Under Section 7 of the Insolvency and Bankruptcy Code (IBC), a financial creditor either by itself or jointly with other financial creditors, may file an application for initiating CIRP against a corporate debtor before NCLT, in case of a default.
Corporate affairs secretary Injeti Srinivas Thursday said the government is mulling ‘deemed admission’ of Section 7 cases of corporate defaults to National Company Law Tribunal (NCLT), under corporate insolvency resolution process (CIRP), to expedite the resolution process. Under Section 7 of the Insolvency and Bankruptcy Code (IBC), a financial creditor either by itself or jointly with other financial creditors, may file an application for initiating CIRP against a corporate debtor before NCLT, in case of a default.
“For admission (of cases of corporate default), we are looking at the possibility of a ‘deemed admission’ for Section 7 cases (to NCLT), where a financial creditor is there, and there can hardly be much dispute on whether there is Rs 1 lakh default or default is one-day old or not,” Srinivas told reporters on the sidelines of an event organised by Columbia Business School.
“In such instances where it is open and shut case, we are looking at a possibility of a deemed admission,” he added. He said the government is also looking to introduce cross border as well as individual insolvency framework soon.
“We don’t have cross border insolvency framework. It is now been looked at very closely and we may soon have a crossborder insolvency framework,” Srinivas said. When asked about the reasons for delays in admission of corporate defaults cases to NCLT, he said there are some limitations over a few sections such as Section 29 A of Insolvency and Bankruptcy Code, but most of the issues are now getting settled. Section 29 (A) of the IBC, deals with related-party provisioning and aims to prevent defaulting promoters from taking back their companies.