Under Insolvency and Bankruptcy Code, 2016, has been set up for resolving the issues related to Corporate and Banking Sector.
A financial creditor can approach the NCLT as and when required. Under IBC Code, a financial creditor is as an individual to whom a financial debt is owed and incorporates an individual to whom such debt has been legally assigned or transferred.
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Who can file the application?
- A financial creditor can file an application either by itself or jointly with other financial creditors.
- Govt. notified person: Any other person notified by the Central government, on behalf of the financial creditor can also file the application. Following notified person may file an application for initiating Corporate Insolvency Resolution Process (CIRP) on behalf of the financial creditor: –
- A guardian
- An executor or an administrator of an estate of a financial creditor
- A trustee (including debenture trustee)
- An authorised person who is duly appointed by the Board of Directors of a Company.
- Depositors: An application for initiation CIRP, where a financial debt is in the form of securities or deposits, shall be jointly filed. This application should not be filed by less than 100 of such creditors in the same class. Also, it should not be less than 10% of the total number of such creditors in the same class, whichever is less.
- Creditors and their Class: An application for initiation of CIRP shall be filed jointly, where a financial debt owed by a class of creditors exceeding the number as may be specified. It should be filed by no less than 100 of such creditors in the same class. Also, it should not be less than 10% of the total number of such creditors in the same class, considering whichever is less.
- Home Buyer: For a home buyer, the application shall be filed jointly, under the same real estate project, by not less than 100 of such allottees or not less than 10% of the total number of such allottees, whichever is less.
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Initially, the applicant has to satisfy the Tribunal on the lines of maintainability of the case. At this stage, it is considered by NCLT whether the application/case falls inside the ambit of Financial Creditor or Operational Creditor. An application before NCLT, against a corporate debtor, can be filed by a financial creditor, where the amount of the default is minimum one lakh rupees.
The IBC Code defines the procedure involved in NCLT proceedings. When a default has happened, a financial creditor can file an application for starting the Corporate Insolvency Resolution Process (CIRP). After that, an IRP (Interim resolution professional) gets appointed by the NCLT to begin the procedure of CIRP. The financial creditor must prepare a claim regarding his debt pending towards the debtor and file the same to the IRP, and then IRP acts upon the same and prepares a resolution plan.
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Filing of the claim has to be in Form-C, according to Regulation 8 of IBBI (Insolvency and Bankruptcy Board of India) (Insolvency Resolution Process for Corporate Persons) Regulations, 2017. When Form C of the applicant is acknowledged and accepted by the Tribunal, that applicant has got the right to be part of the Committee of Creditors (CoC). The CoC is empowered to finalise the resolution plan.
The NCLT may also reject the claim application at the initial stage of filing. The NCLT shall consider and examine the default and its existence from the records of an information utility or based on all other evidence furnished by the financial creditor within fourteen days of the receipt of the application. After a detailed observation by the Adjudicating Authority, the proceedings move forward.
The Adjudicating Authority once gets satisfied with the evidence and records decides that no default has occurred. The Adjudicating Authority makes sure, before any action, that the application is complete, or if any proceeding regarding disciplinary action is pending against the proposed resolution professional. It may, by order, reject such an application.
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The Adjudicating Authority, before rejecting the application, gives a notice to the applicant. This notice is for the applicant to rectify the defect in his application. Within seven days of receipt of such information from the Adjudicating Authority, the applicant can resubmit the application duly rectified.
Hence, the partition of property among the heirs of an individual will be divided according to the above-mentioned procedure.