THE INSOLVENCY AND BANKRUPTCY CODE, 2016

THE INSOLVENCY AND BANKRUPTCY CODE, 2016
NO. 31 OF 2016
[28th May, 2016.]
An Act to consolidate and amend the laws relating to reorganisation and insolvency
resolution of corporate persons, partnership firms and individuals in a time
bound manner for maximisation of value of assets of such persons, to promote
entrepreneurship, availability of credit and balance the interests of all the
stakeholders including alteration in the order of priority of payment of
Government dues and to establish an Insolvency and Bankruptcy Board of
India, and for matters connected therewith or incidental thereto.
BE it enacted by Parliament in the Sixty-seventh Year of the Republic of India as
follows:—
PART I
PRELIMINARY
1. (1) This Code may be called the Insolvency and Bankruptcy Code, 2016.
(2) It extends to the whole of India:
Provided that Part III of this Code shall not extend to the State of Jammu and Kashmir.
(3) It shall come into force on such date as the Central Government may, by notification
in the Official Gazette, appoint:
Short title,
extent and
commencement.
jftLVªh lañ Mhñ ,yñ—(,u)04@0007@2003—16
vlk/kkj.k
EXTRAORDINARY
Hkkx II — [k.M 1
PART II — Section 1
izkf/kdkj ls izdkf’kr
PUBLISHED BY AUTHORITY
lañ 37] ubZ fnYyh] ‘kfuokj] ebZ 28] 2016@T;s”B 7] 1938 ¼’kd½
No. 37] NEW DELHI, SATURDAY, MAY 28, 2016/JYAISTHA 7, 1938 (SAKA)
bl Hkkx esa fHkUu i`”B la[;k nh tkrh gS ftlls fd ;g vyx ladyu ds :i esa j[kk tk ldsA
Separate paging is given to this Part in order that it may be filed as a separate compilation.
REGISTERED NO. DL—(N)04/0007/2003—16
MINISTRY OF LAW AND JUSTICE
(Legislative Department)
New Delhi, the 28th May, 2016/Jyaistha 7, 1938 (Saka)
The following Act of Parliament received the assent of the President on the
28th May, 2016, and is hereby published for general information:—
2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Provided that different dates may be appointed for different provisions of this Code
and any reference in any such provision to the commencement of this Code shall be construed
as a reference to the commencement of that provision.
2. The provisions of this Code shall apply to—
(a) any company incorporated under the Companies Act, 2013 or under any
previous company law;
(b) any other company governed by any special Act for the time being in force,
except in so far as the said provisions are inconsistent with the provisions of such
special Act;
(c) any Limited Liability Partnership incorporated under the Limited Liability
Partnership Act, 2008;
(d) such other body incorporated under any law for the time being in force, as
the Central Government may, by notification, specify in this behalf; and
(e) partnership firms and individuals,
in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case
may be.
3. In this Code, unless the context otherwise requires,—
(1) “Board” means the Insolvency and Bankruptcy Board of India established
under sub-section (1) of section 188;
(2) “bench” means a bench of the Adjudicating Authority;
(3) “bye-laws” mean the bye-laws made by the insolvency professional agency
under section 205;
(4) “charge” means an interest or lien created on the property or assets of any
person or any of its undertakings or both, as the case may be, as security and includes
a mortgage;
(5) “Chairperson” means the Chairperson of the Board;
(6) “claim” means—
(a) a right to payment, whether or not such right is reduced to judgment,
fixed, disputed, undisputed, legal, equitable, secured or unsecured;
(b) right to remedy for breach of contract under any law for the time being
in force, if such breach gives rise to a right to payment, whether or not such right
is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured
or unsecured;
(7) “corporate person” means a company as defined in clause (20) of section 2
of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of
sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other
person incorporated with limited liability under any law for the time being in force but
shall not include any financial service provider;
(8) “corporate debtor” means a corporate person who owes a debt to any person;
(9) “core services” means services rendered by an information utility for—
(a) accepting electronic submission of financial information in such form
and manner as may be specified;
(b) safe and accurate recording of financial information;
(c) authenticating and verifying the financial information submitted by a
person; and
18 of 2013.
Definitions.
6 of 2009.
18 of 2013.
6 of 2009.
Application.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 3
(d) providing access to information stored with the information utility to
persons as may be specified;
(10) “creditor” means any person to whom a debt is owed and includes a financial
creditor, an operational creditor, a secured creditor, an unsecured creditor and a decreeholder;
(11) “debt” means a liability or obligation in respect of a claim which is due from
any person and includes a financial debt and operational debt;
(12) “default” means non-payment of debt when whole or any part or instalment
of the amount of debt has become due and payable and is not repaid by the debtor or
the corporate debtor, as the case may be;
(13) “financial information”, in relation to a person, means one or more of the
following categories of information, namely:—
(a) records of the debt of the person;
(b) records of liabilities when the person is solvent;
(c) records of assets of person over which security interest has been
created;
(d) records, if any, of instances of default by the person against any debt;
(e) records of the balance sheet and cash-flow statements of the person; and
(f) such other information as may be specified.
(14) “financial institution” means—
(a) a scheduled bank;
(b) financial institution as defined in section 45-I of the Reserve Bank of
India Act, 1934;
(c) public financial institution as defined in clause (72) of section 2 of the
Companies Act, 2013; and
(d) such other institution as the Central Government may by notification
specify as a financial institution;
(15) “financial product” means securities, contracts of insurance, deposits, credit
arrangements including loans and advances by banks and financial institutions,
retirement benefit plans, small savings instruments, foreign currency contracts other
than contracts to exchange one currency (whether Indian or not) for another which are
to be settled immediately, or any other instrument as may be prescribed;
(16) “financial service” includes any of the following services, namely:—
(a) accepting of deposits;
(b) safeguarding and administering assets consisting of financial products,
belonging to another person, or agreeing to do so;
(c) effecting contracts of insurance;
(d) offering, managing or agreeing to manage assets consisting of financial
products belonging to another person;
(e) rendering or agreeing, for consideration, to render advice on or soliciting
for the purposes of—
(i) buying, selling, or subscribing to, a financial product;
(ii) availing a financial service; or
2 of 1934.
18 of 2013.
4 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(iii) exercising any right associated with a financial product or
financial service;
(f) establishing or operating an investment scheme;
(g) maintaining or transferring records of ownership of a financial product;
(h) underwriting the issuance or subscription of a financial product; or
(i) selling, providing, or issuing stored value or payment instruments or
providing payment services;
(17) “financial service provider” means a person engaged in the business of
providing financial services in terms of authorisation issued or registration granted by
a financial sector regulator;
(18) “financial sector regulator” means an authority or body constituted under
any law for the time being in force to regulate services or transactions of financial
sector and includes the Reserve Bank of India, the Securities and Exchange Board of
India, the Insurance Regulatory and Development Authority of India, the Pension Fund
Regulatory Authority and such other regulatory authorities as may be notified by the
Central Government;
(19) “insolvency professional” means a person enrolled under section 206 with
an insolvency professional agency as its member and registered with the Board as an
insolvency professional under section 207;
(20) “insolvency professional agency” means any person registered with the
Board under section 201 as an insolvency professional agency;
(21) “information utility” means a person who is registered with the Board as an
information utility under section 210;
(22) “notification” means a notification published in the Official Gazette, and
the terms “notified” and “notify” shall be construed accordingly;
(23) “person” includes—
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a trust;
(e) a partnership;
(f) a limited liability partnership; and
(g) any other entity established under a statute,
and includes a person resident outside India;
(24) “person resident in India” shall have the meaning asassigned to such term
in clause (v) of section 2 of the Foreign Exchange Management Act, 1999;
(25) “person resident outside India” means a person other than a person resident
in India;
(26 ) “prescribed” means prescribed by rules made by the Central Government;
(27) “property” includes money, goods, actionable claims, land and every
description of property situated in India or outside India and every description of
interest including present or future or vested or contingent interest arising out of, or
incidental to, property;
42 of 1999.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 5
(28) “regulations” means the regulations made by the Board under this Code;
(29) “Schedule” means the Schedule annexed to this Code;
(30) “secured creditor” means a creditor in favour of whom security interest is
created;
(31) “security interest” means right, title or interest or a claim to property, created
in favour of, or provided for a secured creditor by a transaction which secures payment
or performance of an obligation and includes mortgage, charge, hypothecation,
assignment and encumbrance or any other agreement or arrangement securing payment
or performance of any obligation of any person:
Provided that security interest shall not include a performance guarantee;
(32) “specified” means specified by regulations made by the Board under this
Code and the term “specify” shall be construed accordingly;
(33) “transaction” includes a agreement or arrangement in writing for the transfer
of assets, or funds, goods or services, from or to the corporate debtor;
(34) “transfer” includes sale, purchase, exchange, mortgage, pledge, gift, loan
or any other form of transfer of right, title, possession or lien;
(35) “transfer of property” means transfer of any property and includes a transfer
of any interest in the property and creation of any charge upon such property;
(36) “workman” shall have the same meaning as assigned to it in clause (s) of
section 2 of the Industrial Disputes Act, 1947;
(37) words and expressions used but not defined in this Code but defined in the
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, shall have the meanings
respectively assigned to them in those Acts.
PART II
INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS
CHAPTER I
PRELIMINARY
4. (1) This Part shall apply to matters relating to the insolvency and liquidation of
corporate debtors where the minimum amount of the default is one lakh rupees:
Provided that the Central Government may, by notification, specify
the minimum amount of default of higher value which shall not be more than one crore
rupees.
5. In this Part, unless the context otherwise requires,—
(1) “Adjudicating Authority”, for the purposes of this Part, means National
Company Law Tribunal constituted under section 408 of the Companies Act, 2013;
(2) “auditor” means a chartered accountant certified to practice as such by the
Institute of Chartered Accountants of India under section 6 of the Chartered Accountants
Act, 1949;
(3) “Chapter” means a Chapter under this Part;
(4) “constitutional document”, in relation to a corporate person, includes articles
of association, memorandum of association of a company and incorporation document
of a Limited Liability Partnership;
14 of 1947.
9 of 1872.
9 of 1932.
42 of 1956.
15 of 1992.
51 of 1993.
6 of 2009.
18 of 2013.
Application of
this Part.
Definitions.
18 of 2013.
XXXVIII of
1949.
6 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(5) “corporate applicant” means—
(a) corporate debtor; or
(b) a member or partner of the corporate debtor who is authorised to make
an application for the corporate insolvency resolution process under the
constitutional document of the corporate debtor; or
(c) an individual who is in charge of managing the operations and resources
of the corporate debtor; or
(d) a person who has the control and supervision over the financial affairs
of the corporate debtor;
(6) “dispute” includes a suit or arbitration proceedings relating to—
(a) the existence of the amount of debt;
(b) the quality of goods or service; or
(c) the breach of a representation or warranty;
(7) “financial creditor” means any person to whom a financial debt is owed and
includes a person to whom such debt has been legally assigned or transferred to;
(8) “financial debt” means a debt alongwith interest, if any, which is disbursed
against the consideration for the time value of money and includes—
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any acceptance credit facility
or its de-materialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue
of bonds, notes, debentures, loan stock or any similar instrument;
(d) the amount of any liability in respect of any lease or hire purchase
contract which is deemed as a finance or capital lease under the Indian Accounting
Standards or such other accounting standards as may be prescribed;
(e) receivables sold or discounted other than any receivables sold on nonrecourse
basis;
(f) any amount raised under any other transaction, including any forward
sale or purchase agreement, having the commercial effect of a borrowing;
(g) any derivative transaction entered into in connection with protection
against or benefit from fluctuation in any rate or price and for calculating the
value of any derivative transaction, only the market value of such transaction
shall be taken into account;
(h) any counter-indemnity obligation in respect of a guarantee, indemnity,
bond, documentary letter of credit or any other instrument issued by a bank or
financial institution;
(i) the amount of any liability in respect of any of the guarantee or indemnity
for any of the items referred to in sub-clauses (a) to (h) of this clause;
(9) “financial position”, in relation to any person, means the financial information
of a person as on a certain date;
(10) “information memorandum” means a memorandum prepared by resolution
professional under sub-section (1) of section 29;
(11) “initiation date” means the date on which a financial creditor, corporate
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 7
applicant or operational creditor, as the case may be, makes an application to the
Adjudicating Authority for initiating corporate insolvency resolution process;
(12) “insolvency commencement date” means the date of admission of an
application for initiating corporate insolvency resolution process by the Adjudicating
Authority under sections 7, 9 or section 10, as the case may be;
(13) “insolvency resolution process costs” means—
(a) the amount of any interim finance and thecosts incurred in raising such
finance;
(b) the fees payable to any person acting as a resolution professional;
(c) any costs incurred by the resolution professional in running the
business of the corporate debtor as a going concern;
(d) any costs incurred at the expense of the Government to facilitate the
insolvency resolution process; and
(e) any other costs as may be specified by the Board;
(14) “insolvency resolution process period” means the period of one hundred
and eighty days beginning from the insolvency commencement date and ending on
one hundred and eightieth day;
(15) “interim finance” means any financial debt raised by the resolution
professional during the insolvency resolution process period;
(16) “liquidation cost” means any cost incurred by the liquidator during the
period of liquidation subject to such regulations, as may be specified by the Board;
(17) “liquidation commencement date” means the date on which proceedings
for liquidation commence in accordance with section 33 or section 59, as the case may
be;
(18) “liquidator” means an insolvency professional appointed as a liquidator in
accordance with the provisions of Chapter III or Chapter V of this Part, as the case
may be;
(19) “officer” for the purposes of Chapter VII of this Part, means an officer who
is in default, as defined in clause (60) of section 2 of the Companies Act, 2013 or a
designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership
Act, 2008, as the case may be;
(20) “operational creditor” means a person to whom an operational debt is owed
and includes any person to whom such debt has been legally assigned or transferred;
(21) “operational debt” means a claim in respect of the provision of goods or
services including employment or a debt in respect of the repayment of dues arising
under any law for the time being in force and payable to the Central Government, any
State Government or any local authority;
(22) “personal guarantor” means an individual who is the surety in a contract of
guarantee to a corporate debtor;
(23) “personnel” includes the directors, managers, key managerial personnel,
designated partners and employees, if any, of the corporate debtor;
(24) “related party”, in relation to a corporate debtor, means—
(a) a director or partner of the corporate debtor or a relative of a director or
partner of the corporate debtor;
(b) a key managerial personnel of the corporate debtor or a relative of a key
managerial personnel of the corporate debtor;
18 of 2013.
6 of 2009.
8 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(c) a limited liability partnership or a partnership firm in which a director,
partner, or manager of the corporate debtor or his relative is a partner;
(d) a private company in which a director, partner or manager of the
corporate debtor is a director and holds along with his relatives, more than two
per cent. of its share capital;
(e) a public company in which a director, partner or manager of the corporate
debtor is a director and holds along with relatives, more than two per cent. of its
paid-up share capital;
(f) anybody corporate whose board of directors, managing director or
manager, in the ordinary course of business, acts on the advice, directions or
instructions of a director, partner or manager of the corporate debtor;
(g) any limited liability partnership or a partnership firm whose partners or
employees in the ordinary course of business, acts on the advice, directions or
instructions of a director, partner or manager of the corporate debtor;
(h) any person on whose advice, directions or instructions, a director,
partner or manager of the corporate debtor is accustomed to act;
(i) a body corporate which is a holding, subsidiary or an associate company
of the corporate debtor, or a subsidiary of a holding company to which the
corporate debtor is a subsidiary;
(j) any person who controls more than twenty per cent. of voting rights in
the corporate debtor on account of ownership or a voting agreement;
(k) any person in whom the corporate debtor controls more than twenty
per cent. of voting rights on account of ownership or a voting agreement;
(l) any person who can control the composition of the board of directors
or corresponding governing body of the corporate debtor;
(m) any person who is associated with the corporate debtor on account
of—
(i) participation in policy making processes of the corporate
debtor; or
(ii) having more than two directors in common between the corporate
debtor and such person; or
(iii) interchange of managerial personnel between the corporate
debtor and such person; or
(iv) provision of essential technical information to, or from, the
corporate debtor;
(25) “resolution applicant” means any person who submits a resolution plan to
the resolution professional;
(26) “resolution plan” means a plan proposed by any person for insolvency
resolution of the corporate debtor as a going concern in accordance with Part II;
(27) “resolution professional”, for the purposes of this Part, means an insolvency
professional appointed to conduct the corporate insolvency resolution process and
includes an interim resolution professional; and
(28) “voting share” means the share of the voting rights of a single financial
creditor in the committee of creditors which is based on the proportion of the financial
debt owed to such financial creditor in relation to the financial debt owed by the
corporate debtor.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 9
CHAPTER II
CORPORATE INSOLVENCY RESOLUTION PROCESS
6. Where any corporate debtor commits a default, a financial creditor, an
operational creditor or the corporate debtor itself may initiate corporate insolvency resolution
process in respect of such corporate debtor in the manner as provided under this
Chapter.
7. (1) A financial creditor either by itself or jointly with other financial creditors may file
an application for initiating corporate insolvency resolution process against a corporate
debtor before the Adjudicating Authority when a default has occurred.
Explanation.—For the purposes of this sub-section, a default includes a
default in respect of a financial debt owed not only to the applicant financial creditor but to
any other financial creditor of the corporate debtor.
(2) The financial creditor shall make an application under sub-section (1) in such form
and manner and accompanied with such fee as may be prescribed.
(3) The financial creditor shall, along with the application furnish—
(a) record of the default recorded with the information utility or such other
record or evidence of default as may be specified;
(b) the name of the resolution professional proposed to act as an interim resolution
professional; and
(c) any other information as may be specified by the Board.
(4) The Adjudicating Authority shall, within fourteen days of the receipt of the
application under sub-section (2), ascertain the existence of a default from the records of an
information utility or on the basis of other evidence furnished by the financial creditor under
sub-section (3).
(5) Where the Adjudicating Authority is satisfied that—
(a) a default has occurred and the application under sub-section (2) is complete,
and there is no disciplinary proceedings pending against the proposed resolution
professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete
or any disciplinary proceeding is pending against the proposed resolution professional,
it may, by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting the application under
clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application
within seven days of receipt of such notice from the Adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of
admission of the application under sub-section (5).
(7) The Adjudicating Authority shall communicate—
(a) the order under clause (a) of sub-section (5) to the financial creditor and the
corporate debtor;
(b) the order under clause (b) of sub-section (5) to the financial creditor,
within seven days of admission or rejection of such application, as the case may be.
8. (1) An operational creditor may, on the occurrence of a default, deliver a demand
notice of unpaid operational debtor copy of an invoice demanding payment of the amount
involved in the default to the corporate debtor in such form and manner as may be
prescribed.
Persons who
may initiate
corporate insolvency
resolution
process.
Initiation of
corporate
insolvency
resolution
process by
financial
creditor.
Insolvency
resolution by
operational
creditor.
10 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(2) The corporate debtor shall, within a period of ten days of the receipt of the demand
notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational
creditor—
(a) existence of a dispute, if any, and record of the pendency of the suit or
arbitration proceedings filed before the receipt of such notice or invoice in relation to
such dispute;
(b) the repayment of unpaid operational debt—
(i) by sending an attested copy of the record of electronic transfer of the
unpaid amount from the bank account of the corporate debtor; or
(ii) by sending an attested copy of record that the operational creditor has
encashed a cheque issued by the corporate debtor.
Explanation.—For the purposes of this section, a “demand notice” means a notice
served by an operational creditor to the corporate debtor demanding repayment of the
operational debt in respect of which the default has occurred.
9. (1) After the expiry of the period of ten days from the date of delivery of the
notice or invoice demanding payment under sub-section (1) of section 8, if the
operational creditor does not receive payment from the corporate debtor or notice of the
dispute under sub-section (2) of section 8, the operational creditor may file an application
before the Adjudicating Authority for initiating a corporate insolvency resolution
process.
(2) The application under sub-section (1) shall be filed in such form and manner and
accompanied with such fee as may be prescribed.
(3) The operational creditor shall, along with the application furnish—
(a) a copy of the invoice demanding payment or demand notice delivered by the
operational creditor to the corporate debtor;
(b) an affidavit to the effect that there is no notice given by the corporate debtor
relating to a dispute of the unpaid operational debt;
(c) a copy of the certificate from thefinancial institutions maintaining accounts
of the operational creditor confirming that there is no payment of an unpaid operational
debt by the corporate debtor; and
(d) such other information as may be specified.
(4) An operational creditor initiating a corporate insolvency resolution process under
this section, may propose a resolution professional to act as an interim resolution professional.
(5) The Adjudicating Authority shall, within fourteen days of the receipt of the
application under sub-section (2), by an order—
(i) admit the application and communicate such decision to the operational
creditor and the corporate debtor if,—
(a) the application made under sub-section (2) is complete;
(b) there is no repayment of the unpaid operational debt;
(c) the invoice or notice for payment to the corporate debtor has been
delivered by the operational creditor;
(d) no notice of dispute has been received by the operational creditor or
there is no record of dispute in the information utility; and
(e) there is no disciplinary proceeding pending against any resolution
professional proposed under sub-section (4), if any.
Application
for initiation
of corporate
insolvency
resolution
process by
operational
creditor.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 11
(ii) reject the application and communicate such decision to the operational
creditor and the corporate debtor, if—
(a) the application made under sub-section (2) is incomplete;
(b) there has been repayment of the unpaid operational debt;
(c) the creditor has not delivered the invoice or notice for payment to the
corporate debtor;
(d) notice of dispute has been received by the operational creditor or there
is a record of dispute in the information utility; or
(e) any disciplinary proceeding is pending against any proposed resolution
professional:
Provided that Adjudicating Authority, shall before rejecting an application under subclause
(a) of clause (ii) give a notice to the applicant to rectify the defect in his application
within seven days of the date of receipt of such notice from the adjudicating Authority.
(6) The corporate insolvency resolution process shall commence from the date of
admission of the application under sub-section (5) of this section.
10. (1) Where a corporate debtor has committed a default, a corporate applicant thereof
may file an application for initiating corporate insolvency resolution process with the
Adjudicating Authority.
(2) The application under sub-section (1) shall be filed in such form, containing such
particulars and in such manner and accompanied with such fee as may be prescribed.
(3) The corporate applicant shall, along with the application furnish the information
relating to—
(a) its books of account and such other documents relating to such period as
may be specified; and
(b) the resolution professional proposed to be appointed as an interim resolution
professional.
(4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of
the application, by an order—
(a) admit the application, if it is complete; or
(b) reject the application, if it is incomplete:
Provided that Adjudicating Authority shall, before rejecting an application, give a
notice to the applicant to rectify the defects in his application within seven days from the
date of receipt of such notice from the Adjudicating Authority.
(5) The corporate insolvency resolution process shall commence from the date of
admission of the application under sub-section (4) of this section.
11. The following persons shall not be entitled to make an application to initiate
corporate insolvency resolution process under this Chapter, namely:—
(a) a corporate debtor undergoing a corporate insolvency resolution process; or
(b) a corporate debtor having completed corporate insolvency resolution process
twelve months preceding the date of making of the application; or
(c) a corporate debtor or a financial creditor who has violated any of the terms of
resolution plan which was approved twelve months before the date of making of an
application under this Chapter; or
(d) a corporate debtor in respect of whom a liquidation order has been made.
Initiation of
corporate
insolvency
resolution
process by
corporate
applicant.
Persons not
entitled to
make
application.
12 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Explanation.—For the purposes of this section, a corporate debtor includes a corporate
applicant in respect of such corporate debtor.
12. (1) Subject to sub-section (2), the corporate insolvency resolution process shall
be completed within a period of one hundred and eighty days from the date of admission of
the application to initiate such process.
(2) The resolution professional shall file an application to the Adjudicating Authority
to extend the period of the corporate insolvency resolution process beyond one hundred
and eighty days, if instructed to do so by a resolution passed at a meeting of the committee
of creditors by a vote of seventy-five per cent. of the voting shares.
(3) On receipt of an application under sub-section (2), if the Adjudicating Authority is
satisfied that the subject matter of the case is such that corporate insolvency resolution
process cannot be completed within one hundred and eighty days, it may by order extend
the duration of such process beyond one hundred and eighty days by such further period as
it thinks fit, but not exceeding ninety days:
Provided that any extension of the period of corporate insolvency resolution process
under this section shall not be granted more than once.
13. (1) The Adjudicating Authority, after admission of the application under section 7
or section 9 or section 10, shall, by an order—
(a) declare a moratorium for the purposes referred to in section 14;
(b) cause a public announcement of the initiation of corporate insolvency
resolution process and call for the submission of claims under section 15; and
(c) appoint an interim resolution professional in the manner as laid down in
section 16.
(2) The public announcement referred to in clause (b) of sub-section (1) shall be made
immediately after the appointment of the interim resolution professional.
14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency
commencement date, the Adjudicating Authority shall by order declare moratorium for
prohibiting all of the following, namely:—
(a) the institution of suits or continuation of pending suits or proceedings
against the corporate debtor including execution of any judgment, decree or order in
any court of law, tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the corporate debtor
any of its assets or any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security interest created by
the corporate debtor in respect of its property including any action under the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002;
(d) the recovery of any property by an owner or lessor where such property is
occupied by or in the possession of the corporate debtor.
(2) The supply of essential goods or services to the corporate debtor as may be
specified shall not be terminated or suspended or interrupted during moratorium period.
(3) The provisions of sub-section (1) shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial sector regulator.
(4) The order of moratorium shall have effect from the date of such order till the
completion of the corporate insolvency resolution process:
Time-limit for
completion of
insolvency
resolution
process.
Declaration of
moratorium
and public
announcement.
54 of 2002.
Moratorium.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 13
Provided that where at any time during the corporate insolvency resolution process
period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of
section 31 or passes an order for liquidation of corporate debtor under section 33, the
moratorium shall cease to have effect from the date of such approval or liquidation order, as
the case may be.
15. (1) The public announcement of the corporate insolvency resolution process
under the order referred to in section 13 shall contain the following information, namely:—
(a) name and address of the corporate debtor under the corporate insolvency
resolution process;
(b) name of the authority with which the corporate debtor is incorporated or
registered;
(c) the last date for submission of claims;
(d) details of the interim resolution professional who shall be vested with the
management of the corporate debtor and be responsible for receiving claims;`
(e) penalties for false or misleading claims; and
(f) the date on which the corporate insolvency resolution process shall
close, which shall be the one hundred and eightieth day from the date of the
admission of the application under sections 7, 9 or section 10, as the case may
be.
(2) The public announcement under this section shall be made in such manner as may
be specified.
16. (1) The Adjudicating Authority shall appoint an interim resolution professional
within fourteen days from the insolvency commencement date.
(2) Where the application for corporate insolvency resolution process is made by a
financial creditor or the corporate debtor, as the case may be, the resolution professional, as
proposed respectively in the application under section 7 or section 10, shall be appointed as
the interim resolution professional, if no disciplinary proceedings are pending against him.
(3) Where the application for corporate insolvency resolution process is made by an
operational creditor and—
(a) no proposal for an interim resolution professional is made,the Adjudicating
Authority shall make a reference to the Board for the recommendation of an insolvency
professional who may act as an interim resolution professional;
(b) a proposal for an interim resolution professional is made under sub-section (4)
of section 9, the resolution professional as proposed, shall be appointed as the interim
resolution professional, if no disciplinary proceedings are pending against him.
(4) The Board shall, within ten days of the receipt of a reference from the Adjudicating
Authority under sub-section (3), recommend the name of an insolvency professional to the
Adjudicating Authority against whom no disciplinary proceedings are pending.
(5) The term of the interim resolution professional shall not exceed thirty days from
date of his appointment.
17. (1) From the date of appointment of the interim resolution professional,—
(a) the management of the affairs of the corporate debtor shall vest in the interim
resolution professional;
(b) the powers of the board of directors or the partners of the corporate debtor,
as the case may be, shall stand suspended and be exercised by the interim resolution
professional;
Public
announcement
of corporate
insolvency
resolution
process.
Appointment
and tenure of
interim
resolution
professional.
Management
of affairs of
corporate
debtor by
interim
resolution
professional.
14 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(c) the officers and managers of the corporate debtor shall report to the interim
resolution professional and provide access to such documents and records of the
corporate debtor as may be required by the interim resolution professional;
(d) the financial institutions maintaining accounts of the corporate debtor shall
act on the instructions of the interim resolution professional in relation to such accounts
and furnish all information relating to the corporate debtor available with them to the
interim resolution professional.
(2) The interim resolution professional vested with the management of the corporate
debtor shall—
(a) act and execute in the name and on behalf of the corporate debtor all deeds,
receipts, and other documents, if any;
(b) take such actions, in the manner and subject to such restrictions, as may be
specified by the Board;
(c) have the authority to access the electronic records of corporate debtor from
information utility having financial information of the corporate debtor;
(d) have the authority to access the books of account, records and
other relevant documents of corporate debtor available with government
authorities, statutory auditors, accountants and such other persons as may be
specified.
18. The interim resolution professional shall perform the following duties, namely:—
(a) collect all information relating to the assets, finances and operations of the
corporate debtor for determining the financial position of the corporate debtor, including
information relating to—
(i) business operations for the previous two years;
(ii) financial and operational payments for the previous two years;
(iii) list of assets and liabilities as on the initiation date; and
(iv) such other matters as may be specified;
(b) receive and collate all the claims submitted by creditors to him, pursuant to
the public announcement made under sections 13 and 15;
(c) constitute a committee of creditors;
(d) monitor the assets of the corporate debtor and manage its operations until a
resolution professional is appointed by the committee of creditors;
(e) file information collected with the information utility, if necessary; and
(f) take control and custody of any asset over which the corporate debtor has
ownership rights as recorded in the balance sheet of the corporate debtor, or with
information utility or the depository of securities or any other registry that records the
ownership of assets including—
(i) assets over which the corporate debtor has ownership rights which
may be located in a foreign country;
(ii) assets that may or may not be in possession of the corporate debtor;
(iii) tangible assets, whether movable or immovable;
(iv) intangible assets including intellectual property;
(v) securities including shares held in any subsidiary of the corporate
debtor, financial instruments, insurance policies;
Duties of
interim
resolution
professional.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 15
(vi) assets subject to the determination of ownership by a court or authority;
(g) to perform such other duties as may be specified by the Board.
Explanation.—For the purposes of this sub-section, the term “assets” shall not include
the following, namely:—
(a) assets owned by a third party in possession of the corporate debtor held
under trust or under contractual arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the corporate debtor; and
(c) such other assets as may be notified by the Central Government in consultation
with any financial sector regulator.
19. (1) The personnel of the corporate debtor, its promoters or any other person
associated with the management of the corporate debtor shall extend all assistance and
cooperation to the interim resolution professional as may be required by him in managing
the affairs of the corporate debtor.
(2) Where any personnel of the corporate debtor, its promoter or any other person
required to assist or cooperate with the interim resolution professional does not assist or
cooperate, the interim resolution professional may make an application to the Adjudicating
Authority for necessary directions.
(3) The Adjudicating Authority, on receiving an application under sub-section (2),
shall by an order, direct such personnel or other person to comply with the instructions of
the resolution professional and to cooperate with him in collection of information and
management of the corporate debtor.
20. (1) The interim resolution professional shall make every endeavour to protect and
preserve the value of the property of the corporate debtor and manage the operations of the
corporate debtor as a going concern.
(2) For the purposes of sub-section (1), the interim resolution professional shall have
the authority—
(a) to appoint accountants, legal or other professionals as may be necessary;
(b) to enter into contracts on behalf of the corporate debtor or to amend or
modify the contracts or transactions which were entered into before the commencement
of corporate insolvency resolution process;
(c) to raise interim finance provided that no security interest shall be created
over any encumbered property of the corporate debtor without the prior consent of the
creditors whose debt is secured over such encumbered property:
Provided that no prior consent of the creditor shall be required where the value of such
property is not less than the amount equivalent to twice the amount of the debt.
(d) to issue instructions to personnel of the corporate debtor as may be necessary
for keeping the corporate debtor as a going concern; and
(e) to take all such actions as are necessary to keep the corporate debtor as a
going concern.
21. (1) The interim resolution professional shall after collation of all claims received
against the corporate debtor and determination of the financial position of the corporate
debtor, constitute a committee of creditors.
(2) The committee of creditors shall comprise all financial creditors of the corporate
debtor:
Provided that a related partyto whom a corporate debtor owes a financial debt shall not
have any right of representation, participation or voting in a meeting of the committee of creditors.
Personnel to
extend cooperation
to
interim
resolution
professional.
Management
of operations
of corporate
debtor as
going concern.
Committee of
creditors.
16 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(3) Where the corporate debtor owes financial debts to two or more financial creditors
as part of a consortium or agreement, each such financial creditor shall be part of the committee
of creditors and their voting share shall be determined on the basis of the financial debts
owed to them.
(4) Where any person is a financial creditor as well as an operational creditor,—
(a) such person shall be a financial creditor to the extent of the financial debt
owed by the corporate debtor,and shall be included in the committee of creditors, with
voting share proportionate to the extent of financial debts owed to such creditor;
(b) such person shall be considered to be an operational creditor to the extent of
the operational debt owed by the corporate debtor to such creditor.
(5) Where an operational creditor has assigned or legally transferred any operational
debt to a financial creditor, the assignee or transferee shall be considered as an operational
creditor to the extent of such assignment or legal transfer.
(6) Where the terms of the financial debt extended as part of a consortium arrangement
or syndicated facility or issued as securities provide for a single trustee or agent to act for all
financial creditors, each financial creditor may—
(a) authorise the trustee or agent to act on his behalf in the committee of creditors
to the extent of his voting share;
(b) represent himself in the committee of creditors to the extent of his voting
share;
(c) appoint an insolvency professional (other than the resolution professional)
at his own cost to represent himself in the committee of creditors to the extent of his
voting share; or
(d) exercise his right to vote to the extent of his voting share with one or more
financial creditors jointly or severally.
(7) The Board may specify the manner of determining the voting share in respect of
financial debts issued as securities under sub-section (6) .
(8) All decisions of the committee of creditors shall be taken by a vote of not less than
seventy-five per cent. of voting share of the financial creditors:
Provided that where a corporate debtor does not have any financial creditors, the
committee of creditors shall be constituted and comprise of such persons to exercise such
functions in such manner as may be specified by the Board.
(9) The committee of creditors shall have the right to require the resolution professional
to furnish any financial information in relation to the corporate debtor at any time during the
corporate insolvency resolution process.
(10) The resolution professional shall make available any financial information so
required by the committee of creditors under sub-section (9) within a period of seven days of
such requisition.
22. (1) The first meeting of the committee of creditors shall be held within seven days
of the constitution of the committee of creditors.
(2) The committee of creditors, may, in the first meeting, by a majority vote
of not less than seventy-five per cent. of the voting share of the financial creditors,
either resolve to appoint the interim resolution professional as a resolution
professional or to replace the interim resolution professional by another resolution
professional.
(3) Where the committee of creditors resolves under sub-section (2)—
Appointment
of resolution
professional.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 17
(a) to continue the interim resolution professional as resolution professional, it
shall communicate its decision to the interim resolution professional, the corporate
debtor and the Adjudicating Authority; or
(b) to replace the interim resolution professional, it shall file an application before
the Adjudicating Authority for the appointment of the proposed resolution
professional.
(4) The Adjudicating Authority shall forward the name of the resolution professional
proposed under clause (b) of sub-section (3) to the Board for its confirmation and shall make
such appointment after confirmation by the Board.
(5) Where the Board does not confirm the name of the proposed resolution professional
within ten days of the receipt of the name of the proposed resolution professional, the
Adjudicating Authority shall, by order, direct the interim resolution professional to continue
to function as the resolution professional until such time as the Board confirms the
appointment of the proposed resolution professional.
23. (1) Subject to section 27, the resolution professional shall conduct the entire
corporate insolvency resolution process and manage the operations of the corporate debtor
during the corporate insolvency resolution process period.
(2) The resolution professional shall exercise powers and perform duties as are vested
or conferred on the interim resolution professional under this Chapter.
(3) In case of any appointment of a resolution professional under
sub-sections (4) of section 22, the interim resolution professional shall provide all the
information, documents and records pertaining to the corporate debtor in his
possession and knowledge to the resolution professional.
24. (1) The members of the committee of creditors may meet in person or by such
electronic means as may be specified.
(2) All meetings of the committee of creditors shall be conducted by the resolution
professional.
(3) The resolution professional shall give notice of each meeting of the committee of
creditors to—
(a) members of Committee of creditors;
(b) members of the suspended Board of Directors or the partners of the corporate
persons, as the case may be;
(c) operational creditors or their representatives if the amount of their aggregate
dues is not less than ten per cent. of the debt.
(4) The directors, partners and one representative of operational creditors, as referred
to in sub-section (3), may attend the meetings of committee of creditors, but shall not have
any right to vote in such meetings:
Provided that the absence of any such direct or, partner or representative of operational
creditors, as the case may be, shall not invalidate proceedings of such meeting.
(5) Any creditor who is a member of the committee of creditors may appoint an insolvency
professional other than the resolution professional to represent such creditor in a meeting of
the committee of creditors:
Provided that the fees payable to such insolvency professional representing any
individual creditor will be borne by such creditor.
Resolution
professional to
conduct
corporate
insolvency
resolution
process.
Meeting of
committee of
creditors.
18 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(6) Each creditor shall vote in accordance with the voting share assigned to him based
on the financial debts owed to such creditor.
(7) The resolution professional shall determine the voting share to be assigned to each
creditor in the manner specified by the Board.
(8) The meetings of the committee of creditors shall be conducted in such manner as
may be specified.
25. (1) It shall be the duty of the resolution professional to preserve and protect the
assets of the corporate debtor, including the continued business operations of the corporate
debtor.
(2) For the purposes of sub-section (1), the resolution professional shall undertake the
following actions, namely:—
(a) take immediate custody and control of all the assets of the corporate debtor,
including the business records of the corporate debtor;
(b) represent and act on behalf of the corporate debtor with third parties, exercise
rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration
proceedings;
(c) raise interim finances subject to the approval of the committee of creditors
under section 28;
(d) appoint accountants, legal or other professionals in the manner as specified
by Board;
(e) maintain an updated list of claims;
(f) convene and attend all meetings of the committee of creditors;
(g) prepare the information memorandum in accordance with section 29;
(h) invite prospective lenders, investors, and any other persons to put forward
resolution plans;
(i) present all resolution plans at the meetings of the committee of creditors;
(j) file application for avoidance of transactions in accordance with Chapter III,
if any; and
(k) such other actions as may be specified by the Board.
26. The filing of an avoidance application under clause (j) of sub-section (2) of section
25 by the resolution professional shall not affect the proceedings of the corporate insolvency
resolution process.
27. (1) Where, at any time during the corporate insolvency resolution process, the
committee of creditors is of the opinion that a resolution professional appointed under
section 22 is required to be replaced, it may replace him with another resolution professional
in the manner provided under this section.
(2) The committee of creditors may, at a meeting, by a vote of seventy five per cent. of
voting shares, propose to replace the resolution professional appointed under section 22
with another resolution professional.
(3) The committee of creditors shall forward the name of the insolvency professional
proposed by them to the Adjudicating Authority.
(4) The Adjudicating Authority shall forward the name of the proposed resolution
professional to the Board for its confirmation and a resolution professional shall be appointed
in the same manner as laid down in section 16.
Duties of
resolution
professional.
Application
for avoidance
of
transactions
not to affect
proceedings.
Replacement
of resolution
professional by
committee of
creditors.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 19
(5) Where any disciplinary proceedings are pending against the proposed resolution
professional under sub-section (3), the resolution professional appointed under
section 22 shall continue till the appointment of another resolution professional under this
section.
28. (1) Notwithstanding anything contained in any other law for the time being in
force, the resolution professional, during the corporate insolvency resolution process, shall
not take any of the following actions without the prior approval of the committee of creditors
namely:—
(a) raise any interim finance in excess of the amount as may be decided by the
committee of creditors in their meeting;
(b) create any security interest over the assets of the corporate debtor;
(c) change the capital structure of the corporate debtor, including by way of
issuance of additional securities, creating a new class of securities or buying back or
redemption of issued securities in case the corporate debtor is a company;
(d) record any change in the ownership interest of the corporate debtor;
(e) give instructions to financial institutions maintaining accounts of the corporate
debtor for a debit transaction from any such accounts in excess of the amount as may
be decided by the committee of creditors in their meeting;
(f) undertake any related party transaction;
(g) amend any constitutional documents of the corporate debtor;
(h) delegate its authority to any other person;
(i) dispose of or permit the disposal of shares of any shareholder of the corporate
debtor or their nominees to third parties;
(j) make any change in the management of the corporate debtor or its subsidiary;
(k) transfer rights or financial debts or operational debts under material contracts
otherwise than in the ordinary course of business;
(l) make changes in the appointment or terms of contract of such personnel as
specified by the committee of creditors; or
(m) make changes in the appointment or terms of contract of statutory auditors
or internal auditors of the corporate debtor.
(2) The resolution professional shall convene a meeting of the committee of creditors
and seek the vote of the creditors prior to taking any of the actions under sub-section (1).
(3) No action under sub-section (1) shall be approved by the committee of creditors
unless approved by a vote of seventy five per cent. of the voting shares.
(4) Where any action under sub-section (1) is taken by the resolution professional
without seeking the approval of the committee of creditors in the manner as required in this
section, such action shall be void.
(5) The committee of creditors may report the actions of the resolution professional
under sub-section (4) to the Board for taking necessary actions against him under this Code.
29. (1) The resolution professional shall prepare an information memorandum in such
form and manner containing such relevant information as may be specified by the Board for
formulating a resolution plan.
(2) The resolution professional shall provide to the resolution applicant access to all
Approval of
committee of
creditors for
certain
actions.
Preparation
of
information
memorandum.
20 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
relevant information in physical and electronic form, provided such resolution applicant
undertakes—
(a) to comply with provisions of law for the time being in force relating to
confidentiality and insider trading;
(b) to protect any intellectual property of the corporate debtor it may have access
to; and
(c) not to share relevant information with third parties unless clauses (a) and (b)
of this sub-section are complied with.
Explanation.—For the purposes of this section, “relevant information” means the
information required by the resolution applicant to make the resolution plan for the corporate
debtor, which shall include the financial position of the corporate debtor, all information
related to disputes by or against the corporate debtor and any other matter pertaining to the
corporate debtor as may be specified.
30. (1) A resolution applicant may submit a resolution plan to the resolution professional
prepared on the basis of the information memorandum.
(2) The resolution professional shall examine each resolution plan received by him to
confirm that each resolution plan—
(a) provides for the payment of insolvency resolution process costs in a manner
specified by the Board in priority to the repayment of other debts of the corporate
debtor;
(b) provides for the repayment of the debts of operational creditors in such
manner as may be specified by the Board which shall not be less than the amount to be
paid to the operational creditors in the event of a liquidation of the corporate debtor
under section 53;
(c) provides for the management of the affairs of the Corporate debtor after
approval of the resolution plan;
(d) the implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the time being in
force;
(f) conforms to such other requirements as may be specified by the Board.
(3) The resolution professional shall present to the committee of creditors for its
approval such resolution plans which confirm the conditions referred to in sub-section (2).
(4) The committee of creditors may approve a resolution plan by a vote of not less than
seventy five per cent. of voting share of the financial creditors.
(5) The resolution applicant may attend the meeting of the committee of creditors in
which the resolution plan of the applicant is considered:
Provided that the resolution applicant shall not have a right to vote at the meeting of
the committee of creditors unless such resolution applicant is also a financial creditor.
(6) The resolution professional shall submit the resolution plan as approved by the
committee of creditors to the Adjudicating Authority.
31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved
by the committee of creditors under sub-section (4) of section 30 meets the requirements as
referred to in sub-section (2) of section 30, it shall by order approve the resolution plan
which shall be binding on the corporate debtor and its employees, members, creditors,
guarantors and other stakeholders involved in the resolution plan.
Submission of
resolution
plan.
Approval of
resolution
plan.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 21
(2) Where the Adjudicating Authority is satisfied that the resolution plan does not
confirm to the requirements referred to in sub-section (1), it may, by an order, reject the
resolution plan.
(3) After the order of approval under sub-section (1),—
(a) the moratorium order passed by the Adjudicating Authority under section 14
shall cease to have effect; and
(b) the resolution professional shall forward all records relating to the conduct
of the corporate insolvency resolution process and the resolution plan to the Board to
be recorded on its database.
32. Any appeal from an order approving the resolution plan shall be in the manner and
on the grounds laid down in sub-section (3) of section 61.
CHAPTER III
LIQUIDATION PROCESS
33. (1) Where the Adjudicating Authority, —
(a) before the expiry of the insolvency resolution process period or the maximum
period permitted for completion of the corporate insolvency resolution process under
section 12 or the fast track corporate insolvency resolution process under section 56,
as the case may be, does not receive a resolution plan under sub-section (6) of
section 30; or
(b) rejects the resolution plan under section 31 for the non-compliance of the
requirements specified therein,
it shall—
(i) pass an order requiring the corporate debtor to be liquidated in the manner as
laid down in this Chapter;
(ii) issue a public announcement stating that the corporate debtor is in
liquidation; and
(iii) require such order to be sent to the authority with which the corporate
debtor is registered.
(2) Where the resolution professional, at any time during the corporate insolvency
resolution process but before confirmation of resolution plan, intimates the Adjudicating
Authority of the decision of the committee of creditors to liquidate the corporate debtor, the
Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii)
and (iii) of clause (b) of sub-section (1).
(3) Where the resolution plan approved by the Adjudicating Authority is contravened
by the concerned corporate debtor, any person other than the corporate debtor, whose interests
are prejudicially affected by such contravention, may make an application to the Adjudicating
Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of
sub-section (1).
(4) On receipt of an application under sub-section (3), if the Adjudicating Authority
determines that the corporate debtor has contravened the provisions of the resolution plan, it
shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of
sub-section (1).
(5) Subject to section 52, when a liquidation order has been passed, no suit or other
legal proceeding shall be instituted by or against the corporate debtor:
Provided that a suit or other legal proceeding may be instituted by the liquidator, on
behalf of the corporate debtor, with the prior approval of the Adjudicating Authority.
Appeal.
Initiation of
liquidation.
22 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(6) The provisions of sub-section (5) shall not apply to legal proceedings in relation to
such transactions as may be notified by the Central Government in consultation with any
financial sector regulator.
(7) The order for liquidation under this section shall be deemed to be a notice of
discharge to the officers, employees and workmen of the corporate debtor, except when the
business of the corporate debtor is continued during the liquidation process by the
liquidator.
34. (1) Where the Adjudicating Authority passes an order for liquidation of the corporate
debtor under section 33, the resolution professional appointed for the corporate insolvency
resolution process under Chapter II shall act as the liquidator for the purposes of liquidation
unless replaced by the Adjudicating Authority under sub-section (4).
(2) On the appointment of a liquidator under this section, all powers of the board of
directors, key managerial personnel and the partners of the corporate debtor, as the case may
be, shall cease to have effect and shall be vested in the liquidator.
(3) The personnel of the corporate debtor shall extend all assistance and cooperation
to the liquidator as may be required by him in managing the affairs of the corporate debtor
and provisions of section 19 shall apply in relation to voluntary liquidation process as they
apply in relation to liquidation process with the substitution of references to the liquidator
for references to the interim resolution professional.
(4) The Adjudicating Authority shall by order replace the resolution professional, if—
(a) the resolution plan submitted by the resolution professional under section 30
was rejected for failure to meet the requirements mentioned in sub-section (2) of
section 30; or
(b) the Board recommends the replacement of a resolution professional to the
Adjudicating Authority for reasons to be recorded in writing.
(5) For the purposes of clause (a) of sub-section (4), the Adjudicating Authority may
direct the Board to propose the name of another insolvency professional to be appointed as
a liquidator.
(6) The Board shall propose the name of another insolvency professional within ten
days of the direction issued by the Adjudicating Authority under sub-section (5).
(7) The Adjudicating Authority shall, on receipt of the proposal of the Board for the
appointment of an insolvency professional as liquidator, by an order appoint such insolvency
professional as the liquidator.
(8) An insolvency professional proposed to be appointed as a liquidator shall charge
such fee for the conduct of the liquidation proceedings and in such proportion to the value of
the liquidation estate assets, as may be specified by the Board.
(9) The fees for the conduct of the liquidation proceedings under sub-section (8) shall
be paid to the liquidator from the proceeds of the liquidation estate under section 53.
35. (1) Subject to the directions of the Adjudicating Authority, the liquidator shall
have the following powers and duties, namely:—
(a) to verify claims of all the creditors;
(b) to take into his custody or control all the assets, property, effects and
actionable claims of the corporate debtor;
(c) to evaluate the assets and property of the corporate debtor in the manner as
may be specified by the Board and prepare a report;
(d) to take such measures to protect and preserve the assets and properties of
the corporate debtor as he considers necessary;
Appointment
of liquidator
and fee to be
paid.
Powers and
duties of
liquidator.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 23
(e) to carry on the business of the corporate debtor for its beneficial liquidation
as he considers necessary;
(f) subject to section 52, to sell the immovable and movable property and
actionable claims of the corporate debtor in liquidation by public auction or private
contract, with power to transfer such property to any person or body corporate, or to
sell the same in parcels in such manner as may be specified;
(g) to draw, accept, make and endorse any negotiable instruments including bill
of exchange, hundi or promissory note in the name and on behalf of the corporate
debtor, with the same effect with respect to the liability as if such instruments were
drawn, accepted, made or endorsed by or on behalf of the corporate debtor in the
ordinary course of its business;
(h) to take out, in his official name, letter of administration to any deceased
contributory and to do in his official name any other act necessary for obtaining
payment of any money due and payable from a contributory or his estate which cannot
be ordinarily done in the name of the corporate debtor, and in all such cases, the money
due and payable shall, for the purpose of enabling the liquidator to take out the letter
of administration or recover the money, be deemed to be due to the liquidator himself;
(i) to obtain any professional assistance from any person or appoint any
professional, in discharge of his duties, obligations and responsibilities;
(j) to invite and settle claims of creditors and claimants and distribute proceeds
in accordance with the provisions of this Code;
(k) to institute or defend any suit, prosecution or other legal proceedings, civil
or criminal, in the name of on behalf of the corporate debtor;
(l) to investigate the financial affairs of the corporate debtor to determine
undervalued or preferential transactions;
(m) to take all such actions, steps, or to sign, execute and verify any paper, deed,
receipt document, application, petition, affidavit, bond or instrument and for such
purpose to use the common seal, if any, as may be necessary for liquidation, distribution
of assets and in discharge of his duties and obligations and functions as liquidator;
(n) to apply to the Adjudicating Authority for such orders or directions as may
be necessary for the liquidation of the corporate debtor and to report the progress of
the liquidation process in a manner as may be specified by the Board; and
(o) to perform such other functions as may be specified by the Board.
(2) The liquidator shall have the power to consult any of the stakeholders entitled to a
distribution of proceeds under section 53:
Provided that any such consultation shall not be binding on the liquidator:
Provided further that the records of any such consultation shall be made
available to all other stakeholders not so consulted, in a manner specified by the Board.
36. (1) For the purposes of liquidation, the liquidator shall form an estate of the assets
mentioned in sub-section (3), which will be called the liquidation estate in relation to the
corporate debtor.
(2) The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the
creditors.
(3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation
estate assets which shall include the following:—
Liquidation
estate.
24 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(a) any assets over which the corporate debtor has ownership rights, including
all rights and interests therein as evidenced in the balance sheet of the corporate
debtor or an information utility or records in the registry or any depository recording
securities of the corporate debtor or by any other means as may be specified by the
Board, including shares held in any subsidiary of the corporate debtor;
(b) assets that may or may not be in possession of the corporate debtor including
but not limited to encumbered assets;
(c) tangible assets, whether movable or immovable;
(d) intangible assets including but not limited to intellectual property, securities
(including shares held in a subsidiary of the corporate debtor) and financial instruments,
insurance policies, contractual rights;
(e) assets subject to the determination of ownership by the court or authority;
(f) any assets or their value recovered through proceedings for avoidance of
transactions in accordance with this Chapter;
(g) any asset of the corporate debtor in respect of which a secured creditor has
relinquished security interest;
(h) any other property belonging to or vested in the corporate debtor at the
insolvency commencement date; and
(i) all proceeds of liquidation as and when they are realised.
(4) The following shall not be included in the liquidation estate assets and shall not be
used for recovery in the liquidation:—
(a) assets owned by a third party which are in possession of the corporate
debtor, including—
(i) assets held in trust for any third party;
(ii) bailment contracts;
(iii) all sums due to any workman or employee from the provident fund,
the pension fund and the gratuity fund;
(iv) other contractual arrangements which do not stipulate transfer of title
but only use of the assets; and
(v) such other assets as may be notified by the Central Government in
consultation with any financial sector regulator;
(b) assets in security collateral held by financial services providers and are subject
to netting and set-off in multi-lateral trading or clearing transactions;
(c) personal assets of any shareholder or partner of a corporate debtor as the
case may be provided such assets are not held on account of avoidance transactions
that may be avoided under this Chapter;
(d) assets of any Indian or foreign subsidiary of the corporate debtor; or
(e) any other assets as may be specified by the Board, including assets which
could be subject to set-off on account of mutual dealings between the corporate debtor
and any creditor.
37. (1) Notwithstanding anything contained in any other law for the time being in
force, the liquidator shall have the power to access any information systems for the purpose
of admission and proof of claims and identification of the liquidation estate assets relating to
the corporate debtor from the following sources, namely:—
Powers of
liquidator to
access
information.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 25
(a) an information utility;
(b) credit information systems regulated under any law for the time being in
force;
(c) any agency of the Central, State or Local Government including any registration
authorities;
(d) information systems for financial and non-financial liabilities regulated under
any law for the time being in force;
(e) information systems for securities and assets posted as security interest
regulated under any law for the time being in force;
(f) any database maintained by the Board; and
(g) any other source as may be specified by the Board.
(2) The creditors may require the liquidator to provide them any financial information
relating to the corporate debtor in such manner as may be specified.
(3) The liquidator shall provide information referred to in sub-section (2) to such
creditors who have requested for such information within a period of
seven days from the date of such request or provide reasons for not providing such
information.
38. (1) The liquidator shall receive or collect the claims of creditors within a period of
thirty days from the date of the commencement of the liquidation process.
(2) A financial creditor may submit a claim to the liquidator by providing a record of
such claim with an information utility:
Provided that where the information relating to the claim is not recorded in the
information utility, the financial creditor may submit the claim in the same manner as provided
for the submission of claims for the operational creditor under sub-section (3).
(3) An operational creditor may submit a claim to the liquidator in such form and in
such manner and along with such supporting documents required to prove the claim as may
be specified by the Board.
(4) A creditor who is partly a financial creditor and partly an operational creditor shall
submit claims to the liquidator to the extent of his financial debt in the manner as provided
in sub-section (2) and to the extent of his operational debt under sub-section (3).
(5) A creditor may withdraw or vary his claim under this section within fourteen days
of its submission.
39. (1) The liquidator shall verify the claims submitted under section 38 within such
time as specified by the Board.
(2) The liquidator may require any creditor or the corporate debtor or any other person
to produce any other document or evidence which he thinks necessary for the purpose of
verifying the whole or any part of the claim.
40. (1) The liquidator may, after verification of claims under section 39, either admit or
reject the claim, in whole or in part, as the case may be:
Provided that where the liquidator rejects a claim, he shall record in writing the reasons
for such rejection.
(2) The liquidator shall communicate his decision of admission or rejection of claims
to the creditor and corporate debtor within seven days of such admission or rejection of
claims.
Consolidation
of claims.
Verification
of claims.
Admission or
rejection of
claims.
26 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
41.The liquidator shall determine the value of claims admitted under section 40 in such
manner as may be specified by the Board.
42. A creditor may appeal to the Adjudicating Authority against the
decision of the liquidator rejecting the claims within fourteen days of the receipt of such
decision.
43. (1) Where the liquidator or the resolution professional, as the case may be, is of the
opinion that the corporate debtor has at a relevant time given a preference in such transactions
and in such manner as laid down in sub-section (2) to any persons as referred to in
sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential
transactions and for, one or more of the orders referred to in section 44.
(2) A corporate debtor shall be deemed to have given a preference, if—
(a) there is a transfer of property or an interest thereof of the corporate debtor for
the benefit of a creditor or a surety or a guarantor for or on account of an antecedent
financial debt or operational debt or other liabilities owed by the corporate debtor; and
(b) the transfer under clause (a) has the effect of putting such creditor or a
surety or a guarantor in a beneficial position than it would have been in the event of a
distribution of assets being made in accordance with section 53.
(3) For the purposes of sub-section (2), a preference shall not include the following
transfers—
(a) transfer made in the ordinary course of the business or financial affairs of the
corporate debtor or the transferee;
(b) any transfer creating a security interest in property acquired by the corporate
debtor to the extent that—
(i) such security interest secures new value and was given at the time of or
after the signing of a security agreement that contains a description of such
property as security interest and was used by corporate debtor to acquire such
property; and
(ii) such transfer was registered with an information utility on or before
thirty days after the corporate debtor receives possession of such property:
Provided that any transfer made in pursuance of the order of a court shall not, preclude
such transfer to be deemed as giving of preference by the corporate debtor.
Explanation.—For the purpose of sub-section (3) of this section, “new value” means
money or its worth in goods, services, or new credit, or release by the transferee of property
previously transferred to such transferee in a transaction that is neither void nor voidable by
the liquidator or the resolution professional under this Code, including proceeds of such
property, but does not include a financial debt or operational debt substituted for existing
financial debt or operational debt.
(4) A preference shall be deemed to be given at a relevant time, if—
(a) it is given to a related party (other than by reason only of being an employee),
during the period of two years preceding the insolvency commencement date; or
(b) a preference is given to a person other than a related party during the period
of one year preceding the insolvency commencement date.
44. The Adjudicating Authority, may, on an application made by the resolution
professional or liquidator under sub-section (1) of section 43, by an order :
Determination
of valuation of
claims.
Appeal
against the
decision of
liquidator.
Preferential
transactions
and relevant
time.
Orders in case
of preferential
transactions.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 27
(a) require any property transferred in connection with the giving of the preference
to be vested in the corporate debtor;
(b) require any property to be so vested if it represents the application either of
the proceeds of sale of property so transferred or of money so transferred;
(c) release or discharge (in whole or in part) of any security interest created by
the corporate debtor;
(d) require any person to pay such sums in respect of benefits received by him
from the corporate debtor, such sums to the liquidator or the resolution professional,
as the Adjudicating Authority may direct;
(e) direct any guarantor, whose financial debts or operational debts owed to any
person were released or discharged (in whole or in part) by the giving of the preference,
to be under such new or revived financial debts or operational debts to that person as
the Adjudicating Authority deems appropriate;
(f) direct for providing security or charge on any property for the discharge of
any financial debt or operational debt under the order, and such security or charge to
have the same priority as a security or charge released or discharged wholly or in part
by the giving of the preference; and
(g) direct for providing the extent to which any person whose property is so
vested in the corporate debtor, or on whom financial debts or operational debts are
imposed by the order, are to be proved in the liquidation or the corporate insolvency
resolution process for financial debts or operational debts which arose from, or were
released or discharged wholly or in part by the giving of the preference:
Provided that an order under this section shall not—
(a) affect any interest in property which was acquired from a person other than
the corporate debtor or any interest derived from such interest and was acquired in
good faith and for value;
(b) require a person, who received a benefit from the preferential transaction in
good faith and for value to pay a sum to the liquidator or the resolution professional.
Explanation I.—For the purpose of this section, it is clarified that where a person,who
has acquired an interest in property from another person other than the corporate debtor, or
who has received a benefit from the preference or such another person to whom the corporate
debtor gave the preference,—
(i) had sufficient information of the initiation or commencement of insolvency
resolution process of the corporate debtor;
(ii) is a related party,
it shall be presumed that the interest was acquired or the benefit was received otherwise than
in good faith unless the contrary is shown.
Explanation II.—A person shall be deemed to have sufficient information or
opportunity to avail such information if a public announcement regarding the corporate
insolvency resolution process has been made under section 13.
45. (1) If the liquidator or the resolution professional, as the case may be, on an
examination of the transactions of the corporate debtor referred to in sub-section (2) of
section 43 determines that certain transactions were made during the relevant period under
section 46, which were undervalued, he shall make an application to the Adjudicating Authority
to declare such transactions as void and reverse the effect of such transaction in accordance
with this Chapter.
Avoidance of
undervalued
transactions.
28 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(2) A transaction shall be considered undervalued where the corporate debtor—
(a) makes a gift to a person; or
(b) enters into a transaction with a person which involves the transfer of one or
more assets by the corporate debtor for a consideration the value of which is significantly
less than the value of the consideration provided by the corporate debtor,
and such transaction has not taken place in the ordinary course of business of the corporate
debtor.
46. (1) In an application for avoiding a transaction at undervalue, the liquidator or the
resolution professional, as the case may be, shall demonstrate that—
(i) such transaction was made with any person within the period of one year
preceding the insolvency commencement date; or
(ii) such transaction was made with a related party within the period of two years
preceding the insolvency commencement date.
(2) The Adjudicating Authority may require an independent expert to assess evidence
relating to the value of the transactions mentioned in this section.
47. (1) Where an undervalued transaction has taken place and the liquidator or the
resolution professional as the case may be, has not reported it to the Adjudicating Authority,
a creditor, member or a partner of a corporate debtor, as the case may be, may make an
application to the Adjudicating Authority to declare such transactions void and reverse their
effect in accordance with this Chapter.
(2) Where the Adjudicating Authority, after examination of the application made under
sub-section (1), is satisfied that—
(a) undervalued transactions had occurred; and
(b) liquidator or the resolution professional, as the case may be, after having
sufficient information or opportunity to avail information of such transactions did not
report such transaction to the Adjudicating Authority,
it shall pass an order—
(a) restoring the position as it existed before such transactions and reversing
the effects thereof in the manner as laid down in section 45 and section 48;
(b) requiring the Board to initiate disciplinary proceedings against the liquidator
or the resolution professional as the case may be.
48. The order of the Adjudicating Authority under sub-section (1) of section 45 may
provide for the following:—
(a) require any property transferred as part of the transaction, to be vested in the
corporate debtor;
(b) release or discharge (in whole or in part) any security interest granted by the
corporate debtor;
(c) require any person to pay such sums, in respect of benefits received by such
person, to the liquidator or the resolution professional as the case may be, as the
Adjudicating Authority may direct; or
(d) require the payment of such consideration for the transaction as may be
determined by an independent expert.
Relevant
period for
avoidable
transactions.
Application
by creditor in
cases of
undervalued
transactions.
Order in cases
of undervalued
transactions.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 29
49. Where the corporate debtor has entered into an undervalued transaction as referred
to in sub-section (2) of section 45 and the Adjudicating Authority is satisfied that such
transaction was deliberately entered into by such corporate debtor—
(a) for keeping assets of the corporate debtor beyond the reach of any person
who is entitled to make a claim against the corporate debtor; or
(b) in order to adversely affect the interests of such a person in relation to the
claim,
the Adjudicating Authority shall make an order—
(i) restoring the position as it existed before such transaction as if the
transaction had not been entered into; and
(ii) protecting the interests of persons who are victims of such transactions:
Provided that an order under this section—
(a) shall not affect any interest in property which was acquired from a person
other than the corporate debtor and was acquired in good faith, for value and without
notice of the relevant circumstances, or affect any interest deriving from such an
interest, and
(b) shall not require a person who received a benefit from the transaction in good
faith, for value and without notice of the relevant circumstances to pay any sum unless
he was a party to the transaction.
50. (1) Where the corporate debtor has been a party to an extortionate credit transaction
involving the receipt of financial or operational debt during the period within two years
preceding the insolvency commencement date, the liquidator or the resolution professional
as the case may be, may make an application for avoidance of such transaction to the
Adjudicating Authority if the terms of such transaction required exorbitant payments to be
made by the corporate debtor.
(2) The Board may specify the circumstances in which a transactions which shall be
covered under sub-section (1).
Explanation.—For the purpose of this section, it is clarified that any debt extended by
any person providing financial services which is in compliance with any law for the time
being in force in relation to such debt shall in no event be considered as an extortionate
credit transaction.
51. Where the Adjudicating Authority after examining the application made under
sub-section (1) of section 50 is satisfied that the terms of a credit transaction required
exorbitant payments to be made by the corporate debtor, it shall, by an order—
(a) restore the position as it existed prior to such transaction;
(b) set aside the whole or part of the debt created on account of the extortionate
credit transaction;
(c) modify the terms of the transaction;
(d) require any person who is, or was, a party to the transaction to repay any
amount received by such person; or
(e) require any security interest that was created as part of the extortionate
credit transaction to be relinquished in favour of the liquidator or the resolution
professional, as the case may be.
Transactions
defrauding
creditors.
Extortionate
credit
transactions.
Orders of
Adjudicating
Authority in
respect of
extorionate
credit
transactions.
30 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
52. (1) A secured creditor in the liquidation proceedings may—
(a) relinquish its security interest to the liquidation estate and receive proceeds
from the sale of assets by the liquidator in the manner specified in section 53; or
(b) realise its security interest in the manner specified in this section.
(2) Where the secured creditor realises security interest under clause (b) of
sub-section (1), he shall inform the liquidator of such security interest and identify the asset
subject to such security interest to be realised.
(3) Before any security interest is realised by the secured creditor under this section,
the liquidator shall verify such security interest and permit the secured creditor to realise
only such security interest, the existence of which may be proved either—
(a) by the records of such security interest maintained by an information utility; or
(b) by such other means as may be specified by the Board.
(4) A secured creditor may enforce, realise, settle, compromise or deal with the secured
assets in accordance with such law as applicable to the security interest being realised and
to the secured creditor and apply the proceeds to recover the debts due to it.
(5) If in the course of realising a secured asset, any secured creditor faces resistance
from the corporate debtor or any person connected therewith in taking possession of, selling
or otherwise disposing off the security, the secured creditor may make an application to the
Adjudicating Authority to facilitate the secured creditor to realise such security interest in
accordance with law for the time being in force.
(6) The Adjudicating Authority, on the receipt of an application from a secured creditor
under sub-section (5) may pass such order as may be necessary to permit a secured creditor
to realise security interest in accordance with law for the time being in force.
(7) Where the enforcement of the security interest under sub-section (4) yields an
amount by way of proceeds which is in excess of the debts due to the secured creditor, the
secured creditor shall—
(a) account to the liquidator for such surplus; and
(b) tender to the liquidator any surplus funds received from the enforcement of
such secured assets.
(8) The amount of insolvency resolution process costs, due from secured creditors
who realise their security interests in the manner provided in this section, shall be deducted
from the proceeds of any realisation by such secured creditors, and they shall transfer such
amounts to the liquidator to be included in the liquidation estate.
(9) Where the proceeds of the realisation of the secured assets are not adequate to
repay debts owed to the secured creditor, the unpaid debts of such secured creditor shall be
paid by the liquidator in the manner specified in clause (e) of sub-section (1) of
section 53.
53. (1) Notwithstanding anything to the contrary contained in any law enacted by the
Parliament or any State Legislature for the time being in force, the proceeds from the sale of
the liquidation assets shall be distributed in the following order of priority and within such
period and in such manner as may be specified, namely :—
(a) the insolvency resolution process costs and the liquidation costs paid in
full;
Secured
creditor in
liquidation
proceedings.
Distribution
of assets.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 31
(b) the following debts which shall rank equally between and among the
following :—
(i) workmen’s dues for the period of twenty-four months preceding the
liquidation commencement date; and
(ii) debts owed to a secured creditor in the event such secured creditor
has relinquished security in the manner set out in section 52;
(c) wages and any unpaid dues owed to employees other than workmen for the
period of twelve months preceding the liquidation commencement date;
(d) financial debts owed to unsecured creditors;
(e) the following dues shall rank equally between and among the following:—
(i) any amount due to the Central Government and the State Government
including the amount to be received on account of the Consolidated Fund of
India and the Consolidated Fund of a State, if any, in respect of the whole or
any part of the period of two years preceding the liquidation commencement
date;
(ii) debts owed to a secured creditor for any amount unpaid following the
enforcement of security interest;
(f) any remaining debts and dues;
(g) preference shareholders, if any; and
(h) equity shareholders or partners, as the case may be.
(2) Any contractual arrangements between recipients under sub-section (1) with equal
ranking, if disrupting the order of priority under that sub-section shall be disregarded by the
liquidator.
(3) The fees payable to the liquidator shall be deducted proportionately from the
proceeds payable to each class of recipients under sub-section (1), and the proceeds to the
relevant recipient shall be distributed after such deduction.
Explanation.—For the purpose of this section—
(i) it is hereby clarified that at each stage of the distribution of proceeds in
respect of a class of recipients that rank equally, each of the debts will either be paid in
full, or will be paid in equal proportion within the same class of recipients, if the
proceeds are insufficient to meet the debts in full; and
(ii) the term “workmen’s dues” shall have the same meaning as assigned to it in
section 326 of the Companies Act, 2013.
54. (1) Where the assets of the corporate debtor have been completely liquidated, the
liquidator shall make an application to the Adjudicating Authority for the dissolution of such
corporate debtor.
(2) The Adjudicating Authority shall on application filed by the liquidator under
sub-section (1) order that the corporate debtor shall be dissolved from the date of that order
and the corporate debtor shall be dissolved accordingly.
(3) A copy of an order under sub-section (2) shall within seven days from the date of
such order, be forwarded to the authority with which the corporate debtor is registered.
Dissolution
of corporate
debtor.
18 of 2013.
32 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
CHAPTER IV
FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS
55. (1) A corporate insolvency resolution process carried out in accordance with this
Chapter shall be called as fast track corporate insolvency resolution process.
(2) An application for fast track corporate insolvency resolution process may be made
in respect of the following corporate debtors, namely:—
(a) a corporate debtor with assets and income below a level as may be notified
by the Central Government; or
(b) a corporate debtor with such class of creditors or such amount of debt as
may be notified by the Central Government; or
(c) such other category of corporate persons as may be notified by the Central
Government.
56. (1) Subject to the provisions of sub-section (3), the fast track corporate insolvency
resolution process shall be completed within a period of ninety days from the insolvency
commencement date.
(2) The resolution professional shall file an application to the Adjudicating Authority
to extend the period of the fast track corporate insolvency resolution process beyond ninety
days if instructed to do so by a resolution passed at a meeting of the committee of creditors
and supported by a vote of seventy five percent of the voting share.
(3) On receipt of an application under sub-section (2), if the Adjudicating Authority is
satisfied that the subject matter of the case is such that fast track corporate insolvency
resolution process cannot be completed within a period of ninety days, it may, by order,
extend the duration of such process beyond the said period of ninety days by such further
period, as it thinks fit, but not exceeding forty-five days:
Provided that any extension of the fast track corporate insolvency resolution process
under this section shall not be granted more than once.
57. An application for fast track corporate insolvency resolution process may be filed
by a creditor or corporate debtor as the case may be, alongwith-—
(a) the proof of the existence of default as evidenced by records available with
an information utility or such other means as may be specified by the Board; and
(b) such other information as may be specified by the Board to establish that the
corporate debtor is eligible for fast track corporate insolvency resolution process.
Manner of initiating fast track corporate insolvency resolution process.
58. The process for conducting a corporate insolvency resolution process under
Chapter II and the provisions relating to offences and penalties under Chapter VII shall
apply to this Chapter as the context may require.
CHAPTER V
VOLUNTARY LIQUIDATION OF CORPORATE PERSONS
59. (1) A corporate person who intends to liquidate itself voluntarily and has not
committed any default may initiate voluntary liquidation proceedings under the provisions
of this Chapter.
(2) The voluntary liquidation of a corporate person under sub-section (1) shall meet
such conditions and procedural requirements as may be specified by the Board.
Fast track
corporation
insolvency
resolution
process.
Time period
for completion
of fast track
corporate
insolvency
resolution
process.
Manner of
initiating fast
track corporate
insolvency
resolution
process.
Applicability
of Chapter II to
this Chapter.
Voluntary
liquidation of
corporate
persons.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 33
(3) Without prejudice to sub-section (2), voluntary liquidation proceedings of a
corporate person registered as a company shall meet the following conditions, namely:—
(a) a declaration from majority of the directors of the company verified by an
affidavit stating that—
(i) they have made a full inquiry into the affairs of the company and they
have formed an opinion that either the company has no debt or that it will be
able to pay its debts in full from the proceeds of assets to be sold in the voluntary
liquidation; and
(ii) the company is not being liquidated to defraud any person;
(b) the declaration under sub-clause (a) shall be accompanied with the following
documents, namely:—
(i) audited financial statements and record of business operations of the
company for the previous two years or for the period since its incorporation,
whichever is later;
(ii) a report of the valuation of the assets of the company, if any prepared
by a registered valuer;
(c) within four weeks of a declaration under sub-clause (a), there shall be—
(i) a special resolution of the members of the company in a general meeting
requiring the company to be liquidated voluntarily and appointing an insolvency
professional to act as the liquidator; or
(ii) a resolution of the members of the company in a general meeting
requiring the company to be liquidated voluntarily as a result of expiry of the
period of its duration, if any, fixed by its articles or on the occurrence of any
event in respect of which the articles provide that the company shall be dissolved,
as the case may be and appointing an insolvency professional to act as the
liquidator:
Provided that the company owes any debt to any person, creditors representing twothirds
in value of the debt of the company shall approve the resolution passed under
sub-clause (c) within seven days of such resolution.
(4) The company shall notify the Registrar of Companies and the Board about the
resolution under sub-section (3) to liquidate the company within seven days of such resolution
or the subsequent approval by the creditors, as the case may be.
(5) Subject to approval of the creditors under sub-section (3), the voluntary liquidation
proceedings in respect of a company shall be deemed to have commenced from the date of
passing of the resolution under sub-clause (c) of sub-section (3).
(6) The provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply to
voluntary liquidation proceedings for corporate persons with such modifications as may be
necessary.
(7) Where the affairs of the corporate person have been completely wound up, and its
assets completely liquidated, the liquidator shall make an application to the Adjudicating
Authority for the dissolution of such corporate person.
(8) The Adjudicating Authority shall on anapplication filed by the liquidator under
sub-section (7), pass an order that the corporate debtor shall be dissolved from the date of
that order and the corporate debtor shall be dissolved accordingly.
(9) A copy of an order under sub-section (8) shall within fourteen days from the date
of such order, be forwarded to the authority with which the corporate person is
registered.
34 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
CHAPTER VI
ADJUDICATING AUTHORITY FOR CORPORATE PERSONS
60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation
for corporate persons including corporate debtors and personal guarantors thereof shall be
the National Company Law Tribunal having territorial jurisdiction over the place where the
registered office of the corporate personis located.
(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary
contained in this Code, where a corporate insolvency resolution process or liquidation
proceeding of a corporate debtor is pending before a National Company Law Tribunal, an
application relating to the insolvency resolution or bankruptcy of a personal guarantor of
such corporate debtor shall be filed before such National Company Law Tribunal.
(3) An insolvency resolution process or bankruptcy proceeding of a personal guarantor
of the corporate debtor pending in any court or tribunal shall stand transferred to the
Adjudicating Authority dealing with insolvency resolution process or liquidation proceeding
of such corporate debtor.
(4) The National Company Law Tribunal shall be vested with all the powers of the Debt
Recovery Tribunal as contemplated under Part III of this Code for the purpose of
sub-section (2).
(5) Notwithstanding anything to the contrary contained in any other law for the time
being in force, the National Company Law Tribunal shall have jurisdiction to entertain or
dispose of—
(a) any application or proceeding by or against the corporate debtor or corporate
person;
(b) any claim made by or against the corporate debtor or corporate person,
including claims by or against any of its subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts, arising out of or in
relation to the insolvency resolution or liquidation proceedings of the corporate debtor
or corporate person under this Code.
(6) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law
for the time being in force, in computing the period of limitation specified for any suit or
application by or against a corporate debtor for which an order of moratorium has been made
under this Part, the period during which such moratorium is in place shall be excluded.
61. (1) Notwithstanding anything to the contrary contained under the Companies
Act 2013, any person aggrieved by the order of the Adjudicating Authority under this part
may prefer an appeal to the National Company Law Appellate Tribunal.
(2) Every appeal under sub-section (1) shall be filed within thirty days before the
National Company Law Appellate Tribunal:
Provided that the National Company Law Appellate Tribunal may allow an appeal to be
filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient
cause for not filing the appeal but such period shall not exceed fifteen days.
(3) An appeal against an order approving a resolution plan under section 31 may be
filed onthe following grounds, namely:—
(i) the approved resolution plan is in contravention of the provisions of any law
for the time being in force;
(ii) there has been material irregularity in exercise of the powers by the resolution
professional during the corporate insolvency resolution period;
Adjudicating
Authority for
corporate
persons.
Appeals and
Appellate
Authority.
36 of 1963.
18 of 2013.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 35
(iii) the debts owed to operational creditors of the corporate debtor have not
been provided for in the resolution plan in the manner specified by the Board;
(iv) the insolvency resolution process costs have not been provided for
repayment in priority to all other debts; or
(v) the resolution plan does not comply with any other criteria specified by the
Board.
(4) An appeal against a liquidation order passed under section 33 may be filed on
grounds of material irregularity or fraud committed in relation to such a liquidation
order.
62. (1) Any person aggrieved by an order of the National Company Law
Appellate Tribunal may file an appeal to the Supreme Court on a question of law arising out
of such order under this Code within forty-five days from the date of receipt of such
order.
(2) The Supreme Court may, if it is satisfied that a person was prevented by sufficient
cause from filing an appeal within forty-five days, allow the appeal to be filed within a further
period not exceeding fifteen days.
63. No civil court or authority shall have jurisdiction to entertain any suit or proceedings
in respect of any matter on which National Company Law Tribunal or the National Company
Law Appellate Tribunal has jurisdiction under this Code. Civil court not to have jurisdiction.
64. (1) Where an application is not disposed of or an order is not passed within the
period specified in this Code, the National Company Law Tribunal or the National Company
Law Appellate Tribunal, as the case may be, shall record the reasons for not doing so within
the period so specified; and the President of the National Company Law Tribunal or the
Chairperson of the National Company Law Appellate Tribunal, as the case may be, may, after
taking into account the reasons so recorded, extend the period specified in the Act but not
exceeding ten days.
(2) No injunction shall be granted by any court, tribunal or authority in respect
of any action taken, or to be taken, in pursuance of any power conferred on the National
Company Law Tribunal or the National Company Law Appellate Tribunal under this
Code.
65. (1) If, any person initiates the insolvency resolution process or liquidation
proceedings fraudulently or with malicious intent for any purpose other than for the resolution
of insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose
upon such person a penalty which shall not be less than one lakh rupees, but may extend to
one crore rupees.
(2) If, any person initiates voluntary liquidation proceedings with the intent
to defraud any person, the Adjudicating Authority may impose upon such person a
penalty which shall not be less than one lakh rupees but may extend to one crore
rupees.
66. (1) If during the corporate insolvency resolution process or a liquidation process,
it is found that any business of the corporate debtor has been carried on with intent to
defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating
Authority may on the application of the resolution professional pass an order that any
persons who were knowingly parties to the carrying on of the business in such manner shall
be liable to make such contributions to the assets of the corporate debtor as it may deem
fit.
(2) On an application made by a resolution professional during the corporate insolvency
resolution process, the Adjudicating Authority may by an order direct that a director or
Appeal to
Supreme
Court.
Civil court
not to have
jurisdiction.
Expeditious
disposal of
applications.
Fraudulent or
malicious
intiation of
proceedings.
Fraudulent
trading or
wrongful
trading.
36 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
partner of the corporate debtor, as the case may be, shall be liable to make such contribution
to the assets of the corporate debtor as it may deem fit, if—
(a) before the insolvency commencement date, such director or partner knew or
ought to have known that the there was no reasonable prospect of avoiding the
commencement of a corporate insolvency resolution process in respect of such
corporate debtor; and
(b) such director or partner did not exercise due diligence in minimising the
potential loss to the creditors of the corporate debtor.
Explanation.—For the purposes of this section a director or partner of the corporate
debtor, as the case may be, shall be deemed to have exercised due diligence if such diligence
was reasonably expected of a person carrying out the same functions as are carried out by
such director or partner, as the case may be, in relation to the corporate debtor.
67. (1) Where the Adjudicating Authority has passed an order under sub-section (1)
or sub-section (2) of section 66, as the case may be, it may give such further directions as it
may deem appropriate for giving effect to the order, and in particular, the Adjudicating
Authority may—
(a) provide for the liability of any person under the order to be a charge on any
debt or obligation due from the corporate debtor to him, or on any mortgage or charge
or any interest in a mortgage or charge on assets of the corporate debtor held by or
vested in him, or any person on his behalf, or any person claiming as assignee from or
through the person liable or any person acting on his behalf; and
(b) from time to time, make such further directions as may be necessary for
enforcing any charge imposed under this section.
Explanation.—For the purposes of this section, “assignee” includes a person to
whom or in whose favour, by the directions of the person held liable under clause (a) the
debt, obligation, mortgage or charge was created, issued or transferred or the interest created,
but does not include an assignee for valuable consideration given in good faith and without
notice of any of the grounds on which the directions have been made.
(2) Where the Adjudicating Authority has passed an order under sub-section (1) or
sub-section (2) of section 66, as the case may be, in relation to a person who is a creditor of
the corporate debtor, it may, by an order, direct that the whole or any part of any debt owed
by the corporate debtor to that person and any interest thereon shall rank in the order of
priority of payment under section 53 after all other debts owed by the corporate
debtor.
CHAPTER VII
OFFENCES AND PENALTIES
68. Where any officer of the corporate debtor has,—
(i) within the twelve months immediately preceding the insolvency
commencement date,—
(a) wilfully concealed any property or part of such property of the corporate
debtor or concealed any debt due to, or from, the corporate debtor, of the value
of ten thousand rupees or more; or
(b) fraudulently removed any part of the property of the corporate debtor
of the value of ten thousand rupees or more; or
(c) wilfully concealed, destroyed, mutilated or falsified any book or paper
affecting or relating to the property of the corporate debtor or its affairs, or
Proceedings
under section
66.
Punishment
for
concealment
of property.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 37
(d) wilfully made any false entry in any book or paper affecting or relating
to the property of the corporate debtor or its affairs; or
(e) fraudulently parted with, altered or made any omission in any document
affecting or relating to the property of the corporate debtor or its affairs; or
(f) wilfully created any security interest over, transferred or disposed of
any property of the corporate debtor which has been obtained on credit and has
not been paid for unless such creation , transfer or disposal was in the ordinary
course of the business of the corporate debtor; or
(g) wilfully concealed the knowledge of the doing by others of any of the
acts mentioned in clauses (c), (d) or clause (e); or
(ii) at any time after the insolvency commencement date, committed any of the
acts mentioned in sub-clause (a) to (f) of clause (i) or has the knowledge of the doing
by others of any of the things mentioned in sub-clauses (c) to (e) of clause (i) ; or
(iii) at any time after the insolvency commencement date, taken in pawn or
pledge, or otherwise received the property knowing it to be so secured, transferred or
disposed,
such officer shall be punishable with imprisonment for a term which shall not be
less than three years but which may extend to five years, or with fine, which shall not be less
than one lakh rupees, but may extend to one crore rupees, or with both:
Provided that nothing in this section shall render a person liable to any punishment
under this section if he proves that he had no intent to defraud or to conceal the state of
affairs of the corporate debtor.
69. On or after the insolvency commencement date, if an officer of the corporate debtor
or the corporate debtor—
(a) has made or caused to be made any gift or transfer of, or charge on, or has
caused or connived in the execution of a decree or order against, the property of the
corporate debtor;
(b) has concealed or removed any part of the property of the corporate debtor
within two months before the date of any unsatisfied judgment, decree or order for
payment of money obtained against the corporate debtor,
such officer of the corporate debtor or the corporate debtor, as the case may be, shall be
punishable with imprisonment for a term which shall not be less than one year, but which may
extend to five years, or with fine, which shall not be less than one lakh rupees, but may extend
to one crore rupees, or with both:
Provided that a person shall not be punishable under this section if the
acts mentioned in clause (a) were committed more than five years before the insolvency
commencement date; or if he proves that, at the time of commission
of those acts, he had no intent to defraud the creditors of the corporate debtor.
70. (1) On or after the insolvency commencement date, where an officer of the corporate
debtor—
(a) does not disclose to the resolution professional all the details of property of
the corporate debtor, and details of transactions thereof, or any such other information
as the resolution professional may require; or
(b) does not deliver to the resolution professional all or part of the property of
the corporate debtor in his control or custody and which he is required to deliver; or
Punishment
for
transactions
defrauding
creditors.
Punishment
for
misconduct in
course of
corporate
insolvency
resolution
process.
38 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(c) does not deliver to the resolution professional all books and papers in his
control or custody belonging to the corporate debtor and which he is required to
deliver; or
(d) fails to inform there solution professional the information in his knowledge
that a debt has been falsely proved by any person during the corporate insolvency
resolution process; or
(e) prevents the production of any book or paper affecting or relating to the
property or affairs of the corporate debtor; or
(f) accounts for any part of the property of the corporate debtor by fictitious
losses or expenses, or if he has so attempted at any meeting of the creditors of the
corporate debtor within the twelve months immediately preceding the insolvency
commencement date,
he shall be punishable with imprisonment for a term which shall not be less than three years,
but which may extend to five years, or with fine, which shall not be less than one lakh rupees,
but may extend to one crore rupees, or with both:
Provided that nothing in this section shall render a person liable to any punishment
under this section if he proves that he had no intent to do so in relation to the state of affairs
of the corporate debtor.
(2) If an insolvency professional deliberately contravenes the provisions of this Part
the shall be punishable with imprisonment for a term which may extend to six months, or with
fine which shall not be less than one lakh rupees, but may extend to five lakhs rupees, or with
both.
71. On and after the insolvency commencement date, where any person
destroys, mutilates, alters or falsifies any books, papers or securities, or makes or is in
the knowledge of making of any false or fraudulent entry in any register, books of
account or document belonging to the corporate debtor with intent to defraud or deceive
any person, he shall be punishable with imprisonment for a term which shall not
be less than three years, but which may extend to five years, or with fine which
shall not be less than one lakh rupees, but may extend to one crore rupees, or with
both.
72. Where an officer of the corporate debtor makes any material and wilful omission in
any statement relating to the affairs of the corporate debtor, he shall be punishable with
imprisonment for a term which shall not be less than three years but which may extend to five
years, or with fine which shall not be less than one lakh rupees, but may extend to one crore
rupees, or with both.
73. Where any officer of the corporate debtor—
(a) on or after the insolvency commencement date, makes a false representation
or commits any fraud for the purpose of obtaining the consent of the creditors of the
corporate debtor or any of them to an agreement with reference to the affairs of the
corporate debtor, during the corporate insolvency resolution process, or the liquidation
process;
(b) prior to the insolvency commencement date,has made any false representation,
or committed any fraud, for that purpose,
he shall be punishable with imprisonment for a term which shall not be less than three years,
but may extend to five years or with fine which shall not be less than one lakh rupees, but
may extend to one crore rupees, or with both.
Punishment
for
falsification
of books of
corporate
debtor.
Punishment
for wilful and
material
omissions
from
statements
relating to
affairs of
corporate
debtor.
Punishment
for false
representations
to creditors.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 39
74. (1) Where the corporate debtor or any of its officer violates the provisions of
section 14, any such officer who knowingly or wilfully committed or authorised or permitted
such contravention shall be punishable with imprisonment for a term which shall not be less
than three years, but may extend to five years or with fine which shall not be less than one
lakh rupees, but may extend to three lakh rupees, or with both.
(2) Where any creditor violates the provisions of section 14, any person who knowingly
and wilfully authorised or permitted such contravention by a creditor shall be punishable
with imprisonment for a term which shall not be less than one year, but may extend to five
years, or with fine which shall not be less than one lakh rupees, but may extend to one crore
rupees, or with both.
(3) Where the corporate debtor, any of its officers or creditors or any person on whom
the approved resolution plan is binding under section 31, knowingly and wilfully contravenes
any of the terms of such resolution plan or abets such contravention, such corporate debtor,
officer, creditor or person shall be punishable with imprisonment of not less than one year,
but may extend to five years, or with fine which shall not be less than one lakh rupees, but
may extend to one crore rupees, or with both.
75. Where any person furnishes information in the application made under section 7,
which is false in material particulars, knowing it to be false or omits any material fact, knowing
it to be material, such person shall be punishable with fine which shall not be less than one
lakh rupees, but may extend to one crore rupees.
76. Where—
(a) an operational creditor has wilfully or knowingly concealed in an application
under section 9 the fact that the corporate debtor had notified him of a dispute in
respect of the unpaid operational debt or the full and final repayment of the unpaid
operational debt; or
(b) any person who knowingly and wilfully authorised or permitted such
concealment under clause (a),
such operational creditor or person, as the case may be, shall be punishable with imprisonment
for a term which shall not be less than one year but may extend to five years or with fine
which shall not be less than one lakh rupees but may extend to one crore rupees, or with
both.
77. Where—
(a) a corporate debtor provides information in the application under section 10
which is false in material particulars, knowing it to be false and omits any material fact,
knowing it to be material; or
(b) any person who knowingly and wilfully authorised or permitted the furnishing
of such information under sub-clause (a),
such corporate debtor or person, as the case may be, shall be punishable with imprisonment
for a term which shall not be less than three years, but which may extend to five years or with
fine which shall not be less than one lakh rupees, but which may extend to one crore rupees,
or with both.
Explanation.—For the purposes of this section and sections 75 and 76, an application
shall be deemed to be false in material particulars in case the facts mentioned or omitted in the
application, if true, or not omitted from the application as the case may be, would have been
sufficient to determine the existence of a default under this Code.
Punishment
for
contravention
of
moratorium
or the
resolution
plan.
Punishment
for false
information
furnished in
application.
Punishement
for nondisclosure
of
dispute or
repayment of
debt by
operational
creditor.
Punishment
for providing
false
information
in application
made by
corporate
debtor.
40 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
PART III
INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS
CHAPTER I
PRELIMINARY
78. This Part shall apply to matters relating to fresh start, insolvency and bankruptcy
of individuals and partnership firms where the amount of the default is not less than one
thousand rupees:
Provided that the Central Government may, by notification, specify the minimum amount
of default of higher value which shall not be more than one lakh rupees.
79. In this Part, unless the context otherwise requires,—
(1) “Adjudicating Authority” means the Debt Recovery Tribunal constituted under
sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993;
(2) “associate” of the debtor means—
(a) a person who belongs to the immediate family of the debtor;
(b) a person who is a relative of the debtor or a relative of the spouse of the
debtor;
(c) a person who is in partnership with the debtor;
(d) a person who is a spouse or a relative of any person with whom the debtor is
in partnership;
(e) a person who is employer of the debtor or employee of the debtor;
(f) a person who is a trustee of a trust in which the beneficiaries of the trust
include a debtor, or the terms of the trust confer a power on the trustee which may be
exercised for the benefit of the debtor; and
(g) a company, where the debtor or the debtor along with his associates, own
more than fifty per cent. of the share capital of the company or control the appointment
of the board of directors of the company.
Explanation.—For the purposes of this sub-section, “relative”,with reference to any
person, means anyone who is related to another, if—
(i) they are members of a Hindu Undivided Family;
(ii) one person is related to the other in such manner as may be prescribed;
(3) “bankrupt” means—
(a) a debtor who has been adjudged as bankrupt by a bankruptcy order under
section 126;
(b) each of the partners of a firm, where a bankruptcy order under section 126 has
been made against a firm; or
(c) any person adjudged as an undischarged insolvent;
(4) “bankruptcy” means the state of being bankrupt;
(5) “bankruptcy debt”, in relation to a bankrupt, means—
(a) any debt owed by him as on the bankruptcy commencement date;
Application.
Definitions.
51 of 1993.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 41
(b) any debt for which he may become liable after bankruptcy commencement
date but before his discharge by reason of any transaction entered into before the
bankruptcy commencement date; and
(c) any interest which is a part of the debt under section 171;
(6) “bankruptcy commencement date” means the date on which a bankruptcy order is
passed by the Adjudicating Authority under section 126;
(7) “bankruptcy order” means an order passed by an Adjudicating Authority under
section 126;
(8) “bankruptcy process” means a process against a debtor under Chapters IV and V
of this Part;
(9) “bankruptcy trustee” means the insolvency professional appointed as a trustee for
the estate of the bankrupt under section 125;
(10) “Chapter” means a chapter under this Part;
(11) “committee of creditors” means a committee constituted under section 134;
(12) “debtor” includes a judgment-debtor;
(13) “discharge order” means an order passed by the Adjudicating Authority
discharging the debtor under sections 92, 119 and section 138, as the case may be;
(14) “excluded assets” for the purposes of this part includes—
(a) unencumbered tools, books, vehicles and other equipment as are necessary
to the debtor or bankrupt for his personal use or for the purpose of his employment,
business or vocation,
(b) unencumbered furniture, household equipment and provisions as are
necessary for satisfying the basic domestic needs of the bankrupt and his immediate
family;
(c) any unencumbered personal ornaments of such value, as may be prescribed,
of the debtor or his immediate family which cannot be parted with, in accordance with
religious usage;
(d) any unencumbered life insurance policy or pension plan taken in the name of
debtor or his immediate family; and
(e) an unencumbered single dwelling unit owned by the debtor of such value as
may be prescribed;
(15) “excluded debt” means—
(a) liability to pay fine imposed by a court or tribunal;
(b) liability to pay damages for negligence, nuisance or breach of a statutory,
contractual or other legal obligation;
(c) liability to pay maintenance to any person under any law for the time being in
force;
(d) liability in relation to a student loan; and
(e) any other debt as may be prescribed;
(16) “firm” means a body of individuals carrying on business in partnership whether
or not registered under section 59 of the Indian Partnership Act, 1932;
(17) “immediate family” of the debtor means his spouse, dependent children and
dependent parents;
9 to 1932.
42 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(18) “partnership debt” means a debt for which all the partners in a firm are jointly
liable;
(19) “qualifying debt” means amount due, which includes interest or any other sum
due in respect of the amounts owed under any contract, by the debtor for a liquidated sum
either immediately or at certain future time and does not include—
(a) an excluded debt;
(b) a debt to the extent it is secured; and
(c) any debt which has been incurred three months prior to the date of the
application for fresh start process;
(20) “repayment plan” means a plan prepared by the debtor in consultation with the
resolution professional under section 105 containing a proposal to the committee of creditors
for restructuring of his debts or affairs;
(21) “resolution professional” means an insolvency professional appointed under
this part as a resolution professional for conducting the fresh start process or insolvency
resolution process;
(22) “undischarged bankrupt” means a bankrupt who has not received a discharge
order under section 138.
CHAPTER II
FRESH START PROCESS
80. (1) A debtor, who is unable to pay his debt and fulfils the conditions specified in
sub-section (2) , shall be entitled to make an application for a fresh start for discharge of his
qualifying debt under this Chapter.
(2) A debtor may apply, either personally or through a resolution professional, for a
fresh start under this Chapter in respect of his qualifying debts to the Adjudicating Authority
if —
(a) the gross annual income of the debtor does not exceed sixty thousand rupees;
(b) the aggregate value of the assets of the debtor does not exceed twenty
thousand rupees;
(c) the aggregate value of the qualifying debts does not exceed thirty-five
thousand rupees;
(d) he is not an undischarged bankrupt;
(e) he does not own a dwelling unit, irrespective of whether it is encumbered or
not;
(f) a fresh start process, insolvency resolution process or bankruptcy process is
not subsisting against him; and
(g) no previous fresh start order under this Chapter has been made in relation to
him in the preceding twelve months of the date of the application for fresh start.
81. (1) When an application is filed under section 80 by a debtor, an interim-moratorium
shall commence on the date of filing of said application in relation to all the debts and shall
cease to have effect on the date of admission or rejection of such application, as the case
may be.
(2) During the interim-moratorium period,—
(i) any legal action or legal proceeding pending in respect of any of his debts
shall be deemed to have been stayed; and
Eligibility for
making an
application.
Application
for fresh start
order.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 43
(ii) no creditor shall initiate any legal action or proceedings in respect of such
debt.
(3) The application under section 80 shall be in such form and manner and accompanied
by such fee, as may be prescribed.
(4) The application under sub-section (3) shall contain the following information
supported by an affidavit, namely:—
(a) a list of all debts owed by the debtor as on the date of the said application
along with details relating to the amount of each debt, interest payable thereon and the
names of the creditors to whom each debt is owed;
(b) the interest payable on the debts and the rate thereof stipulated in the contract;
(c) a list of security held in respect of any of the debts;
(d) the financial information of the debtor and his immediate family up to two
years prior to the date of the application;
(e) the particulars of the debtor’s personal details, as may be prescribed;
(f) the reasons for making the application;
(g) the particulars of any legal proceedings which, to the debtor’s knowledge
has been commenced against him;
(h) the confirmation that no previous fresh start order under this Chapter has
been made in respect of the qualifying debts of the debtor in the preceding twelve
months of the date of the application.
82. (1) Where an application under section 80 is filed by the debtor through a resolution
professional, the Adjudicating Authority shall direct the Board within seven days of the date
of receipt of the application and shall seek confirmation from the Board that there are no
disciplinary proceedings against the resolution professional who has submitted such
application.
(2) The Board shall communicate to the Adjudicating Authority in writing either—
(a) confirmation of the appointment of the resolution professional who filed an
application under sub-section (1); or
(b) rejection of the appointment of the resolution professional who filed an
application under sub-section (1) and nominate a resolution professional suitable for
the fresh start process.
(3) Where an application under section 80 is filed by the debtor himself and not
through the resolution professional, the Adjudicating Authority shall direct the Board within
seven days of the date of the receipt of an application to nominate a resolution professional
for the fresh start process.
(4) The Board shall nominate a resolution professional within ten days of receiving the
direction issued by the Adjudicating Authority under sub-section (3).
(5) The Adjudicating Authority shall by order appoint the resolution professional
recommended or nominated by the Board under sub-section (2) or sub-section (4), as the
case may be.
(6) A resolution professional appointed by the Adjudicating Authority under
sub-section (5) shall be provided a copy of the application for fresh start.
83. (1) The resolution professional shall examine the application made under section 80
within ten days of his appointment, and submit a report to the Adjudicating Authority, either
recommending acceptance or rejection of the application.
Appointment
of resolution
professional.
Examination
of application
by resolution
professional.
44 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(2) The report referred to in sub-section (1) shall contain the details of the amounts
mentioned in the application which in the opinion of the resolution professional are—
(a) qualifying debts; and
(b) liabilities eligible for discharge under sub-section (3) of section 92.
(3) The resolution professional may call for such further information or explanation in
connection with the application as may be required from the debtor or any other person who,
in the opinion of the resolution professional, may provide such information.
(4) The debtor or any other person, as the case may be, shall furnish such information
or explanation within seven days of receipt of the request under sub-section (3).
(5) The resolution professional shall presume that the debtor is unable to pay his
debts at the date of the application if—
(a) in his opinion the information supplied in the application indicates that the
debtor is unable to pay his debts and he has no reason to believe that the information
supplied is incorrect or incomplete; and
(b) he has reason to believe that there is no change in the financial circumstances
of the debtor since the date of the application enabling the debtor to pay his debts.
(6) The resolution professional shall reject the application, if in his opinion—
(a) the debtor does not satisfy the conditions specified under section 80; or
(b) the debts disclosed in the application by the debtor are not qualifying debts; or
(c) the debtor has deliberately made a false representation or omission in the
application or with respect to the documents or information submitted.
(7) The resolution professional shall record the reasons for recommending the
acceptance or rejection of the application in the report to the Adjudicating Authority under
sub-section (1) and shall give a copy of the report to the debtor.
84. (1) The Adjudicating Authority may within fourteen days from the date of
submission of the report by the resolution professional, pass an order either admitting or
rejecting the application made under sub-section (1) of section 81.
(2) The order passed under sub-section (1) accepting the application shall state the
amount which has been accepted as qualifying debts by the resolution professional and
other amounts eligible for discharge under section 92 for the purposes of the fresh start
order.
(3) A copy of the order passed by the Adjudicating Authority under sub-section (1)
along with a copy of the application shall be provided to the creditors mentioned in the
application within seven days of the passing of the order.
85. (1) On the date of admission of the application, the moratorium period shall
commence in respect of all the debts.
(2) During the moratorium period—
(a) any pending legal action or legal proceeding in respect of any debt shall be
deemed to have been stayed; and
(b) subject to the provisions of section 86, the creditors shall not initiate any
legal action or proceedings in respect of any debt.
(3) During the moratorium period, the debtor shall—
(a) not act as a director of any company, or directly or indirectly take part in or be
concerned in the promotion, formation or management of a company;
Admission or
rejection of
application by
Adjudicating
Authority.
Effect of
admission of
application.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 45
(b) not dispose of or alienate any of his assets;
(c) inform his business partners that he is undergoing a fresh start process;
(d) be required to inform prior to entering into any financial or commercial
transaction of such value as may be notified by the Central Government, either
individually or jointly, that he is undergoing a fresh start process;
(e) disclose the name under which he enters into business transactions, if it is
different from the name in the application admitted under section 84;
(f) not travel outside India except with the permission of the Adjudicating
Authority.
(4) The moratorium ceases to have effect at the end of the period of one hundred and
eighty days beginning with the date of admission unless the order admitting the application
is revoked under sub-section (2) of section 91.
86. (1) Any creditor mentioned in the order of the Adjudicating Authority under
section 84 to whom a qualifying debt is owed may, within a period of ten days from the date
of receipt of the order under section 84, object only on the following grounds, namely:—
(a) inclusion of a debt as a qualifying debt; or
(b) incorrectness of the details of the qualifying debt specified in the order under
section 84.
(2) A creditor may file an objection under sub-section (1) by way of an application to
the resolution professional.
(3) The application under sub-section (2) shall be supported by such information and
documents as may be prescribed.
(4) The resolution professional shall consider every objection made under this section.
(5) The resolution professional shall examine the objections under sub-section (2) and
either accept or reject the objections, within ten days of the date of the application.
(6) The resolution professional may examine any matter that appears to him to be
relevant to the making of a final list of qualifying debts for the purposes of section 92.
(7) On the basis of the examination under sub-section (5) or sub-section (6), the
resolution professional shall—
(a) prepare an amended list of qualifying debts for the purpose of the discharge
order;
(b) make an application to the Adjudicating Authority for directions under
section 90; or
(c) take such other steps as he considers necessary in relation to the debtor.
87. (1) The debtor or the creditor who is aggrieved by the action taken by the resolution
professional under section 86 may, within ten days of such decision, make an application to
the Adjudicating Authority challenging such action on any of the following grounds,
namely:—
(a) that the resolution professional has not given an opportunity to the debtor
or the creditor to make a representation; or
(b) that the resolution professional colluded with the other party in arriving at
the decision; or
(c) that the resolution professional has not complied with the requirements of
section 86.
Objections by
creditor and
their
examination
by resolution
professional.
Application
against
decision of
resolution
professional.
46 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(2) The Adjudicating Authority shall decide the application referred to in sub-section (1)
within fourteen days of such application, and make an order as it deems fit.
(3) Where the application under sub-section (1) has been allowed by the Adjudicating
Authority, it shall forward its order to the Board and the Board may take such action as may
be required under Chapter VI of Part IV against the resolution professional.
88. The debtor shall—
(a) make available to the resolution professional all information relating to his
affairs, attend meetings and comply with the requests of the resolution professional in
relation to the fresh start process.
(b) inform the resolution professional as soon as reasonably possible of—
(i) any material error or omission in relation to the information or document
supplied to the resolution professional; or
(ii) any change in financial circumstances after the date of application,
where such change has an impact on the fresh start process.
89. (1) Where the debtor or the creditor is of the opinion that the
resolution professional appointed under section 82 is required to be replaced, he may
apply to the Adjudicating Authority for the replacement of such resolution
professional.
(2) The Adjudicating Authority shall within seven days of the receipt of the application
under sub-section (1) make a reference to the Board for replacement of the resolution
professional.
(3) The Board shall, within ten days of the receipt of a reference from the Adjudicating
Authority under sub-section (2), recommend the name of an insolvency professional to the
Adjudicating Authority against whom no disciplinary proceedings are pending.
(4) The Adjudicating Authority shall appoint another resolution professional for the
purposes of the fresh start process on the basis of the recommendation by the Board.
(5) The Adjudicating Authority may give directions to the resolution professional
replaced under sub-section (4)—
(a) to share all information with the new resolution professional in respect of the
fresh start process; and
(b) to co-operate with the new resolution professional as may be required.
90. (1) The resolution professional may apply to the Adjudicating Authority for any of
the following directions, namely:—
(a) compliance of any restrictions referred to in sub-section (3) of section 85, in
case of non-compliance by the debtor; or
(b) compliance of the duties of the debtor referred to in section 88, in case of
non-compliance by the debtor.
(2) The resolution professional may apply to the Adjudicating Authority for directions
in relation to any other matter under this Chapter for which no specific provisions have been
made.
91. (1) The resolution professional may submit an application to the Adjudicating
Authority seeking revocation of its order made under section 84 on the following grounds,
namely :—
(a) if due to any change in the financial circumstances of the debtor, the debtor
is ineligible for a fresh start process; or
General duties
of debtor.
Replacement
of resolution
professional.
Directions for
compliances
of
restrictions,
etc.
Revocation of
order
admitting
application.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 47
(b) non-compliance by the debtor of the restrictions imposed under sub-section (3)
of section 85; or
(c) if the debtor has acted in a mala fide manner and has wilfully failed to comply
with the provisions of this Chapter.
(2) The Adjudicating Authority shall, within fourteen days of the receipt of the
application under sub-section (1), may by order admit or reject the application.
(3) On passing of the order admitting the application referred to in sub-section (1) , the
moratorium and the fresh start process shall cease to have effect.
(4) A copy of the order passed by the Adjudicating Authority under this section shall
be provided to the Board for the purpose of recording an entry in the register referred to in
section 196.
92. (1) The resolution professional shall prepare a final list of qualifying debts and
submit such list to the Adjudicating Authority at least seven days before the moratorium
period comes to an end.
(2) The Adjudicating Authority shall pass a discharge order at the end of the moratorium
period for discharge of the debtor from the qualifying debts mentioned in the list under
sub-section (1).
(3) Without prejudice to the provisions of sub-section (2), the Adjudicating Authority
shall discharge the debtor from the following liabilities, namely:—
(a) penalties in respect of the qualifying debts from the date of application till the
date of the discharge order;
(b) interest including penal interest in respect of the qualifying debts from the
date of application till the date of the discharge order; and
(c) any other sums owed under any contract in respect of the qualifying debts
from the date of application till the date of the discharge order.
(4) The discharge order shall not discharge the debtor from any debt not included in
sub-section (2) and from any liability not included under sub-section (3).
(5) The discharge order shall be forwarded to the Board for the purpose of recording
an entry in the register referred to in section 196.
(6) A discharge order under sub-section (2) shall not discharge any other person from
any liability in respect of the qualifying debts.
93. The resolution professional shall perform his functions and duties in compliance
with the code of conduct provided under section 208.
CHAPTER III
INSOLVENCY RESOLUTION PROCESS
94. (1) A debtor who commits a default may apply, either personally or through a
resolution professional, to the Adjudicating Authority for initiating the insolvency resolution
process, by submitting an application.
(2) Where the debtor is a partner of a firm, such debtor shall not apply under this
Chapter to the Adjudicating Authority in respect of the firm unless all or a majority of the
partners of the firm file the application jointly.
(3) An application under sub-section (1) shall be submitted only in respect of debts
which are not excluded debts.
Discharge
order.
Standard of
conduct.
Application
by debtor to
initiate
insolvency
resolution
process.
48 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(4) A debtor shall not be entitled to make an application under sub-section (1) if he is—
(a) an undischarged bankrupt;
(b) undergoing a fresh start process;
(c) undergoing an insolvency resolution process; or
(d) undergoing a bankruptcy process.
(5) A debtor shall not be eligible to apply under sub-section (1) if an application under
this Chapter has been admitted in respect of the debtor during the period of twelve months
preceding the date of submission of the application under this section.
(6) The application referred to in sub-section (1) shall be in such form and manner and
accompanied with such fee as may be prescribed.
95. (1) A creditor may apply either by himself, or jointly with other creditors, or through
a resolution professional to the Adjudicating Authority for initiating an insolvency resolution
process under this section by submitting an application.
(2) A creditor may apply under sub-section (1) in relation to any partnership debt owed
to him for initiating an insolvency resolution process against—
(a) any one or more partners of the firm; or
(b) the firm.
(3) Where an application has been made against one partner in a firm, any other
application against another partner in the same firm shall be presented in or transferred to the
Adjudicating Authority in which the first mentioned application is pending for adjudication
and such Adjudicating Authority may give such directions for consolidating the proceedings
under the applications as it thinks just.
(4) An application under sub-section (1) shall be accompanied with details and
documents relating to—
(a) the debts owed by the debtor to the creditor or creditors submitting the
application for insolvency resolution process as on the date of application;
(b) the failure by the debtor to pay the debt within a period of fourteen days of
the service of the notice of demand; and
(c) relevant evidence of such default or non-repayment of debt.
(5) The creditor shall also provide a copy of the application made under sub-section (1)
to the debtor.
(6) The application referred to in sub-section (1) shall be in such form and manner and
accompanied by such fee as may be prescribed.
(7) The details and documents required to be submitted under sub-section (4) shall be
such as may be specified.
96. (1) When an application is filed under section 94 or section 95—
(a) an interim-moratorium shall commence on the date of the application in relation
to all the debts and shall cease to have effect on the date of admission of such
application; and
(b) during the interim-moratorium period—
(i) any legal action or proceeding pending in respect of any debt shall be
deemed to have been stayed; and
Application
by creditor to
initiate
insolvency
resolution
process.
Interimmoratorium.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 49
(ii) the creditors of the debtor shall not initiate any legal action or
proceedings in respect of any debt.
(2) Where the application has been made in relation to a firm, the interim-moratorium
under sub-section (1) shall operate against all the partners of the firm as on the date of the
application.
(3) The provisions of sub-section (1) shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial sector regulator.
97. (1) If the application under section 94 or 95 is filed through a resolution professional,
the Adjudicating Authority shall direct the Board within seven days of the date of the
application to confirm that there are no disciplinary proceedings pending against resolution
professional.
(2) The Board shall within seven days of receipt of directions under sub-section (1)
communicate to the Adjudicating Authority in writing either—
(a) confirming the appointment of the resolution professional; or
(b) rejecting the appointment of the resolution professional and nominating
another resolution professional for the insolvency resolution process.
(3) Where an application under section 94 or 95 is filed by the debtor or the creditor
himself, as the case may be, and not through the resolution professional, the Adjudicating
Authority shall direct the Board, within seven days of the filing of such application, to
nominate a resolution professional for the insolvency resolution process.
(4) The Board shall nominate a resolution professional within ten days of receiving the
direction issued by the Adjudicating Authority under sub-section (3).
(5) The Adjudicating Authority shall by order appoint the resolution professional
recommended under sub-section (2) or as nominated by the Board under sub-section (4).
(6) A resolution professional appointed by the Adjudicating Authority under
sub-section (5) shall be provided a copy of the application for insolvency resolution process.
98. (1) Where the debtor or the creditor is of the opinion that the resolution
professional appointed under section 97 is required to be replaced, he may apply to
the Adjudicating Authority for the replacement of the such resolution
professional.
(2) The Adjudicating Authority shall within seven days of the receipt of the application
under sub-section (1) make a reference to the Board for replacement of the resolution
professional.
(3) The Board shall, within ten days of the receipt of a reference from the Adjudicating
Authority under sub-section (2), recommend the name of the resolution professional to the
Adjudicating Authority against whom no disciplinary proceedings are pending.
(4) Without prejudice to the provisions contained in sub-section (1), the creditors may
apply to the Adjudicating Authority for replacement of the resolution professional where it
has been decided in the meeting of the creditors, to replace the resolution professional with
a new resolution professional for implementation of the repayment plan.
(5) Where the Adjudicating Authority admits an application made under sub-section (1)
or sub-section (4) , it shall direct the Board to confirm that there are no disciplinary
proceedings pending against the proposed resolution professional.
(6) The Board shall send a communication within ten days of receipt of the direction
under sub-section (5) either—
(a) confirming appointment of the nominated resolution professional; or
Appointment
of resolution
professional.
Replacement
of resolution
professional.
50 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(b) rejecting appointment of the nominated resolution professional and
recommend a new resolution professional.
(7) On the basis of the communication of the Board under sub-section (3) or
sub-section (6) , the Adjudicating Authority shall pass an order appointing a new resolution
professional.
(8) The Adjudicating Authority may give directions to the resolution professional
replaced under sub-section (7)—
(a) to share all information with the new resolution professional in respect of the
insolvency resolution process; and
(b) to co-operate with the new resolution professional in such matters as may be
required.
99. (1) The resolution professional shall examine the application referred to in
section 94 or section 95, as the case may be, within ten days of his appointment, and submit
a report to the Adjudicating Authority recommending for approval or rejection of the
application.
(2) Where the application has been filed under section 95, the resolution professional
may require the debtor to prove repayment of the debt claimed as unpaid by the creditor by
furnishing—
(a) evidence of electronic transfer of the unpaid amount from the bank account
of the debtor;
(b) evidence of encashment of a cheque issued by the debtor; or
(c) a signed acknowledgment by the creditor accepting receipt of dues.
(3) Where the debt for which an application has been filed by a creditor is registered
with the information utility, the debtor shall not be entitled to dispute the validity of such debt.
(4) For the purposes of examining an application, the resolution professional may seek
such further information or explanation in connection with the application as may be required
from the debtor or the creditor or any other person who, in the opinion of the resolution
professional, may provide such information.
(5) The person from whom information or explanation is sought under sub-section (4)
shall furnish such information or explanation within seven days of receipt of the request.
(6) The resolution professional shall examine the application and ascertain that—
(a) the application satisfies the requirements set out in section 94 or 95;
(b) the applicant has provided information and given explanation sought by the
resolution professional under sub-section (4).
(7) After examination of the application under sub-section (6), he may recommend
acceptance or rejection of the application in his report.
(8) Where the resolution professional finds that the debtor is eligible for a fresh start
under Chapter II, the resolution professional shall submit a report recommending that the
application by the debtor under section 94 be treated as an application under section 81 by
the Adjudicating Authority.
(9) The resolution professional shall record the reasons for recommending the
acceptance or rejection of the application in the report under sub-section (7).
(10) The resolution professional shall give a copy of the report under sub-section (7)
to the debtor or the creditor, as the case may be.
Submission of
report by
resolution
professional.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 51
100. (1) The Adjudicating Authority shall, within fourteen days from
the date of submission of the report under section 99 pass an order either
admitting or rejecting the application referred to in section 94 or 95, as the case
may be.
(2) Where the Adjudicating Authority admits an application under sub-section (1) , it
may, on the request of the resolution professional, issue instructions for the purpose of
conducting negotiations between the debtor and creditors and for arriving at a repayment
plan.
(3) The Adjudicating Authority shall provide a copy of the order passed under
sub-section (1) along with the report of the resolution professional and the application
referred to in section 94 or 95, as the case may be, to the creditors within seven days from the
date of the said order.
(4) If the application referred to in section 94 or 95, as the case may be, is rejected by
the Adjudicating Authority on the basis of report submitted by the resolution professional
that the application was made with the intention to defraud his creditors or the resolution
professional, the order under sub-section (1) shall record that the creditor is entitled to file
for a bankruptcy order under Chapter IV.
101. (1) When the application is admitted under section 100, a moratorium shall
commence in relation to all the debts and shall cease to have effect at the end of the period
of one hundred and eighty days beginning with the date of admission of the application or
on the date the Adjudicating Authority passes an order on the repayment plan under
section 114, whichever is earlier.
(2) During the moratorium period—
(a) any pending legal action or proceeding in respect of any debt shall be deemed
to have been stayed;
(b) the creditors shall not initiate any legal action or legal proceedings in respect
of any debt; and
(c) the debtor shall not transfer, alienate, encumber or dispose of any of his
assets or his legal rights or beneficial interest therein;
(3) Where an order admitting the application under section 96 has been made in
relation to a firm, the moratorium under sub-section (1) shall operate against all the partners
of the firm.
(4) The provisions of this section shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial sector regulator.
102. (1) The Adjudicating Authority shall issue a public notice within seven days of
passing the order under section 100 inviting claims from all creditors within twenty-one days
of such issue.
(2) The notice under sub-section (1) shall include—
(a) details of the order admitting the application;
(b) particulars of the resolution professional with whom the claims are to be
registered; and
(c) the last date for submission of claims.
(3) The notice shall be—
(a) published in at least one English and one vernacular newspaper which is in
circulation in the state where the debtor resides;
Admission or
rejection of
application.
Moratorium.
Public notice
and claims
from
creditors.
52 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(b) affixed in the premises of the Adjudicating Authority; and
(c) placed on the website of the Adjudicating Authority.
103. (1) The creditors shall register claims with the resolution professional by sending
details of the claims by way of electronic communications or through courier, speed post or
registered letter.
(2) In addition to the claims referred to in sub-section (1) , the creditor shall provide to
the resolution professional, personal information and such particulars as may be prescribed.
104. (1) The resolution professional shall prepare a list of creditors on the basis of—
(a) the information disclosed in the application filed by the debtor under section
94 or 95, as the case may be;
(b) claims received by the resolution professional under section 102.
(2) The resolution professional shall prepare the list mentioned in sub-section (1)
within thirty days from the date of the notice.
105. (1) The debtor shall prepare, in consultation with the resolution professional, a
repayment plan containing a proposal to the creditors for restructuring of his debts or
affairs.
(2) The repayment plan may authorise or require the resolution professional to—
(a) carry on the debtor’s business or trade on his behalf or in his name; or
(b) realise the assets of the debtor; or
(c) administer or dispose of any funds of the debtor.
(3) The repayment plan shall include the following, namely:—
(a) justification for preparation of such repayment plan and reasons on the basis
of which the creditors may agree upon the plan;
(b) provision for payment of fee to the resolution professional;
(c) such other matters as may be specified.
106. (1) The resolution professional shall submit the repayment plan under
section 105 along with his report on such plan to the Adjudicating Authority within a
period of twenty-one days from the last date of submission of claims under section 102.
(2) The report referred in sub-section (1) shall include that—
(a) the repayment plan is in compliance with the provisions of any law for the
time being in force;
(b) the repayment plan has a reasonable prospect of being approved and
implemented; and
(c) there is a necessity of summoning a meeting of the creditors, if required, to
consider the repayment plan:
Provided that where the resolution professional recommends that a meeting of the
creditors is not required to be summoned, reasons for the same shall be provided.
(3) The report referred to in sub-section (2) shall also specify the date on which, and
the time and place at which, the meeting should be held if he is of the opinion that a meeting
of the creditors should be summoned.
Resistering of
claims by
creditors.
Preparation
of list of
creditors.
Repayment
plan.
Report of
resolution
professional
on repayment
plan.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 53
(4) For the purposes of sub-section (3)—
(a) the date on which the meeting is to be held shall be not less than fourteen
days and not more than twenty eight days from the date of submission of report under
sub-section (1);
(b) the resolution professional shall consider the convenience of creditors in
fixing the date and venue of the meeting of the creditors.
107. (1) The resolution professional shall issue a notice calling the meeting
of the creditors at least fourteen days before the date fixed for such meeting.
(2) The resolution professional shall send the notice of the meeting to the list of
creditors prepared under section 104.
(3) The notice sent under sub-section (1) shall state the address of the Adjudicating
Authority to which the repayment plan and report of the resolution professional on the
repayment plan has been submitted and shall be accompanied by—
(a) a copy of the repayment plan;
(b) a copy of the statement of affairs of the debtor;
(c) a copy of the said report of the resolution professional; and
(d) forms for proxy voting.
(4) The proxy voting, including electronic proxy voting shall take place in such manner
and form as may be specified.
108. (1) The meeting of the creditors shall be conducted in accordance with the
provisions of this section and sections 109,110 and 111.
(2) In the meeting of the creditors, the creditors may decide to approve, modify or
reject the repayment plan.
(3) The resolution professional shall ensure that if modifications are suggested by the
creditors, consent of the debtor shall be obtained for each modification.
(4) The resolution professional may for a sufficient cause adjourn the meeting of the
creditors for a period of not more than seven days at a time.
109. (1) A creditor shall be entitled to vote at every meeting of the creditors in
respect of the repayment plan in accordance with the voting share assigned to
him.
(2) The resolution professional shall determine the voting share to be assigned to each
creditor in the manner specified by the Board.
(3) A creditor shall not be entitled to vote in respect of a debt for an unliquidated
amount.
(4) A creditor shall not be entitled to vote in a meeting of the creditors if he—
(a) is not a creditor mentioned in the list of creditors under section 104; or
(b) is an associate of the debtor.
110. (1) Secured creditors shall be entitled to participate and vote in the meetings of
the creditors.
(2) A secured creditor participating in the meetings of the creditors and voting in
relation to the repayment plan shall forfeit his right to enforce the security during the period
of the repayment plan in accordance with the terms of the repayment plan.
Summoning
of meeting of
creditors.
Conduct of
meeting of
creditors.
Voting rights
in meeting of
creditors.
Rights of
secured
creditors in
relation to
repayment
plan.
54 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(3) Where a secured creditor does not forfeit his right to enforce security, he shall
submit an affidavit to the resolution professional at the meeting of the creditors stating—
(a) that the right to vote exercised by the secured creditor is only in respect of
the unsecured part of the debt; and
(b) the estimated value of the unsecured part of the debt.
(4) In case a secured creditor participates in the voting on the repayment plan by
submitting an affidavit under sub-section (3) , the secured and unsecured parts of the debt
shall be treated as separate debts.
(5) The concurrence of the secured creditor shall be obtained if he does not participate
in the voting on repayment plan but provision of the repayment plan affects his right to
enforce security.
Explanation.—For the purposes of this section, “period of the repayment plan” means
the period from the date of the order passed under section 114 till the date on which the
notice is given by the resolution professional under section 117 or report submitted by the
resolution professional under section 118, as the case may be.
111. The repayment plan or any modification to the repayment plan shall be approved
by a majority of more than three-fourth in value of the creditors present in person or by proxy
and voting on the resolution in a meeting of the creditors.
112. (1) The resolution professional shall prepare a report of the meeting of the creditors
on repayment plan.
(2) The report under sub-section (1) shall contain—
(a) whether the repayment plan was approved or rejected and if approved, the
list the modifications, if any;
(b) the resolutions which were proposed at the meeting and the decision on
such resolutions;
(c) list of the creditors who were present or represented at the meeting, and the
voting records of each creditor for all meetings of the creditors; and
(d) such other information as the resolution professional thinks appropriate to
make known to the Adjudicating Authority.
113. The resolution professional shall provide a copy of the report of the meeting of
creditors prepared under section 99 to—
(a) the debtor;
(b) the creditors, including those who were not present at the meeting; and
(c) the Adjudicating Authority.
114. (1) The Adjudicating Authority shall by an order approve or reject the repayment
plan on the basis of the report of the meeting of the creditors submitted by the resolution
professional under section 112:
Provided that where a meeting of creditors is not summoned, the Adjudicating Authority
shall pass an order on the basis of the report prepared by the resolution professional under
section 106.
(2) The order of the Adjudicating Authority approving the repayment plan may also
provide for directions for implementing the repayment plan.
Approval of
repayment
plan by
creditors.
Report of
meeting of
creditors on
repayment
plan.
Notice of
decisions
taken at
meeting of
creditors.
Order of
Adjudicating
Authority on
repayment
plan.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 55
(3) Where the Adjudicating Authority is of the opinion that the repayment plan requires
modification, it may direct the resolution professional to re-convene a meeting of the creditors
for reconsidering the repayment plan.
115. (1) Where the Adjudicating Authority has approved the repayment plan under
section 114, such repayment plan shall—
(a) take effect as if proposed by the debtor in the meeting; and
(b) be binding on creditors mentioned in the repayment plan and the
debtor.
(2) Where the Adjudicating Authority rejects the repayment plan under section 114,
the debtor and the creditors shall be entitled to file an application for bankruptcy under
Chapter IV.
(3) A copy of the order passed by the Adjudicating Authority under sub-section (2)
shall be provided to the Board, for the purpose of recording an entry in the register referred
to in section 196.
116. (1) The resolution professional appointed under section 97 or under
section 98 shall supervise the implementation of the repayment plan.
(2) The resolution professional may apply to the Adjudicating Authority for directions,
if necessary, in relation to any particular matter arising under the repayment plan.
(3) The Adjudicating Authority may issue directions to the resolution professional on
the basis of an application under sub-section (2).
117. (1) The resolution professional shall within fourteen days of the completion of
the repayment plan, forward to the persons who are bound by the repayment plan under
section 115 and the Adjudicating Authority, the following documents, namely:—
(a) a notice that the repayment plan has been fully implemented; and
(b) a copy of a report by the resolution professional summarising all receipts and
payments made in pursuance of the repayment plan and extent of the implementation
of such plan as compared with the repayment plan approved by the meeting of the
creditors.
(2) The resolution professional may apply to the Adjudicating Authority to extend the
time mentioned in sub-section (1) for such further period not exceeding seven days.
118. (1) A repayment plan shall be deemed to have come to an end prematurely if it has
not been fully implemented in respect of all persons bound by it within the period as mentioned
in the repayment plan.
(2) Where a repayment plan comes to an end prematurely under this section, the
resolution professional shall submit a report to the Adjudicating Authority which shall
state—
(a) the receipts and payments made in pursuance of the repayment plan;
(b) the reasons for premature end of the repayment plan; and
(c) the details of the creditors whose claims have not been fully satisfied.
(3) The Adjudicating Authority shall pass an order on the basis of the report submitted
under sub-section (2) by the resolution professional that the repayment plan has not been
completely implemented.
(4) The debtor or the creditor, whose claims under repayment plan have not been fully
satisfied, shall be entitled to apply for a bankruptcy order under Chapter IV.
Effect of
order of
Adjudicating
Authority on
repayment
plan.
Implementation
and
supervision of
repayment
plan.
Completion
of repayment
plan.
Repayment
plan coming
to end
prematurely.
56 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(5) The Adjudicating Authority shall forward to the persons bound by the repayment
plan under section 115, a copy of the—
(a) report submitted by the resolution professional to the Adjudicating Authority
under sub-section (2); and
(b) order passed by the Adjudicating Authority under sub-section (3).
(6) The Adjudicating Authority shall forward a copy of the order passed under
sub-section (4) to the Board, for the purpose of recording entries in the register referred to in
section 196.
119. (1) On the basis of the repayment plan, the resolution professional shall
apply to the Adjudicating Authority for a discharge order in relation to the debts
mentioned in the repayment plan and the Adjudicating Authority may pass such
discharge order.
(2) The repayment plan may provide for—
(a) early discharge; or
(b) discharge on complete implementation of the repayment plan.
(3) The discharge order shall be forwarded to the Board, for the purpose of recording
entries in the register referred to in section 196.
(4) The discharge order under sub-section (3) shall not discharge any other person
from any liability in respect of his debt.
120. The resolution professional shall perform his functions and duties in compliance
with the code of conduct provided under section 208.
CHAPTER IV
BANKRUPTCY ORDER FOR INDIVIDUALS AND PARTNERSHIP FIRMS
121. (1) An application for bankruptcy of a debtor may be made, by a creditor
individually or jointly with other creditors or by a debtor, to the Adjudicating Authority in the
following circumstances, namely;—
(a) where an order has been passed by an Adjudicating Authority under
sub-section 4 of section 100; or
(b) where an order has been passed by an Adjudicating Authority under
sub-section 2 of section 115; or
(c) where an order has been passed by an Adjudicating Authority under
sub-section 3 of section 118.
(2) An application for bankruptcy shall be filed within a period of threemonths of the
date of the order passed by the Adjudicating Authority under the sections referred to in
sub-section (1).
(3) Where the debtor is a firm, the application under sub-section (1) may be filed by
any of its partners.
122. (1) The application for bankruptcy by the debtor shall be accompanied by—
(a) the records of insolvency resolution process undertaken under Chapter III of
Part III;
(b) the statement of affairs of the debtor in such form and manner as may be
prescribed, on the date of the application for bankruptcy; and
(c) a copy of the order passed by the Adjudicating Authority under Chapter III
of Part III permitting the debtor to apply for bankruptcy.
Discharge
order.
Standard of
conduct.
Application
for
bankruptcy.
Application
by debtor.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 57
(2) The debtor may propose an insolvency professional as the bankruptcy trustee in
the application for bankruptcy.
(3) The application referred to in sub-section (1) shall be in such form and manner and
accompanied by such fee as may be prescribed.
(4) An application for bankruptcy by the debtor shall not be withdrawn without the
leave of the Adjudicating Authority.
123. (1) The application for bankruptcy by the creditor shall be accompanied by—
(a) the records of insolvency resolution process undertaken under Chapter III;
(b) a copy of the order passed by the Adjudicating Authority under Chapter III
permitting the creditor to apply for bankruptcy;
(c) details of the debts owed by the debtor to the creditor as on the date of the
application for bankruptcy; and
(d) such other information as may be prescribed.
(2) An application under sub-section (1) made in respect of a debt which is secured,
shall be accompanied with—
(a) a statement by the creditor having the right to enforce the security that he
shall, in the event of a bankruptcy order being made, give up his security for the
benefit of all the creditors of the bankrupt; or
(b) a statement by the creditor stating—
(i) that the application for bankruptcy is only in respect of the unsecured
part of the debt; and
(ii) an estimated value of the unsecured part of the debt.
(3) If a secured creditor makes an application for bankruptcy and submits a statement
under clause (b) of sub-section (2), the secured and unsecured parts of the debt shall be
treated as separate debts.
(4) The creditor may propose an insolvency professional as the bankruptcy trustee in
the application for bankruptcy.
(5) An application for bankruptcy under sub-section (1), in case of a deceased debtor,
may be filed against his legal representatives.
(6) The application for bankruptcy shall be in such form and manner and accompanied
by such fee as may be prescribed.
(7) An application for bankruptcy by the creditor shall not be withdrawn without the
permission of the Adjudicating Authority.
124. (1) When an application is filed under sections 122 or 123,—
(a) an interim-moratorium shall commence on the date of the making of the
application on all actions against the properties of the debtor in respect of his debts
and such moratorium shall cease to have effect on the bankruptcy commencement
date; and
(b) during the interim-moratorium period—
(i) any pending legal action or legal proceeding against any property of
the debtor in respect of any of his debts shall be deemed to have been stayed;
(ii) the creditors of the debtor shall not be entitled to initiate any legal
action or legal proceedings against any property of the debtor in respect of any
of his debts.
Application
by creditor.
Effect of
application.
58 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(2) Where the application has been made in relation to a firm, the interim-moratorium
under sub-section (1) shall operate against all the partners of the firm as on the date of the
making of the application.
(3) The provisions of this section shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial sector regulator.
125. (1) If an insolvency professional is proposed as the bankruptcy trustee in the
application for bankruptcy under section 122 or section 123, the Adjudicating Authority
shall direct the Board within seven days of receiving the application for bankruptcy to
confirm that there are no disciplinary proceedings pending against such professional.
(2) The Board shall within ten days of the receipt of the direction under sub-section (1)
in writing either—
(a) confirm the appointment of the proposed insolvency professional as the
bankruptcy trustee for the bankruptcy process; or
(b) reject the appointment of the proposed insolvency professional as the
bankruptcy trustee and nominate another bankruptcy trustee for the bankruptcy process.
(3) Where a bankruptcy trustee is not proposed by the debtor or creditor under
section 122 or 123, the Adjudicating Authority shall direct the Board within seven days of
receiving the application to nominate a bankruptcy trustee for the bankruptcy process.
(4) The Board shall nominate a bankruptcy trustee within ten days of receiving the
direction of the Adjudicating Authority under sub-section (3).
(5) The bankruptcy trustee confirmed or nominated under this section shall be
appointed as the bankruptcy trustee by the Adjudicating Authority in the bankruptcy order
under section 126.
126. (1) The Adjudicating Authority shall pass a bankruptcy order within fourteen
days of receiving the confirmation or nomination of the bankruptcy trustee under section 125.
(2) The Adjudicating Authority shall provide the following documents to bankrupt,
creditors and the bankruptcy trustee within seven days of the passing of the bankruptcy
order, namely:—
(a) a copy of the application for bankruptcy; and
(b) a copy of the bankruptcy order.
127. The bankruptcy order passed by the Adjudicating Authority under
section 126 shall continue to have effect till the debtor is discharged under section 138.
128. (1) On the passing of the bankruptcy order under section 126,—
(a) the estate of the bankrupt shall vest in the bankruptcy trustee as provided in
section 154;
(b) the estate of the bankrupt shall be divided among his creditors;
(c) subject to provisions of sub-section (2), a creditor of the bankrupt indebted
in respect of any debt claimed as a bankruptcy debt shall not—
(i) initiate any action against the property of the bankrupt in respect of
such debt; or
(ii) commence any suit or other legal proceedings except with the leave of
the Adjudicating Authority and on such terms as the Adjudicating Authority
may impose.
Appointment
of insolvency
professional
as bankruptcy
trustee.
Bankruptcy
order.
Validity of
bankruptcy
order.
Effect of
bankruptcy
order.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 59
(2) Subject to the provisions of section 123, the bankruptcy order shall not affect the
right of any secured creditor to realise or otherwise deal with his security interest in the same
manner as he would have been entitled if the bankruptcy order had not been passed:
Provided that no secured creditor shall be entitled to any interest in respect of his debt
after the bankruptcy commencement date if he does not take any action to realise his security
within thirty days from the said date.
(3) Where a bankruptcy order under section 126 has been passed against a firm, the
order shall operate as if it were a bankruptcy order made against each of the individuals who,
on the date of the order, is a partner in the firm.
(4) The provisions of sub-section (1) shall not apply to such transactions as may be
notified by the Central Government in consultation with any financial sector regulator.
129. (1) Where a bankruptcy order is passed on the application for bankruptcy by a
creditor under section 123, the bankrupt shall submit his statement of financial position
to the bankruptcy trustee within seven days from the bankruptcy commencement
date.
(2) The statement of financial position shall be submitted in the such form and manner
as may be prescribed.
(3) Where the bankrupt is a firm, its partners on the date of the order shall submit a joint
statement of financial position of the firm, and each partner of the firm shall submit a statement
of his financial position.
(4) The bankruptcy trustee may require the bankrupt or any other person to submit in
writing further information explaining or modifying any matter contained in the statement of
financial position.
130. (1) The Adjudicating Authority shall—
(a) send notices within ten days of the bankruptcy commencement date, to the
creditors mentioned in—
(i) the statement of affairs submitted by the bankrupt under section 129; or
(ii) the application for bankruptcy submitted by the bankrupt under
section 122.
(b) issue a public notice inviting claims from creditors.
(2) The public notice under clause (b) of sub-section (1) shall include the last date up
to which the claims shall be submitted and such other matters and details as may be prescribed
and shall be—
(a) published in leading newspapers, one in English and another in vernacular
having sufficient circulation where the bankrupt resides;
(b) affixed on the premises of the Adjudicating Authority; and
(c) placed on the website of the Adjudicating Authority.
(3) The notice to the creditors referred to under clause (a) of sub-section (1) shall
include such matters and details as may be prescribed.
131. (1) The creditors shall register claims with the bankruptcy trustee within seven
days of the publication of the public notice, by sending details of the claims to the bankruptcy
trustee in such manner as may be prescribed.
(2) The creditor, in addition to the details of his claims, shall provide such other
information and in such manner as may be prescribed.
Statement of
financial
position.
Public notice
inviting
claims from
creditors.
Registration
of claims.
60 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
132. The bankruptcy trustee shall, within fourteen days from the bankruptcy
commencement date, prepare a list of creditors of the bankrupt on the basis of—
(a) the information disclosed by the bankrupt in the application for bankruptcy
filed by the bankrupt under section 118 and the statement of affairs filed under
section 125; and
(b) claims received by the bankruptcy trustee under sub-section (2) of section 130.
133. (1) The bankruptcy trustee shall, within twenty-one days from the
bankruptcy commencement date, issue a notice for calling a meeting of the creditors,
to every creditor of the bankrupt as mentioned in the list prepared under section 132.
(2) The notices issued under sub-section (1) shall—
(a) state the date of the meeting of the creditors, which shall not be later than
twenty-one days from the bankruptcy commencement date;
(b) be accompanied with forms of proxy voting;
(c) specify the form and manner in which the proxy voting may take place.
(3) The proxy voting, including electronic proxy voting shall take place in such manner
and form as may be specified.
134. (1) The bankruptcy trustee shall be the convener of the meeting of the creditors
summoned under section 133.
(2) The bankruptcy trustee shall decide the quorum for the meeting of the creditors,
and conduct the meeting only if the quorum is present.
(3) The following business shall be conducted in the meeting of the creditors in which
regard a resolution may be passed, namely:—
(a) the establishment of a committee of creditors;
(b) any other business that the bankruptcy trustee thinks fit to be transacted.
(4) The bankruptcy trustee shall cause the minutes of the meeting of the creditors to be
recorded, signed and retained as a part of the records of the bankruptcy process.
(5) The bankruptcy trustee shall not adjourn the meeting of the creditors for any
purpose for more than seven days at a time.
135. (1) Every creditor mentioned in the list under section 132 or his proxy shall be
entitled to vote in respect of the resolutions in the meeting of the creditors in accordance
with the voting share assigned to him.
(2) The resolution professional shall determine the voting share to be assigned to each
creditor in the manner specified by the Board.
(3) A creditor shall not be entitled to vote in respect of a debt for an unliquidated
amount.
(4) The following creditors shall not be entitled to vote under this section, namely:—
(a) creditors who are not mentioned in the list of creditors under section 132 and
those who have not been given a notice by the bankruptcy trustee;
(b) creditors who are associates of the bankrupt.
136. The bankruptcy trustee shall conduct the administration and distribution of the
estate of the bankrupt in accordance with the provisions of Chapter V.
Preparation
of list of
creditors.
Summoning of
meeting of
creditors.
Conduct of
meeting of
creditors.
Voting rights
of creditors.
Administration
and
distribution of
estate of
bankrupt.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 61
137. (1) The bankruptcy trustee shall convene a meeting of the committee of creditors
on completion of the administration and distribution of the estate of the bankrupt in
accordance with the provisions of Chapter V.
(2) The bankruptcy trustee shall provide the committee of creditors with a report of the
administration of the estate of the bankrupt in the meeting of the said committee.
(3) The committee of creditors shall approve the report submitted by the bankruptcy
trustee under sub-section (2) within seven days of the receipt of the report and determine
whether the bankruptcy trustee should be released under section 148.
(4) The bankruptcy trustee shall retain sufficient sums from the estate of the bankrupt
to meet the expenses of convening and conducting the meeting required under this section
during the administration of the estate.
138. (1) The bankruptcy trustee shall apply to the Adjudicating Authority for a discharge
order—
(a) on the expiry of one year from the bankruptcy commencement date; or
(b) within seven days of the approval of the committee of creditors of the
completion of administration of the estates of the bankrupt under section 137, where
such approval is obtained prior to the period mentioned in clause (a).
(2) The Adjudicating Authority shall pass a discharge order on an application by the
bankruptcy trustee under sub-section (1).
(3) A copy of the discharge order shall be provided to the Board for the purpose of
recording an entry in the register referred to in section 196.
139. The discharge order under sub-section (2) of section 138 shall release the bankrupt
from all the bankruptcy debt:
Provided that discharge shall not—
(a) affect the functions of the bankruptcy trustee; or
(b) affect the operation of the provisions of Chapters IV and V of Part III; or
(c) release the bankrupt from any debt incurred by means of fraud or breach of
trust to which he was a party; or
(d) discharge the bankrupt from any excluded debt.
140. (1) The bankrupt shall, from the bankruptcy commencement date, be subject to
the disqualifications mentioned in this section.
(2) In addition to any disqualification under any other law for the time being in force,
a bankrupt shall be disqualified from—
(a) being appointed or acting as a trustee or representative in respect of any
trust, estate or settlement;
(b) being appointed or acting as a public servant;
(c) being elected to any public office where the appointment to such office is by
election; and
(d) being elected or sitting or voting as a member of any local authority.
(3) Any disqualification to which a bankrupt may be subject under this section shall
cease to have effect, if—
(a) the bankruptcy order against him is modified or recalled under section 142; or
(b) he is discharged under section 138.
Completion
of
administration.
Discharge
order.
Effect of
discharge.
Disqualification
of bankrupt.
62 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Explanation.—For the purposes of this section, the term “public servant” shall have
the same meaning as assigned to it in section 21 of the Indian Penal Code.
141. (1) A bankrupt, from the bankruptcy commencement date, shall—
(a) not act as a director of any company, or directly or indirectly take part in or be
concerned in the promotion, formation or management of a company;
(b) without the previous sanction of the bankruptcy trustee, be prohibited from
creating any charge on his estate or taking any further debt;
(c) be required to inform his business partners that he is undergoing a bankruptcy
process;
(d) prior to entering into any financial or commercial transaction of such value as
may be prescribed, either individually or jointly, inform all the parties involved in such
transaction that he is undergoing a bankruptcy process;
(e) without the previous sanction of the Adjudicating Authority, be incompetent
to maintain any legal action or proceedings in relation to the bankruptcy debts; and
(f) not be permitted to travel overseas without the permission of the Adjudicating
Authority.
(2) Any restriction to which a bankrupt may be subject under this section shall cease
to have effect, if—
(a) the bankruptcy order against him is modified or recalled under section 142; or
(b) he is discharged under section 138.
142. (1) The Adjudicating Authority may, on an application or suo motu, modify or
recall a bankruptcy order, whether or not the bankrupt is discharged, if it appears to the
Adjudicating Authority that—
(a) there exists an error apparent on the face of such order; or
(b) both the bankruptcy debts and the expenses of the bankruptcy have, after
the making of the bankruptcy order, either been paid for or secured to the satisfaction
of the Adjudicating Authority.
(2) Where the Adjudicating Authority modifies or recalls the bankruptcy order under
this section, any sale or other disposition of property, payment made or other things duly
done by the bankruptcy trustee shall be valid except that the property of the bankrupt shall
vest in such person as the Adjudicating Authority may appoint or, in default of any such
appointment, revert to the bankrupt on such terms as the Adjudicating Authority may direct.
(3) A copy of the order passed by the Adjudicating Authority under sub-section (1)
shall be provided to the Board, for the purpose of recording an entry in the register referred
to in section 191.
(4) The modification or recall of the order by the Adjudicating Authority under
sub-section (1) shall be binding on all creditors so far as it relates to any debts due to them
which form a part of the bankruptcy.
143. The bankruptcy trustee shall perform his functions and duties in compliance with
the code of conduct provided under section 208.
144. (1) A bankruptcy trustee appointed for conducting the bankruptcy process shall
charge such fees as may be specified in proportion to the value of the estate of the bankrupt.
(2) The fees for the conduct of the bankruptcy process shall be paid to the bankruptcy
trustee from the distribution of the estate of the bankrupt in the manner provided in
section 178.
Restrictions
on bankrupt.
Modification
or recall of
bankruptcy
order.
Standard of
conduct.
Fees of
bankruptcy
trustee.
45 of 1860.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 63
145. (1) Where Committee of creditors is of the opinion that at any time during the
bankruptcy process, a bankruptcy trustee appointed under section 125 is required to be
replaced, it may replace him with another bankruptcy trustee in the manner provided under
this section.
(2) The Committee of creditors may, at a meeting, by a vote of seventy-five per cent. of
voting share, propose to replace the bankruptcy trustee appointed under section 125 with
another bankruptcy trustee.
(3) The Committee of creditors may apply to the Adjudicating Authority for the
replacement of the bankruptcy trustee.
(4) The Adjudicating Authority shall within seven days of the receipt of the application
under sub-section (3) direct the Board to recommend for replacement of bankruptcy trustee.
(5) The Board shall, within ten days of the direction of the Adjudicating Authority
under sub-section (4) , recommend a bankruptcy trustee for replacement against whom no
disciplinary proceedings are pending.
(6) The Adjudicating Authority shall, by an order, appoint the bankruptcy trustee as
recommended by the Board under sub-section (5) within fourteen days of receiving such
recommendation.
(7) The earlier bankruptcy trustee shall deliver possession of the estate of the bankrupt
to the bankruptcy trustee appointed under sub-section (6) , on the date of his appointment.
(8) The Adjudicating Authority may give directions to the earlier bankruptcy trustee—
(a) to share all information with the new bankruptcy trustee in respect of the
bankruptcy process; and
(b) to co-operate with the new bankruptcy trustee in such matters as may be
required.
(9) The earlier bankruptcy trustee replaced under this section shall be released in
accordance with the provisions of section 148.
(10) The bankruptcy trustee appointed under this section shall give a notice of his
appointment to the bankrupt within seven days of his appointment.
146. (1) A bankruptcy trustee may resign if—
(a) he intends to cease practising as an insolvency professional; or
(b) there is conflict of interest or change of personal circumstances which preclude
the further discharge of his duties as a bankruptcy trustee.
(2) The Adjudicating Authority shall, within seven days of the acceptance of the
resignation of the bankruptcy trustee, direct the Board for his replacement.
(3) The Board shall, within ten days of the direction of the Adjudicating Authority
under sub-section (2) recommend another bankruptcy trustee as a replacement.
(4) The Adjudicating Authority shall appoint the bankruptcy trustee recommended by
the Board under sub-section (3) within fourteen days of receiving the recommendation.
(5) The replaced bankruptcy trustee shall deliver possession of the estate of the
bankrupt to the bankruptcy trustee appointed under sub-section (4), on the date of his
appointment.
(6) The Adjudicating Authority may give directions to the bankruptcy trustee who has
resigned—
Replacement
of bankruptcy
trustee.
Resignation
by
bankruptcy
trustee.
64 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(a) to share all information with the new bankruptcy trustee in respect of the
bankruptcy process; and
(b) to co-operate with the new bankruptcy trustee in such matters as may be
required.
(7) The bankruptcy trustee appointed under this section shall give a notice of his
appointment to the committee of creditors and the bankrupt within seven days of his
appointment.
(8) The bankruptcy trustee replaced under this section shall be released in accordance
with the provisions of section 148.
147. (1) If a vacancy occurs in the office of the bankruptcy trustee for any reason other
than his replacement or resignation, the vacancy shall be filled in accordance with the
provisions of this section.
(2) In the event of the occurrence of vacancy referred to in sub-section (1), the
Adjudicating Authority shall direct the Board for replacementof a bankruptcy trustee.
(3) The Board shall, within ten days of the direction of the Adjudicating Authority
under sub-section (2), recommenda bankruptcy trustee as a replacement.
(4) The Adjudicating Authority shall appoint the bankruptcy trustee recommended by
the Board under sub-section (3) within fourteen days of receiving the recommendation.
(5) The earlier bankruptcy trustee shall deliver possession of the estate of the bankrupt
to the bankruptcy trustee appointed under sub-section (4), on the date of his appointment.
(6) The Adjudicating Authority may give directions to the bankruptcy trustee who has
vacated the office—
(a) to share all information with the new bankruptcy trustee in respect of the
bankruptcy;
(b) to co-operate with the new bankruptcy trustee in such matters as may be
required.
(7) The bankruptcy trustee appointed under sub-section (4) shall give a notice of his
appointment to the committee of creditors and the bankrupt within seven days of his
appointment.
(8) The earlier bankruptcy trustee replaced under this section shall be released in
accordance with the provisions of section 148:
Provided that this section shall not apply if the vacancy has occurred due to temporary
illness or temporary leave of the bankruptcy trustee.
148. (1) A bankruptcy trustee shall be released from his office with effect from the date
on which the Adjudicating Authority passes an order appointing a new bankruptcy trustee
in the event of replacement, resignation or occurrence of vacancy under sections 145, 146 or
section 147, as the case may be.
(2) Notwithstanding the release under sub-section (1) , the bankruptcy trustee who
has been so released, shall share all information with the new bankruptcy trustee in respect
of the bankruptcy process and co-operate with the new bankruptcy trustee in such matters
as may be required.
(3) A bankruptcy trustee who has completed the administration of the bankruptcy
process shall be released of his duties with effect from the date on which the committee of
creditors approves the report of the bankruptcy trustee under section 137.
Vacancy in
office of
bankruptcy
trustee.
Release of
bankruptcy
trustee.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 65
CHAPTER V
ADMINISTRATION AND DISTRIBUTION OF THE ESTATE OF THE BANKRUPT
149. The bankruptcy trustee shall perform the following functions in accordance with
the provisions of this Chapter—
(a) investigate the affairs of the bankrupt;
(b) realise the estate of the bankrupt; and
(c) distribute the estate of the bankrupt.
150. (1) The bankrupt shall assist the bankruptcy trustee in carrying out his functions
under this Chapter by—
(a) giving to the bankruptcy trustee the information of his affairs;
(b) attending on the bankruptcy trustee at such times as may be required;
(c) giving notice to the bankruptcy trustee of any of the following events which
have occurred after the bankruptcy commencement date,—
(i) acquisition of any property by the bankrupt;
(ii) devolution of any property upon the bankrupt;
(iii) increase in the income of the bankrupt;
(d) doing all other things as may be prescribed.
(2) The bankrupt shall give notice of the increase in income or acquisition or devolution
of property under clause (c) of sub-section (1) within seven days of such increase, acquisition
or devolution.
(3) The bankrupt shall continue to discharge the duties under sub-section (1) other
than the duties under clause (c) evenafter the discharge under section 138.
151. For the purpose of performing his functions under this Chapter, the bankruptcy
trustee may, by his official name—
(a) hold property of every description;
(b) make contracts;
(c) sue and be sued;
(d) enter into engagements in respect of the estate of the bankrupt;
(e) employ persons to assist him;
(f) execute any power of attorney, deed or other instrument; and
(g) do any other act which is necessary or expedient for the purposes of or in
connection with the exercise of his rights.
152. The bankruptcy trustee may while discharging his functions under this
Chapter,—
(a) sell any part of the estate of the bankrupt;
(b) give receipts for any money received by him;
(c) prove, rank, claim and draw a dividend in respect of such debts due to the
bankrupt as are comprised in his estate;
(d) where any property comprised in the estate of the bankrupt is held by any
person by way of pledge or hypothecation, exercise the right of redemption in respect
of any such property subject to the relevant contract by giving notice to the said person;
Functions of
bankruptcy
trustee.
Duties of
bankrupt
towards
bankruptcy
trustee.
Rights of
bankruptcy
trustee.
General
powers of
bankruptcy
trustee.
66 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(e) where any part of the estate of the bankrupt consists of securities in a
company or any other property which is transferable in the books of a person, exercise
the right to transfer the property to the same extent as the bankrupt might have exercised
it if he had not become bankrupt; and
(f) deal with any property comprised in the estate of the bankrupt to which the
bankrupt is beneficially entitled in the same manner as he might have dealt with it.
153. The bankruptcy trustee for the purposes of this Chapter may after procuring the
approval of the committee of creditors,—
(a) carry on any business of the bankrupt as far as may be necessary for winding
it up beneficially;
(b) bring, institute or defend any legal action or proceedings relating to the
property comprised in the estate of the bankrupt;
(c) accept as consideration for the sale of any property a sum of money due at a
future time subject to certain stipulations such as security;
(d) mortgage or pledge any property for the purpose of raising money for the
payment of the debts of the bankrupt;
(e) where any right, option or other power forms part of the estate of the bankrupt,
make payments or incur liabilities with a view to obtaining, for the benefit of the
creditors, any property which is the subject of such right, option or power;
(f) refer to arbitration or compromise on such terms as may be agreed, any debts
subsisting or supposed to subsist between the bankrupt and any person who may have
incurred any liability to the bankrupt;
(g) make compromise or other arrangement as may be considered expedient,
with the creditors;
(h) make compromise or other arrangement as he may deem expedient with
respect to any claim arising out of or incidental to the bankrupt’s estate;
(i) appoint the bankrupt to—
(A) supervise the management of the estate of the bankrupt or any part of
it;
(B) carry on his business for the benefit of his creditors;
(C) assist the bankruptcy trustee in administering the estate of the bankrupt.
154. (1) The estate of the bankrupt shall vest in the bankruptcy trustee immediately
from the date of his appointment.
(2) The vesting under sub-section (1) shall take effect without any conveyance,
assignment or transfer.
155. (1) The estate of the bankrupt shall include,—
(a) all property belonging to or vested in the bankrupt at the bankruptcy
commencement date;
(b) the capacity to exercise and to initiate proceedings for exercising all such
powers in or over or in respect of property as might have been exercised by the bankrupt
for his own benefit at the bankruptcy commencement date or before the date of the
discharge order passed under section 138; and
(c) all property which by virtue of any of the provisions of this Chapter is
comprised in the estate.
(2) The estate of the bankrupt shall not include—
Approval of
creditors for
certain acts.
Vesting of
estate of
bankrupt in
bankruptcy
trustee.
Estate of
bankrupt.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 67
(a) excluded assets;
(b) property held by the bankrupt on trust for any other person;
(c) all sums due to any workman or employee from the provident fund, the
pension fund and the gratuity fund; and
(d) such assets as may be notified by the Central Government in consultation
with any financial sector regulator.
156. The bankrupt, his banker or agent or any other person having possession of any
property, books, papers or other records which bankruptcy trustee is required to take
possession for the purposes of the bankruptcy process shall deliver the said property and
documents to the bankruptcy trustee.
157. (1) The bankruptcy trustee shall take possession and control of all property,
books, papers and other records relating to the estate of the bankrupt or affairs of the bankrupt
which belong to him or are in his possession or under his control.
(2) Where any part of the estate of the bankrupt consists of things in actionable claims,
they shall be deemed to have been assigned to the bankruptcy trustee without any notice of
the assignment.
158. (1) Any disposition of property made by the debtor, during the period between
the date of filing of the application for bankruptcy and the bankruptcy commencement date
shall be void.
(2) Any disposition of property made under sub-section (1) shall not give rise to any
right against any person, in respect of such property, even if he has received such property
before the bankruptcy commencement date in—
(a) good faith;
(b) for value; and
(c) without notice of the filing of the application for bankruptcy.
(3) For the purposes of this section, the term “property” means all the property of the
debtor, whether or not it is comprised in the estate of the bankrupt, but shall not include
property held by the debtor in trust for any other person.
159. (1) The bankruptcy trustee shall be entitled to claim for the estate of the bankrupt,
any after-acquired property by giving a notice to the bankrupt.
(2) A notice under sub-section (1) shall not be served in respect of—
(a) excluded assets; or
(b) any property which is acquired by or devolves upon the bankrupt after a
discharge order is passed under section 138.
(3) The notice under sub-section (2) shall be given within fifteen days from the day on
which the acquisition or devolution of the after-acquired property comes to the knowledge
of the bankruptcy trustee.
(4) For the purposes of sub-section (3)—
(a) anything which comes to the knowledge of the bankruptcy trustee shall be
deemed to have come to the knowledge of the successor of the bankruptcy trustee at
the same time; and
(b) anything which comes to the knowledge of a person before he is appointed
as a bankruptcy trustee shall be deemed to have come to his knowledge on the date of
his appointment as bankruptcy trustee.
Delivery of
property and
documents to
bankruptcy
trustee.
Acquisition of
control by
bankruptcy
trustee.
Restrictions
on disposition
of property.
After-acquired
property of
bankrupt.
68 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(5) The bankruptcy trustee shall not be entitled, by virtue of this section, to claim from
any person who has acquired any right over after-acquired property, in good faith, for value
and without notice of the bankruptcy.
(6) A notice may be served after the expiry of the period under sub-section (3) only
with the approval of the Adjudicating Authority.
Explanation.—For the purposes of this section, the term “after-acquired property”
means any property which has been acquired by or has devolved upon the bankrupt after the
bankruptcy commencement date.
160. (1) The bankruptcy trustee may, by giving notice to the bankrupt or any person
interested in the onerous property, disclaim any onerous property which forms a part of the
estate of the bankrupt.
(2) The bankruptcy trustee may give the notice under sub-section (1) notwithstanding
that he has taken possession of the onerous property, endeavoured to sell it or has exercised
rights of ownership in relation to it.
(3) A notice of disclaimer under sub-section (1) shall—
(a) determine, as from the date of such notice, the rights, interests and liabilities
of the bankrupt in respect of the onerous property disclaimed;
(b) discharge the bankruptcy trustee from all personal liability in respect of the
onerous property as from the date of appointment of the bankruptcy trustee.
(4) A notice of disclaimer under sub-section (1) shall not be given in respect of the
property which has been claimed for the estate of the bankrupt under section 155 without the
permission of the committee of creditors.
(5) A notice of disclaimer under sub-section (1) shall not affect the rights or liabilities
of any other person, and any person who sustains a loss or damage in consequence of the
operation of a disclaimer under this section shall be deemed to be a creditor of the bankrupt
to the extent of the loss or damage.
Explanation.—For the purposes of this section, the term “onerous property”
means—
(i) any unprofitable contract; and
(ii) any other property comprised in the estate of the bankrupt which is unsaleable
or not readily saleable, or is such that it may give rise to a claim.
161. (1) No notice of disclaimer under section 160 shall be necessary if—
(a) a person interested in the onerous property has applied in writing to the
bankruptcy trustee or his predecessor requiring him to decide whether the onerous
property should be disclaimed or not; and
(b) a decision under clause (a) has not been taken by the bankruptcy trustee
within seven days of receipt of the notice.
(2) Any onerous property which cannot be disclaimed under sub-section (1) shall be
deemed to be part of the estate of the bankrupt.
Explanation.—For the purposes of this section, an onerous property is said to be
disclaimed where notice in relation to that property has been given by the bankruptcy trustee
under section 160.
162. (1) The bankruptcy trustee shall not be entitled to disclaim any leasehold interest,
unless a notice of disclaimer has been served on every interested person and—
Onerous
property of
bankrupt.
Notice to
disclaim
onerous
property.
Disclaimer of
leaseholds.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 69
(a) no application objecting to the disclaimer by the interested person, has been
filed with respect to the leasehold interest, within fourteen days of the date on which
notice was served; and
(b) where the application objecting to the disclaimer has been filed by the
interested person, the Adjudicating Authority has directed under section 163 that the
disclaimer shall take effect.
(2) Where the Adjudicating Authority gives a direction under clause (b) of sub-section (1),
it may also make order with respect to fixtures, improvements by tenant and other matters
arising out of the lease as it may think fit.
163. (1) An application challenging the disclaimer may be made by the following
persons under this section to the Adjudicating Authority—
(a) any person who claims an interest in the disclaimed property; or
(b) any person who is under any liability in respect of the disclaimed
property; or
(c) where the disclaimed property is a dwelling house, any person who on the
date of application for bankruptcy was in occupation of or entitled to occupy that
dwelling house.
(2) The Adjudicating Authority may on an application under sub-section (1) make an
order for the vesting of the disclaimed property in, or for its delivery to any of the persons
mentioned in sub-section (1).
(3) The Adjudicating Authority shall not make an order in favour of a person who has
made an application under clause (b) of sub-section (1) except where it appears to the
Adjudicating Authority that it would be just to do so for the purpose of compensating the
person.
(4) The effect of an order under this section shall be taken into account while
assessing loss or damage sustained by any person in consequence of the disclaimer under
sub-section (5) of section 160.
(5) An order under sub-section (2) vesting property in any person need not be completed
by any consequence, assignment or transfer.
164. (1) The bankruptcy trustee may apply to the Adjudicating Authority for an order
under this section in respect of an undervalued transaction between a bankrupt and any
person.
(2) The undervalued transaction referred to in sub-section (1) should have—
(a) been entered into during the period of two years ending on the filing of the
application for bankruptcy; and
(b) caused bankruptcy process to be triggered.
(3) A transaction between a bankrupt and his associate entered into during the period
of two years preceding the date of making of the application for bankruptcy shall be deemed
to be an undervalued transaction under this section.
(4) On the application of the bankruptcy trustee under sub-section (1), the Adjudicating
Authority may—
(a) pass an order declaring an undervalued transaction void;
(b) pass an order requiring any property transferred as a part of an undervalued
transaction to be vested with the bankruptcy trustee as a part of the estate of the
bankrupt; and
Challenge
against
disclaimed
property.
Undervalued
transactions.
70 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(c) pass any other order it thinks fit for restoring the position to what it would
have been if the bankrupt had not entered into the undervalued transaction.
(5) The order under clause (a) of sub-section (4) shall not be passed if it is proved by
the bankrupt that the transaction was undertaken in the ordinary course of business of the
bankrupt:
Provided that the provisions of this sub-section shall not be applicable to undervalued
transaction entered into between a bankrupt and his associate under sub-section (3) of this
section.
(6) For the purposes of this section, a bankrupt enters into an undervalued transaction
with any person if—
(a) he makes a gift to that person;
(b) no consideration has been received by that person from the bankrupt;
(c) it is in consideration of marriage; or
(d) it is for a consideration, the value of which in money or money’s worth is
significantly less than the value in money or money’s worth of the consideration provided
by the bankrupt.
165. (1) The bankruptcy trustee may apply to the Adjudicating Authority for an order
under this section if a bankrupt has given a preference to any person.
(2) The transaction giving preference to an associate of the bankrupt under
sub-section (1) should have been entered into by the bankrupt with the associate during the
period of two years ending on the date of the application for bankruptcy.
(3) Any transaction giving preference not covered under sub-section (2) should have
been entered into by the bankrupt during the period of six months ending on the date of the
application for bankruptcy.
(4) The transaction giving preference under sub-section (2) or under sub-section (3)
should have caused the bankruptcy process to be triggered.
(5) On the application of the bankruptcy trustee under sub-section (1), the Adjudicating
Authority may—
(a) pass an order declaring a transaction giving preference void;
(b) pass an order requiring any property transferred in respect of a transaction
giving preference to be vested with the bankruptcy trustee as a part of the estate of the
bankrupt; and
(c) pass any other order it thinks fit for restoring the position to what it would
have been if the bankrupt had not entered into the transaction giving preference.
(6) The Adjudicating Authority shall not pass an order under sub-section (5) unless
the bankrupt was influenced in his decision of giving preference to a person by a desire to
produce in relation to that person an effect under clause (b) of sub-section (8).
(7) For the purpose of sub-section (6), if the person is an associate of the bankrupt,
(otherwise than by reason only of being his employee), at the time when the preference was
given, it shall be presumed that the bankrupt was influenced in his decision under that subsection.
(8) For the purposes of this section, a bankrupt shall be deemed to have entered into a
transaction giving preference to any person if—
(a) the person is the creditor or surety or guarantor for any debt of the
bankrupt; and
Preference
transactions.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 71
(b) the bankrupt does anything or suffers anything to be done which has the
effect of putting that person into a position which, in the event of the debtor becoming
a bankrupt, will be better than the position he would have been in, if that thing had not
been done.
166. (1) Subject to the provision of sub-section (2), an order passed by the
Adjudicating Authority under section 164 or section 165 shall not,—
(a) give rise to a right against a person interested in the property which was
acquired in an undervalued transaction or a transaction giving preference, whether or
not he is the person with whom the bankrupt entered into such transaction; and
(b) require any person to pay a sum to the bankruptcy trustee in respect of the
benefit received from the undervalued transaction or a transaction giving preference,
whether or not he is the person with whom the bankrupt entered into such transaction.
(2) The provision of sub-section (1) shall apply only if the interest was acquired or the
benefit was received—
(a) in good faith;
(b) for value;
(c) without notice that the bankrupt entered into the transaction at an undervalue
or for giving preference;
(d) without notice that the bankrupt has filed an application for bankruptcy or a
bankruptcy order has been passed; and
(e) by any person who at the time of acquiring the interest or receiving the
benefit was not an associate of the bankrupt.
(3) Any sum required to be paid to the bankruptcy trustee under sub-section (1) shall
be included in the estate of the bankrupt.
167. (1) Subject to sub-section (6), on an application by the bankruptcy trustee, the
Adjudicating Authority may make an order under this section in respect of extortionate
credit transactions to which the bankrupt is or has been a party.
(2) The transactions under sub-section (1) should have been entered into by the bankrupt
during the period of two years ending on the bankruptcy commencement date.
(3) An order of the Adjudicating Authority may—
(a) set aside the whole or part of any debt created by the transaction;
(b) vary the terms of the transaction or vary the terms on which any security for
the purposes of the transaction is held;
(c) require any person who has been paid by the bankrupt under any transaction,
to pay a sum to the bankruptcy trustee;
(d) require any person to surrender to the bankruptcy trustee any property of the
bankrupt held as security for the purposes of the transaction.
(4) Any sum paid or any property surrendered to the bankruptcy trustee shall be included
in the estate of the bankrupt.
(5) For the purposes of this section, an extortionate credit transaction is a transaction
for or involving the provision of credit to the bankrupt by any person—
(a) on terms requiring the bankrupt to make exorbitant payments in respect of
the credit provided; or
(b) which is unconscionable under the principles of law relating to contracts.
Effect of
order.
Extortionate
credit
transactions.
72 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(6) Any debt extended by a person regulated for the provision of financial services in
compliance with the law in force in relation to such debt, shall not be considered as an
extortionate credit transaction under this section.
168. (1) This section shall apply where a contract has been entered into by the bankrupt
with a person before the bankruptcy commencement date.
(2) Any party to a contract, other than the bankrupt under sub-section (1), may apply
to the Adjudicating Authority for—
(a) an order discharging the obligations of the applicant or the bankrupt under
the contract; and
(b) payment of damages by the party or the bankrupt, for non-performance of
the contract or otherwise.
(3) Any damages payable by the bankrupt by virtue of an order under clause (b) of
sub-section (2) shall be provable as bankruptcy debt.
(4) When a bankrupt is a party to the contract under this section jointly with another
person, that person may sue or be sued in respect of the contract without joinder of the
bankrupt.
169. If a bankrupt dies, the bankruptcy proceedings shall, continue as if he were alive.
170. (1) All the provisions of Chapter V relating to the administration and distribution
of the estate of the bankrupt shall, so far as the same are applicable, apply to the administration
of the estate of a deceased bankrupt.
(2) While administering the estate of a deceased bankrupt, the bankruptcy trustee
shall have regard to the claims by the legal representatives of the deceased bankrupt to
payment of the proper funeral and testamentary expenses incurred by them.
(3) The claims under sub-section (2) shall rank equally to the secured creditors in the
priority provided under section 178.
(4) If, on the administration of the estate of a deceased bankrupt, any surplus remains
in the hands of the bankruptcy trustee after payment in full of all the debts due from the
deceased bankrupt, together with the costs of the administration and interest as provided
under section 178, such surplus shall be paid to the legal representatives of the estate of the
deceased bankrupt or dealt with in such manner as may be prescribed.
171. (1) The bankruptcy trustee shall give notice to each of the creditors to submit
proof of debt within fourteen days of preparing the list of creditors under section 132.
(2) The proof of debt shall—
(a) require the creditor to give full particulars of debt, including the date on
which the debt was contracted and the value at which that person assesses it;
(b) require the creditor to give full particulars of the security, including the date
on which the security was given and the value at which that person assesses it;
(c) be in such form and manner as may be prescribed.
(3) In case the creditor is a decree holder against the bankrupt, a copy of the decree
shall be a valid proof of debt.
(4) Where a debt bears interest, that interest shall be provable as part of the debt
except in so far as it is owed in respect of any period after the bankruptcy commencement
date.
Obligations
under
contracts.
Continuance
of proceedings
on death of
bankrupt.
Administration
of estate of
deceased
bankrupt.
Proof of debt.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 73
(5) The bankruptcy trustee shall estimate the value of any bankruptcy debt which
does not have a specific value.
(6) The value assigned by the bankruptcy trustee under sub-section (5) shall be the
amount provable by the concerned creditor.
(7) A creditor may prove for a debt where payment would have become due at a date
later than the bankruptcy commencement date as if it were owed presently and may receive
dividends in a manner as may be prescribed.
(8) Where the bankruptcy trustee serves a notice under sub-section (1) and the person
on whom the notice is served does not file a proof of security within thirty days after the date
of service of the notice, the bankruptcy trustee may, with leave of the Adjudicating Authority,
sell or dispose of any property that was subject to the security, free of that security.
172. (1) Where a secured creditor realises his security, he may produce proof of the
balance due to him.
(2) Where a secured creditor surrenders his security to the bankruptcy trustee for the
general benefit of the creditors, he may produce proof of his whole claim.
173. (1) Where before the bankruptcy commencement date, there have been mutual
dealings between the bankrupt and any creditor, the bankruptcy trustee shall—
(a) take an account of what is due from each party to the other in respect of the
mutual dealings and the sums due from one party shall be set-off against the sums due
from the other; and
(b) only the balance shall be provable as a bankruptcy debt or as the amount
payable to the bankruptcy trustee as part of the estate of the bankrupt.
(2) Sums due from the bankrupt to another party shall not be included in the account
taken by the bankruptcy trustee under sub-section (1), if that other party had notice at the
time they became due that an application for bankruptcy relating to the bankrupt was pending.
174. (1) Whenever the bankruptcy trustee has sufficient funds in his hand, he may
declare and distribute interim dividend among the creditors in respect of the bankruptcy
debts which they have respectively proved.
(2) Where the bankruptcy trustee has declared any interim dividend, he shall give
notice of such dividend and the manner in which it is proposed to be distributed.
(3) In the calculation and distribution of the interim dividend, the bankruptcy trustee
shall make provision for—
(a) any bankruptcy debts which appear to him to be due to persons who, by
reason of the distance of their place of residence, may not have had sufficient time to
tender and establish their debts; and
(b) any bankruptcy debts which are subject of claims which have not yet been
determined;
(c) disputed proofs and claims; and
(d) expenses necessary for the administration of the estate of the bankrupt.
175. (1) The bankruptcy trustee may, with the approval of the committee of creditors,
divide in its existing form amongst the creditors, according to its estimated value, any property
in its existing form which from its peculiar nature or other special circumstances cannot be
readily or advantageously sold.
Proof of debt
by secured
creditors.
Mutual credit
and set-off.
Distribution
of interim
dividend.
Distribution
of property.
74 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(2) An approval under sub-section (1) shall be sought by the bankruptcy trustee for
each transaction, and a person dealing with the bankruptcy trustee in good faith and for
value shall not be required to enquire whether any approval required under sub-section (1)
has been given.
(3) Where the bankruptcy trustee has done anything without the approval of the
committee of creditors, the committee may, for the purpose of enabling him to meet his
expenses out of the estate of the bankrupt, ratify the act of the bankruptcy trustee.
(4) The committee of the creditors shall not ratify the act of the bankruptcy trustee
under sub-section (3) unless it is satisfied that the bankruptcy trustee acted in a case of
urgency and has sought its ratification without undue delay.
176. (1) Where the bankruptcy trustee has realised the entire estate of the bankrupt or
so much of it as could be realised in the opinion of the bankruptcy trustee, he shall give
notice—
(a) of his intention to declare a final dividend; or
(b) that no dividend or further dividend shall be declared.
(2) The notice under sub-section (1) shall contain such particulars as may be prescribed
and shall require all claims against the estate of the bankrupt to be established by a final date
specified in the notice.
(3) The Adjudicating Authority may, on the application of any person interested in
the administration of the estate of the bankrupt, postpone the final date referred to in
sub-section (2).
(4) After the final date referred to in sub-section (2) , the bankruptcy trustee shall—
(a) defray any outstanding expenses of the bankruptcy out of the estate of the
bankrupt; and
(b) if he intends to declare a final dividend, declare and distribute that dividend
among the creditors who have proved their debts, without regard to the claims of any
other persons.
(5) If a surplus remains after payment in full with interest to all the creditors of the
bankrupt and the payment of the expenses of the bankruptcy, the bankrupt shall be entitled to
the surplus.
(6) Where a bankruptcy order has been passed in respect of one partner in a firm, a
creditor to whom the bankrupt is indebted jointly with the other partners in the firm or any of
them shall not receive any dividend out of the separate property of the bankrupt until all the
separate creditors have received the full amount of their respective debts.
177. (1) A creditor who has not proved his debt before the declaration of any dividend
is not entitled to disturb, by reason that he has not participated in it, the distribution of that
dividend or any other dividend declared before his debt was proved, but—
(a) when he has proved the debt, he shall be entitled to be paid any dividend or
dividends which he has failed to receive, out of any money for the time being available
for the payment of any further dividend; and
(b) any dividend or dividends payable to him shall be paid before that money is
applied to the payment of any such further dividend.
(2) No action shall lie against the bankruptcy trustee for a dividend, but if the bankruptcy
trustee refuses to pay a dividend payable under sub-section (1), the Adjudicating Authority
may order him to—
(a) pay the dividend; and
Final dividend.
Claims of
creditors.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 75
(b) pay, out of his own money—
(i) interest on the dividend; and
(ii) the costs of the proceedings in which the order to pay has been made.
178. (1) Notwithstanding anything to the contrary contained in any law enacted by
the Parliament or the State Legislature for the time being in force, in the distribution of the
final dividend, the following debts shall be paid in priority to all other debts—
(a) firstly, the costs and expenses incurred by the bankruptcy trustee for the
bankruptcy process in full;
(b) secondly,—
(i) the workmen’s dues for the period of twenty-four months preceding the
bankruptcy commencement date; and
(ii) debts owed to secured creditors;
(c) thirdly, wages and any unpaid dues owed to employees, other than workmen,
of the bankrupt for the period of twelve months preceding the bankruptcy
commencement date;
(d) fourthly, any amount due to the Central Government and the State Government
including the amount to be received on account of Consolidated Fund of India and the
Consolidated Fund of a State, if any, in respect of the whole or any part of the period
of two years preceding the bankruptcy commencement date;
(e) lastly, all other debts and dues owed by the bankrupt including unsecured
debts.
(2) The debts in each class specified in sub-section (1) shall rank in the order mentioned
in that sub-section but debts of the same class shall rank equally amongst themselves, and
shall be paid in full, unless the estate of the bankrupt is insufficient to meet them, in which
case they shall abate in equal proportions between themselves.
(3) Where any creditor has given any indemnity or has made any payment of moneys
by virtue of which any asset of the bankrupt has been recovered, protected or preserved, the
Adjudicating Authority may make such order as it thinks just with respect to the distribution
of such asset with a view to giving that creditor an advantage over other creditors in
consideration of the risks taken by him in so doing.
(4) Unsecured creditors shall rank equally amongst themselves unless contractually
agreed to the contrary by such creditors.
(5) Any surplus remaining after the payment of the debts under sub-section (1) shall
be applied in paying interest on those debts in respect of the periods during which they have
been outstanding since the bankruptcy commencement date.
(6) Interest payments under sub-section (5) shall rank equally irrespective of the
nature of the debt.
(7) In the case of partners, the partnership property shall be applicable in the first
instance in payment of the partnership debts and the separate property of each partner shall
be applicable in the first instance in payment of his separate debts.
(8) Where there is a surplus of the separate property of the partners, it shall be dealt
with as part of the partnership property; and where there is a surplus of the partnership
property, it shall be dealt with as part of the respective separate property in proportion to the
rights and interests of each partner in the partnership property.
Priority of
payment of
debts.
76 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
CHAPTER VI
ADJUDICATING AUTHORITY FOR INDIVIDUALS AND PARTNERSHIP FIRMS
179. (1) Subject to the provisions of section 60, the Adjudicating Authority, in relation
to insolvency matters of individuals and firms shall be 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 gain and can entertain an application
under this Code regarding such person.
(2) The Debt Recovery Tribunal shall, notwithstanding anything contained in any
other law for the time being in force, have jurisdiction to entertain or dispose of—
(a) any suit or proceeding by or against the individual debtor;
(b) any claim made by or against the individual debtor;
(c) any question of priorities or any other question whether of law or facts,
arising out of or in relation to insolvency and bankruptcy of the individual debtor or
firm under this Code.
(3) Notwithstanding anything contained in the Limitation Act, 1963 or in any other law
for the time being in force, in computing the period of limitation specified for any suit or
application in the name and on behalf of a debtor for which an order of moratorium has been
made under this Part, the period during which such moratorium is in place shall be excluded.
180. (1) No civil court or authority shall have jurisdiction to entertain any suit or
proceedings in respect of any matter on which the Debt Recovery Tribunal or the Debt
Recovery Appellate Tribunal has jurisdiction under this Code.
(2) No injunction shall be granted by any court, tribunal or authority in respect of any
action taken, or to be taken, in pursuance of any power conferred on the Debt Recovery
Tribunal or the Debt Recovery Appellate Tribunal by or under this Code.
181. (1) An appeal from an order of the Debt Recovery Tribunal under this Code shall
be filed within thirty days before the Debt Recovery Appellate Tribunal.
(2) The Debt Recovery Appellate Tribunal may, if it is satisfied that a person was
prevented by sufficient cause from filing an appeal within thirty days, allow the appeal to be
filed within a further period not exceeding fifteen days.
182. (1) An appeal from an order of the Debt Recovery Appellate Tribunal on a question
of law under this Code shall be filed within forty-five days before the Supreme Court.
(2) The Supreme Court may, if it is satisfied that a person was prevented by sufficient
cause from filing an appeal within forty-five days, allow the appeal to be filed within a further
period not exceeding fifteen days.
183. Where an application is not disposed of or order is not passed within the period
specified in this Code, the Debt Recovery Tribunal or the Debt Recovery Appellate Tribunal,
as the case may be, shall record the reasons for not doing so within the period so specified;
and the Chairperson of the Debt Recovery Appellate Tribunal, after taking into account the
reasons so recorded, extend the period specified in this Code, but not exceeding ten days.
Adjudicating
Authority for
individuals
and
partnership
firms.
Civil court
not to have
jurisdiction.
Appeal to
Debt
Recovery
Appellate
Tribunal.
Appeal to
Supreme
Court.
Expeditious
disposal of
applications.
14 of 1963.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 77
CHAPTER VII
OFFENCES AND PENALTIES
184. (1) If a debtor or creditor provides information which is false in any material
particulars to the resolution professional, he shall be punishable with imprisonment for a
term which may extend to one year, or with fine which may extend to five lakh rupees, or with
both.
(2) If a creditor promises to vote in favour of the repayment plan dishonestly by
accepting any money, property or security from the debtor, he shall be punishable with
imprisonment for a term which may extend to two years, or with fine which may extend to
three times the amount or its equivalent of such money, property or security accepted by
such creditor, as the case may be, or with both:
Provided that where such amount is not quantifiable, the total amount of fine shall not
exceed five lakh rupees.
185. If an insolvency professional deliberately contravenes the provisions of this
Part, he shall be punishable with imprisonment for a term which may extend to six months, or
with fine, which shall not be less than one lakh rupees, but may extend to five lakhs rupees,
or with both.
186. If the bankrupt—
(a) knowingly makes a false representation or wilfully omits or conceals any
material information while making an application for bankruptcy under section 122 or
while providing any information during the bankruptcy process, he shall be punishable
with imprisonment which may extend to six months, or with fine which may extend to
five lakh rupees, or with both;
Explanation.—For the purposes of clause (a), a false representation or omission
includes non-disclosure of the details of disposal of any property, which but for the
disposal, would be comprised in the estate of the bankrupt, other than dispositions
made in the ordinary course of business carried on by the bankrupt;
(b) fraudulently has failed to provide or deliberately withheld the production
of, destroyed, falsified or altered, his books of account, financial information and
other records under his custody or control, he shall be punishable with imprisonment
which may extend to one year, or with fine, which may extend to five lakh rupees, or
with both;
(c) has contravened the restrictions under section 140 or the provisions of
section 141, he shall be punishable with imprisonment for a term which may extend to
six months, or with fine, which may extend to five lakh rupees, or with both;
(d) has failed to deliver the possession of any property comprised in the estate
of the bankrupt under his possession or control, which he is required to deliver under
section 156, he shall be punishable with imprisonment for a term which may extend to
six months, or with fine, which may extend to five lakh rupees, or with both;
(e) has failed to account, without any reasonable cause or satisfactory
explanation, for any loss incurred of any substantial part of his property comprised in
the estate of the bankrupt from the date which is twelve months before the filing of the
bankruptcy application, he shall be punishable with imprisonment for a term which
may extend to two years, or with fine, which may extend to three times of the value of
the loss, or with both:
Provided that that where such loss is not quantifiable, the total amount of fine
imposed shall not exceed five lakh rupees;
Punishment
for false
information,
etc., by
creditor in
insolvency
resolution
process.
Punishment
for
contravention
of provisions.
Punishment
for false
information,
concealment,
etc., by
bankrupt.
78 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(f) has absconded or attempts to absconds after the bankruptcy commencement
date, he shall be punishable with imprisonment for a term which may extend to one
year, or with fine, which may extend to five lakh rupees, or with both;
Explanation.—For the purposes of this clause, a bankrupt shall be deemed to have
absconded if he leaves, or attempts to leave the country without delivering the possession
of any property which he is required to deliver to the bankruptcy trustee under section 156.
187. If a bankruptcy trustee,—
(a) has fraudulently misapplied, retained or accounted for any money or property
comprised in the estate of the bankrupt; or
(b) has wilfully acted in a manner that the estate of the bankrupt has suffered any
loss in consequence of breach of any duty of the bankruptcy trustee in carrying out
his functions under section 149,
he shall be punishable with imprisonment for a term which may extend to three years, or with
fine, which shall not be less than three times the amount of the loss caused, or likely to have
been caused, to persons concerned on account of such contravention, or with both:
Provided that where such loss or unlawful gain is not quantifiable, the total amount of
fine imposed shall not exceed five lakh rupees:
Provided further that the bankruptcy trustee shall not be liable under this section if he
seizes or disposes of any property which is not comprised in the estate of the bankrupt and
at that time had reasonable grounds to believe that he is entitled to seize or dispose that
property.
PART IV
REGULATION OF INSOLVENCY PROFESSIONALS, AGENCIES AND INFORMATION UTILITIES
CHAPTER I
THE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
188. (1) With effect from such date as the Central Government may, by notification,
appoint, there shall be established, for the purposes of this Code, a Board by the name of the
Insolvency and Bankruptcy Board of India.
(2) The Board shall be a body corporate by the name aforesaid, having perpetual
succession and a common seal, with power, subject to the provisions of this Code, to
acquire, hold and dispose of property, both movable and immovable, and to contract, and
shall, by the said name, sue or be sued.
(3) The head office of the Board shall be at such place in the National Capital Region,
as the Central Government may, by notification, specify.
Explanation.—For the purposes of this section, the expression “National Capital
Region” shall have the same meaning as assigned to it in clause (f) of section 2 of the
National Capital Region Planning Board Act, 1985.
(4) The Board may establish offices at other places in India.
189. (1) The Board shall consist of the following members who shall be appointed by
the Central Government, namely:—
(a) a Chairperson;
(b) three members from amongst the officers of the Central Government not
below the rank of Joint Secretary or equivalent, one each to represent the Ministry of
Finance, the Ministry of Corporate Affairs and Ministry of Law, ex officio;
Punishment
for certain
actions.
Establishment
and
incorporation
of Board.
Constitution
of Board.
2 of 1985.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 79
(c) one member to be nominated by the Reserve Bank of India, ex officio;
(d) five other members to be nominated by the Central Government, of whom at
least three shall be the whole-time members.
(2) The Chairperson and the other members shall be persons of ability, integrity and
standing, who have shown capacity in dealing with problems relating to insolvency or
bankruptcy and have special knowledge and experience in the field of law, finance, economics,
accountancy or administration.
(3) The appointment of the Chairperson and the members of the Board other than the
appointment of an ex officio member under this section shall be made after obtaining the
recommendation of a selection committee consisting of—
(a) Cabinet Secretary—Chairperson;
(b) Secretary to the Government of India to be nominated by the Central
Government—Member;
(c) Chairperson of the Insolvency and Bankruptcy Board of India (in case of
selection of members of the Board)—Member;
(d) three experts of repute from the field of finance, law, management, insolvency
and related subjects, to be nominated by the Central Government—Members.
(4) The term of office of the Chairperson and members (other than ex officio members)
shall be five years or till they attain the age of sixty-five years, whichever is earlier, and they
shall be eligible for reappointment.
(5) The salaries and allowances payable to, and other terms and conditions of service
of, the Chairperson and members (other than the ex officio members) shall be such as may be
prescribed.
190. The Central Government may remove a member from office if he—
(a) is an undischarged bankrupt as defined under Part III;
(b) has become physically or mentally incapable of acting as a member;
(c) has been convicted of an offence, which in the opinion of the Central
Government involves moral turpitude;
(d) has, so abused his position as to render his continuation in office detrimental
to the public interest:
Provided that no member shall be removed under clause (d) unless he has been given
a reasonable opportunity of being heard in the matter.
191. Save as otherwise determined by regulations, the Chairperson shall have powers
of general superintendence and direction of the affairs of the Board and may also exercise
such other powers as may be delegated to him by the Board. .
192. (1) The Board shall meet at such times and places, and observe such rules of
procedure in regard to the transaction of business at its meetings (including quorum at such
meetings) as may be determined by regulations.
(2) The Chairperson, or if, for any reason, the Chairperson is unable to attend any
meeting of the Board, any other member chosen by the members present at the meeting shall
preside at the meeting.
(3) All questions which come up before any meeting of the Board shall be decided by
a majority votes of the members present and voting, and, in the event of an equality of votes,
the Chairperson, or in his absence, the person presiding, shall have a second or casting vote.
Removal of
member from
office.
Powers of
Chairperson.
Meetings of
Board.
80 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
193. Any member, who is a director of a company and who as such director has any
direct or indirect pecuniary interest in any matter coming up for consideration at a meeting of
the Board, shall, as soon as possible after relevant circumstances have come to his knowledge,
disclose the nature of his interest at such meeting and such disclosure shall be recorded in
the proceedings of the Board, and the member shall not take any part in any deliberation or
decision of the Board with respect to that matter.
194. (1) No act or proceeding of the Board shall be invalid merely by reason of—
(a) any vacancy in, or any defect in the constitution of, the Board; or
(b) any defect in the appointment of a person acting as a member of the Board; or
(c) any irregularity in the procedure of the Board not affecting the merits of the
case.
(2) The Board may appoint such other officers and employees as it considers necessary
for the efficient discharge of its functions in such manner as may be specified.
(3) The salaries and allowances payable to, and other terms and conditions of service
of, officers and employees of the Board appointed under sub-section (2) shall be such as
may be specified by regulations.
195. Until the Board is established, the Central Government may by notification,
designate any financial sector regulator to exercise the powers and functions of the Board
under this Code.
CHAPTER II
POWERS AND FUNCTIONS OF THE BOARD
196. (1) The Board shall, subject to the general direction of the Central Government,
perform all or any of the following functions namely:—
(a) register insolvency professional agencies, insolvency professionals and
information utilities and renew, withdraw, suspend or cancel such registrations;
(b) specify the minimum eligibility requirements for registration of insolvency
professional agencies, insolvency professionals and information utilities;
(c) levy fee or other charges for the registration of insolvency professional
agencies, insolvency professionals and information utilities;
(d) specify by regulations standards for the functioning of insolvency
professional agencies, insolvency professionals and information utilities;
(e) lay down by regulations the minimum curriculum for the examination of the
insolvency professionals for their enrolment as members of the insolvency professional
agencies;
(f) carry out inspections and investigations on insolvency professional agencies,
insolvency professionals and information utilities and pass such orders as may be
required for compliance of the provisions of this Code and the regulations issued
hereunder;
(g) monitor the performance of insolvency professional agencies, insolvency
professionals and information utilities and pass any directions as may be required for
compliance of the provisions of this Code and the regulations issued hereunder;
(h) call for any information and records from the insolvency professional agencies,
insolvency professionals and information utilities;
Member not
to participate
in meetings in
certain cases.
Vacancies,
etc., not to
invalidate
proceedings of
Board,
Officers and
employees of
Board.
Power to
designate
financial sector
regulator.
Powers and
functions of
Board.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 81
(i) publish such information, data, research studies and other information as
may be specified by regulations;
(j) specify by regulations the manner of collecting and storing data by the
information utilities and for providing access to such data;
(k) collect and maintain records relating to insolvency and bankruptcy cases and
disseminate information relating to such cases;
(l) constitute such committees as may be required including in particular the
committees laid down in section 197;
(m) promote transparency and best practices in its governance;
(n) maintain websites and such other universally accessible repositories of
electronic information as may be necessary;
(o) enter into memorandum of understanding with any other statutory authorities;
(p) issue necessary guidelines to the insolvency professional agencies, insolvency
professionals and information utilities;
(q) specify mechanism for redressal of grievances against insolvency
professionals, insolvency professional agencies and information utilities and pass orders
relating to complaints filed against the aforesaid for compliance of the provisions of
this Code and the regulations issued hereunder;
(r) conduct periodic study, research and audit the functioning and performance
of to the insolvency professional agencies, insolvency professionals and information
utilities at such intervals as may be specified by the Board;
(s) specify mechanisms for issuing regulations, including the conduct of public
consultation processes before notification of any regulations;
(t) make regulations and guidelines on matters relating to insolvency and
bankruptcy as may be required under this Code, including mechanism for time bound
disposal of the assets of the corporate debtor or debtor; and
(u) perform such other functions as may be prescribed.
(2) The Board may make model bye-laws to be to adopted by insolvency professional
agencies which may provide for—
(a) the minimum standards of professional competence of the members of
insolvency professional agencies;
(b) the standards for professional and ethical conduct of the members of
insolvency professional agencies;
(c) requirements for enrolment of persons as members of insolvency professional
agencies which shall be non-discriminatory;
Explanation.—For the purposes of this clause, the term “non-discriminatory”
means lack of discrimination on the grounds of religion, caste, gender or place of birth
and such other grounds as may be specified;
(d) the manner of granting membership;
(e) setting up of a governing board for internal governance and management of
insolvency professional agency in accordance with the regulations specified by the
Board;
(f) the information required to be submitted by members including the form and
the time for submitting such information;
82 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(g) the specific classes of persons to whom services shall be provided at
concessional rates or for no remuneration by members;
(h) the grounds on which penalties may be levied upon the members of insolvency
professional agencies and the manner thereof;
(i) a fair and transparent mechanism for redressal of grievances against the
members of insolvency professional agencies;
(j) the grounds under which the insolvency professionals may be expelled from
the membership of insolvency professional agencies;
(k) the quantum of fee and the manner of collecting fee for inducting persons as
its members;
(l) the procedure for enrolment of persons as members of insolvency professional
agency;
(m) the manner of conducting examination for enrolment of insolvency
professionals;
(n) the manner of monitoring and reviewing the working of insolvency
professional who are members;
(o) the duties and other activities to be performed by members;
(p) the manner of conducting disciplinary proceedings against its members and
imposing penalties;
(q) the manner of utilising the amount received as penalty imposed against any
insolvency professional.
(3) Notwithstanding anything contained in any other law for the time being in force,
while exercising the powers under this Code, the Board shall have the same powers as are
vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect
of the following matters, namely:—
(i) the discovery and production of books of account and other documents, at
such place and such time as may be specified by the Board;
(ii) summoning and enforcing the attendance of persons and examining them on
oath;
(iii) inspection of any books, registers and other documents of any person at any
place;
(iv) issuing of commissions for the examination of witnesses or documents.
197. The Board may, for the efficient discharge of its functions, may constitute advisory
and executive committees or such other committees, as it may deem fit, consisting of a
Chairperson and such other members as may be specified by regulations.
198. Notwithstanding anything contained in this Code, where the Board does not perform
any act within the period specified under this Code, the relevant Adjudicating Authority may,
for reasons to be recorded in writing, condone the delay.
CHAPTER III
INSOLVENCY PROFESSIONAL AGENCIES
199. Save as otherwise provided in this Code, no person shall carry on its business as
insolvency professional agencies under this Code and enrol insolvency professionals as its
members except under and in accordance with a certificate of registration issued in this
behalf by the Board.
Constitution
of advisory
committee,
executive
committee or
other
committee.
Condonation
of delay.
No person to
function as
insolvency
professional
agency without
valid certificate
of registration.
5 of 1908.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 83
200. The Board shall have regard to the following principles while registering the
insolvency professional agencies under this Code, namely:—
(a) to promote the professional development of and regulation of insolvency
professionals;
(b) to promote the services of competent insolvency professionals to cater to
the needs of debtors, creditors and such other persons as may be specified;
(c) to promote good professional and ethical conduct amongst insolvency
professionals;
(d) to protect the interests of debtors, creditors and such other persons as may
be specified;
(e) to promote the growth of insolvency professional agencies for the effective
resolution of insolvency and bankruptcy processes under this Code.
201. (1) Every application for registration shall be made to the Board in such form and
manner, containing such particulars, and accompanied by such fee, as may be specified by
regulations:
Provided that every application received by the Board shall be acknowledged within
seven days of its receipt.
(2) On receipt of the application under sub-section (1), the Board may, on being
satisfied that the application conforms with all requirements specified under sub-section (1),
grant a certificate of registration to the applicant or else, reject, by order, such
application:
Provided that no order rejecting the application shall be made without giving an
opportunity of being heard to the applicant:
Provided further that every order so made shall be communicated to the applicant
within a period of fifteen days.
(3) The Board may issue a certificate of registration to the applicant in such form and
manner and subject to such terms and conditions as may be specified.
(4) The Board may renew the certificate of registration from time to time in such manner
and on payment of such fee as may be specified.
(5) The Board may, by order, suspend or cancel the certificate of registration granted to
an insolvency professional agency on any of the following grounds, namely:—
(a) that it has obtained registration by making a false statement or
misrepresentation or by any other unlawful means;
(b) that it has failed to comply with the requirements of the regulations made by
the Board or bye-laws made by the insolvency professional agency;
(c) that it has contravened any of the provisions of the Act or the rules or the
regulations made thereunder;
(d) on any other ground as may be specified by regulations:
Provided that no order shall be made under this sub-section unless the insolvency
professional agency concerned has been given a reasonable opportunity of being heard:
Provided further that no such order shall be passed by any member except whole-time
members of the Board.
202. Any insolvency professional agency which is aggrieved by the order of the
Board made under section 201 may prefer an appeal to the National Company Law Appellate
Tribunal in such form, within such period, and in such manner, as may be specified by
regulations.
Principles
governing
registration of
insolvency
professional
agency.
Registration
of insolvency
professional
agency.
Appeal to
National
Company Law
Appellate
Tribunal.
84 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
203. The Board may, for the purposes of ensuring that every insolvency professional
agency takes into account the objectives sought to be achieved under this Code, make
regulations to specify—
(a) the setting up of a governing board of an insolvency professional agency;
(b) the minimum number of independent members to be on the governing board
of the insolvency professional agency; and
(c) the number of the insolvency professionals being its members who shall be
on the governing board of the insolvency professional agency.
204. An insolvency professional agency shall perform the following functions,
namely:—
(a) grant membership to persons who fulfil all requirements set out in its byelaws
on payment of membership fee;
(b) lay down standards of professional conduct for its members;
(c) monitor the performance of its members;
(d) safeguard the rights, privileges and interests of insolvency professionals
who are its members;
(e) suspend or cancel the membership of insolvency professionals who are its
members on the grounds set out in its bye-laws;
(f) redress the grievances of consumers against insolvency professionals who
are its members; and
(g) publish information about its functions, list of its members, performance of
its members and such other information as may be specified by regulations.
205. Subject to the provisions of this Code and any rules or regulations made thereunder
and after obtaining the approval of the Board,every insolvency professional agency shall
make bye-laws consistent with the model bye-laws specified by the Board under sub-section (2)
of section 196.
CHAPTER IV
INSOLVENCY PROFESSIONALS
206. No person shall render his services as insolvency professional under this Code
without being enrolled as a member of an insolvency professional agency and registered
with the Board.
207. (1) Every insolvency professional shall, after obtaining the membership of any
insolvency professional agency, register himself with the Board within such time, in such
manner and on payment of such fee, as may be specified by regulations.
(2) The Board may specify the categories of professionals or persons possessing
such qualifications and experience in the field of finance, law, management, insolvency or
such other field, as it deems fit.
208. (1) Where any insolvency resolution, fresh start, liquidation or bankruptcy process
has been initiated, it shall be the function of an insolvency professional to take such actions
as may be necessary, in the following matters, namely:—
(a) a fresh start order process under Chapter II of Part III;
(b) individual insolvency resolution process under Chapter III of Part III;
Governing
Board of
insolvency
professional
agency.
Functions of
insolvency
professional
agencies.
Insolvency
professional
agencies to
make bye-laws.
Enrolled and
registered
persons to act
as insolvency
professionals.
Registration
of insolvency
professionals.
Functions and
obligations of
insolvency
professionals.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 85
(c) corporate insolvency resolution process under Chapter II of Part II;
(d) individual bankruptcy process under Chapter IV of Part III; and
(e) liquidation of a corporate debtor firm under Chapter III of Part II.
(2) Every insolvency professional shall abide by the following code of conduct:—
(a) to take reasonable care and diligence while performing his duties;
(b) to comply with all requirements and terms and conditions specified in the
bye-laws of the insolvency professional agency of which he is a member;
(c) to allow the insolvency professional agency to inspect his records;
(d) to submit a copy of the records of every proceeding before the Adjudicating
Authority to the Board as well as to the insolvency professional agency of which he is
a member; and
(e) to perform his functions in such manner and subject to such conditions as
may be specified.
CHAPTER V
INFORMATION UTILITIES
209. Save as otherwise provided in this Code, no person shall carry on its business as
information utility under this Code without a certificate of registration issued in that behalf
by the Board.
210. (1) Every application for registration shall be made to the Board in such form and
manner, containing such particulars, and accompanied by such fee, as may be specified by
regulations:
Provided that every application received by the Board shall be acknowledged within
seven days of its receipt.
(2) On receipt of the application under sub-section (1), the Board may, on being
satisfied that the application conforms to all requirements specified under sub-section (1),
grant a certificate of registration to the applicant or else, reject, by order, such application.
(3) The Board may issue a certificate of registration to the applicant in such form and
manner and subject to such terms and conditions as may be specified.
(4) The Board may renew the certificate of registration from time to time in such manner
and on payment of such fee as may be specified by regulations.
(5) The Board may, by order, suspend or cancel the certificate of registration granted to
an information utility on any of the following grounds, namely:—
(a) that it has obtained registration by making a false statement or
misrepresentation or any other unlawful means;
(b) that it has failed to comply with the requirements of the regulations made by
the Board;
(c) that it has contravened any of the provisions of the Act or the rules or the
regulations made thereunder;
(d) on any other ground as may be specified by regulations:
Provided that no order shall be made under this sub-section unless the information
utility concerned has been given a reasonable opportunity of being heard:
No person to
function as
information
utility without
certificate of
registration.
Registration
of
information
utility.
86 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Provided further that no such order shall be passed by any member except whole-time
members of the Board.
211. Any information utility which is aggrieved by the order of the Board made under
section 210 may prefer an appeal to the National Company Law Appellate Tribunal in such
form, within such period, and in such manner, as may be specified by regulations.
212. The Board may, for ensuring that an information utility takes into account the
objectives sought to be achieved under this Code, require every information utility to set up
a governing board, with such number of independent members, as may be specified by
regulations.
213. An information utility shall provide such services as may be specified including
core services to any person if such person complies with the terms and conditions as may be
specified by regulations.
214. For the purposes of providing core services to any person, every information
utility shall-—
(a) create and store financial information in a universally accessible format;
(b) accept electronic submissions of financial information from persons who are
under obligations to submit financial information under sub-section (1) of section 215,
in such form and manner as may be specified by regulations;
(c) accept, in specified form and manner, electronic submissions of financial
information from persons who intend to submit such information;
(d) meet such minimum service quality standards as may be specified by
regulations;
(e) get the information received from various persons authenticated by all
concerned parties before storing such information;
(f) provide access to the financial information stored by it to any person who
intends to access such information in such manner as may be specified by regulations;
(g) publish such statistical information as may be specified by regulations;
(h) have inter-operatability with other information utilities.
215. (1) Any person who intends to submit financial information to the information
utility or access the information from the information utility shall pay such fee and submit
information in such form and manner as may be specified by regulations.
(2) A financial creditor shall submit financial information and information relating to
assets in relation to which any security interest has been created, in such form and manner
as may be specified by regulations.
(3) An operational creditor may submit financial information to the information utility
in such form and manner as may be specified.
216. (1) A person who intends to update or modify or rectify errors in the financial
information submitted under section 215, he may make an application to the information
utility for such purpose stating reasons therefor, in such manner and within such time, as
may be specified.
Appeal to
National
Company Law
Appellate
Tribunal.
Governing
Board of
information
utility.
Core services,
etc., of
information
utilities.
Obligations of
information
utility.
Procedure for
submission,
etc., of
financial
information.
Rights and
obligations of
persons
submitting
financial
information.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 87
(2) A person who submits financial information to an information utility shall not
provide such information to any other person, except to such extent, under such circumstances,
and in such manner, as may be specified.
CHAPTER VI
INSPECTION AND INVESTIGATION
217. Any person aggrieved by the functioning of an insolvency professional agency
or insolvency professional or an information utility may file a complaint to the Board in such
form, within such time and in such manner as may be specified.
218. (1) Where the Board, on receipt of a complaint under section 217 or has reasonable
grounds to believe that any insolvency professional agency or insolvency professional or
an information utility has contravened any of the provisions of the Code or the rules or
regulations made or directions issued by the Board thereunder, it may, at any time by an order
in writing, direct any person or persons to act as an investigating authority to conduct an
inspection or investigation of the insolvency professional agency or insolvency professional
or an information utility.
(2) The inspection or investigation carried out under sub-section (1) of this section
shall be conducted within such time and in such manner as may be specified by regulations.
(3) The Investigating Authority may, in the course of such inspection or investigation,
require any other person who is likely to have any relevant document, record or information
to furnish the same, and such person shall be bound to furnish such document, record or
information:
Provided that the Investigating Authority shall provide detailed reasons to such person
before requiring him to furnish such document, record or information.
(4) The Investigating Authority may, in the course of its inspection or investigation,
enter any building or place where they may have reasons to believe that any such document,
record or information relating to the subject-matter of the inquiry may be found and may
seize any such document, record or information or take extracts or copies therefrom, subject
to the provisions of section 100 of the Code of Criminal Procedure, 1973, insofar as they may
be applicable.
(5) The Investigating Authority shall keep in its custody the books, registers, other
documents and records seized under this section for such period not later than the conclusion
of the investigation as it considers necessary and thereafter shall return the same to the
concerned person from whose custody or power they were seized:
Provided that the Investigating Authority may, before returning such books, registers,
other documents and record as aforesaid, place identification marks on them or any part
thereof.
(6) A detailed report of inspection or investigation shall be submitted to the Board by
the Investigating Authority.
219.The Board may, upon completion of an inspection or investigation under
section 218, issue a show cause notice to such insolvency professional agency or insolvency
professional or information utility, and carry out inspection of such insolvency professional
agency or insolvency professional or information utility in such manner, giving such time for
giving reply, as may be specified by regulations.
Complaints
against
insolvency
professional
agency or its
member or
information
utility.
Investigation
of insolvency
professional
agency or its
member or
information
utility.
Show cause
notice to
insolvency
professional
agency or its
member or
information
utility.
88 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
220. (1) The Board shall constitute a disciplinary committee to consider the reports of
the investigating Authority submitted under sub-section (6) of section 218:
Provided that the members of the disciplinary committee shall consist of whole-time
members of the Board only.
(2) On the examination of the report of the Investigating Authority, if the disciplinary
committee is satisfied that sufficient cause exists, it may impose penalty as specified in
sub-section (3) or suspend or cancel the registration of the insolvency professional or,
suspend or cancel the registration of insolvency professional agency or information utility
as the case may be.
(3) Where any insolvency professional agency or insolvency professional or an
information utility has contravened any provision of this Code or rules or regulations made
thereunder, the disciplinary committee may impose penalty which shall be—
(i) three times the amount of the loss caused, or likely to have been caused, to
persons concerned on account of such contravention; or
(ii) three times the amount of the unlawful gain made on account of such
contravention,
whichever is higher:
Provided that where such loss or unlawful gain is not quantifiable, the total amount of
the penalty imposed shall not exceed more than one crore rupees.
(4) Notwithstanding anything contained in sub-section (3), the Board may direct any
person who has made unlawful gain or averted loss by indulging in any activity in
contravention of this Code, or the rules or regulations made thereunder, to disgorge an amount
equivalent to such unlawful gain or aversion of loss.
(5) The Board may take such action as may be required to provide restitution to the
person who suffered loss on account of any contravention from the amount so disgorged, if
the person who suffered such loss is identifiable and the loss so suffered is directly attributable
to such person.
(6) The Board may make regulations to specify—
(a) the procedure for claiming restitution under sub-section (5);
(b) the period within which such restitution may be claimed; and
(c) the manner in which restitution of amount may be made.
CHAPTER VII
FINANCE, ACCOUNTS AND AUDIT
221. The Central Government may, after due appropriation made by Parliament by law
in this behalf, make to the Board grants of such sums of money as that Government may think
fit for being utilised for the purposes of this Code.
222. (1) There shall be constituted a Fund to be called the Fund of the Insolvency and
Bankruptcy Board and there shall be credited thereto—
(a) all grants, fees and charges received by the Board under this Code;
(b) all sums received by the Board from such other sources as may be decided
upon by the Central Government;
(c) such other funds as may be specified by the Board or prescribed by the
Central Government.
(2) The Fund shall be applied for meeting—
Appointment
of disciplinary
committee.
Grants by
Central
Government.
Board’s Fund.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 89
(a) the salaries, allowances and other remuneration of the members, officers and
other employees of the Board;
(b) the expenses of the Board in the discharge of its functions under section 196;
(c) the expenses on objects and for purposes authorised by this Code;
(d) such other purposes as may be prescribed.
223. (1) The Board shall maintain proper accounts and other relevant records and
prepare an annual statement of accounts in such form as may be prescribed by the Central
Government in consultation with the Comptroller and Auditor-General of India.
(2) The accounts of the Board shall be audited by the Comptroller and Auditor-General
of India at such intervals as may be specified by him and any expenditure incurred in
connection with such audit shall be payable by the Board to the Comptroller and AuditorGeneral
of India.
(3) The Comptroller and Auditor-General of India and any other person appointed by
him in connection with the audit of the accounts of the Board shall have the same rights and
privileges and authority in connection with such audit as the Comptroller and Auditor-General
generally has in connection with the audit of the Government accounts and, in particular,
shall have the right to demand the production of books, accounts, connected vouchers and
other documents and papers and to inspect any of the offices of the Board.
(4) The accounts of the Board as certified by the Comptroller and Auditor-General of
India or any other person appointed by him in this behalf together with the audit report
thereon shall be forwarded annually to the Central Government and that Government shall
cause the same to be laid before each House of Parliament.
PART V
MISCELLENEOUS
224. (1) There shall be formed a Fund to be called the Insolvency and Bankruptcy
Fund (hereafter in this section referred to as the “Fund”) for the purposes of insolvency
resolution, liquidation and bankruptcy of persons under the Code.
(2) There shall be credited to the Fund the following amounts, namely—
(a) the grants made by the Central Government for the purposes of the Fund;
(b) the amount deposited by persons as contribution to the Fund;
(c) the amount received in the Fund from any other source; and
(d) the interest or other income received out of the investment made from the
Fund.
(3) A person who has contributed any amount to the Fund may, in the event of
proceedings initiated in respect of such person under this Code before an Adjudicating
Authority, make an application to such Adjudicating Authority for withdrawal of funds not
exceeding the amount contributed by it, for making payments to workmen, protecting the
assets of such persons, meeting the incidental costs during the proceedings or such other
purposes as may be prescribed.
(4) The Central Government shall, by notification, appoint an administrator to
administer the fund in such manner as may be prescribed.
225. (1) Without prejudice to the foregoing provisions of this Code, the Board shall, in
exercise of its powers or the performance of its functions under this Code, be bound by such
directions on questions of policy as the Central Government may give in writing to it from
time to time:
Accounts and
audit.
Insolvency
and
Bankruptcy
Fund.
Power of
Central
Government to
issue
directions.
90 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Provided that the Board shall, as far as practicable, be given an opportunity to express
its views before any direction is given under this sub-section.
(2) The decision of the Central Government as to whether a question is one of policy
or not shall be final.
226. (1) If at any time the Central Government is of opinion—
(a) that on account of grave emergency, the Board is unable to discharge the
functions and duties imposed on it by or under the provisions of this Code; or
(b) that the Board has persistently not complied with any direction issued by the
Central Government under this Code or in the discharge of the functions and duties
imposed on it by or under the provisions of this Code and as a result of such noncompliance
the financial position of the Board or the administration of the Board has
deteriorated; or
(c) that circumstances exist which render it necessary in the public interest so to
do,
the Central Government may, by notification, supersede the Board for such period, not
exceeding six months, as may be specified in the notification.
(2) Upon the publication of a notification under sub-section (1) superseding the
Board, — (a) all the members shall, as from the date of supersession, vacate their offices as
such; (b) all the powers, functions and duties which may, by or under the provisions of this
Code, be exercised or discharged by or on behalf of the Board, shall until the Board is
reconstituted under sub-section (3), be exercised and discharged by such person or persons
as the Central Government may direct; and (c) all property owned or controlled by the Board
shall, until the Board is reconstituted under sub-section (3), vest in the Central Government.
(3) On the expiration of the period of supersession specified in the notification issued
under sub-section (1), the Central Government may reconstitute the Board by a fresh
appointment and in such case any person or persons who vacated their offices under
clause (a) of sub-section (2), shall not be deemed disqualified for appointment:
Provided that the Central Government may, at any time, before the expiration of the
period of supersession, take action under this sub-section.
(4) The Central Government shall cause a notification issued under sub-section (1)
and a full report of any action taken under this section and the circumstances leading to such
action to be laid before each House of Parliament at the earliest.
227. Notwithstanding anything to the contrary examined in this Code or any other law
for the time being in force, the Central Government may, if it considers necessary, in
consultation with the appropriate financial sector regulators, notify financial service providers
or categories of financial service providers for the purpose of their insolvency and liquidation
proceedings, which may be conducted under this Code, in such manner as may be prescribed.
228. The Board shall prepare, in such form and at such time in each financial year as
may be prescribed, its budget for the next financial year, showing the estimated receipts and
expenditure of the Board and forward the same to the Central Government.
229. (1) The Board shall prepare, in such form and at such time in each financial year
as may be prescribed, its annual report, giving a full account of its activities during the
previous financial year, and submit a copy thereof to the Central Government.
(2) A copy of the report received under sub-section (1) shall be laid, as soon as may be
after it is received, before each House of Parliament.
Power of
Central
Government to
supersede
Board.
Power of
Central
Government to
notify
financial
service
providers, etc.
Budget.
Annual
report.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 91
230. The Board may, by general or special order in writing delegate to any member or
officer of the Board subject to such conditions, if any, as may be specified in the order, such
of its powers and functions under this Code (except the powers under section 240 as it may
deem necessary.
231. No civil court shall have jurisdiction in respect of any matter in which the
Adjudicating Authority is empowered by, or under, this Code to pass any order and no
injunction shall be granted by any court or other authority in respect of any action taken or
to be taken in pursuance of any order passed by such Adjudicating Authority under this
Code.
232. The Chairperson, Members, officers and other employees of the Board shall
be deemed, when acting or purporting to act in pursuance of any of the provisions of
this Code, to be public servants within the meaning of section 21 of the Indian Penal
Code.
233. No suit, prosecution or other legal proceeding shall lie against the Government or
any officer of the Government, or the Chairperson, Member, officer or other employee of the
Board or an insolvency professional or liquidator for anything which is in done or intended
to be done in good faith under this Code or the rules or regulations made thereunder.
234. (1) The Central Government may enter into an agreement with the Government of
any country outside India for enforcing the provisions of this Code.
(2) The Central Government may, by notification in the Official Gazette, direct that the
application of provisions of this Code in relation to assets or property of corporate debtor or
debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at
any place in a country outside India with which reciprocal arrangements have been made,
shall be subject to such conditions as may be specified.
235. (1) Notwithstanding anything contained in this Code or any law for the time
being in force if, in the course of insolvency resolution process, or liquidation or bankruptcy
proceedings, as the case may be, under this Code, the resolution professional, liquidator or
bankruptcy trustee, as the case may be, is of the opinion that assets of the corporate debtor
or debtor, including a personal guarantor of a corporate debtor, are situated in a country
outside India with which reciprocal arrangements have been made under section 234, he may
make an application to the Adjudicating Authority that evidence or action relating to such
assets is required in connection with such process or proceeding.
(2) The Adjudicating Authority on receipt of an application under sub-section (1) and,
on being satisfied that evidence or action relating to assets under sub-section (1) is required
in connection with insolvency resolution process or liquidation or bankruptcy proceeding,
may issue a letter of request to a court or an authority of such country competent to deal with
such request.
236. (1) Notwithstanding anything in the Code of Criminal Procedure, 1973, offences
under this Code shall be tried by the Special Court established under Chapter XXVIII of the
Companies Act, 2013.
(2) No Court shall take cognizance of any offence punishable under this Act, save on
a complaint made by the Board or the Central Government or any person authorised by the
Central Government in this behalf.
(3) The provisions of the Code of Criminal Procedure, 1973 shall apply to the
proceedings before a Special Court and for the purposes of the said provisions, the Special
Court shall be deemed to be a Court of Session and the person conducting a prosecution
before a Special Court shall be deemed to be a Public Prosecutor.
(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, in
case of a complaint under sub-section (2), the presence of the person authorised by the
Delegation.
Bar of
jurisdiction.
Members,
officers and
employees of
Board to the
public
servants.
Protection of
action taken in
good faith.
Agreements
with foreign
countries.
Letter of
request to a
country outside
India in certain
cases.
Trial of
offences by
Special Court.
45 of 1860.
2 of 1974.
18 of 2013.
92 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
Central Government or the Board before the Court trying the offences shall not be necessary
unless the Court requires his personal attendance at the trial.
237. The High Court may exercise, so far as may be applicable, all the powers conferred
by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a
Special Court within the local limits of the jurisdiction of the High Court were a Court of
Session trying cases within the local limits of the jurisdiction of the High Court.
238. The provisions of this Code shall have effect, notwithstanding anything
inconsistent therewith contained in any other law for the time being in force or any instrument
having effect by virtue of any such law.
239. (1) The Central Government may, by notification, make rules for carrying out the
provisions of this Code.
(2) Without prejudice to the generality of the provisions of sub-section (1), the Central
Government may make rules for any of the following matters, namely:—
(a) any other instrument which shall be a financial product under clause (15) of
section 3;
(b) other accounting standards which shall be a financial debt under clause (d)
of sub-section (8) of section 5;
(c) the form, the manner and the fee for making application before the Adjudicating
Authority for initiating corporate insolvency resolution process by financial creditor
under sub-section (2) of section 7;
(d) the form and manner in which demand notice may be made and the manner of
delivery thereof to the corporate debtor under sub-section (1) of section 8;
(e) the form, the manner and the fee for making application before the Adjudicating
Authority for initiating corporate insolvency resolution process by operational creditor
under sub-section (2) of section 9;
(f) the form, the manner and the fee for making application before the Adjudicating
Authority for initiating corporate insolvency resolution process by corporate applicant
under sub-section (2) of section 10;
(g) the persons who shall be relative under clause (ii) of the Explanation to
sub-section (1) of section 79;
(h) the value of unencumbered single dwelling unit owned by the debtor under
clause (e) of sub-section (13) of section 79;
(i) the value under clause (c), and any other debt under clause (f), of
sub-section (14) of section 79;
(j) the form, the manner and the fee for making application for fresh start order
under sub-section (3) of section 81;
(k) the particulars of the debtor’s personal details under clause (e) of sub-section (3)
of section 81;
(l) the information and documents to support application under sub-section (3)
of section 86;
(m) the form, the manner and the fee for making application for initiating the
insolvency resolution process by the debtor under sub-section (6) of section 94;
(n) the form, the manner and the fee for making application for initiating the
insolvency resolution process by the creditor under sub-section (6) of section 95;
Appeal and
revision.
Provisions of
this Code to
override other
laws.
Power to
make rules.
2 of 1974.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 93
(o) the particulars to be provided by the creditor to the resolution professional
under sub-section (2) of section 103;
(p) the form and the manner for making application for bankruptcy by the debtor
under clause (b) of sub-section (1) of section 122;
(q) the form and the manner of the statement of affairs of the debtor under
sub-section (3) of section 122;
(r) the other information under clause (d) of sub-section (1) of section 123;
(s) the form, the manner and the fee for making application for bankruptcy under
sub-section (6) of section 123;
(t) the form and the manner in which statement of financial position shall be
submitted under sub-section (2) of section 129;
(u) the matters and the details which shall be included in the public notice under
sub-section (2) of section 130;
(v) the matters and the details which shall be included in the notice to the creditors
under sub-section (3) of section 130;
(w) the manner of sending details of the claims to the bankruptcy trustee and
other information under sub-sections (1) and (2) of section 131;
(x) the value of financial or commercial transaction under clause (d) of
sub-section (1) of section 141;
(y) the other things to be done by a bankrupt to assist bankruptcy trustee in
carrying out his functions under clause (d) of sub-section (1) of section 150;
(z) the manner of dealing with the surplus under sub-section (4) of section 170;
(za) the form and the manner of proof of debt under clause (c) of sub-section (2)
of section 171;
(zb) the manner of receiving dividends under sub-section (7) of section 171;
(zc) the particulars which the notice shall contain under sub-section (2) of
section 176;
(zd) the salaries and allowances payable to, and other terms and conditions of
service of, the Chairperson and members of the Board under sub-section (5) of
section 189;
(ze) the other functions of the Board under clause (u) of sub-section (1) of
section 196;
(zf) the other funds under clause (c) of sub-section (1) of section 222;
(zg) the other purposes for which the fund shall be applied under clause (d) of
sub-section (2) of section 222;
(zh) the form in which annual statement of accounts shall be prepared under
sub-section (1) of section 223;
(zi) the purpose for which application for withdrawal of funds may be made
under sub-section (3) of section 224;
(zj) the manner of administering the fund under sub-section (4) of section 224;
(zk) the manner of conducting insolvency and liquidation proceedings under
section 227;
(zl) the form and the time for preparing budget by the Board under section 228;
94 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(zm) the form and the time for preparing annual report under sub-section (1) of
section 229;
(zn) the time up to which a person appointed to any office shall continue to hold
such office under clause (vi) of sub-section (2) of section 243.
240. (1) The Board may, by notification, make regulations consistent with this Code
and the rules made thereunder, to carry out the provisions of this Code.
(2) In particular, and without prejudice to the generality of the foregoing power, such
regulations may provide for all or any of the following matters, namely:—
(a) the form and the manner of accepting electronic submission of financial
information under sub-clause (a) of clause (9) of section 3;
(b) the persons to whom access to information stored with the information utility
may be provided under sub-clause (d) of clause (9) of section 3;
(c) the other information under sub-clause (f) of clause (13) of section 3;
(d) the other costs under clause (e) of sub-section (13) of section 5;
(e) the cost incurred by the liquidator during the period of liquidation which
shall be liquidation cost under sub-section (16) of section 5;
(f) the other record or evidence of default under clause (a), and any other
information under clause (c), of sub-section (3) of section 7;
(g) the other information under clause (d) of sub-section (3) of section 9;
(h) the period under clause (a) of sub-section (3) of section 10;
(i) the supply of essential goods or services to the corporate debtor under
sub-section (2) of section 14;
(j) the manner of making public announcement under sub-section (2) of
section 15;
(k) the manner of taking action and the restrictions thereof under clause (b) of
sub-section (2) of section 17;
(l) the other persons under clause (d) of sub-section (2) of section 17;
(m) the other matters under clause (d) of sub-section (2) of section 17;
(n) the other matters under sub-clause (iv) of clause (a), and the other duties to
be performed by the interim resolution professional under clause (g), of section 18;
(o) the persons who shall comprise the committee of creditors, the functions to
be exercised such committee and the manner in which functions shall be exercised
under the proviso to sub-section (8) of section 21;
(p) the other electronic means by which the members of the committee of creditors
may meet under sub-section (1) of section 24;
(q) the manner of assigning voting share to each creditor under sub-section (7)
of section 24;
(r) the manner of conducting the meetings of the committee of creditors under
sub-section (8) of section 24;
(s) the manner of appointing accountants, lawyers and other advisors under
clause (d) of sub-section (2) of section 25;
(t) the other actions under clause (k) of sub-section (2) of section 25;
(u) the form and the manner in which an information memorandum shall be
prepared by the resolution professional sub-section (1) of section 29;
Power to
make
regulations.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 95
(v) the other matter pertaining to the corporate debtor under the Explanation to
sub-section (2) of section 29;
(w) the manner of making payment of insolvency resolution process costs under
clause (a), the manner of repayment of debts of operational creditors under clause (b),
and the other requirements to which a resolution plan shall conform to under
clause (d), of sub-section (2) of section 30;
(x) the fee for the conduct of the liquidation proceedings and proportion to the
value of the liquidation estate assets under sub-section (8) of section 34;
(y) the manner of evaluating the assets and property of the corporate debtor
under clause (c), the manner of selling property in parcels under clause (f), the manner
of reporting progress of the liquidation process under clause (n), and the other functions
to be performed under clause (o), of sub-section (1) of section 35;
(z) the manner of making the records available to other stakeholders under
sub-section (2) of section 35;
(za) the other means under clause (a) of sub-section (3) of section 36;
(zb) the other assets under clause (e) of sub-section (4) of section 36;
(zc) the other source under clause (g) of sub-section (1) of section 37;
(zd) the manner of providing financial information relating to the corporate debtor
under sub-section (2) of section 37;
(ze) the form, the manner and the supporting documents to be submitted by
operational creditor to prove the claim under sub-section (3) of section 38;
(zf) the time within which the liquidator shall verify the claims under sub-section (1)
of section 39;
(zg) the manner of determining the value of claims under section 41;
(zh) the manner of relinquishing security interest to the liquidation estate and
receiving proceeds from the sale of assets by the liquidator under clause (a), and the
manner of realising security interest under clause (b) of sub-section (1) of section 52;
(zi) the other means under clause (b) of sub-section (3) of section 52;
(zj) the manner in which secured creditor shall be paid by the liquidator under
sub-section (9) of section 52;
(zk) the period and the manner of distribution of proceeds of sale under
sub-section (1) of section 53;
(zl) the other means under clause (a) and the other information under clause (b)
of section 57;
(zm) the conditions and procedural requirements under sub-section (2) of
section 59;
(zn) the details and the documents required to be submitted under
sub-section (7) of section 95;
(zo) the other matters under clause (c) of sub-section (3) of section 105;
(zp) the manner and form of proxy voting under sub-section (4) of section 107;
(zq) the manner of assigning voting share to creditor under sub-section (2) of
section 109;
(zr) the manner and form of proxy voting under sub-section (3) of section 133;
(zs) the fee to be charged under sub-section (1) of section 144;
96 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(zt) the appointment of other officers and employees under sub-section (2), and
the salaries and allowances payable to, and other terms and conditions of service of,
such officers and employees of the Board under sub-section (3), of section 194;
(zu) the other information under clause (i) of sub-section (1) of section 196;
(zv) the intervals in which the periodic study, research and audit of the functioning
and performance of the insolvency professional agencies, insolvency professionals
and information utilities under clause (r), and mechanism for disposal of assets under
clause (t), of sub-section (1) of section 196;
(zw) the place and the time for discovery and production of books of account
and other documents under clause (i) of sub-section (3) of section 196;
(zx) the other committees to be constituted by the Board and the other members
of such committees under section 197;
(zy) the other persons under clause (b) and clause (d) of section 200;
(zz) the form and the manner of application for registration, the particulars to be
contained therein and the fee it shall accompany under sub-section (1) of section 201;
(zza) the form and manner of issuing a certificate of registration and the terms
and conditions thereof, under sub-section (3) of section 201;
(zzb) the manner of renewal of the certificate of registration and the fee therefor,
under sub-section (4) of section 201;
(zzc) the other ground under clause (d) of sub-section (5) of section 201;
(zzd) the form of appeal to the National Company Law Appellate Tribunal, the
period within which it shall be filed under section 202;
(zze) the other information under clause (g) of section 204;
(zzf) the other grounds under Explanation to section 196;
(zzg) the setting up of a governing board for its internal governance and
management under clause (e), the curriculum under clause (l), the manner of conducting
examination under clause (m) , of section 196;
(zzh) the time within which, the manner in which, and the fee for registration of
insolvency professional under sub-section (1) of section 207;
(zzi) the categories of professionals or persons, the qualifications and experience
and the fields under sub-section (2) of section 207;
(zzj) the manner and the conditions subject to which the insolvency professional
shall perform his function under clause (f) of sub-section (2) of section 208;
(zzk) the form and manner in which, and the fee for registration of information
utility under sub-section (1) of section 210;
(zzl) the form and manner for issuing certificate of registration and the terms and
conditions thereof, under sub-section (3) of section 210;
(zzm) the manner of renewal of the certificate of registration and the fee therefor,
under sub-section (4) of section 210;
(zzn) the other ground under clause (d) of sub-section (5) of section 210;
(zzo) the form, the period and the manner of filling appeal to the National Company
Law Appellate Tribunal under section 211;
(zzp) the number of independent members under section 212;
(zzq) the services to be provided by information utility and the terms and
conditions under section 213;
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 97
(zzr) the form and manner of accepting electronic submissions of financial
information under clause (b) and clause (c) of section 214;
(zzs) the minimum service quality standards under clause (d) of section 214;
(zzt) the information to be accessed and the manner of accessing such information
under clause (f) of section 214;
(zzu) the statistical information to be published under clause (g) of section 214;
(zzv) the form, the fee and the manner for submitting or accessing information
under sub-section (1) of section 215;
(zzw) the form and manner for submitting financial information and information
relating to assets under sub-section (2) of section 215;
(zzx) the manner and the time within which financial information may be updated
or modified or rectified under section 216;
(zzy) the form, manner and time of filing complaint under section 217;
(zzz) the time and manner of carrying out inspection or investigation under subsection
(2) of section 218;
(zzza) the manner of carrying out inspection of insolvency professional agency
or insolvency professional or information utility and the time for giving reply under
section 219;
(zzzb) the procedure for claiming restitution under sub-section (6), the period
within which such restitution may be claimed and the manner in which restitution of
amount may be made under sub-section (7) of section 220;
(zzzc) the other funds of clause (c) of sub-section (1) of section 222.
241. Every rule and every regulation made under this Code shall be laid, as soon as
may be after it is made, before each House of Parliament, while it is in session, for a total
period of thirty days which may be comprised in one session or in two or more successive
sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Houses agree in making any modification in the rule or
regulation or both Houses agree that the rule or regulation should not be made, the rule or
regulation shall thereafter have effect only in such modified form or be of no effect, as the
case may be; so, however, that any such modification or annulment shall be without prejudice
to the validity of anything previously done under that rule or regulation.
242. (1) If any difficulty arises in giving effect to the provisions of this Code, the
Central Government may, by order, published in the Official Gazette, make such provisions
not inconsistent with the provisions of this Code as may appear to be necessary for removing
the difficulty:
Provided that no order shall be made under this section after the expiry of five years
from the commencement of this Code.
(2) Every order made under this section shall be laid, as soon as may be after it is made,
before each House of Parliament.
243. (1) The Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency
Act, 1920 are hereby repealed.
(2) Notwithstanding the repeal under sub-sections (1),—
(i) all proceedings pending under and relating to the Presidency Towns Insolvency
Act 1909, and the Provincial Insolvency Act 1920 immediately before the commencement
of this Code shall continue to be governed under the aforementioned Acts and be
Rules and
regulations to
be laid before
Parliament.
Power to
remove
difficulties.
Repeal of
certain
enactments and
savings.
5 of 1920.
3 of 1909.
98 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
heard and disposed of by the concerned courts or tribunals, as if the aforementioned
Acts have not been repealed;
(ii) any order, rule, notification, regulation, appointment, conveyance, mortgage,
deed, document or agreement made, fee directed, resolution passed, direction given,
proceeding taken, instrument executed or issued, or thing done under or in pursuance
of any repealed enactment shall, if in force at the commencement of this Code, continue
to be in force, and shall have effect as if the aforementioned Acts have not been repealed;
(iii) anything done or any action taken or purported to have been done or taken,
including any rule, notification, inspection, order or notice made or issued or any
appointment or declaration made or any operation undertaken or any direction given
or any proceeding taken or any penalty, punishment, forfeiture or fine imposed under
the repealed enactments shall be deemed valid;
(iv) any principle or rule of law, or established jurisdiction, form or course of
pleading, practice or procedure or existing usage, custom, privilege, restriction or
exemption shall not be affected, notwithstanding that the same respectively may have
been in any manner affirmed or recognised or derived by, in, or from, the repealed
enactments;
(v) any prosecution instituted under the repealed enactments and pending
immediately before the commencement of this Code before any court or tribunal shall,
subject to the provisions of this Code, continue to be heard and disposed of by the
concerned court or tribunal;
(vi) any person appointed to any office under or by virtue of any repealed
enactment shall continue to hold such office until such time as may be prescribed; and
(vii) any jurisdiction, custom, liability, right, title, privilege, restriction, exemption,
usage, practice, procedure or other matter or thing not in existence or in force shall not
be revised or restored.
(3) The mention of particular matters in sub-section (2) shall not be held to prejudice
the general application of section 6 of the General Clauses Act, 1897 with regard to the
effect of repeal of the repealed enactments or provisions of the enactments mentioned in the
Schedule.
244. (1) Until the Board is constituted or a financial sector regulator is designated
under section 195, as the case may be, the powers and functions of the Board or such
designated financial sector regulator, including its power to make regulations, shall be
exercised by the Central Government.
(2) Without prejudice to the generality of the power under sub-section (1), the Central
Government may by regulations provide for the following matters:—
(a) recognition of persons, categories of professionals and persons having such
qualifications and experience in the field of finance, law, management or insolvency
as it deems necessary, as insolvency professionals and insolvency professional agencies
under this Code;
(b) recognition of persons with technological, statistical, and data protection
capability as it deems necessary, as information utilities under this Code; and
(c) conduct of the corporate insolvency resolution process, insolvency resolution
process, liquidation process, fresh start process and bankruptcy process under this
Code.
245. The Indian Partnership Act, 1932 shall be amended in the manner specified in the
First Schedule.
Transitional
provisions.
Amendments
of Act 9 of
1932.
10 of 1897.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 99
246. The Central Excise Act, 1944 shall be amended in the manner specified in the
Second Schedule.
247. The Income- tax Act, 1961 shall be amended in the manner specified in the Third
Schedule.
248. The Customs Act, 1962 shall be amended in the manner specified in the Fourth
Schedule.
249. The Recovery of Debts due to Banks and Financial Institutions Act, 1993 shall be
amended in the manner specified in the Fifth Schedule.
250. The Finance Act, 1994 shall be amended in the manner specified in the Sixth
Schedule.
251. The Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 shall be amended in the manner specified in the Seventh Schedule.
252. The Sick Industrial Companies (Special Provisions) Repeal Act, 2003 shall be
amended in the manner specified in the Eighth Schedule.
253. The Payment and Settlement Systems Act, 2007 shall be amended in the manner
specified in the Ninth Schedule.
254. The Limited Liability Partnership Act, 2008 shall be amended in the manner specified
in the Tenth Schedule.
255. The Companies Act, 2013 shall be amended in the manner specified in the Eleventh
Schedule.
THE FIRST SCHEDULE
(See section 245)
AMENDMENT TO THE INDIAN PARTNERSHIP ACT, 1932
( 9 OF 1932)
1. In section 41, clause (a) shall be omitted.
THE SECOND SCHEDULE
(See section 246)
AMENDMENT TO THE CENTRAL EXCISE ACT, 1944
(1 of 1944)
1. In section 11E, for the words, figures and brackets “and the Securitisation and
Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002
(54 of 2002) “, the words, figures and brackets “the Securitisation and Reconstruction of
Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002) and the
Insolvency and Bankruptcy Code, 2016” shall be substituted.
Amendments
of Act 1 of
1944.
Amendments
of Act 43 of
1961.
Amendments
of Act 52 of
1962.
Amendments
of Act 51 of
1993.
Amendments
of Act 32 of
1994.
Amendments
of Act 54 of
2002.
Amendments
of Act 1 of
2004.
Amendments
of Act 51 of
2007.
Amendments
of Act 6 of
2009.
Amendments
of Act 18 of
2013.
100 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
THE THIRD SCHEDULE
(See section 247)
AMENDMENT TO THE INCOME-TAX ACT, 1961
(43 OF 1961)
In sub-section (6) of section 178, after the words “for the time being in force”, the
words and figures “except the provisions of the Insolvency and Bankruptcy Code, 2016”
shall be inserted.
THE FOURTH SCHEDULE
(See section 248)
AMENDMENT TO THE CUSTOMS ACT, 1962
(52 OF 1962)
In section 142A, for the words and figures “and the Securitisation and Reconstruction
of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002)”, the
words and figures ” the Securitisation and Reconstruction of Financial Assets and the
Enforcement of Security Interest Act, 2002 and the Insolvency and Bankruptcy Code, 2016″
shall be substituted.
THE FIFTH SCHEDULE
(See section 249)
AMENDMENT TO THE RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993
(51 OF 1993)
1. In the long title, after the words “financial institutions”, the words “, insolvency
resolution and bankruptcy of individuals and partnership firms” shall be inserted,
namely:—.
2. In section 1,—
(a) in sub-section (1), for the words “Due to Banks and Financial Institutions”
the words “and Bankruptcy” shall be substituted;
(b) in sub-section (4), for the words ” The provision of this Code”, the words
“Save as otherwise provided, the provisions of this Code”, shall be substituted.
3. In section 3, after sub-section (1), the following sub-section shall be inserted,
namely:—
” (1A) The Central Government shall by notification establish such number of
Debts Recovery Tribunals and its benches as it may consider necessary, to exercise
the jurisdiction, powers and authority of the Adjudicating Authority conferred on
such Tribunal by or under the Insolvency and Bankruptcy Code, 2016.”.
4. In section 8, after sub-section (1), the following section shall be inserted,
namely:—
” (1A) The Central Government shall, by notification, establish such number of Debt
Recovery Appellate Tribunals to exercise jurisdiction, powers and authority to entertain
appeal against the order made by the Adjudicating Authority under Part III of the Insolvency
and Bankruptcy Code, 2016.”.
5. In section 17,—
(i) after sub-section (1), the following sub-section shall be inserted, namely:—
” (1A) Without prejudice to sub-section (1),—
(a) the Tribunal shall exercise, on and from the date to be appointed
by the Central Government, the jurisdiction, powers and authority to
entertain and decide applications under Part III of Insolvency and
Bankruptcy Code, 2016.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 101
(b) the Tribunal shall have circuit sittings in all district headquarters.”
(ii) after sub-section (2), the following sub-section shall be inserted, namely:—
” (2A) Without prejudice to sub-section (2), the Appellate Tribunal shall
exercise, on and from the date to be appointed by the Central Government, the
jurisdiction, powers and authority to entertain appeals against the order made
by the Adjudicating Authority under Part III of the Insolvency and Bankruptcy
Code, 2016.”.
6. After section 19, the following section shall be inserted, namely:—
“19A. The application made to Tribunal for exercising the powers of the
Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 shall be
dealt with in the manner as provided under that Code.”.
7. In section 20, in sub-section (4) , after the word, brackets and figure “sub-section (1) “,
the words, brackets and figures “or under sub-section (1) of section 181 of the Insolvency
and Bankruptcy Code, 2016” shall be inserted.
THE SIXTH SCHEDULE
(See section 250 )
AMENDMENT TO THE FINANCE ACT, 1994
(32 OF 1994)
In section 88, for the words and figures “and the Securitisation and Reconstruction of
Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002)”, the words
and figures “the Securitisation and Reconstruction of Financial Assets and the Enforcement
of Security Interest Act, 2002 and the Insolvency and Bankruptcy Code, 2016” shall be
substituted.
THE SEVENTH SCHEDULE
(See section 251)
AMENDMENT TO THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY INTEREST ACT, 2002
(54 OF 2002)
In section 13, in sub-section (9), for the words “In the case of”, the words and figures
“Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of”
shall be substituted.
THE EIGHTH SCHEDULE
(See section 252)
AMENDMENT TO THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) REPEAL ACT, 2003
(1 OF 2004)
In section 4, for sub-clause (b), the following sub-clause shall be substituted,
namely—
” (b) On such date as may be notified by the Central Government in this behalf, any
appeal preferred to the Appellate Authority or any reference made or inquiry pending to or
before the Board or any proceeding of whatever nature pending before the Appellate
Authority or the Board under the Sick Industrial Companies (Special Provisions) Act,1985
(1 of 1986) shall stand abated:
Provided that a company in respect of which such appeal or reference or inquiry
stands abated under this clause may make reference to the National Company Law Tribunal
under the Insolvency and Bankruptcy Code, 2016 within one hundred and eighty days from
102 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
the commencement of the Insolvency and Bankruptcy Code, 2016 in accordance with the
provisions of the Insolvency and Bankruptcy Code, 2016:
Provided further that no fees shall be payable for making such reference under
Insolvency and Bankruptcy Code, 2016 by a company whose appeal or reference or inquiry
stands abated under this clause.”.
THE NINTH SCHEDULE
(See section 253)
AMENDMENT TO THE PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007
(51 OF 2007)
1. In section 23, in sub-sections (4), (5) and (6), after the words and figures “the
Banking Regulation Act, 1949 (10 of 1949)” “the Companies Act, 2013 (18 of 2013)”, the
words and figures “or the Insolvency and Bankruptcy Code, 2016” shall be inserted.
2. In section 23A, in sub-section (3), after the words and figures “the Companies Act,
2013”, the words and figures “or the Insolvency and Bankruptcy Code, 2016” shall be
inserted.
THE TENTH SCHEDULE
(See section 254)
AMENDMENT TO THE LIMITED LIABILITY PARTNERSHIP ACT, 2008
(6 OF 2009)
In section 64, Clause (c) shall be omitted.
THE ELEVENTH SCHEDULE
(See section 255)
AMENDMENTS TO THE COMPANIES ACT, 2013
(18 OF 2013)
1. In section 2,—
(a) for clause (23), the following clause shall be substituted, namely:—
“(23) “Company Liquidator” means a person appointed by the Tribunal
as the Company Liquidator in accordance with the provisions of section 275 for
the winding up of a company under this Act;”;
(b) after clause (94) , the following clause shall be inserted, namely:—
“(94A) “winding up” means winding up under this Act or liquidation
under the Insolvency and Bankruptcy Code, 2016, as applicable.”.
2. In section 8, in sub-section (9), for the words “the Rehabilitation and Insolvency
Fund formed under section 269”, the words “Insolvency and Bankruptcy Fund formed under
section 224 of the Insolvency and Bankruptcy Code, 2016″ shall be substituted.
3. In section 66, in sub-section (8), for the words, brackets and figures ” is unable,
within the meaning of sub-section (2) of section 271, to pay the amount of his debt or claim,”,
the words and figures “commits a default, within the meaning of section 6 of the Insolvency
and Bankruptcy Code, 2016, in respect of the amount of his debt or claim,” shall be substituted.
4. In sections 77, in sub-section (3), after the words “the liquidator”, the words and
figures “appointed under this Act or the Insolvency and Bankruptcy Code, 2016, as the case
may be,” shall be inserted.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 103
5. In section 117 in sub-section (3), in clause (f), for the word and figures “section 304”,
the words and figures “section 59 of the Insolvency and Bankruptcy Code, 2016” shall be
substituted.
6. In section 224, in sub-section (2), after the words “wound up under this Act”, the
words and figures “or under the Insolvency and Bankruptcy Code, 2016” shall be inserted.
6A. In section 230,—
(a) in sub-section (1), after the word “liquidator”, the words “appointed under
this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be,”
shall be inserted;
(b) in sub-section (6), after the word “on the liquidator”, the words “appointed
under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may
be,” shall be inserted;
7. In section 249, in sub-section (1), for clause (e), the following clause shall be
substituted, namely:—
” (e) is being wound up under Chapter XX of this Act or under the Insolvency
and Bankruptcy Code, 2016.”.
8. Sections 253 to 269 shall be omitted.
9. For section 270, the following section shall be substituted, namely:—
“270. The provisions of Part I shall apply to the winding up of a company by the
Tribunal under this Act.”.
10. For section 271, the following section shall be substituted, namely:—
“271. A company may, on a petition under section 272, be wound up by the
Tribunal,—
(a) if the company has, by special resolution, resolved that the company
be wound up by the Tribunal;
(b) if the company has acted against the interests of the sovereignty and
integrity of India, the security of the State, friendly relations with foreign States,
public order, decency or morality;
(c) if on an application made by the Registrar or any other person authorised
by the Central Government by notification under this Act, the Tribunal is of the
opinion that the affairs of the company have been conducted in a fraudulent
manner or the company was formed for fraudulent and unlawful purpose or the
persons concerned in the formation or management of its affairs have been
guilty of fraud, misfeasance or misconduct in connection therewith and that it is
proper that the company be wound up;
(d) if the company has made a default in filing with the Registrar its financial
statements or annual returns for immediately preceding five consecutive financial
years; or
(e) if the Tribunal is of the opinion that it is just and equitable that the company
should be wound up.”.
12. For section 272, the following section shall be substituted, namely:—
“272. (1) Subject to the provisions of this section, a petition to the Tribunal for
the winding up of a company shall be presented by—
Winding up by
Tribunal.
Circumstances
in which
company may
be wound up
by Tribunal.
Petition for
winding up.
104 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(a) the company;
(b) any contributory or contributories;
(c) all or any of the persons specified in clauses (a) and (b);
(d) the Registrar;
(e) any person authorised by the Central Government in that behalf; or
(f) in a case falling under clause (b) of section 271, by the Central Government or
a State Government.
(2) A contributory shall be entitled to present a petition for the winding up of a company,
notwithstanding that he may be the holder of fully paid-up shares, or that the company may
have no assets at all or may have no surplus assets left for distribution among the shareholders
after the satisfaction of its liabilities, and shares in respect of which he is a contributory or
some of them were either originally allotted to him or have been held by him, and registered
in his name, for at least six months during the eighteen months immediately before the
commencement of the winding up or have devolved on him through the death of a former
holder.
(3) The Registrar shall be entitled to present a petition for winding up under section 271,
except on the grounds specified in clause (a) or clause (e) of that sub-section:
Provided that the Registrar shall obtain the previous sanction of the Central Government
to the presentation of a petition:
Provided further that the Central Government shall not accord its sanction unless the
company has been given a reasonable opportunity of making representations.
(4) A petition presented by the company for winding up before the Tribunal shall be
admitted only if accompanied by a statement of affairs in such form and in such manner as
may be prescribed.
(5) A copy of the petition made under this section shall also be filed with the Registrar
and the Registrar shall, without prejudice to any other provisions, submit his views to the
Tribunal within sixty days of receipt of such petition.”.
13. In section 275,—
(a) for sub-section (2), the following sub-section shall be substituted, namely:—
“(2) The provisional liquidator or the Company Liquidator, as the case
may, shall be appointed by the Tribunal from amongst the insolvency
professionals registered under the Insolvency and Bankruptcy Code, 2016;”;
(b) sub-section (4) shall be omitted.
14. For section 280, the following section shall be substituted, namely:—
“280. The Tribunal shall, notwithstanding anything contained in any other law
for the time being in force, have jurisdiction to entertain, or dispose of,—
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company, including claims by or
against any of its branches in India;
(c) any application made under section 233;
(d) any question of priorities or any other question whatsoever, whether
of law or facts, including those relating to assets, business, actions, rights,
entitlements, privileges, benefits, duties, responsibilities, obligations or in any
matter arising out of, or in relation to winding up of the company,
Jurisdiction of
Tribunal.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 105
whether such suit or proceeding has been instituted, or is instituted, or such claim or question
has arisen or arises or such application has been made or is made or such scheme has been
submitted, or is submitted, before or after the order for the winding up of the company is
made.”.
15. Section 289 shall be omitted.
15A. The heading “Part II.—Voluntary winding up” shall be omitted.
16. Sections 304 to 323 shall be omitted.
17. Section 325 shall be omitted.
18. For section 326, the following section shall be substituted, namely:—
“326. (1) In the winding up of a company under this Act, the following debts
shall be paid in priority to all other debts:—
(a) workmen’s dues; and
(b) where a secured creditor has realised a secured asset, so much of the
debts due to such secured creditor as could not be realised by him or the amount
of the workmen’s portion in his security (if payable under the law), whichever is
less, pari passu with the workmen’s dues:
Provided that in case of the winding up of a company, the sums referred to in
sub-clauses (i) and (ii) of clause (b) of the Explanation, which are payable for a period
of two years preceding the winding up order or such other period as may be prescribed,
shall be paid in priority to all other debts (including debts due to secured creditors),
within a period of thirty days of sale of assets and shall be subject to such charge over
the security of secured creditors as may be prescribed.
(2) The debts payable under the proviso to sub-section (1) shall be paid in full before
any payment is made to secured creditors and thereafter debts payable under that subsection
shall be paid in full, unless the assets are insufficient to meet them, in which case
they shall abate in equal proportions.
Explanation.—For the purposes of this section, and section 327—
(a) “workmen”, in relation to a company, means the employees of the company,
being workmen within the meaning of clause (s) of section 2 of the Industrial Disputes
Act, 1947 (14 of 1947);
(b) “workmen’s dues”, in relation to a company, means the aggregate of the
following sums due from the company to its workmen, namely:—
(i) all wages or salary including wages payable for time or piece work and
salary earned wholly or in part by way of commission of any workman in respect
of services rendered to the company and any compensation payable to any
workman under any of the provisions of the Industrial Disputes Act, 1947
(14 of 1947);
(ii) all accrued holiday remuneration becoming payable to any workman
or, in the case of his death, to any other person in his right on the termination of
his employment before or by the effect of the winding up order or resolution;
(iii) unless the company is being wound up voluntarily merely for the
purposes of reconstruction or amalgamation with another company or unless
the company has, at the commencement of the winding up, under such a contract
with insurers as is mentioned in section 14 of the Workmen’s Compensation
Act, 1923 (19 of 1923), rights capable of being transferred to and vested in the
workmen, all amount due in respect of any compensation or liability for
compensation under the said Act in respect of the death or disablement of any
workman of the company;
Overriding
preferential
payments.
106 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(iv) all sums due to any workman from the provident fund, the pension
fund, the gratuity fund or any other fund for the welfare of the workmen,
maintained by the company;
(c) “workmen’s portion”, in relation to the security of any secured creditor of a
company, means the amount which bears to the value of the security the same proportion
as the amount of the workmen’s dues bears to the aggregate of the amount of workmen’s
dues and the amount of the debts due to the secured creditors.
Illustration
The value of the security of a secured creditor of a company is Rs. 1,00,000. The total
amount of the workmen’s dues is Rs. 1,00,000. The amount of the debts due from the company
to its secured creditors is Rs.3,00,000. The aggregate of the amount of workmen’s dues and
the amount of debts due to secured creditors is Rs. 4,00,000. The workmen’s portion of the
security is, therefore, one-fourth of the value of the security, that is Rs. 25,000.”.
19. In section 327,—
(a) after sub-section (6), the following sub-section shall be inserted, namely:—
” (7) Sections 326 and 327 shall not be applicable in the event of
liquidation under the Insolvency and Bankruptcy Code, 2016.”;
(b) in the Explanation, for clause (c), the following clause shall be substituted,
namely:—
“(c) the expression “relevant date” means in the case of a company being
wound up by the Tribunal, the date of appointment or first appointment of a
provisional liquidator, or if no such appointment was made, the date of the
winding up order, unless, in either case, the company had commenced to be
wound up voluntarily before that date under the Insolvency and Bankruptcy
Code, 2016;”.
20. For section 329, the following section shall be substituted, namely:—
“329. Any transfer of property, movable or immovable, or any delivery of goods,
made by a company, not being a transfer or delivery made in the ordinary course of its
business or in favour of a purchaser or encumbrancer in good faith and for valuable
consideration, if made within a period of one year before the presentation of a petition
for winding up by the Tribunal under this Act shall be void against the Company
Liquidator.”.
21. For section 334, the following section shall be substituted, namely:—
“334. In the case of a winding up by the Tribunal, any disposition of the property
including actionable claims, of the company and any transfer of shares in the company
or alteration in the status of its members, made after the commencement of the winding
up shall, unless the Tribunal otherwise orders, be void.”.
22. In section 336, in sub-section (1) , in the opening paragraph, for the words “whether
by the Tribunal or voluntarily, or which is subsequently ordered to be wound up by the
Tribunal or which subsequently passes a resolution for voluntary winding up”, the words
“by the Tribunal under this Act or which is subsequently ordered to be wound up by the
Tribunal under this Act” shall be substituted.
23. In section 337, for the words “or which subsequently passes a resolution for
voluntary winding up,”, the words “under this Act”, shall be substituted.
24. In section 342, sub-sections (2), (3) and (4) shall be omitted.
25. In section 343, for sub-section (1) , the following sub-section shall be substituted,
namely—
Transfers not
in good faith to
be void.
Transfer, etc.,
after
commencement
of winding up
to be void.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 107
“(1) The Company Liquidator may, with the sanction of the Tribunal, when the
company is being wound up by the Tribunal,—
(i) pay any class of creditors in full;
(ii) make any compromise or arrangement with creditors or persons claiming
to be creditors, or having or alleging themselves to have any claim, present or
future, certain or contingent, against the company, or whereby the company
may be rendered liable; or
(iii) compromise any call or liability to call, debt, and liability capable of
resulting in a debt, and any claim, present or future, certain or contingent,
ascertained or sounding only in damages, subsisting or alleged to subsist between
the company and a contributory or alleged contributory or other debtor or person
apprehending liability to the company, and all questions in any way relating to
or affecting the assets or liabilities or the winding up of the company, on such
terms as may be agreed, and take any security for the discharge of any such call,
debt, liability or claim, and give a complete discharge in respect thereof.”.
26.In section 347, for sub-section (1), the following sub-section shall be substituted,
namely—
“(1) When the affairs of a company have been completely wound up and it is
about to be dissolved, the books and papers of such company and those of the Company
Liquidator may be disposed of in such manner as the Tribunal directs.”.
27. In section 348, for sub-section (1), the following sub-section shall be substituted,
namely—
“(1) If the winding up of a company is not concluded within one year after its
commencement, the Company Liquidator shall, unless he is exempted from so doing,
either wholly or in part by the Central Government, within two months of the expiry of
such year and thereafter until the winding up is concluded, at intervals of not more
than one year or at such shorter intervals, if any, as may be prescribed, file a statement
in such form containing such particulars as may be prescribed, duly audited, by a
person qualified to act as auditor of the company, with respect to the proceedings in,
and position of, the liquidation, with the Tribunal:
Provided that no such audit as is referred to in this sub-section shall be necessary
where the provisions of section 294 apply;”.
28. For section 357, the following section shall be substituted, namely:—
“357. The winding up of a company by the Tribunal under this Act shall be
deemed to commence at the time of the presentation of the petition for the winding
up.”.
29. In section 370, in the proviso, after the words “obtained for the winding up the
company”, the words “in accordance with the provisions of this Act or of the Insolvency and
Bankruptcy Code, 2016” shall be inserted.
30. In section 372, after the words “The provisions of this Act”, the words “or of the
Insolvency and Bankruptcy Code, 2016, as the case may be,” shall be inserted.
31. In section 419, for sub-section (4), the following sub-section shall be substituted,
namely:—
“(4) The Central Government shall, by notification, establish such number of
benches of the Tribunal, as it may consider necessary, to exercise the jurisdiction,
powers and authority of the Adjudicating Authority conferred on such Tribunal by or
under Part II of the Insolvency and Bankruptcy Code, 2016.”.
32. In section 424,—
Commencement
of winding up by
Tribunal.
108 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(i) in sub-section (1), after the words, “other provisions of this Act”, the words
“or of the Insolvency and Bankruptcy Code, 2016” shall be inserted;
(ii) in sub-section (2), after the words, “under this Act”, the words “or under the
Insolvency and Bankruptcy Code, 2016” shall be inserted.
33. In section 429, for sub-section (1), the following sub-section shall be substituted,
namely:—
“(1) The Tribunal may, in any proceedings for winding up of a company under
this Act or in any proceedings under the Insolvency and Bankruptcy Code, 2016, in
order to take into custody or under its control all property, books of account or other
documents, request, in writing, the Chief Metropolitan Magistrate, Chief Judicial
Magistrate or the District Collector within whose jurisdiction any such property, books
of account or other documents of such company under this Act or of corporate persons
under the said Code, are situated or found, to take possession thereof, and the Chief
Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector, as the
case may be, shall, on such request being made to him,—
(a) take possession of such property, books of account or other documents; and
(b) cause the same to be entrusted to the Tribunal or other persons authorised
by it.”.
34. For section 434, the following section shall be substituted, namely:—
“434. (1) On such date as may be notified by the Central Government in this
behalf,—
(a) all matters, proceedings or cases pending before the Board of Company
Law Administration (herein in this section referred to as the Company Law
Board) constituted under sub-section (1) of section 10E of the Companies
Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the
Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in
accordance with the provisions of this Act;
(b) any person aggrieved by any decision or order of the Company Law
Board made before such date may file an appeal to the High Court within sixty
days from the date of communication of the decision or order of the Company
Law Board to him on any question of law arising out of such order:
Provided that the High Court may if it is satisfied that the appellant was prevented
by sufficient cause from filing an appeal within the said period, allow it to be filed
within a further period not exceeding sixty days; and
(c) all proceedings under the Companies Act, 1956 (1 of 1956), including
proceedings relating to arbitration, compromise, arrangements and reconstruction
and winding up of companies, pending immediately before such date before any
District Court or High Court, shall stand transferred to the Tribunal and the
Tribunal may proceed to deal with such proceedings from the stage before their
transfer:
Provided that only such proceedings relating to the winding up of companies
shall be transferred to the Tribunal that are at a stage as may be prescribed by the
Central Government.
(2) The Central Government may make rules consistent with the provisions of
this Act to ensure timely transfer of all matters, proceedings or cases pending before
the Company Law Board or the courts, to the Tribunal under this section.”
Transfer of
certain
pending
proceedings.
SEC. 1] THE GAZETTE OF INDIA EXTRAORDINARY 109
35.In section 468, for sub-section (2), the following sub-section shall be substituted,
namely:—
” (2) In particular, and without prejudice to the generality of the foregoing power,
such rules may provide for all or any of the following matters, namely:—
(i) as to the mode of proceedings to be held for winding up of a company
by the Tribunal under this Act;
(ii) for the holding of meetings of creditors and members in connection
with proceedings under section 230;
(iii) for giving effect to the provisions of this Act as to the reduction of the
capital;
(iv) generally for all applications to be made to the Tribunal under the
provisions of this Act;
(v) the holding and conducting of meetings to ascertain the wishes of
creditors and contributories;
(vi) the settling of lists of contributories and the rectifying of the register
of members where required, and collecting and applying the assets;
(vii) the payment, delivery, conveyance, surrender or transfer of money,
property, books or papers to the liquidator;
(viii) the making of calls; and
(ix) the fixing of a time within which debts and claims shall be proved.”.
36. In Schedule V, in Part II, in section III, for clause (b), the following clause shall be
substituted, namely:—
“(b) where the company—
(i) is a newly incorporated company, for a period of seven years from the
date of its incorporation, or
(ii) is a sick company, for whom a scheme of revival or rehabilitation has
been ordered by the Board for Industrial and Financial Reconstruction for a
period of five years from the date of sanction of scheme of revival, or
(iii) is a company in relation to which a resolution plan has been approved
by the National Company Law Tribunal under the Insolvency and Bankruptcy
Code, 2016 for a period of five years from the date of such approval,
it may pay remuneration up to two times the amount permissible under section II.”.
————
DR. G. NARAYANA RAJU,
Secretary to the Govt. of India.
GMGIPMRND—1105GI(S3)—28-05-2016.
PRINTED BY THE GENERAL MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI
AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS, DELHI—2016.

Advertisements
This entry was posted in Uncategorized. Bookmark the permalink.