IBC Section 10: Initiation of corporate insolvency resolution process by corporate applicant

Section 10 of Insolvency and Bankruptcy Code, 2016: Initiation of corporate insolvency resolution process by corporate applicant

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

(1) Where a corporate debtor has committed a default, a corporate applicant thereof may file an application for initiating corporate insolvency resolution process with the Adjudicating Authority.

(2) The application under sub-section (1) shall be filed in such form, containing such particulars and in such manner and accompanied with such fee as may be prescribed.

(3) The corporate applicant shall, along with the application, furnish-

(a) the information relating to its books of account and such other documents for such period as may be specified;

(b) the information relating to the resolution professional proposed to be appointed as an interim resolution professional; and the special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving filing of the application.

(4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the application, by an order-

(a) admit the application, if it is complete and no disciplinary proceeding is pending against the proposed resolution professional; or

(b) reject the application, if it is incomplete: or any disciplinary proceeding is pending against the proposed resolution professional:

Provided that Adjudicating Authority shall, before rejecting an application, give a notice to the applicant to rectify the defects in his application within seven days from the date of receipt of such notice from the Adjudicating Authority.

(5) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (4) of this section.

1. Subs. by Act 26 of 2018, s. 6, for "repayment" (w.e.f. 6-6-2018).

2. Subs. by s. 7, ibid., for sub-section (3) (w.e.f. 6-6-2018). 25 (c)

Legal Commentary & Landmark Judgments: Section 10

Section 10 provides a statutory avenue for a corporate debtor that has suffered default to voluntarily initiate the Corporate Insolvency Resolution Process against itself before the NCLT.

Core Legal Standard: A corporate applicant—comprising the corporate debtor, designated partner, director, or authorized manager—may file for voluntary CIRP upon the occurrence of a default.
Operational Mechanism: The applicant must submit its books of accounts, financial statements, and proposed Interim Resolution Professional.
Evidentiary Proof & Admissibility: The 2018 amendment requires that the filing must be approved by a special resolution passed by at least 75% of the shareholders or partners of the corporate entity.

The Adjudicating Authority must admit the application within 14 days if complete and default is admitted, provided the debtor is not disqualified under Section 11.

Key Landmark Precedents:

Leo Duct Engineers & Consultants Ltd. (2018) NCLAT: Held that the Adjudicating Authority is bound to admit an application under Section 10 if statutory criteria are satisfied, and cannot reject it on extraneous subjective considerations unless fraudulent or malicious initiation under Section 65 is established.
Alchemist Asset Reconstruction Co. Ltd. v. Hotel Gaudavan Pvt. Ltd. (2018) 16 SCC 94: Recognized that Section 10 voluntary CIRP enables financially distressed companies to seek the statutory umbrella of moratorium to protect enterprise value and achieve debt restructuring.

Legal Commentary:

Section 10 represents the Indian counterpart to voluntary Chapter 11 reorganization filings. While designed as a bona fide corporate rescue mechanism, judicial vigilance under Section 65 remains paramount to prevent recalcitrant promoters from utilizing voluntary CIRP merely to thwart SARFAESI or execution proceedings.