Bare Act

THE INSOLVENCY AND BANKRUPTCY CODE, 2016 

Last Update 18-8-2021 

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ARRANGEMENT OF SECTIONS 

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PART I 

PRELIMINARY 

SECTIONS 

  1. Short title, extent and commencement. 
  2. Application. 
  3. Definitions. 

PART II 

INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS 

CHAPTER I 

PRELIMINARY 

  1. Application of this Part. 
  2. Definitions. 

CHAPTER II 

CORPORATE INSOLVENCY RESOLUTION PROCESS 

  1. Persons who may initiate corporate insolvency resolution process. 
  2. Initiation of corporate insolvency resolution process by financial creditor. 8. Insolvency resolution by operational creditor. 
  3. Application for initiation of corporate insolvency resolution process by operational creditor. 10. Initiation of corporate insolvency resolution process by corporate applicant. 10A. Suspension of initiation of corporate insolvency resolution process. 
  4. Persons not entitled to make application. 

11A. Disposal of applications under section 54C and under section 7 or section 9 or section 10. 12. Time-limit for completion of insolvency resolution process. 

12A. Withdrawal of application admitted under section 7, 9 or 10. 

  1. Declaration of moratorium and public announcement. 
  2. Moratorium. 
  3. Public announcement of corporate insolvency resolution process. 
  4. Appointment and tenure of interim resolution professional. 
  5. Management of affairs of corporate debtor by interim resolution professional. 18. Duties of interim resolution professional.

SECTIONS 

  1. Personnel to extend co-operation to interim resolution professional. 20. Management of operations of corporate debtor as going concern. 21. Committee of creditors. 
  2. Appointment of resolution professional. 
  3. Resolution professional to conduct corporate insolvency resolution process. 24. Meeting of committee of creditors. 
  4. Duties of resolution professional. 

25A. Rights and duties of authorised representative of financial creditors. 26. Application for avoidance of transactions not to affect proceedings. 27. Replacement of resolution professional by committee of creditors. 28. Approval of committee of creditors for certain actions. 

  1. Preparation of information memorandum. 

29A. Person not eligible to be resolution applicant. 

  1. Submission of resolution plan. 
  2. Approval of resolution plan. 
  3. Appeal. 

32A. Liability for prior offences, etc. 

CHAPTER III 

LIQUIDATION PROCESS 

  1. Initiation of liquidation. 
  2. Appointment of liquidator and fee to be paid. 
  3. Powers and duties of liquidator. 
  4. Liquidation estate. 
  5. Powers of liquidator to access information. 
  6. Consolidation of claims. 
  7. Verification of claims. 
  8. Admission or rejection of claims. 
  9. Determination of valuation of claims. 
  10. Appeal against the decision of liquidator. 
  11. Preferential transactions and relevant time. 
  12. Orders in case of preferential transactions. 
  13. Avoidance of undervalued transactions. 
  14. Relevant period for avoidable transactions.

SECTIONS 

  1. Application by creditor in cases of undervalued transactions. 
  2. Order in cases of undervalued transactions. 
  3. Transactions defrauding creditors. 
  4. Extortionate credit transactions. 
  5. Orders of Adjudicating Authority in respect of extortionate credit transactions. 52. Secured creditor in liquidation proceedings. 
  6. Distribution of assets. 
  7. Dissolution of corporate debtor. 

CHAPTER III-A 

PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS 

54A. Corporate debtors eligible for pre-packaged insolvency resolution process. 

54B. Duties of insolvency professional before initiation of pre-packaged insolvency resolution  process. 

54C. Application to initiate pre-packaged insolvency resolution process. 

54D. Time-limit for completion of pre-packaged insolvency resolution process. 

54E. Declaration of moratorium and public announcement during pre-packaged insolvency resolution  process. 

54F. Duties and powers of resolution professional during pre-packaged insolvency resolution process. 54G. List of claims and preliminary information memorandum. 

54H. Management of affairs of corporate debtor. 

54-I. Committee of creditors. 

54J. Vesting management of corporate debtor with resolution professional. 

54K. Consideration and approval of resolution plan. 

54L. Approval of resolution plan. 

54M. Appeal against order under section 54L. 

54N. Termination of pre-packaged insolvency resolution process. 

54-O. Initiation of corporate insolvency resolution process. 

54P. Application of provisions of Chapters II, III, VI and VII to this Chapter. 

CHAPTER IV 

FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS 

  1. Fast track corporate insolvency resolution process. 
  2. Time period for completion of fast track corporate insolvency resolution process. 57. Manner of initiating fast track corporate insolvency resolution process. 
  3. Applicability of Chapter II to this Chapter.

CHAPTER V 

VOLUNTARY LIQUIDATION OF CORPORATE PERSONS 

SECTIONS 

  1. Voluntary liquidation of corporate persons. 

CHAPTER VI 

ADJUDICATING AUTHORITY FOR CORPORATE PERSONS 

  1. Adjudicating Authority for corporate persons. 
  2. Appeals and Appellate Authority. 
  3. Appeal to Supreme Court. 
  4. Civil court not to have jurisdiction. 
  5. Expeditious disposal of applications. 
  6. Fraudulent or malicious initiation of proceedings. 
  7. Fraudulent trading or wrongful trading. 
  8. Proceedings under section 66. 

67A. Fraudulent management of corporate debtor during pre-packaged insolvency resolution process. CHAPTER VII 

OFFENCES AND PENALTIES 

  1. Punishment for concealment of property. 
  2. Punishment for transactions defrauding creditors. 
  3. Punishment for misconduct in course of corporate insolvency resolution process. 71. Punishment for falsification of books of corporate debtor. 
  4. Punishment for wilful and material omissions from statements relating to affairs of corporate  debtor. 
  5. Punishment for false representations to creditors. 
  6. Punishment for contravention of moratorium or the resolution plan. 
  7. Punishment for false information furnished in application. 
  8. Punishment for non-disclosure of dispute or repayment of debt by operational creditor. 77. Punishment for providing false information in application made by corporate debtor. 77A. Punishment for offences related to pre-packaged insolvency resolution process.

PART III 

INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS CHAPTER I 

PRELIMINARY 

SECTIONS 

  1. Application. 
  2. Definitions. 

CHAPTER II 

FRESH START PROCESS 

  1. Eligibility for making an application. 
  2. Application for fresh start order. 
  3. Appointment of resolution professional. 
  4. Examination of application by resolution professional. 
  5. Admission or rejection of application by Adjudicating Authority. 
  6. Effect of admission of application. 
  7. Objections by creditor and their examination by resolution professional. 87. Application against decision of resolution professional. 
  8. General duties of debtor. 
  9. Replacement of resolution professional. 
  10. Directions for compliances of restrictions, etc. 
  11. Revocation of order admitting application. 
  12. Discharge order. 
  13. Standard of conduct. 

CHAPTER III 

INSOLVENCY RESOLUTION PROCESS 

  1. Application by debtor to initiate insolvency resolution process. 
  2. Application by creditor to initiate insolvency resolution process. 
  3. Interim moratorium. 
  4. Appointment of resolution professional. 
  5. Replacement of resolution professional. 
  6. Submission of report by resolution professional.

SECTIONS 

  1. Admission or rejection of application. 
  2. Moratorium. 
  3. Public notice and claims from creditors. 
  4. Registering of claims by creditors. 
  5. Preparation of list of creditors. 
  6. Repayment plan. 
  7. Report of resolution professional on repayment plan. 
  8. Summoning of meeting of creditors. 
  9. Conduct of meeting of creditors. 
  10. Voting rights in meeting of creditors. 
  11. Rights of secured creditors in relation to repayment plan. 
  12. Approval of repayment plan by creditors. 
  13. Report of meeting of creditors on repayment plan. 
  14. Notice of decisions taken at meeting of creditors. 
  15. Order of Adjudicating Authority on repayment plan. 
  16. Effect of order of Adjudicating Authority on repayment plan. 116. Implementation and supervision of repayment plan. 
  17. Completion of repayment plan. 
  18. Repayment plan coming to end prematurely. 
  19. Discharge order. 
  20. Standard of conduct. 

CHAPTER IV 

BANKRUPTCY ORDER FOR INDIVIDUALS AND PARTNERSHIP FIRMS 

  1. Application for bankruptcy. 
  2. Application by debtor. 
  3. Application by creditor. 
  4. Effect of application. 
  5. Appointment of insolvency professional as bankruptcy trustee. 126. Bankruptcy order.

SECTIONS 

  1. Validity of bankruptcy order. 
  2. Effect of bankruptcy order. 
  3. Statement of financial position. 
  4. Public notice inviting claims from creditors. 
  5. Registration of claims. 
  6. Preparation of list of creditors. 
  7. Summoning of meeting of creditors. 
  8. Conduct of meeting of creditors. 
  9. Voting rights of creditors. 
  10. Administration and distribution of estate of bankruptcy. 
  11. Completion of administration. 
  12. Discharge order. 
  13. Effect of discharge. 
  14. Disqualification of bankrupt. 
  15. Restrictions on bankrupt. 
  16. Modification or recall of bankruptcy order. 
  17. Standard of conduct. 
  18. Fees of bankruptcy trustee. 
  19. Replacement of bankruptcy trustee. 
  20. Resignation by bankruptcy trustee. 
  21. Vacancy in office of bankruptcy trustee. 
  22. Release of bankruptcy trustee. 

CHAPTER V 

ADMINISTRATION AND DISTRIBUTION OF THE ESTATE OF THE BANKRUPT 149. Functions of bankruptcy trustee. 

  1. Duties of bankrupt towards bankruptcy trustee. 
  2. Rights of bankruptcy trustee. 
  3. General powers of bankruptcy trustee. 
  4. Approval of creditors for certain acts. 
  5. Vesting of estate of bankrupt in bankruptcy trustee.

SECTIONS 

  1. Estate of bankrupt. 
  2. Delivery of property and documents to bankruptcy trustee. 
  3. Acquisition of control by bankruptcy trustee. 
  4. Restrictions on disposition of property. 
  5. After-acquired property of bankrupt. 
  6. Onerous property of bankrupt. 
  7. Notice to disclaim onerous property. 
  8. Disclaimer of leaseholds. 
  9. Challenge against disclaimed property. 
  10. Undervalued transactions. 
  11. Preference transactions. 
  12. Effect of order. 
  13. Extortionate credit transactions. 
  14. Obligations under contracts. 
  15. Continuance of proceedings on death of bankrupt. 
  16. Administration of estate of deceased bankrupt. 
  17. Proof of debt. 
  18. Proof of debt by secured creditors. 
  19. Mutual credit and set-off. 
  20. Distribution of interim dividend. 
  21. Distribution of property. 
  22. Final dividend. 
  23. Claims of creditors. 
  24. Priority of payment of debts. 

CHAPTER VI 

ADJUDICATING AUTHORITY FOR INDIVIDUALS AND PARTNERSHIP FIRMS 179. Adjudicating authority for individuals and partnership firms. 

  1. Civil court not to have jurisdiction. 
  2. Appeal to Debt Recovery Appellate Tribunal. 
  3. Appeal to Supreme Court.

SECTIONS 

  1. Expeditious disposal of applications. 

CHAPTER VII 

OFFENCES AND PENALTIES 

  1. Punishment for false information, etc., by creditor in insolvency resolution process. 185. Punishment for contravention of provisions. 
  2. Punishment for false information, concealment, etc., by bankrupt. 
  3. Punishment for certain actions. 

PART IV 

REGULATION OF INSOLVENCY PROFESSIONALS, AGENCIES AND INFORMATION UTILITIES CHAPTER I 

THE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA 

  1. Establishment and incorporation of Board. 
  2. Constitution of Board. 
  3. Removal of member from office. 
  4. Powers of Chairperson. 
  5. Meetings of Board. 
  6. Member not to participate in meetings in certain cases. 
  7. Vacancies, etc., not to invalidate proceedings of Board, Officers and employees of Board. 195. Power to designate financial sector regulator. 

CHAPTER II 

POWERS AND FUNCTIONS OF THE BOARD 

  1. Powers and functions of Board. 
  2. Constitution of advisory committee, executive committee or other committee. 198. Condonation of delay. 

CHAPTER III 

INSOLVENCY PROFESSIONAL AGENCIES 

  1. No person to function as insolvency professional agency without valid certificate of registration. 200. Principles governing registration of insolvency professional agency. 
  2. Registration of insolvency professional agency. 
  3. Appeal to National Company Law Appellate Tribunal.

SECTIONS 

  1. Governing Board of insolvency professional agency. 
  2. Functions of insolvency professional agencies. 
  3. Insolvency professional agencies to make bye-laws. 

CHAPTER IV 

INSOLVENCY PROFESSIONALS 

  1. Enrolled and registered persons to act as insolvency professionals. 
  2. Registration of insolvency professionals. 
  3. Functions and obligations of insolvency professionals. 

CHAPTER V 

INFORMATION UTILITIES 

  1. No person to function as information utility without certificate of registration. 210. Registration of information utility. 
  2. Appeal to National Company Law Appellate Tribunal. 
  3. Governing Board of information utility. 
  4. Core services, etc., of information utilities. 
  5. Obligations of information utility. 
  6. Procedure for submission, etc., of financial information. 
  7. Rights and obligations of persons submitting financial information. 

CHAPTER VI 

INSPECTION AND INVESTIGATION 

  1. Complaints against insolvency professional agency or its member or information utility. 218. Investigation of insolvency professional agency or its member or information utility. 219. Show cause notice to insolvency professional agency or its member or information utility. 220. Appointment of disciplinary committee. 

CHAPTER VII 

FINANCE, ACCOUNTS AND AUDIT 

  1. Grants by Central Government. 
  2. Board’s Fund. 
  3. Accounts and audit.

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PART V 

MISCELLANEOUS 

SECTIONS 

  1. Insolvency and Bankruptcy Fund. 
  2. Power of Central Government to issue directions. 
  3. Power of Central Government to supersede Board. 
  4. Power of Central Government to notify financial service providers, etc. 228. Budget. 
  5. Annual report. 
  6. Delegation. 
  7. Bar of jurisdiction. 
  8. Members, officers and employees of Board to the public servants. 233. Protection of action taken in good faith. 
  9. Agreements with foreign countries. 
  10. Letter of request to a country outside India in certain cases. 235A. Punishment where no specific penalty or punishment is provided. 236. Trial of offences by Special Court. 
  11. Appeal and revision. 
  12. Provisions of this Code to override other laws. 

238A. Limitation. 

  1. Power to make rules. 
  2. Power to make regulations. 

240A. Application of this Code to micro, small and medium enterprises. 241. Rules and regulations to be laid before Parliament. 

  1. Power to remove difficulties. 
  2. Repeal of certain enactments and savings. 
  3. Transitional provisions. 
  4. Amendments of Act 9 of 1932. 
  5. Amendments of Act 1 of 1944. 
  6. Amendments of Act 43 of 1961. 
  7. Amendments of Act 52 of 1962.

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SECTIONS 

  1. Amendments of Act 51 of 1993. 250. Amendments of Act 32 of 1994. 251. Amendments of Act 54 of 2002. 252. Amendments of Act 1 of 2004. 
  2. Amendments of Act 51 of 2007. 254. Amendments of Act 6 of 2009. 255. Amendments of Act 18 of 2013. THE FIRST SCHEDULE. 

THE SECOND SCHEDULE. 

THE THIRD SCHEDULE. 

THE FOURTH SCHEDULE. 

THE FIFTH SCHEDULE. 

THE SIXTH SCHEDULE. 

THE SEVENTH SCHEDULE. 

THE EIGHTH SCHEDULE. 

THE NINTH SCHEDULE. 

THE TENTH SCHEDULE. 

THE ELEVENTH SCHEDULE.

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THE INSOLVENCY AND BANKRUPTCY CODE, 2016 

ACT 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. Short title, extent and commencement.—(1) This Code may be called the Insolvency and  Bankruptcy Code, 2016. 

(2) It extends to the whole of India: 

1* * * * * 

(3) It shall come into force on such date2as the Central Government may, by notification in the  Official Gazette, appoint: 

  

  1. The proviso omitted by the Jammu and Kashmir Reorganization (Adaptation of Central Laws) Order, 2020, vide notification  No. S.O. 1123(E) dated (18-3-2020) and vide Union Territory of Ladakh Reorganisation (Adaptation of Central Laws) Order,  2020, notification No. S.O. 3774(E), dated (23-10-2020). 
  2. 5th August, 2016, vide Notification no. S.O. 2618(E), dated 5th August, 2016 (ss. 188 to 194), see Gazette of India, Extraordinary, Part II, sec. 3(ii). 

19th August, 2016—S. 3, cls. (1), (5), (22), (26), (28), (37), ss. 221, 222, 225, 230, 232, 233, sub-section (1) of cls. (zd), sub section (2) of section 239, sub-section (1) and cls. (zt), sub-section (2) of section 240; ss. 241 and 242; vide notification No.  S.O. 2746(E), dated 19th August 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii). 

1st November, 2016—S. 3 of Cla. (2), (3), (4), (6), (7), (8), (9), (10), (11), (12),(13), (14), (15), (16), (17), (18), (19), (20),  (21), (23), (24), (25), (27), (29), (30), (31), (32), (33), (34), (35), (36), ss. 196, 197, 223, sub-section (2) of section 239, clause  (ze), (zf), (zg), (zh), (zl), (zm), sub-section (2) of section 240;cls. (a) to (zm); (zu) to (zzzc); s. 244, 246 to 248 (both  inclusive); 250, 252, vide notification No. S.O. 3344(E), see Gazette of India, Extraordinary, Part II, sec. 3(ii). 

15th November, 2016—S. 199 to 207 (both inclusive), sub-section (1) of 208, Cl.(c), (e), s. 208(2), s. 217 to 220 (both  inclusive), ss. 251, 253, 254 and 255, vide Notification No. S.O. 3453(E), dated 15th November, 2016  1st December, 2016 —S. 2, Cl.(a) to (d)(except with regard to voluntary liquidation or Bankruptcy), s. 60, 61, 62, 63, 64, 65,  66, 67, 68, 69, 70 (both inclusive), ss. 198, 231, 236, 237, 238(both inclusive), sub-section (2) of s. 239, cl (a), (b), (c), (d),  (e), (d), (f), vide notification No. S.O. 3594(E) dated 30th November 2016, see Gazette of India, Extraordinary, Part II, sec.  3(ii). 

15th December 2016—Ss 33 to 54 (both inclusive), vide notification No. S.O. 3687(E), dated 9th December 2016, see Gazette  of India, Extraordinary, Part II, sec. 3(ii). 

1st April 2017—Sub-section (2) of cls. (a) to (d), vide notification No. S.O. 1570(E), dated 15th May 2017, see Gazette of  India, Extraordinary, Part II, sec. 3(ii). 

1st April 2017—S. 59; Ss. 209 to 215 (both inclusive); Sub-section (1) of S 216; Ss. 234 and 235 vide notification No. S.O.  1005(E), dated 30th March 2017, see Gazette of India, Extraordinary, Part II, sec. 3(ii). 

14th June 2017—Ss 55 to 58 (both inclusive), vide notification No. S.O. 1910(E), dated 14th June 2017, see Gazette of India,  Extraordinary, Part II, sec. 3(ii). 

1st May, 2018—Ss. 227 to 229 (both inclusive), vide notification No. S.O. 1817(E), dated 1st May 2018, see Gazette of India,  Extraordinary, Part II, sec. 3(ii). 

1st December, 2019—S. 2 clause (e), s. 78 (except with regard to fresh start process) and s. 79, ss. 94 to 187 (both inclusive), clause (g) to  clause (i) of sub-section (2) of s. 239, clause (m) to clause (zc) of sub-section (2) of s. 239, clause (zn) to clause (zs) of sub-section (2) of s.  240 and s. 249, in so far as they relate to personal guarantors to corporate debtors, vide notification No. S. O. 4126 (E), dated 15th  November, 2019, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

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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. 

  1. Application.—The provisions of this Code shall apply to— 

(a) any company incorporated under the Companies Act, 2013 (18 of 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 (6 of 2009);  

(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; 1*** 

2[(e) personal guarantors to corporate debtors;  

(f) partnership firms and proprietorship firms; and 

(g) individuals, other than persons referred to in clause (e),] 

  1. Definitions.—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 (18 of 2013), a limited liability partnership, as defined in clause (n) of sub-section (1) of  section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), 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; 

  

  1. The word “and” omitted by Act 8 of 2018, s. 2 (w.e.f. 23-11-2017). 
  2. Subs. by s. 2, ibid., for clause (e) (w.e.f. 23-11-2017).

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(b) safe and accurate recording of financial information; 

(c) authenticating and verifying the financial information submitted by a person; and 

(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 decree-holder; 

(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 1[Paid] 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 (2 of 1934); 

(c) public financial institution as defined in clause (72) of section 2 of the Companies  Act, 2013 (18 of 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; 

  

  1. Subs. by Act 26 of 2018, s. 2 for “repaid” (w.e.f. 6-6-2018).

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(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 

(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 as assigned to such term in clause (v) of  section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);

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(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; 

(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 (14 of 1947); 

(37) words and expressions used but not defined in this Code but defined in the Indian Contract  Act, 1872 (9 of 1872), the Indian Partnership Act, 1932 (9 of 1932), the Securities Contact  (Regulation) Act, 1956 (42 of 1956), the Securities Exchange Board of India Act, 1992 (15 of 1992),  the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), the Limited  Liability Partnership Act, 2008 (6 of 2009) and the Companies Act, 2013 (18 of 2013), shall have the  meanings respectively assigned to them in those Acts. 

PART II 

INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS 

CHAPTER I 

PRELIMINARY 

  1. Application of this Part.—(1) This Part shall apply to matters relating to the insolvency and  liquidation of corporate debtors where the minimum amount of the default is 1[one crore 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. 

2[Provided further that the Central Government may, by notification, specify such minimum amount  of default of higher value, which shall not be more than one crore rupees, for matters relating to the pre packaged insolvency resolution process of corporate debtors under Chapter III-A.] 

  1. Definitions.—In this Part, unless the context otherwise requires,— 

  

  1. Subs. by Notification No. S.O. 1205(E), for “one lakh rupees” (w.e.f. 24-3-2020). 
  2. Ins. by Act 26 of 2021, s. 2 (w.e.f. 4-4-2021).

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(1) “Adjudicating Authority”, for the purposes of this Part, means National Company Law  Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 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 (38 of 1949); 

1[(2A) “base resolution plan” means a resolution plan provided by the corporate debtor under  clause (c) of sub-section (4) of section 54A;] 

(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; 

(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 1[or the pre-packaged insolvency resolution process,  as the case may be,] 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;  

2[(5A) “corporate guarantor” means a corporate person who is the surety in a contract of  guarantee to a 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 along with 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; 

  

  1. Ins. by Act 26 of 2021, s. 3 (w.e.f. 4-4-2021). 
  2. Ins. by Act 26 of 2018, s. 3 (w.e.f. 6-6-2018).

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(e) receivables sold or discounted other than any receivables sold on non-recourse basis; 

(f) any amount raised under any other transaction, including any forward sale or purchase  agreement, having the commercial effect of a borrowing; 

1[Explanation.—For the purposes of this sub-clause,— 

(i) any amount raised from an allottee under a real estate project shall be deemed to be an  amount having the commercial effect of a borrowing; and 

(ii) the expressions, “allottee” and “real estate project” shall have the meanings  respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate  (Regulation and Development) Act, 2016 (16 of 2016);] 

(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 applicant or  operational creditor, as the case may be, makes an application to the Adjudicating Authority for  initiating corporate insolvency resolution process 2[or pre-packaged insolvency resolution process, as  the case may be]; 

(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; 

1* * * * * (13) “insolvency resolution process costs” means— 

(a) the amount of any interim finance and the costs 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; 

  

  1. The proviso shall be omitted by Act 1 of 2020, s. 2 (w.e.f. 28-12-2019). 
  2. Ins. by Act 26 of 2021, s. 3 (w.e.f. 4-4-2021).

19 

(15) “interim finance” means any financial debt raised by the resolution professional during the  insolvency resolution process period 1[or by the corporate debtor during the pre-packaged insolvency  resolution process period, as the case may be]2[and such other debt as may be notified]; 

(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 1[Chapter VI and] 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 (18 of 2013) or a  designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership Act, 2008  (6 of 2009), 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 3[payment] 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; 

1[(23A) “preliminary information memorandum” means a memorandum submitted by the  corporate debtor under clause (b) of sub-section (1) of section 54G; 

(23B) “pre-packaged insolvency commencement date” means the date of admission of an  application for initiating the pre-packaged insolvency resolution process by the Adjudicating  Authority under clause (a) of sub-section (4) of section 54C; 

(23C) “pre-packaged insolvency resolution process costs” means— 

(a) the amount of any interim finance and the costs incurred in raising such finance; 

(b) the fees payable to any person acting as a resolution professional and any expenses  incurred by him for conducting the pre-packaged insolvency resolution process during the pre packaged insolvency resolution process period, subject to sub-section (6) of section 54F; 

(c) any costs incurred by the resolution professional in running the business of the corporate  debtor as a going concern pursuant to an order under sub-section (2) of section 54J; 

(d) any costs incurred at the expense of the Government to facilitate the pre-packaged  insolvency resolution process; and 

(e) any other costs as may be specified; 

  

  1. Ins. by Act 26 of 2021, s. 3 (w.e.f. 4-4-2021). 
  2. Ins. by Act 1 of 2020, s. 2 (w.e.f. 28-12-2019). 
  3. Subs. by Act 26 of 2018, s. 3, for “repayment” (w.e.f. 6-6-2018).

20 

(23D) “pre-packaged insolvency resolution process period” means the period beginning from the  pre-packaged insolvency commencement date and ending on the date on which an order under sub section (1) of section 54L, or sub-section (1) of section 54N, or sub-section (2) of section  54-O, as the case may be, is passed by the Adjudicating Authority;] 

(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; 

(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) any body 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; 

1[(24A) “related party”, in relation to an individual, means— 

  

  1. Ins. by Act 26 of 2018, s. 3 (w.e.f. 6-6-2018).

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(a) a person who is a relative of the individual or a relative of the spouse of the  individual; 

(b) a partner of a limited liability partnership, or a limited liability partnership or a  partnership firm, in which the individual is a partner;  

(c) a person who is a trustee of a trust in which the beneficiary of the trust includes the  individual, or the terms of the trust confers a power on the trustee which may be exercised for  the benefit of the individual;  

(d) a private company in which the individual is a director and holds along with his  relatives, more than two per cent. of its share capital;  

(e) a public company in which the individual is a director and holds along with relatives,  more than two per cent. of its paid-up share capital;  

(f) a body corporate whose board of directors, managing director or manager, in the  ordinary course of business, acts on the advice, directions or instructions of the individual; (g)  a limited liability partnership or a partnership firm whose partners or employees in the  ordinary course of business, act on the advice, directions or instructions of the individual; 

(h) a person on whose advice, directions or instructions, the individual is accustomed to  act;  

(i) a company, where the individual or the individual along with its related party, own  more than fifty per cent. of the share capital of the company or controls the appointment of  the board of directors of the company. 

Explanation.—For the purposes of this clause,— 

(a) “relative”, with reference to any person, means anyone who is related to another, in  the following manner, namely:— 

(i) members of a Hindu Undivided Family, 

(ii) husband, 

(iii) wife,  

(iv) father,  

(v) mother,  

(vi) son,  

(vii) daughter, 

(viii) son’s daughter and son, 

(ix) daughter’s daughter and son,  

(x) grandson’s daughter and son,  

(xi) granddaughter’s daughter and son,  

(xii) brother,  

(xiii) sister, 

(xiv) brother’s son and daughter, 

(xv) sister’s son and daughter,  

(xvi) father’s father and mother,

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(xvii) mother’s father and mother,  

(xviii) father’s brother and sister, 

(xix) mother’s brother and sister, and 

(b) wherever the relation is that of a son, daughter, sister or brother, their spouses shall  also be included;’. 

1[(25) “resolution applicant” means a person, who individually or jointly with any other person,  submits a resolution plan to the resolution professional pursuant to the invitation made under clause  (h) of sub-section (2) of section 25] 2[or pursuant to section 54K, as the case may be]; 

(26) “resolution plan” means a plan proposed by 3[resolution applicant] for insolvency resolution  of the corporate debtor as a going concern in accordance with Part II; 

4[Explanation.—For the removal of doubts, it is hereby clarified that a resolution plan may  include provisions for the restructuring of the corporate debtor, including by way of merger,  amalgamation and demerger;] 

(27) “resolution professional”, for the purposes of this Part, means an insolvency professional  appointed to conduct the corporate insolvency resolution process 2[or the pre-packaged insolvency  resolution process, as the case may be,] 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. 

CHAPTER II 

CORPORATE INSOLVENCY RESOLUTION PROCESS 

  1. Persons who may initiate corporate insolvency resolution process.—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. 
  2. Initiation of corporate insolvency resolution process by financial creditor.—(1) A financial  creditor either by itself or jointly with 5[other financial creditors, or any other person on behalf of the  financial creditor, as may be notified by the Central Government,] may file an application for initiating  corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority  when a default has occurred. 

6[Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of  section 21, an application for initiating corporate insolvency resolution process against the corporate  debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less  than ten per cent. of the total number of such creditors in the same class, whichever is less: 

Provided further that for financial creditors who are allottees under a real estate project, an  application for initiating corporate insolvency resolution process against the corporate debtor shall be  filed jointly by not less than one hundred of such allottees under the same real estate project or not less  

  

  1. Subs. by Act 8 of 2018, s.3 (w.e.f. 23-11-2017). 
  2. Ins. by Act 26 of 2021, s. 3 (w.e.f. 4-4-2021). 
  3. Subs. by s. 3, ibid., for “any person” (w.e.f.23-11-2017). 
  4. Ins. by Act 26 of 2019, s. 2 (w.e.f. 16-08-2019). 
  5. Subs. by Act 26 of 2018, s. 4, for “other financial creditors” (w.e.f. 6-6-2018).  
  6. Ins. by Act 1 of 2020, s. 3 (w.e.f. 28-12-2019).

23 

than ten per cent. of the total number of such allottees under the same real estate project, whichever is  less: 

Provided also that where an application for initiating the corporate insolvency resolution process  against a corporate debtor has been filed by a financial creditor referred to in the first and second provisos  and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and  Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the  requirements of the first or second proviso within thirty days of the commencement of the said Act,  failing which the application shall be deemed to be withdrawn before its admission.] 

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). 

1[Provided that if the Adjudicating Authority has not ascertained the existence of default and passed  an order under sub-section (5) within such time, it shall record its reasons in writing for the same.] (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. 

  1. Insolvency resolution by operational creditor.—(1) An operational creditor may, on the  occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice  

  

  1. Ins. by Act 26 of 2019, s. 3 (w.e.f. 16-08-2019). 

24 

demanding payment of the amount involved in the default to the corporate debtor in such form and  manner as may be prescribed. 

(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, 1[if any, or] 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 2[payment] 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 3[payment] of the operational debt in respect of  which the default has occurred. 

  1. Application for initiation of corporate insolvency resolution process by operational  creditor.—(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 the financial institutions maintaining accounts of the operational  creditor confirming that there is no payment of an unpaid operational debt 3[by the corporate debtor,  if available;] 

4[(d) a copy of any record with information utility confirming that there is no payment of an  unpaid operational debt by the corporate debtor, if available; and 

(e) any other proof confirming that there is no payment of an unpaid operational debt by the  corporate debtor or such other information, as may be prescribed]; 

(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— 

  

  1. Subs. by Act 26 of 2018, s. 5, for “if any, and” (w.e.f. 6-6-2018). 
  2. Subs. by s. 5, ibid for “repayment” (w.e.f. 6-6-2018). 
  3. Subs. by Act 26 of 2018, s. 6, for “by the corporate debtor; and” (w.e.f. 6-6-2018). 
  4. Subs. by s. 6, ibid., for “clause (d) such other information as may be specified” (w.e.f. 6-6-2018).

25 

(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 1[payment] 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; 

(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 1[payment] 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  sub-clause (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. 

  1. Initiation of corporate insolvency resolution process by corporate applicant.—(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. 

2[(3) The corporate applicant shall, along with the application, furnish— 

(a) the information relating to its books of account and such other documents for such period as  may be specified;  

(b) the information relating to the resolution professional proposed to be appointed as an interim  resolution professional; and  

(c) the special resolution passed by shareholders of the corporate debtor or the resolution passed by at  least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving  filing of the application.]; 

(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; 3[and no disciplinary proceeding is pending against the  proposed resolution professional] or 

(b) reject the application, if it is incomplete: 3[or any disciplinary proceeding is pending against  the proposed resolution professional] 

  

  1. Subs. by Act 26 of 2018, s. 6, for “repayment” (w.e.f. 6-6-2018). 
  2. Subs. by s. 7, ibid., for “section 10 of sub-section (3)” (w.e.f. 6-6-2018). 
  3. Ins. by s. 7, ibid. (w.e.f. 6-6-2018).

26 

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. 

1[10A. Suspension of initiation of corporate insolvency resolution process.—Notwithstanding  anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency resolution  process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a  period of six months or such further period, not exceeding one year from such date, as may be notified in  this behalf: 

Provided that no application shall ever be filed for initiation of corporate insolvency resolution  process of a corporate debtor for the said default occurring during the said period. Explanation.—For the removal of doubts, it is hereby clarified that the provisions of this section shall  not apply to any default committed under the said sections before 25th March, 2020.] 11. Persons not entitled to make application.—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 2[or a pre-packaged  insolvency resolution process]; or 

2[(aa) a financial creditor or an operational creditor of a corporate debtor undergoing a pre packaged 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 

2[(ba) a corporate debtor in respect of whom a resolution plan has been approved under  Chapter III-A, 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. 

3[Explanation I].—For the purposes of this section, a corporate debtor includes a corporate applicant  in respect of such corporate debtor. 

4[Explanation II.—For the purposes of this section, it is hereby clarified that nothing in this section  shall prevent a corporate debtor referred to in clauses (a) to (d) from initiating corporate insolvency  resolution process against another corporate debtor.] 

5[11A. Disposal of applications under section 54C and under section 7 or section 9 or section  10.(1) Where an application filed under section 54C is pending, the Adjudicating Authority shall pass  an order to admit or reject such application, before considering any application filed under section 7 or  section 9 or section 10 during the pendency of such application under section 54C, in respect of the same  corporate debtor. 

(2) Where an application under section 54C is filed within fourteen days of filing of any application  under section 7 or section 9 or section 10, which is pending, in respect of the same corporate debtor, then,  notwithstanding anything contained in sections 7, 9 and 10, the Adjudicating Authority shall first dispose  of the application under section 54C. 

  

  1. Ins. by Act 17 of 2020, s. 2 (w.e.f. 5-6-2020). 
  2. Ins. by Act 26 of 2021, s. 4 (w.e.f. 4-4-2021). 
  3. The existing Explanation shall be numbered as Explanation I by Act 1 of 2020, s. 4 (w.e.f. 28-12-2019). 4. Ins. by Act 1 of 2020, s. 4 (w.e.f. 28-12-2019). 
  4. Ins. by Act 26 of 2021, s. 5 (w.e.f. 4-4-2021).

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(3) Where an application under section 54C is filed after fourteen days of the filing of any application  under section 7 or section 9 or section 10, in respect of the same corporate debtor, the Adjudicating  Authority shall first dispose of the application under section 7or section 9 or section 10. 

(4) The provisions of this section shall not apply where an application under section 7 or section 9 or  section 10 is filed and pending as on the date of the commencement of the Insolvency and Bankruptcy  Code (Amendment) Act, 2021.] 

  1. Time-limit for completion of insolvency resolution process.—(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 1[sixty-six] 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. 

2[Provided further that the corporate insolvency resolution process shall mandatorily be completed  within a period of three hundred and thirty days from the insolvency commencement date, including any  extension of the period of corporate insolvency resolution process granted under this section and the time  taken in legal proceedings in relation to such resolution process of the corporate debtor: 

Provided also that where the insolvency resolution process of a corporate debtor is pending and has  not been completed within the period referred to in the second proviso, such resolution process shall be  completed within a period of ninety days from the date of commencement of the Insolvency and  Bankruptcy Code (Amendment) Act, 2019.] 

3[12A. Withdrawal of application admitted under section 7, 9 or 10.—The Adjudicating Authority  may allow the withdrawal of application admitted under section 7 or section 9 or section 10, on an  application made by the applicant with the approval of ninety per cent. voting share of the committee of  creditors, in such manner as may be specified.]. 

  1. Declaration of moratorium and public announcement.—(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. 

  

  1. Subs. by Act 26 of 2018, s. 8, for “seventy-five” (w.e.f. 6-6-2018).  
  2. Ins. by Act 26 of 2019, s. 4 (w.e.f. 16-08-2019). 
  3. Ins. by Act 26 of 2018, s. 9 (w.e.f. 6-6-2018).

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  1. Moratorium.—(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 (54 of 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. 

1[Explanation.—For the purposes of this sub-section, it is hereby clarified that notwithstanding  anything contained in any other law for the time being in force, a license, permit, registration, quota,  concession, clearances or a similar grant or right given by the Central Government, State  Government, local authority, sectoral regulator or any other authority constituted under any other law  for the time being in force, shall not be suspended or terminated on the grounds of insolvency, subject  to the condition that there is no default in payment of current dues arising for the use or continuation  of the license, permit, registration, quota, concession, clearances or a similar grant or right during the  moratorium period;] 

(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. 

1[(2A) Where the interim resolution professional or resolution professional, as the case may be,  considers the supply of goods or services critical to protect and preserve the value of the corporate debtor  and manage the operations of such corporate debtor as a going concern, then the supply of such goods or  services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such  circumstances as may be specified;] 

2[(3) The provisions of sub-section (1) shall not apply to— 

3[(a) such transactions, agreements or other arrangements as may be notified by the Central  Government in consultation with any financial sector regulator or any other authority;] 

(b) a surety in a contract of guarantee to a corporate debtor.]. 

(4) The order of moratorium shall have effect from the date of such order till the completion of the  corporate insolvency resolution process: 

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. 

  1. Public announcement of corporate insolvency resolution process.—(1) The public  announcement of the corporate insolvency resolution process under the order referred to in section 13  shall contain the following information, namely:— 

  

  1. Ins. by Act 1 of 2020, s. 5 (w.e.f. 28-12-2019). 
  2. Subs. by Act 26 of 2018, s. 10, for “sub-section (3)” (w.e.f. 6-6-2018). 
  3. Subs. by Act 1 of 2020, s. 5, for clause (a) (w.e.f. 28-12-2019).

29 

(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 1[claims, as may be specified]; 

(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.  

  1. Appointment and tenure of interim resolution professional.—(1) The Adjudicating Authority  shall appoint an interim resolution professional 2[on 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 3[shall continue till the date of appointment of the  resolution professional under section 22]. 

  1. Management of affairs of corporate debtor by interim resolution professional.—(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; 

(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; 

  

  1. Subs. by Act 26 of 2018, s. 11, for “claims” (w.e.f. 6-6-2018). 
  2. Subs. by Act 1 of 2020, s. 6, for “within fourteen days from the insolvency commencement date” (w.e.f. 28-12-2019). 3. Subs. by Act 26 of 2018, s. 12, for “shall not exceed thirty days from date of his appointment” (w.e.f. 6-6-2018).

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(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 1[may be specified; and]. 

2[(e) be responsible for complying with the requirements under any law for the time being in  force on behalf of the corporate debtor.]. 

  1. Duties of interim resolution professional.—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; 

  

  1. Subs. by Act 26 of 2018, s. 13, for “may be specified” (w.e.f. 6-6-2018). 
  2. Ins. by s. 13, ibid., (w.e.f. 6-6-2018).

31 

(v) securities including shares held in any subsidiary of the corporate debtor, financial  instruments, insurance policies; 

(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 1[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. 

  1. Personnel to extend cooperation to interim resolution professional.—(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. 

  1. Management of operations of corporate debtor as going concern.—(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. Committee of creditors.—(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 2[financial creditor or the authorised representative of the financial creditor referred to  in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the  

  

  1. Subs. by Act 26 of 2018, s. 14, for “sub-section” (w.e.f. 6-6-2018). 
  2. Subs. by s.15, ibid., for “related party to whom a corporate debtor owes a financial debt” (w.e.f. 6-6-2018).

32 

corporate debtor,] shall not have any right of representation, participation or voting in a meeting of the  committee of creditors. 

1[Provided further that the first proviso shall not apply to a financial creditor, regulated by a financial  sector regulator, if it is a related party of the corporate debtor solely on account of conversion or  substitution of debt into equity shares or instruments convertible into equity shares 2[or completion of  such transactions as may be prescribed,] prior to the insolvency commencement date.]; 

(3) 3[Subject to sub-sections (6) and (6A), 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 4*** 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. 

5[(6A) Where a financial debt— 

(a) is in the form of securities or deposits and the terms of the financial debt provide for  appointment of a trustee or agent to act as authorised representative for all the financial creditors, such  trustee or agent shall act on behalf of such financial creditors; 

(b) is owed to a class of creditors exceeding the number as may be specified, other than the  creditors covered under clause (a) or sub-section (6), the interim resolution professional shall make an  application to the Adjudicating Authority along with the list of all financial creditors, containing the  name of an insolvency professional, other than the interim resolution professional, to act as their  authorised representative who shall be appointed by the Adjudicating Authority prior to the first  meeting of the committee of creditors; 

  

  1. Ins. by Act 26 of 2018, s. 15 (w.e.f. 6-6-2018). 
  2. Ins. by Act 1 of 2020, s. 7 (w.e.f. 28-12-2019). 
  3. Subs. by Act 26 of 2018, s. 15, for “Where” (w.e.f. 6-6-2018). 
  4. The words “or issued as securities” omitted by s.15, ibid. (w.e.f. 6-6-2018). 
  5. Ins. by s. 15, ibid., (w.e.f. 6-6-2018).

33 

(c) is represented by a guardian, executor or administrator, such person shall act as authorised  representative on behalf of such financial creditors, 

and such authorised representative under clause (a) or clause (b) or clause (c) shall attend the meetings of  the committee of creditors, and vote on behalf of each financial creditor to the extent of his voting share.  

(6B) The remuneration payable to the authorised representative— 

(i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the financial  debt or the relevant documentation; and  

(ii) under clause (b) of sub-section (6A) shall be as specified which shall form part of the  insolvency resolution process costs]; 

1[(7) The Board may specify the manner of voting and the determining of the voting share in respect  of financial debts covered under sub-sections (6) and (6A).  

(8) Save as otherwise provided in this Code, all decisions of the committee of creditors shall be taken  by a vote of not less than fifty-one 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 shall comprise of such persons to exercise such functions in such  manner as may be specified.] 

(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. 

  1. Appointment of resolution professional.—(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 2[sixty six] 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)— 

(a) to continue the interim resolution professional as resolution professional, 3[subject to a written  consent from the interim resolution professional in the specified form] 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[along with a  written consent from the proposed resolution professional in the specified form]. 

(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. 

  

  1. Subs. by Act 26 of 2018, s. 15, for “sub-sections (7) and (8)” (w.e.f. 6-6-2018). 
  2. Subs. by s. 16, ibid., for “seventy-five” (w.e.f. 6-6-2018). 
  3. Ins. by s. 16, ibid. (w.e.f. 6-6-2018). 
  4. Ins. by Act 26 of 2018, s. 16 (w.e.f. 6-6-2018).

34 

(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. 

  1. Resolution professional to conduct corporate insolvency resolution process.—(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.  

1[Provided that the resolution professional shall continue to manage the operations of the corporate  debtor after the expiry of the corporate insolvency resolution process period, until an order approving the  resolution plan under sub-section (1) of section 31 or appointing a liquidator under section 34 is passed by  the Adjudicating Authority.] 

(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-section (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. 

  1. Meeting of committee of creditors.—(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 2[committee of creditors, including the authorised representatives referred to in  sub-sections (6) and (6A) of section 21 and sub-section (5)]; 

(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 director, partner or representative of operational creditors, as  the case may be, shall not invalidate proceedings of such meeting. 

(5) 3[Subject to sub-sections (6), (6A) and (6B) of section 21, 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. 

(6) Each creditor shall vote in accordance with the voting share assigned to him based on the financial  debts owed to such creditor. 

  

  1. 1. by Act 1 of 2020, s. 8, for the proviso (w.e.f. 28-12-2019). 
  2. Subs. by Act 26 of 2018, s. 18, for “Committee of creditors” (w.e.f. 6-6-2018). 
  3. Subs. by s.18, ibid., for “Any creditor” (w.e.f. 6-6-2018).

35 

(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. 

  1. Duties of resolution professional.—(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; 

1[(h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him  with the approval of committee of creditors, having regard to the complexity and scale of operations of  the business of the corporate debtor and such other conditions as may be specified by the Board, to  submit a resolution plan or 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. 

2[25A. Rights and duties of authorised representative of financial creditors.—(1) The authorised representative under sub-section (6) or sub-section (6A) of section 21 or sub-section (5) of section 24 shall  have the right to participate and vote in meetings of the committee of creditors on behalf of the financial  creditor he represents in accordance with the prior voting instructions of such creditors obtained through  physical or electronic means.  

(2) It shall be the duty of the authorised representative to circulate the agenda and minutes of the  meeting of the committee of creditors to the financial creditor he represents. 

(3) The authorised representative shall not act against the interest of the financial creditor he  represents and shall always act in accordance with their prior instructions:  

Provided that if the authorised representative represents several financial creditors, then he shall  cast his vote in respect of each financial creditor in accordance with instructions received from each  financial creditor, to the extent of his voting share:  

Provided further that if any financial creditor does not give prior instructions through physical or  electronic means, the authorised representative shall abstain from voting on behalf of such creditor. 

  

  1. Subs. by Act 8 of 2018, s. 4, for sub-section (2) (w.e.f. 23-11-2017). 
  2. Ins. by Act 26 of 2018, s. 19 (w.e.f. 6-6-2018). 

36 

1[(3A) Notwithstanding anything to the contrary contained in sub-section (3), the authorised  representative under sub-section (6A) of section 21 shall cast his vote on behalf of all the financial  creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of  the voting share of the financial creditors he represents, who have cast their vote: 

Provided that for a vote to be cast in respect of an application under section 12A, the authorised  representative shall cast his vote in accordance with the provisions of sub-section (3).] 

(4) The authorised representative shall file with the committee of creditors any instructions  received by way of physical or electronic means, from the financial creditor he represents, for voting  in accordance therewith, to ensure that the appropriate voting instructions of the financial creditor he  represents is correctly recorded by the interim resolution professional or resolution professional, as  the case may be.  

Explanation.—For the purposes of this section, the “electronic means” shall be such as may be  specified.] 

  1. Application for avoidance of transactions not to affect proceedings.—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. 
  2. Replacement of resolution professional by committee of creditors.—(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[(2) The committee of creditors may, at a meeting, by a vote of sixty-six per cent. of voting shares,  resolve to replace the resolution professional appointed under section 22 with another resolution  professional, subject to a written consent from the proposed resolution professional in the specified form.] 

(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. 

  1. Approval of committee of creditors for certain actions.—(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; 

  

  1. Ins. by Act 26 of 2019, s. 5 (w.e.f. 16-08-2019). 
  2. Subs. by Act 26 of 2018, s. 20, for sub-section (2) (w.e.f. 6-6-2018).

37 

(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 1[sixty-six] 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. 

  1. Preparation of information memorandum.—(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 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. 

2[29A. Person not eligible to be resolution applicant. A person shall not be eligible to submit a  resolution plan, if such person, or any other person acting jointly or in concert with such person— 

  

  1. Subs. by Act 26 of 2018, s. 21, for “seventy five” (w.e.f. 6-6-2018). 
  2. Ins. by Act 8 of 2018, s. 5 ( w.e.f. 23-11-2017)

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(a) is an undischarged insolvent;  

(b) is a wilful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949; 

(c) 1[at the time of submission of the resolution plan has an account,] or an account of a corporate  debtor under the management or control of such person or of whom such person is a promoter,  classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India  issued under the Banking Regulation Act, 1949 (10 1949) 2[or the guidelines of a financial sector  regulator issued under any other law for the time being in force,] and at least a period of one year has  lapsed from the date of such classification till the date of commencement of the corporate insolvency  resolution process of the corporate debtor: 

Provided that the person shall be eligible to submit a resolution plan if such person makes payment of  all overdue amounts with interest thereon and charges relating to non-performing asset accounts before  submission of resolution plan; 

1[Provided further that nothing in this clause shall apply to a resolution applicant where such applicant  is a financial entity and is not a related party to the corporate debtor.  

Explanation I.—For the purposes of this proviso, the expression “related party” shall not include a  financial entity, regulated by a financial sector regulator, if it is a financial creditor of the corporate debtor  and is a related party of the corporate debtor solely on account of conversion or substitution of debt into  equity shares or instruments convertible into equity shares 3[or completion of such transactions as may be  prescribed,] prior to the insolvency commencement date.  

Explanation II.—For the purposes of this clause, where a resolution applicant has an account, or an  account of a corporate debtor under the management or control of such person or of whom such person is  a promoter, classified as non-performing asset and such account was acquired pursuant to a prior  resolution plan approved under this Code, then, the provisions of this clause shall not apply to such  resolution applicant for a period of three years from the date of approval of such resolution plan by the  Adjudicating Authority under this Code;] 

4[(d) has been convicted for any offence punishable with imprisonment— 

(i) for two years or more under any Act specified under the Twelfth Schedule; or (ii) for seven years or more under any other law for the time being in force: 

Provided that this clause shall not apply to a person after the expiry of a period of two years from the  date of his release from imprisonment:  

Provided further that this clause shall not apply in relation to a connected person referred to in clause  (iii) of Explanation I;] 

(e) is disqualified to act as a director under the Companies Act, 2013;  

2[Provided that this clause shall not apply in relation to a connected person referred to in clause (iii)  of Explanation I;] 

(f) is prohibited by the Securities and Exchange Board of India from trading in securities or accessing  the securities markets; 

(g) has been a promoter or in the management or control of a corporate debtor in which a preferential  transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken  place and in respect of which an order has been made by the Adjudicating Authority under this Code;  

  

  1. Subs. by Act 26 of 2018, s. 22, for “has an account” (w.e.f. 6-6-2018). 
  2. Ins. by s. 22, ibid., (w.e.f. 6-6-2018).  
  3. Ins. by Act 1 of 2020, s. 9 (w.e.f. 28-12-2019). 
  4. Subs. by Act 26 of 2018, s. 22, for clause (d) (w.e.f. 6-6-2018).

39 

1[Provided that this clause shall not apply if a preferential transaction, undervalued transaction,  extortionate credit transaction or fraudulent transaction has taken place prior to the acquisition of the  corporate debtor by the resolution applicant pursuant to a resolution plan approved under this Code or  pursuant to a scheme or plan approved by a financial sector regulator or a court, and such resolution  applicant has not otherwise contributed to the preferential transaction, undervalued transaction,  extortionate credit transaction or fraudulent transaction;] 

(h) has executed 2[a guarantee] in favour of a creditor in respect of a corporate debtor against which an  application for insolvency resolution made by such creditor has been admitted under this Code 3[and such  guarantee has been invoked by the creditor and remains unpaid in full or part]; 

(i) 4[is] subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction  outside India; or 

(j) has a connected person not eligible under clauses (a) to (i)  

5[Explanation. I] — For the purposes of this clause, the expression “connected person” means— (i) any person who is the promoter or in the management or control of the resolution applicant; or 

(ii) any person who shall be the promoter or in management or control of the business of the  corporate debtor during the implementation of the resolution plan; or  

(iii) the holding company, subsidiary company, associate company or related party of a person  referred to in clauses (i) and (ii):  

6[Provided that nothing in clause (iii) of Explanation I shall apply to a resolution applicant where  such applicant is a financial entity and is not a related party of the corporate debtor: 

Provided further that the expression “related party” shall not include a financial entity, regulated by  a financial sector regulator, if it is a financial creditor of the corporate debtor and is a related party of  the corporate debtor solely on account of conversion or substitution of debt into equity shares or  instruments convertible into equity shares 7[or completion of such transactions as may be prescribed,] prior to the insolvency commencement date;] 

8[Explanation II.—For the purposes of this section, “financial entity” shall mean the following entities  which meet such criteria or conditions as the Central Government may, in consultation with the financial  sector regulator, notify in this behalf, namely:— 

(a) a scheduled bank;  

(b) any entity regulated by a foreign central bank or a securities market regulator or other financial  sector regulator of a jurisdiction outside India which jurisdiction is compliant with the Financial  Action Task Force Standards and is a signatory to the International Organisation of Securities  Commissions Multilateral Memorandum of Understanding;  

(c) any investment vehicle, registered foreign institutional investor, registered foreign portfolio  investor or a foreign venture capital investor, where the terms shall have the meaning assigned to them  in regulation 2 of the Foreign Exchange Management (Transfer or Issue of Security by a Person  

  

  1. Ins. by Act 26 of 2018, s. 22 (w.e.f. 6-6-2018). 
  2. Subs. by s. 22, ibid., for “an enforceable guarantee” (w.e.f. 6-6-2018).  
  3. Ins. by s. 22, ibid., (w.e.f. 6-6-2018). 
  4. Subs. by s. 22, ibid., for “has been” (w.e.f. 6-6-2018). 
  5. Explanation renumbered as Explanation I by s. 22, ibid. (w.e.f. 6-6-2018). 
  6. The proviso subs. by s. 22, ibid., (w.e.f. 6-6-2018). 
  7. Ins. by Act 1 of 2020, s. 9 (w.e.f. 28-12-2019). 
  8. Explanation ins. by Act 26 of 2018, s. 22 (w.e.f. 6-6-2018). 

40 

Resident Outside India) Regulations, 2017 made under the Foreign Exchange Management Act, 1999 (42 of 1999);  

(d) an asset reconstruction company registered with the Reserve Bank of India under section 3 of  the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,  2002 (54 of 2002);  

(e) an Alternate Investment Fund registered with the Securities and Exchange Board of India;  (f) such categories of persons as may be notified by the Central Government.].] 

  1. Submission of resolution plan.—(1) A resolution applicant may submit a resolution plan 1[along  with an affidavit stating that he is eligible under section 29A] 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 2[payment] of other debts of the corporate debtor; 

3[(b) provides for the payment of debts of operational creditors in such manner as may be  specified by the Board which shall not be less than— 

(i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor  under section 53; or 

(ii) the amount that would have been paid to such creditors, if the amount to be distributed  under the resolution plan had been distributed in accordance with the order of priority in  sub-section (1) of section 53, 

whichever is higher and provides for the payment of debts of financial creditors, who do not vote in  favour of the resolution plan, in such manner as may be specified by the Board, which shall not be  less than the amount to be paid to such creditors in accordance with sub-section (1) of section 53 in  the event of a liquidation of the corporate debtor. 

Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution in  accordance with the provisions of this clause shall be fair and equitable to such creditors. 

Explanation 2.—For the purposes of this clause, it is hereby declared that on and from the  date of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the  provisions of this clause shall also apply to the corporate insolvency resolution process of a  corporate debtor— 

(i) where a resolution plan has not been approved or rejected by the Adjudicating  Authority; 

(ii) where an appeal has been preferred under section 61 or section 62 or such an appeal  is not time barred under any provision of law for the time being in force; or 

(iii) where a legal proceeding has been initiated in any court against the decision of the  Adjudicating Authority in respect of a resolution plan;] 

  

  1. Ins. by Act 26 of 2018, s. 23 (w.e.f. 6-6-2018). 
  2. Subs. by s. 23, ibid., for “repayment” (w.e.f. 6-6-2018).  
  3. Subs. by Act 26 of 2019, s. 6, for clause (b) (w.e.f. 16-08-2019).

41 

(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. 

1[Explanation.—For the purposes of clause (e), if any approval of shareholders is required under  the Companies Act, 2013 or any other law for the time being in force for the implementation of actions  under the resolution plan, such approval shall be deemed to have been given and it shall not be a  contravention of that Act or law]; 

(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). 

2[(4) The committee of creditors may approve a resolution plan by a vote of not less than 3[sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, 4[the  manner of distribution proposed, which may take into account the order of priority amongst creditors as  laid down in sub-section (1) of section 53, including the priority and value of the security interest of a  secured creditor] and such other requirements as may be specified by the Board: 

Provided that the committee of creditors shall not approve a resolution plan, submitted before the  commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017(Ord. 7 of 2017),  where the resolution applicant is ineligible under section 29A and may require the resolution professional  to invite a fresh resolution plan where no other resolution plan is available with it: 

Provided further that where the resolution applicant referred to in the first proviso is ineligible under  clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such  period, not exceeding thirty days, to make payment of overdue amounts in accordance with the proviso to  clause (c) of section 29A: 

Provided also that nothing in the second proviso shall be construed as extension of period for the  purposes of the proviso to sub-section (3) of section 12, and the corporate insolvency resolution process  shall be completed within the period specified in that sub-section.] 

5[Provided also that the eligibility criteria in section 29A as amended by the Insolvency and  Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution applicant who has not  submitted resolution plan as on the date of commencement of the Insolvency and Bankruptcy Code  (Amendment) Ordinance, 2018.] 

(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. 

  

  1. Ins. by Act 26 of 2018, s. 23 (w.e.f. 6-6-2018). 
  2. Subs. by Act 8 of 2018, s. 6, for sub-section (4) (w.e.f. 23-11-2017). 
  3. Subs. by Act 26 of 2018, s., 23, for “seventy-five” (w.e.f. 6-6-2018). 
  4. Ins. by Act 26 of 2019, s. 6 (w.e.f. 16-08-2019). 
  5. Ins. by Act 26 of 2018, s. 23 (w.e.f. 6-6-2018).

42 

(6) The resolution professional shall submit the resolution plan as approved by the committee of  creditors to the Adjudicating Authority. 

  1. Approval of resolution plan.—(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, 1[including the Central  Government, any State Government or any local authority to whom a debt in respect of the payment of  dues arising under any law for the time being in force, such as authorities to whom statutory dues are  owed,] guarantors and other stakeholders involved in the resolution plan. 

2[Provided that the Adjudicating Authority shall, before passing an order for approval of resolution  plan under this sub-section, satisfy that the resolution plan has provisions for its effective  implementation.]  

(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. 

2[(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1),  obtain the necessary approval required under any law for the time being in force within a period of one  year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1)  or within such period as provided for in such law, whichever is later: 

Provided that where the resolution plan contains a provision for combination, as referred to in section  5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the  Competition Commission of India under that Act prior to the approval of such resolution plan by the  committee of creditors.] 

  1. Appeal.—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. 

3[32A. Liability for prior offences, etc.—(1) Notwithstanding anything to the contrary contained in  this Code or any other law for the time being in force, the liability of a corporate debtor for an offence  committed prior to the commencement of the corporate insolvency resolution process shall cease, and the  corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been  approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in  the management or control of the corporate debtor to a person who was not— 

(a) a promoter or in the management or control of the corporate debtor or a related party of such a  person; or 

(b) a person with regard to whom the relevant investigating authority has, on the basis of material  in its possession, reason to believe that he had abetted or conspired for the commission of the offence,  and has submitted or filed a report or a complaint to the relevant statutory authority or Court: 

  

  1. Ins. by Act 26 of 2019, s. 7 (w.e.f. 16-08-2019). 
  2. Ins. by Act 26 of 2018, s. 24 (w.e.f. 6-6-2018). 
  3. Ins. by Act 1 of 2020, s. 10 (w.e.f. 28-12-2019).

43 

Provided that if a prosecution had been instituted during the corporate insolvency resolution  process against such corporate debtor, it shall stand discharged from the date of approval of the  resolution plan subject to requirements of this sub-section having been fulfilled: 

Provided further that every person who was a “designated partner” as defined in clause (j) of  section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or an “officer who is in default”,  as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013), or was in any manner  incharge of, or responsible to the corporate debtor for the conduct of its business or associated with  the corporate debtor in any manner and who was directly or indirectly involved in the commission of  such offence as per the report submitted or complaint filed by the investigating authority, shall  continue to be liable to be prosecuted and punished for such an offence committed by the corporate  debtor notwithstanding that the corporate debtor’s liability has ceased under this sub-section. 

(2) No action shall be taken against the property of the corporate debtor in relation to an offence  committed prior to the commencement of the corporate insolvency resolution process of the corporate  debtor, where such property is covered under a resolution plan approved by the Adjudicating Authority  under section 31, which results in the change in control of the corporate debtor to a person, or sale of  liquidation assets under the provisions of Chapter III of Part II of this Code to a person, who was not— 

(i) a promoter or in the management or control of the corporate debtor or a related party of such a  person; or 

(ii) a person with regard to whom the relevant investigating authority has, on the basis of material  in its possession reason to believe that he had abetted or conspired for the commission of the offence,  and has submitted or filed a report or a complaint to the relevant statutory authority or Court. 

Explanation.—For the purposes of this sub-section, it is hereby clarified that,— 

(i) an action against the property of the corporate debtor in relation to an offence shall include  the attachment, seizure, retention or confiscation of such property under such law as may be  applicable to the corporate debtor; 

(ii) nothing in this sub-section shall be construed to bar an action against the property of any  person, other than the corporate debtor or a person who has acquired such property through  corporate insolvency resolution process or liquidation process under this Code and fulfils the  requirements specified in this section, against whom such an action may be taken under such law  as may be applicable. 

(3) Subject to the provisions contained in sub-sections (1) and (2), and notwithstanding the immunity  given in this section, the corporate debtor and any person who may be required to provide assistance  under such law as may be applicable to such corporate debtor or person, shall extend all assistance and  co-operation to any authority investigating an offence committed prior to the commencement of the  corporate insolvency resolution process.]

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CHAPTER III 

LIQUIDATION PROCESS 

  1. Initiation of liquidation.—(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 1[approved by not less than sixty-six per cent. of the voting share] 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). 

2[Explanation.—For the purposes of this sub-section, it is hereby declared that the committee of  creditors may take the decision to liquidate the corporate debtor, any time after its constitution under  sub-section (1) of section 21 and before the confirmation of the resolution plan, including at any time  before the preparation of the information memorandum.] 

(3) Where the resolution plan approved by the Adjudicating Authority 3[under section 31 or under  sub-section (1) of section 54L,] 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. 

(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. 

  

  1. Ins. by Act 26 of 2018, s. 25 (w.e.f. 6-6-2018). 
  2. Ins. by Act 26 of 2019, s. 8 (w.e.f. 16-08-2019). 
  3. Ins. by Act 26 of 2021, s. 6 (w.e.f. 4-4-2021).

45 

(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. 

  1. Appointment of liquidator and fee to be paid.—(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 1[Chapter II 2[or for the pre-packaged insolvency  resolution process under Chapter III-A] shall, subject to submission of a written consent by the resolution  professional to the Adjudicatory Authority in specified form,] 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 3[in writing; or] 

4[(c) the resolution professional fails to submit written consent under sub-section (1).] 

(5) For the purposes of 5[clauses (a) and (c)] 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 3[along with written consent  from the insolvency professional in the specified form,] 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. 

  1. Powers and duties of liquidator.—(1) Subject to the directions of the Adjudicating Authority,  the liquidator shall have the following powers and duties, namely:— 

  

  1. Subs. by Act 26 of 2018, s. 26, for “Chapter II shall” (w.e.f 6-6-2018). 
  2. Ins. by Act 26 of 2021, s. 7 (w.e.f. 4-4-2021). 
  3. Subs. by Act 26 of 2018, s. 26, for “in writing” (w.e.f. 6-6-2018). 
  4. Ins. by s. 26, ibid (w.e.f 6-6-2018). 
  5. Subs. by s. 26, ibid, for “clause (a)” (w.e.f. 6-6-2018).

46 

(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; 

(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; 

1[Provided that the liquidator shall not sell the immovable and movable property or actionable  claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution  applicant.]. 

(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 

  

  1. Ins. by Act 8 of 2018, s. 7 (w.e.f. 23-11-2017).

47 

(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. 

  1. Liquidation estate.—(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:— 

(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

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(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. 

  1. Powers of liquidator to access information.—(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:— 

(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. 

  1. Consolidation of claims.—(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).

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(5) A creditor may withdraw or vary his claim under this section within fourteen days of its  submission. 

  1. Verification of claims.—(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. 

  1. Admission or rejection of claims.—(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. 

  1. Determination of valuation of claims.—The liquidator shall determine the value of claims  admitted under section 40 in such manner as may be specified by the Board. 
  2. Appeal against the decision of liquidator.—A creditor may appeal to the Adjudicating  Authority against the decision of the liquidator 1[accepting or] rejecting the claims within fourteen days of  the receipt of such decision. 
  3. Preferential transactions and relevant time.—(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 

  

  1. Ins. by Act 26 of 2018, s. 27 (w.e.f. 6-6-2018).

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(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. 

  1. Orders in case of preferential transactions.—The Adjudicating Authority, may, on an  application made by the resolution professional or liquidator under sub-section (1) of section 43, by an  order: 

(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 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.

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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. 

  1. Avoidance of undervalued transactions.—(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) 1*** 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. 

(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. 

  1. Relevant period for avoidable transactions.—(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. 

  1. Application by creditor in cases of undervalued transactions.—(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 

  

  1. The words and figures “of section 43” omitted by Act 26 of 2018, s. 28 (w.e.f. 6-6-2018).

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(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. 

  1. Order in cases of undervalued transactions.—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. 

  1. Transactions defrauding creditors.—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. 

  1. Extortionate credit transactions.—(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).

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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. 

  1. Order of Adjudicating Authority in respect of extortionate credit transactions.—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. 

  1. Second creditor in liquidation proceedings.—(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  of 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.

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(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. 

  1. Distribution of assets.—(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; 

(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 (18 of 2013). 

  1. Dissolution of corporate debtor.—(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.

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(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. 

1[CHAPTER III-A 

PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS 

54A. Corporate debtors eligible for pre-packaged insolvency resolution process.—(1) An  application for initiating pre-packaged insolvency resolution process may be made in respect of a  corporate debtor classified as a micro, small or medium enterprise under sub-section (1) of section 7 of  the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006). 

(2) Without prejudice to sub-section (1), an application for initiating pre-packaged insolvency  resolution process may be made in respect of a corporate debtor, who commits a default referred to in  section 4, subject to the following conditions, that— 

(a) it has not undergone pre-packaged insolvency resolution process or completed corporate  insolvency resolution process, as the case may be, during the period of three years preceding the  initiation date; 

(b) it is not undergoing a corporate insolvency resolution process; 

(c) no order requiring it to be liquidated is passed under section 33; 

(d) it is eligible to submit a resolution plan under section 29A; 

(e) the financial creditors of the corporate debtor, not being its related parties, representing such  number and in such manner as may be specified, have proposed the name of the insolvency  professional to be appointed as resolution professional for conducting the pre-packaged insolvency  resolution process of the corporate debtor, and the financial creditors of the corporate debtor, not  being its related parties, representing not less than sixty-six per cent. in value of the financial debt due  to such creditors, have approved such proposal in such form as may be specified: 

Provided that where a corporate debtor does not have any financial creditors, not being its related  parties, the proposal and approval under this clause shall be provided by such persons as may be  specified; 

(f) the majority of the directors or partners of the corporate debtor, as the case may be, have made  a declaration, in such form as may be specified, stating, inter alia, that— 

(i) the corporate debtor shall file an application for initiating pre-packaged insolvency  resolution process within a definite time period not exceeding ninety days; 

(ii) the pre-packaged insolvency resolution process is not being initiated to defraud any  person; and 

(iii) the name of the insolvency professional proposed and approved to be appointed as  resolution professional under clause (e); 

  

  1. Ins. by Act 26 of 2021, s. 8 (w.e.f. 4-4-2021).

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(g) the members of the corporate debtor have passed a special resolution, or at least three-fourth  of the total number of partners, as the case may be, of the corporate debtor have passed a resolution,  approving the filing of an application for initiating pre-packaged insolvency resolution process. 

(3) The corporate debtor shall obtain an approval from its financial creditors, not being its related  parties, representing not less than sixty-six per cent. in value of the financial debt due to such creditors,  for the filing of an application for initiating pre-packaged insolvency resolution process, in such form as  may be specified: 

Provided that where a corporate debtor does not have any financial creditors, not being its related  parties, the approval under this sub-section shall be provided by such persons as may be specified. 

(4) Prior to seeking approval from financial creditors under sub-section (3), the corporate debtor shall  provide such financial creditors with— 

(a) the declaration referred to in clause (f) of sub-section (2); 

(b) the special resolution or resolution referred to in clause (g) of sub-section (2); 

(c) a base resolution plan which conforms to the requirements referred to in section 54K, and  such other conditions as may be specified; and 

(d) such other information and documents as may be specified. 

54B. Duties of insolvency professional before initiation of pre-packaged insolvency resolution  process.—(1) The insolvency professional, proposed to be appointed as the resolution professional, shall  have the following duties commencing from the date of the approval under clause (e) of sub-section (2) of  section 54A, namely:— 

(a) prepare a report in such form as may be specified, confirming whether the corporate debtor  meets the requirements of section 54A, and the base resolution plan conforms to the requirements  referred to in clause (c) of sub-section (4) of section 54A; 

(b) file such reports and other documents, with the Board, as may be specified; and (c) perform such other duties as may be specified. 

(2) The duties of the insolvency professional under sub-section (1) shall cease, if,— 

(a) the corporate debtor fails to file an application for initiating pre-packaged insolvency  resolution process within the time period as stated under the declaration referred to in clause (f) of  sub-section (2) of section 54A; or 

(b) the application for initiating pre-packaged insolvency resolution process is admitted or  rejected by the Adjudicating Authority,  

as the case may be. 

(3) The fees payable to the insolvency professional in relation to the duties performed under  sub-section (1) shall be determined and borne in such manner as may be specified and such fees shall  form part of the pre-packaged insolvency resolution process costs, if the application for initiation of pre packaged insolvency resolution process is admitted.

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54C. Application to initiate pre-packaged insolvency resolution process.—(1) Where a corporate  debtor meets the requirements of section 54A, a corporate applicant thereof may file an application with  the Adjudicating Authority for initiating pre-packaged insolvency resolution process. 

(2) The application under sub-section (1) shall be filed in such form, containing such particulars, in  such manner and accompanied with such fee as may be prescribed. 

(3) The corporate applicant shall, along with the application, furnish— 

(a) the declaration, special resolution or resolution, as the case may be, and the approval of  financial creditors for initiating pre-packaged insolvency resolution process in terms of section 54A; 

(b) the name and written consent, in such form as may be specified, of the insolvency  professional proposed to be appointed as resolution professional, as approved under clause (e) of  sub-section (2) of section 54A, and his report as referred to in clause (a) of sub-section (1) of section  54B; 

(c) a declaration regarding the existence of any transactions of the corporate debtor that may be  within the scope of provisions in respect of avoidance of transactions under Chapter III or fraudulent  or wrongful trading under Chapter VI, in such form as may be specified; 

(d) information relating to books of account of the corporate debtor and such other documents  relating to such period as may be specified. 

(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 the Adjudicating Authority shall, before rejecting an application, give notice to the  applicant to rectify the defect in the application within seven days from the date of receipt of such notice  from the Adjudicating Authority. 

(5) The pre-packaged insolvency resolution process shall commence from the date of admission of  the application under clause (a) of sub-section (4). 

54D. Time-limit for completion of pre-packaged insolvency resolution process.—(1) The pre packaged insolvency resolution process shall be completed within a period of one hundred and twenty  days from the pre-packaged insolvency commencement date. 

(2) Without prejudice to sub-section (1), the resolution professional shall submit the resolution plan,  as approved by the committee of creditors, to the Adjudicating Authority under sub-section (4) or  sub-section (12), as the case may be, of section 54K, within a period of ninety days from the pre packaged insolvency commencement date. 

(3) Where no resolution plan is approved by the committee of creditors within the time period  referred to in sub-section (2), the resolution professional shall, on the day after the expiry of such time  period, file an application with the Adjudicating Authority for termination of the pre-packaged insolvency  resolution process in such form and manner as may be specified.

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54E. Declaration of moratorium and public announcement during prepackaged insolvency  resolution process.—(1) The Adjudicating Authority shall, on the pre-packaged insolvency  commencement date, along with the order of admission under section 54C— 

(a) declare a moratorium for the purposes referred to in sub-section (1) read with sub-section (3)  of section 14, which shall, mutatis mutandis apply, to the proceedings under this Chapter; 

(b) appoint a resolution professional— 

(i) as named in the application, if no disciplinary proceeding is pending against him; or 

(ii) based on the recommendation made by the Board, if any disciplinary proceeding is  pending against the insolvency professional named in the application; 

(c) cause a public announcement of the initiation of the pre-packaged insolvency resolution  process to be made by the resolution professional, in such form and manner as may be specified,  immediately after his appointment. 

(2) The order of moratorium shall have effect from the date of such order till the date on which the  pre-packaged insolvency resolution process period comes to an end. 

54F. Duties and powers of resolution professional during prepackaged insolvency resolution  process.—(1) The resolution professional shall conduct the pre-packaged insolvency resolution process  of a corporate debtor during the pre-packaged insolvency resolution process period. 

(2) The resolution professional shall perform the following duties, namely:— 

(a) confirm the list of claims submitted by the corporate debtor under section 54G, in such  manner as may be specified; 

(b) inform creditors regarding their claims as confirmed under clause (a), in such manner as may  be specified; 

(c) maintain an updated list of claims, in such manner as may be specified; 

(d) monitor management of the affairs of the corporate debtor; 

(e) inform the committee of creditors in the event of breach of any of the obligations of the Board  of Directors or partners, as the case may be, of the corporate debtor, under the provisions of this  Chapter and the rules and regulations made thereunder; 

(f) constitute the committee of creditors and convene and attend all its meetings; 

(g) prepare the information memorandum on the basis of the preliminary information  memorandum submitted under section 54G and any other relevant information, in such form and  manner as may be specified; 

(h) file applications for avoidance of transactions under Chapter III or fraudulent or wrongful  trading under Chapter VI, if any; and 

(i) such other duties as may be specified. 

(3) The resolution professional shall exercise the following powers, namely:— 

(a) access all books of account, records and information available with the corporate debtor;

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(b) access the electronic records of the corporate debtor from an information utility having  financial information of the corporate debtor; 

(c) access the books of account, records and other relevant documents of the corporate debtor  available with Government authorities, statutory auditors, accountants and such other persons as may  be specified; 

(d) attend meetings of members, Board of Directors and committee of directors, or partners, as  the case may be, of the corporate debtor; 

(e) appoint accountants, legal or other professionals in such manner as may be specified; 

(f) collect all information relating to the assets, finances and operations of the corporate debtor for  determining the financial position of the corporate debtor and the existence of any transactions that may be within the scope of provisions relating to avoidance of transactions under Chapter III or  fraudulent or wrongful trading under Chapter VI, including information relating to— 

(i) business operations for the previous two years from the date of pre-packaged insolvency  commencement date; 

(ii) financial and operational payments for the previous two years from the date of pre packaged insolvency commencement date; 

(iii) list of assets and liabilities as on the initiation date; and 

(iv) such other matters as may be specified; 

(g) take such other actions in such manner as may be specified. 

(4) From the date of appointment of the resolution professional, the financial institutions maintaining  accounts of the corporate debtor shall furnish all information relating to the corporate debtor available  with them to the resolution professional, as and when required by him. 

(5) The personnel of the corporate debtor, its promoters and any other person associated with the  management of the corporate debtor shall extend all assistance and cooperation to the resolution  professional as may be required by him to perform his duties and exercise his powers, and for such  purposes, the provisions of sub-sections (2) and (3) of section 19 shall, mutatis mutandis apply, in relation  to the proceedings under this Chapter. 

(6) The fees of the resolution professional and any expenses incurred by him for conducting the pre packaged insolvency resolution process shall be determined in such manner as may be specified: 

Provided that the committee of creditors may impose limits and conditions on such fees and expenses: 

Provided further that the fees and expenses for the period prior to the constitution of the committee of  creditors shall be subject to ratification by it. 

(7) The fees and expenses referred to in sub-section (6) shall be borne in such manner as may be  specified. 

54G. List of claims and preliminary information memorandum.—(1) The corporate debtor shall,  within two days of the pre-packaged insolvency commencement date, submit to the resolution  professional the following information, updated as on that date, in such form and manner as may be  specified, namely:—

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(a) a list of claims, along with details of the respective creditors, their security interests and  guarantees, if any; and 

(b) a preliminary information memorandum containing information relevant for formulating a  resolution plan. 

(2) Where any person has sustained any loss or damage as a consequence of the omission of any  material information or inclusion of any misleading information in the list of claims or the preliminary  information memorandum submitted by the corporate debtor, every person who— 

(a) is a promoter or director or partner of the corporate debtor, as the case may be, at the time of  submission of the list of claims or the preliminary information memorandum by the corporate debtor;  or 

(b) has authorised the submission of the list of claims or the preliminary information  memorandum by the corporate debtor, 

shall, without prejudice to section 77A, be liable to pay compensation to every person who has sustained  such loss or damage. 

(3) No person shall be liable under sub-section (2), if the list of claims or the preliminary information  memorandum was submitted by the corporate debtor without his knowledge or consent. 

(4) Subject to section 54E, any person, who sustained any loss or damage as a consequence of  omission of material information or inclusion of any misleading information in the list of claims or the  preliminary information memorandum shall be entitled to move a court having jurisdiction for seeking  compensation for such loss or damage. 

54H. Management of affairs of corporate debtor.—During the pre-packaged insolvency resolution  process period,— 

(a) the management of the affairs of the corporate debtor shall continue to vest in the Board of  Directors or the partners, as the case may be, of the corporate debtor, subject to such conditions as  may be specified; 

(b) the Board of Directors or the partners, as the case may be, of the corporate debtor, shall make  every endeavour to protect and preserve the value of the property of the corporate debtor, and manage  its operations as a going concern; and 

(c) the promoters, members, personnel and partners, as the case may be, of the corporate debtor,  shall exercise and discharge their contractual or statutory rights and obligations in relation to the  corporate debtor, subject to the provisions of this Chapter and such other conditions and restrictions  as may be prescribed. 

54-I. Committee of creditors.—(1) The resolution professional shall, within seven days of the  pre-packaged insolvency commencement date, constitute a committee of creditors, based on the list of  claims confirmed under clause (a) of sub-section (2) of section 54F: 

Provided that the composition of the committee of creditors shall be altered on the basis of the  updated list of claims, in such manner as may be specified, and any such alteration shall not affect the  validity of any past decision of the committee of creditors.

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(2) The first meeting of the committee of creditors shall be held within seven days of the constitution  of the committee of creditors. 

(3) The provisions of section 21, except sub-section (1) thereof, shall, mutatis mutandis apply, in  relation to the committee of creditors under this Chapter: 

Provided that for the purposes of this sub-section, references to “resolution professional” under  sub-sections (9) and (10) of section 21, shall be construed as references to “corporate debtor or the  resolution professional”. 

54J. Vesting management of corporate debtor with resolution professional.—(1) Where the  committee of creditors, at any time during the pre-packaged insolvency resolution process period, by a  vote of not less than sixty-six per cent. of the voting shares, resolves to vest the management of the  corporate debtor with the resolution professional, the resolution professional shall make an application for  this purpose to the Adjudicating Authority, in such form and manner as may be specified. 

(2) On an application made under sub-section (1), if the Adjudicating Authority is of the opinion that  during the pre-packaged insolvency resolution process— 

(a) the affairs of the corporate debtor have been conducted in a fraudulent manner; or (b) there has been gross mismanagement of the affairs of the corporate debtor, 

it shall pass an order vesting the management of the corporate debtor with the resolution professional. (3) Notwithstanding anything to the contrary contained in this Chapter, the provisions of— (a) sub-sections (2) and (2A) of section 14; 

(b) section 17;  

(c) clauses (e) to (g) of section 18; 

(d) sections 19 and 20; 

(e) sub-section (1) of section 25; 

(f) clauses (a) to (c) and clause (k) of sub-section (2) of section 25; and 

(g) section 28, 

shall, mutatis mutandis apply, to the proceedings under this Chapter, from the date of the order under  sub-section (2), until the pre-packaged insolvency resolution process period comes to an end. 

54K. Consideration and approval of resolution plan.—(1) The corporate debtor shall submit the  base resolution plan, referred to in clause (c) of sub-section (4) of section 54A, to the resolution  professional within two days of the pre-packaged insolvency commencement date, and the resolution  professional shall present it to the committee of creditors. 

(2) The committee of creditors may provide the corporate debtor an opportunity to revise the base  resolution plan prior to its approval under sub-section (4) or invitation of prospective resolution  applicants under sub-section (5), as the case may be.

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(3) The resolution plans and the base resolution plan, submitted under this section shall conform to  the requirements referred to in sub-sections (1) and (2) of section 30, and the provisions of sub-sections  (1), (2) and (5) of section 30 shall, mutatis mutandis apply, to the proceedings under this Chapter. 

(4) The committee of creditors may approve the base resolution plan for submission to the  Adjudicating Authority if it does not impair any claims owed by the corporate debtor to the operational  creditors. 

(5) Where— 

(a) the committee of creditors does not approve the base resolution plan under sub-section (4); or 

(b) the base resolution plan impairs any claims owed by the corporate debtor to the operational  creditors,  

the resolution professional shall invite prospective resolution applicants to submit a resolution plan or  plans, to compete with the base resolution plan, in such manner as may be specified. 

(6) The resolution applicants submitting resolution plans pursuant to invitation under sub-section (5),  shall fulfil such criteria as may be laid down by the resolution professional with the approval of the  committee of creditors, having regard to the complexity and scale of operations of the business of the  corporate debtor and such other conditions as may be specified. 

(7) The resolution professional shall provide to the resolution applicants,— 

(a) the basis for evaluation of resolution plans for the purposes of sub-section (9), as approved by  the committee of creditors subject to such conditions as may be specified; and 

(b) the relevant information referred to in section 29, which shall, mutatis mutandis apply, to the  proceedings under this Chapter,  

in such manner as may be specified. 

(8) The resolution professional shall present to the committee of creditors, for its evaluation,  resolution plans which conform to the requirements referred to in sub-section (2) of section 30. 

(9) The committee of creditors shall evaluate the resolution plans presented by the resolution  professional and select a resolution plan from amongst them. 

(10) Where, on the basis of such criteria as may be laid down by it, the committee of creditors decides  that the resolution plan selected under sub-section (9) is significantly better than the base resolution plan,  such resolution plan may be selected for approval under sub-section (12): 

Provided that the criteria laid down by the committee of creditors under this sub-section shall be  subject to such conditions as may be specified. 

(11) Where the resolution plan selected under sub-section (9) is not considered for approval or does  not fulfil the requirements of sub-section (10), it shall compete with the base resolution plan, in such  manner and subject to such conditions as may be specified, and one of them shall be selected for approval  under sub-section (12). 

(12) The resolution plan selected for approval under sub-section (10) or sub-section (11), as the case  may be, may be approved by the committee of creditors for submission to the Adjudicating Authority:

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Provided that where the resolution plan selected for approval under sub-section (11) is not approved  by the committee of creditors, the resolution professional shall file an application for termination of the  pre-packaged insolvency resolution process in such form and manner as may be specified. 

(13) The approval of the resolution plan under sub-section (4) or sub-section (12), as the case may be,  by the committee of creditors, shall be by a vote of not less than sixty-six per cent. of the voting shares,  after considering its feasibility and viability, the manner of distribution proposed, taking into account the  order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and  value of the security interest of a secured creditor and such other requirements as may be specified. 

(14) While considering the feasibility and viability of a resolution plan, where the resolution plan  submitted by the corporate debtor provides for impairment of any claims owed by the corporate debtor,  the committee of creditors may require the promoters of the corporate debtor to dilute their shareholding  or voting or control rights in the corporate debtor: 

Provided that where the resolution plan does not provide for such dilution, the committee of creditors  shall, prior to the approval of such resolution plan under sub-section (4) or sub-section (12), as the case  may be, record reasons for its approval. 

(15) The resolution professional shall submit the resolution plan as approved by the committee of  creditors under sub-section (4) or sub-section (12), as the case may be, to the Adjudicating Authority. 

Explanation I.—For the removal of doubts, it is hereby clarified that, the corporate debtor being a  resolution applicant under clause (25) of section 5, may submit the base resolution plan either individually  or jointly with any other person. 

Explanation II.—For the purposes of sub-sections (4) and (14), claims shall be considered to be impaired  where the resolution plan does not provide for the full payment of the confirmed claims as per the updated  list of claims maintained by the resolution professional. 

54L. Approval of resolution plan.—(1) If the Adjudicating Authority is satisfied that the resolution  plan as approved by the committee of creditors under sub-section (4) or sub-section (12), as the case may  be of section 54K, subject to the conditions provided therein, meets the requirements as referred to in  sub-section (2) of section 30, it shall, within thirty days of the receipt of such resolution plan, by order,  approve the resolution plan: 

Provided that the Adjudicating Authority shall, before passing an order for approval of a resolution  plan under this sub-section, satisfy itself that the resolution plan has provisions for its effective  implementation. 

(2) The order of approval under sub-section (1) shall have such effect as provided under sub-sections  (1), (3) and (4) of section 31, which shall, mutatis mutandis apply, to the proceedings under this Chapter. 

(3) Where the Adjudicating Authority is satisfied that the resolution plan does not conform to the  requirements referred to in sub-section (1), it may, within thirty days of the receipt of such resolution  plan, by an order, reject the resolution plan and pass an order under section 54N. 

(4) Notwithstanding anything to the contrary contained in this section, where the Adjudicating  Authority has passed an order under sub-section (2) of section 54J and the resolution plan approved by  the committee of creditors under sub-section (4) or sub-section (12), as the case may be of section 54K,  does not result in the change in the management or control of the corporate debtor to a person who was 

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not a promoter or in the management or control of the corporate debtor, the Adjudicating Authority shall  pass an order— 

(a) rejecting such resolution plan; 

(b) terminating the pre-packaged insolvency resolution process and passing a liquidation order in  respect of the corporate debtor as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of  sub-section (1) of section 33; and 

(c) declaring that the pre-packaged insolvency resolution process costs, if any, shall be included  as part of the liquidation costs for the purposes of liquidation of the corporate debtor. 

54M. Appeal against order under section 54L.—Any appeal against an order approving the  resolution plan under sub-section (1) of section 54L, shall be on the grounds laid down in sub-section (3)  of section 61. 

54N. Termination of prepackaged insolvency resolution process.—(1) Where the resolution  professional files an application with the Adjudicating Authority,— 

(a) under the proviso to sub-section (12) of section 54K; or 

(b) under sub-section (3) of section 54D, 

the Adjudicating Authority shall, within thirty days of the date of such application, by an order,— (i) terminate the pre-packaged insolvency resolution process; and 

(ii) provide for the manner of continuation of proceedings initiated for avoidance of transactions  under Chapter III or proceedings initiated under section 66 and section 67A, if any. 

(2) Where the resolution professional, at any time after the pre-packaged insolvency commencement  date, but before the approval of resolution plan under sub-section (4) or sub-section (12), as the case may  be of section 54K, intimates the Adjudicating Authority of the decision of the committee of creditors,  approved by a vote of not less than sixty-six per cent. of the voting shares, to terminate the pre-packaged  insolvency resolution process, the Adjudicating Authority shall pass an order under sub-section (1). 

(3) Where the Adjudicating Authority passes an order under sub-section (1), the corporate debtor  shall bear the pre-packaged insolvency resolution process costs, if any. 

(4) Notwithstanding anything to the contrary contained in this section, where the Adjudicating  Authority has passed an order under sub-section (2) of section 54J and the pre-packaged insolvency  resolution process is required to be terminated under sub-section (1), the Adjudicating Authority shall  pass an order— 

(a) of liquidation in respect of the corporate debtor as referred to in sub-clauses (i), (ii) and (iii) of  clause (b) of sub-section (1) of section 33; and 

(b) declare that the pre-packaged insolvency resolution process costs, if any, shall be included as  part of the liquidation costs for the purposes of liquidation of the corporate debtor. 

54-O. Initiation of corporate insolvency resolution process.—(1) The committee of creditors, at  any time after the pre-packaged insolvency commencement date but before the approval of resolution  plan under sub-section (4) or sub-section (12), as the case may be of section 54K, by a vote of not less  than sixty-six per cent. of the voting shares, may resolve to initiate a corporate insolvency resolution 

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process in respect of the corporate debtor, if such corporate debtor is eligible for corporate insolvency  resolution process under Chapter II. 

(2) Notwithstanding anything to the contrary contained in Chapter II, where the resolution  professional intimates the Adjudicating Authority of the decision of the committee of creditors under  sub-section (1), the Adjudicating Authority shall, within thirty days of the date of such intimation, pass an  order to— 

(a) terminate the pre-packaged insolvency resolution process and initiate corporate insolvency  resolution process under Chapter II in respect of the corporate debtor; 

(b) appoint the resolution professional referred to in clause (b) of sub-section (1) of section 54E  as the interim resolution professional, subject to submission of written consent by such resolution  professional to the Adjudicating Authority in such form as may be specified; and 

(c) declare that the pre-packaged insolvency resolution process costs, if any, shall be included as  part of insolvency resolution process costs for the purposes of the corporate insolvency resolution  process of the corporate debtor. 

(3) Where the resolution professional fails to submit written consent under clause (b) of  sub-section (2), the Adjudicating Authority shall appoint an interim resolution professional by making a  reference to the Board for recommendation, in the manner as provided under section 16. 

(4) Where the Adjudicating Authority passes an order under sub-section (2)— 

(a) such order shall be deemed to be an order of admission of an application under section 7 and  shall have the same effect; 

(b) the corporate insolvency resolution process shall commence from the date of such order; 

(c) the proceedings initiated for avoidance of transactions under Chapter III or proceedings  initiated under section 66 and section 67A, if any, shall continue during the corporate insolvency  resolution process; 

(d) for the purposes of sections 43, 46 and 50, references to “insolvency commencement date” shall mean “pre-packaged insolvency commencement date”; and 

(e) in computing the relevant time or the period for avoidable transactions, the time-period for the  duration of the pre-packaged insolvency resolution process shall also be included, notwithstanding  anything to the contrary contained in sections 43, 46 and 50. 

54P. Application of provisions of Chapters II, III, VI and VII to this Chapter.—(1) Save as  provided under this Chapter, the provisions of sections 24, 25A, 26, 27, 28, 29A, 32A, 43 to 51, and the  provisions of Chapters VI and VII of this Part shall, mutatis mutandis apply, to the pre-packaged  insolvency resolution process, subject to the following, namely:— 

(a) reference to “members of the suspended Board of Directors or the partners” under clause (b)  of sub-section (3) of section 24 shall be construed as reference to “members of the Board of Directors  or the partners, unless an order has been passed by the Adjudicating Authority under section 54J”; 

(b) reference to “clause (j) of sub-section (2) of section 25” under section 26 shall be construed as  reference to “clause (h) of sub-section (2) of section 54F”;

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(c) reference to “section 16” under section 27 shall be construed as reference to “section 54E”; 

(d) reference to “resolution professional” in sub-sections (1) and (4) of section 28 shall be  construed as “corporate debtor”; 

(e) reference to “section 31” under sub-section (3) of section 61 shall be construed as reference to  “sub-section (1) of section 54L”; 

(f) reference to “section 14” in sub-sections (1) and (2) of section 74 shall be construed as  reference to “clause (a) of sub-section (1) of section 54E”; 

(g) reference to “section 31” in sub-section (3) of section 74 shall be construed as reference to  “sub-section (1) of section 54L”. 

(2) Without prejudice to the provisions of this Chapter and unless the context otherwise requires,  where the provisions of Chapters II, III, VI and VII are applied to the proceedings under this Chapter,  references to— 

(a) “insolvency commencement date” shall be construed as references to “pre-packaged  insolvency commencement date”; 

(b) “resolution professional” or “interim resolution professional”, as the case may be, shall be  construed as references to the resolution professional appointed under this Chapter; 

(c) “corporate insolvency resolution process” shall be construed as references to “pre-packaged  insolvency resolution process”; and 

(d) “insolvency resolution process period” shall be construed as references to “pre-packaged  insolvency resolution process period”.] 

CHAPTER IV 

FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS 

  1. Fast track corporate insolvency resolution process.—(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. 

  1. Time period for completion of fast track corporate insolvency resolution process.—(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 per cent. of the voting share.

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(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. 

  1. Manner of initiating fast track corporate insolvency resolution process.—An application for  fast track corporate insolvency resolution process may be filed by a creditor or corporate debtor as the  case may be, along with— 

(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.  

  1. Applicability of Chapter II to this Chapter.—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 

  1. Voluntary liquidation of corporate persons.—(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. 

(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

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(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 two-thirds 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 an application 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. 

CHAPTER VI 

ADJUDICATING AUTHORITY FOR CORPORATE PERSONS 

  1. Adjudicating authority for corporate persons.—(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 person is 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 1[liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such  corporate debtor] shall be filed before such National Company Law Tribunal. 

(3) An insolvency resolution process or 1[liquidation or bankruptcy proceeding of a corporate  guarantor or personal guarantor, as the case may be, 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). 

  

  1. Subs. by Act 26 of 2018, s. 29, for “bankruptcy of a personal guarantor of such corporate debtor” (w.e.f. 6-6-2018).

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(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 (36 of 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. 

  1. Appeals and Appellate Authority.—(1) Notwithstanding anything to the contrary contained  under the Companies Act 2013 (18 of 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 on the  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; 

(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. 

1[(4) An appeal against a liquidation order passed under section 33, or sub-section (4) of section 54L,  or sub-section (4) of section 54N, may be filed on grounds of material irregularity or fraud committed in  relation to such a liquidation order. 

(5) An appeal against an order for initiation of corporate insolvency resolution process passed under  sub-section (2) of section 54-O, may be filed on grounds of material irregularity or fraud committed in  relation to such an order.] 

  

  1. Subs. by Act 26 of 2021, s. 9, for sub-section (4) (w.e.f. 4-4-2021).

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  1. Appeal to Supreme Court.—(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. 

  1. Civil court not to have jurisdiction.—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. 
  2. Expeditious disposal of applications.—(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. 

  1. Fraudulent or malicious initiation of proceedings.—(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. 

1[(3) If any person initiates the pre-packaged insolvency resolution process— 

(a) fraudulently or with malicious intent for any purpose other than for the resolution of  insolvency; or 

(b) 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.] 

  1. Fraudulent trading or wrongful trading.—(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 partner of the corporate    

  1. Ins. by Act 26 of 2021, s. 10 (w.e.f. 4-4-2021).

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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 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. 

1[(3) Notwithstanding anything contained in this section, no application shall be filed by a resolution  professional under sub-section (2), in respect of such default against which initiation of corporate  insolvency resolution process is suspended as per section 10A.] 

  1. Proceedings under section 66.—(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. 

2[67A. Fraudulent management of corporate debtor during pre-packaged insolvency resolution  process.—On and after the pre-packaged insolvency commencement date, where an officer of the  corporate debtor manages its affairs with the intent to defraud creditors of the corporate debtor or for any  fraudulent purpose, the Adjudicating Authority may, on an application by the resolution professional,  pass an order imposing upon any such officer, a penalty which shall not be less than one lakh rupees, but  may extend to one crore rupees.] 

  

  1. Ins. by Act 17 of 2020, s. 3 (w.e.f. 5-6-2020). 
  2. Ins. by Act 26 of 2021, s. 11 (w.e.f. 4-4-2021).

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CHAPTER VII 

OFFENCES AND PENALTIES 

  1. Punishment for concealment of property.—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 

(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. 

  1. Punishment for transactions defrauding creditors.—1[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:    

  1. Subs. by Act 26 of 2018, s. 30, for “On or after the insolvency commencement date, if” (w.e.f. 6-6-2018).

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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. 

  1. Punishment for misconduct in course of corporate insolvency resolution process.—(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 

(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 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. 

  1. Punishment for falsification of books of corporate debtor.—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. 
  2. Punishment for wilful and material omissions from statements relating to affairs of  corporate debtor.—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. 
  3. Punishment for false representations to creditors.—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 

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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. 

  1. Punishment for contravention of moratorium or the resolution plan.—(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. 

  1. Punishment for false information furnished in application.—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. 
  2. Punishment for non-disclosure of dispute or 1[payment] of debt by operational creditor.— 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 1[payment] 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. 

  1. Punishment for providing false information in application made by corporate debtor.— 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),  

  

  1. Subs. by Act 26 of 2018, s. 31, for “repayment” (w.e.f. 6-6-2018).

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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. 

1* * * * * 

2[77A. Punishment for offences related to prepackaged insolvency resolution process.—(1)  Where— 

(a) a corporate debtor provides any information in the application under section 54C which is  false in material particulars, knowing it to be false or omits any material fact, knowing it to be  material; or 

(b) a corporate debtor provides any information in the list of claims or the preliminary  information memorandum submitted under sub-section (1) of section 54G which is false in material  particulars, knowing it to be false or omits any material fact, knowing it to be material; or 

(c) any person who knowingly and wilfully authorised or permitted the furnishing of such  information under sub-clauses (a) and (b),  

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. 

(2) If a director or partner of the corporate debtor, as the case may be, deliberately contravenes the  provisions of Chapter III-A, such person shall be punishable with imprisonment for not 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, 76 and 77, 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.] 

PART III 

INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUALS AND PARTNERSHIP FIRMS CHAPTER I 

PRELIMINARY 

  1. Application.—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. 

  1. Definitions.—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 (51 of 1993); 

  

  1. The Explanation omitted by Act 26 of 2021, s. 12 (w.e.f. 4-4-2021). 
  2. Ins. by Act 26 of 2021, s. 13 (w.e.f. 4-4-2021).

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(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 clause, “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; 

(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;

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(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 (9 of 1932); 

(17) “immediate family” of the debtor means his spouse, dependent children and dependent  parents; 

(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. 

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CHAPTER II 

FRESH START PROCESS 

  1. Eligibility for making an application.—(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. 

  1. Application for fresh start order.—(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 

(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;

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(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. 

  1. Appointment of resolution professional.—(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. 

  1. Examination of application by resolution professional.—(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. 

(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—

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