India: Cracking The Insovency & Bankruptcy Code, 2016

Last Updated: 14 February 2017
Article by Sonam Mhatre and Sana Khan

Q1. Have all provisions of the Insolvency and Bankruptcy Code, 2016 been notified?

A1. Not all provisions of the Code have been notified. Following is a list of the provisions that are in force:

Sr. No. Enforcement Date Provisions of the Code enforced
1. August 5th 2016 [Part IV Chapter 1] sections 188 to 194 [both inclusive] – Establishment of Insolvency and Bankruptcy Board of India
2. August 19th 2016
  • section 3(1) – Definition of "Board";
  • section 3(5) - Definition of "Chairperson"
  • section 3(22) - Definition of "notification"
  • section 3(26) - Definition of "prescribed"
  • section 3(28) - Definition of "regulations"
  • section 3(37) – reference to Indian Contract Act, 1872, the Indian Partnership Act, 1932, the Securities Contact (Regulation) Act, 1956, the Securities Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Limited Liability Partnership Act, 2008 and the Companies Act, 2013 in case the words and expressions are not defined in the Code.
  • section 221 - Grants to the Insolvency Board by Central Government;
  • section 222 – Fund of the Insolvency and Bankruptcy Board;
  • section 225 – Insolvency Board to be bound by directions of Central Government on policy matters;
  • section 226 – Power of Central Government to supersede the Insolvency Board;
  • section 230 – Delegation of powers by the Insolvency Board to its member/officer;
  • section 232 - Members, officers and employees of Board to be public servants;
  • section 233 – Protection of action taken in good faith by Insolvency Board or Government;
  • section 239(1) and 239(2)(zd) – Power of Central Government to make rules regarding salaries of the Chairperson and members of the Board
  • section240(1) and 240(2)(zt) – Power of Insolvency Board to make regulations regarding appointment of other officers and their salaries.
  • section 241 – Every rule and regulation made must be presented before Parliament;
  • section 242 – Power of Central Government to remove difficulties in giving effect to provisions of the Code.
3. November 1st 2016
  • section 3(2) - Definition of "bench"
  • section 3(3) - Definition of "bye-laws"
  • section 3(4) - Definition of "charge"
  • section 3(6) - Definition of "claim"
  • section 3(7) - Definition of "corporate person"
  • section 3(8) - Definition of "corporate debtor"
  • section 3(9) - Definition of "core services"
  • section 3(10) - Definition of "creditor"
  • section 3(11) - Definition of "debt"
  • section 3(12) - Definition of "default"
  • section 3(13) - Definition of "financial information"
  • section 3(14) - Definition of "financial institution"
  • section 3(15) - Definition of "financial product"
  • section 3(16) - Definition of "financial service"
  • section 3(17) - Definition of "financial service provider"
  • section 3(18) - Definition of "financial sector regulator"
  • section 3(19) - Definition of "insolvency professional"
  • section 3(20) - Definition of "insolvency professional agency"
  • section 3(21) - Definition of "information utility"
  • section 3(23) - Definition of "person"
  • section 3(24) - Definition of "person resident in India"
  • section 3(25) - Definition of "person resident outside India"
  • section 3 (27) - Definition of "property"
  • section 3 (29) - Definition of "Schedule"
  • section 3(30) - Definition of "secured creditor"
  • section 3(31) - Definition of "security interest"
  • section 3(32) - Definition of "specified"
  • section 3(33) - Definition of "transaction"
  • section 3(34) - Definition of "transfer"
  • section 3(35) - Definition of "transfer of property"
  • section 3(36) - Definition of "workman"
  • section 196 – Powers and functions of the Insolvency Board;
  • section 197 – Constitution of advisory and executive Boards by the Insolvency Board;
  • section 223 – Accounts and Audit to be maintained by the Insolvency Board;
  • section 239(2)(ze) - (zh) – Central Government making rules for other functions, funds and annual statement of accounts of the Insolvency Board;
  • section 239(2)(zl) to (zm) – Form and time for preparing budget and annual report by the Insolvency Board;
  • section 240(2)(a) to (zm);
  • section 240(2) (zu) to (zzzc);
  • section 244 – Central Government to exercise power until the Board is constituted;
  • section 246 – amendment provision of Central Excise Act, 1944
  • section 247 - amendment provision of Income Tax Act, 1961
  • section 248 - amendment provision of The Customs Act, 1962
  • section 250 - amendment provision of Finance Act, 1944;
  • section 252 - amendment provision of Sick Industrial Companies (Special Provisions) Repeal Act, 2003
4. November 15th 2016
  • section 199 to section 207 [both inclusive] – Insolvency Professional Agencies and Insolvency Professional;
  • section 208 (1)(c) and (e) - functions of Insolvency professionals.
  • section 208(2) – obligations of Insolvency professionals.
  • section 217 to section 220 [both inclusive] – Inspection and investigation of insolvency professional agency/ insolvency professional/ information utility made by Insolvency Board
  • section 251 - amendment provision of SARFAESI Act, 2002;
  • section 253 - amendment provision of Payment and Settlement Systems Act, 2007;
  • section 254 – amendment provision of Limited Liability Partnership Act, 2008;
  • section 255 – amendment provision of Companies Act, 2013
5. December 1st 2016
  • section 2(a) – (d) (except with regard to voluntary liquidation or Bankruptcy) – Application of the Code
  • section 4 to section 32 [both inclusive] – Insolvency resolution and Liquidation for Corporate persons;
  • section 60 to section 77 [both inclusive] – Adjudicating Authority for corporate persons (NCLT and NCLAT);
  • section 198 – Condonation of delay;
  • section 231 – Bar of Civil Court jurisdiction;
  • section 236 to section 238 [both inclusive] – Offences triable by Special Courts;
  • section 239(2)(a) – (f) – Power of Central Government to make rules.
6. December 15th 2016 Section 33 – 54 [both inclusive] – Liquidation Process

Q2. Is NCLT the adjudicating authority under the Insolvency and Bankruptcy Code? If yes, has the provision been notified?

A2. Section 5 and section 60 of the Code pronounce the National Company Law Tribunal1 as the adjudicating authority. [Both the provisions are enforced since December 1st, 2016]2.

Q3. Has NCLAT been appointed? Where is the Court?

A3. The National Company Law Tribunal (NCLT) and The National Company Law Appellate Tribunal (NCLAT) have been constituted with effect from 1st June, 20163. The NCLAT is located at New Delhi. There is only one NCLAT having territorial jurisdiction all over India.

Q4. How many NCLT are there? What are their jurisdictions?

A4. There are 11 NCLT benches around the country4 including the Principal bench and 10 regular benches. The Principal Bench is where the President of NCLT presides. Following table enumerates the National Company Law Tribunal benches with their jurisdiction:

Sr. NCLT Bench Location Jurisdiction
1. a) NCLT Principal Bench

b) NCLT Delhi Bench
New Delhi (1) State of Haryana.
(2) State of Rajasthan.
(3) Union territory of Delhi.
2. NCLT Ahmedabad Bench Ahmedabad (1) State of Gujarat.
(2) State of Madhya Pradesh.
(3) Union territory of Dadra and Nagar Haveli.
(4) Union territory of Daman and Diu.
3. NCLT, Allahabad Bench Allahabad (1) State of Uttar Pradesh.
(2) State of Uttarakhand.
4. NCLT Bengaluru Bench Bengaluru State of Karnataka
5. NCLT Chandigarh Bench Chandigarh (1) State of Himachal Pradesh.
(2) State of Jammu and Kashmir.
(3) State of Punjab.
(4) Union territory of Chandigarh.
6. NCLT Chennai Bench Chennai (1) State of Kerala.
(2) State of Tamil Nadu.
(3) Union territory of Lakshadweep.
(4) Union territory of Puducherry.
7. NCLT Guwahati Bench Guwahati (1) State of Arunachal 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. NCLT Hyderabad Bench Hyderabad (1) State of Andhra Pradesh.
(2) State of Telangana
9. NCLT Kolkata Bench Kolkata (1) State of Bihar.
(2) State of Jharkhand.
(3) State of Odisha.
(4) State of West Bengal.
(5) Union territory of Andaman and Nicobar Islands.
10. NCLT Mumbai Bench Mumbai (1) State of Chhattisgarh.
(2) State of Goa.
(3) State of Maharashtra.

Q5. Has the Insolvency and Bankruptcy Board been constituted? If yes, has it been notified?

A5. Section 1885 of the Insolvency and Bankruptcy Code 2016 provides for the establishment of the Insolvency and Bankruptcy Board. The Central Government established the Insolvency and Bankruptcy Board of India since 1st October 20166. The head office of the Insolvency and Bankruptcy Board of India is at New Delhi. The Central Government has appointed 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 earlier7.

Q6. Under which Ministry are all these authorities being setup?

A6. These authorities are being set up under the Ministry of Corporate Affairs, Central Government of India.

Q7. Discuss the hierarchy of the adjudicating authorities under the Insolvency and Bankruptcy Code, 2016.

A7. There are two streams of authorities to adjudicate insolvency and bankruptcy applications.

In relation to insolvency matters of individuals and unlimited liability partnership firms, the adjudicating authority is the Debt Recovery Tribunal having territorial jurisdiction over the place where the individual debtor actually and voluntarily resides or carries on business or personally works for gain8. Appeals from the Debt Recovery Tribunal (DRT) would be filed before the Debt Recovery Appellate Tribunal (DRAT) within 30 days of the Order9. An appeal from an order of the DRAT on a question of law under the Code can be filed within forty-five days before the Supreme Court10.

In matters regarding limited liability corporate entities, the National Company Law Tribunal ("NCLT") is the adjudicating authority11. Appeals from NCLT would be filed before the National Company Law Appellate Tribunal (NCLAT) within 30 days of the Order12. The Supreme Court has appellate jurisdiction over the orders of the NCLAT13.

Q8. Has the form under section 7(2) of the Code been prescribed?

A8. The form required under section 7(2) of the Code has been prescribed as 'Form 1' under The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 which has come into force from December 1st, 201614.

Q9. Does the Code override the provisions of the SARFAESI Act 2002 and the Companies Act, 2013?

A9. The Insolvency and Bankruptcy Code 2016 provides for amendments in the SARFAESI Act, 2002 under section 251 in the manner specified in the Seventh Schedule and the Companies Act, 2013 under section 255 in the manner specified in the Eleventh Schedule to function harmoniously.

Q10. What is the role of the Insolvency and Bankruptcy Board of India?

A10. The Insolvency and Bankruptcy Board of India has been established under the Code as an Insolvency Regulator. Sections 196, 207 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016 spell out powers that are conferred on the Board. In pursuance of these powers and functions15, the Board is expected to register and regulate insolvency professional agencies, insolvency professionals and information utilities. The Board has made the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 201616 to lay down guidelines for the eligibility, registration and conduct of Insolvency Professionals. The Board exercises the powers of a Civil Court under the Code of Civil Procedure, 1908 while trying a suit in matters pertaining to Insolvency Agencies and concerning:

  1. The discovery and production of books of account and other documents, at such place and such time as may be specified by the Board.
  2. Summoning and enforcing the attendance of persons and examining them on oath
  3. Inspection of any books, registers and other documents of any person at any place.
  4. Issuing of commissions for the examination of witnesses or documents.

Q11. Which forum should be approached to challenge an order of the Insolvency and Bankruptcy Board of India?

A11. Any insolvency professional agency that is aggrieved by the order of the Board made under section 201 of the Code, may prefer an appeal to the National Company Law Appellate Tribunal17. An information utility may also refer an appeal to the NCLAT against the orders of the Board18.

Q12. Has the concept that the secured creditors stand outside of winding up gone away?

A12. The concept that secured creditors can stand outside of winding up has not gone away. Section 52 of the Insolvency and Bankruptcy Code reflects this concept.

Footnotes

1. constituted under section 408 of the Companies Act, 2013

2.http://www.mca.gov.in/Ministry/pdf/CommencementNotification_01122016.pdf

3.http://www.mca.gov.in/Ministry/pdf/Notification_02062016_II.pdf

4.http://www.mca.gov.in/Ministry/pdf/Notification_02062016_I.pdf

5. Section 188 is in force since August 5th, 2016 http://www.mca.gov.in/Ministry/pdf/Notificationdated05.08.2016.pdf

6.http://www.mca.gov.in/Ministry/pdf/Notification_01102016_II.pdf

7. Ibid

8. Section 179 Insolvency and Bankruptcy Code, 2016

9. Section 181(1) Insolvency and Bankruptcy Code, 2016

10. Section 182(1) Insolvency and Bankruptcy Code, 2016

11. Section 60 Insolvency and Bankruptcy Code, 2016

12. Section 61(2) Insolvency and Bankruptcy Code, 2016

13. Section 62 Insolvency and Bankruptcy Code, 2016

14.http://nclt.gov.in/notification/1108%20e.pdf

15. Section 196 Insolvency and Bankruptcy Code, 2016

16. Enforced since 29th November, 2016 http://mca.gov.in/Ministry/pdf/IBBIRegulation_25112016.pdf

17. Section 202 Insolvency and Bankruptcy Code, 2016

18. Section 211 Insolvency and Bankruptcy Code, 2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions