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Sam Ghosh Founder and SEBI Regd. Investment Adviser at Wisejay Private Limited Bangalore, Karnataka
How Insolvency and Bankruptcy Code 2016 deals with Individuals? Part 3: Insolvency Resolution Process
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08:19:01 AM, 5th April, 2019
  • Sam GhoshFounder and SEBI Regd. Investment Adviser at Wisejay Private LimitedBangalore, Karnataka

    In the previous posts under this series, we discussed the basics of the Insolvency and Bankruptcy Code 2016 (hereafter the Code) and the Fresh Start Process under this Code. In this post, we will discuss the Insolvency Resolution Process under the Code.


    Insolvency Resolution Process gives the debtor ability to create a repayment plan together with the creditors. The resolution process may be initiated by the debtor or by one or more creditors.


    1. The debtor is not an undischarged bankrupt i.e. the debtor is not a bankrupt who did not receive a discharge order.

    2. The debtor is not going through a Fresh Start or Insolvency Resolution process.

    3. The debtor is not going through a bankruptcy process.

    4. The debtor did not make any application for the Insolvency Resolution process in the last 12 months.


    Eligible debtors may apply personally or through resolution professional with relevant fees to the Debt Recovery Tribunal (DRT).

    Creditors may apply alone or jointly with other creditors or through a resolution professional. The application should be accompanied by a list of debts from the debtor owned by the creditor(s) making the application and proof of non-payment of debt even 14 days after the service of the notice of demand.


    An interim-moratorium will come into effect on the date of the application and end of the day of rejection or acceptance of the application. During this period, all legal actions and proceedings related to any debt of the debtor will automatically be stayed and no new legal action or proceeding related to such debt can be initiated.

    If the application is made through a resolution professional, it will be evaluated whether there are any disciplinary proceedings against the resolution professional. In case of a direct application by the debtor or creditor(s), a resolution professional will be nominated. The creditors may apply for replacement of the resolution professionals.

    The resolution professional will examine the application of the application and recommend acceptance or rejection to the Debt Recovery Tribunal (DRT). The resolution professional may recommend a Fresh Start process.

    The Debt Recovery Tribunal (DRT) will pass an order either accepting or rejecting the recommendation of the resolution professional. In case of an accepted application, a moratorium shall commence for 180 days or at the issuance of the repayment plan. All the legal actions related to the debts will be stayed during this moratorium period. Also, the debtor will be restricted from transferring, alienating, encumbering or disposing of any of her assets or her legal rights or beneficial interests.

    The DRT will issue a public notice inviting claims from creditors related to the debtor. The resolution professional will create a fresh list of claims based on information received because of the public notice.

    The debtor will prepare a repayment plan which will contain justification for the repayment plan, justifications why creditors may agree to such plan and provision for payment of fees of the resolution professional.

    The resolution professional will be responsible to make sure that the repayment plan is created in compliance with the law and organising meeting of the creditors.

    The repayment plan needs to be accepted by at least 2/3 of the creditors at the creditors meeting. A report on the meeting has to be submitted to the DRT. The DRT may accept or reject such a repayment plan.

    In case of an acceptable repayment plan, the resolution professional will be responsible to implement the plan.

    In case the repayment plan gets rejected, the debtor and creditors may apply for bankruptcy under chapter IV of Part III of the Code.

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