QA Series 2025 - S No 12 - Legal Points Part 04

 

The Banking Tutor

Question Answer Series 2025

S No 12                                                                    23-06-2025

Legal Points – Part 04 

76. What is a IPA in the context of IBC 2016 ?

IPA stands for an Insolvency Professional Agency. IPAs are the entities responsible for enrolling, educating, monitoring, and regulating insolvency professionals, who are the individuals handling insolvency resolution processes. They act as the first-level regulators for insolvency professionals.

77. What is IP in the context of IBC 2016 ?

In the Insolvency and Bankruptcy Code (IBC) of India, "IP" stands for Insolvency Professional, a licensed individual who manages the insolvency process. IPs are appointed to facilitate the resolution or liquidation of an insolvent company or individual. They play a crucial role in guiding resolution processes and are licensed to act as intermediaries in the insolvency process.

78. Who is a Corporate Person ?

Corporate Person means

(a) A company as defined under section 2(20) of the Companies Act, 2013;

(b) A Limited Liability Partnership as defined in 2(1)(n) of Limited Liability Act, 2008; or, 

(c) Any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider. 

79. What is a Claim?

Claim means a right to payment or right to remedy for breach of contract if such breach gives rise to a right to payment whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. 

80. Who is a Corporate Debtor ? 

Corporate Debtor means a corporate person who owes a debt to any person. 

81. Who is a Corporate Creditor ? 

Creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree holder. 

82. What is meany by a Debt ? 

Debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. 

83. What is meant by Default ? 

Default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be. 

84. Who is a Secured Creditor ? 

Secured creditor means a creditor in favour of whom security interest is created. 

85. What is meant by Security Interest ? 

Security Interest means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge,  hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person. 

86. What is Initiation Date in the context of IBC 2016 ? 

Initiation date means the date on which a financial creditor, corporate applicant or operational creditor, as the case may be, makes an application to the Adjudicating Authority for initiating corporate insolvency resolution process. 

87. What is Insolvency Commencement Date ? 

Insolvency commencement date means the date of admission of an application for initiating corporate insolvency resolution process by the Adjudicating Authority. 

88. What is Insolvency Resolution Process Period ? 

Insolvency resolution process period means the period of 180 days beginning from the insolvency commencement date and ending on 180^th day. 

89. What is Liquidation Commencement Date ? 

Liquidation commencement date means the date on which proceedings for liquidation commence. 

90. Who is a Resolution Professional in the context of IBC 2016 ? 

Resolution professional  means an insolvency professional appointed to conduct the corporate insolvency resolution process and includes an interim resolution professional.

91. What is meant by Voting Share ?

Voting share means the share of the voting rights of a single financial creditor in the committee of creditors which is based on the proportion of the financial debt owed  to such financial creditor in relation to the financial debt owed by the corporate debtor. 

92. What is Committee of Creditors (CoC) in the context of IBC 2016 ?

The Committee of Creditors (CoC) is a crucial body under India's Insolvency and Bankruptcy Code (IBC) 2016. It's formed to represent the interests of financial creditors during the Corporate Insolvency Resolution Process (CIRP) of a distressed company. The CoC's primary role is to make decisions that maximize the value of the corporate debtor's assets.

93. In case a Corporate Debtor not having any financial creditor, who will form CoC?

Where a corporate debtor does not have any financial creditors, the committee of creditors shall be constituted and comprise of such persons to exercise such functions in such manner as may be specified by the Board.

94. How the decisions will be taken by CoC?

All the decisions of the committee of creditors shall be taken by vote of minimum 75% of the voting share of the financial creditors. The voting share is determined based on the value of the debt of the creditor in proportion to the total debt.

95. What is importance of first meeting of CoC?

The first meeting of the CoC shall be held within 7 days of the constitution of the committee of creditors.

The committee of creditors in the first meeting may by a majority vote of not less

than 66% per cent. Of the voting share of the financial creditors, either resolves to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional. 

96. Whether OC will have Voting Power in CoC? 

The Operational Creditors do not have right to vote in the meeting of Committee of Creditors, however, they may attend the meetings of Committee of Creditors. 

97. Who is a Related Party in the context of IBC 2016 ? 

In the context of the Insolvency and Bankruptcy Code (IBC) 2016, a "related party" to a corporate debtor is broadly defined as anyone who has a close relationship with the debtor, such that they could potentially influence or be influenced by the debtor's decisions. 

98. Whether a Related Party can participate meetings of CoC and Vote ?

Related Party to whom a Corporate Debtor owes a financial debt shall not have any right of Representation, Participation or Voting in a meeting of the Committee of Creditors. 

99. What is the required Quorum of CoC meeting ?

A meeting of committee of creditors shall quorate if members of the committee of creditors representing at least 33% of the voting rights are present either in person or by video/audio means. 

100. What can be done in case CoC meting does not have Quorum ?

If the requisite quorum for committee of creditors is not fulfilled the meeting cannot be held and the meeting shall automatically stand adjourned at the same time and place on the next business  day. 

The adjourned meeting shall quorate with the members of the committee attending the meeting. 

Example : The Committee of Creditors has members numbering 32. A committee meeting was scheduled on June 10^th. However, only seven members attended, and the meeting was adjourned due to lack of quorum (Quorum is 11). 

The meeting was automatically rescheduled for the same time and place on June 11th. On that day, only  8 members showed up. Even though this was still less than the original quorum requirement, the meeting proceeded because “the adjourned meeting shall quorate with the members of the committee attending the meeting.”

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Next Issue  will be shared on 25^th    June 2025.

Sekhar Pariti

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