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Area of Practices in Insolvency and Bankruptcy
Insolvency and Bankruptcy – Chansoriya Law Chambers
The Insolvency and Bankruptcy Code (IBC), 2016 is one of the most significant reforms in Indian commercial law. It consolidates and amends laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. The primary objective of the IBC is to promote entrepreneurship, ensure availability of credit, and balance the interests of all stakeholders. Proceedings under the IBC are primarily adjudicated before the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), with limited oversight by the Supreme Court and High Courts.
Creditor and Debtor Representation
IBC matters revolve around two principal parties: Financial Creditors and Operational Creditors: Banks, financial institutions, and suppliers often initiate insolvency proceedings to recover dues. The law provides them with the right to trigger the Corporate Insolvency Resolution Process (CIRP) if default occurs. Corporate Debtors: Companies facing genuine financial distress are also entitled to seek insolvency protection and restructuring through resolution plans. Proper representation ensures that debtors’ rights are not compromised while balancing repayment obligations.
Corporate Insolvency Resolution Process (CIRP)
The CIRP is the heart of the IBC framework. Once admitted by the NCLT, a moratorium is imposed on all suits and enforcement proceedings against the debtor. A Resolution Professional takes charge of management, and creditors form a Committee of Creditors (CoC) to evaluate resolution plans. If no plan is approved within statutory timelines, liquidation proceedings follow. Representation during CIRP requires careful attention to statutory provisions, timelines, and strategic considerations.
Appeals and Appellate Forums
Orders of the NCLT can be challenged before the NCLAT on questions of law or substantial procedural irregularity. Further appeals lie to the Supreme Court. Issues such as interpretation of “default,” treatment of secured creditors, and approval of resolution plans have often been settled through appellate forums, creating an evolving body of insolvency jurisprudence in India.
Current Trends in Insolvency Litigation
Real Estate Sector: Homebuyers have been recognized as financial creditors, allowing them to initiate CIRP against defaulting builders. Cross-Border Insolvency: With increasing foreign investments, Indian courts are exploring frameworks aligned with the UNCITRAL Model Law. Pre-Packaged Insolvency: Introduced for MSMEs, pre-pack insolvency provides a faster and cost-effective resolution process. Personal Guarantors: Liability of promoters and directors acting as guarantors for corporate debt has become a major area of litigation. Banking and NBFC Involvement: IBC is being extensively used by banks to resolve non-performing assets (NPAs), thereby strengthening the credit market.
Insolvency law affects businesses, creditors, employees, and even consumers. Awareness of rights under the IBC—whether as a creditor seeking recovery, or as a debtor seeking restructuring—is essential for protecting interests. Delay in initiating proceedings or misinterpretation of provisions can lead to irreversible consequences such as liquidation or disqualification of directors. Early knowledge and timely action are vital in navigating insolvency and bankruptcy proceedings effectively.