Note on the Insolvency and Bankruptcy Code, 2016

A better understanding into the provisions and most recent changes and amendments to the legislation

1. NOTE ON: INSOLVENCY AND BANKRUPTCY CODE, 2016
 INTRODUCTION
The Insolvency & Bankruptcy Code 2016 (“IBC”), enacted to address the troubling shortcomings
in existing staggered insolvency laws in India and to bring them under one umbrella, is set up to
face a monumental challenge and equally monumental expectations. At present, according to the
data available with the World Bank in 2016, insolvency resolution in India takes around 4.3 years
on average, compared with United Kingdom (1 year), USA (1.5 years) and South Africa (2 years).
India was ranked 135th/190 countries in the World Bank Ease of Doing Business Index 2015 on
the ease of resolving insolvency. Thus, it is apparent that the Code is perhaps one of the most
critical legislations introduced in the recent years impacting the ease of doing business in India.
The Insolvency and Bankruptcy Code 2016, enacted to radically change the process of insolvency
resolution in India, is keenly watched by economists and jurists as well as businessmen and
investors, for the reason that each aspect of the implementation of law has the potential to critically
impact the ease of doing business in India. For this reason, the Code is especially sensitive to
interpretation and it is vital that the issues thrown up in its inaugural year of implementation be
recognized and the judicial remark on the same be understood. The present article thus traces the
emerging jurisprudence of the Code through judgments of the Supreme Court of India and the
National Company Law Appellate Tribunal.
Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC, 2016”) was notified by
the Government of India on 28th May 2016. The Act consolidates and amends the laws relating to
reorganization and insolvency resolution of corporate persons, partnership firms and individuals
in a time bound manner for maximization of value of assets of these persons, to promote
entrepreneurship, availability of credit and balance the interests of all the stakeholders.
IBC, 2016 also altered the order of priority various payment dues; and put the payments of
workmen’s dues in foremost priority over Government dues. The payments of Government dues
are kept after payment of financial debts owed to unsecured creditors. IBC, 2016 provides the
complementary ecosystem for the insolvency law, and aims to ensure smoother settlement of

2. insolvency cases, enable faster turnaround of businesses and provide for creating a database of
creditors.
The Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) can be initiated
by making an application to the National Company Law Tribunal (NCLT) by the Financial
Creditors under Section 7 of IBC, 2016 by Operational Creditors under Section 9 of the IBC, 2016
and by the Corporate Debtor himself under Section 10 of the IBC, 2016. The basic departure from
the old law and fundamental rule under this new codified law is that a company which has gone
insolvent cannot start the Liquidation process at the primary stage until and unless it has gone
through the process of Corporate Insolvency Resolution Process (CIRP), under the said resolution
process options for revival of the company is looked into and if the said resolution process fails
then only the company goes into liquidation.
 STAGE-WISE PROCESS FOR INSOLVENCY
 In case a corporate debtor makes a default in repayment of dues of the creditors, the
financial creditor/s, an operational creditor or a corporate debtor through Corporate
applicant or any authorised member, a person who has the controlling capacity over the
financial affairs of the corporate debtor, has the power to start the insolvency resolution
process.
In order to initiate the resolution process, an application has to be made to National Company Law
Tribunal (NCLT) under (Section 10, IBC, 2016 in case of Corporate Debtor, Section 7 and 9 of
IBC, 2016 in case of Financial Creditors and Operational Creditors).
 A ten days demand notice under (Section 8(2) of IBC, 2016 in case of Operational
Creditors) has to be given to the corporate debtor by the Operational Creditors before he
approaches the NCLT under Section 9 of IBC, 2016). However, an operational creditor can
directly approach the NCLT if the corporate debtor does not repay the outstanding dues or
fails to show any existing difference.
 The new code states that the insolvency process of a Corporate Debtor must be concluded
within 180 days from the date of initiation in the NCLT (Section 12, IBC of 2016). The
claims of the Creditors shall be frozen for a period of six months on admission of

3. application by NCLT. During this time, the NCLT shall listen to the options to revive and
decide the future course of action. It is further clarified that unless a resolution plan is made
or liquidation process is initiated, no legal claim shall be sought against the corporate
debtor in any other forum or Court (Section 14 of IBC, 2016).
 When the application for insolvency is accepted under Section 7/9/10 of IBC, 2016 the
NCLT within fourteen days appoints an Insolvency Resolution Professional (IRP) on
receiving a confirmation from Board of Insolvency and Bankruptcy.
 The appointed IP then takes up the responsibility of the debtor’s properties and functioning.
He also collects all the information that is relevant with regard to the financial condition of
the debtor from information utilities.
 IP is appointed for a term of thirty days only within which he does all the necessary
scrutinization (Section 18, IBC, 2016).
 The next step is to make a public announcement about the commencement of corporate
insolvency process so that claims from any other creditors can also come forward, if any.
 A creditor’s committee is constituted by the IRP post receiving any claims by public
announcement (Section 13 of IBC, 2016). In the event any financial creditor is a related
party of the defaulting debtor, such a creditor will not have the right to represent, participate
or vote in the committee of creditors so constituted by the IP. In order to be a part of the
Creditor’s Committee, the average dues of the operational creditors must be at least ten
percent of the debt.
 The Committee of Creditors shall first seven days of its incorporation decide through
seventy five percent votes whether the interim IRP should be used as a Resolution
Professional or should be replaced with someone else.
After the Committee finalizes the Resolution Professional, he is appointed by the NCLT (Section
16 of IBC, 2016). The Resolution Professional so appointed can be replaced anytime by the
Creditor’s Committee with a majority of seventy five percent votes. In the interim, i.e. till the
appointed of any new Resolution Professional, the Creditor’s Committee can take decisions with
regard to insolvency resolution by seventy five percent majority voting.

4. In the event majority (75%) of the financial creditors are of the view that the case is very complex
and more time extension is required, the NCLT may grant a one-time extension of up to a
maximum of 90 days over and above the pre decided tenure of 180 days. It shall be the sole
responsibility of the Resolution Professional to manage and conduct the corporate insolvency
resolution procedure during such a term (Section 18 of IBC, 2016).
To enable the resolution applicant for preparing a resolution plan, the Resolution Professional shall
compile a statistic note. A resolution applicant can be defined as an individual who has the duty
and responsibility to submit a resolution plan to the Resolution Professional. The Creditor’s
Committee further receives the plan from the Resolution Professional for its approval.
On the resolution being approved, the next step by the Creditor’s Committee is to come up with
options on restructuring which can be either coming up with a modified repayment plan or to
simply liquidate the properties of the company in order to recover dues. If the Creditor’s
Committee fails to take any binding decision with regard to the repayment by the debtor, the
debtor’s assets are liquidated in order to pay back the creditors. If there is a plan prepared for
resolution, the same shall be sent to NCLT for approval and implementation.
 LIQUIDATION
 The liquidation process commences only if:
 The Creditors Committee fails to submit the resolution plan with the provided time frame
to the NCLT.
 The Resolution Plan is rejected because of non-adherence to the Code.
 The Creditor’s Committee takes a decision for liquidating the assets by a majority vote.
 The resolution plan is flouted by the debtor.
As mentioned above, no suit can be instituted by or against the corporate debtor during liquidation
process (Section 14 of IBC, 2016). The only exception, in this case, can be through the liquidator
representing the corporate debtor based on the permission of the NCLT. The liquidator shall be
the same person as the Resolution Professional lest replaced. The liquidator so appointed shall
constitute the liquidation estate which shall comprise of all the properties, whether financial or

5. immovable, of the corporate debtor. The claims of the creditors may be received, verified, admitted
or rejected based on the final decision of the liquidator within a prearranged time. In order to appeal
to the adjudicator, the creditor gets a total of fourteen days.
Based on the priority, a security creditor may receive the proceeds from sale of assets or realize
the security interest by enforcing or dealing with the secured asset as per the applicable laws related
to him. He may either relinquish his security interest or realize it based on his intent. Any
supplementary sum so realized shall be submitted to the liquidator. Although the security creditors
will be paid by the liquidator on priority basis out of the corporate debtor’s assets, his claim shall
be considered subordinate to the unsecured creditors to the extent of deficit. The distribution shall
be in manner laid down in the Code. All those persons who have any sort of individual rights over
the assets of the debtor shall also form a part of the liquidation procedure.
There are certain funds which cannot be attached to the estate of the debtor for recovery of debts.
Such funds are provident fund, gratuity fund and the pension fund because this amount belongs to
the employees and workmen and hence, they are given the priority with regard to these funds.
Once all the assets of the corporate debtor are liquidated, the NCLT passes an order to finally
liquefy the corporate debtor.
AMENDMENTS
In June 2018, came an amendment in the Insolvency and Bankruptcy Code, 2016 ("the Code")
which have introduced many new changes in the Code. When such change occurs, the rules and
regulations forming part of the whole scheme also need to be amended accordingly to ensure the
smooth functioning of the scheme. Accordingly, on 04th July 2018 amendment to the Insolvency
and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons)Regulations, 2016 ("Regulations") were notified.
These omissions, editions and additions to the Regulations by the way of the third amendment
compliment the changes in the Code. Apart from the small changes in the Regulations, the
following are the major changes that have taken place.

6. Authorised Representative
Where the Corporate Debtor has class of creditors with such number of creditors in a class as
specified, the Interim Resolution Professional (IRP), as per the amended regulations, shall offer a
choice of three (3) Insolvency Professionals (IP) to act as the Authorised Representative of
Creditors of the respective class. Such offer shall be made in Public Announcement. The
Insolvency Professional to get the maximum number of votes by the creditors of that respective
class shall be appointed as the Authorised Representative of that class. This has been provided in
the new regulations 4A, 16A and 16B.
For the purpose, of counting the voting percentage of Creditors, it has been clarified in
Regulation16A that where the rate of interest has not been agreed to between the parties in case
of creditors in a class, the voting share of such a creditor shall be in proportion to the financial
debt that includes an interest at the rate of eight percent per annum.
Constitution of Committee
Before the amendment, under Regulation 17, the IRP needs to file the report w.r.t constitution of
Committee with the Adjudicating Authority on or before the expiry of Thirty (30) clays from the
elate of his appointment and the first meeting of the such Committee was required to be
convened within seven (7) clays of filing of such report.
Under the amended regulation, the IRP shall file the report certifying the Constitution of the
Committee to the Adjudication Authority within two (2) clays of verification of claims under
Regulation 12(1). Thereafter, the first meeting of the Committee needs to be convened within
Seven (7) days of filing of such report.
IRP to act as RP
Amended Regulation17(3)
1
provides, if by any reason the appointment of RP is delay then the
IRP shall act as the RP from the Fortieth (40) day of commencement Corporate Insolvency
Resolution Process (CIRP) date till the RP is appointed under Section 22 of the Code.

7. Notice for calling the Meeting of Committee
The time period to call the meeting of the Committee under Regulation 19 has been changed
from Seven (7) clays to Five (5).
The Regulation 19 further provides that the time period of serving notice can further be reduced
from Five (5) days to such other period of not less than forty-eight (48) hours where there is any
Authorised representative and to twenty-four hours in all other cases.
Voting in case of Creditors in a class
As per newly inserted Regulation 16(A)(9), the Authorised Representative shall circulate the
agenda to creditors in a class and announce the voting window at least twenty-four hours before
the window opens for voting instructions and keep the voting window open for at least twelve
hours.
Withdrawal of Application
Section12 A of the Code provides that withdrawal of an Application admitted under Sections 7, 9
or 10 of the Code by Hon'ble Adjudicating Authority can be filed before issue of invitation for
expression of interest under Regulation 36A i.e. before Seventy-fifth (75) day of initiation of
CIRP.
As per Regulation 30A, such application for withdrawal needs to be submitted to the IRP or the
RP along with a bank guarantee towards estimated cost incurred for purposes of clauses (c)
and(d) of Regulation 31 till the date of application. The committee shall consider the application
with in seven (7) days of its constitution or seven days of receipt of the application, whichever is
later. If approved by 90% votes or more, the RP shall submit the application to the Adjudicating
Authority on behalf of the applicant, within three (3) clays of such approval. The option of
withdrawal of application gives the applicant an opportunity to have the situation corrected
without forcing the corporate debtor into insolvency This is especially helpful to corporate
debtors who themselves have filed for insolvency as it helps them to reconsider the decision and
improve their status on their own.

8. Timelines for determining Preferential and Other Transactions
Though the Code provides Section 43 that the RP/Liquidator have formed an opinion that the
Corporate Debtor has at a relevant time given a Preference to such transactions as enumerated
under Sub section (2) with persons enumerated under sub section (4), it can file an application
before the Adjudicating Authority for avoidance of such transactions however there were no
timelines provided to file such application .
Accordingly, Regulation 35A which was inserted vide second amendment have now been
substituted and a time period has been given to RP within which an opinion be formed,
determined and accordingly been filed before Adjudicating Authority for relief. As per the
amended regulation, the RP needs to form an opinion whether the Corporate Debtor has been
subjected to any transactions covered under Section 43,45,50 and 66 on or before Seventy fifth
(75) day of insolvency commencement date. Further, under the intimation of the Board, the
determination of such transactions be made on or before the One Hundred and Fifteenth (115)
day of insolvency commencement date.
Furthermore, an application be filed on or before One Hundred Thirty Fifth (135) day from
Insolvency commencement date for appropriate relief before the Hon'ble Adjudicating Authority.
Such inclusion of timelines is a welcome insertion as otherwise in many cases the application
before the Hon'ble Adjudicating Authority have been filed for relief near to the end date of
CIRP. when all the efforts should be towards completing the CIRP with a resolution plan.
Submission of Information Memorandum
Regulation 36 has been amended to the extent that the RP (Resolution Professional) is required
to submit the Information Memorandum in electronic form to each member of committee within
two (2) weeks of his appointment but not later than fifty-fourth (54) day from the insolvency
commencement date, whichever is earlier.
In other words, where the appointment of RP is delayed, and IRP continues as per Regulation
17(3) then IRP will be required to submit the information memorandum by Fifty Fourth (54) day
from the insolvency commencement date.

9. Furthermore, earlier under Regulation 36 (4), the information memorandum can be shared with
potential resolution applicant after receiving an undertaking however now after the amendment
the information memorandum cannot be shared with potential resolution applicant.
Invitation for Expression of Interest
The existing Regulation 36A has been substituted with insertion of new Regulation 36A. in the
newly substituted Regulation 36A, a resolution professional is required to publish an invitation
for submitting Expression of Interest (EOI) in Form G by the Seventy Fifth (75) day of
insolvency commencement date specifying basic information about the Corporate Debtor, the
criteria (which has been approved by Committee under Section 25 of the Code), ineligibility (as
stated under Section 29A of the code), last elate for submission of the EOI, documents required
to be submitted along with EOI and such other details as need be.
The resolution professional after receiving of the EOI will be required to conduct due diligence
based on material on record and issue a provisional list of prospective resolution applicants
within 10 days of the last date of submission of EOI with Committee and to all Prospective
Resolution Applicants who have submitted the EOI.
Any objection w.r.t provisional list need so to be made within five(5) days from the date of issue
of the provisional list. The final list needs to be issued within 10 days of the last date for receipt
of objections.
Request for Resolution Plans
A new Regulation 36B has been inserted which provides for the mode and manner to Request for
Resolution Plans.
A RP is required to issue information memorandum, evaluation matrix and request for resolution
plans, within five (5) days of issue of the provisional list to the prospective resolution applicants
who are part of the provisional list and also to the prospective resolution applicant who has
contested the decision of the RP against its inclusion I the provisional list. The request for
Resolution plans shall details step in the process, the manner and purposes of interaction between

10. the resolution professional and the prospective resolution applicant, along with corresponding
timelines.
Minimum time period given to Prospective Resolution Applicant for submission of Resolution
Plan should not be less than 30 days. If any modified request for submission of Resolution Plan
is made by RP or there is any amendment in evaluation matrix shall be deemed to be a fresh
issue and shall be subject to timeline given in the regulation. Any extension in the submission of
Resolution Plans shall be with the approval of Committee. Further, in case the Resolution Plans
receive dare not satisfactory, the RP can with the approval Committee however such request will
be made to the prospective resolution applicants of the final list.
Timelines for submission of Resolution Plan approved by Committee
As per substituted Regulation 39(4), the RP shall take all endeavors to submit the Resolution
Plan approved by the Committee to the Adjudicating Authority at least fifteen (15) days before
the maximum period for completion of CIRP. The said submission will be accompanied along
with Form H (Compliance Certificate).
Model Timeline
The legislature has inserted a model timeline for the corporate insolvency resolution process by
the way of adding regulation 40A. A welcomed addition as there was always confusion and
distress with respect to a stable universal timeline for the process as the dates and deadlines were
scattered in various regulations and not jotted down at one place. It assumes that the interim
resolution professional is appointed on the date of commencement of the process and the time
available is hundred and eighty (180) days.
AA: Adjudicating Authority; AR: Authorised Representative; CIRP: Corporate Insolvency
Resolution Process; CoC: Committee of Creditors; Eal: Expression of Interest; IM: Information
Memorandum; /RP: Interim Resolution Professional; RA: Resolution Applicant; RP: Resolution
Professional; RFRP: Request for Resolution Plan. References to all sections are with respect to
the Insolvency and Bankruptcy Code, 2016. References to all regulations are with respect to the

11. Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016.
Section/Regulation Description of Activity Norm Timeline
Section 16(1) Commencement of CIRP
and appointment of IRP
.... T
Regulation 6(1) Public announcement
inviting claims
Within 3 days of
Appointment of IRP
T+3
Section 15(1)(c)/
Regulations 6(2)(c) and
12 (1)
Submission of claims For 14 Days from
Appointment of IRP
T+14
Regulation 12(2) Submission of claims Up to 90th day of
commencement
T+90
Regulation 13(1) Verification of claims
received under regulation
12(1)
Within 7 days from the
receipt of the claim
T+21
Regulation 13(2) Verification of claims
received under regulation
12(2)
T+97
Section 21(6A) (b) /
Regulation16A
Application for
appointment of AR
Within 2 days from
verification of claims
received under regulation
12(1)
T+23
Regulation 17(1) Report certifying
constitution of CoC
T+23

12. Section 22(1)/
Regulation 19(1)
1st meeting of the CoC Within 7 days of the
constitution of the CoC,
but with seven days’
notice
T+30
Section 22(2) Resolution to appoint RP
by the CoC
In the first meeting of the
CoC
T+30
Section 16(5) Appointment of RP On approval by the AA ......
Regulation 17(3) IRP performs the functions
of RP till the RP is
appointed
If RP is not appointed by
40th day of
commencement
T+40
Regulation 27 Appointment of valuer Within 7 days of
appointment of RP, but
not later than 40th day of
commencement
T+47
Section
12(A)/Regulation 30A
Submission of application
for withdrawal of
application admitted
Before issue of Eol w
CoC to dispose of the
application
Within 7 days of its
receipt or 7 days of
constitution of CoC,
whichever is later
W+7
Filling application of
withdrawal, if approved by
Within 3 days of approval
by CoC
W+10

13. CoC with 90% majority
voting by RP to AA
Regulation 35A RP to form an opinion on
preferential and other
transactions
Within 75 days of the
commencement
T+75
RP to decide on preferential
and other transactions
Within 115 days of
commencement
T+115
RP to file applications to
AA for appropriate relief
Within 135 days of
commencement-
T+135
Regulation 36(1) Submission of IM to CoC Within 2 weeks of
appointment of RP but not
later than 54th day of
commencement
T+54
Regulation 36A Publish Form G Within 75 days of
commencement
T+75
Invitation of EOI
Submission of Eol At least 15 days from
issue of Eol (Assume 15
days)
T+90
Provisional List of RAs by
RP
Within 10 days from the
last day of receipt of Eol
T+100

14. Submission of objections to
provisional list
For 5 days from the date
of provisional list
T+105
Final list of RAs by RP Within 10 days of the
receipt of objections
T+115
Regulation 36B Issue of RFRP, including
Evaluation Matrix and IM
Within 5 days of the issue
of the provisional list
T+105
Receipt of Resolution Plans At least 30 days from
issue of RFRP (Assume
30 days)
T+135
Regulation 39(4) Submission of CoC
approved Resolution Plan
to AA
As soon as approved by
the CoC
T+165
Section 31(1) Approval of resolution plan
by AA
T=180
Changes and Additions in Forms
Form A: Public Announcement
To get in sync with the matters relating to class of creditors and authorised representatives, From
A has been amended to add
12. Classes of creditors, if any, under clause {b) of sub-section {6A) of section 21, ascertained
by the interim resolution professional.
13. Names of Insolvency Professionals identified to act as Authorised Representative of creditors
in a class {Three names for each class).
14. (a)Relevant Forms and {b)Details of authorised representatives are available at:

15. Form AA: Written Consent to Act as Resolution Professional
This is a new addition which is basically a consent form stating that the resolution professional
consents to act as the same. It is required under regulation 3(1A).
Form AB: Written Consent to Act as Authorised Representative
Similar to Form AA, it is a consent form stating that the authorised representative consents to act
as the same. It is required under regulation 4A (3).
Form CA: Submission of Claims by Financial Creditors in a Class
As the freshly introduced regulation 8A talks about claims by creditors in a class, it was
understood that there should be a form complementing the regulation, like Form C with respect
to regulation 8.
Form FA: Application for Withdrawal of Corporate Insolvency Resolution Process
Since the possibility of withdrawal of application has been included in the Code and, with the
third amendment, in the regulations, the necessity of a form for the same does not require any
clarification. It is with respect to regulation 30A.
Form G: Invitation for Expression of Interest
As the regulation 36A relating to Invitation of Resolution Plans has been divided into two new
regulations, namely, regulation 36A relating to Invitation for expression of interest and
regulation 36B relating to request of resolution plans, the old form G has been changed to
correspond with the new regulation 36A.
Form H: Compliance Certificate
This form has been added as a requirement as per regulation 39(4) as the resolution plan
requirements and functioning have majorly changed in the amended Code. This makes the easier
and faster for the resolution professional to check whether all compliances as per the Regulations

16. have been completed or not. This form is basically the compliance certificate which is now
necessary to get the approval of the resolution plan. This makes things more transparent and
avoids confusion.
CASE STUDIES

A. CIRP Application Against Companies Struck Off By The Roc Is
Maintainable
1. Mr. Hemang Phophalia vs The Greater Bombay Co-operative Bank Limited
 Facts
In the case of Mr. Hemang Phophalia vs The Greater Bombay Co-operative Bank Limited, the
Greater Bombay Co-operative Bank Limited had filed an application under Section 7 of
IBC(Insolvency and Bankruptcy Code) to initiate CIRP(Corporate Insolvency Resolution Process)
against Penguin Umbrella Works Private Limited which was admitted in the NCLT, Mumbai
Bench. The appellant filed an appeal stating that as the Corporate Debtor, was struck off from the
RoC(Registrar of Companies), thus CIRP cannot be initiated. The main issue was whether an
application for CIRP under section 7 or 9 can be initiated against a company struck off by the
RoC?
 Ratio
It was held that CIRP application against companies struck off by the RoC is maintainable. Further,
it was also stated that NCLT also has the power to restore the name of the company and all other
persons in their respective position for the purpose of initiating CIRP under section 7 and 9 of IBC.
2. State Bank of India v Rohito Ferro Tech Pvt Ltd
 Facts
SBI had moved an application in NCLT under Section 7 of the IBC against Rohit Ferro Tech, but
the adjudicating authority dismissed the appeal stating the RBI circular issued by the RBI, dated
February 12, 2018, based on which the petition is filed for initiating CIRP has been declared to
be ultra vires and illegal by the Supreme Court. Therefore, the CIRP cannot be admitted. This
was appealed in the NCLAT by the SBI.

17.  Ratio
The NCLAT dismissed the order passed by NCLT stating that only the circular had been
declared ultra vires and not the CIRP. It was clarified by the NCLAT that any creditor cannot
only rely upon the circular to initiate insolvency proceedings, it needs to be backed by proper
evidence.
3. Jet Airways (India) Ltd. vs. State Bank of India & Anr.
 Facts
In this case CIRP proceedings were going on against Jet airways in two countries
simultaneously, in India and in Netherlands. The issue arose whether separate proceedings of
CIRP can take place against a common 'Corporate Debtor', if it takes place in two separate
jurisdictions or countries?
 Ratio
The NCLAT held that the Dutch Trustee also hold the same position as the RP in India.
Therefore, the NCLAT after a guarantee from the Dutch counterpart that it wont be interfering
with the CIRP in India, it allowed Dutch Trustee to attend the CoC meetings in India.

4. Jignesh Shah and another v. Union of India and Anr.
 Facts
In this case, a winding up petition was initiated against La-Fin Financial Services Private
Limited by the Bombay High Court. A letter of undertaking given by La Fin, a group company
promoted by Jignesh Shah, on 20 August 2009, to IL&FS in which it undertook to purchase the
shares held by IL&FS in MCS Stock Exchange with in three years. IL&FS exercised the option
in 2012 but La Fin refused to honour the undertaking. But after the coming up of the IBC, 2016,
the winding up petition were converted into company petitions under section 7 of the IBC. So the
main issue was whether a winding up petition, which is converted into a Section 7 application
under IBC be barred by lapse of time under the limitation act.
 Ratio
The Supreme Court stated that in winding up or commercial insolvency cases, first there is a
requirement that the default should takes place, after which the debts remain outstanding. It is
only on this date that the limitation period is triggered. It also clarified that the winding up
proceeding is a right in rem and not a recovery proceeding. Thus, concluding that the Limitation
Act is applicable in cases of insolvency.

18. B. Pre-Incorporation of The Moratorium Period Before the Initiation of
CIRP
 Facts
In the case of “NUI Pulp and Paper Industries Pvt Ltd v Roxcel Trading GmbH”, Roxcel
Trading GmbH had filed an application under section 9 of the IBC against NUI Pulp and Paper
Industries for the unpaid operational debt. The Corporate Debtor claimed that the debt is
disputed therefore it seek time for filing the reply. But Roxcel had apprehensions that the
Corporate Debtor might be intending to sell its assets thus leading to abuse of the process of the
IBC. Therefore, the NCLT under Rule 11 of the NCLT rules, 2016 passed an order stating that
the Directors of the Corporate Debtor shall create no interests, or no assets shall be sold to any
third party, ordering a pre- moratorium order. This was challenged by the Corporate Debtor in
the NCLAT. So, the issue was whether the NCLT has inherent powers under rule 11 of NCLT
rules to alienate powers of the Directors of the Corporate Debtor?
 Ratio
The NCLAT stated that there are no such restrictions which have been imposed upon the NCLT
to pass orders under rule 11 of the NCLT Rules. If the NCLT feels that there has been a situation
of abuse of process of law or injustice, then the NCLT can pass such interim relief at any stage.

C. When can the High Court interfere to with the orders passed by the
NCLT?
 Facts
In the case of M/s Embassy Property Developments Pvt Ltd v State of Karnataka and Ors , the
Resolution Applicant, CoC and the Corporate Debtor had filed appeal in the Supreme Court
challenging the interim order passed by the Karnataka High Court, which had put a stay on an
order passed by the NCLT. The application in High Court was filed by the Resolution
Professional. The issue which arose in this case was whether the High Court can pass any interim
order under article 226/227 interfering with the order of the NCLT and also ignoring the fact that
there is an alternative remedy of appealing to the NCLAT for the same?
 Ratio
The Supreme Court stated that the NCLT is a creation of the special statute to discharge specific
functions. Therefore, it cannot be given a status higher than judicial courts which have power of
judicial review over the administrative action. It also stated that NCLT's are not even civil courts,
thus , it can only try cases within its statute which has been prescribed by law and no other
matters i.e. matters of public interest, civil nature etc. Therefore, the HC can try matters in realm
of public law which arise in matters of IBC 2016.

19. D. ArcelorMittal India Private Limited v. Satish Kumar Gupta and Others
(Essar Insolvency case)
 Facts
In this case Financial Creditors of the Essar Steel India Limited had filed an application for CIRP
under section 7 of the IBC. The main issue in this case was with regard to the treatment of the
secured and unsecured creditors, determining of the powers of the CoC , powers in relation to the
powers of accepting the resolution plan and the constitutional validity of the section 12(3) and
section 30(2) of the IBC.
 Ratio
The Supreme Court differentiated with regard to the payment of debts to the Secured and
Unsecured creditors. It pressed on the fact that the un-equals cannot be treated equally. Thus, a
resolution plan cannot be rejected on the ground that the plan is unjust or unfair to a certain class
of creditors, if the interest of each class of the creditor has been looked into.
The Supreme Court also stated that the CoC has the total powers over the running of the business
of the Corporate Debtor, hence such vital powers cannot be delegated to any other person or sub
committees. But the Supreme Court clarified that the Sub Committees can be instituted for other
purposes such as performing of administrative functions etc.
Section 12(3) of the IBC, which provided for the mandatory timeline of 330 days for completion
of CIRP, if not complied with, the corporate debtor would be liquidated. The Supreme Court
partially struck down the section in which the word 'mandatory' was considered as arbitrary and
unreasonable under article 14 of the Indian Constitution and it also hindered with the rights of
the carrying out business under article 19(1) (g). Section 30(2) of the IBC provided for the
minimum payment that needs to be made dissenting financial creditors as well as the operational
creditors. The Supreme Court held that this section was a mere guideline that the CoC needs to
follow while it arrives at any decision regarding the resolution plan and any such decision must
be taken taking the feasibility and the ground realities. Thus, section 30(2) was upheld by the
Supreme Court.