What is Fast Track Corporate Insolvency Resolution Process ?
Fast track corporate insolvency resolution process
The aim of the Insolvency and Bankruptcy code is to give speedy conclusions for person seeking faster relief. The person who wants fast relief will have the responsibility to start the process and also prove if the case is fit for fast track process. Therefore, whosoever fills the application for fast track process under Chapter IV (Section 55) of the Insolvency and Bankruptcy Code 2016 have to make application with proof of default such as by records available with an information utility or such other means as may be specified by the Board.
It provides a fast track insolvency resolution process to corporate debtors( qualification to be notified by the Government). The process completed in 90 days(extendable by maximum 45 days). The fast track process also complies with the provisions of insolvency process. This is very important for start-ups and small and also medium enterprises for completing the resolution process quickly.
To whom fast track process applicable?
Ministry of corporate notified the following categories:
1. A small company under clause 85 section 2 of Companies Act 2013,
small company means
- the paid up share capital should not be more than 50 lakh rupees or such amount prescribed which should not exceed 5 crore;
- turnover of the company should not be more than 2 crore or such amount prescribed which should not exceed 20 crore;
- Except a holding and also subsidiary company or Company governed under section 8 and under any special Act.
2. A start-up (except partnership firm)
- company incorporated as private company ( under The Companies Act 2013) or registered as partnership (under section 59 of The Partnership Act 1932) or also registered as Limited Liability Partnership ( Under Limited liability partnership Act 2008)
- It will be start-up up to seven years from the date of incorporation or registration or up to 10 years in case of biotechnology start-up
- if the turnover has not exceeded 25 crore for any financial year from its incorporation or registration
- if it is working for innovation, development, or improvement of product or process or service
3. An unlisted company with total assets not exceeding 1 crore as mentioned in the financial statement of immediately preceding financial year
How much time is required for completion of process?
It starts with checking the eligibility of corporate debtor to opt fast track and ends with approval for resolution plan by Adjudicating officer. Process completion with in 90 days ( for other cases it is 180 days) . Further also extension of 45 days can also be give if adjudicating authority think fit.
Can Fast track process converted into corporate insolvency resolution process?
Yes , it can be converted into normal corporate insolvency resolution process if the corporate debtor is not eligible. The interim resolution process is of opinion that the corporate debtor is not eligible for fast track process . He have to file an application before expiry of 21 days from the date of his appointment.
Adjudication, Offences and Penalties
Appeals against order of National Company Law Tribunal can be filed with National Company Law Appellant Tribunal and then if still aggrieved before Supreme Court.
Penalties for :-
- Concealment of property.
- Undertaking transactions through defrauding Creditors.
- Misconduct while conducting corporate resolution process.
- Falsification of books of corporate debtor.
- False representation to Creditors.
- Contravention of resolution plan.
- Non disclosure of dispute or repayment of debt by operational creditor.
- Imprisonment 1 to 5 years and also Monetary Penalty – Rs. 1 lakh to Rs. 10 lakhs
- For Insolvency Professional – Imprisonment up to 6 months and also Monetary Penalty range Rs. 1 lakh to Rs. 5 lakhs