Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016 is focused on the initiation of the Corporate Insolvency Resolution Process (CIRP) by the corporate debtor itself. Below are the key concepts of Section 10:

1. Corporate Debtor Initiating CIRP

• Corporate Debtor: A company or a limited liability partnership (LLP) facing financial distress due to defaults in repaying its debt. Under Section 10, the corporate debtor can file for its insolvency process.
• This is a self-initiation process, which allows the corporate debtor to take proactive steps to resolve its insolvency issues, as opposed to waiting for creditors to file the application.

2. Application to the National Company Law Tribunal (NCLT)

• The corporate debtor must file a petition with the National Company Law Tribunal (NCLT) for the initiation of the Corporate Insolvency Resolution Process (CIRP).
• The NCLT has the power to either admit or reject the application based on the evidence provided by the debtor.

3. Default in Repayment of Debt

• Before initiating the CIRP under Section 10, the corporate debtor must demonstrate that there is a default in the payment of debts. The default can be in relation to the payment of financial debts such as loans, bonds, or other similar obligations.
• The default amount must meet the minimum threshold, which was ₹1 lakh under the original provisions (subject to any updates).

4. Resolution Plan

• The corporate debtor must submit relevant details regarding the resolution plan or the efforts made to come up with a feasible plan to settle debts. This could include attempts to negotiate with creditors.
• If a resolution plan is not already in place, it is still possible to proceed with the CIRP, where the resolution professional appointed by NCLT will take charge.

5. Filing of Application in the Prescribed Form

• The corporate debtor is required to file an application in the form prescribed under the Insolvency and Bankruptcy Code (IBC).
• The application must include specific information such as details about the default, the financial condition of the debtor, and other documents to establish the need for insolvency resolution.

6. Appointment of Interim Resolution Professional (IRP)

• Once the NCLT admits the application, an Interim Resolution Professional (IRP) is appointed. The IRP will temporarily take over the management of the corporate debtor’s affairs, replacing the management of the company during the insolvency proceedings.
• The IRP is responsible for taking control of the company, managing its day-to-day affairs, and ensuring that the insolvency process is followed effectively.

7. Moratorium Period

• Upon admission of the application, the NCLT will impose a moratorium. This means that for a specified period (typically 180 days, extendable), no legal action can be taken against the corporate debtor for recovery of debts, and its assets are protected from creditor claims.
• The moratorium ensures that the company can focus on the resolution process without external interference.

8. CIRP Process

• After the application is admitted and the IRP is appointed, the Corporate Insolvency Resolution Process begins.
• The IRP will invite claims from creditors, form a Committee of Creditors (CoC), and work with the creditors to formulate a resolution plan.
• The goal is to resolve the company’s financial distress by restructuring its debts or finding a suitable buyer through the resolution process.

9. Role of Creditors

• While Section 10 allows the debtor to initiate the process, the creditors still play a key role in approving the resolution plan.
• The creditors have a significant say through the Committee of Creditors (CoC), which is responsible for deciding the next course of action, including agreeing to a resolution plan or opting for liquidation if no resolution is reached.

10. Timeline and Extensions

• The CIRP must be completed within 180 days, which can be extended for another 90 days (a total of 270 days) unless the creditors agree otherwise.
• If the process fails to resolve the financial issues within this period, the company may proceed to liquidation.

Summary of Section 10:

In essence, Section 10 of the IBC enables a corporate debtor to take charge of its insolvency process by applying for CIRP in NCLT, which provides a structured path to address its financial issues, protect it from creditor action during the process, and find a resolution through collaboration with creditors.

Landmark Judgements

Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016 pertains to the initiation of the corporate insolvency resolution process (CIRP) by the corporate debtor. This provision allows a corporate debtor, facing financial distress, to apply for initiation of the CIRP before the National Company Law Tribunal (NCLT). Here are some landmark cases and judgments related to Section 10 of the IBC:

1. Innoventive Industries Ltd. v. ICICI Bank (2017)

Citation: (2017) 1 SCC 148
Summary: This landmark judgment by the Supreme Court of India clarified the applicability of the IBC and the procedure for initiating insolvency proceedings under Section 10 of the IBC. The Court upheld the constitutional validity of the IBC and emphasized that once a default is proven, the National Company Law Tribunal (NCLT) has to admit the insolvency petition, thereby initiating the CIRP. This case reinforced the debtor’s right to approach the tribunal under Section 10 for triggering the insolvency process.

2. K. Sashidhar v. Indian Overseas Bank (2019)

Citation: (2019) 12 SCC 150
Summary: In this case, the Supreme Court addressed the issue of whether a corporate debtor can file an application under Section 10 of the IBC if there is a dissenting vote from the Committee of Creditors (CoC) in the resolution plan. The Court held that even if the CoC rejects a resolution plan, the tribunal has the final authority in determining whether the CIRP should continue or be concluded. The judgment clarified that the corporate debtor’s application under Section 10 is independent of the CoC’s opinion on resolution plans.

3. Swiss Ribbons Pvt. Ltd. v. Union of India (2019)

Citation: (2019) 4 SCC 17
Summary: This judgment focused on the constitutionality of various provisions of the IBC, including Section 10. The petitioners in this case challenged the provisions of the IBC, but the Supreme Court upheld the validity of Section 10, stressing that the IBC’s objective was to balance the interests of both creditors and corporate debtors while fostering a conducive environment for resolving financial distress. This case affirmed the ability of corporate debtors to initiate the insolvency process under Section 10 without the need for a creditor’s application.

4. P. Mohanraj v. M/s. Shah Brothers Ispat Pvt. Ltd. (2021)

Citation: (2021) 6 SCC 342
Summary: This case clarified the process of applying Section 10 of the IBC. The Supreme Court in this case explained that once a debtor files for insolvency, the tribunal is obligated to admit the application if the necessary documentation is in order, and the application meets the requirements prescribed under Section 10. The judgment also laid down the necessary guidelines for ensuring that the corporate debtor’s application for CIRP is processed efficiently.

5. Jaypee Infratech Ltd. v. Axis Bank Ltd. (2019)

Citation: (2019) 8 SCC 816
Summary: The Supreme Court dealt with the issue of whether a corporate debtor could approach the NCLT under Section 10, even if there were ongoing disputes related to defaults or repayment obligations. The Court ruled that the mere existence of disputes between the debtor and the creditors does not bar the debtor from applying Section 10. This judgment affirmed the corporate debtor’s right to initiate the CIRP process without the need for a creditor to make the application.

6. State Bank of India v. Videocon Industries Ltd. (2020)

Citation: (2020) 8 SCC 785
Summary: This judgment by the Supreme Court dealt with the issue of whether the corporate debtor is entitled to file for insolvency under Section 10, even if the financial distress arises from reasons other than non-payment of debts. The Court held that the debtor’s application could be admitted if the financial distress was substantial and the corporate debtor could demonstrate that there was no other recourse available to resolve the financial stress.

7. Anuj Jain (Interim Resolution Professional of Jaypee Infratech Ltd.) v. Axis Bank Ltd. (2018)

Citation: (2018) 9 SCC 674
Summary: This case involved the interpretation of Section 10 in the context of a corporate debtor seeking the initiation of CIRP after facing financial insolvency. The Court held that once an application is filed under Section 10, the NCLT is obligated to admit it unless it is found that the debtor has not complied with the requirements set forth under the IBC. This case reinforced the procedural requirements for filing an application and the debtor’s right to access insolvency resolution.

These cases highlight the significant judicial interpretations and clarifications surrounding Section 10 of the Insolvency and Bankruptcy Code, 2016, particularly about the corporate debtor’s ability to file for insolvency and the process for initiating the Corporate Insolvency Resolution Process (CIRP).