The Insolvency and Bankruptcy Code, 2016 (IBC) is one of the most significant pieces of commercial legislation in India's post-independence history. In under a decade, it has transformed the way creditors recover debt, how companies are rescued or liquidated, and how promoters face accountability for failed enterprises. Understanding how to navigate the NCLT insolvency process is essential for financial creditors, operational creditors, and corporate debtors alike.
The CIRP Trigger: Section 7 vs Section 9
The Corporate Insolvency Resolution Process (CIRP) can be triggered in two ways. Section 7 allows a Financial Creditor — a bank, NBFC, or bondholder — to file an application before the NCLT when a default of ₹1 crore or above has occurred. Section 9 allows an Operational Creditor — a vendor, service provider, or employee — to initiate CIRP after issuing a demand notice and not receiving payment or dispute notice within 10 days.
The NCLT must admit or reject a Section 7 application within 14 days (in practice, often longer due to docket pressure). Once admitted, an Interim Resolution Professional (IRP) is appointed, a moratorium under Section 14 is declared — suspending all civil litigation and debt recovery proceedings against the corporate debtor — and public announcement is made inviting claims.
The Committee of Creditors and Its Powers
Once claims are collated and admitted, a Committee of Creditors (CoC) is constituted comprising all financial creditors. The CoC's decisions are made by voting share — each creditor's voting power proportional to their admitted claim. Critically, decisions on the resolution plan require 66% approval; decisions on liquidation require 51%. The CoC effectively controls the fate of the corporate debtor during CIRP.
Operational creditors are not members of the CoC but have the right to attend CoC meetings without vote. This is a source of significant friction in practice — operational creditors with large exposures often feel marginalised by the IBC architecture, which prioritises financial creditors in the waterfall.
Resolution Plans: What Bidders and Creditors Need to Know
A Resolution Applicant submitting a plan under Section 30 must satisfy the eligibility criteria under Section 29A (excluding promoters who caused the default, wilful defaulters, and related parties). The resolution plan must provide for payment of CIRP costs in full, payment of operational creditors at least to the extent of liquidation value, and must be approved by the CoC before submission to the NCLT.
The NCLT's role in approving a resolution plan is limited — it cannot re-evaluate commercial decisions of the CoC or second-guess the terms accepted by a 66% majority of creditors. The Supreme Court has repeatedly affirmed this principle, most definitively in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019).
Liquidation: The Last Resort
If the CIRP fails to yield an approved plan within 180 days (extendable by 90 days, and further by the NCLT in special circumstances up to 330 days total), the corporate debtor is ordered into liquidation. The liquidator realises assets and distributes proceeds in the waterfall order under Section 53: CIRP costs → secured creditors → workmen dues → employee dues → unsecured financial creditors → government dues → remaining debt → shareholders.
In practice, liquidation often results in poor recovery, particularly for unsecured operational creditors and equity holders. This is precisely why creditors are incentivised to accept reasonable resolution plans rather than push to liquidation.
Section 12A: Withdrawal After Admission
A CIRP application can be withdrawn after admission with 90% CoC approval under Section 12A — a settlement mechanism inserted by amendment in 2018. This has become an important tool in practice: promoters often negotiate settlements with financial creditors to secure withdrawal, allowing the corporate debtor to exit insolvency while the promoter retains control. Such settlements must be disclosed to the NCLT.
Key Timelines at a Glance
CIRP admission: 14 days from filing (target). Moratorium: Begins on admission order. IRP appointment: Within 3 days of admission. Public announcement: Within 3 days of IRP appointment. Claims submission deadline: 14 days from public announcement. CoC constitution: Within 30 days of IRP appointment. Resolution plan submission deadline: 90 days from CIRP commencement. Total CIRP period including extensions: Maximum 330 days including litigation.
How We Can Help
Satyam Dwivedi and the team at DC Law Offices represent financial creditors, operational creditors, and resolution applicants before the NCLT Delhi and Mumbai Benches. We have successfully presented resolution plans valued at over ₹200 crore before the NCLT. For counsel on IBC proceedings, contact us directly or see our FAQ section for common questions about insolvency law.