Insolvency & Debt Resolution Advisory

It is a single, unified law that governs how a company (or individual, in specified cases) that cannot pay its debts is either revived under a new resolution plan or wound up in an orderly liquidation. It replaced a fragmented system of multiple recovery laws with one time-bound process, administered by the NCLT for companies and overseen by the Insolvency and Bankruptcy Board of India (IBBI).

Three categories: a financial creditor under Section 7 (banks, NBFCs, bondholders, or anyone who has extended a financial debt), an operational creditor under Section 9 (vendors, suppliers, employees, and government dues above the threshold), or the corporate debtor itself under Section 10, filed voluntarily by its own board.

Section 4 of the Code prescribes the minimum amount of default for triggering CIRP, and the Central Government is empowered to notify and revise this threshold by notification. The threshold was significantly raised in 2020. Because this figure is set by government notification and has changed before, we verify the currently applicable threshold against the latest IBBI/MCA notification at the time of filing rather than relying on a fixed number.

Under Section 9(5)(ii)(d), an NCLT must reject an operational creditor's application if the corporate debtor demonstrates a genuine dispute about the debt that existed before the Section 8 demand notice was issued — for example, a quality complaint raised in earlier correspondence, an ongoing arbitration, or a suit already filed. The Supreme Court in Mobilox Innovations v. Kirusa Software clarified that the dispute need only be plausible on the facts — not proven — for the application to fail at the admission stage.

Two things happen immediately: a moratorium comes into effect under Section 14, freezing all suits, asset transfers, and security enforcement against the corporate debtor; and the existing board of directors is suspended, with powers vesting in an Interim Resolution Professional (IRP) appointed by the Tribunal. The promoters and management continue to exist but lose operational control.

Only if they are not disqualified under Section 29A of the Code. This provision — introduced specifically to prevent promoters who caused the default from regaining control cheaply — bars persons connected with an undischarged NPA account (subject to specified cure periods), wilful defaulters, persons convicted of certain offences, and several other categories from submitting a resolution plan. A promoter who does not fall into any of these bars can submit a plan like any other resolution applicant.

A financial creditor's debt arises from a transaction with the commercial effect of borrowing — loans, debentures, bonds, and similar instruments. An operational creditor's debt arises from the supply of goods or services, including employment dues and certain government dues. The distinction matters because financial creditors sit on and vote in the Committee of Creditors (CoC), while operational creditors generally do not have voting rights on the CoC except in limited circumstances specified under the Code.

Section 12 of the Code prescribes an outer limit — originally 180 days extendable by 90 days, and now (per amendments and the Supreme Court's ruling in Essar Steel) capped at 330 days from the date of admission, inclusive of any time spent in legal proceedings. In practice, contested or complex cases frequently exceed this in reality due to litigation and appeals, though the statutory framework is designed to be strictly time-bound.

PPIRP, introduced under Section 54A and the related Chapter III-A of the Code, is a faster, more promoter-friendly insolvency route available only to corporate debtors classified as micro, small, or medium enterprises (MSMEs) under the MSME Development Act. It requires the corporate debtor to negotiate a base resolution plan informally with financial creditors first, secure approval from at least 66% of unrelated financial creditors, and only then file with NCLT — with the existing management typically continuing to run day-to-day operations during the process, unlike a standard CIRP.

The CoC comprises all financial creditors of the corporate debtor, with voting share proportional to the value of their admitted financial debt. Most significant decisions — approval of a resolution plan, appointment/replacement of the RP, raising interim finance beyond specified limits — require a 66% majority vote. Certain other decisions require a 51% majority. Related-party financial creditors are excluded from the CoC's voting on the resolution plan.

Employee and workmen dues are treated with priority under the Code. During the moratorium, the corporate debtor is expected to continue as a going concern where feasible, which generally includes continuing to pay wages for services rendered during the CIRP period as part of insolvency resolution process costs. In the liquidation waterfall under Section 53, workmen's dues for the 24 months preceding liquidation commencement rank pari passu with secured creditors' dues (to the extent they have relinquished security), ahead of unsecured financial creditors.

Yes, but only through the mechanism under Section 12A, which requires the applicant creditor's withdrawal request to be approved by 90% of the CoC's voting share, and then approved by NCLT. Before the CoC is even constituted, withdrawal is comparatively simpler. This high threshold reflects the Code's design — once a CIRP is admitted, it is meant to run its collective course rather than be settled bilaterally between the original applicant and the debtor at the expense of other creditors' interests.

If a company moves to liquidation, Section 53 prescribes a strict priority order for distributing sale proceeds: first, insolvency resolution process costs and liquidation costs in full; second, secured creditors' dues (to the extent security is relinquished to the liquidation estate) ranking pari passu with workmen's dues for the preceding 24 months; third, wages and unpaid dues to other employees for the preceding 12 months; fourth, unsecured financial creditors; fifth, government dues and remaining secured creditor claims (where security was not relinquished, after enforcement) for the preceding 2 years, ranking pari passu with any remaining secured creditor claim; sixth, any remaining debts and dues; seventh, preference shareholders; and finally, equity/other shareholders or partners.

No. Liquidation value is a technical estimate — determined by two registered valuers appointed by the RP — of what the corporate debtor's assets would fetch if sold off individually in a hypothetical liquidation, used as a benchmark during the CIRP to test whether a resolution plan offers creditors more than they would get in liquidation. The actual amount realised in an eventual liquidation, if it comes to that, depends on real market conditions, buyer interest, and asset condition at the time of sale, and often differs from the earlier liquidation value estimate.

Avoidance transactions are transactions entered into by the corporate debtor before the CIRP that unfairly prejudiced creditors or drained value from the company — preferential transactions (Section 43), undervalued transactions (Section 45), extortionate credit transactions (Section 50), and fraudulent or wrongful trading (Section 66). The RP is obligated to review the corporate debtor's transaction history within the prescribed look-back periods and, where such transactions are identified, apply to NCLT to have them reversed or for compensation, which can bring value back into the estate for creditors.

No. The Supreme Court has confirmed (notably in Lalit Kumar Jain v. Union of India) that approval of a resolution plan for the corporate debtor does not automatically discharge a personal guarantor's liability, unless the resolution plan expressly and specifically provides for such discharge and creditors agree to it. Lenders frequently proceed against personal guarantors under Part III of the Code, in parallel with or after the corporate process.

A creditor (or the guarantor) can file an application before the Debt Recovery Tribunal (DRT) under Part III of the Code. On filing, an interim moratorium applies to the guarantor's own pending legal proceedings relating to the debt. A Resolution Professional is appointed to examine the guarantor's affairs and prepare a repayment plan, which is then put to creditors for approval. If no acceptable repayment plan emerges, the process can move to a bankruptcy order against the individual.

Yes, and this is very often the best outcome for both sides. Once a demand notice or recall notice is received, there is usually a window — before formal filing, or even after filing but before CoC formation — to negotiate a One Time Settlement (OTS), a restructured repayment schedule, or a scheme of arrangement under Sections 230–232 of the Companies Act. These preserve management continuity and are typically faster and less costly than a full CIRP for a business that is fundamentally viable.

An Insolvency Professional is a specifically licensed professional registered with the IBBI, who acts as the Interim Resolution Professional (IRP) and, once confirmed, the Resolution Professional (RP) — running the corporate debtor's affairs, managing the claims and resolution-plan process, and reporting to the CoC and NCLT. PNPC provides Chartered Accountancy advisory services around the process — financial due diligence, claims support, valuation coordination, and tax structuring — and works alongside IBBI-registered Insolvency Professionals and insolvency counsel; we clarify our specific role in any engagement at the outset.

We verify the underlying debt against the creditor's own books and the corporate debtor's records where available, compute the exact claim amount including any contractually or statutorily due interest, assemble the documentary proof required under the prescribed claim form (Form B for operational creditors, Form C for financial creditors), and file within the timeline specified in the RP's public announcement — a deadline that, once missed, can significantly prejudice recovery.

We review the corporate debtor's Information Memorandum against the underlying books where accessible, assess the quality and recoverability of receivables, evaluate contingent liabilities and pending litigation disclosed by the RP, verify tax positions (pending assessments, disputed demands, GST liabilities), and model the resolution plan's cash-flow feasibility against the applicant's own funding capacity. We also run the Section 29A eligibility screen early, before significant diligence cost is incurred.

Companies undergoing insolvency resolution under the IBC receive certain concessions under India's income-tax law that are not generally available to other companies — including relaxed conditions for carry-forward and set-off of losses despite a substantial change in shareholding pursuant to an approved resolution plan (a relaxation that applied under Section 79 of the erstwhile Income-tax Act, 1961, and continues in equivalent form under the Income-tax Act, 2025, which replaced the 1961 Act with effect from 1 April 2026), and specific provisions addressing Minimum Alternate Tax / minimum tax credit treatment. These provisions are technical, have been renumbered as part of the transition to the new Act, and have been amended over time, so we verify the specific, currently applicable section and position against the latest statutory and CBDT guidance for each transaction rather than assuming a general rule or section number applies uniformly.

The Supreme Court has held (in Ghanashyam Mishra & Sons) that once a resolution plan is approved by NCLT, all claims not part of the resolution plan — including statutory dues such as tax claims not submitted or not provided for in the plan — stand extinguished, and no proceedings can be initiated for such claims post-approval. This includes government dues such as GST, provided they were dues that existed prior to the approval date and were not included in the approved plan. However, the government (as an operational creditor for statutory dues) must be given the opportunity to file its claim during the CIRP for this protection to operate cleanly.

Under the IBBI Liquidation Process Regulations, a liquidator is required to first explore selling the corporate debtor as a going concern (the business as a whole, or a group of assets as an operating unit) before resorting to piecemeal asset sale, because a going-concern sale typically realises significantly more value for creditors than break-up asset sales. Only if a going-concern sale is not achievable within the prescribed process does the liquidator move to asset-by-asset realisation.

Section 66 empowers the RP or liquidator to apply to NCLT for orders against persons who were knowingly party to carrying on the business of the corporate debtor with intent to defraud creditors or for any fraudulent purpose, potentially making them personally liable to contribute to the corporate debtor's assets. Separately, Section 19 obliges the erstwhile management to fully cooperate with and hand over records to the IRP/RP, and non-cooperation can itself have penal consequences under the Code.

Once a CIRP is admitted, the Section 14 moratorium bars enforcement of any security interest against the corporate debtor's assets, including by secured creditors — this is a blanket freeze designed to preserve the corporate debtor as a going concern during resolution. A secured creditor's option to enforce security independently effectively arises only if the process moves to liquidation, at which point Section 52 permits a secured creditor to either relinquish security to the liquidation estate (and rank in the Section 53 waterfall) or realise the security outside the liquidation process, subject to specific conditions and timelines.

Fee structure depends on the nature of engagement: a fixed fee is typical for defined-scope work such as claims preparation, debt verification, or a resolution plan financial review; a retainer or milestone-based fee is more common for ongoing CoC advisory, RP support through a full CIRP, or resolution applicant due diligence, given the variable duration and intensity of these engagements. We agree and confirm the fee structure in writing before work begins in every case.

IBC matters are simultaneously legal and deeply financial — debt computation, claims documentation, resolution plan feasibility, avoidance transaction analysis, and post-resolution tax structuring are Chartered Accountancy disciplines that a purely legal drafting service does not cover. A weak financial case is one of the most common reasons applications are dismissed or claims are undervalued, regardless of how well the legal pleadings are drafted. We work alongside empanelled insolvency counsel to ensure both the legal and financial dimensions of a matter are handled with equal rigour.

Under the IBC's terminology, 'insolvency' refers to the inability to pay debts as they fall due and the resolution process that follows (CIRP for companies, and the pre-bankruptcy insolvency resolution process for individuals under Part III). 'Bankruptcy' specifically refers to the final legal status and process that applies to individuals (including personal guarantors) once a repayment plan fails or is not accepted — a distinct, later stage that does not have a direct equivalent for corporate entities, which instead move to liquidation and eventual dissolution.

Yes, generally. Section 20 of the Code obliges the IRP/RP to manage the corporate debtor's operations as a going concern during the CIRP, to preserve and maximise value. Day-to-day contracts, supply arrangements, and payroll typically continue under the RP's oversight, subject to the constraints of the moratorium (no fresh security creation, no asset transfers outside the ordinary course without appropriate authorisation) and, for significant decisions, CoC approval where required under the Code and regulations.

Information Utilities, registered with and regulated by the IBBI, maintain authenticated records of debts and defaults submitted and verified electronically. A default record from an Information Utility such as the National e-Governance Services Limited (NeSL) provides strong, largely uncontestable evidence of default for a Section 7 application, significantly easing and speeding the admission process compared to relying solely on bank statements and loan documents.

Never ignore it. Within the 10-day window, you must either arrange payment of the undisputed operational debt, or issue a reply under Section 8(2) that either brings to the operational creditor's notice the existence of a pre-existing dispute (with supporting record) or the existence of a pending suit/arbitration, or record and send an attachment of the pendency of such a dispute. Doing nothing removes the strongest available defence and effectively invites a Section 9 filing.

Yes. Many of our Dubai-based clients have Indian subsidiaries, Indian trade counterparties, or personal guarantees connected to Indian facilities, and the IBC process applies specifically to entities incorporated and registered in India (and to guarantors in relation to Indian corporate debt), regardless of where the promoter or director is personally resident. We coordinate India-side IBC advisory from our Chennai, Bangalore, and Hyderabad offices while managing the UAE-side relationship and communication through our Dubai office — a single team across both jurisdictions.