Under the Insolvency and Bankruptcy Code, 2016, what are the timelines for initiating corporate insolvency resolution for a defaulting company?

Detailed Legal Analysis

Under the Insolvency and Bankruptcy Code, 2016 (IBC), the timeline for initiating corporate insolvency resolution for a defaulting company is strictly defined to ensure efficient proceedings.

The key steps and timelines involved in initiating the corporate insolvency resolution process (CIRP) are outlined below:

• Default Identification: The process begins when a company defaults on its debt obligations. A default is defined under Section 3(12) of the IBC as the non-payment of a debt that has become due and payable.
• Application Filing: An application for initiating CIRP can be filed by either the corporate debtor (the company facing insolvency) or a financial creditor or operational creditor (as per Section 7, 8, or 9 of the IBC). The application must be submitted to the National Company Law Tribunal (NCLT).
• Timeline for Admission: Upon receipt of the application, NCLT must admit or reject the application within 14 days of its receipt, as stipulated in Section 7(4) and Section 9(5) of the IBC.
• Commencement of CIRP: If the application is admitted, the CIRP commences from the date of the order of the NCLT, as stated in Section 13 of the IBC. The corporate debtor is then considered to be in a state of insolvency.
• Appointment of Interim Resolution Professional (IRP): The NCLT shall appoint an IRP who will take control of the company and manage its affairs in the best interest of the creditors.
• Submission of Claims: All creditors must submit their claims to the IRP within 30 days from the date of commencement of the CIRP (Section 15 of the IBC).
• Preparation of Information Memorandum: The IRP must prepare an information memorandum within 7 days of the last date of submission of claims (Section 29 of the IBC).
• Resolution Plan Submission: Resolution plans must be submitted within 180 days from the commencement of the CIRP, which can be extended by a further 90 days under specific circumstances (Section 12 of the IBC).

In conclusion, the IBC establishes a clear framework to initiate corporate insolvency resolution effectively, emphasizing timely actions by all parties involved to protect the interests of creditors and maintain the viability of the corporate debtor.