the other performance
measures that are also maintained. This includes size of the insolvency being
resolved, the days taken for resolution, the frequency with which entities are
resolved and turn out to be successful turnarounds and the frequency with which
entities are resolved but eventually turn up for liquidation. Then, customers will
be able to carry out a fee-performance when choosing among professionals to
engage for other cases.
The Committee feels it is prudent to allow the market to develop and competition
to drive charges of the RP rather than setting these in the Code, or in regulations.
In any competitive market, we expect that there will be a range of services
available for a range of problems. However, there is one case that will require
intervention. When the insolvency is brought for resolution well within time, there
is typically a sizeable amount of assets that support the fees of insolvency
resolution. On the other hand, this is not the case for an insolvency that is
discovered at a late stage. In a typical situation, there will have been a build up of
the leverage by the entity borrowing at higher rates to make payments. Or assets
may have been sold or pledged for cash to make payments. Experience from
other jurisdictions suggest that there will be cases of low or no asset entities
which come to the Adjudicator for resolution. In this case, the Adjudicator can
approach the Regulator to recommend an RP who will be appointed with the
condition that her services will be offered at a minimum charge, paid for by the
Regulator. The requirement to offer to serve in a minimum number of such cases
472 BLRC REPORT
will be part of the requirements of continuing registration for the insolvency

professional.
Box 5.9 : Drafting instructions for the role of the

Resolution Professional (RP)
1. The interim RP can continue to be the RP for the rest of the IRP.
2. The creditors committee can apply to the Adjudicator to appoint a new
RP with a majority vote from the creditors committee.
3. The RP has the following responsibilities:
(a) To take control over all the assets entitled to the entity;
(b) To manage the entity so that it remains a going concern during the IRP;
(c) To call meetings of the creditors committee for guidance on how to
resolve matters related to keeping the entity as a going concern if
required.
(d) To verify accounts and liabilities as is required;
(e) To raise finances to carry on operations;
(f) To create an information memorandum about the entity on the
basis of which solutions can be proposed to keep it as a going
concern;
(g) To provide the information memorandum to whoever wishes to
make a proposal, and to provide a visible channel through which
proposals can be submitted for evaluation;
(h) To ensure that all submitted proposals provide for the payment of
the liabilities of the operational creditors within a reasonable period
as specified by the Regulator;
(i) To call meetings of the creditors committee for evaluation of
proposals; and
(j) To ensure that all actions are taken in a time-bound and transparent
manner.
4. The RP has the power to:
(a) Take any action required to manage the entity so that it remains a
going concern during the IRP;
(b) Remove any director of the company and to appoint a replacement
if required;
BLRC REPORT 473
(c) Issue notices against fraudulent behaviour for the purposes of

recovery if required, and bring such cases for adjudication to the
Adjudicator;
(d) Issue public announcements about the availability of the
information memorandum and a mechanism through which
proposals to keep the entity as a going concern can be submitted
for evaluation by the creditors committee; and
(e) Call any meeting of the members or creditors of the company
when required.
5. The charges and costs incurred by the RP will be part of the resolution
costs.
Box 5.10 : Drafting instructions for the role of the

Resolution Professional (RP)
1. The fees charged by the RP will be as an outcome from market forces,
and not set in the Code or provided in regulations.
2. The Regulator will require that any registered insolvency professional
will offer her services at a nominal charge for a certain minimum number
of cases a year. The fees will be paid by the Regulator in this case. The
same requirement will hold for all registered professionals. The manner
in which the Regulator will select the professional for the case will be
specified in regulations.
5.3.3 Obtaining the resolution to insolvency in the IRP
The Committee is of the opinion that there should be freedom permitted to the
overall market to propose solutions on keeping the entity as a going concern.
Since the manner and the type of possible solutions are specific to the time and
environment in which the insolvency becomes visible, it is expected to evolve
over time, and with the development of the market. The Code will be open to all
forms of solutions for keeping the entity going without prejudice, within the rest of
the constraints of the IRP. Therefore, how the insolvency is to be resolved will not
be prescribed in the Code. There will be no restriction in the Code on possible
ways in which the business model of the entity, or its financial model, or both, can
be changed so as to keep the entity as a going concern. The Code will not state
that the entity is to be revived, or the debt is to be restructured, or the entity is to be
liquidated. This decision will come from the deliberations of the creditors
committee in response to the solutions proposed by the market.
There are three aspects of this process that the Code does state. The first is that
474 BLRC REPORT
the process of obtaining solutions is provided with all information as can be

reasonably expected at the time, is transparent and is time-bound.
The second is that any proposed solution must explicitly account for the IRP costs
and the liabilities of the operational creditors within a reasonable period from the
approval of the solution if it is approved. The Committee argues that there must
be a counterbalance to operational creditors not having a vote on the creditors
committee. Thus, they concluded that the dues of the operational creditors must
have priority in being paid as an explicit part of the proposed solution. This must
be ensured by the RP in evaluating a proposal before bringing it to the creditors
committee. If there is ambiguity about the coverage of the liability in the information
memorandum that the RP presents to garner solutions, then the RP must ensure
that this is clearly stated and accounted for in the proposed solution.
Box 5.11: Drafting instructions for solutions to an IRP

1. As stated in Box 5.9, the RP must ensure as comprehensive an
information memorandum as possible about the state of the entity as of
the time of the IRP.
2. As stated in Box 5.9, the RP must create a universally visible process
through which to gather and collect proposals to resolve the IRP.
3. For all the proposals received, the RP must apply the following two filters
before it can be considered ready for submission to the creditors
committee:
(a) The RP must ensure that all proposals must include timely payment
to verified liabil-ities of operational creditors and others not
represented on the creditors committee, within time frames that
are specified by the Regulator.
(b) The RP must verify that the solutions proposed are consistent with
relevant laws that govern corporate actions of the given entity.
4. The RP must ensure that the collection and presentation of the proposed
solutions to the creditors committee is done keeping in consideration
the time limit available for the IRP.
5. The RP must ensure that the solution agreed upon by majority vote in the
creditors committee is presented as a binding contract signed by the
majority to the Adjudicator within the time limit available.
6. If the solution involves the exercise of the cram-down choice, the RP can
apply to the Adjudicator for a moratorium against debt recovery action
during the time period required for the solution.
BLRC REPORT 475
The third is that any solution that is presented must recognise restrictions and
requirements from related laws. This holds particularly for corporate actions,
which have provisions in Act governing the form of the given entity. For example,
if the entity is a listed firm and the solution involves a merger of the entity with
another, the solution must include awareness of the rules and regulations
governing the merger of firms under Companies Act 2013, and SEBI (Substantial
Acquisition of Shares and Takeover) Regulations if the firm is listed on an exchange.
The remaining mechanics of the process to acquire solutions and communicating
these to the creditors committee is left to the management by the RP as described
in Box 5.9. The Code states how the RP can call the creditors committee, and
what constitutes majority vote. Once the majority is obtained as stated in the
Code, the RP will have to obtain a signed agreement to the solution by the
creditors committee, and submit it to the Adjudicator before the end of the
maximum period for the IRP. This solution will be the outcome of the IRP.
5.3.4 Rules to close the IRP
The Committee agrees that it is critical for the Code to preserve the time value of
the entity by ensuring that negotiations in the IRP are time bound. The Code states
that the IRP has a default maximum time limit that is strictly adhered to, regardless
of whether the creditors committee has identified a solution. On the other side,
the Committee is also of the view that, if a solution can be identified within a
shorter time frame, the process must accommodate closing the IRP in a shorter
time period also.
The Committee proposes that the IRP can come to a close in either of two ways.
Either the RP is able to get a binding agreement from the majority of the creditors
committee or the calm period reaches the default maximum date set by the
Adjudicator at the start of the IRP. If either condition is met, the Adjudicator will
issue an order to close the IRP. However, the orders will vary depending upon the
condition.
Box 5.12: Drafting instructions for closing the IRP case

1. The IRP will come to an end when any of the following conditions is
reached:
(a) the Adjudicator receives a submission from RP with a signed
agreement of a solution with a majority from the creditors
committee; or
(b) the period of the IRP has reached the default maximum IRP period.
This is referred to as the outcome of the IRP.
476 BLRC REPORT
2. The Adjudicator will pass an order closing the IRP case. The order will be
of one of two types depending upon the :
(a) An order closing the case, if the RP submits a binding agreement
from the majority of the creditor committee to a proposed solution.
(b) An order closing the case and an order of liquidation of the entity,
if the calm period has reached the end of 180 days and the RP has
not submitted a binding agreement from the majority of the creditor
committee. If 75% of the creditors think that the resolution will
require additional time, the resolution professional (on the
instructions of the committee of creditors) may make an application
to the Adjudicating Authority for another 90 days. The debtor or
other creditors will not be entitled to make an application for
extension of time.
3. The Adjudicator will simultaneously pass orders to:
(a) Lift the moratorium;
(b) Release the RP from the case if required; and
(c) Release the records of the IRP to the Regulator.
If the RP submits a binding agreement to the Adjudicator before the default
maximum date, then the Adjudicator orders the IRP case to be closed. If the
Adjudicator does not receive a binding agreement by this date, the Adjudicator
issues an order to close the IRP case along with an order to liquidate the entity.
When the IRP case is closed, the Adjudicator will also issue following set of
orders:
1. To lift the moratorium put in place for the IRP,
2. To release the RP as required; and
3. To release the IRP records to the Regulator.
In the case where the IRP resolves that the entity cannot be kept as a going
concern and the Adjudicator issues an order for liquidation, the Adjudicator may
order the RP to continue managing the assets of the entity during the Liquidation.
5.4 Fast-track IRP

By default, each IRP must be carried out within the default maximum period set in
the Code (Box 5.4). However, this is the time taken for the resolution of a very
complex entity, where complexity may come in the structure of liabilities and
assets, or size of operations. Most entities are likely to have a less complex
BLRC REPORT 477
structure in these aspects. Their insolvency is also likely to take a shorter time to
resolve. For example, the time taken to resolve a conflict for an entity with a single
secured creditor who has more than 80 percent of the financial liability is likely to
take a shorter time to resolve than one with multiple creditors where the maximum
exposure is 20 percent. Another example is that of an insolvent entity where the
debtor or the majority of the creditors have a robust argument for liquidation as
the most efficient outcome.
While it is likely that the creditors and debtors themselves chose to wind down
negotiations in a shorter period than the default maximum period allowed, the
Committee view is that there is merit in creating explicit provisions for cases
where the IRP to be necessarily carried out in shorter time periods than the most
complex case. These cases will be called the Fast-track IRP. The Code will specify
three types of fast-track cases: for entities with small scale of operations, for
entities with low complexity of creditors and for such other categories of corporate
debtors as may be prescribed. In the first two, definitions of what constitutes such
entities will be issued by the Central Government.
In Fast-track cases, the process flow of the IRP will be the same in order to retain
the principles of transparency and collective action. Since the resolution is expected
to be done in a shorter period, there will be greater onus on the process at trigger.
The entity who triggers the Fast-track process must submit documentation with
the application to support the case for the Fast-track IRP. The Adjudicator will seek
validation from the other parties involved before issuing the order for a Fast-track
IRP. For example, if the creditor triggers the small entity Fast-track IRP, the application
must include audited statements that the entity is eligible for this process. The
Adjudicator will forward these to the debtor for validation. If there is no dispute
from the debtor on the eligibility documents within a specified amount of time,
the Adjudicator will issue the order for the Fast-track IRP.
With the registration of the case, a process similar to that at the start of an IRP will
commence. There will be an interim RP who is in charge of collection of claims,
monitoring the entity and the creation of a creditors committee. Once the creditors
committee is formed, the RP will verify the submitted liabilities to the best of her
ability. She will have the same responsibilities as defined in Box 5.9, but a shorter
time period within which to resolve the insolvency. The Committee recommends
that this time period should be at least half the time taken for the complex cases,
or within 90 days. Similar to the provision for IRP, in a fast-track process, if more
than 75% of the creditors are of the view that more time is required to resolve the
stress, they may apply to the Adjudicating Authority for an extension. The debtor
or any other creditor will not be entitled to seek an extension. While these are the
cases that have been visualised at the start, the Committee feels that the Regulator
478 BLRC REPORT
can issue regulations to create more cases for Fast-track IRP as the case history
builds under this Code.
5.5 A time-bound, efficient Liquidation

Liquidation is the state the entity enters at the end of an IRP, where neither creditors
nor debtors can find a commonly agreeable solution by which to keep the entity
as a going concern. In India, it is widely accepted that liquidation is a weak link in
the bankruptcy process and must be strengthened as part of ensuring a robust
legal framework. The process flow in liquidation shares some objectives in
common with that of resolving insolvency. Preservation of time value is the most
important, and efficient outcomes under collective action is the next, both of
which are important principles driving the design. However, this is not
straightforward in implementation, particularly in an environment where different
creditors have different rights over the assets of the entity, information is
asymmetric, and governance and enforcement has been traditionally weak.
Box 5.13: Drafting instructions for Fast-track IRP

1. The Code and the regulations thereunder will have provisions for Fast-
track IRP.
2. The Fast-track IRP differs from the default in two ways:
(a) If the order for the Fast-track IRP is passed, the interim RP and RP
are informed of the shorter time period within which they have to
carry out their responsibilities.
(b) In order to trigger the Fast-track process:
i. The entity who is triggering the IRP must submit a separate
application for the fast-track process.
ii. The fast-track application must contain a statement with
evidence supporting the case for Fast-rack that is signed by
an Insolvency Professional.
iii. The Adjudicator will forward the application for the Fast-track
to the entity that did not trigger the IRP.
iv. If there is no objection raised to the fast-track within two days
of the Ad-judicator sending out the application, the Adjudicator
will issue an order to register the IRP as a fast-track process.
v. If there is an objection, the following process must be
followed:
BLRC REPORT 479
A. An objection must be submitted with evidence of why

the triggering application is incorrect, and it must be
signed off by an Insolvency Professional.
B. On receiving such an objection, the Adjudicator will
confirm that due process has been followed and
forward it to the Insolvency Professional proposed by
the triggering entity for a rebuttal.
C. If there is no response from the triggering entity by the
end of the next day, the Adjudicator will reject both the
application for the IRP and the Fast-track process, and
ask the triggering entity to submit the IRP application
without the Fast-track application.
D. If a response is received that is signed off by the RP
within the designated time, the Adjudicator will accept
the Fast-track application and register the Fast-track
IRP.
The Committee presents some principles that the provisions of the Code must
hold in Liquidation :
1. Only assets that are owned by the entity, as it was in place before the IRP,
is available for liquidation.
2. The entity loses beneficial ownership on the assets. The ownership is
moved to a liquidation trust and the liquidator manages this trust. The
assets are taken over as is - with all encumbrances.
3. Secured creditors can choose to enforce their security interest after the
liquidation order is passed.
4. Liabilities that were in place before the IRP are unaffected by the liquidation.
Only liabilities that are written before liquidation can have a right to
distribution under liquidation.
5. Creditors have no direct interest in the realisation or distribution of
liquidation. They can only charge the liquidator to carry out her statutory
duties.
6. Under liquidation, all liabilities that are fully earned are accelerated to the
time of the liquidation. Liabilities that are not earned can only demand
what has already fallen due.
7. Members of a limited liability firm are not liable for its dues. Exceptions
include: where the entity is registered as an unlimited liability firm; where
480 BLRC REPORT
the entity acts as the agent of the members; or where they undertake a
collateral liability such as a guarantee or other such contracts. Individual
members can also be liable for instances of explicit fraud.
8. Foreign creditors are treated on par with domestic creditors.
With these principles, the Code states the process of liquidation as following the
following process flow: well defined triggers - who can trigger and how the
trigger can be accepted; the process flow once liquidation is triggered as first
steps, the actions after and the closure of the process.
5.5.1 What can trigger Liquidation?

The Code describes four ways in which liquidation can be triggered:
a. By rejection of resolution plan by the adjudicator if it fails to meet the
necessary conditions.
b. By failure to reach an agreement in the committee of creditors during the
stipulated period.
c. By a decision of the committee of creditors during the IRP.
d. By the failure of adherence to terms of a resolution plan.
Box 5.14: Drafting instructions for triggering Liquidation

1. There are four ways to trigger Liquidation:
a. Rejection of resolution plan by the adjudicator if it fails to meet the
necessary conditions.
b. Failure to reach an agreement in the committee of creditors during
the stipulated period.
c. Decision of the committee of creditors during the IRP.
d. Failure to adhere to terms of a resolution plan.
2. The Code will also provide for voluntary liquidation of corporate persons
who have not defaulted on any debt.
5.5.2 Rules to accept the trigger to Liquidation
(a) As an outcome of on-going IRP
Liquidation triggered as an outcome of the IRP is automatic; the RP will apply to
the Adjudicator to create an order either when the creditors sign off on liquidation
or the Adjudicating Authority will order a liquidation when the period of the IRP
comes to an end and no proposal for resolution has been submitted or where the
resolution plan does comply with the required conditions.
BLRC REPORT 481
(b) Failure to comply with the terms of the resolution plan

Where the resolution plan approved by the Adjudicating Authority is contravened
by the concerned firm, then any person other than such firm, whose interests are
prejudicially affected by such contravention, may make an application to the
Adjudicating Authority for a liquidation order.
(c) As an application for voluntary liquidation
Where a firm has not defaulted on any debt (or where a firm has no debt), it may
make any application to be liquidated voluntarily in such manner as may be
specified by the Board.
5.5.3 Steps at the start of the Liquidation
A liquidation order is accompanied by a set of other orders issued by the
Adjudicator to:
(a) Create a trust for the assets of the entity
During the liquidation process, a trust is created which becomes the owner of the
assets of the entity. The trust will hold the assets on behalf of the entity. Further,
once the assets start being sold, the trust will receive realisations from the sales.
The trust will distribute the dividends as per the payout provisions of the Code.
These are described in Section 5.5.8. The trust will be managed by the insolvency
professional appointed by the Adjudicator, who has the role of managing the
assets, asset sales and the distribution of the realisations.
While the trust is being created and before it can take over, the Adjudicator will
order the RP of the IRP to continue as manager of the assets of the entity. Even
after the trust is in place, the RP can continue as the manager of the trust until a
liquidator is appointed.
All transactions done by the trust as sale of assets or distribution of dividends
must be treated as pass-through. The realisations must only be taxed in the
hands of the recipients.
(b) Appoint a Liquidator
The RP from the IRP may continue as the liquidator as long as the Regulator raises
no objection to her continuing in this role.
If there is a complaint against the RP at any stage during the IRP or after the
liquidation order is passed, the Adjudicator must apply to the Regulator for an
alternative RP as a replacement.
The roles of the liquidator is described in detail in Section 5.5.9.
482 BLRC REPORT
(c) Liquidating the legal entity

The Committee recommends that the Adjudicator will pass the following orders
to liquidate the legal entity:
(a) An order to the relevant registration authority to rename the entity by
adding the phrase “-in-liquidation” to the original name. This will increase
the visibility of the Liquidation order and ensure that the entity cannot
assume a business-as-usual manner in transactions with counterparties.
It will also protect and safeguard the assets of the entity from fraudulent
action by the erstwhile managers and owners.
(b) An order to cease all powers of the board and the management and vest
them with the liquidator.
Box - 5.15 - Drafting intstructions voluntory liquidation

An application for voluntary liquidation of a corporate person registered as a
company shall meet the following conditions:
(a) a special resolution of the shareholders of the company requiring the
corporate debtor to be liquidated voluntarily; or a resolution of the
shareholders of the company in a general meeting requiring the company
to be wound of voluntarily as a result of expiry of the period of its duration,
if any, fixed by its articles or on the occurrence of any event in respect of
which the articles provide that the company, as the case may be;
(b) a declaration from majority of the directors of the company verified by an
affidavit stating that -
(i) they have made a full inquiry into the affairs of the company and
they have formed an opinion that either the company has no debt
or that it will be able to pay its debts in full from the proceeds of
assets sold in the voluntary liquidation; and
(ii) the company is not being liquidated to defraud any person;
(c) audited financial statements and record of business operations of the
company for the previous two years; and
(d) a report of the valuation of the assets of the company, if any prepared by
a registered valuer.
BLRC REPORT 483
Box 5.16 - Drafting instructions for certain orders in realtion to the

liquidation order
The Adjudicator will issue these orders as soon as a liquidation order is passed:
1. An order to appoint the liquidator following the process described in Box
5.17.
2. An order to the relevant registration authority to change the name of the
entity by adding the phrase “-in-liquidation” to the original name.
3. An order to cease all powers of the the board and the management and
vest them with the liquidator.
Box 5.17: Drafting instructions for the appointment of a Liquidator

1. The liquidator can be selected through any of the following ways:
(a) The RP of the IRP can continue as the liquidator.
(b) The Regulator can recommend, with reason, a new liquidator to
replace the RP to the Adjudicator.
(c) The Adjudicator can apply to the Regulator for a replacement
liquidator.
2. The Adjudicator will either issue an order for the RP to continue as a
liquidator, or the Adjudicator will issue an order to appoint the liquidator
recoimnended by the Regulator
Box 5.18: Drafting instructions for establishing the irreversibility of

Liquidation
1. The Code will provide for a period beyond which the outcome of
Liquidation cannot be reversed by appeal in any other court. This does
not refer to appeals against the behaviour of the RP or the failure to
adhere to process during the IRP, which is directed to the Regulator for
redressal.
2. The period of irreversibility for Fast-track Liquidation will be less than that
set in the Code for Liquidation. This period will be specified by the
Regulator.
5.5.4 Establishing the irreversibility of Liquidation
The Committee argues for clarity on what can be appealed once a Liquidation
order has been issued. The Liquidation outcome is a matter of business that is
managed by a regulated professional, under a reasonably well-defined set of
484 BLRC REPORT
rules of process. In that case, appeals are likely to be placed against the behaviour
of the Resolution Professional, or about failure of following the process.
Appeals against the outcome can be entertained if there is evidence of fraud or
material irregularity. These must be presented and resolved, within a reasonable
window of time. If resolution of the case requires more than this period of time,
then the Liquidation of the entity becomes irreversible, and will hold irrespective
of legal action in any other court of the land.
5.5.5 Establishing assets in Liquidation
The Committee debated what assets of the entity must be available for realisation
in liquidation. Not all assets that are present within the entity, from the start of the
IRP, can be considered for Liquidation. The Committee agrees that the following
sets of assets must be kept out of the liquidation process:
a. Assets held by the entity in trust (such as employee pensions).
b. Assets held as collateral to certain financial market institutions (such as
clearing corporations or similar financial transactions to either creditors
or non-creditors). In other jurisdictions, these may be referred to as “assets
subject to netting and set-off in multi-lateral trading or clearing
transactions”.
In defining these assets, the Code will take cognisance of the assets that
are used as collateral to ensure counterparty guarantees in financial
transactions where clear legal documentation is available as proof of
transaction (Reference to IFC). These funds and assets cannot be used for
recovery in Liquidation.
c. Assets held as part of operational transactions where the entity has rights
over the asset but is not the owner of the title of the asset. For example,
there could be goods belonging to third parties given to the debtor for
processing or value addition. The entity only has rights over goods held in
inventory. But these are owned by the producer or a wholesale distributor
of these goods. These can be claimed back by the owner, and cannot be
sold to realise value in liquidation.
Box 5.19: Drafting instructions for establishing the assets of the entity in
Liquidation
1. Only assets where the entity is a beneficial owner before the start of the
IRP can be considered as available to realisation during Liquidation.
2. The assets that are not owned by the entity include:
BLRC REPORT 485
(a) Assets held in trust. An example are funds and securities held for
employees pensions programs.
(b) Assets that are held as security by financial market institutions that
are laid out in the Indian Financial Code. These include collateral
posted to the clearing corporation.
(c) Assets held as part of operational transactions which have been
provided to the entity with reservation of title. These include goods
in inventory where the title of the goods belongs to a trade creditor
or a wholesale distributor.
All such assets cannot be used by the liquidator to realise recoveries for
creditors.
3. Access to security in contracts that were entered into prior to the IRP and
Liquidation will not be changed as a consequence of Liquidation.
5.5.6 Right of the secured creditors to withdraw from collective Liquidation
Once the moratorium is lifted at the closure of the IRP, the secured creditors can
initiate debt recovery action on the assets of the entity. As recognised in other
jurisdictions and in the IRP under the Code, the Committee argues that there are
likely benefits to collective action in liquidation just as there is in assessing viability
during the IRP (Mukherjee, Thyagarajan, and Anchayil, 2015).
However, at the close of the IRP, the Committee appreciates that the secured
creditor must be able to enforce their interest and act to maximise their loss given
default through sale of the security without the costs of the Liquidation process
under the Code. Thus, the Code provides that the secured creditor can withdraw
the asset against which they hold security interest.
Drafting instructions for provisions in the Code enforcing the rights of secured
creditors in Liquidation is presented in Box 5.20
5.5.7 Realisation in Liquidation other than through sale of assets
The Committee drew on the liquidation experiences both in India as well as other
countries, and listed two other ways in which higher economic value can be
realised other than just sale of assets.
Box 5.20 Realization of the security of secured creditor

1. Secured creditors can withdraw the asset against which they have security
interest from the liquidation trust subject to the following conditions:
(a) Existence of records establishing their claim on the asset present
in a registered IU or proved in a manner as may be specified; and
(b) Payment instruction for their share of the IRP costs.
486 BLRC REPORT
Treating proposals to sell the business as a whole, or parts of the business,

in Liquidation
In this form of maximising value recovered, the distinction is made between the
business and the entity. The business is the underlying structure whose operations
generate revenue, either as a whole or in parts. The entity includes the
management, the ownership and the financial elements around this core
business. In the liquidation phase, the liquidator can coordinate proposals from
the market on sale of the business, in parts or even as a whole. The evaluation of
these proposals come under matters of business. The selection of the best proposal
is therefore left to the creditors committee which form the board of the erstwhile
entity in liquidation.
However, a different set of principles guide what is defines the best solution in the
l iquidation phase, unlike the IRP. In the IRP, the financial creditors had the power
to choose the best solution to keep the entity as a going concern, with the condition
that the liabilities of the other creditors will be fully met within a reasonable
period in the implementation of the solution.
In liquidation, such a condition cannot be applied. The interests of both the financial
and the operational creditors will be served on a best efforts basis. Under the
waterfall of liabilities provided in the Code, secured creditors who have the priority
in the waterfall, will have the best recovery while all other creditors, both financial
and operational, will face a lower recovery. It is important for the Code to retain a
sense of fairness in how the solutions in Liquidation should preserve the rights of
all creditors, so that they are incentivised to continue providing credit to other
entities. Thus solutions in Liquidations must be evaluated on the long-term
incentives of both secured creditors and non-secured creditors.
This suggests a two-filter approach to evaluating the proposals that the liquidator
receives on how to optimally liquidate the business, before she presents it to the
creditors committee. The first is to maximise the value expected under realisation.
The second is to evaluate the impact on the non-secured creditors. If two
proposals are reasonably similar in the expected realisation, then the proposal
which minimises the adverse impact on non-secured creditors should be ranked
higher in the presentation to the creditors committee. On the other hand, if a
proposal has a significantly higher expected realisation among all other proposal,
this proposal may have the highest ranking even if the other proposals may have
a lower adverse impact on non-secured creditors.
The liquidator will be responsible for recording the rankings of various proposals,
along with the arguments, in the presentation to the creditors committee. These
records will be available publicly through the Regulator within as short a period
as is reasonably possible. They can be used in appeals to the Adjudicator against
BLRC REPORT 487
outcomes selectedby the creditors committee in liquidation, but cannot be used

as an appeal against the liquidation itself.
Treating recoveries from vulnerable transactions

The Committee discussed the possibility of identifying and recovering from
vulnerable transactions. These are transactions that fall within the category of
wrongful or fraudulent trading by the entity, or unauthorised use of capital by the
management. There are two concepts that are recognised in other jurisdictions
under this category of transactions: of fraudulent transfers, and fraudulently
preferring a certain creditor or class of creditors. If such transactions are
established, then they will be reversed. Assets that were fraudulently transferred
will be included as part of the assets in liquidation.
The Committee recommends that all transactions up to a certain period of time
prior to the application of the IRP (referred to as the “look-back period”) should be
scrutinised for any evidence of such transactions by the relevant Insolvency
Professional. The relevant period will be specified in regulations. At any time
within the resolution period (or during the Liquidation period if the entity is
liquidated) the relevant Insolvency Professional is responsible for verifying that
reported transactions are valid and central to the running of the business. There
should be stricter scrutiny for transactions of fraudulent preference or transfer to
related parties, for which the “look back period” should be specified in regulations
to be longer.
The Code will give the Liquidator the power to file cases for recovery. Some
jurisdictions set such recoveries aside for payment to the secured creditors.
Given the extent of equity financing in India, all recoveries from such transactions
will become the property of the trust, and will be distributed as described within
the waterfall of liabilities.
Drafting instructions for realisation of value in Liquidation other than through sale
of assets are presented in Box 5.21.
5.5.8 Establishing priority of payout in Liquidation
In the principles about the rights of claimants in Liquidation, the core principle is
that the order of liabilities that were in place before Liquidation, must be retained
after Liquidation. Therefore, the Code visualises that no new claims can be
submitted on the assets of the entity beyond those that are registered in the
financial and operational liabilities information systems of Section 4.3 (or by other
specified means), and those that are submitted at the start of the IRP. The only
claims that can be admitted after the start of the IRP are claims arising from
transactions registered with, or by, the RP in charge of the IRP. These are likely to
488 BLRC REPORT
have been transactions for temporary financing or working capital arrangements

that are considered critical to keep the entity as a going concern. Rather than
fresh creditor claims, these will be considered on par with the costs of the IRP,
and be treated as such.
Box 5.21: Drafting instructions for regulations on realization in Liquidation

other than through sale of assets
a. There could be two sources of additional value in Liquidation other than
sale of assets.
These include:
(a) Proposals for sale of the business as a whole or in parts.
(b) Value recovered from vulnerable transactions.
b. In proposals for sale of the business:
(a) The liquidator will call for proposals to buy the business, either in
parts or as a whole, to maximise economic value.
(b) The proposals in Liquidation will be evaluated on both:
i. Value offered, and
ii. Ranking of the proposal in terms of impact on non-secured
creditors, including operational creditors.
(c) The creditors committee as the board of the erstwhile entity will
select the best of the proposed solutions.
(d) All the solutions will be recorded in the Liquidation case, and will
be available from the Regulator in as short a time as is reasonably
possible.
(e) The liquidator will conduct the sale and the trust will receive the
proceeds for distribution.
(f) The distribution of these proceeds will be made according to the
waterfall of payments provided by the Code (Section 5.5.8).
c. Recoveries from vulnerable transactions are carried out in the following
manner:
(a) These transactions are identified by an insolvency professional,
either in IRP or in Liquidation, as those which are wrongful or
fraudulent trading, unauthorised use of capital by the management.
(b) The period over which the transactions are scrutinised is specified
in the Code.
BLRC REPORT 489
(c) Once these are identified, the Liquidator will file an appeal to the
Adjudicator against the party that carried out the transaction to
revoke the transaction, if possible, and recover the lost value.
(d) When the case is resolved in favour, the recovered value is
deposited with the trust for distribution.
(e) The cost incurred by the Liquidator for recovery in these cases is
covered by the general realisations from in Liquidation up to a
threshold that is specified by the Regulator. Beyond this threshold,
the costs will be recovered from the value recovered from the
case.
The Committee also agrees that a creditor with claims that is backed by proof of
beneficial ownership of the security can automatically apply to the liquidator to
retrieve the security from the Liquidation trust. This includes assets underlying
transactions of hire-purchase and financial lease assets, and secured creditors
who can exercise their rights over assets where they have security rights as
described in Section 5.5.6. Such creditors can apply to the Adjudicator with proof
of the ownership, and payment for the IRP costs as specified in regulations. The
Adjudicator will then issue an order to the Liquidator to release the asset from the
Liquidation Trust.
For the remaining creditors who participate in the collective action of Liquidation,
the Committee debated on the waterfall of liabilities that should hold in Liquidation
in the new Code. Across different jurisdictions, the observation is that secured
creditors have first priority on the realisations, and that these are typically paid
out net of the costs of insolvency resolution and Liquidation. In order to bring the
practices in India in-line with the global practice, and to ensure that the objectives
of this proposed Code is met, the Committee recommends that the waterfall in
Liquidation should be as follows:
1. Costs of IRP and liquidation.
2. Secured creditors and Workmen dues capped up to three months from
the start of IRP.
3. Employees capped up to three months.
4. Dues to unsecured financial creditors, debts payable to workmen in respect
of the period beginning twelve months before the liquidation
commencement date and ending three months before the liquidation
commencement date;
5. Any amount due to the State Government and the Central Government in
490 BLRC REPORT
respect of the whole or any part of the period of two years before the
liquidation commencement date; any debts of the secured creditor for
any amount unpaid following the enforcement of security interest
6. Remaining debt
7. Surplus to shareholders.
There was some debate in the committee on whether the priority given to
workmen14 in the Companies Act, 2013 should be retained in the proposed Code
as well.
5.5.9 The role of the liquidator
The swiftness with which the Liquidation phase can be completed in the most
efficient way has always rested on the liquidator. One of the central problems
identified in the poor implementation of bankruptcy systems in India has been
the liquidator.
Box 5.22: Drafting instructions for the priority of payout in Liquidation

1. The Code will state that the priority of payout of the dividends from the
Liquidation trust will be as follows:
(a) Tier 0: Costs of IRP and liquidation costs.
(b) Tier 1: Secured creditors and Workmen dues capped up to three
months from the start of IRP.
(c) Tier 2: Employees wages and unpaid dues capped up to three
months.
(d) Tier 3:
i. Dues to unsecured financial creditors,
ii. workmen’s dues in respect of the nine month period beginning
twelve months before the liquidation commencement date
and ending three months before the liquidation
commencement date.
(e) Tier 4:
i. Any amount due to the State Government and the Central
Government in respect of the whole or any part of the period
of two years before the liquidation commencement date;
ii. any debts of the secured creditor for any amount unpaid
following the enforcement of security interest.
BLRC REPORT 491
(f) Tier 5: any remaining debt

(g) Tier 6: surplus to shareholders/partners.
2. At each point in the waterfall, there will be no differentiation between
domestic and international creditors.
Responsibilities include verification of all claims made on the assets of the entity.
Here, the full list of claims needs to be identified and verified, so that any recovery
can be made to these creditors in all fairness. In addition, the liquidator has the
responsibility to identify the assets of the entity that is available for realisation
under Liquidation.
The Liquidator applies to access the records of liability verification of the IRP from
the Regulator. The Liquidator also independently is given the power to access all
the information systems required to verify claims of liabilities, assets that are
security, audited balance sheets and cash flow transaction records of the entity.
Finally, claims of liability that were submitted at the start of the IRP and that are not
included in the rest of the information system are included as liabilities against
the erstwhile entity for recovery. The principle of collective action requires that all
assets are held in the Trust by the Liquidator, who also carries out all realisations
and adds it to the cash assets in the trust.
Fees charged the Liquidator

The recovery from assets are paid out to creditors net of the insolvency resolution
and Liquidation costs.
Like in the case of fees for the Resolution Professional, the Code has very few
provisions on the costs of Liquidation or the fees that the Liquidator has charged.
The Committee is of the view that the costs incurred and the fees charged by the
professional in carrying out their role should be the market price from a competitive
market. However, while the IRP is designed as a time-bound process, there can
be no such externally imposed, general time limit on the Liquidation process that
can lead to optimal Liquidation outcomes.
thereunder on the role of the Liquidator
a. The responsibilities of the Liquidator include:
(a) Account for, and verify, all legitimate claims to the distribution from
the value realised from Liquidation. These must done at least as
good as the reporting standards specified by the Regulator.
(b) Account for, and establish all assets where the entity was the
492 BLRC REPORT
beneficiary owner. Ascertain their presence as registered with the

Liquidation trust. These must done to reporting standards specified
by the Regulator.
(c) At a regular frequency specified by the Regulator, the Liquidator
will report the estimated value of the assets held in the Liquidation
trust. Where the assets do not have regularly updated and
transparent market price, the Liquidator will also make available
the methodology using which the estimated value was arrived at.
The methodology must be audited by the Regulator.
(d) Ensure full transparency and good governance practices in the
management of the assets of the Liquidation trust. These must be
at least as good as specified by the Regulator.
(e) The Liquidator is responsible to each creditor to ensure swift
distribution of the maximum realisation, and to the Regulator for
compliance with the standards of good practice and no conflict of
interest in this distribution.
(f) The Liquidator manages the Liquidation trust and must adhere to
the provisions, rules and regulations applicable under the relevant
law.
b. The powers of the Liquidator include:
(a) The Liquidator has the power to access all the records related to
the entity that is available in the information systems. This includes:
i. the credit information systems;
ii. the records submitted to the relevant registration authority;
iii. the information systems for financial liabilities and those for
non-financial liabilities;
iv. the information systems for securities and assets posted as
collateral;
v. the IRP records for the case at the Regulator; and
vi. any other system that is specified as relevant by the Regulator
from time to time.
(b) The Liquidator is registered as the manager of the Liquidation trust.
(c) The Liquidator can call for bids, run auctions, hire the services of
third party valuation experts in order to assess the value of the
assets in the Liquidation trust while creating valuation reports to
the Regulator.
BLRC REPORT 493
Box – 5.24 – Drafting instructions for regulations on liquidator’s fee.

1. The liquidator fees will be a function of the realised value in Liquidation,
which will earn lower revenues for later recoveries. The regulations will
specify that the maximum fraction that is permitted of the value that is
realised in the first year of Liquidation. In subsequent years, the fraction
that is permitted as liquidator fees of the realised value will continuously
decrease.
2. The form of the function will be specified by the Regulator subject to the
condition that it satisfies the provisions in the Code.
3. The fees that can be charged while recovering from vulnerable
transactions will have a different structure. Here, the Regulator will specify
a threshold value for the fees charged. All costs incurred above this
threshold value has to be recovered from the case filed for recovery from
the vulnerable transactions.
4. As in the case of the IRP for low or no asset cases, the Regulator will
specify that a Liquidator offer her services free of charge for a certain
miniumum number of cases as part of requirements of registration.
In fact, it has been found that often the Liquidator has the incentive to prolong the
Liquidation process purely as a mechanism to seek rents from the creditors. They
earn rents either by deploying the capital realised, or differentiating payouts to
those who can pay for it. The Committee agrees that the Code and the regulations
thereunder should incentivise good behaviour by the Liquidator by imposing a
structure on fees charged in Liquidation. An ideal structure will be one that
incentivises the Liquidator to preserve time value of transactions in Liquidation.
The fees that the Liquidator can charge must be a decreasing function of time.
Under such a fee structure, the same realisation obtained in the second year will
mean a smaller fee for the liquidator than the fee for the realisation in the first
year. The precise function can be specified by the Regulator, and can vary from
case to case in regulations. However, irrespective of the variations, because fees
earned must be lower in a later year than in an earlier year, the Liquidator is
motivated to realise value sooner rather than later.
Lastly, in order to ensure greater distribution certainty to creditors in Liquidation,
the Code differentiates the fees that can be charged for verified and quantified
assets and for uncertain recoveries (such as those from lawsuits to recover value
from vulnerable transactions). When there is surety about the assets, the Liquidator
is incentivised to maximise the payout for the creditors when her fees are a
fraction of the realisations. However, when there is uncertainty on the possibility
494 BLRC REPORT
of any recovery or the time at which it can be realised (as in a lawsuit against
directors or management), the costs of recovery will become surely very high
while the realisation is uncertain. In such cases, the Code directs the Regulator to
set a threshold value for the fees that the Liquidator can charge. All the fees
beyond that threshold will be recovered from the recoveries at a higher rate than
is used for charges when realisations are sure.
5.5.10 Rules to close the Liquidation
The end of Liquidation requires complete dissolution of the entity. One indicator is
that the assets held in the Liquidation trust have been sold and the realisations
paid out to satisfy as much of the liabilities within the prioritisation of the waterfall
in Section 5.5.8. At this stage, there are possible recoveries of the assets of the
entity in the future. These are most likely to come from lawsuits to recover from
identified vulnerable transactions and cases of fraudulent actions carried out by
the directors of the erstwhile entity. However, these are highly uncertain. The
tradeoff is to keep the case open and accrue costs of Liquidation from Liquidator
fees on one hand and on the other, to close the case, dissolve the entity, but retain
the Liquidation trust, so that whatever recoveries are made can be deposited into
the trust net of the Liquidator costs of managing these lawsuits.
Box 5.25: Drafting instructions for closing the Liquidation case

1. The Liquidator can apply to the Adjudicator to close the Liquidation case
at any point after the clear assets held in the Liquidation trust has been
realised, and the value has been distributed to creditors.
2. The Adjudicator will hear the case based on the probability of realisations
expected from vulnerable transactions and disputed assets.
3. If the Adjudicator accepts the application, then an order is issued to
close the Liquidation case. This is accompanied by the following orders:
(a) An order to the registration authority to remove the name of the
entity from the register;
(b) Release the Liquidator from the case, but retain management of
the Trust; and
(c) Release the records of the Liquidation case to the Regulator. Details
of the submitted records will be consistent with those specified by
the Regulator.
4. The Liquidator continues to manage the cases for vulnerable transactions.
Whatever recoveries are made are deposited into the Trust are paid out
as dividends, net of legal fees.
BLRC REPORT 495
The Liquidator may apply to the Adjudicator to close down the case with estimates
of the time to recovery and possible value of recovery from the vulnerable
transactions. If the Adjudicator rules in favour of the application, an order to close
the Liquidation case will be issued. This will trigger a set of accompanying orders
as follows:
1. An order to the relevant registration authority to remove the name of the
entity from its register.
2. An order releasing the Liquidator from the case.
3. An order to submit all records related to the case to the Regulator.
If the Adjudicator does not rule in favour of the application, the Liquidation case
remains open. The Code permits the Liquidator to apply for the closure again
after a reasonable period of time has passed.
Removal of the RP during the resolution process

The Code makes provision for the removal of the RP during the resolution process.
This can be done either during an insolvency or a bankruptcy resolution process.
An application can be made to the Adjudicator by the creditors committee for the
removal of the RP at any time during the IRP, or by the board during the Liquidation
process. In either case, this must be supported with a majority vote. Any other
application for the removal of the RP can be made to the Adjudicator with cause
shown. The Adjudicator must apply to the Regulator for a replacement RP as
soon as the application is made. The Regulator must recommend a replacement
RP within not more than 48 hours. In case the application is to remove an RP
during the IRP, the removal of the RP does not allow for an extension in the
window of time permitted for the IRP: there final date of closure for the IRP remains
the same as in the order registering the IRP.
Box 5.26: Drafting instructions for removing an during an IRP or a

Liquiation
1. The creditors committee can apply to the Adjudicator for the removal of
an IP at any time during a live insolvency or bankruptcy resolution case.
The application lias to be accompanied with a majority vote.
2. The Adjudicator will admit an application for the removal of either the RP
or a Liquidator during the resolution process, from any other party with
cause shown.
3. The Code does not permit the removal to be accompanied by a new
recoimnended replace-ment candidate.
496 BLRC REPORT
4. The Code provides that the Adjudicator must apply to the Regulator for a
replacement RP, and that the Regulator must respond within under 48
horns of the Adjudicator application.
5. If the application for removal is made during an active IRP, there is no
extension permitted to the period of the IRP as a consequence of the
removal of the RP. The date of closure of the IRP case remains the same
as on the order registering the IRP case.
5.6 Actions against fraud, malpractice and other wrongs

In the deliberations of the Committee, there are two categories of offences/
wrongs against which actions can be initiated: fraud and malpractice. Further,
depending upon the perpetrator of the act or omission, actions are further
differentiated based on whether they can be heard by the Adjudicator, courts or
the Regulator.
In the view of the Committee, bankruptcy is a legal process that is designed to
give honest people a chance for a better financial future. It is therefore important
that all participants in the bankruptcy and insolvency resolution processes act
honestly in disclosing their true state of affairs. This approach leads to principles
that guide the identification of offences/wrongs under the Code.
The first principle that the Code seeks to ensure is better symmetry of information
between the creditors and the debtor. The onus of honest behaviour in this respect
typically sits with the debtor who has the information advantage over the creditor.
Thus, it is crucial that the debtor is honest in all disclosures and does not make
false representation or conceal facts about the assets or transactions in these
disclosures. If the debtor triggers the IRP, the Adjudicator will admit the case only
if these records are accompanied by a signed Statement of Truth document. For
example, the records of the operations and the finances of the entity are expected
to be presented to the Resolution Professional managing the IRP.
The Code expects that creditors adhere to the principle of honest disclosure as
well. False and frivolous claims at the time of triggering the insolvency,
misrepresentation or false claims during the negotiations in the creditors
committee, false representation about claims on the assets of the entity in
liquidation are all subject to appeals at the Adjudicator.
Once the IRP is admitted, the types of actions that can be made are divided into
those that can be admitted during the IRP, appeals on the outcome of the IRP and
those during the Liquidation Process.
BLRC REPORT 497
5.6.1 Actions during the IRP

It may be useful to think about legal actions during the IRP as being categorised
under actions made to the Adjudicator against the RP or by the RP. In any of the
cases, it is important to note that:
1. The hearing of the petition and the subsequent actions taken in remedy
will not cause a change in the date of closure of the IRP.
2. The charges of such petitions will not automatically become part of the
IRP costs. This can vary depending upon the outcome of the appeal.
Actions against the RP

Since the RP manages the resolution process, the Adjudicator can hear petitions
against the behavior of the RP. The wrongs can range from failure to adhere to
processes, to misrepresentation of facts to the creditor’s committee on behalf of
the debtor, misrepresentation of facts to the Adjudicator on behalf of the debtor or
on behalf of the creditors or the creditors committee, fraudulent action on dealing
with the assets of the entity. The wrongs/offences will be specified in the Code,
along with those over which the Regulator have quasi-judicial power and those
which will be adjudicated in the Courts. The Code will also specify the board
framework of penalties that will be applicable for each of the offences.
Action by the RP against the debtor

There are two specific instances where the RP can petition the adjudicator against
the debtor, which has a material impact on the process flow of the IRP. These are
actions by the RP against the debtor for a lack of cooperation of the debtor. This
has often been cited as a problem by both the judges as well as the intermediaries
who negotiate the settlement between the creditors and the debtor of defaulting
entities in India. The current proposal seeks to mitigate this problem partly by
using electronic filing of information in the information utilities. However, there
will be instances where the RP will need to seek clarifications or greater detail
from the debtor, who will always have the best information available about the
entity.
If the debtor does not cooperate with the RP, the RP can file a petition to the
Adjudicator. The Adjudicator can hold a hearing with the debtor, and either issue
an order to the debtor to cooperate with the RP. If the RP does not report that the
debtor has cooperated with the RP within the specified time, the Adjudicator can
close the IRP case, withdraw the moratorium against debt recovery and new
cases filed against the entity, ban the debtor from triggering an IRP for a specified
period, and issue an order for the debtor to pay all the costs incurred during the
IRP.
498 BLRC REPORT
The Adjudicator can also hear petitions by the RP against fraud by the debtor
entity. If the Adjudicator finds sufficient evidence of fraudulent transactions on the
part of the management, or the promoter, or the directors, it can pass appropriate
orders.
5.6.2 Appeals/Actions after the IRP
• The following of appeals/actions that can be visualized at the end of the
IRP:
1. If the outcome is liquidation, there is a window of time when appeals
can be heard to change this outcome. The Code provides the period
of time within which the Adjudicator must finalise her judgment on
the matter. If the period of time passes without resolution of the
appeal, then the Adjudicator will automatically pass the order of
irreversibility of the Liquidation of the existing entity.
2. There can continue to be petitions to the Regulator on failure of the
RP to adhere to processes during the IRP. These will be filed by
individuals, and may attract monetary penalty in the case of failure
of adherence to processes or collusion with one party in the process,
or criminal liability in the case of fraudulent practices involving theft
of property.
3. Actions on fraud during the IRP, with or without the collusion of the
RP. Depending upon the magnitude of the fraud, the outcome of the
IRP may be declared as voided by the adjudicator.
In the case of liquidation, the appeal must be resolved before the time at which
the liquidation is considered irreversible.
5.7 Penalties
The code provides for both civil and criminal liability for wrongdoing.
BLRC REPORT 499
6. Process for individuals
The focus of bankruptcy reform so far has been legal entities, i.e. firms registered
under the Companies Act, 1956 (and 2013), as well as the Limited Liability
Partnership Act, 2008. However, large parts of the credit market consists of
loans to individuals, and loans to small and medium enterprises (SMEs) which
are in the form of sole proprietorships. These enterprises are a large and
important component of the Indian economy. According to reports by the SMB
Chamber of Commerce and the Ministry of Micro, Small and Medium
Enterprises, India currently has more than 48 million SMEs. These SMEs
contribute more than 45% of India’s industrial output, 40% of the country’s total
exports and create 1.3 million jobs every year. Indian SMEs employ close to
40% of India’s workforce.
India has a weak record on recovery of loans to individuals and to SMEs. Either
recovery is difficult and leads to creditors incurring losses, or recovery takes
place through the use of coercive practices which leads to debtors incurring
losses. Given the importance of such borrowers in the economy, the Committee
believes that a fresh approach to individual bankruptcy is an important goal.
The goals of the process for individual insolvency and bankruptcy presented in
the Code include:
• Providing a fair and orderly process for dealing with the financial affairs of
insolvent individuals.
• Providing effective relief or release from the financial liabilities and
obligations of the insolvent.
• Providing mechanisms that enable both debtor and creditor to participate
with the least possible delay and expense.
• Providing the correct ex-ante incentives so that individuals are not able to
unfairly strategise during the process of bankruptcy.
These goals overlap considerably with goals of the resolution for legal entities.
There are two differences: First, in the bankruptcy process, where unlike a legal
entity, the individual cannot be liquidated. Second, the Code provides for debt
relief for a certain section of debtors where the chances of recovery are so low
that the cost of resolving the insolvency would only become an additional burden
to either the debtor or the creditor or the State.
500 BLRC REPORT
Box 6.1 – Drafting instructions for creating a code for individuals

1. The Code will cover individuals and partnership firms.
2. The Code requires that the provisions and laws related to resolving
bankruptcy and insolvency for these entities must be repealed, and
replaced with provisions under this Code.
6.1 The applicability of the Code

The Committee considers the following categories of entities to whom the
individual insolvency and bankruptcy provisions shall apply:
• Sole proprietorships where the legal personality of the proprietorship is
not different from the individual who owns it.
• Personal guarantors
• Consumer finance borrowers
• Student loan borrowers
• Credit card borrowers
• Farmers
• Micro-finance borrowers
• Partnership firms
When individuals encounter financial distress, it is likely that they are unable to
make payments to entities, such as landlords and operational creditors. It is likely
that, for small individuals, such non-financial creditors bear the costs of individual
financial distress. Jurisdictions such as the UK allow for individuals to declare
insolvency if they cannot pay arrears with rent, utility bills, telephone bills, council
tax and income tax, as well as hire purchase agreements.
A similar question of what type of credit should be in the list of “qualifying debts”
for which an individual may seek relief under the Code. While there are
difficulties in verifying information surrounding these claims, the Committee
agreed that non-financial creditors should not be excluded, as it is likely that
without resolution of debts of non-financial creditors, insolvency resolution will
not be complete.
Finally, in the existing legal framework, individuals are geographically divided
across the respective Acts, Presidency Towns Insolvency Act, 1909 (PTIA) for
Calcutta, Bom-bay and Madras and the Provincial Insolvency Act, 1920 (PIA) for
the rest of India, respectively. These will need to be repealed.
BLRC REPORT 501
6.2 Overall procedure

A sound bankruptcy and insolvency framework requires the existence of an
impartial, efficient and expeditious administration. This is more likely to be possible
for individual insolvency when administrative proceedings are placed outside
the court of law. As with legal entities, what is visualised for individuals is to
enable a negotiated settlement between creditors and debtor without active
involvement of the court. The principle is to allow greater flexibility in the repayment
plans, and a time to execute the plans, that can be acceptable to both parties. If
creditors and debtors can settle on such a plan out of court, what matters for the
system is that there is a record of this settlement and that it can affect the premium
of future credit transactions. Economies across the world are increasingly placing
administrative proceedings outside of the courts. This seems to be a natural way
forward for India as well.
The Committee proposal for an individual bankruptcy law envisages two distinct
processes as can be seen from Figure 6.1. The first is the “Fresh Start Order”
(henceforth referred to as FSO) is a process by which individuals with assets and
income lower than specified amounts will be eligible for a discharge from their
qualifying debts (the aggregate of which must not exceed the prescribed amount).
Their debts will be written off, giving the debtor a “fresh start”. Both the default and
the FSO will be recorded in the individual’s credit history.
The second is the “Insolvency Resolution Process” (IRP), which will involve a
process of negotiation between debtors and creditors supervised by a Resolution
Professional (RP). The formal oversight of the process of negotiation by the RP
under the shadow of the law with no long term adversarial effects to the debtor is
a critical step towards a modern insolvency framework. If the negotiation
succeeds, it will lead to a repayment plan which the RP will execute. This gives
the debtor an “earned start”. The debtor gets a discharge but only as per the terms
of the negotiation. However, if negotiations fail, then the matter will proceed to
“bankruptcy resolution process” which is led by a Bankruptcy Trustee appointed
by the Adjudicating Authority. In bankruptcy resolution, the debtor will get a
discharge from bankruptcy after a specified time.
The Committee debated on the course of action in the event of disability or death
of the debtor during any of the processes. The Committee agreed that at no point
should any external event lead to a deviation from the repayment plan as this
precludes the possibility of foul play by either party to turn the plan to their unfair
advantage. The parties may choose to purchase life insurance as part of the
repayment plan to provision for such a possibility. This is reflected in the choices
described in the following sections.
502 BLRC REPORT
6.3 Triggering insolvency

6.3.1 Who can trigger insolvency?
As with insolvency of legal entities, the Committee observes that there is no
standard, indisputable way to establish insolvency for an individual. The Code
prescribes different rules for who can trigger insolvency for the FSO and the IRP,
and different processes on how the trigger can be accepted in each case.
Figure 6.1: The process flow of individual insolvency
Fresh Start Order, FSO

The FSO is a process of discharge of the qualifying debts of the debtor if the
assets and income of a debtor are below a specified amount . Thus, debtors
who have assets and income below this specified level, and do not own their
home, are eligible for an FSO. Hence, only the debtor can file for a FSO. The
proposed thresholds in the Code have been provided taking into account the
relevant data and the Central Government shall have the power to revise the
relevant assets and income test from time to time. These should ideally be
increased at regular intervals in line with inflation measured by the Consumer
Price Index (CPI). The home- ownership clause is important, because if the
debtor owns a home, then this should be available for sale, the proceeds of
which can be used to repay the full (or partial) amount due to the creditor.
Further, the Code shall also specify the maximum amount of qualifying debts
for which an application can be made.
The FSO application cannot be made for debts specifically excluded from the FSO.
These include secured debts, court fines, child support payments, student loans,
money owed under a criminal charge, and debts resulting from certain personal
injury claims against the debtor. All other debts qualify for an FSO. An indicative
BLRC REPORT 503
list includes, but is not restricted to, credit card debt, unsecured bank overdrafts
and loans, unsecured loans from finance companies, credit from money-lenders,
employers, friends and family, and debts to customers who have paid for goods
or services that the debtor was unable to supply.
The debtor should not be under another FSO, or IRP prior to the application. The
debtor cannot jointly make an FSO application with a spouse (or de facto partner).
Each individual has to make an individual application.
Insolvency Resolution Process, IRP

The application for an IRP can be made both by the debtor and the creditor. The
IRP application cannot be made for debts specifically excluded from the IRP.
These include court fines, child support payments, student loans, money owed
under a criminal charge, and debts resulting from certain personal injury claims
against the debtor. All other debts qualify for an IRP. The debtor should not be
under another FSO, or IRP, or be an undischarged bankrupt prior to the application.
Box 6.2: Drafting instructions for who can trigger the individual
resolution process
1. The Fresh Start Order (FSO) Process can be triggered by the debtor by
submitting documentation specified in the Code to the Adjudicating
authority.
2. The FSO cannot be made jointly with a spouse (or de facto partner). Each
debtor must make an individual application.
3. The Insolvency Resolution Process can be triggered by either the debtor
or the creditors by submitting documentation specified in the Code to the
Adjudicator.
4. The Code specifies who is a debtor or a creditor for the purposes of
triggering the insolvency resolution process (IRP).
5. The debtor should not be under another FSO, or IRP, or should not be an
undischarged bankrupt prior to the application.
6. The Code specifies the debts that qualify for resolving individual
insolvency.
6.3.2 What is the process for triggering insolvency?
As the debtor has more information about the entity than the creditor, a debtor
application to trigger the process must include information so as to reduce the
asymmetry that the creditor has in evaluating insolvency. This requires disclosure
of all information pertinent to the insolvency. The debtor may hire an RP to help
with the application. The application must contain:
504 BLRC REPORT
1. A list of all debts, secured and unsecured, owed by the debtor on the date
of the application.
2. The amount of each debt, secured and unsecured, owed by the debtor on
the date of the application.
3. The names of creditors to whom each debt is owed.
4. Details of security (collateral) held in respect of any of the debts.
5. Other financial information w.r.t to assets and cash flow status of the
debtor for upto two years prior to the application date.
Since it is difficult to verify each claim made by the debtor, she will have to also
submit a “Statement of Truth”, which implies that if any part of the information in
the application is found to be fraudulent, or to have been deliberately hidden, the
applicant will be liable for criminal penalties. The Adjudicator will charge a
monetary penalty for a frivolous application.
In the event that the creditor has evidence of default on payments, the creditor
can trigger insolvency. The creditor may appoint an RP to trigger the process.
The Committee debated on whether the criterion of “reasonable prospect” of
inability to pay debts should be valid for triggering legal proceedings by a creditor.
On the one hand, such a clause can help with early detection of bankruptcy and
lead to saving of asset value of debtors. On the other, ambiguity around the
definition of reasonable prospect can induce delays into the process. It is possible
that, in situations where the balance of power is tilted in favour of the creditor, the
clause may get used to harass debtors. The Committee took the view, therefore,
to exclude the clause. This may be allowed when the information systems support
the creditors ability to reliably support such a claim.
Box 6.3: Drafting instructions for triggering the Insolvency Resolution

Process
1. There are different requirements for a debtor and for a creditor to trigger
the insolvency resolution process.
2. The debtor will have to submit proof of failure to pay debts when they are
due. The application must contain
(a) A list of all debts, secured and unsecured, owed by the debtor on
the date of the application.
(b) The amount of each debt, secured and unsecured, owed by the
debtor on the date of the application.
BLRC REPORT 505
(c) The names of creditors to whom each debt is owed.

(d) Details of security (collateral) held in respect of any of the debts.
(e) Other financial information w.r.t to assets and cash flow status of
the debtor.
3. The debtors’ application must contain a “Statement of Truth” which implies
that if any part of the information in the application is found to be
fraudulent, or to have been deliberately hidden, the applicant will be
liable for criminal penalties.
4. The application of the creditor must contain
(a) The most recent information regarding the debtor that the creditor
has in possession
(b) Record of debts owed by the debtor to the creditor submitting the
application
(c) Record of default on payments by the debtor and evidence
substantiating such default.
5. The application for an FSO and IRP must be accompanied by a non-
refundable fee.
The application of the creditor should contain evidence of default on payments by
the debtor that is filed in a registered information utility. In case the evidence is
not present in the information utility, the creditor will have to provide other relevant
evidence of default. In case of loans to individuals, especially between family
and friends, it may be difficult to mandate registration in an information utility as
a prerequisite for making an application. The hope, however, is that the ease of
presenting evidence from the records in the information utility incentivise debtors
as well as creditors to register the same voluntarily.
The application must be accompanied by a non-refundable fee to cover the costs
of the procedure.
6.3.3 Effect of filing an application at the Adjudicator
The application for IRP will be made to the relevant Adjudicator. A key element in
any process is to evaluate the veracity and validity of the application. However,
given that records in the case of individuals may be difficult to verify in a short
span of time, the application will only be checked for adhering to the specified
format. As described earlier, the Statement of Truth filed by the debtor will imply
that if any information in the application is found to be fraudulent, or to have been
deliberately hidden, the applicant will be liable for criminal penalties.
506 BLRC REPORT
Box 6.4: Drafting instructions for effect of filing an application at the

Adjudicator
1. If the application confirms to the required format the Adjudicator will
accepted it immediately.
2. A moratorium will coimnence as soon as the application is fried. This
moratorium will end once the application is accepted.
3. During this period no creditor will be permitted to take any action to
recover debts or to initiate any other legal proceedings against the debtor.
4. If the applicant has proposed a RP the Adjudicating Authority will seek
confirmation from the Regulator within a specified period of time that the
proposed RP lias relevant expertise to act as one, and that no disciplinary
proceedings exist against her.
5. If the Regulator confirms that the proposed RP has the relevant expertise
and that there are no disciplinary proceedings against her, the
Adjudicating Authority will appoint the RP.
6. If the application is made without an RP, the Adjudicator will request the
Regulator to appoint an RP to the case.
7. The Regulator must do so within a specified time period.
If the application meets the format requirements, it will be accepted. A
moratorium will commence as soon as the application is filed, to avoid the
possibility of action against the debtor between the filing and acceptance of the
application.
If the application is made with the help of a RP, the Adjudicator will check the
database of the Board for any disciplinary proceedings against the RP. If there are
no disciplinary proceedings, the Adjudicating Authority will appoint the RP.
If the application is made without the help of a RP, or if the Adjudicator finds
disciplinary proceedings against the RP chosen by the debtor, the Adjudicator
will request the Board to appoint an RP to the case.
6.3.4 The process for acceptance of the Application
Once an RP is appointed, the RP will evaluate the application within a specified
period of time. If the application is for FSO, the RP will determine if the applicant is
indeed eligible for the FSO. The RP may raise queries to the applicant of the
receipt of the application. If the application does not meet specific requirements,
or if the queries of the RP are not answered within a specified time period, the RP
will recommend refusal of the application. On receipt of the recommendation of
BLRC REPORT 507
acceptance of the application by the RP, the Adjudicator will register the FSO or
IRP as the case may be.
If at any point till the conclusion of the FSO or the IRP, the appointed RP is unable
to function in her role, the Adjudicator will record the failure and request the
Board for another RP. The details of the RP will be changed in the details of the
individual resolution case.
Box 6.5 – Drafting instructions for the acceptance of the

application by the adjudicator
1. The RP will evaluate the application within a specified time period.
2. The RP will present either an approval or a rejection report.
3. The RP may recommend refusal if the application does not meet all the
specific require-ments, or if the information provided is not satisfactory.
The RP may also recommend refusal if queries raised are not answered
within a specified time period.
4. On receipt of recommendation of acceptance by the RP, the Adjudicating
authority will accept the application within a specified period of time.
5. The Order must be communicated to the debtor as well as the creditors
6. On receipt of recommendation of refusal by the RP, the Adjudicating
authority will refuse the application within a specified period of time.
7. If the application is refused, the Adjudicating Authority will pass an Order
refusing the application. The Order will permit the debtor and creditors to
file a separate application for bankruptcy.
8. If the application is refused, the applicant will not be able to file an FSO or
an IRP as the case may be again in the next twelve months.
9. If at any point the appointed RP is unable, or unwilling to function in her
role, another RP may be appointed. The Adjudicator will record the failure
of the original RP and change the details of the RP in the records of the
6.4 The process after acceptance of the application

6.4.1 Moratorium period
One of the goals of having an insolvency law is to ensure the suspension of debt
collection actions by the creditors, and provide time for the debtors and creditors
to re-negotiate their contract. This requires a moratorium period in which there is
508 BLRC REPORT
no collection or other action by creditors against debtors. The moratorium period

will have the following characteristics:
1. Applicability of the moratorium The Code envisages two kinds of
moratoriums. The first is the moratorium that takes effect at the time of
application as discussed in the previous section. The second commences
once the FSO or the IRP application is accepted by the Adjudicator.
A creditor can object to the inclusion of his particular debt in the list of
debts eli-gible for the FSO within a specified time frame that falls within
the moratorium period. The RP will evaluate this request. If the creditors
objection is accepted by the Adjudicating authority after investigation by
the RP, that particular debt may be struck off the list of “qualifying debts”.15
During the period of the moratorium, all creditors, including secured
creditors who may not be part of the list of “qualifying debts” for which an
FSO or IRP is sought, will not be permitted to take any action to recover
debts or initiate any other legal proceedings against the debtor. In effect,
the creditor will not have any remedy in respect of the debt.
2. Public announcement of IRP and collection of claims
The Adjudicator will issue an order for public announcements of the IRP
registered for the entity, with a location where all creditors can submit any
credit claims against the entity. This ensures that all creditors have the
opportunity to lodge their claim into the process of resolving insolvency,
and realisation during bankruptcy proceedings if negotiations fail.
The claims collection announcement includes publishing the
announcement of the IRP in newspapers, and other public media. The
claims will be collected and maintained by the RP in the records of the
3. Time period of the moratorium
In the case of the FSO, the moratorium will remain for six months from the
date of the acceptance of the application. This ensures that debt relief is
not without its costs, as certain restrictions apply to the debtor in the
moratorium period.
In the case of an IRP, it is important to ensure that the debtor is incentivised
to offer a repayment plan to the creditor. In order to ensure that incentives
are aligned, the moratorium should before a clearly defined, and fixed
period of time. The moratorium will, therefore, remain for six months or till
the debtor and creditor agree on a repayment plan, whichever is earlier.
In this context, it is presumed that the debtor does intend to make a
BLRC REPORT 509
proposal to the creditor regarding a repayment plan, and that all

negotiations have to necessarily take place within this moratorium period.
4. Preparation of the repayment plan
During the moratorium period, the debtor, in consultation with the RP
needs to prepare a repayment plan. The proposal should include not only
the balance sheet of the individual, but also details of how the debtor
proposes to repay creditors, and should also provide reasons why the
creditors may accept the plan. In addition, the RP should submit a report
on the repayment plan, stating that the plan is legally valid, and has a
reasonable prospect of being approved by the creditors, and propose a
date for the meeting of the creditors. The plan and the report prepared by
the RP should be submitted to the Adjudicating Authority. In addition, this
proposal should be sent to every creditor by the RP, along with the date for
the proposed meeting between the debtor and creditors.
5. Changes in the application
In order to ensure that there is no fraud, the debtor should be required to
notify the Adjudicator (through the RP) if she is aware of any error or
omission in the information supplied in the application for insolvency, or if
there is any change in her financial circumstances since the date on
which the insolvency trigger was made, and before the moratorium period
ends. This includes information such as an increase in income, or acquiring
of property.
6.4.2 The process of negotiation
The goal of the IRP is to facilitate all types of repayment plans that are acceptable
to the debtor and creditors by placing the proceedings that lead to an agreement
of such a plan outside the court of law. This makes the stage of negotiation an
important one in the insolvency process.
Box 6.6: Drafting instructions for the moratorium period during the IRP
1. A moratorium period will first commence from the date of application,
and then a second moratorium will commence from the date that the
insolvency resolution application is accepted. The moratorium will apply
to all creditors, including those whose debt is not part of the application.
2. The moratorium period for both FSO and IRP will be six months. In the
case of the IRP, the moratorium period may end before six months if the
debtor and creditor agree on a repayment plan.
510 BLRC REPORT
recover debts or to initiate any other legal proceedings against the

debtor.
4. A creditor can object to the inclusion of a particular debt in the list of
debts eligible for the FSO within a specified time frame that falls within
the moratorium period. The Adjudicator will request the RP to evaluate
this objection. If the creditors objection is accepted after investigation by
the RP, that particular debt may be struck off the list of qualifying debts.
5. All creditors will have the opportunity to lodge their claim into the IRP.
6. The debtor will make a proposal of a repayment plan to the creditors for
with the help of an RP.
7. The proposal should contain
(a) The balance sheet of the debtor, include assets and cashflows for
the past two years.
(b) A proposal with the details of the repayment plan.
(c) The repayment plan must include fees to be paid towards the IRP.
8. The RP should prepare a report on the plan proposed by the debtor. This
report should state that the plan is legally valid, and likely to be accepted
by the creditors. Both the plan, and the report should be submitted to the
Adjudicating Authority, along with a proposed date for the creditors
meeting.
9. The proposed repayment plan should also be sent to the creditors by the
RP.
10. The debtor will be required to notify the Adjudicating Authority if she
becomes aware of any error or omission in the information supplied in
her application for insolvency, or if there is any change in her financial
circumstances since the date on which the insolvency trigger was made,
and before the moratorium period ends.
Once the repayment plan has been lodged with the Adjudicating Authority and
sent to all creditors, the latter will be summoned to a meeting. The details of the
creditor meeting, including the names of creditor, the name of the debtor and the
location of the meeting must be placed in the records of the resolution case.
Secured creditors may choose to not be a part of the meeting.
In the case of negotiations between an individual debtor and creditors, it is possible
that the balance of power tilts in favour of the creditor. The creditor may threaten
the debtor with a court-led bankruptcy unless she refuses to part with essential
BLRC REPORT 511
items of livelihood. To avoid such an event, the Committee agreed that the meeting
should be conducted in accordance with rules specified by the Code. This should
include documentation of a list of debts, income and assets that cannot be claimed
through negotiations, unless voluntarily offered by the debtor. These include
necessary clothing and household items, tools of trade to an indexed amount,
financial assets in pension and provident funds (below a specified amount), and
child support payments. The debtor also has to be present at the meeting. The
creditors may propose modifications, but these can become part of the repayment
plan only on the consent of the debtor.
The final arrangement has to have a majority vote of creditors with 75% in value.
Creditors absent at the meeting will have to accept the decision of those present.
If the secured creditor chooses to vote in the creditors meeting, she will have to
give up her right to enforce security during the period of the repayment plan. She
will then be bound by the terms of the repayment plan. If the secured creditor
chooses to not vote in the creditors meeting, the final arrangement cannot affect
the right of a secured creditor to appropriate or enforce her security, unless the
secured creditor consents to the same. The repayment plan must include fees to
be paid towards the IRP. Once a decision on the repayment plan has been made,
the same must be reported to the Adjudicator.
The entire process of negotiation should be concluded within the moratorium
period of six months. In the event of the death of the debtor during the period of
negotiations, the legal representative of the debtor may assume responsibility
for the same.
Once a consensus has been reached, the Adjudicator should accept the agreement
without any modification, and give the stamp of approval which will give effect to
the agreement. Failure to reach a consensus, or refusal by the next-of-kin to
participate in the negotiation process will lead to the failure of the IRP.
6.4.3 Implementation of the repayment plan
A critical feature of orderly resolution is the actual implementation of the
repayment plan agreed to by both the debtor and creditors. This requires an
impartial authority to oversee the process of repayment, either through the sale
of assets, or through the transfer of part of future income of the debtor to creditors.
The terms of the agreement will bind all parties affected by it.
The parties concerned may choose to continue with the same RP, or appoint a
new RP to oversee the implementation of the plan. The time-frame for the
implementation will be a function of the terms of agreement of the plan. However,
the terms of agreement of the plan will prohibit creditors from taking any action
against the debtor, except as agreed in the plan. If the debtor is found in violation
512 BLRC REPORT
of the agreement in the repayment plan, the Adjudicator may revoke the voluntary
agreement.
Box 6.7: Drafting instructions for the process of negotiation

1. The repayment plan proposal should be sent to all creditors, and all
creditors should be summoned to a creditors meeting.
2. The details of the creditor meeting, including the names of creditor, the
name of the debtor and the location of the meeting will be recorded in
the resolution case.
3. The proposal may be modified, but the final proposal must have full
consent of the debtor.
4. The Code shall specify the rules of negotiation which will include a list of
debts, income and assets that cannot be claimed through negotiations,
unless voluntarily offered by the debtor.
5. If the secured creditor chooses to vote in the creditors meeting, she will
give up her right to enforce security during the period of the repayment
plan and will be bound by the terms of the repayment plan.
6. If the secured creditor chooses to not vote in the creditors meeting, the
final arrangement will not affect rights of secured creditors without her
consent.
7. The final decision will be reported to the debtor, creditors and the
Adjudicator. It should contain
(a) The repayment plan, or the failure to agree to a repayment plan
(b) The resolutions that were discussed at the meeting and the decision
on such resolutions
(c) List of creditors who were present (or represented) at the meeting
and their respective voting records
8. The Adjudicating Authority will pass a written Order on the basis of the
final decision reported.
9. The entire process of negotiation should take place within the moratorium
period of six months.
If the debtor becomes disabled during the implementation of the plan, the debtor
and creditors may once again re-negotiate on a new plan. If the debtor dies during
the implementation of the plan, then the legal representative of the debtor can
choose to continue with the repayment plan, or request for an Adjudicator led
BLRC REPORT 513
bankruptcy process which will lead to the sale of the deceased debtors assets up
to the value of debt owed to creditors at that point in time. This ensures that the next-
of-kin continues to bear the cost either through period cash flow payments to
creditors, or some loss of inheritance through the sale of the debtors assets.
Once all the repayments have been made, the RP should send a notice to the effect
to both the Adjudicating Authority, as well as all persons who are bound by the
repayment plan. If the repayment plan comes to an end prematurely, i.e. before all
repayments have been made, the RP should notify the Adjudicating Authority of the
same. The Adjudicating Authority should then pass an order stating that the IRP
was not completed, and the debtor or the creditors may apply for bankruptcy.
Box 6.8: Drafting instructions for implementing the repayment plan

1. Once the repayment plan is lodged with the Adjudicator, the terms of the
agreement will bind all parties affected by it.
2. The parties concerned may choose to continue with the same RP, or
appoint a new RP to oversee the implementation of the plan.
3. The time-frame for the implementation will be defined in the terms of
agreement of the plan.
4. The terms of agreement of the plan will prohibit creditors from taking any
action against the debtor, except as agreed in the plan.
5. If the debtor is found in violation of the agreement in the repayment plan,
the Adjudicator may revoke the voluntary agreement.
6. If the debtor becomes disabled during the implementation of the plan,
the debtor and creditors may once again re-negotiate on a new plan.
7. If the debtor dies during the implementation of the plan, then the legal
representative of the debtor can choose to continue with the repayment
plan, or request for an Adjudicator led bankruptcy process which will
lead to the sale of the deceased debtors assets up to the value of debt
owed to creditors at that point in time.
8. Once all the repayments have been made, the RP will send a notice to
the effect to both the Adjudicating Authority, as well as all persons who
are bound by the repayment plan.
9. If the repayment plan comes to an end prematurely, i.e. before all
repayments have been made, the RP will notify the Adjudicating Authority
of the same. The Adjudicating Authority will then pass an order stating
that the IRP was not completed, and the debtor or the creditors may
apply for bankruptcy.
514 BLRC REPORT
6.4.4 Restrictions on the debtor

For the processes under the Code for individuals to be effective, it is imperative
that there are restrictions on what actions the debtor can undertake during the
fresh start process. The restrictions also serve to incentivise debtors to manage
debts such that they minimise the possibility of an insolvency. Such restriction are
not imposed on the debtor under the insolvency resolution process, as this process
is for bonafide negotiations between the debtor and the creditors for the purposes
of repayment of debt by the debtor.
The Code will specify restrictions on the debtor from the period of acceptance of
application till the debtor is awarded a “fresh start” (at the end of the fresh start
process). Specifically, the debtor will not be able to participate as a director of any
company, will have to inform other trading partners that she is undergoing such
process, will have to make all assets, and financial statements available, including
those of associated entities such as companies and trusts to the RP. The debtor
will have to inform any potential lender about the pending process before
borrowing fresh amounts. The debtor will not be permitted to travel overseas
without the permission of the Adjudicating Authority.
6.4.5 Replacement of the resolution professional
As the RP plays a key role in the life-cycle of the insolvency resolution process -
from the time of the acceptance of the application, the design and agreement of
the repayment plan, to the final execution of the plan, it is possible that unfair
conduct of the RP jeopardises the interests of either party. If the debtor or the
creditor have the ability to request for a replacement of a RP, then this serves as
another deterrent to bad behaviour. The Code, therefore, allows for both the
debtor and the creditor to apply to the Adjudicating Authority requesting for
replacing the RP. The Code will specify the grounds on which a replacement can
be requested, and the procedure to be followed by the Adjudicating Authority
and the Board for finding a replacement.
Box 6.9: Drafting instructions for restrictions on the debtor

1. The Code will specify restrictions on the debtor till the debtor is awarded
a fresh start.
2. The restrictions will include:
(a) The debtor will not be permitted to dispose assets.
(b) The debtor will have to specify to other trading partners that the
debtor is under the process of the FSO.
(c) The debtor will have to inform all parties about the on-going FSO
before entering commercial or financial transactions.
BLRC REPORT 515
(d) The debtor will have to make all assets, and financial statements
available, including those of associated entities such as companies
and trusts.
(e) The debtor will not be permitted to travel without the permission of
the Adjudicating Authority.
Box - 6.10 - Drafting instructions for replacement of the insolvency

professional
1. The debtor or creditor may apply to the Adjudicating Authority requesting
the replacement of the RP.
2. The Code will specify the grounds on which such an application may be
made.
3. In addition, the creditors may request for a different RP for the
implementation of the repayment plan.
4. The Adjudicating Authority must form aprima facie opinion on whether
to accept or reject the application within a specified time frame.
5. If the Adjudicating Authority accepts the application, it should check the
basic credentials of the proposed RP with the Board.
6. The Board should send a response to the Adjudicating Authority
recommending or rejecting the appointment of the proposed RP within a
specified time period.
7. On the receipt of the recommendation approving the appointment of the
RP from the Board, the Adjudicating Authority should appoint the new RP.
8. The Board should commence an enforcement action if the replacement
was requested on grounds that the RP was not performing as per the
code of conduct.
9. If, however, the Board finds that the request for replacement was made
with an intent to defraud or to delay the IRP, the applicant may be directed
to compensate the RP.
6.5 Bankruptcy proceedings

It is widely recognised that the bankruptcy process must be strengthened as part
of ensuring a robust legal framework. The Committee recommended that once
the bankruptcy process has started, it should be established as irreversible as
quickly as possible, and be concluded in as short a time as is reasonably possible.
One way to ensure this is to provide as much clarity about the steps of bankruptcy
516 BLRC REPORT
as is possible in the design of the relevant provisions of the Code. These are
discussed in the following sections.
6.5.1 Bankruptcy application
The process flow drawn by the Committee envisages an Adjudicator-led
bankruptcy procedure in the event of failure of the IRP. This failure could be at the
time of the application, at the time of negotiations around the repayment plan, or
at the time of the actual implementation of the repayment plan. There are two
differences w.r.t legal entities. First, there is no provision for a fast-track IRP to
bankruptcy. Second, the failure of IRP does not lead to automatic bankruptcy - it
only makes it possible for either the debtor or creditor to make a separate
application for bankruptcy. This is because the Committee believed that in the
case of individual insolvency, there should be greater effort at the possibility of
voluntary negotiations such that personal assets of the debtor remain with her to
the extent possible. The stigma of bankruptcy is higher for individuals, hence
failure of an IRP should not automatically lead to bankruptcy proceedings. The
Code describes three ways in which bankruptcy can be triggered for individuals:
1. By the failure of the acceptance of the application of the IRP by the
Adjudicating Authority-
If at the time of application the IRP is rejected by the Adjudicating Authority
due to the non disclosure of information requested by the RP, or if the
application was made with the intention to defraud creditors or the RP, the
creditors can trigger a bankruptcy.
2. By the failure of negotiations during the IRP.
If the process of negotiation of an on-going IRP fails, or if the IRP cannot
conclude with a plan within a specified time period, either the debtor or
the creditor can apply for a bankruptcy.
3. By the failure of adherence to terms agreed to in negotiations in a previous
IRP.
Creditors can also apply for bankruptcy when the debtor failed on terms
that were part of the solution of a previous IRP. Here, the main objective is
to minimise the time to bankruptcy and maximise value. Such an
application is permitted if this is triggered within a reasonable period of
the previous IRP having been resolved.
Once a bankruptcy petition is filed, it cannot be withdrawn without the leave of
the Adjudicating Authority.
BLRC REPORT 517
6.5.2 Effect of the application

There is likely to be a period of time between the application of bankruptcy and
the acceptance of the application. This makes it important to have provisions for
a morato-rium period even before the application has been accepted. This is
also the period where a professional playing the role of a “bankruptcy trustee”
needs to be appointed. The Committee proposes a moratorium period at the
time of the application and also makes recommendations regarding the
appointment of the bankruptcy trustee.
6.5.3 Effect of the bankruptcy order
Once the bankruptcy order is passed, the estate of the bankrupt will vest with the
Trustee, and become divisible among the creditors. To expedite the process of
the sale of assets,
Box 6.11: Drafting instructions for triggering bankruptcy

1. There are three reasons to trigger bankruptcy:
(a) Failure by the debtor or creditor to get the IRP application accepted
by the Adjudicating Authority
The failure can be due to the non disclosure of information
requested by the RP, or if the application was made with the
intention to defraud creditors or the RP.
(b) Failure by creditors and debtors to negotiate a solution in an ongoing
IRP.
The failure can be either an explicit failure to agree on a solution,
or that the ongoing IRP has hit the time limit permitted in the Code.
(c) Application by financial creditors for a bankruptcy on a failure to
adhere to terms solution of a previous IRP.
The previous IRP should have been resolved within a reasonable
time as specified in regulations issued by the IRB from time to time
from the application to trigger bankruptcy.
2. The application may be made by creditors of the debtor (singly or jointly
with other creditors), or by the debtor.
3. If the debtor has deceased at the time of the bankruptcy application, the
notice should be served to the legal representative of the deceased
debtor.
518 BLRC REPORT
4. The applicant may nominate a resolution professional as the bankruptcy

trustee for the purposes of the bankruptcy application.
5. The application of the debtor must include:
(a) Proof of application of the IRP.
(b) The records of the IRP, and the proof of failure of the IRP.
(c) The order passed by the Adjudicating Authority allowing for the
application of bankruptcy
(d) Particulars of the creditors of the debtor
(e) Particulars of debts owed to the creditors
(f) Particulars of securities held in respect of the debt
(g) Audited statement of list of assets and list of liabilities of the debtor
(h) Information of the debtor
6. The application of the creditor must include:
(a) Records of the previous IRP, and the negotiation solution
(b) The order passed by the Adjudicating Authority allowing for the
application of bankruptcy
(c) Details of the debts owed by the debtor to the creditor as on the
date of the bankruptcy application
(d) Information about the individual that is necessary to complete the
bankruptcy application
(e) If the applicant is a secured creditor, she should provide a statement
that she is willing, in the event of a bankruptcy order being made,
to give up his security for the benefit of all the creditors of the
bankrupt, or that the application is made only in respect to the
unsecured part of the debt.
(f) If the secured creditor makes an application only in respect to the
unsecured part of the debt, then she should provide an estimated
value of the unsecured part of the debt.
7. The bankruptcy application must be submitted along with a prescribed
non-refundable fee.
BLRC REPORT 519
Box 6.12: Drafting instructions for the effect of filing of application

1. A moratorium will commence as soon as the application for bankruptcy
is filed. This moratorium will end once the application is accepted.
recover debts or to initiate any other legal proceedings against the debtor.
3. If the applicant has proposed a bankruptcy trustee the Adjudicating
Authority will seek con-firmation from the Board within a specified period
of time that the proposed bankruptcy trustee has relevant expertise to
act as one, and that no disciplinary proceedings exist against her.
4. If the Board confirms that the proposed bankruptcy trustee has the relevant
expertise and that there are no disciplinary proceedings against her, the
Adjudicating Authority will appoint the bankruptcy trustee.
5. If the application is made without a bankruptcy trustee the Adjudicator
will request the Board to appoint an RP to the case. The Board must do so
6. The Adjudication Authority should pass a bankruptcy order within a
specified time period of receiving the confirmation from the Board
regarding the bankruptcy trustee.
7. The order should provide for the appointment of the bankruptcy trustee.
The Trustee can be changed during the process of bankruptcy.
8. The Code will provide provisions on resignation, replacement or vacancy
in the office of the Trustee.
9. A copy of the order should be sent to the debtor as well as the creditors.
the following steps need to be taken:
1. Estate of the trust The Code will enumerate on what constitutes the
estate of the bankrupt. This is important so as to provide clarity on all that
is available for realisation in the process of bankruptcy.
2. Statement of affairs The bankrupt will be required to submit his statement
of affairs to the bankruptcy trustee within a specified time period from the
bankruptcy commencement date. The statement of affairs should provide
information on the creditors of the debtor, the debts, assets and liabilities,
and other information as may be necessary.
3. Notice inviting claims from creditors
The bankruptcy proceedings should give an opportunity to all creditors to
520 BLRC REPORT
lodge their claims. This involves dispatching notices to all the creditors
listed in the application, as well as putting up a public notice giving details
of the bankruptcy order for those creditors who may have been missed in
the application.
4. Registration of claims and final list of creditors
The creditors will be required to register their claims with the bankruptcy
trustee in a specified format within a specified period of time. Secured
creditors who realise their security will have to prove the balance due
after deducting the net amount realised. They can prove the whole claim
if they surrender the security to the trust. Once the date for registration of
claims has passed, the bankruptcy trustee should prepare a final list of
creditors of the bankrupt, also within a specified period of time.
5. Meeting of creditors
Once a final list of creditors has been made, all the creditors should be
summoned for a creditors meeting. The meeting notice should be issued
within a specified period of time from the date of the bankruptcy order. All
creditors summoned to the meeting (or their proxies) will be entitled to
vote in respect of the resolutions in the meeting. Votes will be calculated
according to the value of debt owed to the creditor at the bankruptcy
commencement date. Since the vote of the immediate family members or
associates of the bankrupt may be biased, such a creditor will not be
entitled to vote.
Box 6.13: Drafting instructions for effect of the bankruptcy order.

1. The Code will enumerate on what constitutes the estate of the bankrupt.
2. The bankrupt will be required to submit his statement of affairs to the
bankruptcy trustee within a specified time period from the bankruptcy
commencement date. The statement of affairs should provide information
on
(a) creditors of the debtor
(b) debts owed to the creditors
(c) property owned by the debtor and his immediate family
(d) books of accounts of the debtor
(e) legal proceedings pending against her or her immediate family, to
his knowledge.
BLRC REPORT 521
3. The bankruptcy trustee will dispatch notices to all the creditors listed in
the application.
4. The bankruptcy trustee will put a public notice giving details of the
bankruptcy order for those creditors who may have been missed in the
application.
5. The creditors will be required to register their claims with the bankruptcy
trustee in a specified format within a specified period of time.
6. Secured creditors who realise their security will have to prove the balance
due after deducting the net amount realised. They can prove the whole
claim if they surrender the security to the trust.
7. The bankruptcy trustee will prepare a final list of creditors of the bankrupt
within a specified period of time.
8. The bankruptcy trustee will summon the creditors for a creditors meeting.
The meeting notice should be issued within a specified period of time
from the date of the bankruptcy order.
9. All creditors summoned to the meeting (or their proxies) will be entitled
to vote in respect of the resolutions in the meeting.
10. Votes will be calculated according to the value of debt owed to the creditor
at the bankruptcy commencement date.
11. A creditor who is a member of the immediate family or who is an
associate, of the bankrupt will not be entitled to vote.
6.5.4 Restrictions on the bankrupt
For the process of bankruptcy to be effective, it is imperative that there are
restrictions on what actions the bankrupt can undertake and that she is also
subject to certain disqualifications, from the date of acceptance of the application
for bankruptcy till the passing of the discharge order. The restrictions /
disqualifications are of a nature similar to the restrictions as enumerated for the
fresh start process.
6.5.5 Functions of the Trustee
In being appointed by the Adjudicator, the Trustee is vested with the rights and
powers that the debtor would have had if she had not become bankrupt. In
addition, the Trustee has recovery powers that the debtor would not have. Any
property of the debtor automatically vests in the Trustee, who is not required to
take any action for this ’vesting’ to occur.
522 BLRC REPORT
Box 6.14: Drafting instructions for restrictions on the bankrupt

1. The Code will specify restrictions on the bankrupt from the date of the
bankruptcy commencement. The bankrupt will:
(a) not be permitted to be a director of any company, or directly or
indirectly take part in or be concerned in the promotion, formation
or management of a company
(b) be required to inform his business partners that he is undergoing
a bankruptcy process
(c) prior to entering into any financial or commercial transaction of a
pre-scribed value, either individually or jointly, inform all the parties
involved that he is undergoing a bankruptcy process
(d) be incompetent to maintain any action, other than an action for
damages in respect of an injury to his person, without the previous
sanction of the Adjudicating Authority
(e) be permitted to travel overseas only with the permission of the
Adjudicating Authority
The function of the Trustee is to preserve and protect the value of the assets until
a formal order of bankruptcy is passed, at which time the Trustee has to maximise
the value in sale. In undertaking this role, the Trustee verifies all claims made on
the assets of the debtor. The full list of claims needs to be identified and verified,
so that any recovery can be made to these creditors in all fairness. The Trustee
may investigate the affairs of the debtor, admit debts, examine the debtor, and
identify the assets of the debtor that are available for realisation under bankruptcy.
Finally, the Trustee may sell assets of the debtor.
6.5.6 Assets in bankruptcy
The Committee debated what assets of the individual must be available for
realisation in bankruptcy, who will control the sale of the assets - whether the
sale has to be done by the Trustee, or whether the secured creditor can take
charge instead - and to whom the value can be paid out. Assets acquired by the
bankrupt, or devolved to the bankrupt, after the commencement of the insolvency
process and before discharge will also vest in the Trustee when they are acquired.
Items held in trust, or loaned to the bankrupt do not vest in the Trustee.
The Trustee will usually invite the co-owner of the property (usually the family
home) to either buy the bankrupt’s interest or join in selling the property. If the co-
owner will not cooperate with the Trustee or they cannot agree on a satisfactory
arrangement, the Trustee can force the sale of joint property. In that case, however,
BLRC REPORT 523
the Trustee will share the surplus with the non-bankrupt co-owner on the basis of
the legal entitlement as shown on the title deed.
There was clarity that the following unencumbered assets must be kept out of
bankruptcy:
Box 6.15: Drafting instructions for functions and rights of the Trustee
1. The estate of the bankrupt shall vest in the bankruptcy trustee immediately
on the appointment of the trustee
2. The Trustee will have the following functions:
(a) Investigate the affairs of the bankrupt
(b) Realise the estate of the bankrupt
(c) Distribute the estate of the bankrupt
3. The Trustee will have the right to:
(a) Hold property of every description,
(b) Make contracts,
(c) Sue and be sued,
(d) Enter into engagements binding on himself and, in respect of the
bankrupt’s estate
(e) Employ an agent
(f) Execute any power of attorney, deed or other instrument,
(g) Do any other act which is necessary or expedient for the purposes
of or in connection with the exercise of those powers.
4. The Trustee will have the power to:
(a) sell any part of the estate of the bankrupt
(b) give receipts for any money received by him
(c) prove, rank, claim and draw a dividend in respect of such debts
due to the bankrupt as are comprised in her estate
(d) exercise the right of redemption in respect of any property of the
bankruptcy held by any person by way of pledge or hypothecation.
(e) exercise the right to transfer the property of the bankrupt which is
transferable in the books of a person to the same extent as the
bankrupt might have exercised it if she had not become bankrupt.
524 BLRC REPORT
(f) deal with any property comprised in the estate of the bankrupt to
which the bankrupt is beneficially entitled in the same manner as
the bankrupt might have dealt with it.
5. The Code will specify actions that will require creditors approval before
the Trustee can act on them.
Box 6.16: Drafting instructions for the assets realisable in bankruptcy

1. All assets owned by the bankrupt can be used in realising value.
2. Assets acquired by the bankrupt, or devolved to the bankrupt after the
commencement of the insolvency process and before discharge will
also vest with the Trustee when they are acquired.
3. Items held in trust, or loaned to the bankrupt do not vest in the Trustee.
4. The following assets will be exempted:
(a) Assets held as collateral to certain financial market institutions.
(b) Necessary clothing and household items.
(c) Tools of trade to an indexed amount.
(d) Financial assets (and interest earned on the financial assets) in
pension and provident funds (up to a specified amount).
(e) Any right to recover damages or compensation for personal injury
or wrong doing or in respect of the death of the spouse or member
of family of the debtor.
(f) The dwelling unit (family home) of the bankrupt (up to a specified
amount).
(g) Funds earmarked for maintenance of children, spouse and elderly
parents.
5. The Trustee will invite the co-owner of the property to either buy the
bankrupt’s interest or join in selling the property. The Trustee can, however,
force the sale of joint property if the co-owner chooses to not co-operate.
6. In that case, however, the Trustee will share the surplus with the non-
bankrupt co-owner on the basis of the legal entitlement as shown on the
title deed.
1. Assets held as collateral to certain financial market institutions subject to

protection available regarding secured assets (such as clearing
BLRC REPORT 525
corporations or similar financial transactions to either creditors or non-

creditors).
2. Necessary clothing and household items
3. Tools of trade to an indexed amount,
4. Financial assets in pension and provident funds (under an specified
amount)
5. Any right to recover damages or compensation for personal injury or
wrong doing or in respect of the death of the spouse or member of family
of the debtor.
6. The dwelling unit (family home) of the bankrupt (up to a specified amount)
7. Funds earmarked for maintenance of children, spouse and elderly parents.
6.5.7 Administration of the estate
Administration and distribution of the estate of the bankruptcy are critical elements
of the bankruptcy procedure. There are several transactions that can compromise
the process. For example, disposition of property by the bankrupt, or onerous
property such as unprofitable contracts, or property that may actually give rise to
a liability to the estate may lead to fewer realisable assets to the detriment of the
creditors.
There was additional discussion around the recoveries of wrongful or fraudulent
trading or unauthorised use of capital. The Committee recommended that all
transactions undertaken during a specified time period prior to the application of
the bankruptcy should be scrutinised for any evidence of such fraudulent practices.
From the start of the IRP, the RP who is managing the relevant process is responsible
for scrutinising and verifying that the reported transactions are valid and central
to the running of the business. Those that can be classified as fraudulent and/or
unauthorised will become evidence in a case of alleged fraud made to include
such assets as part of the estate of the insolvent, through an order of the court.
During the bankruptcy phase, the Code will give the Trustee the power to file
lawsuits to recover lost value by canceling those transactions where they are
able to, or to recover value from the accused party. These are referred to as
vulnerable transactions, carried out in the lead up to, and during, insolvency
resolution as well as after bankruptcy.
526 BLRC REPORT
Box 6.17: Drafting instructions for administration of the estate

1. The Code will specify provisions related to the following
(a) Restrictions on disposition of property
(b) Treatment of after acquired property
(c) Treatment of onerous property
(d) Disclaimer of leaseholds
(e) Challenge against disclaimed property
(f) Treatment of transactions at an undervalue
(g) Treatment of transactions giving preference
(h) Bona-fide purchasers
(i) Treatment of extortionate credit transactions (j) Treatment of
contracts
(k) Administration of the estate of a deceased debtor
Some jurisdictions set such recoveries aside for payment to the secured creditors.
Given the extent of equity financing in India, all recoveries from such transactions
will become the property of the enterprise, and so will be distributed as described
within the waterfall of liabilities. Also particular to Indian conditions are transactions
made in relation to marriage. It was recommended that vulnerable transactions
may include the case of a settlement made in consideration of marriage where
the settlor is not at the time of making the settlement able to pay all his debts
without the aid of the property comprised in the settlement and it appears to the
Adjudicator that the settlement, covenant or contract was made in order to defeat
or delay creditors, or was unjustifiable having regard to the state of the settlor’s
affairs at the time when it was made.
The Code will specify provisions related to all such transactions.
6.5.8 Priority of payout
The Committee debated on the waterfall of liabilities that should hold in bankruptcy
in the new Code. In order to uphold the objectives of preserving the rights of
creditors in bankruptcy, the Committee agreed that the optimal waterfall should
be as follows:
1. Costs and expenses incurred by the bankruptcy trustee for the bankruptcy
process.
2. The second priority will be to
BLRC REPORT 527
(a) Secured creditors.

(b) Workmen dues for the period of three months prior to the date of the
bankruptcy commencement
3. Employee dues for the period of three months prior to the date of the
bankruptcy commencement.
Box 6.18 – Drafting instructions for the distribution of proceeds in

bankruptcy
The optimal waterfall should be as follows:
1. Costs and expenses incurred by the bankruptcy trustee for the bankruptcy
process.
2. The second priority will be to
(a) Secured creditors,
(b) Workmen dues for the period of three months prior to the date of
the bankruptcy commencement.
3. Employee wages and unpaid dues for the period of three months prior to
the date of the bankruptcy commencement
4. The next priority will be to
(a) amounts due to the Central and State Government in respect of the
whole or any part of two years before the bankruptcy
commencement date.
(b) dues payable to workmen of the bankrupt for whole or any part of
the nine month period beginning from twelve months before the
bankruptcy commencement date and ending three months before
the bankruptcy commencement date;
(c) wages and unpaid dues payable to employees of the bankrupt for
whole or any part of the three month period beginning from six
months before the bankruptcy commencement date and ending
three months before the bankruptcy commencement date
5. Lastly all other debts payable by the bankrupt.
6. Debts of the same class will rank equally between themselves
7. Any surplus remaining after the payment of the debts will be applied in
paying interest on those debts in respect of the periods during which
they have been outstanding since the bankruptcy commencement date.
8. Interest payments will rank equally irrespective of the nature of the debt.
528 BLRC REPORT
3. The next priority will be to

(a) Amounts due to the Central and State Government in respect of the
whole or any part of two years before the bankruptcy commencement
date.
(b) dues payable to workmen of the bankrupt for whole or any part of
the period beginning from twelve months before the bankruptcy
commencement date and ending three months before the
bankruptcy commencement date;
(c) dues payable to employees of the bankrupt for whole or any part of
the period beginning from six months before the bankruptcy
commencement date and ending three months before the
bankruptcy commencement date.
4. lastly, all other debts owed by the bankrupt, including unsecured debts.
6.5.9 Rules to close bankruptcy
When the Trustee has realised all of the bankrupt’s estate, or is of the view that the
costs of realising additional amounts outweigh benefits, the Trustee will give a
notice of closing the bankruptcy to the Adjudicating authority. The notice will
propose a final date by which all the claims against the bankrupt will be closed
off. The Trustee will defray any outstanding expense of the bankruptcy out of the
bankrupt’s estate. Any surplus amount will belong to the bankrupt.
The Trustee will also propose a final meeting with all creditors in which, the
Trustee all creditors will receive a report of the administration of the bankrupt’s
estate. At this point, the Trustee will be released from duty, and the bankruptcy
will come to a close.
Box 6.19: Drafting instructions for the close of bankruptcy

1. After the Trustee has realised all of the bankrupt’s estate, she will give a
notice
(a) of her intention to declare a final dividend or
(b) inform that no further dividend will be declared
2. The notice will propose a final date by which all the claims against the
bankrupt will be closed off.
3. After the final date the Trustee will
(a) defray any outstanding expenses of the bankruptcy out of the estate
of the bankrupt
BLRC REPORT 529
(b) declare and distribute that dividend

4. All creditors will receive a report of the administration of the bankrupt’s
estate
5. If a surplus remains after payment in full and with interest of all the
creditors of the bankrupt and the payment of the expenses of the
bankruptcy, the bankrupt will be entitled to the surplus
6. The Trustee will be released from duty, and the bankruptcy will come to
a close.
Box 6.20: Drafting instructions for the annulment of the bankruptcy

order
1. The Adjudicating Authority may annul a bankruptcy order if it appears
that
(a) on any ground existing at the time the bankruptcy order was made,
the bankruptcy order ought not to have been made
(b) both the debts and the expenses of the bankruptcy have all, since
the making of the bankruptcy order, either been paid or secured
for to the satisfaction of the Adjudicating Authority
2. If the bankruptcy is annulled, any action duly taken by the bankruptcy
trustee in the process of bankruptcy will be valid except that the property
of the bankrupt will vest in a individual appointed by the Adjudicating
Authority or revert to the bankrupt on terms stated by the Adjudicating
Authority.
3. The Adjudicating Authority must notify the following of the annulment
(a) the Board;
(b) the insolvency professional agency
4. An annulment will bind all the creditors so far as it relates to any debts
due to them which forms a part of the bankruptcy debts.
6.5.10 Annulment
An annulment is the cancellation of the bankruptcy and reinstatement of the
affairs of the debtor as if no bankruptcy had occurred. The Adjudicating Authority
may annul a bankruptcy order if it appears that the order should actually not have
been made, or if all the debts have been paid since the making of the order.
Annulment is an important clause as the record of the bankruptcy forever stays
on the record of the debtor. If there is reason to believe that the bankruptcy order
530 BLRC REPORT
should not have been made, then the debtor should not have to go through the
entire process.
6.6 Discharge
Discharge relates to the relief offered to the debtor. The world has adopted one of
two measures - an “earned” start where the duration of the repayment plan lasts
for between three to seven years. This is the system prevalent in most European
countries. The other is that of a “fresh” start where debt relief is granted with a
year. In the US, fresh start underlies the policy of small-business insolvency
legislation. The UK has also moved towards a system of discharge within twelve
months. The choice for India seems to be a combination of debt relief and earned
relief given the design of two procedures: the FSO and the IRP.
Box 6.21: Drafting instructions for discharge

1. When the moratorium period ends and an FSO is issued, the debtor is
discharged from all debt specified in the Order. The record will
permanently stay on the credit history of the debtor.
2. The discharge under the IRP will be granted in accordance with the
repayment plan. It is possible that discharge is granted before full
repayment, as negotiated in the plan, is complete. The successful IRP
will be recorded in the credit history of the debtor and will permanently
stay.
3. The debtor will be granted a “discharge from bankruptcy” at the end of
one year. This record will stay on the credit history permanently.
4. The bankruptcy procedure may continue. The discharged bankrupt will
be required to co-operate with the relevant authority to conclude the
bankruptcy process.
5. The discharge does not release the debtor from liabilities specified by
the Code.
6.6.1 FSO
The debtor will get discharge from her qualifying debts at the end of the
moratorium period. The Adjudicating authority will issue an Order which will
discharge the debtor from all the debt specified in the Order. This would also
include all the interest and penalties that may have become payable since the
date of application of the FSO. The record will remain permanently on the credit
history of the debtor.
BLRC REPORT 531
6.6.2 IRP
The discharge under the IRP will be granted in accordance with the repayment
plan. It is possible that discharge is granted before full repayment, as negotiated
in the plan, is complete. The debtor will be required to co-operate with the relevant
authority to conclude the repayment process. The successful IRP will be
permanently recorded in the credit history of the debtor.
6.6.3 Bankruptcy
In the case of an Adjudicator-led bankruptcy, the debtor will be granted a “discharge
from bankruptcy” at the end of one year from the date of being adjudged a
“bankrupt” i.e. the bankruptcy order. This record will stay on the credit history
permanently. The bankruptcy proceedings may continue. The discharged bankrupt
will be required to co-operate with the relevant authority to conclude the bankruptcy
process. The discharge does not release the debtor from any liability in respect of
a fine imposed, or liability to pay damages from negligence, nuisance or breach
of a statutory, contractual or other duty.
6.7 Offences
In disputes regarding insolvency, howsoever settled or disposed, the debtor
stands in a position of strength with regard to information of assets held by him.
All known creditors put together may not be able to obtain a full picture of revenue
flows and assets over which the debtor has a beneficial control or exercises a
power over its disposition. This information asymmetry has, at least in part,
attempted to be restored by creating provisions in the law that capture all possible
violations that an insolvent may engineer or commit to maintain opacity over his
assets and deny creditors’ access to assets that legally fall within the ownership
of the insolvent or over which it exercises a power of disposition.
An individual is not guilty of the offence if he proves that, at the time of the conduct
constituting the offence, he had no intent to defraud. The indicative list of offences
by an insolvent debtor /bankrupt may be of three kinds:
1. Fraud
(a) Fraudulent disposal of property i.e. makes or causes to be made or
caused to be made, any gift or transfer of, or any charge on his
property.
(b) Making a false representation or omits material information in the
application.
2. Absconding
532 BLRC REPORT
(a) Absconding which carries the meaning of the bankrupt who leaves
in the 6 months before petition, or in the initial period, or attempts or
makes preparations to leave the country.
3. Malpractice
(a) Bankrupt attempts to account for any part of her property by fictitious
losses or expenses.
(b) Non-disclosure of all the property comprised in his estate or disposal
of any such property.
(c) Contravention of the restrictions or disqualifications imposed on the
debtor.
(d) Concealment of property i.e. when an insolvent conceals any debt
due to or from him or conceals any property.
(e) Concealment of books and papers, falsification - does not deliver
possession to the Trustee or conceals destroys, mutilates or falsifies,
books, papers and other records of which he has possession or
control and which relate to his estate or his affairs.
(f) Obtaining credit; engaging in business - either alone or jointly with
any other person, he obtains credit to the extent of the prescribed
amount or more without giving the person from whom he obtains it
the relevant information about his status; or he engages (whether
directly or indirectly) in any business under a name other than that
in which he was adjudged bankrupt without disclosing to all persons
with whom he enters into any business transaction the name in
which he was so adjudged.
6.8 Appeals
Appeals shall be heard against the following:
1. The fresh start order.
2. Fraud in an agreement under the IRP or final order under the IRP process.
3. The bankruptcy order.
4. The final discharge order of the Adjudicator in the case of bankruptcy.
BLRC REPORT 533
7. Repeals and savings
There are four types of existing laws (both central and state) that the proposed
Code will interface with. These are:
1. Laws dealing with matters of insolvency and bankruptcy of persons and
legal entities.
2. Laws dealing with recovery of dues from persons and legal entities and
disputes associated with the same.
3. Laws whose provisions can impact the procedures and the creditors
waterfall in the proposed Code.
4. Subordinate legislation, both rules and regulations, in each of the above.
For the Code to be implemented effectively, these interfaces will need to be
defined and made clear. Such clarity will ease the transition to the Code and also
ensure that its robustness and credibility are maintained over time. Some of the
existing laws will need to be repealed in entirety, some in part and in others
amendments that either introduce new provisions or change existing provisions
will need to be enacted to ensure that the existing provisions do not adversely
impact the functioning of the proposed Code.
From a constitutional perspective, a parliamentary law on and insolvency and
bankruptcy can over-ride other laws on this subject matter. However, there are
two points of specific concern. First, certain categories of secured creditors and
the tax authorities have special powers granted to them under extant laws. Second,
the number of adjudicating authorities (specialised tribunals) under the various
laws is large and appears to be growing. The adjudicating authority under the
Code needs to have the requisite jurisdiction to deal with conflicts that may arise
due to this.
In the following sections, an attempt is made to identify the various statutes and
regulations that will need repeal or amendment in the context of their interface
with the proposed insolvency and bankruptcy Code. In practice, however, defining
all possible interfaces with an exhaustive list of relevant laws is impossible.
These will be the subject matter of case law and will evolve over time.
7.1 Laws dealing with bankruptcy and insolvency

These are central or state laws that have provisions on reorganisation,
restructuring and winding up of entities under their respective jurisdictions,
including under conditions of financial distress, insolvency or bankruptcy.
534 BLRC REPORT
1. Companies Act, 1956 or Companies Act, 2013 (whichever is relevant)

2. Sick Industrial Companies Act, 1985
3. Limited Liability Partnership Act, 2008
4. Indian Trusts Act, 1882
5. Various state laws on state cooperative societies
6. Multi-state Cooperative Societies Act, 2002
7. Trade Union Act, 1926
8. Laws governing incorporation of statutory corporations (whether created
by parliament or by state legislative assemblies)
9. Presidency Towns Insolvency Act, 1909
10. Provincial Insolvency Act, 1920
7.2 Laws dealing with recovery of dues

These laws have provisions dealing with recovery of dues, either by financial
and non-financial creditors.
1. Securitisation and Reconstruction ofFinancial Assets and Enforcement of
Security Interest Act, 2002
2. Recovery of Debts Due to Banks and Financial Institutions Act, 1993
3. Recovery provisions of the Income Tax Act 1961
4. Enforcement provisions of the Contract Act, 1872
5. Laws related to tort dues.
7.3 Laws that may impact procedures under the proposed Code
These include the non-insolvency or non-recovery provisions of various laws
that may impact the procedures or creditors’ waterfall under the proposed Code.
These could be provisions with regard to procedural matters, dispute resolution
or primacy over other laws. Some of these are:
1. Companies Act, 1956 or Companies Act, 2013 (whichever is the extant
law at that time)
2. Limited Liability Partnership Act, 2008
3. Indian Trusts Act, 1882
4. Securitisation and Reconstruction ofFinancial Assets and Enforcement of
Security Interest Act, 2002
BLRC REPORT 535
5. Recovery of Debts Due to Banks and Financial Institutions Act, 1993

6. Income Tax Act 1961
7. Contract Act, 1872
8. Transfer of Property Act, 1882
9. Registration Act, 1908
10. Stamp Act, 1899 (and the various state laws)
11. Various indirect tax laws in the states
12. The Bombay Shops and Establishments Act, 1948 (and equivalent
legislation in other states, if any)
13. Criminal, civil or personal laws relating to payment of maintenance (for
example Section 125 of the Code of Criminal Procedure, 1973)
14. Laws dealing with employees and workmen such as: Employees State
Insurance Act, 1948, Employees’ Provident Fund and Miscellaneous
Provisions Act, 1952, Workmen’s Compensation Act, 1923, Payment of
Wages Act, 1936, Payment of Bonus Act, 1965, Payment of Gratuity Act,
1972, Bombay Industrial Relations Act, 1946 (and equivalent legislation in
other states, if any) and any other laws relating to employment and welfare
15. Industrial Disputes Act, 1947
7.4 Subordinate legislation that interface with the Code

These include rules made by government departments or regulations by financial
sector or other regulatory bodies that may impact the effective implementation of
the Code. Some of these are:
1. RBI norms on corporate debt restructuring (CDR) and strategic debt
restructuring (SDR).
2. Government and RBI norms for self help groups (SHG) and joint liability
groups (JLG).
3. RBI norms for functioning of asset reconstruction companies (ARCs).
4. RBI prudential norms and asset classification guidelines.
5. SEBI Substantial Acquisition of Shares and Takeovers Regulation.
6. SEBI Issue of Capital and Disclosure Requirement Regulation.
7. SEBI Issue and Listing of Debt Securities Regulation.
8. SEBI Public Offer and Listing of Securitised Debt Instruments Regulation.
536 BLRC REPORT
9. Companies Rules under the Companies Act.

10. MSME guidelines on various matters.
7.5 Interfaces with the draft Indian Financial Code

In addition to the extant laws, the proposed Code is also interconnected with the
draft Indian Financial Code through the following elements:
1. The Resolution Corporation envisaged in the draft Indian Financial Code
is the primary mechanism for the insolvency of financial firms. The work
of the Committee addresses all non-financial firms.
2. The resolution process of the Resolution Corporation takes place in an
information- rich environment partly owing to the working of the statutory
Financial Data Management Centre. The approach taken in this report is
to obtain an information- rich environment through a competitive industry
of ‘information utilities’.
3. The principles of consumer protection, as envisaged in the draft Indian
Financial Code, limit and shape the methods adopted for individual
bankruptcy. The proposals made in this report are fully compatible with
these principles.
4. It is expected that under the proposed insolvency law, financial advisors
will emerge who will advise and guide consumers who are under credit
stress. This business, of credit counseling, would be a financial service
and would be regulated by the draft Indian Financial Code.
BLRC REPORT 537
8. Implementation
In order to carry this report from a proposal to complete implementation, the

following areas of work are required:
1. The legislative track: obtaining feedback from the public and refining the
draft law;
2. Constructing the regulator;
3. Constructing the adjudication infrastructure;
4. Initiating the information utilities;
5. Initiating the insolvency profession.
Alongside all work on the legislation, careful thinking is required about the
executive and judicial aspects also. Advance planning is required on the
construction of State capacity on all aspects that is required for the proper functioning
of the law. This will include institutional infrastructure in the form of the regulator,
information systems, administrative arrangements for courts, and the insolvency
profession.
8.1 Constructing the regulator

The Committee has proposed the creation of a regulator which will be integral to
the working of the bankruptcy process. While many countries do not have a
specialised regulator for the field of insolvency, the Committee believes that the
construction of a non-departmental public agency, which fuses certain legislative,
executive and quasi-judicial functions, is of essence in achieving the desired
outcome. The desired outcomes, however, hinge on the construction of a high
performance government agency which will perform the roles anticipated in this
law.
Many times, in the Indian experience, when there is low institutional capacity, the
performance of a government agency critically depends on the individuals present
therein. This puts an undue emphasis on the appointments process, which may
or may not always deliver remarkable outcomes. In a situation where institutional
capacity is low, the performance of a government agency varies greatly with the
identities of its key personnel. The working of the agency is not predictable; it
fluctuates depending on staffing changes. India’s quest for State capacity lies in
achieving consistent institutional capacity, where high performance is obtained
consistently for decades, and staffing changes are routine.
In the past, most government agencies have been setup in an informal manner,
538 BLRC REPORT
by recruiting a few people. Many years elapse before the agency is fully working,
and in many aspects, it has been difficult to achieve high performance. In recent
years, the Ministry of Finance has adopted a new approach to this question,
which comprises of the following elements.
Every government agency is composed of: (a) Office facilities (b) Organisation
design (c) Process manuals (d) IT systems which encode the process manuals. A
formal process is required, of constructing these four elements. The Ministry of
Finance has adopted the practice of setting up ‘Task Forces’ which support it in
procuring IT and consulting companies to assist in the construction of these four
elements. Large teams and resources are brought into play in a short time, so as
to construct world class capabilities in these four dimensions.
This approach is being used by the Ministry of Finance in building the institutional
landscape envisioned in the draft Indian Financial Code: the Financial Sector
Appellate Tribunal (FSAT), the Resolution Corporation (RC), the Financial Data
Management Centre (FDMC), the Public Debt Management Agency (PDMA) and
the Financial Redress Agency (FRA). As constructing State capacity is a slow and
complex process, the Ministry of Finance has embarked on this work prior to the
enactment of the Indian Financial Code as law. Similar methods are also being
used by the Department of Food for building the Warehouse Development and
Regulatory Authority (WDRA).
Drawing on these experiences, the Committee recommends:
1. The government must immediately create a ‘Task Force/Committee for
Construction of the Indian Bankruptcy and Insolvency Resolution Authority’
which will set about creating the requisite State capacity. This would ensure
that the Regulator is fully ready to perform the roles required of it by the
time the law is enacted.
8.2 Information utilities

The strategy envisaged in this report is that an industry of multiple competing
information utilities will come about. However, on day one this does not exist.
The first task for Government is to collaborate with academics and technical
organisations to draft a set of industry standard APIs (Section 4.3.9) which will be
used all through the information utility industry. These standard APIs will serve as
a coordination point for a large number of software developers all across the
economy: those building information utilities, and those building applications
which will be used by insolvency professionals and others in the insolvency
industry in accessing this information.16
There are already many organisations in India who could potentially play the role
BLRC REPORT 539
of the ‘information utilities’ as envisaged in this report and draft law. To the extent
that a consultation process is established, and Government proactively reaches
out to these firms and clarifies open questions, this will yield a more rapid initiation
of projects at these information utilities.
Information utilities will necessarily have incomplete coverage at the start. They
have to first reach a certain critical mass so that there are incentives for insolvency
professionals to always use them. There are, of course, strong incentives for
economic agents to use information utilities, as this would eliminate delays and
disputes in the insolvency process. The Government and the Board/Regulator
will have to manage a calibrated process through which at first there is a hybrid
system involving paper-based records for legacy activities coupled with newer
information in the information utilities, and coverage in the information utilities
becomes increasingly pervasive.17
Drawing on this reasoning, the Committee recommends:
1. A project should be immediately initiated, in collaboration with academics
and technical organisations, to draft a set of standard APIs, and provide
reference implementations. The standards-making process utilised here
should be similar to that adopted by the Internet Engineering Task Force
(IETF). These will become an organising framework for the entire
automation of the insolvency industry.
2. Government must immediately initiate a consultation process where
prospective entrants into the information utility industry have an opportunity
to better understand what is envisaged, and thus refine their plans.
3. After the law is enacted, Government and the Board/Regulator must first
ensure that information utilities are used even when the amount of
information in them is small. Gradual steps should be undertaken over a
period of roughly five years to create a complete straight- through-
processing environment where most firm failure is processed without
recourse to any physical paper records.
8.3 Insolvency profession

The strategy proposed in this report is one where multiple competing private self
regula-tory organisations will emerge, under the oversight of the Board/Regulator.
Private persons will play a leadership role in creating a profession that addresses
the requirements of insolvency in India. The Board/ Regulator will have oversight
over these organisations from the viewpoint of ensuring that standards are
maintained, and enforcement actions are being taken appropriately.
On day one, such SROs do not exist. Activities must be initiated, before the new
540 BLRC REPORT
law is enacted, which induce the requisite capacity building and transitioning
into the new insolvency profession.
Drawing on this reasoning, the Committee recommends:
1. The Government should begin consultations with public minded citizens
who may like to play a leadership role in establishing these SROs.
2. The Government and the Board/Regulator will need to establish a
framework for grandfathering, where persons with expertise in insolvency
are rapidly accepted as SRO members, and a first set of insolvency
practitioners is available in the market.
3. The Government and the Regulator should initiate human capital building
activities all across the country so as to build up the first wave of expertise
for this field.
8.4 Adjudication infrastructure

A critical element of the insolvency process is well functioning adjudication
infrastructure. The working of courts or tribunals is a business process, and
comprehensive workflow redesign is required, as part of business process
re-engineering, in order to obtain smooth functioning of courts. The Committee
recommends that international best practices on modern tribunal management
be followed in resolving insolvency related disputes.
8.5 Transition provision

Given that setting up of a Regulator, and the development of entities like Insolvency
Professionals and Information Utilities will take time, the Committee recommends
a transition provision during which the Central Government shall exercise all the
powers of the Regulator till the time the Regulator is established. Under these
powers, the Central Government may inter-alia:
1. Prescribe the categories, qualifications, experience and expertise of
persons to act as insolvency professionals;
2. Prescribe the qualification of entities to act as information utilities; and
3. Frame regulations for the conduct of the insolvency resolution process,
liquidation and bankruptcy.
8.6 Summary
The ultimate objective is for India to have an efficient bankruptcy and insolvency
framework. This involves navigating the legislative track and going from the draft
law to a Parliamentary legislation. This also involves many other elements of
BLRC REPORT 541
building State capacity. Establishing a sound insolvency framework for India should
be seen as a project which encompasses five things: (a) The legislative track; (b)
Establishing the Regulator; (c) Initiating the industry of information utilities and
phasing-in comprehensive adoption of these utilities; (d) Initiating the insolvency
profession; and (e) Establishing world class adjudication infrastructure.
Given that establishing a regulator is likely to take time, the Committee
recommends that till then the Central Government may exercise all powers of
the regulator.
542 BLRC REPORT
9. Annexures
Officer order : Constituting the BLRC
F. No. 7/2/2014-FSLRC
Government of India
Ministry of Finance
Department of Economic Affairs
(FSLRC Division)
North Block, New Delhi
22.8. 2014
OFFICE ORDER
The Hon’ble Finance Minster in Para 106 of his Budget Speech 2014-15 has
announced that an “Entrepreneur friendly legal bankruptcy framework will also
be developed for SMEs to enable easy exit”.
2. Pursuant to the above announcement, it has been decided to set up a Committee
with the following composition to study the corporate bankruptcy legal framework
in India and to submit a report within a period of six months; ie, by 28.2.2015.
i. Shri TK Vishwanathan,- Chairperson
ii. Representative of the Department of Financial Services-Member
iii. Representative of the Ministry of Corporate Affairs - Member
iv. Representative of the Ministry of Law(Legislative Deptt) -Member
v. Additional Secretary(Investment), DEA- Member
vi. Representatives of RBI and SEBI- Permanent Invitees
The Committee will have the option to invite experts in the field and representatives
of other Ministries/Departments concerned as Special Invitees.
3. The detailed Terms of Reference (ToRs) of the Committee and the Technical
Support required will be decided by the Committee in its first meeting and will be
issued separately.
4. This issues with the approval of the Hon’ble Finance Minister.
Gaurav Masaldan
Director (FSLRC)
BLRC REPORT 543
1. Shri TK Vishwanathan, Chairperson

2. Secretaries of the Department of Financial Services, Ministry of Corporate Affairs,
Legislative Department, Ministry of Law; with the request to nominate Senior
Officers conversant with the subject to attend the meetings of the Committee, as
Members.
3. Governor, RBI, Mumbai; with the request to nominate a Senior Officer conversant
with the subject to attend the meetings of the Committee,
4. Chairman, SHBI, Mumbai; with a request to nominate a Senior Officer conversant
with the subject to attend the meetings of the Committee.
Copy for information to :
i. PS to Hon’ble Finance Minster
ii. PS to MoS (Finance)
iiii. PPS to FS, Ministry of Finance
iv. PS to AS (Investment), AS(EA), DEA, Ministry of Finance
v. JSM(FM)/Adv(CM)/Adv(FSDC), DEA, Ministry of Finance
544 BLRC REPORT
Office Order Revising : Composition of the BLRC
F. No. 7/2/2014-FSLRC
Government of India
Ministry of Finance
Department of Economic Affairs
(FSLRC Division)
North Block, New Delhi
10.11.2014
OFFICE ORDER
In partial modification of the Ministry of Finance Office Order No 7/2/2104-FSLRC
dated 22.8.2014, setting up the Committee to study the corporate bankruptcy
legal framework in India, the composition of the Committee is revised as follows:-
i. Shri TK Vishwanathan – Chairperson
ii. Representative of the Department of Financial Services – Member
iii. Representative of the Ministry of Corporate Affairs – Member
iv. Representative of the Ministry of Law(Legislative Dcptt) – Member
V. Additional Secretary(lnvcstment), DEA – Member
vi. Representatives of RBI – Member
vii. Representatives of SEBI – Member
viii. Dr. Ajay Shah, NIPFP – Member
ix. Prof. Susan Thomas. IGIDR – Member
x. Mr. P.Ravi Prasad, Tempus Law Associates – Member
xi. Mr. Bahrain Vakil, AZB & Partners – Member
xii. Mr. B.S. Saluja, ICADR – Member
xiii. Mr. M.R.Umarji, Alliance Corporate Lawyers – Member
xiv. Ms. Aparna Ravi, Centre for Law and Policy Research – Member
xv. CEO & MD, IFCI, New Delhi Permanent Invitee
Legal research and writing for the Committee will be provided by M/s Vidhi
Centre for Legal Policy, New Delhi.
BLRC REPORT 545
2. The Committee will have the option to invite experts in the field and
representatives of other Ministries/Departments concerned as Special Invitees.
3. The Committee will submit its report in 2 phases:-
a) Interim Report for immediate action, pending legislation of the Bankruptcy
Code; by Feb 2015.
b) Final Report within 12 months thereafter, recommending a Bankruptcy
Code.
This issues with the approval of the Hon’ble Finance Minster.
Gaurav Masaldan
Director (FSLRC)
1. Shri TK Vishwanathan, Chairperson
2. All Members of the Committee
3. CFO & Managing Director, IFCI, New Delhi.
4. M/s Vidhi Centre for Legal Policy, New Delhi,
5. Copy for information to :
i. PS to Hon’ble Finance Minster
ii. PS to MoS (Finance)
iiii. PPS to Secretary (EA) Ministry of Finance
iv. PS to AS (Investment), DEA, Ministry of Finance
v. Adv(CM)/ DEA, Ministry of Finance
546 BLRC REPORT
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548 NOTIFICATION OF NCLT AND NCLAT
NOTIFICATION OF NCLT AND NCLAT

New Delhi, the 1st June, 2016
S.O. 1932(E). In exercise of the powers conferred by section 408 of the Companies
Act, 2013 (18 of 2013), the Central Government hereby constitutes the National
Company Law Tribunal to exercise and discharge the powers and functions as
are, or may be, conferred on it by or under the said Act with effect from the 1st day
of June, 2016.
NOTIFICATION
S.O. 1933(E).– In exercise of the powers conferred by section 410 of the Companies
Act, 2013 (18 of 2013), the Central Government hereby constitutes the National
Company Law Appellate Tribunal for hearing appeals against the orders of the
National Company Law Tribunal with effect from the 1st day of June, 2016.
LOCATION AND POSTAL ADDRESS OF NCLT AND ITS BENCHES AND NCLAT 549
LOCATION AND POSTAL ADDRESS OF NCLT AND ITS

BENCHES AND NCLAT
No. A-45011/14/2016-Ad IV
Government of India
Ministry of Corporate Affairs
The National Company Law Tribunal (NCLT) and National Company Law Appellate
Tribunal (NCLAT) have been constituted w.e.f. 1st June, 2016. The location and
postal address of NCLT/NCLAT Benches are as under
SI. Title of the Bench Location and Postal Address
No.
1. National Company Law ''B'' Wing, 3rd Floor, Paryavaran Bhawan, CGO
Appellate Tribunal New Complex, Lodhi Road, New Delhi-110003
Delhi. Note : The office of NCLAT at the aforesaid location
is under renovation. therefore, it is temporarily
functioning at Block No. 3, 8th Floor, CCU
Complex, Lodhi Road, New Delhi - 110003
SI. Title of the Bench Location and Postal Address

No.
(1) (2) (3)
1. (a) National Company Law New Delhi Block No.3, GF, 5th, 6th 7th & 8th
Tribunal, Principal Bench. Floors, CGO Complex, Lodhi Road, New Delhi
(b) National Company Law 110003
Tribunal, New Delhi Bench.
2. National Company Law Ahmedabad Anand House, Ground, 1st and 2nd
Tribunal, Ahmedabad Floors, SG Highway, Thaltej, Ahmedabad 380054
Bench.
3. National Company Law Allahabad 9th Floor, Sangam Place, Civil Lines,
Tribunal, Allahabad Allahabad - 211001
Bench.
4. National Company Law Bengaluru Corporate Bhawan, 12th Floor, Raheja
Tribunal, Bengaluru Towers, M G Road, Bengaluru - 560001
Bench.
5. National Company Law Chandigarh Ground Floor, Corporate Bhawan,
Tribunal, Chandigarh Sector - 27-B, Madhya Marg, Chandigarh -
Bench 160019.
6. National Company Law Chennai Corporate Bhawan (UTI Building), 3rd
Tribunal, Chennai Bench. Floor, No. 29 Rajaji Salai, Chennai - 600001
7. National Company Law Guwahati 4th Floor, Prithvi Planet, Behind
Tribunal, Guwahati Hanuman Mandir, G S Road, Guwahati -
Bench. 781007.
550 LOCATION AND POSTAL ADDRESS OF NCLT AND ITS BENCHES AND NCLAT
8. National Company Law Hyderabad Corporate Bhawan, Bandlaguda,

Tribunal, Hyderabad Lattiannaram Village, Hayatnagar Mandal,
Bench Rangareddy District, Hyderabad 500068
9. National Company Law Kolkata 5, Esplanade Row (West), Town Hall
Tribunal, Kolkata Bench Ground and First Floor, Kolkata - 700001.
10. National Company Law Mumbai 6th Floor, Fountain Telecom Building
Tribunal, Mumbai Bench No.1, Near Central Telegraph, M G
Road, Mumbai - 400001
TERRITORIAL JURISDICTION OF THE BENCH 551
NOTIFICATION
TERRITORIAL JURISDICTION OF THE BENCH
S.O. 1935(E).– In exercise of the powers conferred by sub-section (1) of section 419
of the Companies Act, 2013 (18 of 2013), the Central Government hereby constitutes
the following Benches of the National company Law Tribunal mentioned in column
(2) of the table below, located at the place mentioned in column (3) and to exercise
the jurisdiction over the area mentioned in column (4), namely :
TABLE
Sl. Title of the Bench Location Territorial Jurisdiction of the
No. Bench
(1) (2) (3) (4)
1. (a) National Company Law New Delhi (1) State of Haryana.
Tribunal, Principal Bench. (2) State of Rajasthan.
(b) National Company Law (3) Union territory of Delhi.
Tribunal, New Delhi Bench.
2. National Company Law Ahmedabad (1) State of Gujarat.
Tribunal, Ahmedabad (2) State of Madhya Pradesh.
Bench. (3) Union territory of Dadra
and Nagar Haveli.
(4) Union territory of
Daman and Diu.
3. National Company Law Allahabad (1) State of Uttar Pradesh.
Tribunal, Allahabad (2) State of Uttarakhand.
Bench.
4. National Company Law Bengaluru (1) State of Karnataka.
Tribunal, Bengaluru
Bench.
5. National Company Law Chandigarh (1) State of Himachal

Tribunal, Chandigarh Pradesh.
Bench. (2) State of Jammu and
Kashmir.
(3) State of Punj ab.
Chandigarh.
6. National Company Law Chennai (1) State of Kerala.
552 TERRITORIAL JURISDICTION OF THE BENCH
Tribunal, Chennai Bench. (2) State of Tamil Nadu.

Lakshadweep.
Puducherry.
7. National Company Law Guwahati (1) State of Arunachal
Tribunal, Guwahati Bench. Pradesh.
(2) State of Assam.
(3) State of Manipur.
(4) State of Mizoram.
(5) State of Meghalaya.
(6) State of Nagaland.
(7) State of Sikkim.
(8) State of Tripura.
8. National Company Law Hyderabad (1)State of Andhra Pradesh.
Tribunal, Hyderabad (2) State of Telangana.
Bench.
9. National Company Law Kolkata (1) State of Bihar.

Tribunal, Kolkata Bench. (2) State of Jharkhand.
(3) State of Odisha.
(4) State of West Bengal.
Andaman and Nicobar
Islands.
10. National Company Law Mumbai (1) State of Chhattisgarh.

Tribunal, Mumbai Bench. (2) State of Goa.
(3) State of Maharashtra.
DIVISION BENCH ENTITLEMENT TO FUNCTION AS A BENCH 553
No. 25/2/201 6-NCLT

GOVERNMENT OF INDIA
NATIONAL COMPANY LAW TRIBUNAL
Dated : 6th July 2016
ORDER
In continuation of notification No. S.O.1934(E) and 1935 (L) dated 1.6.2016 issued
by the Central Government, Ministry of Corporate Affairs and order no. 10/03/
2016-NCLT dated 5.7.2016 of this Tribunal.
2. The Division Bench is entitled to function as a bench and exercise powers of
the Tribunal irrespective of any class of cases except those specified by an order
of the President.
3. The single Judicial Member posted at various benches of the Tribunal are also
authorized in addition to the Division Bench wherever applicable, to function as
bench and exercise powers of the Tribunal in the following class of cases:
(a) All cases which have been transferred from erstwhile Company Law Board.
However, in terms of second proviso to section 419(3) of die Act the Member
Judicial shall be entitle to refer the matter to President with the opinion
that the matter ought to be heard by two Members for the reasons to be
recorded in writing.
(b) All new petitions where the Company involved has paid-up share capital
of Rs. 50 Lakhs or less where the Division Bench is available. However,
where the Division Bench is not available the pecuniary limit of Rs. 50
Lakhs shall not apply.
(c) Any other matter which the President may authorize by passing a specific
or general order.
By order of the National Company Law Tribunal.
554 DRESS CODE FOR NCLT
DRESS CODE FOR NCLT
File 25/2/2016-NCLT dated 2nd August 2016, issued by NCLT
In exercise of the powers conferred on Tribunal by rule 51 of National Company

Law Tribunal Rules, 2016. It has been decided to issue following dress code for
President, Members, Authorized Representatives and for the parties in person to
be followed during the proceeding of the Tribunal.
(i) For President and Member : The dress of the President and Members shall be
white or striped or black trouser with black coat over white shirt and band or
buttoned- up black coat and band. In the case of a female President or Member,
the dress shall be black coat over a white saree.
(ii) For Authorised Representatives : Every authorized Representative as provided
in section 432 of the Act shall appear before the Tribunal in his-her professional
dress if any, and if there is no such dress, a male in a suit buttoned-up coat over
a trouser or national dress that is a long buttoned-up coat and a female in a coat
over white or any other sober coloured saree or in any other sober and decent
dress.
(iii) For Parties in Person : Parties appearing in person before the Tribunal shall be
properly dressed.
2. The dress code shall be followed with immediate effect.
CHECKLIST FOR SCRUTINY OF PETITION/APPEAL/REPLY 555
CHECKLIST FOR SCRUTINY OF PETITION/APPEAL/REPLY

No. 25/2/2016-NCLT dated 28th July 2016, issued by NCLT
Reference NCLT Rules, 2016 notified on 21st July, 2016 by the Ministry of Corporate
Affairs.
2. A uniform check list for scrutiny of the petition/application/appeal to be filed
before all Benches of the National Company Law Tribunal as per the NCLT Rules,
2016 is attached (Annexure ‘A’) for necessary action.
ANNEXURE ‘A’
(Order No. 25/2/2016-NCLT dated 28th July, 2016)
National Company Law Tribunal New Delhi
Diary No....
Check List for Scrutiny of Petition, Application, Appeal/Reply
Sl. To be Ascertained Yes/No Reference
No. Page No.
1. Whether the petition/application appeal falls

under the territorial jurisdiction of New Delhi
Bench of NCLT?
2. Whether petition/application/appeal/reply)-
and all enclosures are legible and in English
language?
3. Whether petition/application/appeal/reply
has been printed in double spacing on one
side of standard petition paper with an inner
margin of about four centimetre width on top
and with a right margin of 2.5 cm. left margin
of 5 cm and duly pagenated, indexed and
stitched together in paper book form?
4. Whether the relevant provisions of the

Companies Act, 2013/NCLT Rules, 2016 have
been clearly mentioned in the petition/
application/appeal?
5. Whether petitioner/applicant/appellant is
entitled to and have the requisite qualification
to file the petition, e.g., under sections 241
556 CHECKLIST FOR SCRUTINY OF PETITION/APPEAL/REPLY
and 242 of the Companies Act, 2013 in

accordance with section 244 of the Act &
attached documentary proof of entitlement?
6. Whether the petition/application/appeal/reply

has been signed at the foot of each page by
all the petitioners/applicants/appellants/
respondents and their name(s) has also been
mentioned?
7. Whether name of the petitioner/applicant

appellant/respondent, complete address, viz.,
the name of the road street lane and municipal
division or ward, municipal door and other
number of the house; the name of the town or
village ; the post office, postal district and PIN
Code has been mentioned in the petition/
application/appeal reply?
8. Whether fax number, mobile number, valid

email address of the petitioner/applicant/
appellant/respondent have been mentioned?
9. Whether in every interlineations, eraser or

correction or deletion in petition/application/
appeal/document/reply has been initiated by
the party or his authorised representative?
10. Whether affidavits (Form NCLT-6) verifying the

petition/application/appeal/reply from all the
petitioner/applicant/appellant/respondent
drawn on non-judicial/stamp paper of
requisite value duly attested by Notary Public/
Oath Cornrnissioner have been filed?
11. Whether full name, parentage, age,

description of each part, date, address and in
case a party sues or being sued in a
representative character, has been set out in
accordance to rule 20(5) of NCLT Rules, 2016?
12. Whether petition /application/appeal reply

has been drawn in prescribed form as per
CHECKLIST FOR SCRUTINY OF PETITION/APPEAL/REPLY 557
Annexure ‘A’ of NCLT, Rules, 2016 with

stipulated fee given in the Schedule of these
rules’? The fee is to be paid by way of demand
draft/IPO drawn in favour of “The Pay &
Accounts Officer, Ministry of Corporate Affairs,
New Delhi”.
13. Whether documents accompanied to petition/

application/appeal reply have been duly
certified by the authorised representative or
advocate filing the petition or application or
appeal?
14. Whether the accompanied documents to the

petition/application/appeal/reply has been
verified from the originals and are in line with
the provisions of rule 23 NCLT, Rules, 2016? The
original should be brought before the Deputy
Registrar for verification?
15. Whether petition application/appeal/reply has

been filed in three authenticated copies and
delivered to the opposite party?
16. Whether all relevant enclosures to the petition/

application/appeal/reply have been attached
as per the Annexure ‘B’ of NCLT Rules, 2016?
17. Whether Annexures to the petition/application/
appeal/reply has been
numbered serially?
18. Whether Vakalatnama (with enrolment No.)

filed, is bearing court fee stamp of Rs. 2.75p
and in accordance with the Circular No.13/
Rules DHC/ dated 26th October, 2009 issued
by the Registrar General, Delhi High Court?
19. Whether documents with regard to

shareholding/paid-up capital/balance sheet
of the petitioner/applicant/appellant have
been attached?
20. Whether notice to be given to the Central

558 CHECKLIST FOR SCRUTINY OF PETITION/APPEAL/REPLY
Government along with copy of petition/

application/appeal under the relevant
provisions of the Companies Act, 2013?
21. Whether proof of service of the petition/

application/appeal/ reply on the concerned
Registrar of Companies and Regional Director,
Ministry of Corporate Affairs has been filed?
22. Whether proof of service of the petition/

application/appeal/reply on all the
respondents as well as caveat or(s), if any has
been filed?
23. Whether brief of synopsis within two or three

pages has been filed?
24. Whether date of events within two or three

pages has been filed?
ORDERS BY INSOLVENCY AND BANKRUPTCY BOARD OF INDIA 559

IN THE MATTER OF APPLICATION OF MR. GAURAV JAIN FOR
GRANT OF CERTIFICATE OF REGISTRATION AS AN INSOLVENCY
PROFESSIONAL UNDER REGULATION 7 OF THE INSOLVENCY AND
BANKRUPTCY BOARD OF INDIA (INSOLVENCY PROFESSIONALS)
REGULATIONS, 2016
ORDER
UNDER REGULATION 8(3)(b) OF THE INSOLVENCY AND
REGULATIONS, 2016
1. Mr. Gaurav Jain, a resident of Flat No. 152, HEWO Apartments, Sector 15
Part 2, Gurgaon - 122001 (hereinafter ‘the applicant’) had submitted an
application under regulation 6 of the Insolvency and Bankruptcy Board of
India (Insolvency Professionals) Regulations, 2016 (hereinafter
‘Regulations’), through the Indian Institute of Insolvency Professionals of
ICAI, seeking certificate of registration as an Insolvency Professional
(hereinafter ‘IP’).The application was forwarded by the Indian Institute of
Insolvency Professionals of ICAI to the Insolvency and Bankruptcy Board
of India (hereafter, ‘Board’) on 31stJanuary, 2017 with a recommendation
for registration.
2. Under regulation 7(2)(a) of the Regulations, the registration of an IP is
subject to a condition that he shall at all times abide by the code of conduct
as specified in the First Schedule to the Regulations. Clause 23 of the said
code of conduct requires that an IP must not engage in any employment.
Accordingly, a person cannot hold registration as an IP and be in
employment simultaneously. While considering the aforesaid application
for registration, it was observed that the applicant is employed with Ernest
& Young LLP as Assistant Vice President. The Board, therefore, formed a
prima facie opinion that the registration ought not be granted to the
applicant, as he does not meet the conditions of registration as an IP. It
communicated, vide its letter dated 8th February, 2017, its prima facie
opinion along with the reason for the same and provided an opportunity
to explain why his application should be accepted, within 15 days of the
receipt of the communication.
3. In reply, the applicant has, vide communication dated 9thFebruary, 2017,
provided two explanations. First, clause 23 of the code of conduct suggests
560 ORDERS BY INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
that an IP must not engage in any employment with the entity where he is
appointed (as a resolution professional, liquidator, bankruptcy trustee,
etc.).To justify this explanation, he has submitted that the objective of the
code of conduct is to maintain independence and to avoid conflict of
interest. Second, the requirements of the code of conduct cannot be used
to determine eligibility for registration as an IP. Therefore, he should be
granted registration.
4. I have considered the application, the recommendation of the Indian
Institute of Insolvency Professionals of ICAI, the explanations submitted
by the applicant, and material available on record. I proceed to examine
the two explanations submitted by the applicant.
5. Clause 23 of the code of conduct reads as under:
“23. An insolvency professional must not engage in any employment,
except when he has temporarily surrendered his certificate of membership
with the insolvency professional agency with which he is registered.”
6. A plain reading of the above clause makes it clear that an IP must not
‘engage in any employment’, repeat ‘any employment’. It envisages that
a person must not play two roles - profession and employment -
simultaneously. It is like the requirement that a person in employment
must not practise as an Advocate and vice versa. The solemn objective
behind such a requirement is that a professional must have undivided
loyalty and unflinching attention towards his professional obligations. It
assumes further significance in case of an IP who renders time critical
services under the Insolvency and Bankruptcy Code, 2016. This Code, for
example, mandates resolution plan to be submitted within 180 days of
the resolution commencement date and if it is not done, the corporate
person is pushed into liquidation. It is, therefore, beyond comprehension
to have an employed person as an IP. The clause, however, allows an IP
to temporarily surrender registration and thereafter engage in employment.
This is only an exception and even the exception does not allow a person
to engage in employment without surrendering registration.
7. The applicant has submitted that an IP is prohibited from employment
with that entity where he is appointed as a resolution professional,
liquidator, bankruptcy trustee, etc. as the objective is to maintain
independence and to avoid conflict of interest. I find that the prohibition is
comprehensive, that is, no employment whatsoever. The objective of the
clause is total commitment for the profession. This clause is not intended
to address the issues of independence or conflict of interests. There are
specific provisions in the relevant Regulations to address such issues.

Take the example of regulation 3(1) of the IBBI (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016. The said regulation
reads as under:
“3(1) An insolvency professional shall be eligible to be appointed as a
resolution professional for a corporate insolvency resolution process of a
corporate debtor if he, and all partners and directors of the insolvency
professional entity of which he is a partner or director, are independent of
Explanation - A person shall be considered independent of the corporate
debtor, if he:
(a) is eligible to be appointed as an independent director on the board
of the corporate debtor under section 149 of the Companies Act,
2013 (18 of 2013), where the corporate debtor is a company;
(b) is not a related party of the corporate debtor; or
(c) is not an employee or proprietor or a partner:
(i) of a firm of auditors or company secretaries in practice or cost
auditors of the corporate debtor; or
(ii) of a legal or a consulting firm, that has or had any transaction
with the corporate debtor amounting to ten per cent or more of
the gross turnover of such firm,
in the last three financial years.”
8. The regulation 3(1) of the IBBI (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 prohibits an IP from being appointed as a
resolution professional of a corporate debtor if he is not independent of
the corporate debtor. Read with section 149(6)(e)(i) of the Companies Act,
2013, an IP is not independent if he has been an employee of the corporate
debtor or its holding, subsidiary or associate company in any of the
preceding three financial years. He is also not independent if he has been
an employee of a firm of auditors or company secretaries in practice or
cost auditors of the corporate debtor in the last three financial years. There
are similar provisions in respective transaction related Regulations to
deal with independence and conflict of interests. Hence the contention of
the applicant about the objective of the code of conduct is misplaced. I,
therefore, do not agree with the first explanation of the applicant.
9. Regulation 7(2)(a) requires an IP to abide by the code of conduct at all
times. This code does not allow him to engage in employment, as

explained above. However, the applicant here is engaged in employment.
Assuming that a requirement in the code of conduct is not an eligibility
requirement, as claimed by the applicant, what purpose would it serve if
he is granted registration as an IP if he is not to render services as an IP?
Further, how can the Board grant registration to a person in employment?
He would be violating the code of conduct the moment he is granted
registration as an IP and consequently violate regulation 7 of the
Regulations. I, therefore, do not find the second explanation of the applicant
tenable.
10. In view of the foregoing, I, in exercise of powers under regulation 8(3)(b)
of the Regulations, reject the application of Mr. Gaurav Jain for registration
as an IP.
Date: March 02, 2017 (M. S. SAHOO)

Place: New Delhi CHAIRPERSON

IN THE MATTER OF APPLICATION OF MR. VIMAL PRAKASH DUBEY
FOR GRANT OF CERTIFICATE OF REGISTRATION AS AN
INSOLVENCY PROFESSIONAL UNDER REGULATION 7 OF THE
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (INSOLVENCY
PROFESSIONALS) REGULATIONS, 2016
ORDER
UNDER REGULATION 8(3)(b) OF THE INSOLVENCY AND
REGULATIONS, 2016
1. Mr. Vimal Prakash Dubey, a resident of Flat No. 602, Dayashreeji, Near
R.B.I Quarters, Gokuldham, Goregaon (East), Mumbai - 400 063
(hereinafter ‘the applicant’) had submitted an application under regulation
6 of the Insolvency and Bankruptcy Board of India (Insolvency
Professionals) Regulations, 2016 (hereinafter ‘the Regulations’), through
the ICSI Insolvency Professional Agency, seeking certificate of registration
as an Insolvency Professional (hereinafter ‘IP’).The application was
forwarded by the ICSI Insolvency Professionals Agency to the Insolvency
and Bankruptcy Board of India (hereafter, ‘the Board’) on 27thJanuary, 2017
with a recommendation for registration.
2. As per regulation 4(g)of the Regulations, no individual shall be eligible to
be registered as an IP if he is not a fit and proper person. Among others,
integrity, reputation and character are taken into account to determine if
an individual is a fit and proper person. While considering the aforesaid
application for registration, it was observed that three criminal proceeding
sare pending against the applicant under section 58A(10) of the Companies
Act, 1956 (hereinafter ‘the Act’)before the Additional Chief Metropolitan
Magistrate (40th Court), Girgaon, Mumbai (hereinafter ‘the CMM’) for
contravention of section 58A(9) of the Act. The Board accordingly formed
a prima facie opinion that the registration ought not be granted to the
applicant, as he is not a fit and proper person to be registered as an IP. It
communicated, vide its communication dated 8th February, 2017,its prima
facie opinion along with the reason for the same and provided an
opportunity to explain why his application should be accepted, within 15
days of the receipt of the communication.
3. The applicant has, vide his communications dated 9thFebruary, 2017, 20th
February, 2017 and 11th March, 2017, submitted the background to the
three criminal proceedings. He has submitted that M/s. Zenith Birla(India)
Limited (hereafter ‘the Company’) had accepted deposits from public under
section 58A of the Act during 2010 and 2011. Subsequently, the applicant
served the Company as its company secretary from 18.06.2013 to
30.07.2016. The Company failed to repay the deposits in accordance with
the terms and conditions of such deposit. Based on three sets of
applications by about 1200 depositors, the Company Law Board (hereafter
‘the CLB’), in exercise of its powers under section 58A(9) of the Act, after
providing an opportunity of hearing, directed the Company, by three
separate orders dated 08.11.2013, 14.02.2014 and 18.08.2014, to repay
deposits to applicant depositors by a date stipulated in those orders. These
orders provided that if the Company did not repay as directed, the
depositors shall approach Registrar of Companies who shall initiate
prosecution proceedings against the Company and its officers in
accordance with the law. The Company, however, failed to comply with
the aforesaid three orders of the CLB. On such failure, the Assistant
Registrar of Companies, Maharashtra (hereafter ‘the ROC’) has filed three
complaints (No. 4427/ss/2014, No. 4428/ss/2014, and No. 2141/ss/2015)
against the Company, the applicant and others under section 58A(10) of
the Act before the CMM for contravention of section 58A(9) of the Act, that
is, non-payment of deposits as directed by the three orders dated
08.11.2013, 14.02.2014 and 18.08.2014 of the CLB. He has further submitted:
“In fact the non payment of deposits in the ordinary course is of civil in
nature. But non payment of deposits as per orders of CLB take the nature
of criminal liability”.
4. In this background, the applicant has explained as under:
(a) He was not employed with the Company when it accepted the
public deposits. Even when he was employed, he was a company
secretary, simpliciter. He had informed the Board of Directors about
repercussions of default on account of non-repayment to depositors.
Further, no company secretary has ever been convicted of an offence
for non-repayment of deposits as per orders of the CLB.
(b) The Company was facing financial crunch and hence could not pay
depositors. It is in the process of applying for resolution under section
10 of the Insolvency and Bankruptcy Code, 2016 (hereafter, Code)
and he hopes that it will pay off its depositors before trial of the
aforesaid three proceedings begins.
(c) In another matter before City Session Court, Mumbai, the property of
Rs.80 crore of promoters of the Company has been attached for

repayment to depositors. In the next hearing, order asking to repay
all depositors of the Company (out of attached property) is very
much likely to be passed and in that case, the depositors would
have no cause for action.
(d) Non-repayment of deposits and non-compliance with orders of the
CLB (by the Company) does not cast any doubt on his integrity,
reputation and character and, therefore, he is a fit and proper person
to be registered as an IP.
5. I have considered the application, the recommendation of the ICSI
Insolvency Professionals Agency, the explanations submitted by the
applicant and material available on record. I proceed to examine the
explanations submitted by the applicant.
6. I find that the explanations provided by the applicant explain his limited
role as company secretary of the Company and the financial crunch of the
Company responsible for default in repayment to depositors. He has also
explained that the cause of action for depositors would disappear soon
as the Company is in the process of applying for resolution under the
Code and the City Session Court is likely to pass an order to repay the
depositors from the attached property. I observe that the applicant had
appeared on behalf of the Company before the CLB in all three sets of
applications and had made some such explanations (for example, financial
crunch, extension of time for repayment, etc. ). After taking such
explanations into account, the CLB passed the aforesaid three orders. He
and or the Company may submit these explanations again before the
CMM, who would take a view in the matter. The CLB and the ROC are
competent authorities who have followed the due process respectively
for issuing the three orders and for filing three complaints before the
CMM. And the CMM would dispose of the three complaints after following
the due process. The Board can neither substitute these competent
authorities nor can second guess their decisions.
7. What is relevant for the Board are the admitted facts, namely: (a) the
Company has failed to repay deposits in accordance with the terms of
conditions of such deposits;
(b) the CLB has passed three orders, after hearing the Company and the
applicant, directing the Company to repay to depositors by a stipulated
time and the Company has failed to repay as per orders of the CLB; (c) the
non-repayment in compliance with the three orders of the CLB attracts
criminal liability; and (d) the ROC has filed three criminal proceedings
against the applicant, among others, for non-compliance with the three
orders of the CLB and these proceedings are pending. The Board needs to
take into account these facts to determine if the applicant is a fit and
proper person for registration as an IP keeping the explanation to regulation
4 in view. Thesaid explanation reads as under:
“Explanation :
For determining whether an individual is fit and proper under these
Regulations, the Board may take account of any consideration as it deems
fit, including but not limited to the following criteria-
(iii) competence, including financial solvency and net worth. “
8. Before I proceed further, it is useful to understand the purpose of the Code
and the role of an IP therein. The Code essentially provides a market
determined and time bound mechanism for orderly resolution of
insolvency, wherever possible, and ease of exit, wherever required. This
ensures ease of doing business and the most efficient use of resources.
An IP plays an important role in resolution, liquidation and bankruptcy
processes of companies, and individuals. Take the example of corporate
insolvency resolution process of a company. When a company undergoes
this process, an IP is vested with the management of the affairs of the
company and he exercises the powers of its board of directors. Such
company could be one of the largest companies in India with probably
Rs.5 lakh crore of market capitalisation. He becomes the custodian of the
property of such a company and manages the affairs of the company as a
going concern. Further, he examines each resolution plan to confirm that
it does not contravene any of the provisions of the law for the time being
in force. These responsibilities require the highest level of integrity,
reputation and character. In sync with the responsibilities, the Regulations
require the Board to take into account integrity, reputation and character of
an individual for determining if an applicant is a fit and proper person.
9. The SEBI regulations have similar provisions for determining fit and proper
persons. While dealing with regulation 20 of the Securities Contracts
(Regulation) (Stock Exchanges and Clearing Corporations) Regulations,
2012 in the matter of U. P. Stock Exchange Brokers vs. SEBI (Civil Writ
Petition 45893 of 2012), the Hon’ble Allahabad High Court, vide its order
sated 23rd May, 2014, observed:
“Financial integrity, reputation, character and honesty are matters which

have a serious bearing on the objective, transparent and fair functioning
of the securities market. “
10. While dealing with regulation 3 of the Securities and Exchange Board of
India (Criteria for Fit and Proper Person) Regulations, 2004, the Hon’ble
Securities Appellate Tribunal, vide its order dated 6th September,
2006,examined the amplitude of fit and proper person as under:
“Good reputation and character of the applicant is a very material
consideration which must necessarily weigh in the mind of the Board
(SEBI) in this regard. Reputation is what others perceive of you. In other
words, it is the subjective opinion or impression of others about a person
and that, according to the Regulations, has to be good. This impression or
opinion is generally formed on the basis of the association he has with
others and/or on the basis of his past conduct. A person is known by the
company he keeps. In the very nature of things, there cannot be any direct
evidence in regard to the reputation of a person whether he be an
individual or a body corporate. In the case of a body corporate or a firm,
the reputation of its whole time director(s) or managing partner(s) would
come into focus. The Board as a regulator has been assigned a statutory
duty to protect the integrity of the securities market and also interest of
investors in securities apart from promoting the development of and
regulating the market by such measures as it may think fit. It is in the
discharge of this statutory obligation that the Board has framed the
Regulations with a view to keep the market place safe for the investors to
invest by keeping the undesirable elements out. The Regulations apply
across to all sets of regulations and all intermediaries of the securities
market including those who associate themselves with the market and
they all have to satisfy the criteria of “fit and proper person “ before they
could be registered under any of the relevant regulations and this criteria
they must continue to satisfy throughout the period of validity of their
registration and throughout the period they associate with the market.
The purpose of the Regulations is to achieve the aforesaid objects and
make the securities market a safe place to invest. One bad element can,
not only pollute the market but can play havoc with it which could be
detrimental to the interests of the innocent investors. In this background,
the Board may, in a given case, be justified in keeping a doubtful character
or an undesirable element out from the market rather than running the
risk of allowing the market to be polluted. “
11. It is thus clear that reputation and character of the applicant is a material
consideration. What is material is what others feel about the applicant

who has three criminal proceedings pending against him. It is also material
what kind of association the applicant has with the Company which has
been repeatedly contravening the provisions of the Act and ignoring several
directions of the CLB and whom he was representing before the CLB for
these contraventions. Does such a person inspire confidence of the
stakeholders who can entrust him with property of lakhs of crores for
management under corporate insolvency resolution process? Pendency
of three criminal proceedings against the applicant adversely impacts his
reputation and makes him not a person fit and proper to become an IP.
12. In view of the foregoing, I, in exercise of powers under regulation 8(3)(b) of
the Regulations, reject the application of Mr. Vimal Prakash Dubey for
registration as an Insolvency Professional.
Date: March 14, 2017 (Dr. M. S. Sahoo)

Place: New Delhi CHAIRPERSON

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INSOLVENCY AND

INSOLVENCY PROFESSIONALS AGENCY

Price : Rs. 550/- (Postage extra)

© INSOLVENCY PROFESSIONALS AGENCY

INSOLVENCY PROFESSIONALS AGENCY

Printed at Chandu Press/1000/April, 2017

The Code establishes an Insolvency Regulator, the Insolvency and

The ICSI Insolvency Professionals Agency (ICSI IPA), a frontline regulator, is

Sl. Topic Page

NOTIFICATIONS RELATING TO NCLT

Sl. Topic Page

1 Notification of NCLT and NCLAT 548

ORDERS BY INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

Sl. Topic Page

1 In the matter of application of Mr. Gaurav Jain for grant of 559

INSOLVENCY AND BANKRUPTCY CODE, 2016

BE it enacted by Parliament in the Sixty-seventh Year of the Republic of India as

(b) safe and accurate recording of financial information ;

institutions, retirement benefit plans, small savings instruments, foreign

Provided that security interest shall not include a performance

Application of this Part

(c) any costs incurred by the resolution professional in running the

(24) “related party”, in relation to a corporate debtor, means –

Initiation of corporate insolvency resolution process by financial creditor

Insolvency resolution by operational creditor

Application for initiation of corporate insolvency resolution process by

(d) such other information as may be specified.

Persons not entitled to make application

Time-limit for completion of insolvency resolution process

Declaration of moratorium and public announcement

(b) transferring, encumbering, alienating or disposing of by the corporate

Public announcement of corporate insolvency resolution process

Appointment and tenure of interim resolution professional

Management of affairs of corporate debtor by interim resolution professional

Duties of interim resolution professional

Personnel to extend co-operation to interim resolution professional

Management of operations of corporate debtor as going concern

committee of creditors shall be constituted and comprise of such persons to

Appointment of resolution professional

Resolution professional to conduct corporate insolvency resolution process

Meeting of committee of creditors

Duties of resolution professional

Application for avoidance of transactions not to affect proceedings

Replacement of resolution professional by committee of creditors

under section 22 is required to be replaced, it may replace him with another

Approval of committee of creditors for certain actions

(i) dispose of or permit the disposal of shares of any shareholder of the

Preparation of information memorandum

Submission of resolution plan

Approval of resolution plan

(ii) issue a public announcement stating that the corporate debtor is in

Appointment of liquidator and fee to be paid

Powers and duties of liquidator

(a) to verify claims of all the creditors ;

Powers of liquidator to access information

(a) an information utility ;

Admission or rejection of claims

Determination of valuation of claims

Appeal against the decision of liquidator

Preferential transactions and relevant time

Orders in case of preferential transactions

(i) had sufficient information of the initiation or commencement of insolvency

Avoidance of undervalued transactions