Resolution bids not to be degraded down by Liquidation Value: CIRP and Fast Track Regulations amended to maintain confidentiality

Vallari Dubey


The Insolvency and Bankruptcy Board of India (‘IBBI’) has, in exercise of its powers contained in Section 196 read with Section 240 of the Insolvency and Bankruptcy Code, 2016 (‘the Code’), amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’)[1] and the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 (‘Fast Track Regulations’)[2] to make small but material changes with respect to two important things, a) Liquidation Value, and b) definition of ‘dissenting financial creditors’. We discuss the changes in further detail below: Read more

Can the liquidator accept a claim after the last date for submission of claims?

Chintan Shah


Since the enactment of the Insolvency and Bankruptcy Code, 2016, many apparent loops have emerged in the process of its implementation. As is with every law, the evolution continues. In this write –up, we discuss about one such scenario were a liquidator is puzzled with a question as to what is to be done in case of submission of claim by a creditor, after the due date for filling of claim as stated in the Public Announcement has expired. Read more


By Vishal Hablani (


The Supreme Court with its decision on December 15, 2017, in the case Macquarie Bank Limited v. Shilpi Cable Technologies Ltd.[1], cleared the ambiguities w.r.t. interpretation of Section 8 and 9(3)(c) of the Insolvency and Bankruptcy Code, 2016 ( ‘the Code’). The decision overturned the concurring rulings laid down by the NCLAT in three cases, viz. Uttam Galve Steels Limited v. DF Deutsche Forfait AG & Anr.[2], Senthil Kumar Karmegam v. Dolphin Offshore Enterprises & Anr.[3], and Goa Antibiotics & Pharmaceuticals Ltd. v. Lark Chemicals Pvt. Ltd.[4]

The judgements laid down by the National Company Law Appellate Tribunal (‘NCLAT’) in the abovementioned cases settled the law, that a lawyer, law firm, C.A., or a C.S. cannot send demand notices to the Corporate Debtor on behalf of an operational creditor, unless they are authorized by the Board. Also, if authorised, they are required to clearly state their position in relation to the operational creditor, in the concerned demand notice.

Importantly, the Hon’ble Supreme Court (‘SC’) in this judgement, also dealt with the issue of requirement of a certificate from the financial institutions maintaining accounts of the operational creditor under Section 9(3)(c) of the Code.

Brief Facts of the Case:

The Appellant had challenged the order passed by the NCLAT before SC. The petitioner demanded the payment for supply of goods to the respondent. When the demand was not met, the Appellant issued a demand notice under Section 8 of the Code for payment of the outstanding debt. Later, the Appellant initiated insolvency proceedings under Section 9 of the Code. The NCLAT, in its impugned judgement (dated 17/7/2017), agreed with the stand of National Company Law Tribunal (‘NCLT’), and dismissed the appeal for non-compliance with the mandatory provision contained in Section 9(3)(c) of the Code. Moreover, it took an obstinate view that an advocate/lawyer cannot issue a demand notice on behalf of an operational creditor under Section 8 of the Code.

The SC, allowing the appeal of the operational creditor, set aside the NCLAT judgment on both the counts. In order to come up with the judgment, reliance was placed on Article 14 of the Constitution of India and Doctrine of Harmonious Construction for the interpretation of Advocates Act, 1961 (‘Advocates Act’) with the Code.

Relevant Provisions of the Law:

Insolvency and Bankruptcy Code, 2016:


Section 3: “Definitions –


(14) “financial institution” means—

(a) a scheduled bank;

(b) financial institution as defined in section 45-I of the Reserve Bank of India Act, 1934;

(c) public financial institution as defined in clause (72) of section 2 of the Companies Act, 2013; and

(d) such other institution as the Central Government may by notification specify as a financial institution;


(23) “person” includes—

(a) an individual;

(b) a Hindu Undivided Family;

(c) a company;

(d) a trust;

(e) a partnership;

(f) a limited liability partnership; and

(g) any other entity established under a statute, and includes a person resident outside  India;


Section 8: “Insolvency Resolution by Operational Creditor (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.


Explanation.— For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding repayment of the operational debt in respect of which the default has occurred.


Section 9: “Application for initiation of corporate insolvency resolution process by operational creditor – (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.


(3) The operational creditor shall, along with the application furnish—


(c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor; and

(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—


(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if— (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under subclause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority.


Advocates Act, 1961:


Section 30: Right of advocates to practise. — Subject to provisions of this Act, every advocate whose name is entered in the 1[State roll] shall be entitled as of right to practise throughout the territories to which this Act extends,—

(i) in all courts including the Supreme Court;

(ii) before any tribunal or person legally authorised to take evidence; and

(iii) before any other authority or person before whom such advocate is by or under any law for the time being in force entitled to practise.


Constitution of India:


Article 14: Equality before law – The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.


Article 19: Protection of certain rights regarding freedom of speech, etc. –

(1) All citizens shall have the right—

          (g) to practise any profession, or to carry on any occupation, trade or business.


Contentions Presented by the Appellant:

The Appellant argued that on a conjoint reading of Section 9(3)(c) of the Code with Rule 6 and Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating AuthorityRules2016 (‘Adjudicating Authority Rules’), it can be found that Section 9(3)(c) is not mandatory, but only directory in nature. Further, it was argued that Section 9(3)(c) is only a procedural provision, and is not a pre-requisite for admission of an application under Section 9(1) of the Code. It was further supported by the fact that, if certificate is not furnished by the financial institution, the application should not be rejected under Section 9(5)(ii). Such certificate under Section 9(3)(c) is just an additional requirement, and is to be provided only “if available”. Moreover, it was argued that there might be situations where it is possible that an operational creditor might have a non-scheduled bank as his banker, or a foreign supplier who is an operational creditor, defined as “person” under Section 3(23) may deal with some other foreign banker who is not covered under Section 3(14) of the Code. It would then become impossible for the petitioner to obtain the requisite certificate and satisfy the condition laid down under Section 9(3)(c). This loophole in the provision(s) cannot operate in a manner to nonsuit the petitioner.

The Appellant went ahead to further submit two important points:

Firstly, that the expression “position with or in relation to the operational creditor” demonstrates that a lawyer, authorized by the operational creditor, would come under the ambit of the said provision.

Secondly, it was emphasised that under Section 30 of the Advocates Act, 1961 the effect of the expression “practise” applies to lawyers, vis-a-vis Tribunals such as the NCLT and NCLAT.

Findings of the Court:

Findings of the court can be summarised by taking into consideration the two prime issues addressed by the Court. They are:

  1. Is the provision contained in Section 9(3)(c) mandatory?

The Court took into consideration the expression “confirming” under Section 9(3)(c) and took the view that a certificate is a mere piece of evidence which only “confirms” that the debt has not been paid. It cannot be construed as a condition precedent for triggering the insolvency process under the Code. Moreover, the certificate is to be provided only “if available”. This can be construed by reading Item 7 of Part V contained in Form 5 under Rule 6, along with Item 8, which talks about other documents in order to prove the existence of an operational debt and the amount in default. Further, Annexure III in the Form speaks about copies of relevant accounts kept by banks/financial institutions maintaining accounts of the operational creditor, confirming that there is no payment of the unpaid operational debt, only “if available”.

Taking into consideration the possibilities presented by the Appellant (as mentioned above), when it becomes impossible for an operational creditor to comply with the provision laid down in Section 9(3)(c), the Court took the view:

The Code cannot be construed in a discriminatory fashion so as to include only those operational creditors who are residents outside India who happen to bank with financial institutions which may be included under Section 3(14) of the Code. It is no answer to state that such person can approach the Central Government to include its foreign banker under Section 3(14) of the Code, for the Central Government may never do so. …….argument that such persons ought to be left out of the triggering of the Code against their corporate debtor, despite being operational creditors as defined, would not sound well with Article 14 of the Constitution, which applies to all persons including foreigners. Therefore, as the facts of these cases show, a so called condition precedent impossible of compliance cannot be put as a threshold bar to the processing of an application under Section 9 of the Code.

The Court further interpreted expression “shall” under Section 9(3) in a liberal manner, taking into consideration the possibility of non compliance with the provision laid down in Section 9(3)(c). It took the view that strict interpretation would cause inconvenience to innocent persons, and would defy the objective of the Act.

  1. Can a lawyer issue a demand notice on behalf of the operational creditor?

The Court took into consideration the expression “delivered”, as stated in Section 8, and took the view that an operational creditor is only required to deliver the demand notice. The notice can be issued by an authorized agent, who can be a lawyer as well. As per Forms 3 and 5 signature of the person “authorized to act” on behalf of the operational creditor is required to be appended to both the demand notice as well as the application under Section 9 of the Code. This authorized agent has to state his position with or in relation to the operational creditor. The expression “in relation to” was interpreted in the widest possible manner, as the Court took the view that, it includes a position which is outside or indirectly related to the operational creditor. It was concluded that both the expressions “authorized to act” and “position in relation to the operational creditor” demonstrate that a lawyer acting on behalf of the creditor is included in the aforesaid expression.

Also, the expression “practise” stated under Section 30 of the Advocates Act was also elaborated at lengths, and the Court took the view that it would include all preparatory steps leading to the filing of an application before a Tribunal. The Court relied on Harish Uppal (Ex-Capt.) v. Union of India, (2003) 2 SCC 45 at 72, which states:

“The right of the advocate to practise envelopes a lot of acts to be performed by him in discharge of his professional duties. Apart from appearing in the courts he can be consulted by his clients, he can give his legal opinion whenever sought for, he can draft instruments, pleadings, affidavits or any other, he can participate in any conference involving legal discussions, he can work in any office or firm as a legal officer, he can appear for clients before an arbitrator or arbitrators etc.”

The Court applied the Doctrine of Harmonious Construction and read both the statutes together. Moreover, it was emphasised that Section 30 of the Advocates Act deals with the fundamental right under Article 19(1)(g) of the Constitution to practice one’s profession. Therefore, a conjoint reading of Section 30 of the Advocates Act and Section 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of the operational creditor by a lawyer would be in order.


Intervention by the Supreme Court to clear the ambiguities w.r.t. interpretation of certain contentious provisions of the Code is commendable. In order to attain the objectives of the Code, the Court has interpreted certain expressions within the provisions liberally, as well as strictly, whenever required. From the above analysis it is evident that this ruling will have a long run impact on the suits filed by operational creditors on the account of two major relaxations provided therein.







-By Sikha Bansal & Vishal Hablani (


The Insolvency and Bankruptcy Code, 2016 (“the Code”) facilitates resolution of corporate entities by providing for a “calm period” during which institution or continuation of suits or “proceedings” against the corporate debtor is prohibited. Recently in Power Grid Corporation of India Ltd. v. Jyoti Structures Ltd.[1] (Order dated 11th December, 2017), the Delhi High Court ruled that the moratorium provisions would apply to “debt recovery actions” against the corporate debtor and not to proceedings beneficial to corporate debtor. Read more

IBBI’s Grievance Handling Regulations to keep a check on service providers

Vallari Dubey


The Insolvency and Bankruptcy Board of India (“IBBI”) has notified a new set of regulations, named the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 (“Grievance Handling Regulations”) vide Gazette Notification dated 6th December, 2017, effective from 7th December, 2017[1][2].

The Regulations shall seek to protect the interests of stakeholders by getting their redressals addressed against any alleged contravention and /or suffering caused to them on an alleged conduct of service providers. There are eight Regulations, divided into 5 Chapters.




Grievance v. Complaint

The Regulations make a clear distinction between ‘grievance’ and ‘complaint’. Both are defined separately (refer definitions later) and the process of filing and disposal is different.

A grievance, as defined is filed by a stakeholder, called an aggrieved, when any suffering is caused to him/her/it due to a wrongful conduct of a service provider. On the other hand, a complaint is specifically filed by a stakeholder, called a complainant, when there is a contravention/breach alleged against a service provider. A complaint may or may not include a grievance.

Filing of Grievance

Regulation 3 of the Regulations provides the process of filing of grievance and complaint both.

In case of grievance, it shall contain following details as provided under Regulation 3(2):

Filing of Complaint

A complaint shall be filed as per Regulation 3(3) containing details as may be prescribed in Form A. The Form has to be accompanied along with a fee of Rs. 2,500[3]. Form A contains all the details as provided under Regulation 3(2), with following differences:

  1. Name and identity of the authorized representative of the complainant, if any;
  2. Details of the alleged contravention of any provision of the Code or rules, regulations, or guidelines made thereunder or circulars or directions issued by the Board by a service provider or its associated persons;
  3. Details of alleged conduct or activity of the service provider or its associated persons, along with date and place of such conduct or activity, which contravenes the provision of the law;
  4. Details of evidence in support of alleged contravention;
  5. Does the complainant have a grievance? If so, how it may be redressed?;
  6. Details of fees paid;
  7. Option of complainant to keep its identity confidential;
  8. List of documents attached to the Form.


The grievance and complaint, as the case may be, shall be submitted online on the website of IBBI. However, till such arrangement is facilitated, it can be submitted either through e-mail or by post/hand delivery.

Confidential Identity

A stakeholder (aggrieved or complainant, as the case may be), may request the IBBI to keep its identity confidential. IBBI may allow the same unless, it disclosure is required to process the grievance/complaint or as required by law.

Registration Number

Each grievance and compliant shall be allotted a unique registration number, which shall be communicated to the aggrieved or complainant, as the case may be, within a week of its receipt.

In case more than one grievance/complaint is received in relation to single matter, such grievances/complaints shall be clubbed together for the purpose of disposal.

Disposal of Grievance/Complaint


IBBI shall seek information from aggrieved person or service provider, if required and shall thereon dispose of the grievance within 45 days of its receipt.

The Regulations however, do not provide for the cases where the Service Provider does not redress the grievance or ignore the direction of IBBI as above. In such cases, there is a chance that the grievance of the aggrieved remains unattended and his/its interest prejudiced.


Alike grievance, a complaint shall also be disposed of within a period of 45 days of its receipt.




IBBI shall disclose on its website, summary statistics of the grievances and/or complaints received and disposed of, periodically.


In absence of any specific regulation in this regard, protection of interest of stakeholders would not be managed properly by the IBBI. Due to such Regulations, it will now on be possible to keep a check on misconduct of any fraudulent service providers, having malafide intent or those that have supposedly breached any provisions of law, which may be prejudicial to the interest of a stakeholder(s).

Interestingly, the Regulations do not provide for marking any copy of the grievance or complaint to the service provider, against whom the same is being/has been filed while it is being filed with IBBI. Furthermore, confidentiality of identity of the aggrieved/complainant has been provided for. Seemingly, the Regulations are favoured towards an aggrieved party and stricter towards a defaulter. Adequate protection may however, will be needed for innocent service providers.

Relevant Definitions (Regulation 2)

  1. aggrieved” means a stakeholder who has filed a grievance with the Board on failing to get his grievance redressed from the concerned service provider;
  2. associated person” means a proprietor, partner, director, officer, or an employee of a service provider, a professional or a valuer engaged by a service provider or any other person acting for or on behalf of a service provider;
  3. complaint” means a written expression by a stakeholder alleging contravention of any provision of the Code or rules, regulations, or guidelines made thereunder or circulars or directions issued by the Board by a service provider or any of its associated persons and includes a complaint-cum-grievance;
  4. complaint-cum-grievance” means a complaint and grievance in the same matter.
  5. complainant” means a stakeholder who has filed a complaint or a complaint-cum-grievance with the Board;
  6. grievance” means a written expression by a stakeholder of his suffering on account of conduct of a service provider or its associated persons;
  7. service provider” means an insolvency professional agency, an insolvency professional, an insolvency professional entity or an information utility;
  8. stakeholder” means a debtor, a creditor, a claimant, a service provider, a resolution applicant and any other person having an interest in the insolvency, liquidation, voluntary liquidation, or bankruptcy transaction under the Code.





[3] Fees is refundable in case of genuine complaints

Presidential Ordinance makes Amendments to Insolvency and Bankruptcy Code

By Vinod Kothari, (

The Presidential Ordinance to amend the Insolvency and Bankruptcy Code tries to address a few concerns, which seem to have been noticed in the early stages of resolution plans being approved by creditors’ committees. Essentially, under the scheme of the Code, a resolution plan may be submitted by a “resolution applicant”, who can be any person proposing a resolution alternative. The resolution applicant may, therefore, be the existing management itself, or may be a potential acquirer. Sometimes, the potential acquirer comes with a masked identity, and the true acquirer is hiding somewhere behind the screen. The true acquirer might be the existing promoters themselves, or may be someone else. Read more

Contents of Resolution Plan redrawn, duties of RP redefined

IBBI notifies 3rd amendment to CIRP and Fast Track Regulations



Vallari Dubey


Resolution plans pursuant to Section 30 and Section 31 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) will hereon be required to contain details of the Resolution Applicant along with the Connected Persons.

A time bound corporate insolvency resolution process is linked with good resolution plans that can feasibly protect the Corporate Debtor from the curse of liquidation. With this ideology, IBBI has brought third set of amendments to the CIRP Regulations and Fast Track Regulation of the Code. Read more

Section 14 (1) v. Section 60(2) of the Code: Creditors cannot take action against personal guarantors while on-going CIRP of a Corporate Debtor

By Shreya Routh & Vallari Dubey, (

Brief facts of the case

Petitioners had filed a writ petition with the Allahabad High Court, challenging the order[1] passed by the Debt Recovery Tribunal (“DRT”). Petitioners are the guarantors of M/s LML Limited, Kanpur (hereinafter referred as the “Company”). The State Bank of India filed an application before the Debt Recovery Tribunal, Allahabad against the Company as the principal borrower and Sanjeev Shriya and others (hereinafter referred to as the “Petitioners”) as the guarantors. On 6.7.2017 DRT heard both the parties and passed the impugned order, staying the proceeding against the Company on the basis of the order passed by NCLT Allahabad dated 30.05.2017 imposing Moratorium on legal proceedings under Section 14 of the Insolvency and Bankruptcy Code, 2016. Subsequent to this, Corporate Insolvency Resolution Process began for the corporate debtor being the Company. As far as the resolution process for the personal guarantors was concerned, the interpretation of Section 60 of the Code provided for admitting such application to NCLT. However, since such provisions are not yet notified, being an individual, initiation of insolvency proceedings were placed before DRT. Read more

IBBI eases norms for setting up of Information Utilities

Chintan Shah

IBBI had notified the IBBI (Information Utilities) Regulations, 2017 (‘the regulations’) on 31st March, 2017, which shall come into effect immediately. The amendment has been made in line with easing the norms for Information Utilities (“IU”).

Read more