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2. Definitions – (Section 5)
Clause 5A
"corporate guarantor" means a corporate person who is the surety in a contract of guarantee
to a corporate debtor;’
Clause 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 de-materialised
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 nonrecourse basis;
f) any amount raised under any other transaction, including any forward sale or purchase
agreement, having the commercial effect of a borrowing;
Explaination –
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;
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;
Clause 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;
"Provided that where the interim resolution professional is not appointed in the order admitting
application under section 7, 9 or section 10, the insolvency commencement date shall be the
date on which such interim resolution professional is appointed by the Adjudicating
Authority;";
Clause 24(A)
"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;
b) wherever the relation is that of a son, daughter, sister or brother, their spouses shall also be
included;'
3. Initiation of corporate insolvency resolution process by financial creditor - (Section 7)
Filing of application before adjudicating authority:
i) A financial creditor either by itself 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.
ii) A default includes a default in respect of a financial debt owed not only to the applicant
financial creditor but to any other financial creditor other financial creditors, or any other
person on behalf of the financial creditor, as may be notified by the Central Government of
the corporate debtor.
Admission/rejection of application:
The Adjudicating Authority shall, within a period of fourteen days of the receipt of the
application, by an order—
i) admits the application, if it is complete; and no disciplinary proceeding is pending against the
proposed resolution professional
ii) rejects the application, if it is incomplete: or any disciplinary proceeding is pending against
the proposed resolution professional
Provided that Adjudicating Authority shall, before rejecting an application, gives a notice to the
applicant to rectify the defects in his application within seven days from the date of receipt of
such notice from the Adjudicating Authority.
The expenses of public announcement shall be borne by the applicant which may be reimbursed
by the Committee of Creditors, to the extent, it ratifies them.
11. Appointment, tenure and Power of interim resolution professional (Section 16)
Term of appointment
The term of the interim resolution professional shall not exceed thirty days from date of his
appointment. shall continue till the date of appointment of the resolution professional under sec. 22
d) have the authority to access the books of account, records and other relevant documents of
corporate debtor available with government authorities, statutory auditors, accountants and such
other persons as may be specified; and
e) be responsible for complying with the requirements under any law for the time being in force on
behalf of the corporate debtor."
13. Committee of creditors (Section 21)
As per the Section 21 of the Code, the interim resolution professional shall after collection of
all claims received against the corporate debtor and determination of the financial position of
the corporate debtor, constitute a committee of creditors:
a) The committee of creditors shall comprise of all financial creditors of the corporate debtor.
Provided that a related party to whom a corporate debtor owes a financial debt financial
creditor or the authorised representative of the financial creditor referred to in sub-section
19. Rights and duties of authorised representative of financial creditors. (Section 25A)
a) Right to participate and Vote on behalf of FC: The authorised representative (AR) under
section 21(6) & 21(6A) or section 24(5) shall have the right to participate and vote in
meetings of the committee of creditors on behalf of the financial creditor(FC) he represents
in accordance with the prior voting instructions of such creditors obtained through physical
or electronic means.
b) Duty of AR to circulate agenda & minutes to FC: It shall be the duty of the authorised
representative to circulate the agenda and minutes of the meeting of the committee of
creditors to the financial creditor he represents.
c) AR to act on instruction of FC: The authorised representative shall not act against the
interest of the financial creditor he represents and shall always act in accordance with their
prior instructions:
Provided that if the authorised representative represents several financial creditors, then he
shall cast his vote in respectof each financial creditor in accordance with instructions
received from each financial creditor, to the extent of his voting share:
Provided further that if any financial creditor does not give prior instructions through
physical or electronic means, the authorised representative shall abstain from voting on
behalf of such creditor.
d) To ensure recording of instruction by IRP/RP: The authorised representative shall file
with the committee of creditors any instructions received by way of physical or electronic
means, from the financial creditor he represents, for voting in accordance therewith, to
21. Approval of committee of creditors for certain actions of resolution professional, during
the corporate insolvency resolution process (Section 28)
The resolution professional, during the corporate insolvency resolution process, shall not take
any of the following actions without the prior approval of the committee of creditors -
a) raise any interim finance in excess of the amount as may be decided by the committee
of creditors in their meeting;
b) create any security interest over the assets of the corporate debtor;
c) change the capital structure of the corporate debtor, including by way of issuance of ad-
ditional securities, creating a new class of securities or buying back or redemption of issued
securities in case the corporate debtor is a company;
d) record any change in the ownership interest of the corporate debtor;
e) give instructions to financial institutions maintaining accounts of the corporate debtor for a
debit transaction from any such accounts in excess of the amount as may be decided by the
committee of creditors in their meeting;
ii) for seven years or more under any other law for the time being in force:
Provided that this clause shall not apply to a person after the expiry of a period of two years from
the date of his release from imprisonment:
Provided further that this clause shall not apply in relation to a connected person referred to in
clause (iii) of Explanation I;"
e) is disqualified to act as a director under the Companies Act, 2013;
"Provided that this clause shall not apply in relation to a connected person referred to in clause
(iii) of Explanation I;";
f) is prohibited by the Securities and Exchange Board of India from trading in securities or accessing
the securities markets;
g) has been a promoter or in the management or control of a corporate debtor in which a preferential
transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has
taken place and in respect of which an order has been made by the Adjudicating Authority under
this Code;
"Provided that this clause shall not apply if a preferential transaction, undervalued transaction,
extortionate credit transaction or fraudulent transaction has taken place prior to the acquisition of
the corporate debtor by the resolution applicant pursuant to a resolution plan approved under
this Code or pursuant to a scheme or plan approved by a financial sector regulator or a court, and
such resolution applicant has not otherwise contributed to the preferential transaction, undervalued
transaction, extortionate credit transaction or fraudulent transaction;"
h) has executed a guarantee in favour of a creditor in respect of a corporate debtor against which an
application for insolvency resolution made by such creditor has been admitted under this Code and
such guarantee has been invoked by the creditor and remains unpaid in full or part;
i) is subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside
India; or
j) has a connected person not eligible under clauses (a) to (i)
Explanation I.— For the purposes of this clause, the expression "connected person" means—
i) any person who is the promoter or in the management or control of the resolution applicant; or
ii) (any person who shall be the promoter or in management or control of the business of the
corporate debtor during the implementation of the resolution plan; or
iii) the holding company, subsidiary company, associate company or related party of a person referred
to in clauses (i) and (ii):
Provided further that the expression "related party" shall not include a financial entity, regulated by a
financial sector regulator, if it is a financial creditor of the corporate debtor and is a related party of the
corporate debtor solely on account of conversion or substitution of debt into equity shares or
instruments convertible into equity shares, prior to the insolvency commencement date;';
'Explanation II—For the purposes of this section, "financial entity" shall mean the following entities
which meet such criteria or conditions as the Central Government may, in consultation with the financial
sector regulator, notify in this behalf, namely:—
a) a scheduled bank;
b) any entity regulated by a foreign central bank or a securities market regulator or other financial
sector regulator of a jurisdiction outside India which jurisdiction is compliantwith the Financial
Action Task Force Standards and is a signatory to the International Organisation of Securities
Commissions Multilateral Memorandum of Understanding;
c) any investment vehicle, registered foreign institutional investor, registered foreign portfolio investor
or a foreign venture capital investor, where the terms shall have the meaning assigned to them in
regulation 2 of the Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2017 made under the Foreign Exchange Management Act,
1999.
d) an asset reconstruction company registered with the Reserve Bank of India under section 3 of the
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
e) an Alternate Investment Fund registered with the Securities and Exchange Board of India;
f) such categories of persons as maybe notified by the Central Government.'.
Provided further that where the resolution applicant referred to in the first proviso is
ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the
committee of creditors such period, not exceeding thirty days, to make payment of overdue
amounts in accordance with the pro- viso to clause (c) of section 29A:
Provided also that nothing in the second proviso shall be construed as extension of period
for the pur- poses of the proviso to sub-section (3) of section 12, and the corporate
insolvency resolution process shall be completed within the period specified in that sub-
section.”
The resolution applicant may attend the meeting of the committee of creditors in which the
resolution plan of the applicant is considered:
Provided that the resolution applicant shall not have a right to vote at the meeting of the
committee of creditors unless such resolution applicant is also a financial creditor.
e) Submission of approved resolution plan to adjudicating authority:
The resolution professional shall submit the resolution plan as approved by the committee
of creditors to the Adjudicating Authority.
b) enters into a transaction with a person which involves the transfer of one or more assets by the
corporate debtor for a consideration the value of which is significantly less than the value of
the consideration provided by the corporate debtor, and such transaction has not taken place
in the ordinary course of business of the corporate debtor.