Last reviewed: November 1, 2026
The IBC is the single most significant piece of corporate insolvency legislation in India since the Companies Act, 2013. It has transformed how a failed corporate debtor is handled: the CIRP is a 330-day resolution process (extendable by 90 days) where a resolution professional manages the corporate debtor and a prospective resolution applicant submits a resolution plan. The IBC has also created a new category of “professional” — the insolvency professional (IP) — who is a key figure in the CIRP. Bijlani & Co. represents financial creditors, operational creditors, and the corporate debtor in IBC proceedings across Delhi NCR.
The Corporate Insolvency Resolution Process (CIRP)
The CIRP is triggered by a “financial debt” of ₵1 lakh or more (Section 5 of the IBC) that is overdue. A “financial creditor” (a bank, a non-banking financial company, or a bondholder) files a “Section 7” application in the NCLT; an “operational creditor” (a supplier, a service provider, or a lessee) files a “Section 9” application. The NCLT, on receiving a valid Section 7 or Section 9 application, can “admit” the CIRP within 21 days. Once admitted, the “board of directors” is replaced by the “Resolution Professional” (RP), who takes control of the corporate debtor’s assets and operations. The “Committee of Creditors” (CoC) — the group of financial creditors who hold more than 75% of the “total financial debt” — is formed within 10 days of the admission order. The CoC has 330 days (extendable by 90 days) to approve a “Resolution Plan” from a prospective resolution applicant. If the CoC approves the plan, the NCLT sanctions it and the corporate debtor is “cured.” If the CoC does not approve a plan, the corporate debtor goes to “liquidation” under Section 33.
The Liquidation Proceedings
Liquidation is the “death” of a corporate debtor — its assets are sold and the proceeds are distributed to the creditors in a statutory waterfall. The “liquidator” is appointed by the NCLT or by the CoC. The “waterfall” under Section 53 of the IBC is: (1) the insolvency professional fee and the “insolvency resolution professional” fee; (2) the “workmen’s dues” (wages, PF, ESI); (3) the “operational creditors” (unsecured); (4) the “financial creditors” (unsecured); and (5) the “equity shareholders.” The waterfall is a strict order; a financial creditor who is “secured” (with a “secured charge” on an asset) is paid from the “proceeds of the secured asset” before the “unsecured” waterfall. The “secured” and “unsecured” distinction is the single most important factor in a liquidation claim.
The Individual Insolvency Process
Section 135 of the IBC (inserted by the 2022 amendment) provides for an “Individual/Banking Borrower Insolvency” process. A natural person who is a “debtor” (a consumer, a professional, or a small business owner) can file a “Section 135” application in the “Insolvency Tribunal” (a new, NCLT-equivalent forum for individual insolvency). The process is a “330-day” resolution or “liquidation” for the individual. The “waterfall” for an individual is: (1) the “family home” (the first ₵50 lakh of the “market value”); (2) the “essential items”; (3) the “creditors.” The individual insolvency process is still being operationalised in most NCLT benches; the first “Insolvency Tribunal” was constituted in 2023. Bijlani & Co. is monitoring the individual insolvency process as it develops.
The “Resolution Plan” and the “Fairness” Test
A “Resolution Plan” is a document submitted by a “prospective resolution applicant” (PRA) to the CoC. The CoC votes on the plan; 75% of the “total financial debt” must approve it. The “fairness” test (Section 31 of the IBC) requires the NCLT to be satisfied that: (1) the plan is “feasible”; (2) the plan is “fair” to all “stakeholder classes”; and (3) the plan does not “dilute” the rights of any “creditor class” below its “equivalent” position in a liquidation. The “equivalence” test — the test that a creditor is not worse off in a resolution than in a liquidation — is the “fairness” test in practice. A “Resolution Plan” that dilutes an “operational creditor” below its “liquidation equivalent” is a “fairness” breach and can be set aside by the NCLT.
The “Operational Creditor” Disadvantage
The IBC has a significant structural problem: an “operational creditor” (a supplier, a service provider) is structurally disadvantaged in a CIRP. The “financial creditors” (banks, NBFCs, bondholders) control the CoC; the “operational creditors” have no “vote” in the CoC. An “operational creditor” who holds a “large” unsecured claim (e.g., a supplier who is owed ₵50 crore) is in a structurally worse position than a “financial creditor” who holds a “smaller” secured claim (e.g., a bank that is owed ₵20 crore secured by a “mortgage”). The IBC (Amendment) Act, 2022 introduced a “hybrid vote” for “operational creditors” in the CoC, but the change has not fully corrected the structural disadvantage. Bijlani & Co. represents “operational creditors” in IBC proceedings and argues the “hybrid vote” in every CoC meeting.
Frequently Asked Questions
What is the difference between a CIRP and a liquidation?
A CIRP is a “resolution” process — the corporate debtor is kept alive and a “Resolution Plan” is implemented. A liquidation is a “death” process — the corporate debtor is dissolved and its assets are sold. The CIRP is the “primary” process; liquidation is the “fallback” if the CoC does not approve a Resolution Plan within 330 days (extendable by 90 days). A corporate debtor that has completed a CIRP and has a sanctioned Resolution Plan is “cured”; a corporate debtor that has gone to liquidation is “dead.”
Can an operational creditor file a CIRP application?
Yes. An “operational creditor” can file a “Section 9” application in the NCLT if the “financial debt” is “overdue” and the “operational debt” is “due.” The NCLT can admit the CIRP on the “operational creditor’s” application. However, the “operational creditor” has no “vote” in the CoC — the “financial creditors” control the CoC. The “hybrid vote” (2022 amendment) gives an “operational creditor” a “vote” in the CoC, but the “financial creditors” still hold the “majority.” An “operational creditor” should file a “Section 9” application early; the “hybrid vote” gives them a “say” in the CoC.
What is the “waterfall” in a liquidation?
The “waterfall” under Section 53 of the IBC is the order in which creditors are paid from the “liquidation proceeds.” The order is: (1) the “insolvency professional fee”; (2) the “workmen’s dues”; (3) the “operational creditors” (unsecured); (4) the “financial creditors” (unsecured); and (5) the “equity shareholders.” A “secured” creditor is paid from the “proceeds of the secured asset” before the “unsecured” waterfall. The “waterfall” is a strict order; a “creditor” cannot “jump” a “waterfall tier.”
How long does a CIRP take?
The “statutory” maximum is 330 days (extendable by 90 days = 420 days total). In practice, most CIRPs in the Delhi NCLT bench are completed in 24-36 months, including the “pre-CIRP” period. The “NCLT” must order a “liquidation” if the CoC does not approve a “Resolution Plan” within 330 days. A “CIRP” that is extended to 420 days is a “last-chance” extension; if a “Resolution Plan” is not approved by 420 days, the corporate debtor “must” go to “liquidation.”
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Areas We Serve in Delhi
Bijlani & Co. serves clients across Delhi, including the following localities and sectors:
- Connaught Place
- Punjab Bagh
- Karol Bagh
- Daryaganj
- New Delhi
- Lajpat Nagar
- Rajouri Garden
- Rohini
- Dwarka
- Saket
- Vasant Kunj
- Greater Kailash
- Hauz Khas
- Chanakyapuri
- Majlis Park
- Nehru Place
