Procedure of Insolvency

Resolution
By Abhishek Kumar
Procedure for Financial Creditor to initiate the
proceeding

Filing of application Admission or If Admitted then the

(Section 7) Rejection of IRP starts.
Application

• Default of amount • Within 14 Days • Date of admission

more than 1 Lakh from the date of will the date from
filing the which the IRP starts
application
 Procedure for operational creditor to initiate
proceeding

Demand the payment in Wait for Reply for 10 days File application when either Adujdicating Authority shall
the manner prescribed there was no reply, or no Either Reject or admit
payment. within 14 Days

•Either payment in 10 •Along with the name of

days. Proof of payment Interim Resolution
to be attached in the Professional
reply.
•Or, notice of existence of
a dispute.
Procedure for Corporate Applicant to initiate
the proceeding
File and application Adjudicating authority will
either admit or reject the
application with 14 days,

• Along with Books of • If rejected on the

Accounts
• Name of the Insolvency
Resolution Professional
grounds that there was
a defect in the
application then, the
application will get
chance to rectify it.
Effect of admission of application
• Moratorium Period is declared
• Public announcement
• Appointment of Insolvency Resolution Professional
 Moratorium Period
• 180 Days
• Can be extended for further 90 days on the application of creditors.
• Prohibition on institution of suits or continuation of pending suits or
proceedings
• Prohibition on transferring, encumbering, alienating or disposing of by the
corporate debtor of any of its assets or any legal right or beneficial interest
• Prohibition on any action to foreclose, recover or enforce any security
interest created by the corporate debtor in respect of its property
• Prohibition on the recovery of any property by an owner or lessor where
such property is occupied by or in the possession of the corporate debtor

This has to be completed with 180 days + 90 days (if extended)
Constitution of committees of
creditors
•Only financial creditors
Further Procedure
Committee of creditors will decide if
the interim resolution professional
will continue or another Resolution
professional will be appointed.
•If a different IRP is required then an
application is to be filed with
adjudicating authority.
Prepare the Insolvency Resolution
Plan
•To be approved by 75% of the
financial creditors.
•Directors and Operational creditors
can attend the meeting but cannot
vote.
Plan to be presented to the
Adjudicating Authority.
•Court to satisfy if it was according
to the law or not.
•If it was duly approved by the
creditors or not.
•It wont go into the efficiency of the
plan
 Liquidation Process
If the plan is rejected by the Adjudication Authority
Or
No plan was submitted in the time period
Then the adjudication authority will order the liquidation of the
company.
• Along with a Public Announcement
• Notice to any authority wherever the company was registered
• The Insolvency professional will act as liquidator.
• Creditors have to submit the claim from the 30 days to the liquidator.
• After the company is liquidated then the order of dissolution shall be
passed.