Prior to this, the government of India had amended the IBC to increase the minimum amount
of default for initiating an insolvency resolution process against a corporate debtor from INR
1 lakh ($1,325) to INR 1 crore ($132,500).
The second section of the insolvency ordinance deals with insertion of a 'non-obstante
provision'+ to the IBC-section 10A, which concerns the suspension of initiation of the
corporate insolvency resolution process. This removes the right to apply for corporate
insolvency by financial creditors under section 7, by operational creditors under section 9 and
by corporate debtors themselves under section 10 of the IBC. This applies for any default
which has arisen in the exempted period starting on 25 March 2020 and ending six months
thereafter, "or such further period, not exceeding one year from such date, as may be notified
in this behalf".
Owing to the language of the insolvency ordinance, it is clear that the right of the applicants
to file for insolvency under sections 7, 9 and 10 of the IBC has not just been suspended, but
indeed permanently taken away for any defaults that have occurred in the exempted period.
The insolvency ordinance also does not provide any reprieve or opportunity to the ongoing
corporate insolvency proceedings for any resubmission of any revised plans or revised
valuations, which under the current economic lockdown seems aptly justifiable.++
in the matter of M/s. Innovative Industries Ltd. Vs. ICICI Bank &Ans, held that in an
application filed by the Financial Creditor under Section 7 for initiation of Corporation
Insolvency Process, the Adjudicating Authority is required to satisfy-
(a) Whether a default has occurred;
(b) Whether an application is complete;
(c) Whether any disciplinary proceeding is against the proposed Insolvency Resolution
Professional? “
(I may define default as nonpayment of banks dues on time)
The recent developments of section (7) cases threw many relevant questions. Borrowers’
lawyers rightfully raised the question whether the officials who are raising the applications
under the said code have the required legal powers to do so? Their arguments were based on
the premise that the powers wrest only with the Board of Directors. Not many know that after
a bank officer is confirmed as such, he/she gets a General Power of Attorney which enables
him/her to sign papers, represent the banks or initiate legal action, whenever required.
It is possible that banks having learnt the bitter medicine of ill preparedness for facing the
robust borrowers equally supported by the best lawyers, got themselves updated and face
them boldly to recapture their rights. Now the banks Boards have started allowing the bank
officials to represent in NCLT/NCLAT by passing special resolution.
I&B Code, 2016 section 7. (3) further explains the following steps, equally important for us
to understand the basics thoroughly.
The financial creditor shall, along with the application furnish _
(A) Record of the default recorded with the information utility or such other record or
evidence of default as may be specified;
(B) The name of the resolution professional proposed to act as an interim professional
