IR&L for CPs (Sec. 4 -77)

“(1) 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:
Provided that the Central Government may, by notification, specify the minimum
amount of default of higher value which shall not be more than one crore rupees” VL Note : –

“In this Part, unless the context otherwise requires, –
(1) “Adjudicating Authority”, for the purposes of this Part, means National Company
Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013);
(2) “auditor” means a chartered accountant certified to practice as such by the Institute
of Chartered Accountants of India under section 6 of the Chartered Accountants Act, 1949
(XXXVIII of 1939);
(3) “Chapter” means a Chapter under this Part;(4) “constitutional document”, in relation to a corporate person, includes articles of
association, memorandum of association of a company and incorporation documents of a
Limited Liability Partnership;
(5) “corporate applicant” means –
(a) corporate debtor; or
(b) a member or partner of the corporate debtor who is authorised to make an
application for the corporate insolvency resolution process under the constitutional
document of the corporate debtor; or
(c) an individual who is in charge of managing the operations and resources of the
corporate debtor; or
(d) a person who has the control, and supervision over the financial affairs of the
corporate debtor;
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[(5A) “corporate guarantor” means a corporate person who is the surety in a contract
of guarantee to a corporate debtor;]
(6) “dispute” includes a suit or arbitration proceedings relating to–
(a) the existence of the amount of debt;
(b) the quality of goods or service; or
(c) the breach of a representation or warranty;
(7) “financial creditor” means any person to whom a financial debt is owed and includes
a person to whom such debt has been legally assigned or transferred to;
(8) “financial debt” means a debt alongwith interest, if any, which is disbursed against
the consideration for the time value of money and includes–
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any acceptance credit facility or its dematerialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds,
notes, debentures, loan stock or any similar instrument;
(d) the amount of any liability in respect of any lease or hire purchase contract which
is deemed as a finance or capital lease under the Indian Accounting Standards or such
other accounting standards as may be prescribed;
(e) receivables sold or discounted other than any receivables sold on non-recourse
basis; (f) any amount raised under any other transaction, including any forward sale or
purchase agreement, having the commercial effect of a borrowing;
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[Explanation. -For the purposes of this sub-clause, –
(i) any amount raised from an allottee under a real estate project shall
be deemed to be an amount having the commercial effect of a borrowing; and
(ii) the expressions, “allottee” and “real estate project” shall have the
meanings respectively assigned to them in clauses (d) and (zn) of section 2 of
the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);]
(g) any derivative transaction entered into in connection with protection against or
benefit from fluctuation in any rate or price and for calculating the value of any
derivative transaction, only the market value of such transaction shall be taken into
account;
(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond,
documentary letter of credit or any other instrument issued by a bank or financial
institution;
(i) the amount of any liability in respect of any of the guarantee or indemnity for
any of the items referred to in sub-clause (a) to (h) of this clause;
(9) “financial position”, in relation to any person, means the financial information of a
person as on a certain date;
(10) “information memorandum” means a memorandum prepared by resolution
professional under sub-section (1) of section 29;
(11) “initiation date” means the date on which a financial creditor, corporate applicant
or operational creditor, as the case may be, makes an application to the Adjudicating
Authority for initiating corporate insolvency resolution process;
(12) “insolvency commencement date” means the date of admission of an application
for initiating corporate insolvency resolution process by the Adjudicating Authority under
sections 7, 9 or section 10, as the case may be:
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[Provided that where the interim resolution professional is not appointed in the order
admitting application under section 7, 9 or 10, the insolvency commencement date shall be
the date on which such interim resolution professional is appointed by the Adjudicating
Authority];
(13) “insolvency resolution process costs” means –
(a) the amount of any interim finance and the costs incurred in raising such finance; (b) the fees payable to any person acting as a resolution professional;
(c) any costs incurred by the resolution professional in running the business of the
corporate debtor as a going concern;
(d) any costs incurred at the expense of the Government to facilitate the insolvency
resolution process; and
(e) any other costs as may be specified by the Board;
(14) “insolvency resolution process period” means the period of one hundred and eighty
days beginning from the insolvency commencement date and ending on one hundred and
eightieth day;
(15) “interim finance” means any financial debt raised by the resolution professional
during the insolvency resolution process period;
(16) “liquidation cost” means any cost incurred by the liquidator during the period of
liquidation subject to such regulations, as may be specified by the Board;
(17) “liquidation commencement date” means the date on which proceedings for
liquidation commence in accordance with section 33 or section 59, as the case may be;
(18) “liquidator” means an insolvency professional appointed as a liquidator in
accordance with the provisions of Chapter III or Chapter V of this Part, as the case may be;
(19) “officer” for the purposes of Chapter VII of this Part, means an officer who is in
default, as defined in clause (60) of section 2 of the Companies Act, 2013 (18 of 2013), or a
designated partner as defined in clause (j) of section 2 of the Limited Liability Partnership
Act, 2008 (6 of 2009), as the case may be;
(20) “operational creditor” means a person to whom an operational debt is owed and
includes any person to whom such debt has been legally assigned or transferred;
(21) “operational debt” means a claim in respect of the provision of goods or services
including employment or a debt in respect of the 1
[payment] of dues arising under any law
for the time being in force and payable to the Central Government, any State Government or
any local authority;
(22) “personal guarantor” means an individual who is the surety in a contract of
guarantee to a corporate debtor;
(23) “personnel” includes the directors, managers, key managerial personnel,
designated partners and employees, if any, of the corporate debtor;
(24) “related party”, in relation to a corporate debtor, means-
(a) a director or partner of the corporate debtor or a relative of a director or partnerof the corporate debtor;
(b) a key managerial personnel of the corporate debtor or a relative of a key
managerial personnel of the corporate debtor;
(c) a limited liability partnership or a partnership firm in which a director, partner,
or manager of the corporate debtor or his relative is a partner;
(d) a private company in which a director, partner or manager of the corporate
debtor is a director and holds along with his relatives, more than two per cent. of its
share capital;
(e) a public company in which a director, partner or manager of the corporate debtor
is a director and holds along with relatives, more than two per cent. of its paid- up share
capital;
(f) anybody corporate whose board of directors, managing director or manager, in
the ordinary course of business, acts on the advice, directions or instructions of a
director, partner or manager of the corporate debtor;
(g) any limited liability partnership or a partnership firm whose partners or
employees in the ordinary course of business, acts on the advice, directions or
instructions of a director, partner or manager of the corporate debtor;
(h) any person on whose advice, directions or instructions, a director, partner or
manager of the corporate debtor is accustomed to act;
(i) a body corporate which is a holding, subsidiary or an associate company of the
corporate debtor, or a subsidiary of a holding company to which the corporate debtor is
a subsidiary;
(j) any person who controls more than twenty per cent. of voting rights in the
corporate debtor on account of ownership or a voting agreement;
(k) any person in whom the corporate debtor controls more than twenty per cent.
of voting rights on account of ownership or a voting agreement;
(l) any person who can control the composition of the board of directors or
corresponding governing body of the corporate debtor;
(m) any person who is associated with the corporate debtor on account of-
(i) participation in policy making processes of the corporate debtor; or
(ii) having more than two directors in common between the corporate debtor
and such person; or
(iii) interchange of managerial personnel between the corporate debtor and
such person; or
(iv) provision of essential technical information to, or from, the corporate
debtor;1
[(24A) “related party”, in relation to an individual, means-
(a) a person who is a relative of the individual or a relative of the spouse of the
individual;
(b) a partner of a limited liability partnership, or a limited liability partnership or a
partnership firm, in which the individual is a partner;
(c) a person who is a trustee of a trust in which the beneficiary of the trust includes
the individual, or the terms of the trust confers a power on the trustee which may be
exercised for the benefit of the individual;
(d) a private company in which the individual is a director and holds along with his
relatives, more than two per cent. of its share capital;
(e) a public company in which the individual is a director and holds along with
relatives, more than two per cent. of its paid-up share capital;(f) anybody corporate whose board of directors, managing director or manager, in
the ordinary course of business, acts on the advice, directions or instructions of a
director, partner or manager of the corporate debtor;
(f) a body corporate whose board of directors, managing director or manager, in
the ordinary course of business, acts on the advice, directions or instructions of the
individual;
(g) a limited liability partnership or a partnership firm whose partners or employees
in the ordinary course of business, act on the advice, directions or instructions of the
individual;
(h) a person on whose advice, directions or instructions, the individual accustomed to act;
(i) a company, where the individual or the individual along with its related party,
own more than fifty per cent. of the share capital of the company or controls the
appointment of the board of directors of the company.
Explanation. – For the purposes of this clause, –
(a) “relative”, with reference to any person, means anyone who is related to
another, in the following manner, namely:-
(i) members of a Hindu Undivided Family,
(ii) husband,
(iii) wife,
(iv) father,
(v) mother,
(vi) son,
(vii) daughter(viii) son’s daughter and son,
(ix) daughter’s daughter and son,
(x) grandson’s daughter and son,
(xi) granddaughter’s daughter and son,
(xii) brother,
(xiii) sister,
(xiv) brother’s son and daughter,
(xv) sister’s son and daughter,
(xvi) father’s father and mother,
(xvii) mother’s father and mother,
(xviii) father’s brother and sister,
(xix) mother’s brother and sister; and
(b) wherever the relation is that of a son, daughter, sister or
brother, their spouses shall also be included;]
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[(25) “”resolution applicant”” means a person, who individually or jointly with any other
person, submits a resolution plan to the resolution professional pursuant to the invitation made
under clause (h) of sub-section (2) of section 25;]
(26) “resolution plan” means a plan proposed by 2
[resolution applicant] for insolvency
resolution of the corporate debtor as a going concern in accordance with Part II
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[Explanation.- For removal of doubts, it is hereby clarified that a resolution plan may
include provisions for the restructuring of the corporate debtor, including by way of merger,
amalgamation and demerger;]
(27) “resolution professional”, for the purposes of this Part, means an insolvency
professional appointed to conduct the corporate insolvency resolution process and includes
an interim-resolution professional; and
(28) “voting share” means the share of the voting rights of a single financial creditor in
the committee of creditors which is based on the proportion of the financial debt owed to such
financial creditor in relation to the financial debt owed by the corporate debtor. ” VL Note : –