Fresh Start Process

As per section 79(19) of the Insolvency and Bankruptcy Code, 2016, "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 excluded debt.

As per section 79(15) of the Insolvency and Bankruptcy Code, 2016, excluded debt means:

-liability to pay fine imposed by a court or tribunal.

-liability in relation to a student loan.

Accordingly, as per the above provisions, the qualifying debt is as under:

Total debt: Rs 39,000 Less: student loan: (Rs 7,000)

Qualifying debt: Rs 32,000

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

(iv)Incorrect The debtor can’t be allowed to file application for a fresh start under Section 80 under the Insolvency and Bankruptcy Code, 2016 as his / her income is beyond the limit of Rs. 60,000 p.a. and futher his asset value is more than Rs 20,000 at the time of application.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 4(b)(iv) (Syllabus 2022).

Section 80(2)(c) of the Insolvency and Bankruptcy Code, 2016 provides a Fresh Start Process for individuals under which they will be eligible for a debt waiver of up to INR 35,000. The individual will be eligible for the waiver subject to certain limits prescribed under the Code.

Section 80 of the Insolvency and Bankruptcy Code, 2016 provides that a debtor who is unable to pay his debt and fulfils the conditions as mentioned in sub-section (2) of section 80 shall be entitled to make an application to the Debt Recovery Tribunal (DRT) for a fresh start process for discharge of his qualifying debt provided the aggregate value of the qualifying debts does not exceed thirty -five thousand rupees.

Section 79(19) of the Insolvency and Bankruptcy Code, 2016 defines the meaning of Qualifying Debt. It 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 but does not include:

l an excluded debt; l a debt to the extent it is secured; and l any debt which has been incurred three months prior to the date of the application for fresh start process.

As the amounts due by Best Food do not fall under the definition of Qualifying Debt, Best Foods cannot apply for fresh start process.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 3(b)(i) (Syllabus 2017).

Section 80 of the Insolvency and Bankruptcy Code, 2016 provides that a debtor who is unable to pay his debt and fulfils the below mentioned conditions shall be entitled to make an application for a fresh start for discharge of his qualifying debt.

A debtor may either personally or through a Resolution Professional may apply for fresh start process in respect of his qualifying debts to the Adjudicating Authority if he fulfils the following conditions:

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 these provisions has been made in relation to him in the preceding twelve months of the date of the application for fresh start.

Section 79 (19) defines “qualifying debt” to mean 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;

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 1(e) (Syllabus 2022).

As per section 80 of the Insolvency and Bankruptcy Code, 2016, 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.

Considering the above, since Raghu's annual income, aggregate value of the assets and aggregate value of the qualifying debts doesn't cross the above limits, he is eligible to make an application under fresh start process.

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

M/s ABC can be advised to take recourse of Fresh Start Process under Insolvency and Bankruptcy Code, 2016 (IBC Code). Following are the brief provisions of Fresh Start Process (FSP):

1.As per the given facts of case, M/s ABC is eligible to take of Fresh Start Process (FSP), under section 80 of IBC Code.

2.An application u/s 81 can be filed for FSP by M/s ABC itself or through Resolution Professional with prescribed fees containing the following information supported by an affidavit, namely: –

(a)a list of all debts owed by the debtor as on the date of the said application along with details relating to the amount of each debt, interest payable thereon and the names of the creditors to whom each debt is owed;

(b)the interest payable on the debts and the rate thereof stipulated in the contract;

(c)a list of security held in respect of any of the debts,

(d)the financial information of the debtor and his immediate family up to two years prior to the date of the application;

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

(f)the reasons for making the application;

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

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

3.Where an application under section 80 is filed by the debtor through a resolution professional, the Adjudicating Authority (AA) 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. On receipt of confirmation from Board, AA shall confirm appointment of RP.

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. On nomination by Board within 10 days, AA shall appoint RP.

4.The RP will examine application and submit report to AA, recommending acceptance or rejection of application u/s 83, within 10 days of his appointment.

5.AA will pass order u/s 84, based on report by RP to admit or reject the application, with 14 days from submission of report by RP.

6.On the date of admission of the application, the moratorium period shall commence in respect of all the debts. The moratorium ceases to have effect at the end of the period of one hundred and eighty days beginning with the date of admission unless the order admitting the application is revoked under sub-section

(2)of section 91.

7.Any creditor mentioned in the order of the Adjudicating Authority under section 84 to whom a qualifying debt is owed may, within a period of ten days from the date of receipt of the order under section 84, file his objections to RP only on the following grounds, namely: - (a )inclusion of a debt as a qualifying debt; or (b)

incorrectness of the details of the qualifying debt specified in the order under section 84.

8.As per section 92, the RP will prepare a final list of qualifying debts and submit such list to AA. Based on that AA will pass discharge order w.r.t. qualifying debts.

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

The contents of the affirmation as per Section 81(4) of the Insolvency and Bankruptcy Code, 2016 provides that an application filed for fresh start process shall be in such form and manner and accompanied by such fee as may be prescribed by the Regulations after their enforcement and shall contain the following information supported by an affidavit namely:

(a)list of all debts owed by the debtor as on the date of the said application along with detail 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)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; and

(h)The confirmation that no previous fresh start order under the provisions of the Code 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, June 2024, Q. 3(B) (Syllabus 2017).

Section 82 of the Insolvency and Bankruptcy Code, 2016, provides that 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.

The Board shall communicate to the adjudicating authority in writing either:

-Confirming the appointment of the Resolution Professional who filed an application or

-Rejecting the appointment of the Resolution Professional who filed an application and nominating a Resolution Professional suitable for the fresh start process Considering the above provisions, contentions of Karan is not correct since disciplinary proceedings are already initiated against him by the Board.

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

Grounds on which the aggrieved debtor or creditor may make an application to the Adjudicating Authority against the action taken by the Resolution Professional under the Fresh Start Process Section 87 of the Insolvency and Bankruptcy Code, 2016 provides that debtor or the creditor who is aggrieved by the action taken by the Resolution Professional under Section 86 may within ten days of such decision may make an application to the Adjudicating Authority challenging such action on any of the following grounds, namely:–

a)that the Resolution Professional has not given an opportunity to the debtor or the creditor to make a representation; or

b)that the Resolution Professional colluded with the other party in arriving at the decision; or

c)that the Resolution Professional has not complied with the requirements of Section 86.

The Adjudicating Authority shall decide the application referred within fourteen days of such application and make an order as it deems fit. Where the application has been allowed by the Adjudicating Authority it shall forward its order to the Board and the Board may take such action as may be required against the Resolution Professional.

Restrictions imposed on a debtor during moratorium period of Fresh Start Process The following restrictions are imposed on debtor during the moratorium period of Fresh Start Process, as provided under section 85(3) of the IBC:

a.shall not act as a director of any company, or directly or indirectly take part in or be concerned in promotion, formation or management of the company.

b.shall not dispose-off or alienate any of the assets.

c.shall inform his business partners that he is undergoing a fresh start process.

d.shall be required to inform prior to entering into any financial or commercial transaction of such value as may be notified by the Central Government, either individual or jointly, that he is undergoing a fresh start process.

e.shall disclose the name under which he enters into business transactions, if it is a different name then the one under the application.

f.shall not travel outside India except with the permission of the Adjudicating Authority.

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