IBC for Creditors

The Insolvency and Bankruptcy Code, 2016 (“IBC”) is a law enacted with the aim of giving the debtor the opportunity to recover and providing relief to all creditors, including other stakeholders. There are 2 types of creditors under IBC, i.e. Financial creditors and operating creditors. Let’s explain it to them

1. ‘Financial Creditor’ refers to any person to whom any financial debt relates. Financial debt as defined in U / S 5(8) of IBC means any debt that is paid out against a consideration for the time value of money, i.e. interest, and includes any other debt as described in the above section.

Example: – Whether any individual or company gives financial aid against interest to the corporate debtor, it is a financial liability. That includes homebuyers who make an advance payment to real estate developers for the reservation of some apartment / unit / property.

2. ‘Operational Creditor’ includes the people to whom the operating debt is owed and includes any person to whom the debt has been legally assigned or transferred. Operational debt as stated in U / S 5(21) of IBC shall mean any claims relating to the provision of goods / services / employment or payable to Government.

Example: – If any person has any outstanding or any advance relating to the purchase or sale of goods / services towards any debtor. This must have been an operating debtor.

Benefits To IBC Investors
In a recent interview dated 01/10/2018, Mr. M. S Sahoo, Chairman of the Insolvency and Bankruptcy Board of India (IBBI), claimed that, owing to IBC, Rs. 1,00,000 Crs had been recovered within 2 years of the IBC activities by IBC procedures.

• Benefits should be made explicit and can be summarized as follows:
• Simple and time-limited procedure for filing a petition
• Comprehensive accountability by information usefulness
• Time-bound process for recovery and related process
• Clear synchronization between IBBI and NCLT.
• Quick and efficient return of interest capital
• Timely detection of distress assets

How To Get The IBC Process Started

The proceedings under IBC may be initiated by filing a petition before the jurisdictional NCLT u/s 7 or 8 or 10 of IBC to begin the Corporate Insolvency Resolution Process (CIRP) of any Corporate Debtor.