QA Series No 11 - Legal Points Part 3

 

The Banking Tutor

Question Answer Series 2025

S No 11                                                                    21-06-2025

Legal Points – Part 03 

51. What is full for of NFRA and what is it ?

NFRA stands for National Financial Reporting Authority. It is an independent regulator to oversee the auditing profession and accounting standards in India under Companies Act 2013.

52. What is the duty of the Companies related to NFRA ?

Companies are required to disclose information of their auditors to the NFRA.

53. What is full form of NCLT and when it was established ?

NCLT stands for The National Company Law Tribunal. It  is a quasi-judicial body that adjudicates issues relating to Indian companies. The tribunal was established under the Companies Act 2013 and was constituted on 1 June 2016 by the government of India.

54. What are the matters that NCLT attends ?

All proceedings under the Companies Act, including proceedings relating to Arbitration , Compromise, arrangements, reconstructions and the winding up of companies shall be disposed off by the National Company Law Tribunal.

55. Which is adjudicating Authority for Insolvency Resolution Process of Companies and LLPs?

The National Company Law Tribunal is the adjudicating authority for the insolvency resolution process of companies and Limited Liability Partnerships. 

56. What is important change in The Companies Act 2013 related to Registration of Charges with RoC , compared to earlier guidelines?

Section 77 to 87 of the Companies Act, 2013, related to Registration of Charges Created on the Assets of the Company.

Section 77 requires a charge created by a company whether public or private must be registered with the Registrar of Companies (ROC) having jurisdiction over Registered Office of the Company.

Earlier there was list of transactions on which charge was required to be registered with RoC. With the enactment of the Companies Act, 2013, the list of charges requiring registration done away with. Thus, in the absence of a specific list of charges to be registered, and the wide definition of the word “charge”, ‘pledges’ and ‘liens’ were also required to be registered. If any loan is given to a Company against the security of Bank Deposit, the same also need to be Registered with RoC. Prior to 2013, this was not there.

57. What is the maximum number of Partners in a Partnership Firm?

Companies Act 2013 (Section 464) allows a partnership firm to have up to 100 partners.

Indian Partnership Act 1932 does not specify a maximum limit on the number of partners. However, earlier, under Companies Act 1956, the limit was 10 for banking businesses and 20 for other businesses.

Companies (Miscellaneous) Rules, 2014 further restricts the number of partners to 50. So, while the Companies Act 2013 sets a theoretical upper limit of 100, the actual enforceable limit under the rules is 50 partners.

58. What is meant by Insolvency ?

Insolvency in the IBC is regarded as a state where assets are insufficient to meet the liabilities.

59. What is meant by Bankruptcy ?

Bankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding debts.

60. What is the difference between Insolvency and Bankruptcy ?

While insolvency is a situation which arises due to inability to pay off the debts due to insufficient assets, bankruptcy is a situation wherein application is made to an authority declaring insolvency and seeking to be declared as bankrupt, which will continue until discharge.

Insolvency is a state and bankruptcy is a conclusion.

61. What are different options under Insolvency ?

Insolvency situations have two options – resolution and recovery or liquidation.

62. What is meant by Liquidation ?

Liquidation is the winding up of a corporation or incorporated entity.

63. In India, Which Act deals with Insolvency and Bankruptcy ?

The Insolvency and Bankruptcy Code, 2016

64. Who are exempted from IBC ?

IBC shall not apply to corporate persons who are regulated financial service providers like Banks, Financial Institutions and Insurance companies.

65. Who will adjucate Insolvency Resolution for Companies ?

The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies.

66. Who will adjudicate Insolvency Resolution for Individuals ?

The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.

67. What is the time mandated by IBC for completion of Insolvency Process ?

The process is mandated to be completed within 180 days, extendable to maximum of 90 days. 

68. What are the Pillars of IBC ?

The Insolvency and Bankruptcy Code (IBC), 2016, is built on four key pillars - the Insolvency and Bankruptcy Board of India (IBBI) ; Insolvency Professionals (IPs) ; Information Utilities (IUs) and  Adjudicating Authority (NCLT  and DRT).

69. What is One Chain Authority in IBC ?

IBC has one chain of authority means it does not even allow the civil courts to interfere with the application pending before the adjudicating authority, thereby reducing the multiplicity of litigations.

70. What is  OC in the context of IBC ?

OC stands for Operational Creditor. Operational creditors are those whose obligation to the firm emerges from an operation-related transaction.

71. What is FC in the context of IBC ?

FC stands for Financial Creditor. A financial creditor is a person or entity to whom a financial debt is owed by a corporate debtor. This debt typically arises from transactions involving the time value of money, such as loans, bonds, or other instruments where repayment is expected with interest or other time-related consideration

72. What is meant by Information Utility in IBC?

Information Utility is an institution with multiple objectives. To provide undisputed information for initiation of insolvency process. IU serves as a credit and contract Repository. Accept financial information from financial or operational creditors or debtors.

73. What is a Resolution Plan in IBC ?

A resolution plan is a proposal agreed to by the Debtors and Creditors of an entity in a collective mechanism to propose a time bound solution to resolve the situation of insolvency. 

74. What are the consequences of Non Submission of Resolution Plan ?

Consequences of non-submission of a Resolution Plan When the Resolution Plan is not filed within 180 days of the Commencement date or such other extended period the Adjudicating Authority may pass orders for the liquidation of the corporate debtor.

75.  What is Fast Track Insolvency Resolution ?

A fast track insolvency resolution, as the name suggests, is a process wherein the insolvency resolution process shall be completed in an expeditious manner i.e., with 90 (ninety) days from the insolvency commencement date.

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Next Issue  will be shared on 23^rd   June 2025.

Sekhar Pariti

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