Fast Track Corporate Insolvency Resolution Process In India

Published on 12 Oct 2018 by Shivi

Under the Insolvency and Bankruptcy Code, 2016, a provision for fast-track corporate insolvency resolution process has been laid down, which is applicable to small-scale corporates in India. The Code focuses on a time-bound resolution of insolvency process and financial claims of the creditors of a corporate debtor.

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017. Under the notification of the IBBI dated June 14, 2017, a fast-track CIRP petition can be filed under Section 55(2) of the IBC against the following entities:

  1. A start-up, other than a Partnership Firm.
  2. A small company, as defined under Section 2(85) of the Companies Act, 2013. A small company has been defined as a company whose paid-up share capital is up to Rs. 50 lakhs or whose annual turnover is not more than Rs. 2 crore, except for a holding or subsidiary company, a Section 8 company, a company or body corporate governed by any special Act.
  3. An unlisted company with total assets worth Rs. 1 crore or less.

The fast-track corporate insolvency resolution process can be initiated by a creditor or the corporate debtor itself to reduce the time taken in an insolvency process by almost a half as compared to the normal CIRP procedure.

Timeline of a Fast-Track Corporate Insolvency Resolution Process

Under Section 56 of the Insolvency Code, the fast track CIRP must be completed within a period of 90 days from the date on which the insolvency petition was filed. The period can be extended if the resolution professional files an application with the Adjudicating Authority upon passing of a resolution by the committee of creditors in a meeting and with the support of at least 75% votes of the voting share.

If the Adjudicating Authority deems it necessary to extend the 90-day period for completion of the insolvency proceedings, it can extend the period further to a maximum of 45 days. However, the extension cannot be granted more than once by the Adjudicating Authority.

The process of fast-track CIRP begins when a creditor either financial or operational, file an insolvency application with the Adjudicating Authority against a debtor that has defaulted in repaying its debts. The application must be filed along with the proof of existence of default stating that a fast track resolution process must be initiated. A corporate law lawyer in India must be consulted before initiating an insolvency resolution process.

The procedure followed in a fast track CIRP is the same as a normal CIRP procedure. The process begins with filing of the insolvency petition by the creditor or corporate debtor when the amount of debts is more than Rs. 1 lakh. A reply of acceptance or rejection of the application is sent by the NCLT within the period of 14 days.

READ: Corporate Insolvency Resolution Process (CIRP) Under IBC, 2016

Once the application is admitted by the Adjudicating Authority, the Interim Resolution Professional (IRP) is appointed. The IRP has a period of 21 days to form an opinion whether the fast track process is applicable to the corporate debtor or not. If the corporate debtor does not fulfil the requirements of fast-track insolvency process, the interim resolution professional must file an application with the Adjudicating Authority before the expiry of 21 days to convert the fast track process into a normal Corporate Insolvency Resolution Process.

A moratorium is effected that prohibits the corporate debtor from selling or transferring any property, enforcing any security interest or recovering any assets. The Committee of Creditors (COC) is appointed within 30 days that comprises all the financial creditors of the debtor.

Based on the report submitted by the interim professional, the Committee of Creditors (CoC) appoints the insolvency resolution professional. The insolvency professional supervises the debtor’s administration and submits an insolvency plan within 180 days with NCLT. This period of 180 days may be extended to a maximum of 270 days if it is deemed necessary by the Tribunal.

ALSO READ: What does Insolvency and Bankruptcy Code, 2016 do?

Legistify connects you with the best corporate law attorneys in India who can assist you in filing a fast track CIRP application with the NCLT. You can call us at 846-883-3013 or send us an email at [email protected].

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