 Good evening friends, amongst us we have Dr. Charu Mathur who has already taken a session with us on the topic how to crack the ER exams, the basic bird view. And similarly we thought why not take a topic with her on the introduction of the IPC that is what we say insolvency and bankruptcy code. If you are connected on the social media you would find that Dr. Charu Mathur has also done deep dive into these topics and people actually learn from her insights. Since she has a flare with English as well as Hindi, therefore we had requested that this session may be taken in a Hindi-English mode so that people had a larger perspective and what we also perceive and conceive that people from the society at large, from the Hindi medium could also understand it because this is a growing field and if we make the professionals understand they as they say that if you have to fly and so high you have to spread your wings and that's the only way to fly high. As you already know Charu Mathur has already taken a session with us and he has explained very well how to crack the exams of advocate and record. So today's session will be a mix of Hindi-English and how to understand the IPC, it will be an introduction and then gradually we will try to call good speakers and judge them as well. We have also done some other sessions on the IPC through Dr. Mamta Binani, Janan Ketru and many other sessions have been done and we try to understand more things. Chandru Shekhar Rao is writing again and again that we are able to hear. Kindly read the message and you will have to connect with the audio. I request ma'am to share her knowledge. Thank you Vikas ji, thank you for inviting me and as I have always appreciated and followed beyond CLC is doing the human service to the society. You are sharing so much knowledge and as a knowledge profession we are here to share the knowledge. So I am thankful that you have invited me to speak on the topic which is quite close to my heart as with my course which I developed for EVC learning was the first one which I did on the Insolvency in Bankruptcy course that was the earliest course that we have in India on the Insolvency in Bankruptcy course. Where I tried to explain what are the issues, what are the concepts of Insolvency in Bankruptcy course. So Insolvency in Bankruptcy course, if you look at it, it came in 2016 and it was not that it came immediately. There were at least 10 people who had become committees. There was a great committee which was made by Prof. Anil Mitra K. Dhritraman, who was the former Vice-Chancellor of NLS Bangalore as well as NLS Jutpur, who was the founding Vice-Chancellor. But effectively things were going very, very slowly. And at the same time, the debt of banks were non-performing assets. They were rising exponentially. So the situation reached that the finance minister, the then finance minister, late Shri Arun Jaitri had to say on the floor of the parliament that if you get stiff from BIFR and it is confirmed by AIFR, then not even God can dispossess you from the possession. So Sikha, as you know, that is your Sikh Industries Act. If the company is sick, then you try to revive the company. That is the management, the betta. That is what it says. And the banks keep running back and forth. The biggest loss of that was that money got stuck. It clogged the money. And money, it could not be a circulated bank kill system. So if something bad has happened to me, then the banks keep running back and forth. They cannot go ahead. Because in our law, they were not proud. So for that, they thought that we need to have a paradigm shift for the same. We will have to apply a totally different approach. Because what happens in Sikha is that your creditors, right? So your creditors, your bank, they kept running back and forth. And your data, the one who had curged you from the bank, he was sitting comfortably, he was chilling. He was putting up trips. He was doing everything except giving money back to the banks. And that is how money was not coming. All the assets were being raised. The factories were not running. And he was not able to pay the debt. But he was enjoying his life because he had money. He didn't utilize it. There were some genuine cases in which he was not able to manage. How to manage? One of the things that came out was the way of insolvency and bankruptcy code. So if we look at insolvency and bankruptcy code, so under the present government, it has been initiated that with the super drug scheme, right? So in 2014, this government came. After that, they saw that this is a mountain problem. There is so much problem that we cannot survive. Our economy won't be able to survive. How to go about it? So in that case, the government thought that a committee was formed under the leadership of Mr. Vishwanath. And within 8 months, they were able to get the legislation and got it passed. And it was up and running legislation within a record 8 months. So in September, December, NCLTeach, National Company Lord Tribunal declared those adjudicating authorities. And the National Company Lord Tribunal was its appellate body. So I would like to tell you about this. As far as your IBC is concerned, it has brought up paradigms. So in this, the creditors, like your bank, right? We were in control and the debtor, he was pushed aside. He was asked to sit down and let the creditor decide in their commercial wisdom, what is the best way to go forward. This was the basic thing. The paradigm shift was moved from the debtor in control to the creditor in control. So as a bank, who has given you a loan, I could decide how to pay for it. You are a manager, you are a promoter. You cannot always sit on the same thing. You have to ensure that your money is circulated in the business again. So essentially, it is taken as whatever wealth you have taken from the banks, it is a national wealth and it should be circulated. It should not get blocked. So when you made your IBC, there were three main objectives. Asset maximization is a very big objective. If you look at any company, when they used to go to SIGC, SIG industries were declared, their factories, machines and plants used to get rushed and they used to be sold as scrap. And it has been done in large number of cases. Because the value of asset for the company, the promoter was also diminishing because it has become a bad debt and it was not able to resolve the issue. So what did they do? They defined two types of creditors. One creditor defined a financial creditor and the other gave an operational creditor. What is a financial creditor? He gave you money. Who has provided you with the funds to invest in the project? It was very easy for me because it is an introductory class. So I will just tell you in a basic way that as a financial creditor, you should understand the bank and the company has given you money because you are fine to borrow from me. So I am a financial creditor. The other is your operational creditor. I have supplied you raw material. Suppose that I have supplied you cement and you did not give me money. So I am in your operational creditor. And the company which is defaulting we will call it corporate creditor. And I want to tell you one more thing that today I am only talking about corporate insolvency. So I am talking about the company's insolvency. So we have two types of creditors in your IBC. One is a financial creditor and the other is an operational creditor. So who can go in this? So it has a threshold limit that is provided under section 4. Initially it was kept as if there is a default of 1 lakh rupees. When you are not able to pay the debt of rupees then any of the financial or operational creditor they can take you to the for this insolvency and bankruptcy procedure. But during pandemic it was realized that it is becoming a very difficult thing. So the government raised this threshold from 1 lakh rupees to 1 crore. So as on date the threshold limit is 1 crore rupees if there is a default of 1 crore rupees then you can initiate the proceedings under the insolvency and bankruptcy code. Similarly I will explain the process. Before explaining the process I would like to share a conceptual point. We use term insolvency and bankruptcy interchangeably. But as a legal person as a lawyer, as a business person you must understand that there is a fundamental difference between insolvency and bankruptcy. Insolvency is that today I have a lot of assets but I do not have liquidity so I cannot give you money. But for that tomorrow I will sell you some assets and give you money. But if the court puts me in trouble if the court fixes and affects that this is a person who is not able to pay the debt then I am called a bankrupt. So insolvency is your temporary state while bankruptcy is the process where you are declared that this person will not be able to pay the debt. So this is the fundamental difference between insolvency and bankruptcy. Now in one concept I would like to explain that it is the time value of money. When will you get debt for anything then its time value of money will not increase. What is the time value of money? The theory is that if you do not invest your money on work then in the future its value will be less. Today I have 10 lakh rupees and if I invest it in the bank then I will get 10% rate of interest and in the future it will be 11 lakh rupees. But if I let 10 lakh rupees remain like this and I do not utilize it then the inflation will increase and the price of 10 lakh rupees will be reduced. The price of 10 lakh rupees will be around 7 lakh rupees worth. So if you have given someone a loan and the time value of money increases then it will qualify as a debt. Suppose I give 10 lakh rupees to my son as out of natural love and affection. In that case it is not a debt that is my son has been inflicted upon my son. It is something that I have given out of love and affection. So the time value of money I did not give that gift. I did not have that purpose but if I have supplied you some cement then if you give me money then I will invest that money then its money will not increase. Likewise whenever the bank gives you a loan the objective is to earn profit. So time value of money is another concept which you need to understand. In the same way you will see the Act in which they have given the definition of financial debt or operational debt which can be read from the Act itself. Thereafter if we go further then I will tell you the process. So in this our adjudicating authority is your NCLT. Now you will say that there are so many NCLT so which one should go to NCLT? So you will go to that NCLT which is the registered address of your corporate data. So you will invoke the jurisdiction of the NCLT where the registered office of the corporate data is situated. Suppose I am a corporate data my registered address is in say Ahmedabad. So I will go to NCLT, Ahmedabad. Likewise if it is in Mumbai I will go to NCLT, Mumbai. If it is Kanpur I will go to NCLT in Abad. So and so. Or NCLT the appellate tribunal was initially in Delhi only and thereafter it had gone to a branch of it has been a bench of it has been open at NCLT, Chinnai. So now we have divided the jurisdiction some matters just southern states can have they have given the completeness they will go to NCLT Chinnai and the other matters will go to NCLT Delhi. So I have told you this ecosystem. Now a very new professional breed has come which is very lucrative if I can use the term that is of IRPs. So it is insolvency resolution professional. They are the people who try to resolve your debt. So initially when the code came they allowed it to be 15 years old CACS or after graduation 15 years old managerial experience. But subsequently they started this limited insolvency examination in that you have to take this computer based test and if you are able to get 60% and above you become we are qualified to become an IR. Likewise a full time by the non-evaluation for the exam now you have to be registered when you were of with the registered with the insolvency bank and bankruptcy board of India or IBBI and with this they have one thing that has happened in CalPERSO is that until now IRP could only be an individual but since yesterday or since last week everyday they have issued two certificates to give certificate to insolvency professional interface. So as a firm you can apply it. So right now AAA insolvency and primers to the best of my knowledge are only to who has got this who has got this opportunity to be an IRP So now we understand the process the main board that is your IBBI that is the insolvency and bankruptcy board of India makes these rules makes the regulation and governs the IBC Now as a financial creditor I have a default so how do I go about and I will tell you a very interesting thing when IBC came at that time they started with something the RBI came out with a list of 12 top most defaulters whose NPA was there highest 12 NPA defaulters this was given and they were called dirty dozen so we will take a look at the procedure as a financial creditor what they did you have to give a file a petition before the relevant NCHT showing out that this is a debt that we have incurred and the process is started when you file this application just one minute you will have to unmute you will have to unmute yourself yeah sorry for this I hope now you all can hear me yeah yeah right so I was telling you how do you start the process so as a financial creditor you file an application giving the complete details how and when the default so when you file this petition it has to be a very detailed exercise where you have to actually give out how and how the default is it has to be meticulously prepared it is filed before the NCHT NCHT when it admits it does following things first it issues moratorium second it appoints an IRP and third it asks IRP to make a public announcement of this thing now we understand how you do this as a financial creditor so first you want to make this IRP you can suggest as a financial creditor after that section 14 moratorium is applied what does the term moratorium apply moratorium is essentially your coming period so that parties can sit and resolve this is one thing that IBC is a forum it is not a forum for recovery you are not going to recover you are going to resolve there is a fundamental difference between the term resolve as well as the term as well as the term as well as your term what do you call it recovery so as far as recovery is concerned this is not a forum for for your recovery it is a forum for resolution for moratorium the process does not resolve so one more thing about IBC is it is a time bound process initially time bound was 180 days plus 90 days now it will increase to 70 plus 90 days you have to take out the resolution what we will do is first you put the moratorium the meaning of moratorium is that the situation stops there so your arbitration is going on your civil suit is going on your pending litigation is going on it stops there so that corporate debtor can have a peace of mind and he can think the best way to resolve the debt likewise the they can sit and decide what to do after that when the moratorium is done all the things are simultaneously there IRP has to be published in 2 days in which they tell that this is a company this is a project insolvency bankruptcy court and you give the list of the forms in the form after that IRP circulates all the forms in 30 days then you form something known as COC or committee of creditors in which there are only financial creditors there is no savings in management management can just sit and see what happens IRP becomes the whole and sole management board is suspended it cannot do anything for and on behalf of the company it is taken over by IRP IRP is the whole and sole of the company when IRP becomes after that all forms come claims come various claims before the committee of creditors now when committee of creditors becomes the first thing they do is to keep IRP they change its name to IRP whether it is in professional or they think it is not right so they can change it another person is a resurrection professional in which there is voting in committee of creditors so if there are 10 creditors financial creditors so it is not that all voting rights are equal it is up to the percentage of amount that they have given as a loan to the company suppose you are coming for 20 crore default SBI gave 5 crore PNB gave 1 crore so on and so forth so their voting rights will be in proportion to their to their investment likewise when all forms are collected then committee of creditors after that they send invitations for resolution plan when invitations come for resolution applicants their plan assess committee of creditors and the one who approves their plan is sent to NCLT to approve that we are doing it now NCLT or any court's decisions are that you do not interfere in committee of creditors it has been settled legal position by various judgments of the Supreme Court this is one of the leading cases where you will find this matter likewise you will find it in the SR matter also so this is a settled position but once in between the question came that is it a matter of 138 that it should also be in moratorium so the court did not say that it will not go on independently it is asking against the court now the judgment of Kali-Dilli High Court is that the PMA procedure will stop in moratorium so the court said it will not stop because of this moratorium so your ordinary business that is there that will be continued under this after this one more question came what will be the personal guarantor will it be a moratorium the court said it is not for the that moratorium will apply moratorium is only for the corporate debtor so you can go and take initiate proceedings against the personal guarantor of the corporate debtor so after that when you have an approved plan or if you have an approved plan then implement it so whatever successful resolution is applicable to the company like if I give you the example of SR Mr. Mittal has bought it Mr. Mittal has taken SR so likewise there have been many more resolution applicants who are coming section 29A you will hear that we will also talk about it is that no one can apply so if you have a related party in the transaction then you cannot apply if you have a corporate insolvency resolution process then you cannot do it so there are certain limitations which are given and court has time and again carved out various ways of integrating there is no resolution plan so as a last resort company will go in for liquidation and during liquidation you can see how to do it in the moratorium then there is a waterfall mechanism under section 53 which tells you how the debt of the company will be will be divided between various parties first the first step is there are expenses for resolution proceedings that is correct I would like to tell you one more thing that IRP used to be you cannot run a company where there was gold where many people used to give better decisions so effectively IRP has a back head note usually if you see IRPs were coming from big 4 accounting firm and then they had their entire network of people who were working for them so this is one more aspect and I wanted to bring to your notice so financial creditors in section 7 when you find operational creditors you have to give a notice in section 8 they say you have made a big mistake you have not given me money give me money otherwise I will take you to IPC so you wait for 10 days if he can show that if either he pays up if he can show that he has already paid up or if there is a situation where the matter is already going between the parties then you cannot initiate the insolvency and bankruptcy but if he doesn't reply in the next 10 days then you find a petition under section 9 of the IPC again a detailed application and then the same process whether financial creditors or financial creditors you have to give a notice of 10 days whether financial creditors or financial creditors initiate the process but the committee of creditors will be your financial creditors once the question came whether financial creditors are not only operational creditors so the court has said in that case it can be but then they gave a situation at what percentage of the voting share they must have similarly a big question came that you must have seen that our maximum defaulters they are the they are the builders so real estate is in shambles and they have been taken to your IPC so one of the earliest was JPEE infrastructure so in this case they filed when it was declared was taken under insolvency and bankruptcy it was also part of dirty dozen so then they realized now what to do so there were many boom buyers they were left in dirt so bank has taken it to the IPC all the activities have stopped and this left home buyers very very worried lord what will happen to us we have to pay bank's EMI we don't even get a house we have to pay rent we are living in a rented accommodation we have to pay EMI and we are not able to give the house and large amount of our money has been invested in the project so you realize that for most of the people having one house or roof over their head is all they require they work for it and it was a big sector so these people home buyers association home buyers association they moved to the supreme court under article 32 and they filed a reputation for the same under article 32 so supreme court they said that we don't know in what category to put so they said that initially they started putting them in the financial credit because you are not an operational credit but money you are not giving it as a loan right you are not giving it as a cement or cement or something as a home buyer so the court and then IBB I thought this is a genuine problem and those are home buyers they have been classified as the financial creditor but then a separate form CA was introduced so they filed their claims as a financial creditor then a big problem now in one project there are thousands of people in the flat you didn't give your financial creditor so all of them will go to the committee committee of creditors so again they said that they have to decide their representative and now they are given a choice of 3 IRPs to pick one whom they would like to vote for then a problem came that one person's default that was a lot of money then they said that the moratorium is on all the projectors are gone there is no functioning can go or nothing can go on then what to do in such a situation then another amendment was brought in they said that only if 100 home buyers or 10% of the value of the real estate if they are in dream then they can move to the as a financial creditor so this is one thing and they put a rider on for initiating the process so after this this is the same process that we will apply so if you look at the NCLT plan if you look at the time limit if you look at the time limit then it can be a very good result in the third category you can go voluntarily because you cannot give money to the default people so many people have gone voluntarily into insolvency process under section 10 of IBC they have said that I am a corporate writer I have made a default kindly resolve this for me and then in this case NCLT follows the same process the points in IRP it goes for a moratorium then the financial creditors of the corporate data they come and then they decide what is the best way to resolve the issue so this is all about your very basic introduction to insolvency and bankruptcy one more thing I would like to tell you insolvency and bankruptcy we are also coming in pre-packs because insolvency is also coming we are putting different things for MSME during pandemic time we have put a time period in which there will be no IBC proceedings so it is still evolving jurisprudence though it has evolved to a great extent or the CD appeal of NCLT of Supreme Court so this is where we also get involved as an AOR we do go to NCLT and NCLT also for our matters but for the young professional this is all I will say that it is a very good area to develop your practice and one more info that I would like to share with you is to become an IRP usually the process is you should have a 10 years of experience as a lawyer and then you write limited insolvency examination but there is a different route available for people under 28 years of age that is through GIP of graduate insolvency program this is run by Indian Institute of Corporate Affairs or IICA which is under the Ministry of Corporate Affairs so there it is the fees of this is around 10 lakhs per year also and they take only 20 students also after a competitive exam so it is very happening to see that 23-24 years old are entering the profession and they are doing it fantastically well for themselves as well as for the profession so this is one route that is alternatively available to people now one tip that I would like to give you is whenever you draft insolvency and bankruptcy petition because in this lot of numbers are involved so whenever you have to make a claim for some claimant and you have to file for say a financial creditor if your numbers are incorrect then it becomes very difficult to even alter it even to amend those cases right amend those petition so you have to be meticulous in deciding whether you are falling into the category you have to be meticulous that numbers the dates that you are putting are absolutely correct so this is what a broad outline that I would like to give and if there are any queries I will be more than happy to have a discussion regarding this yeah first of all thank you for explaining in such a subtle way and the big thing is that we thought of introductions but I have seen that a procedure will be understood by people because a procedure is also procedural aspects and how its remedy is the NCLT Supreme Court as it is said in many tribunals it is believed that normally in High Court there is a 2 to 6 in view of L Chandra or Roger Matthew's judgment in which he said under the superintendents of power even in the AFT and CAT cases ultimately the jurisdiction you have expressed your thoughts for that we are all grateful and let me see if there is a YouTube message there is no question in the group no on the chart they are saying that the session has been well taken and we appreciate your gestures and kindly express our gratitude to Dr. Charu so everyone stay safe stay blessed thank you and we will stay connected with us on the social media for the future updates we will keep on requesting Dr. Charu to share her knowledge thank you everyone stay safe stay blessed Namaste