How to File a Claim as Financial Creditor Before NCLT

How to File a Claim as Financial Creditor Before NCLT

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?

  1. A financial creditor can file an application either by itself or jointly with other financial creditors.
  2. 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: –
  3. A guardian
  4. An executor or an administrator of an estate of a financial creditor
  5. A trustee (including debenture trustee)
  6. An authorised person who is duly appointed by the Board of Directors of a Company.
  7. 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.
  8.  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.
  9. 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.

NCLT and Must Know Facts

National Company Law Tribunal - Corporate Law

National Company Law Tribunal was formed on June 1, 2016. It is a quasi-judicial body for adjudicating disputes of civil nature arising under the Companies Act.  

Before the formation of NCLT, there were various authorities (e.g. Company law Board, Board of Industrial and Financial Reconstruction (BIFR)) dealing with company matters. The establishment of NCLT has consolidated the jurisdiction of such bodies. 

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Wide powers and Issues which NCLT deals with:

Establishment of NCLT has brought redressal of different kinds of corporate disputes under one umbrella. It deals in the following areas: 

  • All proceedings like arbitration, compromise, reconstruction and winding up under the Companies Act, are disposed of by the Tribunal.
  • It undertakes the proceedings under the Insolvency and Bankruptcy Code, 2016. It initiates the IRP – Insolvency Resolution Process when a company defaults to pay the creditors. Under this Code, a homebuyer can file a complaint before NCLT if the developer does not provide possession of the house as promised.
  • It handles the cases related to mismanagement and oppression of a company. The act complained of can be a past or present act. Ex-member of a company can also file a case. 
  • It also handles the cases of companies committing frauds and improprieties with their depositors and shareholders by drying out their investment. The tribunal awards compensation to these investors/depositors. Class action is permissible for giving relief to the depositors. 
  • If a company has been registered wrongfully or fraudulently, it has the power to investigate into the same and deregister the company
  • It can investigate into the affairs of the company if they are prejudicial to the public interest or to the interest of the company itself.  
  • Can change the financial year of the Companies.
  • Can convene General and extraordinary meetings of the company.
  • The Tribunal can declare the liability of the members to be unlimited. For conversion of a company from private to public limited, consent and confirmation of the Tribunal is required.
  • If the company refuses to register the transfer of a share, complaint lies to the Tribunal.
  • It has the authority to dispose of the cases pending before the earlier authorities. 

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Working of National Company Law Appellate Tribunal (NCLT)

It works like a regular court. It passes orders resolving disputes, imposes penalty and orders compensation. The orders of NCLT are appealable before National Company Law Appellate Tribunal. The appeal is filed within 45 days from the date of order. Further appeal lies to the Supreme Court.

Accelerated Dispute Resolution

There were multiple authorities for resolving the disputes related to a company. Resultantly, there used to be delayed and conflicting decisions. The delay hampers the growth of business and discourages investors. The significant benefits of NCLT are accelerated dispute resolution process and uniformity of decision. 

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