Foundations of Insolvency and Bankruptcy in India: Key Definitions
Understanding the core definitions is crucial for navigating the Insolvency and Bankruptcy Code (IBC), 2016. This module breaks down the essential terms that form the bedrock of insolvency and bankruptcy proceedings in India.
The Corporate Debtor: The Heart of the Matter
Creditors: The Claimants in Insolvency
Creditors are individuals or entities to whom a debt is owed. The IBC categorizes creditors based on the nature of their debt, which significantly impacts their role and rights in the resolution process.
| Term | Definition | Key Characteristics |
|---|---|---|
| Financial Creditor | A person to whom a financial debt is owed. | Includes holders of financial instruments like bonds, debentures, or loans. The debt must be disbursed against consideration for the time value of money. |
| Operational Creditor | A person to whom an operational debt is owed. | Includes employees, suppliers, or service providers who have provided goods or services. The debt arises from a contract or statutory obligation. |
| Secured Creditor | A creditor in whose favour security interest is created. | Has a claim over specific assets of the debtor as collateral. Can enforce their security interest if the debt is not repaid. |
| Unsecured Creditor | A creditor who does not have any security interest. | Has a claim against the general assets of the debtor. Ranks lower than secured creditors in the repayment hierarchy. |
Understanding 'Debt' and 'Default'
The distinction between Financial and Operational Creditors is critical. Financial Creditors have a direct stake in the financial health of the company, while Operational Creditors are typically suppliers or employees whose claims arise from the day-to-day operations.
Other Key Definitions
Beyond the core terms, several other definitions are vital for a comprehensive understanding of the IBC.
The Adjudicating Authority (National Company Law Tribunal - NCLT for corporate insolvency) admits or rejects applications for initiating insolvency, supervises the resolution process, and approves resolution plans.
Summary of Key Terms
A solid grasp of these foundational definitions is essential for anyone involved in corporate insolvency and bankruptcy in India. They dictate who can initiate proceedings, who has a say in the resolution, and how the process unfolds.
Learning Resources
The official, consolidated text of the Insolvency and Bankruptcy Code, 2016, providing the definitive legal framework and definitions.
The IBBI's official glossary of terms used within the IBC, offering concise explanations of key concepts.
Provides an overview of the NCLT's role as the Adjudicating Authority for corporate insolvency, crucial for understanding the procedural context of definitions.
A practical explanation of key IBC definitions, offering insights into their application in real-world scenarios.
A video tutorial that visually explains the Corporate Insolvency Resolution Process, often touching upon the roles of different stakeholders defined in the IBC.
This article delves into the distinctions between financial and operational creditors, highlighting their rights and positions within the IBC framework.
A discussion paper detailing the responsibilities and functions of Insolvency Professionals, a key defined role within the IBC.
A detailed guide that breaks down various aspects of the IBC, including explanations of core definitions and their implications.
Provides a general overview of bankruptcy law principles, which can help contextualize the specific definitions within the Indian IBC.
This resource offers a clear and concise explanation of the most important definitions within the IBC, making it easier to grasp the foundational concepts.