IBC 2016 provides a time-bound, creditor-in-control framework for resolution of insolvency of companies, LLPs, and individuals through the NCLT and NCLAT.
CIRP is initiated when a Corporate Debtor (CD) defaults on payment of ₹1 crore or more (threshold raised from ₹1L to ₹1 crore in 2020). Financial Creditors, Operational Creditors, or the Corporate Debtor itself can file an application before the NCLT.
NCLT admits the insolvency application. Moratorium begins — no suits, recovery proceedings, enforcement of security interest against the CD.
Interim Resolution Professional (IRP) appointed. Board of directors suspended; IRP takes management control.
Committee of Creditors (CoC) formed with all Financial Creditors. Voting rights proportional to debt owed. CoC may appoint a new Resolution Professional.
Resolution Plan must be approved by CoC (minimum 66% vote) and submitted to NCLT. NCLT must approve before Day 180.
NCLT may grant 90-day extension to CIRP if justified. Beyond Day 270, NCLT must order liquidation.
Financial creditors (banks, debenture holders, home buyers) can initiate CIRP on default. Home buyers classified as financial creditors since 2018 amendment.
Operational creditors (vendors, employees) can file after issuing a 10-day demand notice. CD has right to dispute existence of debt.
Promoters of insolvent companies, wilful defaulters, undischarged insolvents, and related parties cannot submit Resolution Plans — key anti-abuse provision.
Priority: CIRP costs → secured financial creditors → employee wages → government dues → unsecured financial creditors → equity shareholders (last).
Insolvency of individuals and partnership firms — filed before DRT (Debt Recovery Tribunal). Repayment plan or bankruptcy order can be issued.
Introduced for MSMEs in 2021. Promoter-driven resolution with creditor agreement before NCLT application. Faster (120 days) and less disruptive than full CIRP.
CIRP timelines, creditor rights, resolution plans — ask anything about insolvency law.