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key defintion IBC

  1. Amity Law School Key Definitions Under the IBC
  2. Amity Law School Section 2 • The provisions of this Code shall apply to– • a) any company incorporated under the Companies Act, 2013 (18 of 2013) company law; • (b) any other company governed by any special Act for the time being in for the said provisions are inconsistent with the provisions of such special Act; • (c) any Limited Liability Partnership incorporated under the Limited Liability (6 of 2009); • (d) such other body incorporated under any law for the time being in Government may, by notification, specify in this behalf; • [(e) personal guarantors to corporate debtors; • (f) partnership firms and proprietorship firms; and • (g) individuals, other than persons referred to in clause (e),]
  3. Amity Law School Claim: (a) a right to payment (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment. [S. 3(6)] Debt: A liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. [S. 3(11)] (Concept of Debt payable in B.K Educational Services Limited) Default: 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. [S. 3(12)]
  4. Amity Law School Illustration to the definition • A supplies goods to B on credit of 30 days. • ‘A” has a claim against B. • 30 days subsequent to supply, the sale consideration of the goods shall become a debt. • non payment of the debt shall become default.
  5. Amity Law School Corporate Applicant : (a) corporate debtor; or (b) a member or partner of the corporate debtor; or (c) an individual who is in charge of managing the operations and resources of the corporate debtor; or (d) a person who has the control and supervision over the financial affairs of the corporate debtor; [S. 5(5)] Corporate Debtor: A corporate person who owes a debt to any person [S. 3(8)] Corporate Person: A company as defined in clause (20) of S.2 of the Companies Act, 2013, a LLP , as defined in S. 2(1)(n) the LLP Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider. [S. 3(7)]
  6. Amity Law School • Laxmi Pat Surana v UOI, 2021 SCC Online SC 267 The corporate debtor guaranteed two loans taken by the Principal Borrower from Union Bank. Question: Whether an Action under Section 7 of the Code can be initiated by a financial creditor against a corporate person concerning guarantee offered by it in respect of a loan account of the principal borrower who is not a corporate person. Decision : the Court held that the definition of the term ‘Debt’ is wide enough to include liability of a corporate person including not being a corporate person in the event of a default committed by the latter. A default by a Borrower would result in cause of action that would allow the Creditor to proceed against a Corporate Debtor as the liability of the Guarantor is co-extensive with that of the Principal Borrower and on default, the Guarantor directly inherits the liability to repay the debt
  7. Amity Law School M/S. Innoventive Industries Ltd v. Icici Bank (2018) 1 SCC 407 • The objective of the Insolvency and Bankruptcy Code, 2015 is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or incidental thereto.
  8. Amity Law School • The Code seeks to provide for designating the NCLT and DRT as the Adjudicating Authorities for corporate persons and firms and individuals, respectively, for resolution of insolvency, liquidation and bankruptcy. • The Code separates commercial aspects of insolvency and bankruptcy proceedings from judicial aspects. • As per the data available with the World Bank in 2016, insolvency resolution in India took 4.3 years on an average, which was much higher when compared with the United Kingdom (1 year), USA (1.5 years) and South Africa (2 years). The World Bank’s Ease of Doing Business Index, 2015, ranked India as country number 135 out of 190 countries on the ease of resolving insolvency based on various indicia.
  9. Amity Law School • USA has adopted the Bankruptcy Reform Act of 1978, which has since been codified in Title XI of the United States Code. • The UK Law, on the other hand, is governed by the Insolvency Act of 1986 which has served as a model for the present Code.