Recovering money under Insolvency and Bankruptcy Code

Recovery Proceeding can be started against Debtor/ Corporate Debtor in the event of default by the debtor. Debtor can be Company Only. To initiate this procedure one can approach the National Company Law Tribunal which exercises the power to dispose cases under Insolvency Code.

Who can initiate the Recovery Procedure?

• A Financial Creditor (means any person to whom a financial debt (Loan) is owed)

• An Operational Creditor (means a person to whom an operational debt is owed)

 
How this code is helpful for Recovery of Debt by following Creditors:

Supplier of Goods/ Services: Under the Act, any person has supplied Goods or rendered services to any Corporate Debtor; and such corporate debtor make default as non-payment of debt or any part of debt, non-payment of installments due, then creditor can initiate the action against the corporate debtor by filing of petition in NCLT.

Time Period of Recovery: Creditor will issue demand notice to the debtor, if creditor doesn’t receive payment due within 10 days, then it can file application in NCLT for initiating the recovery (Corporate insolvency resolution) process. The NCLT within 14 days of application either accept the application or reject the application.

Therefore, under this new code, within 24 days from the date of issue of demand notice, petition filled by creditor either accept or reject by NCLT. The unified regime envisages a structured and time-bound process for insolvency.

Employee and workmen dues: Under the Code, employees and workmen are also considered as part of operational creditor. If a Company fails to make salaries payment of employees or workmen and the value of payment is more than Rs. 1 lac then employees can file the application against the Company with NCLT for initiation of process of Recovery.

Process, time, cost of the application by the employees and workmen are same as filing of application by creditor of supply of goods/services.

As a result, this act gives a great opportunity to employees/ workmen of the Companies to file applications for recovery of their dues.

Debtor of Loan: Under the Code, if any person has rendered money (Loan) to any Corporate Debtor; and such corporate debtor makes default as non-payment of debt, interest or any part of debt, non-payment of installments due then lender can initiate the action against the corporate debtor by filing of petition in NCLT.

Time Period of Recovery: Financial Creditor can file application in NCLT for initiating the recovery (Corporate Insolvency Resolution) process. The NCLT, within 14 days of application either accept the application or reject the application.

Therefore, under this new code within 14 days from the date of filing of petition the NCLT either accept or reject the application. However, this code gives a chance to the financial creditor to recover his debt.