INTRODUCTION
The rapid growth of technology, trade, and the corporate world has resulted in the rising number of multinational entities eventually creating a borderless relation among countries and businesses.
In the present times, almost every country has trade relations extending beyond one jurisdiction. Having a presence in various jurisdictions also results in having creditors and debtors situated at various such locations. This makes the insolvency process including overlapping of different laws and proceedings, a complicated process.
Employees as Operational Creditor
The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “Code”) considers all employees and workmen as operational creditors.
Operational Creditor is defined under Section 5 (20) of the IB Code as:
"Operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;”
Operational Debt is defined under Section 5 (21) of the Code which states that:
IBC – Threshold limit proposed to be enhanced for CIRP
At present Rs 1 lakh is the threshold limit to file an application in NCLT for triggering the incidence of Corporate Insolvency Resolution Process(CIRP) under Insolvency & bankruptcy Code,2017(IBC).
This had resulted into flooding of applications in NCLT. In last three and half year, approx. 23,000 cases have come to the NCLT under IBC.It is pertinent to note that almost 65% of such cases are settled prior to the admission under IBC.
Threshold enhanced with force majeure awaited in Insolvency & Bankruptcy Code(IBC) due to COVID-19
In order to check the economical slowdown in the business, the Finance Minister on 24th March,2020 has announced various reliefs and relaxations in IBC due to the pandemic outburst of Covid-19 as below:
The word “Dispute” is significant for the maintainability of every application filed under Section 9 of the IB Code. It will be not wrong to say that the first acid test for an admission of an application under Section 9 is prima facie
TIME LIMIT FOR RECTIFICATION AND ADMISSION IS DIRECTORY
It is pertinent to note thatSection 9 (5) of Insolvency and Bankruptcy Code, 2016 provides the time limit for admission and rejection of the application and also the time limit for rectification of the defect in the application:
SECTION 9(5)
Employees as Operational Creditor
The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “Code”) considers all employees and workmen as operational creditors.
Operational Creditor is defined under Section 5 (20) of the IB Code as:
"Operational creditor"means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;”
TIME LIMIT FOR RECTIFICATION AND ADMISSION IS DIRECTORY
It is pertinent to note that Section 9 (5) of Insolvency and Bankruptcy Code, 2016 provides the time limit for admission and rejection of the application and also the time limit for rectification of the defect in the application:
SECTION 9(5)
“Section 9 (5) – The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—
It is known that I & B Code came into effect from 01.12.2016. Subsequently, it perspired during various proceedings in NCLT that it has no specific provision for limitation period and/or categorical applicability of Limitation Act on initiation of insolvency process under the Act.
However, the limitation period is prescribed under the Limitation Act for every suit instituted, appeal preferred, and application made under the law.
As per Section 5(14) of the IB Code "Insolvency Resolution Process Period" is 180 days.
“Period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day;”
COMPLETION OF INSOLVENCY RESOLUTION PROCESS - It must be noted that Section 12 of the IB Code prescribes the time limit for completion of Insolvency Resolution process.