The Insolvency and Bankruptcy Code, 2016 regulates the insolvency or bankruptcy of individuals, partnership firms, LLPs, and corporations. The Insolvency and Bankruptcy Code empowers creditors with a recovery mechanism referred as the Corporate Insolvency Resolution Process (CIRP). If a corporate entity becomes bankrupt, either the creditor or the corporate entity (the debtor) may initiate CIRP. Section 6 of Chapter II of the Code defines CIRP as a procedure initiated by a financial creditor, operational debtor, or the corporate debtor itself when the corporate debtor fails to make a payment. The process of bankruptcy and liquidation of corporate debtors under the IBC commences, when the minimum default amount is Rs.1 crore.

]When the code announces insolvency, one of two choices available are: corporate debtor revival or liquidation. Every attempt is made to resolve the insolvency through the development of a restructuring strategy or a new ownership structure. If the attempts for resolution is unsuccessful, the corporation's assets are liquidated. The major purpose of the code is to resurrect and save the Corporate Debtor. The liquidation would take place, only when the CIRP fails.[1]

Process Of Corporate Insolvency Resolution

The conduct of the CIRP (CIRP) of a corporate debtor is provided in Part II of the IBC, which are as follows:

1. Initiation Of Cirp
   If a Corporate Debtor becomes insolvent and commits a default, Corporate Insolvency Resolution can be commenced by submitting an application with the Adjudicating Authority, the National Company Law Tribunal (NCLT), for insolvency proceedings of corporate debtors.2 CIRP may be initiated by either:
   
   • Financal creditor (Section 7): Any person who is owing to a business obligation or o whom such an amount has been legally allocated or conveyed. E.g., Banks and other financal institutions are a type of financal entity.[2]
   • Operational creditor (Section 9): Anyone owing them an operational obligation, as well as anyone to whom that sum has been lawfully assigned or transferred in exchange for goods or services they have delivered. E.g., vendors, employees.
   • Corporate applicant of a corporate debtor (Section 10): Anyone who is a corporate debtor or a corporate debtor's member or partner who is permitted to file an application or an individual who is in command of the corporate debtor's activities and resources or a person who has control and oversight over the corporate debtor's financial activities.[3]

The procedure of initating proceedings and other processes to be followed vary for each category of the creditor.[4]

Initiation of CIRP by a financial creditor
In case of financial creditors who are allottees of a real estate project, an application to commence CIRP against a corporate debtor must be filed jointly by not less than 10% of the total number of allottees of the concerned project, or not fewer than one hundred of such allottees of the project, whichever is less.

Such creditors must file an application and pay a fee, as well as provide:

• Evidence of the debt default or record of default which is stored with an information utility (a person or entity entitled to act as a repository of legal information relating to any debt/claim, as submitted by a financal or operational creditor and verified and authenticated by the other parties to the debt/claims, such as National E-Governance Services Limited)
• The name of the resolution professional nominated by the creditors to be the interim resolution professional.
• Any additional information necessary by the Indian Insolvency and Bankruptcy Board (IBBI)

Within 14 days of receiving the application, the NCLT must prove the presence of a default by reviewing the records of an information utility or using other evidence submitted by the financial creditor. If this is not done within the time period, the Tribunal must record its reasons in writing.

If the Adjudicating Authority discovers errors in any of the above three components, it will allow the applicant seven days to correct the error before rejecting the application; the seven days begin on the day the applicant receives the notification to correct the application. If the application is accepted, the NCLT will convey the order to the financial creditor and the corporate debtor, and the resolution procedure will commence on the day the application is approved.[5]

Initiation of CIRP by an operational creditor
The operational creditor should first send the corporate debtor a demand notice for an overdue invoice, requesting the default payment amount. If the operational creditor does not collect payment from the corporate debtor within ten days of receiving the demand notice or invoice requesting payment, he may petition to NCLT to commence the CIRP.

Initiation of CIRP by a partner/member of the corporate debtor
A partner or member of the corporate debtor who is authorized to commence CIRP, or an individual in charge of handling the operations or who has authority and supervision over the corporate debtor's financial dealings, can start CIRP with NCLT. The NCLT will issue an order either accepting or refusing the CIRP application within 14 days. The CIRP will begin on the date that NCLT accepts the application. The CIRP completion time is 180 days from the day the CIRP application was accepted.[6]

Interim Resolution Professional And Moratorium

After a corporate debtor is admitted into the resolution process, NCLT will pass an order:

• Declaring a moratorium for prohibiting certain actions and transactions (Section 14).
• Causing a public announcement of initating the CIRP and call for the submission of claims.
• Appointing an interim resolution professional.

Declaration of Moratorium
On the CIRP's commencement, the NCLT announces a moratorium barring the following:

• The continuation or filing of lawsuits or proceedings against the corporate debtor.
• The corporate debtor encumbering, transferring, disposing of, or alienating its assets or beneficial interest or legal right.
• Any act to collect, foreclose, or enforce any security interest formed by the corporate debtor pertaining to its property, including any action brought under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
• Restoration of any property by a lessor or owner where the property is in possession or inhabited by the corporate debtor.
• The moratorium period continues until the CIRP procedure is completed. The maximum duration of CIRP process is 180 days, with a 90-day extension available in exceptional circumstances.[7]

Public announcement of CIRP
The public announcement of the CIRP should contain the following information:

• Name and address of the corporate debtor.
• Name of the authority under which the corporate debtor is registered or incorporated.
• Last date for submission of claims.
• Details of the interim resolution professional who will be responsible for receiving claims and take over the management of the corporate debtor
• Penalties for misleading or false claims.
• The date of closure of the CIRP, i.e. 180th day from the admission date of the CIRP application.

Appointment of Resolution Professional
The Resolution professional (RP), as specified in Section 27 of the Code, is a registered insolvency professional appointed and nominated by the Committee of Creditors. Till then, the NCLT chooses an interim resolution professional (IRP).

The powers of the appointed IRP relating to the corporate debtor from the date of his appointment are as follows:

• Management of the corporate debtor's business.
• Performing the powers of the corporate debtor's board of directors or partners; and suspending the powers of the company debtor's director or partner.
• Officers and managers of the corporate debtor will be obligated to report to the interim resolution professional and provide access to the corporate debtor's records and data.
• Financial institutions who hold and maintain accounts for the corporate debtor will follow the interim resolution professional's orders and provide all available data on the corporate debtor.[8]

The corporate debtor's board of directors is suspended, and management of the corporate entity's activities is transferred to the IRP. The IRP will be assisted by the corporate debtor's current staff, and his/her term will last until the Resolution Professional's appointment date.[9]

Constitution Of Committee Of Creditors

Throughout this phase of the proceedings, the IRP shall access and examine all data on the corporate debtor, comprising but not restricted to assets and liabilities, company activities, financial and operational payments over the last two years. The IRP will then review, summon, and verify financial creditors' claims, as well as classify them. After compiling all submitted claims against the corporate debtor and analyzing its financial status, the IRP will form a committee of creditors.

The committee of creditors will include all of the corporate debtor's financial creditors. If there are two or more financial creditors in a consortium, as is generally the case with buyers in a real estate project, each such financial creditor would be a member of the COC, and their voting share would be determined by the financial obligations owing to them.11 The IRP shall submit to the Adjudicating Authority a report verifying the composition of the Committee of Creditors and a list of creditors.

The committee of creditors should conduct its first meeting within 7 days of its formation. In its first meeting, the creditors' committee should determine whether to appoint or substitute the interim resolution professional by a majority vote of not less than 66% of the voting share of the financial creditors.[10] The committee shall fix the expenses to be incurred on or by the RP and the expenses shall constitute insolvency resolution process costs.

The Committee of Creditors is the Corporate Debtor's decision-making authority because it is these creditors' investment and interest that is at risk. The actions of the IRP/ RP must be approved by the members of the Committee of Creditors.[11]

Appointment Of Resolution Professional

When the committee of creditors decides to proceed with the IRP assigned by NCLT as the resolution professional, it shall notify NCLT, the IRP, and the corporate debtor of its choice.

When the creditors' committee decides to substitute the interim resolution professional, it must file an application with the NCLT to appoint the proposed resolution professional, as well as his written assent.

The name of the preferred resolution professional supplied by the committee of creditors should be forwarded to the Insolvency and Bankruptcy Board of India ('Board') for approval. After receiving confirmation from the Board, the NCLT will appoint the suggested resolution professional. The resolution expert will supervise and manage the corporate debtor's activities during the CIRP.[12]

Powers And Duties Of The Irp/Rp

• Besides registered valuers, the IRP or RP may select any expert to help him in carrying out his obligations in the corporate insolvency resolution process.
• The RP may dispose an unencumbered asset(s) of the corporate debtor in a manner other than in the regular course of business if he considers that such a sale is required for a greater realization of value in light of the facts and circumstances of the case. However, the total book value of all assets liquidated shall not exceed 10% of the total claims allowed by the IRP.
• The resolution expert must determine if the corporate debtor was subjected to any transaction covered by sections 43, 45, 50, or 66 of the Code.[13]

Preparation Of Information Memorandum

The resolution professional should create an information memorandum in the manner and format required by the Board in order to establish a resolution strategy. A resolution applicant must present to the resolution professional a resolution plan based on the information memorandum.

The resolution applicant is the individual who presents a resolution proposal, either by himself or in collaboration with others.

The resolution professional will review each resolution plan presented to him to ensure that it:

• Provides for the payment of the insolvency resolution process fees as stipulated by the Board, prioritizing the payment of the corporate debtor's other debts.
• Provides for the payment of operational creditors' debts as stipulated by the Board.
• Responsible for the management of the corporate debtor's affairs following the adoption of the resolution plan.
• Supervision and implementation of the resolution plan.
• It does not contravene the provisions of the applicable law(s).
• Confirms to any additional requirements prescribed by the Board.
• The resolution professional will offer the resolution plan to the creditors' committee for approval once it has been examined. The committee of creditors can accept the resolution plan with a vote of at least 66% of the voting share of the financal creditors.[14]

Approval Of Resolution Plan

The creditors must approve the resolution plan for the resurrection of the firm or LLP within 180 days after the start of the CIRP. The NCLT, on the other hand, has the authority to extend the 180day term by another 90 days.

After determining that the resolution plan fulfills the provisions of the IBC, the NCLT will issue an order approving the resolution plan agreed by the committee of creditors. The NCLT's acceptance of the resolution plan will bind the corporate debtor, as well as its workers and members.

The adoption of the resolution plan by the NCLT will also be binding on the guarantors and stakeholders engaged in the resolution plan, as well as the creditors, including the Central or State Government or any local body.

If the NCLT is convinced that the resolution plan does not fulfill the standards of the IBC, it may issue an order rejecting it. When the NCLT issues an order rejecting the settlement plan, it also issues an order liquidating the corporate debtor.

Following approval of the corporate debtor's liquidation, the committee of creditors will appoint a liquidator to liquidate the corporate debtor's assets and distribute the proceeds among the stakeholders. The assets will be distributed in accordance with the terms of the IBC.[15]

Time Period For Completion Of Cirp Process

The CIRP must be completed within 180 days of the date of acceptance of the application to commence such procedure, according to Section 12(1) of the Code. The Adjudicating Authority may issue a one-time 90-day extension. The maximum time limit for completing CIRP, along with any extension or litigation term, is 330 days.

However, in exceptional circumstances, the time restriction can be extended beyond 330 days. In the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others, the Supreme Court held that the Adjudicating Authority may extend the period for the completion of Corporate insolvency resolution process beyond 330 days in exceptional cases where the relevant litigants cannot be held liable for such delay and the said extension is in the interest of all stakeholders.[16]

Conclusion:
The IBC, as comprehensive law, is crucal for the implementation of the country's insolvency regulations. Since the IBC is a newly enacted law that is always evolving, it is critical to research the modifications as well as court decisions in order to fully comprehend the complexity. It has contributed to improving Inda's bankruptcy framework, handle non-performing loans, and improve total recovery for creditors. The CIRP is a CD restructuring methodology based on "creditor control." This power is utilized through the IRP (and later the RP).[17]

The CIRP assists creditors in recovering their funds while also looking out for the best interests of the firm. The Code defines three people who can commence the CIRP procedure under the relevant Sections. Although the IBC contains several flaws and some challenges to the Code's duties, the issues are being handled through the courts and tribunals. Creditors and corporations are also receiving comprehensive insolvency and bankruptcy legislation.[18]

End-Notes:

1. Ankita Pugalia, Corporate insolvency resolution process under IBC INCORP ADVISORY (Dec. 1, 2022), https://incorpadvisory.in/blog/corporate-insolvency-resolution-process-under-ibc/. 2 Id
2. Shefali, CIRP process under IBC, LEGAL SERVICE INDIA (Nov. 24, 2022), https://www.legalserviceindia.com/legal/article-7610-cirp-process-under-ibc.html.
3. Id.
4. Supra note 1.
5. Gautam Sharma, How does the Corporate Insolvency Resolution Process under IBC work?, 99ACRES (Nov. 24, 2022),https://www.99acres.com/articles/how-does-the-corporate-insolvency-resolution-process-under-ibcwork.html.
6. Conducting corporate insolvency resolution process, CLEARTAX (Nov. 25, 2022), https://cleartax.in/s/conductingcorporate-insolvency-resolution-process.
7. Drishti Saxena, Stages of corporate insolvency process, INDIAFILINGS (Nov. 25, 2022), https://www.indiafilings.com/learn/stages-of-corporate-insolvency-process/
8. note 7
9. Supra note 6. 11 Id.
10. Supra note 7.
11. Supra note 1.
12. Supra note 7.
13. note 1
14.  note 7
15. Supra note 7.
16. note 1
17. Supra note 1.
18. note 3.