Application for Corporate Insolvency Resolution Process

The issue in the given question is that- whether an interest-bearing security deposit paid under a commercial distribution agreement qualifies as “financial debt” under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC), thereby enabling initiation of CIRP under Section 7.

Section 5(8) of the Insolvency and Bankruptcy Code, 2016 defines “Financial Debt” which 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;

(e)receivables sold or discounted other than any receivables sold on nonrecourse basis;

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

(g)any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;

(h)any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;

(i)the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause [Section 5(8)].

Yes, an interest-bearing security deposit made under a commercial distribution agreement qualifies as ‘financial debt’ under Section 5(8) of the Insolvency and Bankruptcy Code, 2016, thereby enabling the creditor to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor.

NCLT, New Delhi Bench vide its order dated 11th October 2021 in case of Magicon Impex Pvt. Ltd observed that, the amount which has been released pursuant to Agreement in the form of Security Deposit and the same is interest bearing, which means it is carrying consideration of time value of money having commercial effect of a borrowing. Therefore, in our view the “debt” claimed is a “Financial Debt” within the definition of Section 5(8)(f) of Insolvency and Bankruptcy Code, 2016.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 5(b) (Syllabus 2022).

The present case is similar to the case of Sabarmati Gas Limited vs. Shah Alloys Limited Case no.: Civil Appeal No. 1669 of 2020 Decision Date: 4th January, 2023

The Hon’ble Supreme Court interpreted the provision related to limitation of time that section 238A of Insolvency and Bankruptcy Code, 2016 renders the provision of Limitation Act applicable to the computation of the period of limitation in regard to proceedings before the NCLT.

Decision in the case of B.K. Educational Services Private Limited was referred by the Hon’ble Supreme Court, that the period of limitation is three years from the right to apply accrues but the delay is condonable on sufficient grounds as provided under Section 5 of the Limitation Act.

Sufficient cause is the cause for which a party could not be blamed. As such, in the absence of provisions for exclusion of the period of suspension of legal proceedings, the same can be excluded and is sufficient cause for condoning the delay under Section 5 of the Limitation Act.

Hon’ble Court held that question of condonation of delay is not considered it will result in injustice as the party was statutorily prevented from initiating action against the industrial company concerned.

Moreover, for an application filed under section 7 or 9 of Insolvency and Bankruptcy Code, 2016, the date of coming into force of Insolvency and Bankruptcy Code, 2016 i.e., 01.12.2016 would not form the trigger point of limitation and the period of limitation for an application for initiating of CIRP under Section 9, Insolvency and Bankruptcy Code, 2016 would be three years from the date when the right to apply accrues as provided by Article 137 of the Limitation Act.

Furthermore, the Hon’ble Supreme Court concluded that there was a pre-existing dispute between the parties.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6(d) (Syllabus 2022).

Yes. A corporate debtor in respect of whom a liquidation order has been made is ineligible to initiate a corporate insolvency resolution process

Section 11 of the Insolvency & Bankruptcy Code lists out the persons who are not eligible to make an application to initiate the Corporate Insolvency resolution process. The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under this Chapter II of Part II, namely:

(a)a corporate debtor undergoing a corporate insolvency resolution process or a pre-packaged insolvency resolution process; or

(aa)a financial creditor or an operational creditor of a corporate debtor undergoing a prepackaged 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

(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.

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

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.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 4(c) (Syllabus 2017).

Section 20 of the Insolvency Bankruptcy Code (IBC), 2016 mandates IRP to run 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. It is 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.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 5(b) (Syllabus 2022).

“Corporate Person” means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider [Section 3(7) of the IBC, Code].

National Highway Authority of India (NHAI) is a statutory body which functions as an extended limb of the Central Government and performs Governmental functions which obviously cannot be taken over by an RP, or by any other corporate body nor can NHAI ultimately be wound up under the Code. For all these reasons, it is not possible to either read in, or read down; the definition of ‘corporate person’ in section 3(7) of the Code to include NHAI. (Hindustan Construction Company Ltd. & Anr. Vs. Union of India & Ors. [WP (Civil) No. 1074 of 2019 with other Civil Appeals] SC judgement dated 27.11.2019)

“Corporate Debtor” means a corporate person who owes a debt to any person [Section 3(8) of IBC, 2016].

The facts of the present case are similar to the facts in “Laxmi Pat Surana Vs. Union Bank of India & Anr”.

In the above-mentioned case, the Hon’ble Supreme Court held that:

If a corporate person extends guarantee for the loan transaction concerning a principal borrower not being a corporate person, it would still be covered within the meaning of expression “corporate debtor” in section 3(8) of the Code.

Hence in this particular case, the status of a guarantor, Gita Steel Limited, who is a corporate person, metamorphoses into corporate debtor, when the principal borrower Anuj Constructions (The Principal Borrower), a proprietary firm (regardless of not being a corporate person) commits default in the payment of debt which had become due and payable.

Thus, the action under Section 7 of the Code can be legitimately invoked against a (corporate) guarantor being a corporate debtor and the contention of the Board of Directors of Gita Steel Limited is not tenable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 5(c) (Syllabus 2022).

According to Section 3(7) of Insolvency & Bankruptcy Code, “Corporate Person” means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider

In Hindustan Construction Company Limited & Another Vs. Union of India & Others [WP (Civil) No. 1074/2019 with other Civil Appeals] , a CIRP was sought to be initiated against the National Highway Authority of India. The Supreme Court held that the National Highway Authority of India is a statutory body that functions as an extended limb of the Central Government and performs governmental functions that cannot be taken over by an RP under the Insolvency & Bankruptcy Code or by any other corporate body. Nor can such authority ultimately be wound up under the Insolvency & Bankruptcy Code. For all these reasons, it is not possible to either read in or read down the definition of “corporate person” in section 3(7) of the IBC.

Therefore, TRAI is not a corporate debtor for the purposes of the Insolvency & Bankruptcy Code and, consequently, a Corporate Insolvency Resolution Process against TRAI cannot be initiated under section 7, 9, or 10 of the IBC. Hence, TERO Limited will not succeed in CIRP application against TRAI.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(c) (Syllabus 2022).

Supreme Court (SC) division bench in the case of M/s. Next Education India Pvt. Ltd. Vs. M/s. K12 Techno Services Pvt. Ltd has settled the law regarding the determination of the limitation period where the Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) has been filed on the basis of several invoices. Supreme Court (SC) division bench held that when a petition is filed under Section 9 of the I&B Code based on several invoices wherein some of the invoices are time-barred, the Adjudicating Authority must consider invoices raised at least three years preceding the date of filing of Section 9 petition to determine limitation. The Supreme Court set aside the orders of the NCLT and NCLAT and while considering the starting point of limitation as 12 th March 2011 categorically stated that the NCLT should have taken into consideration the subsequent invoices raised up till at least three years preceding the date of the Company Petition rather than considering the starting point of limitation as 12 th March 2011.

Earlier, NCLT had dismissed the Company Petition on the ground of the claim being time barred. The NCLAT after lengthy consideration decided that as the section 9 petition emanates from the Demand Notice issued under section 8, considered the date of default shall in the matter be 12 th March 2011 which is time barred as the limitation period expired on 12 th March 2014. The said NCLAT order was challenged by way of the present appeal in Supreme Court.

In the given case last date of invoice i.e., 23 rd June, 2020 will be considered at least three years preceding date of filing up petition in NCLT for ascertaining limitation period for filing petition.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(a) (Syllabus 2022).

Section 61 of the IBC specifies a 30-day deadline for filing an appeal against an NCLT order, and the NCLAT can only condone a delay of up to 15 days if sufficient cause is shown. Section 61 of the IBC does not require the appellant to wait for the receipt of a certified copy of the order before filing an appeal.

In recently decided case of Sanket Kumar Agarwal vs. APG Logistics Private Limited (2023), Hon’ble Supreme Court of India held that the date of pronouncement of the order and time taken to provide certified copy by the Adjudicating Authority would stand excluded from limitation period for filing an appeal before the National Company Law Appellate Tribunal under Section 61(2) of the Insolvency and Bankruptcy Code, 2016.

It was noted that the appeal was filed through the e-portal on 10 October 2022, which was the 46 th day following the NCLT order. The Court relied on Section 12(2) of the Limitation Act, 1963 (Limitation Act), Since the certified copy was received by the Appellant on 15 th September 2022, the time taken by the court between 5 th September 2022 and 15 th September 2022 to provide the certified copy should have been excluded when calculating the limitation under Section 61(2) of the IBC. As a result, the Supreme Court allowed the appeal thereby setting aside the NCLAT’s order. Here G [Appellant] can file appeal in NCLAT.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(b) (Syllabus 2022).

In the decided case of lndiabulls Housing Finance Limited V/s Shree Ram Urban Infrastructure Limited, the winding up proceedings against the corporate debtor had already been initiated by the Bombay High Court. Further, the fresh application for insolvency proceedings has been filed with NCLT Mumbai bench, which in turn had dismissed the application as the same was not maintainable in view of the fact that Hon’ble Bombay High Court already initiated the winding up proceedings. The corporate debtor appealed before National Company Law Appellate Tribunal and the tribunal examined the judgments and opined that once second stage i.e. liquidation (winding-up) proceedings has already been initiated, the question of reverting back to the first stage of Corporate Insolvency Resolution Process or preparation of Resolution Plan does not arise.

While arriving at its judgment, the NCLAT relied on the case of Forech India Pvt. ltd. vs. Edelweiss assets reconstruction Company Ltd. & Aanr., wherein the tribunal observed that if a Corporate insolvency resolution has started or on failure, if liquidation proceeding has been initiated against the Corporate debtor, the question of entertaining another application under Section 7 or Section 9 against the same very Corporate debtor does not arise, as it is open to the 'Financial Creditor and the 'Operational Creditor’ to make claim before the Insolvency Resolution Professional/Official Liquidator.

However, the matter went on appeal before the Hon’ble Supreme Court which declared by its judgment that the proceedings under Section 7 or 9 of the Code are independent proceedings and shall remain unaffected by the winding-up proceedings of the Companies Act.

Thus, based on the above judgement given by Hon’ble Supreme Court, application filled by Ritu Housing Finance Company Limited under section 7 of the IBC code is maintainable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 6(a) (Syllabus 2017).

Section 10A of the Insolvency and Bankruptcy Code provides that 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 25t h March, 2020.”

In the case of Ramesh Kymal Vs. M/s Siemens Gamesa Renewable Power Pvt Ltd judgement dated February 9, 2021 Hon’ble Supreme Court observed that Section 10A does not contain any requirement that the Adjudicating Authority must launch into an enquiry into whether, and if so to what extent, the financial health of the corporate debtor was affected by the onset of the Covid-19 pandemic. Parliament has stepped in legislatively because of the wide spread distress caused by an unheralded public health crisis. It was cognizant of the fact that resolution applicants may not come forth to take up the process of the resolution of insolvencies which would lead to instances of the corporate debtors going under liquidation and no longer remaining a going concern.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 5(d) (Syllabus 2017).

Section 12(1) of the Insolvency and Bankruptcy Code provides that 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. Section 12(2) states that 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 [sixtysix] per cent. of the voting shares. Section 12(3) stipulate that 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. 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.

In view of the above legal provisions, there is a resolution by Committee of Creditors with 60% voting shares which is less than minimum 66% voting share as required and hence the Resolution Professional can not fie application for extension.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 6(a) (Syllabus 2017).

Section 11 of the Insolvency & Bankruptcy Code lists out the persons who are not eligible to make an application to initiate the corporate insolvency resolution process. The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process under Chapter II of Part II, namely:

(a)a corporate debtor undergoing a corporate insolvency resolution process or a pre-packaged insolvency resolution process.

(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

(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;

(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; or

(d)a corporate debtor in respect of whom a liquidation order has been made

However, Explanation II provides that 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.

Since there exists a provision in accordance with which a corporate debtor may initiate corporate insolvency resolution process against any other corporate debtor, the opinion of the lawyer is not correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 5(c) (Syllabus 2017).

The home buyer can initiate corporate insolvency process against the builders or developers as they have been included in the definition of Financial debt as per explanation to Section 5(8)(f) of Insolvency & Bankruptcy Code, 2016.

As per Section 7 of the Insolvency & Bankruptcy Code, 2016, 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 than ten per cent. of the total number of such allottees under the same real estate project, whichever is less.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 4(b) (Syllabus 2017).

Section 227 of the Insolvency and Bankruptcy Code (IBC) empowers the Central Government, in consultation with the appropriate financial sector regulators, to notify financial service providers or categories of financial service providers about their insolvency and liquidation proceedings, which may be conducted under the IBC with such modifications and in such manner as may be prescribed.

Pursuant to its powers, Central Government notified the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019.

The Financial Service Provider Rules empower the government to commence the CIRP in terms of the IBC against financial service providers, in consultation with the appropriate financial sector regulator as prescribed by the law. In terms of the notification dated November 18, 2019, issued by the MCA, the Financial Service Provider Rules would apply to non-banking finance companies with a prescribed asset size with the RBI as the appropriate financial service regulator.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 5(d) (Syllabus 2017).

Section 9 (3) of the Insolvency and Bankruptcy Code, 2016 lays down that an application by the operational creditor shall, be accompanied with the following documents:

(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 by the corporate debtor, if available;

(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 any unpaid operational debt by the corporate debtor or such other information, as may be prescribed.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 4(b) (Syllabus 2017).

Section 11 of the Insolvency and Bankruptcy Code 2016 disentitles the following persons to make an application to initiate corporate insolvency resolution process:

a.a corporate debtor undergoing a corporate insolvency resolution process or a pre-packaged insolvency resolution process;

(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

(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;

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.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 5(a) (Syllabus 2017).

Demand notice or copy of invoice demanding payment of the debt – Section 8 of the Insolvency and Bankruptcy Code 2016(IBC) provides that in case of a default, the operational creditor has to deliver a demand notice or a copy of an invoice demanding payment of the debt in default to the corporate debtor.

Application by operational creditor before NCLT – Section 9(1) of the Code provides that if the operational creditor does not receive either the payment of the debt or a notice of existence of dispute in relation to the debt claim from the corporate debtor within a period of ten days from the date of receipt of the invoice or demand notice under section 8, he can file an application with the National Company Law Tribunal for initiating the insolvency resolution process in accordance with section 9 of the Code.

Admission / Rejection of application – The National Company Law Tribunal shall admit or reject the application and communicate such decision to the operational creditor and the corporate debtor within fourteen days of the receipt of such application. However, before rejecting the application, an opportunity shall be given to the applicant to rectify the defect within seven days of receipt of rejection.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6(a) (Old syllabus).

(i)Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) enables a Financial Creditor (FC) either alone or jointly with any other FC may file application for initiating Corporate Insolvency Resolution Process (CIRP). On the other hand an Operational Creditor (OC) may file application for CIRP only after serving 10 days' notice of demand under section 8 of IBC and apply for CIRP under Section 9.

(ii)In case of a Financial Creditor, proposing name of Resolution Professional is mandatory but in case of Operational Creditor it is optional.

(iii)Existence of default is required in case of Financial Creditor whereas nonexistence of dispute is necessary in case of Operational Creditor.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 5(e) (Syllabus 2017).

The following persons shall not be entitled to make application to NCLT for initiation of corporate insolvency resolution process:

(a)a corporate debtor undergoing a corporate insolvency resolution process; or

(b)a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or

(c)a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months preceding the date of making application; or

(d)a corporate debtor in respect of whom a liquidation order has been passed so that finality of the liquidation order is ensured.

For making an application, a corporate debtor includes a corporate applicant in respect of such corporate debtor.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 6(d) (Old syllabus).

In M/s Embassy Property Developments Pvt. Ltd. Vs. State of Karnataka and Others [2019 SCC Online SC 1542], one of the issues before the Supreme Court was whether the Adjudicating Authority (AA) had the power under the Insolvency and Bankruptcy Code, 2016 to review the order passed by the Government of Karnataka during the moratorium period, rejecting the auto extension of a mining lease granted by it to the Corporate Debtor. The Supreme Court observed, among other things, that the moratorium under section 14 did not impact the right of the government to refuse extension of the lease. It observed that the purpose of section 14 was to preserve the status quo and not to create a new right.

Even section 14(1)(d) of the IBC, 2016 prohibits, during the period of moratorium, the recovery of any property by the owner/ lessor will not go to the rescue of the corporate debtor since what is prohibited is only right not to be dispossessed, but not the right to have renewal of the lease of such property. It was further observed that this right not to be dispossessed will have nothing to do with the rights conferred by a mining lease especially on government land. It was noted that what was granted to the Corporate Debtor was not an exclusive possession of the land in question so as to enable the RP to invoke section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016.

Hence, the arguments put forward by the IP were not tenable and the State Government lawfully rejected the lease extension during an active CIRP.

The NCLT and NCLAT are specialist forums dealing with insolvency-related issues. However, they do not have jurisdiction over matters that arise under public law, such as disputes involving state authorities, unless expressly provided.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 5(a) (Syllabus 2022).

Section 14(1) of the Insolvency and Bankruptcy Code, 2016 imposes a moratorium during the Corporate Insolvency Resolution Process (CIRP) whereas section 14(3) of the Code provides for exceptions where moratorium shall not apply i.e. the provisions of sub-section (1) shall not apply to —

(a)such transactions, agreements or other arrangement 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.

In exercise of the powers conferred by clause (a) of sub-section (3) of section 14 of the Insolvency and Bankruptcy Code, 2016, the Central Government hereby notifies that the provisions of subsection (1) of section 14 of the Insolvency and Bankruptcy Code, 2016, shall not apply to

•transactions, arrangements or agreements, under the Convention and the Protocol, relating to aircraft, aircraft engines, airframes and helicopters. (MCA notification dated 3rd October, 2023)

•where the corporate debtor has entered into any of the following transactions, arrangements or agreements, namely: -

(i)the Production Sharing Contracts, Revenue Sharing Contracts, Exploration Licenses and Mining Leases made under the Oilfields (Regulation and Development) Act, 1948 and rules made thereunder; and

(ii)any transactions, arrangements or agreements, including Joint Operating Agreement, connected or ancillary to the transactions, arrangements or agreements referred to in clause (i) (MCA notification dated 14 th June, 2023)

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 5(d) (Syllabus 2022).

According to Section 81(4) of the Insolvency and Bankruptcy Code, 2016, the application under Section 81(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 for up to two years prior to the date of the application;

(e)the particulars of the debtor’s personal details, as may be prescribed;

(f)the reasons for making the application;

(g)the particulars of any legal proceedings which, to the debtor’s knowledge has been commenced against him;

(h)the confirmation that no previous fresh start order under this Chapter has been made in respect of the qualifying debts of the debtor in the preceding twelve months of the date of the application.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 6A(i) (Syllabus 2017).

Section 14 of the Insolvency & Bankruptcy Code details the moratorium protection given to the corporate debtor. The entire period of corporate insolvency resolution professional is covered under this moratorium, during which all suits, legal proceedings, and recovery actions against the corporate debtor are held in abeyance to give time to the corporate debtor to resolve its status.

However, the proceeding in moratorium do not include criminal prosecution. In Mr. Ajay Kumar Bishnoi Vs. M/s Tap Engineering and Other [Criminal Original Petition No. 34996 of 2019), the corporate debtor underwent insolvency resolution while a complaint was pending under section 138 of the Negotiable Instruments Act, 1881. Further, during this time, a resolution plan for the corporate debtor was approved with a change in management and control. The Managing Director (MD) of the erstwhile corporate debtor sought to quash the prosecution under section 138 in view of the approval of the resolution plan. The High Court confirmed that the moratorium under section 14 of the IBC prohibits proceedings, but such proceedings do not include criminal prosecution.

In Alchemist Asset Reconstruction Company Limited Vs. Hotel Gaudavan Private Limited [(2018) 16 SCC 94], the Supreme Court affirmed that once a moratorium is imposed under the IBC, any proceeding initiated against the corporate debtor is non-est (does not exist) in law.

The Hon’ble Supreme Court in the case of P. Mohanraj & Ors vs Shah Brothers Ispat Pvt. Ltd. [AIR 2021 SC 1308] was concerned with the question whether the institution or continuation of a proceeding under Section 138 of Negotiable Instruments Act, 1881 for dishonor of cheque can be said to be covered by the moratorium provision under Section 14 of the IBC.

•The Supreme Court after exhaustively dealing with various provisions of the IBC and the judicial precedents, authoritatively held that the proceedings under Section 138 of NI Act against the corporate debtor were covered by Section 14(1)(a) of the IBC.

•In essence, the Supreme Court held that during the subsistence of the moratorium period as envisaged under Section 14 of the IBC, the proceedings for cheque dishonor, which are quasi-criminal in nature, would be liable to be stayed. One of the reasons for such a finding was that in a proceeding for dishonor of cheques, the corporate debtor, if convicted, may be directed to pay compensation which can amount to twice the amount of the cheque which has bounced.

•Accordingly, payment of such compensation would in fact lead to depletion of the assets of the corporate debtor thereby directly impacting the corporate insolvency resolution process.

•One clarification provided by the Supreme Court in the above case was that though the moratorium would be applicable to the corporate debtor but that would not absolve the directors/persons in charge of and responsible for the conduct of the business of the corporate debtor from being prosecuted for the offence of dishonor of cheque.

The Hon’ble Supreme Court in the matter of Ajay Kumar Radheyshyam Goenka vs tourism Finance Corporation of India [MANU/SC/0244/2023] was concerned with a case where the managing director of a company (for which the resolution plan was approved by the NCLT) sought to seek his discharge from the proceedings under section 138 of the Negotiable Instruments Act.

•The seminal question of law framed by the Supreme Court was whether after the approval of the resolution plan of the corporate debtor, the managing director who signed the cheque, would stand discharged from the penal liability under Section 138 of the NI Act.

•The Supreme Court answered the question in the negative and held that the person who signed the cheque would continue to remain liable for the offence.

Another pertinent observation made by the Court was as under-

“ …16.. In fact, a bare reading of Section 14 of IBC would make it clear that the nature of proceedings which have to be kept in abeyance do not include criminal proceedings, which is the nature of proceedings under Section 138 of the N.I. Act… ”

In view of the above, Mr. X will not be able to get the prosecution quashed under Section 14 of IBC.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(b) (Syllabus 2022).

Section 14(1) of the Insolvency & Bankruptcy Code provides that 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 judgement, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b)transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any

legal right or beneficial interest therein;

(c)any action to foreclose, recover or enforce any security interest created by the corporate debtor in

respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(d)the recovery of any property by an owner or lessor where such property is occupied by or in the

possession of the corporate debtor.

Section 14(2) states that 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.

As per Section 14(2A) of the Act, 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.

Section 14 (3) provides that the provisions of sub-section (1) shall not apply to –

(a)such transaction, 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.

According to Section 14(4), the order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 4(a) (Syllabus 2017).

Section 17(1) of the Insolvency & Bankruptcy Code provides that from the date of appointment of the Interim Resolution Professional 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. It is pertinent to note that only powers are suspended; however, the directors can continue to work and provide assistance to the Resolution Professional.

In the case of M/s. Subasri Realty Private Limited v. Mr. N. Subramanian & Anr , the NCLAT directed that after the appointment of the Resolution Professional and declaration of moratorium, the Board of Directors stands suspended, but that does not amount to a suspension of Managing Director, or any of the directors or officers or employees of the Corporate Debtor (CD). To ensure that the CD remains a going concern, all the directors/ employees are required to function and to assist the RP who manages the affairs of the CD during the moratorium. If one or other officer or employee had the power to sign a cheque on behalf of the CD prior to the order of moratorium such power does not stand suspended on suspension of Board of Directors nor can it be taken away by the RP. If the person empowered to sign cheque refuses to function on the direction of the RP or misuse the power it is always open to the RP to take away such power, after issuing notice to the person concerned.

Therefore, the statement made by Managing Director is not in accordance with the Code.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 5(a) (Syllabus 2017).

According to Section 14 of the Insolvency and Bankruptcy Code, 2016 on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: -

1.The institution of suits or continuation of any pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority.

2.Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein.

3.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 SARFAESI Act, 2002.

4.The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Further, “Insolvency commencement date” means the date of admission of an application for initiating corporate insolvency resolution process by the Adjudicating Authority under section 7, 9 or section 10, as the case may be. [Section 5(12) of the Code]

On the basis of the above provisions the moratorium period will start from the date of acceptance of the application i.e. 14th February 2020 and hence the action taken by the company is invalid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6A(i) (Old syllabus).

Section 14 of the Insolvency and Bankruptcy Code, 2016 empowers the adjudicating authority to declare moratorium while passing the orders for initiating Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor (CD).

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 judgement, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b)transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c)any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(d)the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

The effect of moratorium are deferred till conclusion of CIRP.

Thus, the statement is true to the extent stated above.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 4(b) (Syllabus 2017).

Yes, the moratorium shall not apply to a surety in a contract of guarantee to a corporate debtor.

Effect of order of moratorium - 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 NCLT approves the resolution plan under section 31(1) of the Insolvency and Bankruptcy Code, 2016 (the Code) or passes an order for liquidation of corporate debtor under section 33 of the Code, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. [Section 14(4)].

Declaration of moratorium serves the following purposes:

•Ensures that multiple proceedings are not taking place simultaneously and thus avoids the possibility of potentially conflicting outcomes of related proceedings.

•Keeps the corporate debtor's assets together during the insolvency resolution process and facilitates orderly completion of the process,

•Ensures that the company may continue as a going concern while the creditors assess the options for resolution of default.

•Prohibition on disposal of the corporate debtor's assets ensure that the corporate debtor/management does not transfer its assets, thereby stripping the corporate debtor of value during the corporate insolvency resolution process.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 4(c) (Syllabus 2017).

Regulation 30A of the CIRP Regulations specifies deals with provisions relating to withdrawal of application under section 12A of the Code. It provides as under: -

(1)An application for withdrawal under section 12A may be made to the Adjudicating Authority –

(a)before the constitution of the committee, by the applicant through the interim resolution professional;

(b)after the constitution of the committee, by the applicant through the interim resolution professional or the resolution professional, as the case may be:

Provided that where the application is made under clause (b) after the issue of invitation for expression of interest under regulation 36A, the applicant shall state the reasons justifying withdrawal after issue of such invitation.

In Hem Singh Bharana Vs. Pawan Doot Estate Pvt. Ltd. & Ors. [CA (AT) (Ins.) No. 1481 of 2022],

During pendency of approval of the resolution plan before the AA, ex-promoter submitted revised settlement proposal under section 12A of the Code and filed an application seeking to keep the resolution in abeyance. As the AA rejected the said application, an appeal was filed before the NCLAT on the ground that there is no bar on CoC in accepting the settlement proposal under section 12A even if they have already approved a resolution plan. The NCLAT dismissed the appeal while relying on the judgment of SC in Ebix Singapore Pvt. Ltd. V. Committee of Creditors of Educomp Solutions Limited and Anr . , wherein it was held that after approval of a resolution plan by the CoC, it itself is bound by its decision and cannot be allowed to go back from its decision.

Hence in the present case, an application under section 12 A of IBC cannot be entertained after the approval of a resolution plan by the CoC and filing of application before NCLT for approval of resolution plan. The appeal filed by the ex-promoter of Golconda Industries against the order of NCLT will not be entertained by NCLAT.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 5(d) (Syllabus 2022).

Yes, the appeal is tenable.

The facts of the case are similar to the facts in M/s. Ashish Ispat Pvt. Ltd. v. Primuss Pipes and Tubes Ltd.

In case of M/s. Ashish Ispat Pvt. Ltd. v. Primuss Pipes and Tubes Ltd ., an application under section 9 of the Insolvency & Bankruptcy Code was admitted by the NCLT and after issuance of Form-A, the parties amicably settled the dispute and executed a Memorandum of Understanding. In light of settlement, Form-FA was received by the IRP for withdrawal of the Application in terms of Section 12A of the Code read with Regulation 30A. Accordingly, an Application for withdrawal was filed by the IRP before NCLT. During pendency of said Application, a CoC was constituted and the one meeting of CoC was also held. Thereafter, the NCLT observing that there being two Financial Creditors out of which one having 17% of voting shares has dissented to allow withdrawal, the Application for withdrawal cannot be considered unless the consent from CoC as required under the statute, is obtained. Hence, the Appellants and the Suspended Director of Corporate Debtor both aggrieved by the said order filed two Appeals.

The Hon’ble NCLAT held that when the Application under Section 12A was filed for withdrawal, the CoC was not constituted and hence there was no requirement of approval of 90% of voting share of CoC. Further Regulation 30A also makes it clear that when an application is filed prior to constitution of CoC, the requirement of 90% vote of CoC is not applicable and the NCLT has to consider the Application without requiring approval by 90% vote of the CoC. Thus, the Hon’ble NCLAT relying on the judgment of the Hon’ble Supreme Court in the matter of Kamal K. Singh vs. Dinesh Gupta & Anr . and its previous judgments in the matters of Anuj Tejpal vs. Rakesh Yadav & Anr. and Sunil Tandon v Manoj Kumar Anand, IRP & Ors . held that the NCLT without considering the facts and sequence of the events had refused to entertain the Application on the ground that it is not supported by 90% vote of CoC. Thus, the present Appeals were allowed permitting withdrawal of CIRP.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(a) (Syllabus 2022).

The statement is not correct. Application can be withdrawn before or after admission. It is possible that the compromise formula may be evolved either before or after application is filed before National Company Law Tribunal (NCLT).

Application can be withdrawn with the permission of adjudicating authority under Rule 8 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

According to Section 12A of Insolvency & Bankruptcy Code, 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.

****

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 6A(iii) (Syllabus 2017).

The preamble to the Insolvency and Bankruptcy Code, 2016 (IBC) gives a thrust to provide an effective legal framework for timely resolution of insolvency and bankruptcy. Hence, Section 12 of IBC lays down a time limit for completion of insolvency resolution process.

As per Section 12 (1) of IBC, normally any insolvency resolution process needs to be completed within one hundred and eighty days from the date of commencement of Corporate Insolvency Resolution Process (CIRP)

However, as expected no one and even legislation can bind the time. Keeping this in view Section 12 (2) of IBC enables the resolution professional can seek extension after obtaining instructions by a resolution passed at a meeting of the Committee of Creditors by a vote of sixty-six per cent of the voting share.

Section 12 (3) of IBC enables the Adjudicating Authority to consider such application to grant extension of CIRP duration for further maximum ninety days. It is provided that any extension of the period of corporate insolvency resolution process under this section shall not be granted more than once.

It is further provided that the CIRP shall mandatorily be completed within 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.

Though, the word ‘mandatorily’ has been struck down by the Court in the decision in Committee of Creditors of Essar Steel India Limited, Supreme Court has only balanced the interest of all concerned, by permitting an enlargement of the time, only in those cases, where the delay occurs not on account of the fault of the players concerned and it is based on the principle of actus curiae neminem gravabit , which means that the act of Court shall prejudice no one. The Court has not undermined the timeline fixed by the Legislature and, in fact, it has underlined the importance of conforming to the time limit. Speed, indeed, continues to be of the essence of the Code.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4(d) (Syllabus 2017).

(i)Section 12 (1) of the Insolvency and Bankruptcy Code, 2016 (IBC) stipulates that the Corporate Insolvency Resolution Process (CIRP) must be completed within 180 days of the initiation.

(ii)In the extreme circumstances if CIRP is not completed the Resolution Professional (RP) shall file an application to Adjudicating Authority for extension of time, only when instructed by the Committee of Creditors resolve with 66% voting shares.

(iii)Section 12(3) provides that on receipt of an application, 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. Provided further that the Corporate Insolvency Resolution Process shall mandatorily be completed within a period of 330 days from the insolvency commencement date, including any extension of the period of corporate insolvency resolution process granted and the time taken in legal proceedings in relation to such resolution process of the corporate debtor.

(iv)In the given case, there is a resolution by the Committee of Creditors with 70% voting share and hence the RP can file application but for extension of only 60 days as resolved.

(v)On the application, the Adjudicating Authority will grant extension only when it is satisfied, in other words the application need to be drafted with cogent reason and mere annexing the resolution is not sufficient.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 4(a) (Syllabus 2017).