Framework of Creditor Representation in IBC Court The IBC is an important transformation in India's financial landscape by creating a comprehensive ecosystem to address insolvency and bankruptcy issues. The insolvency and bankruptcy code's main aim is to streamline the resolution process and cover a well-structured framework that enables the timely and efficient resolution of assets. This ecosystem revolves around structures like the National Company Law Tribunal (NCLT) and the Insolvency and Bankruptcy Board of India (IIBI), and it plays an essential role in regulating insolvency proceedings. The INC encourages transparency and accountability among stakeholders to foster a vibrant environment. The IBC not only provides a mechanism for the renewal of viable businesses but also ensures the swift liquidation of assets. It also focuses on the creditor's rights and debtors' responsibilities to establish a healthy foundation for promoting financial stability and nurturing the culture of timely resolution in Indian business. Key Types of Creditors in Insolvency and Bankruptcy Code, 2016 The creditors play a crucial role in IBC proceedings, and there are various types of creditors with distinct rights and properties. Here are some of the key creditors defined below such as Financial Creditors Section 5(7) of the IBC states that the financial creditors are those who have provided financial debt to the corporate debtors. A financial creditor is a person to whom a financial debt is owned and transferred by the financial creditors. The Insolvency Law Committee stated that even the authorized representation of the financial creditor can initiate the Corporate Insolvency Resolution Process CIRP against the Corporate debtor. Operational Creditors Section 5(20) of the IBC states that the operational creditors are the entities that provide goods or services to the corporate debtor with respect to the functioning of the business. This included suppliers, service providers and employers. Secured Creditors The secured creditors hold a security interest in the corporate debtors' assets, which means they have collateral security for the debt owed to them. The waterfall mechanism is used to initiate proceedings under section 53, which is the distribution of assets among the stakeholders. The secured creditors come first in the list of priorities for the distribution of assets. Unsecured Debtors The unsecured debtors do not hold any specific assets or interest as collateral for their debt. They have a claim against the general assets of the corporate debtor and are paid by secured creditors in the event of liquidation. Why Choose Enterslice for Creditor Representation in IBC Court? Enterslice can offer comprehensive services in Creditor Representation in IBC court, and some of the key services are stated below Advisory Services Our experts provide a strategic approach to empowering creditors with strategic insights and informed decision-making by offering continuous guidance by keeping creditors aware of the dynamic legal landscape and updated with the changes in the IBC regulations, emerging legal precedents and industry-specific nuances that may impact the insolvency proceedings. Our experts help mitigate risk and analyze data to identify potential challenges and opportunities for creditors. Legal Due Diligence Our experts provided a legal, due diligence service and thoroughly examined the legal aspects to safeguard the interests of the Creditors throughout insolvency proceedings. Our legal due diligence services involve a review of relevant necessary papers and financial agreements and identify potential risks and opportunities to creditors. Our experts examine the validity and enforceability of claims, potential challenges, and any legal implications that will impact the outcome of the case. Representation in NCLAT or NCLT Our professionals provide the services of Creditor representation in IBC Court, such as the National Company Law Appellate Tribunal (NCLAT) and National Company Law Tribunal (NCLT), and are tailored to meet the needs of the creditors by navigating the insolvency proceedings under the Insolvency and Bankruptcy Code. Our dedicated team of experts ensure the creditor's rights and offers support throughout the entire process. Our legal professionals represent the creditor before the NCLT and focus on strategic litigation and effective communication in the entire court process, from filing petitions to presenting the case in the IBC courts, etc. Strategic Planning Our strategic planning services for Creditor Representation in IBC courts are designed to empower creditors with a roadmap for finding out the future complexities in insolvency proceedings. Strategic planning involves a comprehensive case review and identifying the risks and opportunities. Our experts closely understand the specific objectives and concerns and ensure that the strategies align seamlessly with goals. Also, our experts encompass ongoing monitoring and adaptation to address the challenges and new opportunities that will be related to the insolvency proceedings. Secured Creditor Rights in IBC Proceedings A secured creditor is stated under Section 3(30) of the Insolvency and Bankruptcy Code as a creditor who gets favours. The security interest is defined under Section 3(31) of the Code, which includes the right, title, interest, or claim to property that secures payment or performance of an obligation and also includes a mortgage or charge and arrangement securing payment. However, performance security is not included under this definition. During the Corporate Insolvency Resolution Process (CIRP), a secured creditor is not permitted to enforce their security interest against the corporate debtor due to the moratorium under Section 14 of the insolvency and bankruptcy code which means that the Adjudicating Authority on the commencement of insolvency must declare a moratorium that prohibits any action taken to foreclose, recover, or enforce any security interest created by the corporate debtor, including any action under the SARFAESI Act, 2002. Our experts will assist in the rights of the secured creditors and help in restoring them after the liquidation proceedings commence against the corporate debtor under Section 33 of the Code. If secured creditors relinquish their security interest under Section 52(1)(a), then they are placed second under the waterfall mechanism after the payment of insolvency resolution process costs and the liquidation. Our Experts assist in protecting Creditor rights in IBC Proceedings The protection of creditors' rights provided by IBC in the proceedings is a critical aspect of the legal process. Our experts specialize in providing unwavering assistance to safeguard the interest of creditors throughout the entire IBC proceedings in various ways, such as Legal Assessment Our experts conduct a meticulous legal assessment of the creditor's rights in IBC proceedings by analyzing the nature of the debt, security, interest, and any other challenges related to the case. Strategic Planning Our team formulates a strategic plan to protect and assert the creditor rights in IBC Proceedings. Representation in NCLT and NCLAT At Enterslice, we provide expert representation before the NCLT and NCLAT and ensure that the creditor's rights in IBC proceedings are effectively presented and defended. Negotiation and Settlement Our experts excel in negotiation and settlements, and we have an approach to securing favourable agreements for creditors while protecting the creditor's rights in IBC proceedings. Moral Practices and Compliance Our experts ensure that all the actions align with legal norms and compliance requirements and foster trust and integrity in the creditor representation in IBC Court. Post Resolution Assistance After the successful resolution or IBC proceedings, our experts continue to assist the creditor in post-resolution and ensure that the rights and judgements obtained during the proceedings are effectively imposed. Under Section 7 Provisions of the IBC for Creditor Representation in IBC Court The Corporate Insolvency Resolution Process (CIRP) is initiated when corporate debtors default on a debt that meets the minimum threshold value as prescribed under Section 4 of the IBC. As per Section 7 of the insolvency and bankruptcy code and Section 7 Clause 1 of the IBC, our experts assist the financial creditor in applying to initiate the CIRP and the process of filing the application under Section 7. We also help the financial creditor attach the required necessary papers with the application to send it to the registered office of the corporate debtor and the adjudication authority. Once the application is received by the NCLT, then it must ascertain the existence of default within 14 days and if the NCLT approves the application for further processing. Our experts reduce the chance of rejecting the application and guide the creditor with accurate knowledge of the process. Steps to follow for the Creditor Representation in IBC Court Our experts assist in creditor representation in IBC Courts by following the entire process and assisting in each step of the process under IBC, which involves a structured process aimed at recovering dues from corporate debtors. The key steps to follow are given below Filling the Petition Before filing the claims, the creditor must file a petition under the National Company Law Tribunal (NCLT) to initiate the CIRP against the debtor. The petition will include all the necessary necessary papers, such as proof of debt and a statement of default. However, our experts engage in the process and ensure compliance with regulations. Admission of the Petition If the NCLT approves the petitions, then an IRP is appointed, and a moratorium on the debtor's assets is declared. File a Claim As a creditor, there is a requirement to file a case to the Interim Resolution Professional (IRP) or Resolution Process (RP). Verification of Claim The IRP and RP are responsible for verifying and admitting the claims by the creditors to include the creditor in the list of creditors; however, our experts assist the creditor in the entire procedure of filing the claim to represent it to the IRP. Formation of the Committee of Creditors (CoC) A CoC is formed, comprising all the creditors, because it plays an important role in the insolvency and resolution process, including the approval of the resolution plan. Resolution Plan A resolution plan is prepared and outlines the proposed measures for the revival of the debtor or the liquidation of the assets, and the CoC needs to approve the resolution process with a 66% majority once the CoC approves the resolution plan then it must be submitted to the NCLT for the final approval. Distribution of the Assets As per section 53 of IBC, 2016, the waterfall mechanism is accepted for the distribution of the assets and provides the order of priority in which the distribution proceeds from the sale of liquidation assets of the corporate creditors shall be distributed among the creditors. Constitutional Validity of Sections 95 to 100 for Creditor Rights in IBC Proceedings The Supreme Court, in its judgement dated 9th November 2023, in the matter of Dilip B. Jiwrajka v. Union of India and Others, has upheld the constitutional validity of provisions of the Insolvency and Bankruptcy Code, 2016, about the insolvency resolution process of personal guarantors. It was submitted by the Petitioner that a judicial body must determine the existence of debt before the appointment of a resolution professional and an action initiated by the resolution professional. Petitioner contended that the fundamental aspect as to whether the jurisdiction to entertain an application under Chapter III of Part of IBC exists must be determined at the threshold by allowing the debtor or personal guarantor to be heard and that such jurisdictional question ought to be determined before appointment of the resolution professional under Section 97(5) of IBC itself. Further, Petitioner sought natural justice by a judicial body at the stage of Section 97(1) of IBC, and it was contended that before the appointment of a resolution professional, without incorporating a requirement for a hearing before the adjudicating authority, Sections 95 to 100 of the insolvency and bankruptcy code would be arbitrary and violative of Article 14 of the Constitution of India. The Hon'ble Supreme Court upheld that at the stages envisaged under Sections 95 to Section 99 of the IBC, there is no involvement of judicial adjudication. The resolution professional appointed under Section 97 of IBC serves a facilitative role of collating all the facts relevant to the examination of the insolvency application for the commencement of the insolvency resolution process, which has been preferred under Sections 94 or 95 of IBC. Additionally, the report to be submitted to the adjudicatory authority is recommendatory on whether to accept or reject the application. The Supreme Court held that there is no violation of natural justice under Sections 95 to 100 of the IBC as the debtor is not deprived of an opportunity to participate in the process of the examination of the application by the resolution professional and the creditor rights in IBC proceedings are protected. The Supreme Court also held that until passed by the adjudicating authority, which decides under Section 100 of IBC whether to accept or reject the application, no judicial determination takes place, and the adjudicatory authority must observe the principles of natural justice while exercising its jurisdiction under Section 100 of the IBC to determine whether to accept or reject the application. The Supreme Court held that the purpose of interim moratorium under Section 96 of IBC is to protect the debtor from further legal proceedings. It was held by the Supreme Court that the provisions of Sections 95 to 100 of IBC are not unconstitutional as they do not violate Articles 14 and 21 of the Constitution in the insolvency process.