Crucial Insights into India’s Corporate Insolvency Resolution Process

By Rishabh Kumar

Edited by Bharti Verma, Associate Editor at Law Insider

Published on: 23 September 2023 at 00:01 IST

In the dynamic landscape of India’s corporate world, financial challenges are not uncommon. Whether triggered by market volatility, mismanagement, or unforeseen economic downturns, companies often find themselves grappling with insurmountable debt burdens. To address these issues and provide a structured mechanism for resolution, the Indian government introduced the Insolvency and Bankruptcy Code (IBC) in 2016.

In this article, we shall delve into the concept of the Corporate Insolvency Resolution Process (CIRP) under the IBC. We will explore its objectives, key provisions, procedure and the recent development in the Indian corporate landscape since its inception.

Corporate Insolvency Resolution

Corporate Insolvency Resolution Process (CIRP) is a pivotal mechanism in the modern financial and business landscape, designed to address the challenges and complexities that arise when a corporate entity faces financial distress or insolvency. In an era where business dynamics are increasingly dynamic and volatile, the CIRP stands as a beacon of stability, providing a structured framework for the revival and rehabilitation of financially troubled companies.

Minimum Default Value for corporate insolvency resolution process (CIRP)

According to Section 4 of the Code, the minimum default amount that a company must incur to be admitted into the CIRP is INR 1 Lakh.

Adjudicating authority and relevant tribunals

The Adjudicating Authority responsible for handling matters under the Code is the National Company Law Tribunal (NCLT), as established under Section 408 of the Companies Act of 2013. The determination of which specific NCLT will adjudicate a company’s matters depends on the location of the company’s registered office.

In cases where an applicant is dissatisfied with a decision rendered by the NCLT, they have the option to approach the National Company Law Appellate Tribunal, New Delhi (NCLAT), as provided for under Section 410 of the Companies Act, 2013. If an applicant remains aggrieved by the NCLAT’s decision, they can further seek redress by approaching the Supreme Court of India under Section 62 of the Code.

Who can Initiate CIRP?

When Section 4 is applicable that is when the minimum amount of the default is one lakh rupees the CIRP can be initiated by 3 persons.

As Section 4 states “This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees

The applicant for initiation of CIRP can be any of the following

  1. The financial creditor under section 7 of IBC at stated, financial creditor either by himself or jointly with other financial creditors may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.”
  2. The operational creditor under section 9 as stataed it has Application for initiation of corporate insolvency resolution process by operational creditor.
  3. The corporate debtor himself under section 10 as stated thereby Initiation of corporate insolvency resolution process by corporate applicant.

Resolution Process

Section 7 of the IBC deals with the initiation of the Corporate Insolvency Resolution Process (CIRP) by financial creditors.

This article provides a step-by-step guide to the resolution process under Section 7.

1st Step: Filing an Application for CIRP

The resolution process under Section 7 begins with a financial creditor filing an application for CIRP. This application can be filed individually or jointly with other financial creditors. It is important to note that such an application should only be filed if a default by the corporate debtor has taken place.

The financial creditor must furnish certain attachments along with the application, including:

  1. A record of the default or evidence of default.
  2. The name of the resolution professional proposed to act as an interim resolution professional.
  3. Any other information as specified by the Board.

2nd Step: Verification of Default

Within 14 days from the receipt of the application, the adjudicating authority must verify the existence of the default. This verification can be done using information from an information utility or other evidence provided by the financial creditor.

3rd Step: Admission or Rejection of Application

If the adjudicating authority is satisfied that the details provided in the application are accurate, the default exists, and there are no pending disciplinary proceedings against the proposed resolution professional, the application is admitted. On the other hand, if the authority is not satisfied with any of these criteria, it may reject the application.

4th Step: Commencement of CIRP

Once the application is admitted, the Corporate Insolvency Resolution Process (CIRP) officially begins from the date of admission. The adjudicating authority must communicate its decision to admit or reject the application to both the financial creditors and the corporate debtor within seven days.

When Insolvency Resolution is Initiated by an Operational Creditor

In cases where an operational creditor initiates the CIRP, there are additional steps to be followed:

5th Step: Service of Demand Notice

Before initiating the CIRP, an operational creditor must serve a demand notice of unpaid dues to the corporate debtor upon the occurrence of a default. This notice must include a copy of an invoice demanding payment in the prescribed form and manner.

6th Step: Corporate Debtor’s Response

Upon receiving the demand notice, the corporate debtor has ten days to respond. During this time, the corporate debtor should:

  1. Notify the operational creditor of any dispute that exists.
  2. Provide information about any pending suits or arbitration proceedings.
  3. Furnish evidence of payment, such as an attested copy of the record of electronic transfer or encashment of a cheque issued by the corporate debtor.

7th Step: Filing an Application

If the operational creditor does not receive payment or notice of a dispute from the corporate debtor after the ten-day period, they may file an application before the Adjudicating Authority to initiate the CIRP.

When the CIRP is initiated by Corporate Debtor

In cases where a corporate debtor has defaulted on its financial obligations, the IBC allows for the corporate debtor itself to file an application for initiating the CIRP. This proactive approach enables financially distressed companies to take control of their insolvency proceedings and work towards a resolution.

Furnishing Key Information

When a corporate debtor decides to initiate the CIRP, it is essential to provide comprehensive information to the Adjudicating Authority. This information includes:

  1. Details of Financial Records: The corporate debtor must furnish information related to its books of account and other relevant documents for the specified period. This financial data is crucial for assessing the financial health of the debtor and determining the extent of the default.
  2. Resolution Professional Nomination: The corporate debtor needs to propose the name of an interim resolution professional who will oversee the CIRP process. The choice of a qualified and experienced resolution professional is vital for the successful resolution of the insolvency case.
  3. Approval from Stakeholders: To ensure transparency and accountability, the corporate debtor must obtain approval from its stakeholders. This approval can take the form of a special resolution passed by the shareholders of the corporate debtor or a resolution passed by at least three-fourths of the total number of partners in the case of a partnership firm. This step signifies the collective consent of stakeholders to initiate the CIRP

Recent Development

In a move aimed at enhancing the efficiency of the corporate insolvency resolution process (CIRP) in India, the Insolvency and Bankruptcy Board of India (IBBI) has recently introduced significant amendments to the CIRP regulations. These changes came into effect on September 18, 2023, as per an official notification.

One of the primary objectives of these amendments is to relieve the Adjudicating Authority (AA) from the burden of dealing with delayed claims. To achieve this, the amendments extend the timeline for filing claims. Now, creditors have the option to submit their claims either until the issuance of the request for resolution plans or within ninety days from the commencement of insolvency, whichever is later.

This extension allows for greater flexibility in the claims submission process. Importantly, it empowers the Resolution Professional (RP) to provide their opinion on claims submitted beyond this timeframe. Furthermore, the committee of creditors (COC) is now granted the authority to recommend the inclusion of such claims in the list of claims and their treatment within the resolution plan. This procedural change ensures a more efficient and inclusive approach to handling late claims.

Another significant amendment allows committee members to conduct audits of the corporate debtor, commonly referred to as the CD. These audit expenses are now considered a part of the overall CIRP costs. This provision not only promotes transparency but also enables the CoC to have a comprehensive understanding of the CD’s financial status, further facilitating informed decision-making throughout the resolution process.

Additional modifications brought about by these amendments include aligning timelines for procedural aspects such as the issuance of information memoranda and requests for resolution plans. Form G, which is provided to prospective resolution applicants, now contains more comprehensive information. Furthermore, the compliance certificate (Form H) includes the minutes of the committee of creditors’ meetings, aiding the Adjudicating Authority in gaining insights into the CoC’s decision-making rationale.

To streamline the process even further, the amendments require creditors to promptly provide details of debt assignments within seven days, a step that simplifies CoC meetings. Moreover, applicants filing under sections 7 or 9 are now obligated to submit a chronological account of debt, default, and limitation along with supporting evidence. This additional information assists the Adjudicating Authority in making informed decisions when adjudicating such cases.


The corporate insolvency resolution process (CIRP) is a critical mechanism designed to address financial distress within companies while preserving their economic value. This process has evolved significantly in recent years, bringing about a more structured and transparent approach to resolving insolvency-related issues.

The recent amendments to the CIRP regulations by the IBBI are poised to improve the overall efficiency and transparency of the corporate insolvency resolution process in India. By addressing issues related to claims filing, audit procedures, and timelines, these changes aim to streamline the resolution process and enhance the decision-making capabilities of all stakeholders involved. Ultimately, these amendments signify a significant step forward in the ongoing evolution of India’s insolvency framework.

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