NCLT & Insolvency-India FAQs
- What is the IBC and how does CIRP work?
The Insolvency and Bankruptcy Code 2016 establishes the Corporate Insolvency Resolution Process — a time-bound proceeding before the NCLT triggered by a default of Rs 1 crore or more. The CIRP runs for 180 days (extendable to 270), during which a Resolution Professional manages the corporate debtor and a Committee of Creditors governs the process. If no viable plan is approved, the debtor proceeds to liquidation.
- Who can initiate a CIRP application and what is the threshold?
A financial creditor can file a CIRP application on proof of default of Rs 1 crore or more — no demand notice is required. An operational creditor must first issue a demand notice and allow 10 days for payment or dispute before filing. The corporate debtor itself may also file a voluntary CIRP application. On admission, a moratorium is declared and the Interim Resolution Professional takes over management.
- What is the Committee of Creditors and what powers does it have?
The Committee of Creditors comprises all financial creditors by verified claim value. It approves or rejects resolution plans (requiring 66% vote), authorises CIRP timeline extensions, and decides on liquidation. Creditors with larger claims have proportionately greater voting weight. Creditors who fail to verify claims promptly risk exclusion from the Committee or dilution of their voting share.
- Can a GCC-based creditor initiate or participate in Indian insolvency proceedings?
Yes. An overseas financial creditor — including a GCC-based bank, NBFC, or corporate lender — can file a CIRP application before the NCLT on proof of a debt and default meeting the threshold. Overseas operational creditors can use the demand notice and application route. Overseas financial creditor has the right to participate in the Committee of Creditors in proportion to their verified claim. Qualified consultants can represent overseas creditors in NCLT proceedings and manage the practical aspects of remote participation in the CIRP.
- What happens to claims if the company goes into liquidation?
In liquidation, proceeds are distributed in a statutory waterfall: insolvency and liquidation costs first; then secured creditors and workmen’s dues for 24 months; then other employee dues; then unsecured financial creditors; then other dues; then preference shareholders; then equity. Unsecured creditors and equity holders frequently recover little or nothing, a fact reinforcing the importance of engaging actively in the resolution phase.
- What is pre-packaged insolvency and who can use it?
Pre-packaged insolvency (PPIRP) is available to MSMEs — allowing a debtor to present a pre-negotiated resolution plan to the NCLT with 66% creditor agreement, without a full CIRP. The process runs for 120 days (extendable by 90 more).