Insolvency:

A situation when an entity or a person or family, or company cannot pay its lenders back on time.

In the case of individual debtors, this means that their incomes are too low to pay off their debts.

In the case of companies, this situation arises when the flow of money into the business and assets are less than its liabilities.

Corporate insolvency is a situation when any corporate person has failed to pay his debts, whether whole or any part of the instalment, when due and payable.

The basic procedure for resolving this problem is the corporate insolvency resolution process (CIRP) which will be processed under the provisions.

The corporate insolvency resolution process is initiated by a financial creditor (A financial creditor is a person to whom the business owes a financial debt) or an operational creditor (persons to whom such amount has been legally transferred) or a corporate applicant of a corporate debtor. There is a minimum amount for initiating a corporate insolvency resolution process i.e. ₹ 1 lakh till recently. In a notification passed by the government on March 24th 2020, the minimum amount has been increased to ₹ 1 crore.

National Company Law Tribunal, has territorial jurisdiction to hear an application for the corporate insolvency resolution process where the registered office is located. The documents which are required to be submitted by a Financial Creditor are an application for CIRP in addition to evidence for default which is as specified.

The whole process is to be concluded within 180 days from the date of admission of the application. An extension of ninety days can be granted by the Adjudicating Authority The maximum time within which the process has to be completed, which includes any extension or any litigation period, is 330 days.

Withdrawal can be done from the process by applying an interim resolution professional even before the constitution of the committee of creditors.

Procedure for corporate insolvency resolution

1. Initiate for Corporate insolvency resolution process:

   The corporate insolvency resolution process is initiated by a financial creditor (A financial creditor is a person to whom the business owes a financial debt) or an operational creditor (persons to whom such amount has been legally transferred) or a corporate applicant of a corporate debtor.
    

2. Appointment of interim resolution professional and moratorium

   The adjudicating authority appoints the interim resolution professional. Once the appointment is done the next step is a public announcement which consists of all the details for the corporate debtor.
   
   1. Temporary prohibition (moratorium)
   2. Prohibition of transfer of assets
   3. Recovery of any property by an owner
   4. Enforcement of any security interest
   5. Suspension of supply of goods and services
       

3. Verification and analysis

   Evaluation of the information of the corporate debtor for the last two years. The interim resolution professional forms the committee of creditors which consists of all the corporate creditors.
    

4. Appointment of resolution professional

   Within seven days the committee has to decide whether the interim resolution professional or to be replaced by another resolution professional.
    

5. Confirmation and submitting the resolution plan

   No less than 66 per cent of the voting share of financial creditors for the approval of the resolution plan. The resolution plan needs to be submitted to the Adjudicating Authority by the resolution professional. This plan must be approved within 180 days from the beginning of the corporate insolvency resolution process by financial creditors. A ninety days extension period can be granted by the Adjudicating Authority.

Conclusion
The process for resolving this problem which is corporate insolvency is the corporate insolvency resolution process (CIRP) which has heralded a new era in handling insolvency proceedings and has led to improved ease of doing business in the Indian real estate and other sectors, with regards to redressal mechanisms in case of a default.