My creditor has initiated IBC insolvency proceedings against my company in Guwahati; what defences can I raise and what is the corporate debtor's position?

Detailed Legal Analysis

If a creditor has initiated insolvency proceedings against your company under the Insolvency and Bankruptcy Code, 2016 (IBC), there are several defenses you can raise as a corporate debtor to contest the application.

Here are some common defenses you may consider:

• Dispute on Existence of Debt: If you can prove that the debt is disputed or not payable, it can be a valid defense. Under Section 8 of the IBC, the corporate debtor must be given notice of the default, allowing them to dispute the claim.
• Operational Debt Definition: Ensure that the debt qualifies as an operational debt as defined under Section 5(21) of the IBC. If it does not, the application may be invalid.
• Time-Barred Debt: If the debt is older than the limitation period defined under the Limitation Act, 1963, it may be argued that the creditor cannot enforce it through the IBC.
• Improper Notice: If the creditor did not provide proper notice under Section 8, it could render their application invalid. You can raise this defense if the notice was not in the prescribed format or not served properly.
• Financial Distress Not Established: Under Section 7(1) of the IBC, the creditor must prove the financial distress of the debtor. If your financial position is sound, you can argue against the initiation of the proceedings.
• Fraudulent Transactions: If there are any allegations that the creditor engaged in fraudulent transactions to secure the debt, this can be raised as a defense.
• Resolution Plan in Progress: If you have a resolution plan that is under consideration, you may inform the National Company Law Tribunal (NCLT) and seek an adjournment or dismissal of the application.

The corporate debtor's position in such proceedings is critical. Under the IBC, the corporate debtor has the right to:

• Challenge the admissibility of the application.
• Participate in the resolution process if the insolvency application is admitted.
• Manage its affairs during the Corporate Insolvency Resolution Process (CIRP), subject to the provisions of the IBC.
• Raise funds and submit a resolution plan to the Committee of Creditors (CoC) during the CIRP.

It is advisable to consult with a legal expert specializing in insolvency law to effectively navigate the proceedings and formulate a strong defense.