Persons who may initiate corporate insolvency resolution process:
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Where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor in the manner as provided under this Chapter.
Meaning of Operational Creditor:
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.
Meaning of Operational Debt:
Operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment 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.
In this article we will discuss about how operation creditor make Application for initiation of corporate insolvency resolution process against the corporate debtor
Section 8 (1) of Insolvency and Bankruptcy Code, 2016 :
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. ( Demand Notice will be in Form 3 )
In accordance with this section Operational Creditor is required to send Demand Notice on the default of Payment by Debtor in the prescribed form along with the required evidences of debt due.
Section 8 (2) of Insolvency and Bankruptcy Code, 2016 :
The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor –
(a) existence of a dispute, [if any, or] 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 payment 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.
Now Debtor shall within 10 days of receipt of demand notice make inform to the Creditor of :
- Existence of dispute, if any, or
- Pendency of suit or arbitration proceedings, or
- the payment of debt due, or
- send an attested copy of Electronic Transfer of unpaid amount
- send an attested copy of record that payment has already been encashed
Meaning of Demand Notice :
“Demand Notice” means a notice served by an operational creditor to the corporate debtor demanding payment of the operational debt in respect of which the default has occurred.
If the information or Payment as par Section 8(2) is not received within 10 days :
Application by operational creditor.—(1) An operational creditor, shall make an application for initiating the corporate insolvency resolution process against a corporate debtor under section 9 of the Code in Form 5, accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
Application is required to be made in Form 5
The applicant under sub-rule (1) shall dispatch forthwith, a copy of the application filed with the
Adjudicating Authority, by registered post or speed post to the registered office of the corporate debtor
Documents required to be attached along with Form 5:
- Copy of the invoice / demand notice as in Form 3 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 served on the corporate debtor.
- Copies of all documents referred to in this application.
- Copy of the relevant accounts from the banks/financial institutions maintaining accounts of the
operational creditor confirming that there is no payment of the relevant unpaid operational debt by the operational debtor, if available
- Affidavit in support of the application in accordance with the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
- Written communication by the proposed interim resolution professional as set out in Form 2 of the
Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. [WHERE APPLICABLE]
- Proof that the specified application fee has been paid.
Fee for Filing Application by Operational Creditors : Rs. 2000
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