The meaning of Insolvency and Bankruptcy is not same. “Insolvency” means the situation where an entity (debtor) cannot raise enough cash to meet its obligations or to pay debts as they become due for payment
Bankruptcy is the term for when an individual is declared bankrupt by the Court because they are insolvent. People go bankrupt for two reasons; one is if their assets are less than their liabilities the second is where they are unable to pay their debts when they fall due.
The code would have an overriding effect on all other laws relating to Insolvency & Bankruptcy
The provisions of this Code shall apply to—
- any company incorporated under company act 2013(or any previous company law)
- any other company governed by any special Act
- any Limited Liability Partnership incorporated
- such other body incorporated under any law
- partnership firms and individuals,
- The Code provides for insolvency professionals as intermediaries who would play a key role in the efficient working of the bankruptcy process.
- The role of the IP encompasses a wide range of functions, which include adhering to procedure of the law, as well as accounting and finance related functions.
- In the resolution process, the insolvency professional verifies the claims of the creditors, constitutes a creditors committee, runs the debtor’s business during the moratorium period and helps the creditors in reaching a consensus for a revival plan.
- In liquidation, the insolvency professional acts as liquidator and bankruptcy trustee.
- Where any corporate debtor commits a default, following persons:
- a financial creditor,
- an operational creditor, or
- the corporate debtor itself
may initiate corporate insolvency resolution process in respect of such corporate debtor.
Persons not entitled to make application
The following persons shall not be entitled to make an application to initiate corporate insolvency resolution process –
- a corporate debtor undergoing a corporate insolvency resolution process; or
- a corporate debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application; or
- a corporate debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or
- a corporate debtor in respect of whom a liquidation order has been made
The adjudicating authority for corporate insolvency and liquidation is the NCLT. Appeals arising out of NCLT orders lie to the National Company Law Appellate Tribunal within 30 days and, thereafter, to the Supreme Court of India on a question of law arising out of such order under this Code within forty-five days from the date of receipt of such order.
For individuals and other persons, the adjudicating authority is the DRT. Appeals arising out of DRT orders lie to the Debt Recovery Appellate Tribunal within 30 days and thereafter, to the Supreme Court on a question of law arising out of such order under this Code within forty-five days from the date of receipt of such order.
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