Section 3(8): corporate debtor means a corporate person who owes a debt to any person.
Section 5-
(1): Adjudicating Authority, for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013.
(Section 408 of the Companies Act, 2013: “The Central Government shall, by notification, constitute, with effect from such date as may be specified therein, a Tribunal to be known as the National Company Law Tribunal consisting of a President and such number of Judicial and Technical members, as the Central Government may deem necessary, to be appointed by it by notification, to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force.”)
(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 repayment 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.
Section 8 tells that an operational creditor on the occurrence of a default may deliver a demand notice of unpaid operational debt, copy of an invoice demanding payment of the amount involved in the default. The corporate debtor within a period of ten days of the receipt of the demand notice or copy of the invoice, bring to the notice of the operational creditor—
a) Existence of a dispute and record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute
b) the repayment of unpaid operational debt— (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor or (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.
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 tells that after the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment, the operational creditor does not receive payment from the corporate debtor or notice, he may file an application in the prescribed manner and fees before the Adjudicating Authority for initiating a corporate insolvency resolution process. He may propose a resolution professional to act as an interim resolution professional. He shall furnish—
a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor
b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt
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
d) Such other information as may be specified.
Section 9 (5) tells that the Adjudicating Authority shall, within fourteen days of the application, by an order shall admit the application and communicate such decision to the operational creditor and the corporate debtor if the following are fulfilled—
a. the application is complete
b. there is no repayment of the unpaid operational debt
c. the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor
d. no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility
e. there is no disciplinary proceeding pending against the resolution professional
And the same will be rejected if the above mentioned are not fulfilled but before rejecting the application, a notice to the applicant will be given to rectify the defect within seven days of the date of receipt of such notice from the adjudicating Authority. Thus, the corporate insolvency resolution process shall commence from the date of admission of the application.
Rules 5 of the code tells that Demand notice by operational creditor shall be delivered with the following documents-
a. a demand notice in Form 3, or
b. A copy of an invoice attached with a notice in Form 4.
The demand notice or the copy of the invoice demanding payment may be delivered to the corporate debtor-
a. at the registered office by hand, registered post or speed post with acknowledgement due, or
b. By electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor.
Macquarie Bank Limited Appellant Vs. Uttam Galva Metallics Limited
“16. From bare perusal of Form-3 and Form-4, read with sub-Rule (1) of Rule 5 and Section 8 of the ‘I & B Code, it is clear that the ‘Operational Creditor’ can apply himself or through a person authorized to act on behalf of the ‘Operational Creditor’, who hold same position with or in relation to the ‘Operational Creditor’. Thereby such person(s) authorized by ‘Operational Creditor’, holding position with or in relation to the ‘Operational. Creditor’ can only apply.”
“17. In view of such provision we hold that an advocate / lawyer or Chartered Account or a Company Secretary or any other person in absence of any authority by the ‘Operational Creditor’, and if such person do not hold any position with or in relation to the ‘Operational Creditor’, cannot issue notice under Section 8 of ‘I & B Code’, which otherwise can be treated as a lawyer’s notice/ pleader’s notice, as distinct from notice under Section 8 of ‘I & B Code.“
Uttam Galva Steels Limited V. DF Deutsche Forfait AG & Ant.
“30. From bare perusal of Form-3 and Form-4, read with sub-rule (1) of Rule 5 and Section 8 of the I&B Code, it is clear that an Operational Creditor can apply himself or through a person authorised to act on behalf of Operational Creditor. The person who is authorised to act on behalf of Operational Creditor is also required to state “his position with or in relation to the Operational Creditor”, meaning thereby the person authorised by Operational Creditor must hold position with or in relation to the Operational Creditor and only such person can apply.”
AMENDMENT:
On November 23, 2017, President Ram Nath Kovind had given assent to the Insolvency and Bankruptcy Code Amendment Ordinance, 2017, making major amendments to the Insolvency and Bankruptcy Code 2016.
1. SECTION 5(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.
2. Section 25(2)(h) of the Code is amended to enable the Resolution Professional, with the approval of the Committee of Creditors to specify eligibility conditions while inviting Resolution Plans from prospective Resolution Applicants keeping in view the scale and complexity of operations of business of the Corporate Debtor to avoid frivolous applicants.
3. 29A: A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person—
a) an undischarged insolvent
b) a wilful defaulter
c) account has been identified as a non-performing asset for more than a year
d) has been convicted of an offence punishable with two or more years of imprisonment
e) has been disqualified as a director under the Companies Act, 2013
f) has been prohibited from trading in securities by SEBI
g) has indulged in undervalued, preferential, or fraudulent transactions
h) he has given guarantee on a liability of the defaulting company undergoing resolution or liquidation
i) is connected to any person mentioned above (including promoters, management, or any person related to them), or any person related to them)
j) Has indulged in these activities abroad.
4. Section 30(4): The COC may approve a resolution plan by a vote of not less than 75% of voting share of the financial creditors, after considering its feasibility and viability, and other requirements by the Board. The same shall not be approved where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite a fresh resolution plan where no other is available. Where there is ineligibility under clause (c) of section 29A, the applicant shall be allowed, not exceeding thirty days, to make payment of the overdue, but shall not be construed as extension of period for proviso to sub-section (3) of section 12.
5. Section 35 (1) (f): Provided that the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant.
6. Section 235A: If any person contravenes any of the provisions of this Code or the rules or regulations made thereunder for which no penalty or punishment is provided in this Code, such person shall be punishable with fine which shall not be less than one lakh rupees but which may extend to two crore rupees.