Last Updated on June 10, 2024 by Satish Mishra
With the enactment of Insolvency and Bankruptcy Code, 2016 (IBC), the process of recovery of a debt owed by a Corporate entity towards any person or entity has become easier and time bound. IBC provides for a specialized mechanism and forum for recovery of corporate debt for an amount as low as Rs. 1 Lakh.
Section 6 of the code provides that when a Corporate debtor fails to repay the amount borrowed by it or against the goods/services provided to it then the financial creditor or operational creditor, as the case may be, can initiate a proceeding under IBC by filing a application.
Who is a financial or Operational creditor?
As per section 5(7) financial creditor means a person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. Further section 5(20) explains that an operational creditor means a person to whom an operational debt is owed. Operational debt as per section 5(21) means a debt with regard to supply of goods or services by a person to company and it also includes dues relating to employment and other dues arising under any law for the time being in force.
Process of recovery under IBC:
In order to initiate a proceeding under IBC the pre requisite condition for a operational creditor is to send a demand notice to the corporate debtor in the prescribed format as provided under section 8 along with the invoice of amount due towards the company. The corporate debtor has to repay the amount within 10 days of the receipt of the notice. In case the company fails to repay the amount, the operational creditor can move to National Company Law Tribunal (NCLT) and file an application for insolvency of the company/corporate debtor. NCLT has to decide upon the application within 14 days i.e. it has to either accept or reject the application within 14 days.
Once the application is accepted by the NCLT the corporate insolvency resolution proceedings commences and Insolvency resolution professional is appointed to complete the insolvency resolution process. Section 12 of the Code provides that the insolvency resolution process has to be completed within One Hundred and eighty days subject to a further extension of ninety more days.
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NCLT Chandigarh Bench Address – Address: Ground Floor, Corporate Bhawan, Sector-27 B, Madhya Marg, Chandigarh-160019 extending jurisdiction to State of Himachal Pradesh, State of Jammu and Kashmir, State of Punjab, Union Territory of Chandigarh. For more on Insolvency and Bankruptcy Code, Bankruptcy Proceedings, & IBC stay tuned.
