Section 10 - Corporate Insolvency Resolution Process (CIRP) under IBC, 2016

 

Section 10 of the Insolvency and Bankruptcy Code, 2016 permits the corporate debtor to file for initiation of the corporate insolvency resolution process on the occurrence of default. This provision enables a financially stressed company to proactively seek resolution through the adjudicating authority, rather than waiting for creditors to initiate action.

Requirements:

The corporate debtor is required to furnish clear evidence of default in debt repayment, such as loan agreements, credit facility documents, and records demonstrating non-fulfilment of payment obligations. The minimum default amount must be ₹1 crore.

Before filing, the corporate debtor must obtain formal authorization—either through a special resolution passed by shareholders, a board resolution, or, in the case of an LLP, by approval of at least three-fourths of its total partners.

Along with the application, the corporate debtor must submit detailed financial information, including audited financial statements, a list of creditors, and particulars of all outstanding debts. The consent of a proposed Interim Resolution Professional (IRP), who must declare the absence of any conflict of interest, should also be enclosed.

Procedure:

1. The corporate debtor begins by passing a formal resolution – either a special resolution by the shareholders or a board resolution – authorizing the initiation of insolvency proceedings.
2. The company then prepares an application and compiles necessary documents including evidence of default, financial statements, and details of all creditors. Simultaneously, the corporate debtor selects and obtains consent from an Interim Resolution Professional who will manage the process in Form 2.
3. The application is then filed with the National Company Law Tribunal.
4. The NCLT scrutinizes the application to verify if all procedural and documentary requirements are met. During this phase, the tribunal may seek clarifications or reject incomplete applications.
5. The NCLT shall decide on admission within 14 days.
6. Upon admission, moratorium is declared under Section 14, and the tribunal appoints the Interim Resolution Professional who takes over management of the corporate debtor and commences the corporate insolvency resolution process under court supervision.

Time Limit:

The National Company Law Tribunal (NCLT) shall decide whether the application should be admitted or rejected within 14 days from the date it is received. During this period, the Tribunal reviews the evidence of default, checks whether the application and documents submitted are complete, and verifies that there are no disciplinary proceedings pending against the proposed IRP. If all requirements are satisfied, the application is admitted. If any shortcomings are found, the applicant is given 7 days to rectify them before a final decision is taken.