IMPORTANT QUESTION WITH ANSWERS RELATED TO INSOLVENCY AND BANKRUPTCY CODE 2016
- What is the Insolvency and Bankruptcy Code (IBC) 2016?
Answer: The IBC 2016 is a legislation in India that consolidates and amends the laws related to insolvency resolution and bankruptcy. - What is the objective of the Insolvency and Bankruptcy Code 2016?
Answer: The main objective of the IBC 2016 is to provide a time-bound and efficient mechanism for resolving insolvencies and promoting the maximization of the value of assets. - Who administers the Insolvency and Bankruptcy Code in India?
Answer: The Insolvency and Bankruptcy Board of India (IBBI) administers the provisions of the IBC 2016. - What is an insolvency resolution process?
Answer: An insolvency resolution process is a time-bound mechanism to resolve the financial distress of a debtor and protect the interests of creditors. - Who can initiate an insolvency resolution process?
Answer: A financial creditor, operational creditor, or the corporate debtor itself can initiate an insolvency resolution process under the IBC 2016. - What is a financial creditor?
Answer: A financial creditor is a person to whom a financial debt is owed. It includes banks, financial institutions, and other lenders. - What is an operational creditor?
Answer: An operational creditor is a person to whom an operational debt is owed. It includes suppliers of goods or services. - What is the difference between a financial creditor and an operational creditor?
Answer: A financial creditor is owed a financial debt, while an operational creditor is owed an operational debt. Financial debts relate to borrowing money, while operational debts relate to providing goods or services. - What is a corporate debtor?
Answer: A corporate debtor is a company or a limited liability partnership that owes a debt. - What is a resolution professional?
Answer: A resolution professional is an independent insolvency professional appointed to manage the affairs of the corporate debtor during the insolvency resolution process. - What is the role of a resolution professional?
Answer: The resolution professional takes control of the corporate debtor’s assets, manages its operations, and works towards the resolution of its insolvency. - What is the time limit for completing the insolvency resolution process?
Answer: The insolvency resolution process must be completed within 180 days from the date of initiation, with a maximum extension of 90 days in certain cases. - What is a committee of creditors?
Answer: The committee of creditors is a body consisting of financial creditors of the corporate debtor. It takes key decisions during the insolvency resolution process. - What is a resolution plan?
Answer: A resolution plan is a proposal put forward by a resolution applicant for the resolution of the insolvency of the corporate debtor. - Who can submit a resolution plan?
Answer: Any person, including the corporate debtor, can submit a resolution plan for the consideration of the committee of creditors. - What is the role of the committee of creditors in approving a resolution plan?
Answer: The committee of creditors evaluates and votes on the resolution plan. If approved by a specified majority, the plan is implemented. - What happens if the committee of creditors does not approve a resolution plan?
Answer: If the committee of creditors does not approve a resolution plan, the corporate debtor may go into liquidation. - What is liquidation?
Answer: Liquidation is the process of selling off the assets of a company in order to pay off its debts and distribute the remaining proceeds to its stakeholders. - Who conducts the liquidation process?
Answer: A liquidator, appointed by the Adjudicating Authority, conducts the liquidation process. - What is the order of priority for distribution of proceeds during liquidation?
Answer: The order of priority for distribution of proceeds during liquidation is as follows: 1) Insolvency resolution process costs, 2) Secured creditors, 3) Workmen dues for the past two years, 4) Other employee dues for the past two years, and so on. - Can a company that is undergoing liquidation be revived?
Answer: In certain cases, if it is feasible and in the best interest of stakeholders, the Adjudicating Authority may order the revival of a company even after the commencement of liquidation. - Can a company file for insolvency voluntarily?
Answer: Yes, a company can file for insolvency voluntarily by submitting an application to the Adjudicating Authority. - Can a resolution professional be removed during the insolvency process?
Answer: Yes, a resolution professional can be removed by the committee of creditors with the approval of the Adjudicating Authority under certain circumstances. - Can the corporate debtor continue its operations during the insolvency resolution process?
Answer: The corporate debtor’s operations continue during the insolvency resolution process, under the supervision of the resolution professional. - Can the Adjudicating Authority reject a resolution plan approved by the committee of creditors?
Answer: The Adjudicating Authority can reject a resolution plan if it does not conform to the requirements of the IBC 2016 or if it is not in the interest of stakeholders. - What is the role of the National Company Law Tribunal (NCLT) in the insolvency resolution process?
Answer: The NCLT is the Adjudicating Authority that hears and decides applications related to insolvency resolution and liquidation under the IBC 2016. - Can the decision of the NCLT be appealed?
Answer: Yes, the decision of the NCLT can be appealed before the National Company Law Appellate Tribunal (NCLAT), and further to the Supreme Court of India. - What is the role of the Insolvency and Bankruptcy Board of India (IBBI)?
Answer: The IBBI is the regulatory body responsible for overseeing insolvency professionals, insolvency professional agencies, and information utilities under the IBC 2016. - What is an information utility?
Answer: An information utility is an entity registered with the IBBI that maintains a database of financial and non-financial information of persons subject to the IBC 2016. - Can a person be declared bankrupt under the IBC 2016?
Answer: Yes, an individual can be declared bankrupt under the provisions of the IBC 2016. - What is the process for declaring an individual bankrupt?
Answer: The process for declaring an individual bankrupt involves filing an application before the NCLT, and if satisfied, the NCLT may pass an order declaring the individual bankrupt. - What is the role of the bankruptcy trustee in the case of an individual bankruptcy?
Answer: The bankruptcy trustee is appointed to administer the assets of the bankrupt individual and distribute the proceeds among the creditors. - Can a bankrupt individual be discharged from bankruptcy?
Answer: Yes, a bankrupt individual can be discharged from bankruptcy after certain conditions are met, as provided under the IBC 2016. - Are there any exemptions to the bankruptcy process for individuals?
Answer: Yes, the IBC 2016 provides for certain exemptions and protections for individuals regarding the bankruptcy process, such as the maintenance of essential household items. - Can a corporate debtor initiate multiple insolvency resolution processes simultaneously?
Answer: No, a corporate debtor cannot initiate multiple insolvency resolution processes simultaneously. - Can a resolution plan be modified after its approval by the committee of creditors?
Answer: Yes, a resolution plan can be modified with the approval of the committee of creditors and the Adjudicating Authority, under certain circumstances. - Can a resolution applicant withdraw its resolution plan after its submission?
Answer: No, a resolution applicant cannot unilaterally withdraw its resolution plan after its submission. - Can a resolution professional be held liable for actions taken during the insolvency resolution process?
Answer: Yes, a resolution professional can be held liable for any fraudulent or malicious actions taken during the insolvency resolution process. - Can the shareholders of a corporate debtor participate in the insolvency resolution process?
Answer: The shareholders of a corporate debtor have limited participation in the insolvency resolution process and do not have the power to decide on the resolution plan. - What happens to the contracts of a corporate debtor during the insolvency resolution process?
Answer: Contracts of the corporate debtor may be continued or terminated during the insolvency resolution process, as decided by the resolution professional. - Can a creditor initiate insolvency proceedings directly against a personal guarantor?
Answer: Yes, a creditor can initiate insolvency proceedings directly against a personal guarantor under the provisions of the IBC 2016. - Can a resolution plan be challenged after its approval and implementation?
Answer: Once a resolution plan is approved and implemented, it is binding on all stakeholders and generally cannot be challenged, except under certain circumstances. - Can a resolution applicant acquire assets of the corporate debtor during the insolvency resolution process?
Answer: A resolution applicant can acquire the assets of the corporate debtor as part of the approved resolution plan. - Can a resolution plan provide for the restructuring of the corporate debtor’s debt?
Answer: Yes, a resolution plan can provide for the restructuring of the corporate debtor’s debt, including changes in repayment terms and conversion of debt into equity. - Can the insolvency resolution process be initiated against a partnership firm?
Answer: Yes, the insolvency resolution process can be initiated against a partnership firm under the IBC 2016. - Can the insolvency resolution process be initiated against a financial institution or a bank?
Answer: No, the insolvency resolution process cannot be initiated against a financial institution or a bank. Separate laws and regulations govern the resolution of financial institutions and banks. - Can a resolution professional sell the assets of the corporate debtor below their fair value?
Answer: A resolution professional is required to maximize the value of the assets of the corporate debtor and cannot sell them below their fair value, except under certain circumstances. - Can the resolution professional reject the claims of creditors during the insolvency resolution process?
Answer: The resolution professional can verify and admit or reject the claims of creditors during the insolvency resolution process, based on the available information. - Can a resolution plan provide for the merger or amalgamation of the corporate debtor with another entity?
Answer: Yes, a resolution plan can provide for the merger or amalgamation of the corporate debtor with another entity, subject to compliance with applicable laws and regulations. - Can a person be held liable for preferential or undervalued transactions during the insolvency resolution process?
Answer: A person who has entered into preferential or undervalued transactions with the corporate debtor may be held liable to repay such transactions during the insolvency resolution process. - Can the resolution professional be changed during the insolvency resolution process?
Answer: The resolution professional can be changed during the insolvency resolution process with the approval of the committee of creditors and the Adjudicating Authority. - Can the corporate debtor continue legal proceedings during the insolvency resolution process?
Answer: Legal proceedings against the corporate debtor are generally stayed during the insolvency resolution process, except for certain cases involving employment matters and criminal proceedings. - Can a resolution plan be modified after its approval by the Adjudicating Authority?
Answer: A resolution plan can be modified after its approval by the Adjudicating Authority, but only if the modifications are in the interest of stakeholders and approved by the committee of creditors. - Can a resolution plan be implemented if it does not provide for full repayment of creditors’ dues?
Answer: Yes, a resolution plan can be implemented even if it does not provide for full repayment of creditors’ dues, as long as it is approved by the committee of creditors and the Adjudicating Authority. - Can a resolution applicant acquire the shares of the corporate debtor during the insolvency resolution process?
Answer: A resolution applicant can acquire the shares of the corporate debtor during the insolvency resolution process as part of the approved resolution plan. - Can a resolution plan be modified after its implementation?
Answer: A resolution plan cannot be modified after its implementation, except under exceptional circumstances as approved by the Adjudicating Authority. - Can a resolution plan be withdrawn after its approval by the Adjudicating Authority?
Answer: No, a resolution plan cannot be unilaterally withdrawn after its approval by the Adjudicating Authority. - Can the personal assets of the promoters or directors be used to repay the debts of the corporate debtor?
Answer: The personal assets of the promoters or directors may be used to repay the debts of the corporate debtor only if there is evidence of fraudulent or wrongful trading. - Can a resolution plan be challenged in court after its implementation?
Answer: A resolution plan can be challenged in court after its implementation if there is evidence of fraud, material irregularity, or contravention of the IBC 2016. - Can the insolvency resolution process be initiated against a foreign company?
Answer: Yes, the insolvency resolution process can be initiated against a foreign company if it has assets in India or if it has committed an act of insolvency in India. - Can a resolution applicant submit multiple resolution plans for the same corporate debtor?
Answer: No, a resolution applicant can submit only one resolution plan for a specific corporate debtor during the insolvency resolution process. - Can the insolvency resolution process be withdrawn after its initiation?
Answer: The insolvency resolution process can be withdrawn with the approval of the committee of creditors, before the issuance of the invitation for submission of resolution plans. - Can the Adjudicating Authority reject a resolution plan without considering the views of the committee of creditors?
Answer: The Adjudicating Authority cannot reject a resolution plan without considering the views of the committee of creditors, except in cases involving contravention of the IBC 2016. - Can a resolution applicant acquire the shares of the corporate debtor for a nominal consideration?
Answer: A resolution applicant cannot acquire the shares of the corporate debtor for a nominal consideration. The resolution plan must provide for a fair and equitable consideration for the acquisition. - Can a resolution plan be modified after its approval by the committee of creditors but before its approval by the Adjudicating Authority?
Answer: Yes, a resolution plan can be modified after its approval by the committee of creditors but before its approval by the Adjudicating Authority, with the consent of the committee of creditors. - Can a resolution applicant be held liable for the obligations of the corporate debtor prior to the approval of the resolution plan?
Answer: A resolution applicant cannot be held liable for the obligations of the corporate debtor prior to the approval of the resolution plan, except in cases of fraudulent conduct. - Can a resolution plan provide for the reduction of the amount payable to operational creditors?
Answer: Yes, a resolution plan can provide for the reduction of the amount payable to operational creditors, as long as it is approved by the committee of creditors and the Adjudicating Authority. - Can a resolution plan provide for the payment of debts in installments?
Answer: Yes, a resolution plan can provide for the payment of debts in installments, subject to the approval of the committee of creditors and the Adjudicating Authority. - Can a resolution plan provide for the infusion of additional funds into the corporate debtor?
Answer: Yes, a resolution plan can provide for the infusion of additional funds into the corporate debtor, either by the resolution applicant or by third-party investors. - Can a resolution plan be challenged by dissenting financial creditors?
Answer: A resolution plan can be challenged by dissenting financial creditors if they believe that their interests have been unfairly prejudiced or that the plan contravenes the IBC 2016. - Can a resolution plan be modified after its approval by the Adjudicating Authority but before its implementation?
Answer: A resolution plan can be modified after its approval by the Adjudicating Authority but before its implementation, with the consent of the committee of creditors and the Adjudicating Authority. - Can a resolution plan be rejected by the committee of creditors after its approval?
Answer: The committee of creditors cannot reject a resolution plan after its approval, unless there is evidence of fraud, material irregularity, or contravention of the IBC 2016. - Can a resolution plan provide for the conversion of debt into equity of the corporate debtor?
Answer: Yes, a resolution plan can provide for the conversion of debt into equity of the corporate debtor, subject to compliance with applicable laws and regulations. - Can a resolution plan provide for the transfer of assets of the corporate debtor to a third party?
Answer: Yes, a resolution plan can provide for the transfer of assets of the corporate debtor to a third party as part of the approved resolution plan. - Can a resolution plan be challenged by dissenting operational creditors?
Answer: A resolution plan can be challenged by dissenting operational creditors if they believe that their interests have been unfairly prejudiced or that the plan contravenes the IBC 2016. - Can a resolution plan provide for the settlement of disputes related to the corporate debtor?
Answer: Yes, a resolution plan can provide for the settlement of disputes related to the corporate debtor, including arbitration or other alternative dispute resolution mechanisms. - Can a resolution plan provide for the termination of contracts entered into by the corporate debtor?
Answer: Yes, a resolution plan can provide for the termination of contracts entered into by the corporate debtor, subject to compliance with applicable laws and regulations. - Can a resolution plan be challenged by the resolution applicant after its approval?
Answer: A resolution applicant cannot challenge a resolution plan after its approval, except in cases of fraud, material irregularity, or contravention of the IBC 2016. - Can a resolution plan provide for the payment of creditors’ dues in priority to other claims?
Answer: A resolution plan cannot provide for the payment of creditors’ dues in priority to other claims, as the IBC 2016 follows the principle of pari passu distribution of assets. - Can a resolution plan be modified after its implementation?
Answer: A resolution plan cannot be modified after its implementation, except under exceptional circumstances and with the approval of the Adjudicating Authority. - Can a resolution plan provide for the settlement of claims through compromise or arrangement?
Answer: Yes, a resolution plan can provide for the settlement of claims through compromise or arrangement, subject to compliance with applicable laws and regulations. - Can a resolution plan be challenged by the resolution professional?
Answer: A resolution professional cannot challenge a resolution plan once it has been approved, unless there is evidence of fraud, material irregularity, or contravention of the IBC 2016. - Can a resolution plan provide for the sale of the corporate debtor as a going concern?
Answer: Yes, a resolution plan can provide for the sale of the corporate debtor as a going concern, subject to compliance with applicable laws and regulations. - Can a resolution plan be modified after its approval by the Adjudicating Authority and its implementation?
Answer: A resolution plan cannot be modified after its approval by the Adjudicating Authority and its implementation, except under exceptional circumstances as approved by the Adjudicating Authority. - Can a resolution plan provide for the compromise or settlement of claims with related parties?
Answer: Yes, a resolution plan can provide for the compromise or settlement of claims with related parties, subject to compliance with applicable laws and regulations. - Can a resolution plan be challenged by the resolution professional after its approval?
Answer: A resolution professional cannot challenge a resolution plan after its approval, unless there is evidence of fraud, material irregularity, or contravention of the IBC 2016. - Can a resolution plan provide for the sale of specific assets of the corporate debtor?
Answer: Yes, a resolution plan can provide for the sale of specific assets of the corporate debtor, subject to compliance with applicable laws and regulations. - Can a resolution plan be modified after its implementation without the consent of the committee of creditors?
Answer: A resolution plan cannot be modified after its implementation without the consent of the committee of creditors, except under exceptional circumstances as approved by the Adjudicating Authority. - Can a resolution plan provide for the payment of a reduced amount to operational creditors?
Answer: A resolution plan can provide for the payment of a reduced amount to operational creditors, subject to the approval of the committee of creditors and the Adjudicating Authority. - Can a resolution plan be challenged by the resolution applicant after its implementation?
Answer: A resolution applicant cannot challenge a resolution plan after its implementation, except in cases of fraud, material irregularity, or contravention of the IBC 2016.
