How To Initiate IBC Proceedings?

As per the Insolvency and Bankruptcy Code, 2016 (IBC), the following person may initiate IBC proceedings against corporate debtors where such corporate debtors have defaulted;

1. Financial Creditors
2. Operational Creditors
3. Corporate debtor (itself)

Brief of initiation of Insolvency process;

A)‘Financial Creditor’ – The following three requirements are necessary to file IBC application u/s 7 of the IBC Act;

• The related debt or liability should be covered by the financial debt as defined in U/s 5(8) of IBC, i.e. any debt paid out against the consideration for the time value of money, i.e. interest, and includes other debts as described in the above section, and
• There must be an default in discharge of the above said liability, and
• The sum total of whole default must be Rs. 100,000/-or more.

B) ‘Operational Creditor’ – The procedure for the operational creditor is somewhat different. The operational creditor shall comply with the following requirements in order to initiate the IBC proceeding;

The related debt or liabilities will be covered under ‘Operation Debt,’ which is specified as u/s 5(21) of IBC, i.e. all claims relating to the supply of goods/service/employment or payable to the Government.

• There has been a default in the discharge of the above liability, and
• The number of these defaults should be Rs.100,000/-or more,
• Notice of request U/S 8 has been sent to the corporate debtor and
• Neither payment nor notice of dispute was issued within 10 days of the issuance with the above-mentioned document.

C) ‘Corporate Debtor’ – In compliance with section 10 of the IBC, a corporate debtor can also begin insolvency proceedings against him if the following requirements are met;

• The corporate debtor has undergone defaults, whether in terms of operating debt or financial debt, or any other and
• The sum of this default will be Rs. 100,000/-or more.