My company in Ujjain cannot pay its debts; can I file for insolvency under IBC?

Detailed Legal Analysis

Yes, you can file for insolvency under the Insolvency and Bankruptcy Code, 2016 (IBC) if your company in Ujjain is unable to pay its debts.

The IBC provides a structured framework for resolving insolvency and bankruptcy issues, allowing creditors to recover dues while offering a viable restructuring option for debtors. Here are the key steps and requirements involved in filing for insolvency under the IBC:

• Eligibility:
  • Your company must be classified as a corporate debtor under Section 3(8) of the IBC.
  • The default amount should be at least INR 1,00,000 as per Section 4 of the IBC.
• Filing Application:
  • You can file a petition for the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC if you are a financial creditor, or under Section 9 if you are an operational creditor.
  • The application must be submitted to the National Company Law Tribunal (NCLT) having jurisdiction over your company's registered office.
• Documentation:
  • Provide proof of default, such as invoices, contracts, or any relevant financial statements.
  • Attach a list of creditors and the amount due to each.
  • Include a copy of the company’s board resolution if applicable.
• Admission of Application:
  • Upon filing, the NCLT will evaluate the application and may admit it if it finds the default is established.
  • The NCLT is required to pass an order within 14 days of the application being filed, as per Section 7(4) and Section 9(5) of the IBC.
• Appointment of Interim Resolution Professional (IRP):
  • If the application is admitted, an interim resolution professional will be appointed to manage the affairs of the company during the insolvency process.
• Resolution Process:
  • The IRP will call for a meeting of the creditors to formulate a resolution plan.
  • The resolution plan must be approved by a majority of the creditors, as outlined in Section 30 of the IBC.
• Conclusion:
  • If a resolution plan is not approved within 180 days, the company may face liquidation as per Section 33 of the IBC.

It is advisable to consult with a legal expert specializing in insolvency law to navigate the complexities of the process effectively.