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
 
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.