Introduction

Prospect Legal is a premier legal consultancy firm specializing in insolvency and bankruptcy cases. With extensive experience in handling corporate financial distress, we provide expert legal guidance to businesses and individuals facing insolvency due to economic disruptions, including those caused by COVID-19. Our team ensures compliance with insolvency laws, helps mitigate financial risks, and navigates clients through legal remedies effectively.

Where You Can Find Remedies?

Legal remedies for insolvency-related issues can be sought through various judicial and quasi-judicial bodies, including:

• National Company Law Tribunal (NCLT) – Adjudicates insolvency matters under the Insolvency and Bankruptcy Code (IBC), 2016.
• Debt Recovery Tribunal (DRT) – Handles cases related to debt recovery for financial institutions.
• High Courts & Supreme Court – Deals with appeals and legal interpretations of insolvency laws.
• Mediation & Arbitration Forums – Alternative dispute resolution mechanisms to settle financial disputes outside court.

If you or your business is struggling with insolvency, consult Prospect Legal today for expert guidance on navigating the legal process.

Understanding the Insolvency Process

The insolvency resolution process can be categorized into:

Voluntary Process (Initiated by Companies/Individuals)

1. Filing an Insolvency Petition – The debtor voluntarily approaches NCLT due to financial incapacity.
2. Appointment of Resolution Professional (RP) – The RP takes charge of the company’s affairs.
3. Resolution Plan Formulation – Creditors approve a resolution plan to revive the business.
4. Settlement or Liquidation – If no resolution plan is approved, liquidation follows.

Compulsory Process (Court-Mandated)

1. Creditors File a Case – Financial or operational creditors initiate insolvency proceedings.
2. Debt Verification & Asset Valuation – The RP assesses the debtor’s assets and liabilities.
3. Legal Proceedings & Orders – NCLT decides on debt restructuring or liquidation.
4. Final Resolution – Either the debtor repays, restructures, or the company is liquidated.

Legal Protection Under Section 7 & 9 of the Insolvency and Bankruptcy Code (IBC), 2016

Section 7: When Can a Claim Be Filed?

Under Section 7 of the IBC, 2016, a financial creditor can initiate the corporate insolvency resolution process (CIRP) against a corporate debtor if:

• There is a default in repayment of a debt exceeding ₹1 crore (as revised post-COVID-19).
• The default pertains to a financial debt, including loans from banks, financial institutions, or bondholders.
• The application is submitted to the NCLT along with necessary proof of default and supporting documentation.

Section 9: Claims by Operational Creditors

Under Section 9 of the IBC, 2016, operational creditors (such as suppliers and service providers) can file an insolvency petition if:

• The corporate debtor has failed to make payments for goods or services rendered.
• A demand notice is served, and payment is not received within 10 days.
• The creditor provides evidence of non-payment and meets procedural requirements as per IBC norms.

Powers of the Adjudicating Authority (NCLT)

The NCLT and other adjudicating bodies have the authority to:

• Admit or reject insolvency petitions based on the validity of claims.
• Appoint an insolvency resolution professional (IRP) to oversee the resolution process.
• Facilitate debt restructuring and corporate rescue mechanisms under the CIRP.
• Order liquidation in cases of irrecoverable financial distress where resolution is not feasible.

Process of Remedy Through Prospect Legal

Prospect Legal simplifies the legal complexities of insolvency cases through a structured process:

Step 1: Initial Consultation & Risk Assessment

• Expert evaluation of financial distress and legal options.
• Risk assessment to determine the best course of action.

Step 2: Legal Documentation & Filing

• Preparation and filing of insolvency petitions with NCLT.
• Assistance with financial documentation and statutory compliance.

Step 3: Compliance & Negotiations

• Representation in insolvency proceedings.
• Negotiations with creditors, financial institutions, and stakeholders.

Step 4: Resolution & Final Actions

• Ensuring the best possible resolution through restructuring, settlement, or liquidation.
• Post-resolution legal support for compliance and financial recovery.