The Insolvency and bankruptcy code was notified and came into execution since December 2016. The code at its entry stage repealed the existing legislation which had become outdated and unfruitful with the passage of time. The code is not an easy legislation as the drafters have really worked hard to create a masterpiece legislation that can cater solutions to all sorts of disputes in a time-bound manner.
In the previous article we discussed in detail about the genesis of the code, meaning of the terms “Insolvency” and “Bankruptcy”, the legislation prevailing prior to the code along with the list of overruled acts, the footstep of the code, territorial extent of the code, the objectives of the code, target audience of the code and the pillars of the code. To read the previous article, follow the link: (https://www.muds.co.in/insolvency-bankruptcy-code-ray-new-beginning/)
The insolvency and Bankruptcy code is crafted in such a way that is has inculcated in it significant provisions related to the insolvency or bankruptcy as existing in previous legislation under its ambit. Due to which the code has become detailed and a bit complicated.
The code has imbibed in it legal terminology on which the premises of the code is constructed. Therefore, prior to diving straight into the code, it is of significance to have a quick glance over the legal terminology on which the whole premises of the act are constructed. Once the terminology glances the intent and the premises of the code would become clear and facilitate easy understanding of the code.
In this article, we will discuss the key terms used in the code which are a must to understand prior to directly jumping into the main contents of the acts.
Adjudicating Authority For corporate persons: National Company Law Tribunal (NCLT)
For Individuals &Partnership Firms: Debt Recovery Tribunal (DRT)
Insolvency and Bankruptcy Board of India (IBBI)
The bench of Adjudicating Authority
Bye-Laws made by Insolvency Resolution Professionals (IRPs)
Interest or lien created on the property or assets of any person or on any of its undertakings or on both, as security. The charge includes a mortgage.
Chairperson of the Board
Right to payment or Right to remedy for breach of contract
In reference to Corporate Persons includes:
For the company: Memorandum of Association and Articles of Association
For Limited Liability Partnership: Incorporation documents
The term encompasses the following persons:
Member/Partner of a corporate debtor, who is authorized to make application
An individual in charge of managing operations of the corporate debtor
A person having control and supervision over financial affairs of the corporate debtor
The term corporate person includes with its ambit the following persons:
Limited Liability Partnership(LLP)
Any other person incorporated with limited liability
It is important to note that the term corporate person excludes financial service providers from in its ambit.
A corporate person who owes the debt to any person
Services rendered by Information utility (IU) for accepting, recording, authenticating, verifying and providing access to information stored by it to specified persons.
Person to whom the debt is owed.
The term includes the below mentioned:
Liability or obligation in respect of the claim, due to any person.
The term debt includes both Financial and Operation debt with its umbrella.
Nonpayment of debt which had become due either wholly, partly or in installment and is payable but is nor paid by the debtor.
Person to whom the financial debt is owed.
Any person to whom a debt has been legally assigned or transferred shall be covered under the scope of the financial creditor.
Information related to the financial aspects of a person.
The code specifies categories of information to be counted as financial information.
The term includes the following under its umbrella:
Financial Institutions – defined in Section 45-I of Reserve Bank of India Act, 1934
Public Financial Institutions –defined in section 2(72) of Companies Act, 2013
Any other as Central Government may by notification specify.
The term includes the following under its scope:
Contract of insurance
Retirement benefit plans
Small savings instruments
Foreign currency contracts
Detailed list of services specified in the code to be counted under the category of financial service.
Financial Service Provider
A person engaged in the business of providing financial services on the basis of authorization issued or registration granted from financial sector regulators.
Financial Sector Regulator
Authority or body constituted to regulate services or transaction of the financial sector.
The term includes the following:
Reserve Bank of India
Securities and Exchange Board of India
Insurance Regulatory and Development Authority of India
Pension Fund Regulatory Authority
Any other regulatory authority notified by Central Government
Insolvency Professional (IP)
A person enrolled with Insolvency Professional agency as its member and registered with the board as insolvency professional.
Insolvency Professional Agency (IPA)
Any person registered with the board as insolvency professional agency.
Information Utility (IU)
A person registered with the board as an information utility.
Person to whom operation debt is owed
The term includes a person to whom such debt has been legally assigned or transferred.
The term includes the below mentioned:
Hindu Undivided Family
Limited Liability Partnership
Any other entity constituted by statute
The term includes the following:
Description of property situated in India or outside India
Description of interest, arising out of or incidental to property
A person who submits a resolution plan to resolution professional on receipt of an invitation.
The plan proposed by resolution applicant for insolvency of a corporate debtor.
Insolvency professional appointed to conduct the insolvency proceedings.
The creditor in favor of whom security interest is created.
The term covers the following transactions within its scope:
Any other form of transfer
Having discussed the terminology used in the code, now it would become easy to dive into the code. The terms discussed above are important as they are of the need to be understood as they are the building blocks on which the entire premises of the constructed code rests.
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