Insolvency and Bankruptcy Code, 2016: formula sheet

Key formulas

Extent of the Code (Section 1)

Extends to the whole of India

The proviso that excluded Jammu and Kashmir was omitted by the 2020 adaptation orders.

Commencement (Section 1)

Comes into force on a date notified by the Central Government; different dates for different provisions

Provisions were brought in phases from 5 August 2016.

Liquidation value (IBBI Regulation 2(1)(k))

Estimated realisable value of assets if the corporate debtor were liquidated on the insolvency commencement date

Compare with fair value, which assumes an exchange between a willing buyer and seller.

Fair value (IBBI Regulation 2(1)(hb))

Estimated realisable value of the corporate debtor or its assets in an arm's length exchange on the insolvency commencement date

Includes tangible and intangible assets and their underlying synergies; substituted w.e.f. 25-02-2026.

Class of creditors (Regulation 2(1)(aa))

A class with at least ten financial creditors under section 21(6A)(b)

Fewer than ten does not form a class under this definition.

Applicant (Regulation 2(1)(a))

Person filing an application under section 7, 9 or 10

Section 7: financial creditor. Section 9: operational creditor. Section 10: corporate applicant.

Section 7: financial creditor

Financial creditor (alone or jointly) → application to Adjudicating Authority when default has occurred

The financial creditor must furnish record of default from an information utility or other specified evidence, and the name of the proposed interim resolution professional.

Section 7: decision timing

Within 14 days of receipt of application, the Adjudicating Authority ascertains whether default exists; then admits or rejects under Section 7(5); order communicated within 7 days of admission or rejection

Section 7(4) gives 14 days to ascertain the existence of default. If the Adjudicating Authority has not ascertained default and also passed an order under Section 7(5) within that time, it must record its reasons in writing.

Section 7: special classes

Joint application by not less than 100 creditors of the same class or 10% of such creditors in the class, whichever is less

The same test applies to allottees under the same real estate project. It applies to classes covered by Section 21(6A)(a) and (b).

Section 9: operational creditor

Demand notice or invoice → wait 10 days from delivery → if no payment and no notice of dispute → apply

The operational creditor must file an affidavit that no notice of dispute has been given by the corporate debtor.

Section 9: admission and rejection

Admit if application complete, no payment, notice delivered, no dispute, no disciplinary proceeding pending; otherwise reject

Under Section 9(5) the order must be passed within 14 days of receipt of the application. Before rejecting for incompleteness, give 7 days to rectify.

Section 10: corporate applicant

Corporate debtor has committed default → corporate applicant files; admit or reject by order within 14 days of receipt (Section 10(4))

Must furnish books of account, proposed IRP and a special resolution of shareholders (or resolution of at least three-fourths of partners) approving the filing. Before rejecting, the Adjudicating Authority must give 7 days' notice to rectify.

Commencement

CIRP commences from date of admission of application

Sections 7(6), 9(6) and 10(5).

Submission of plan (section 30(1))

Resolution applicant → RP, with affidavit of eligibility under section 29A

The plan is prepared on the basis of the information memorandum.

CoC approval threshold (section 30(4))

Approval needs ≥ 66% of voting share of the financial creditors

It was 75% earlier and is now 66%. Operational creditors do not vote as a rule. The CoC must consider feasibility, viability and the manner of distribution.

Section 30(2) checks by RP

(a) CIRP costs paid in priority; (b) operational creditors and dissenting financial creditors paid at least the floor; (c) management after approval; (d) implementation and supervision; (e) no contravention of law; (f) other Board requirements

Only plans that confirm to these conditions go to the CoC under section 30(3).

Floor for operational creditors (section 30(2)(b))

Payment ≥ higher of (i) liquidation value under section 53, or (ii) amount if the plan's distributable amount were paid per section 53(1) priority

Distribution must be fair and equitable (Explanation 1).

Floor for dissenting financial creditors

Payment ≥ amount they would get under section 53(1) in liquidation

This applies to financial creditors who do not vote in favour of the plan.

Pre-packaged route (section 54K)

Base plan submitted within 2 days of pre-packaged insolvency commencement date; CoC approval by ≥ 66% of voting shares

The CoC may approve the base plan only if it does not impair operational creditors' claims. Sections 30(1), (2) and (5) apply mutatis mutandis.

Section 53(1) order of priority

(a) IRP costs and liquidation costs → (b) workmen's dues (24 months) = secured creditor who relinquished security → (c) employees' wages and dues other than workmen (12 months) → (d) financial debts of unsecured creditors → (e) Government dues (2 years) = secured creditor's unpaid balance after enforcement → (f) remaining debts and dues → (g) preference shareholders → (h) equity shareholders or partners

Items joined by '=' rank equally. Learn it as a ladder with eight rungs, a to h.

Equal-ranking shortfall rule

Payment to a creditor in a class = Available funds for the class × (Creditor's claim ÷ Total claims of the class)

Applies when proceeds are insufficient within a class that ranks equally (Explanation to Section 53).

Liquidator's fee

Fee is deducted proportionately from the proceeds payable to each class of recipients, before distribution to that class

Section 53(3). The insolvency professional charges the fee in such proportion to the value of the liquidation estate assets as the Board specifies (Section 34(8)). The fee is paid from the proceeds of the liquidation estate under Section 53 (Section 34(9)).

Look-back periods in Section 53

Workmen's dues: 24 months before liquidation commencement date; other employees: 12 months; Government dues: 2 years

All are counted back from the liquidation commencement date.

Who becomes liquidator

Resolution professional acts as liquidator unless replaced by the Adjudicating Authority

Section 34(1) and (4). If replaced, the Board proposes another name within ten days of the direction (Section 34(6)).

Undervalued transaction (Section 45(2))

Gift, OR transfer of assets for consideration significantly less than value given by the debtor; AND not in ordinary course of business

Both limbs (gift or low-value transfer) must also pass the ordinary-course exclusion. Applies in the relevant period under Section 46.

Who applies (Section 45(1))

Liquidator or resolution professional → application to Adjudicating Authority → transaction declared void and effect reversed

The professional applies only after examining the debtor's transactions and determining that undervalued transactions occurred in the relevant period.

Extortionate credit (Section 50)

Debt received within 2 years before insolvency commencement date + exorbitant payments required

Financial-services debt compliant with law in force is never extortionate.

Fraudulent trading (Section 66(1))

Business carried on with intent to defraud creditors or for any fraudulent purpose → persons knowingly parties may be ordered to contribute

Applies during CIRP or liquidation; application is by the resolution professional.

Wrongful trading (Section 66(2))

Director/partner knew or ought to have known no reasonable prospect of avoiding CIRP + no due diligence to minimise creditor loss → contribution

Application by the resolution professional during CIRP. Due diligence is judged by what is reasonably expected of a person in the same functions.

Record retention (IRP Regulations, reg. 39A(3))

Electronic copy of records: minimum 8 years; physical copy: minimum 3 years, from completion of CIRP or conclusion of related proceedings, whichever is later

Records on preferential, undervalued, extortionate and fraudulent or wrongful trading transactions are specifically listed for preservation. Note that the text supplied also contains a different version of regulation 39A; check the latest text before the exam.

Fast track CIRP period

90 days from the insolvency commencement date (Section 56(1))

The clock runs from the insolvency commencement date.

Fast track extension

CoC resolution with 75% of voting share → RP applies → Adjudicating Authority may extend by not more than 45 days; only once (Section 56)

The extension is by the Adjudicating Authority, not the CoC. Total maximum is 90 + 45 = 135 days.

Fast track eligibility (Section 55(2))

Notified: (a) assets and income below a level; (b) class of creditors or amount of debt; (c) other category of corporate persons

Thresholds are notified by the Central Government. The Code gives no figures.

Fast track application (Section 57)

Filed by creditor or corporate debtor, with proof of default (information utility or other specified means) and eligibility information

Both parties can file.

PPIRP eligibility: MSME route

Corporate debtor classified as micro, small or medium enterprise under Section 7(1) of MSME Act, 2006 (Section 54A(1))

The default-based route in Section 54A(2) applies without prejudice to this.

PPIRP conditions (Section 54A(2))

No PPIRP or completed CIRP in preceding 3 years; not under CIRP; no liquidation order under Section 33; eligible under Section 29A

Also needed: creditor approval of the IP and director and member approvals.

PPIRP approvals

Unrelated financial creditors holding at least 66% in value approve the IP proposal and the filing; members pass a special resolution (or at least 3/4 of partners pass a resolution)

Related parties are excluded from the creditor vote. Majority of directors or partners give a declaration.

Declaration by directors

File within a definite period not exceeding 90 days; not to defraud; name of proposed IP

Made by a majority of directors or partners.

Admission of PPIRP application (Section 54C)

Adjudicating Authority decides within 14 days: admit if complete, reject if incomplete; notice gives 7 days to rectify before rejection

PPIRP commences on the date of admission.

Termination of PPIRP (Section 54N)

Adjudicating Authority orders termination within 30 days of the RP's application; CoC decision to terminate needs at least 66% of voting shares

The corporate debtor bears the PPIRP costs on termination.

Penalty for fraudulent management (Section 67A)

Not less than ₹1,00,000 and up to ₹1,00,00,000

Applies to an officer managing affairs with intent to defraud creditors or for a fraudulent purpose, on and after the PPIRP commencement date, on the RP's application.

Application of Part III (Section 78)

Default ≥ ₹1,000; Central Government may notify a higher minimum, not more than ₹1,00,000

Applies to fresh start, insolvency and bankruptcy of individuals and partnership firms.

Fresh start eligibility: money limits (Section 80(2))

Gross annual income ≤ ₹60,000; total assets ≤ ₹20,000; qualifying debts ≤ ₹35,000

All limits are 'does not exceed'. All conditions must be met together.

Fresh start eligibility: other conditions (Section 80(2))

Not an undischarged bankrupt; owns no dwelling unit (even if encumbered); no fresh start, insolvency resolution or bankruptcy process subsisting; no fresh start order in the preceding 12 months

Application may be made personally or through a resolution professional.

Qualifying debt (Section 79(19))

Liquidated sum due, excluding (a) excluded debt, (b) debt to the extent secured, (c) debt incurred within 3 months before the fresh start application

Excluded debt: court or tribunal fines, damages for negligence, nuisance or breach of obligation, maintenance, student loans, and other prescribed debts.

Immediate family (Section 79(17))

Spouse + dependent children + dependent parents

Used in the definitions of associate and excluded assets.

Excluded assets (Section 79(14))

Unencumbered: tools, books, vehicles and equipment needed for work; basic furniture and household items; prescribed religious ornaments; life insurance or pension plan; single dwelling unit of prescribed value

The word unencumbered matters for each item.

Adjudicating Authority

Individuals and firms: DRT (Section 179). Corporate persons and personal guarantors of corporate debtors: NCLT (Section 60)

Section 179 is subject to Section 60.

Board's functions

Section 196(1): register, regulate, specify standards, inspect, monitor, redress grievances, make regulations

The Board acts subject to the general direction of the Central Government.

Civil court powers of the Board

Section 196(3): discovery and production of documents; summoning and examination on oath; inspection of books; commissions

Four matters only. These are powers of a civil court trying a suit under the Code of Civil Procedure, 1908.

Registration of IPA

Section 199: no IPA business or enrolment of professionals without a certificate of registration from the Board

Section 200 lists the principles the Board must have regard to while registering.

Functions of an IPA

Section 204: grant membership, set conduct standards, monitor, safeguard, suspend or cancel membership, redress grievances, publish information

Membership requirements come from the IPA's bye-laws.

Complaint, investigation, show cause

Section 217 (complaint) → Section 218 (investigation) → Section 219 (show cause notice)

Section 218 can also start on the Board's own reasonable grounds, without a complaint.

Investigating authority

Section 218: written order; may require documents from others with detailed reasons; may enter, seize, take copies; keep seized records only as long as needed; detailed report to the Board

Seizure is subject to Section 100 of the Code of Criminal Procedure, 1973, insofar as applicable.

Appeal to Supreme Court (NCLAT order)

Section 62: question of law; within 45 days from the date of receipt of order; further period up to 15 days for sufficient cause

Section 182 covers an order of the Debt Recovery Appellate Tribunal: appeal on a question of law within 45 days before the Supreme Court, with a further period up to 15 days for sufficient cause. Unlike Section 62, it does not say the 45 days run from receipt of the order.

Quick revision

• The Code gives one time-bound framework for insolvency of companies, individuals and partnership firms.
• CIRP is led by a resolution professional, and key decisions are taken by the committee of creditors.
• Liquidation follows when no resolution plan is approved, and assets are distributed in the statutory order.
• Fast track CIRP applies to corporate debtors in classes notified by the Central Government.
• Fast track CIRP must finish within ninety days from the insolvency commencement date.
• A fast track extension needs a committee resolution backed by 75% of the voting share.
• A fast track extension cannot exceed forty-five days and cannot be granted more than once.
• In a pre-pack, the committee of creditors can vote to terminate with not less than 66% of the voting shares.
• The adjudicating authority must pass the termination order within thirty days of the application in the listed pre-pack cases.
• On pre-pack termination under that route, the corporate debtor bears the pre-pack process costs, if any.
• The committee can resolve by not less than 66% of voting shares to move a pre-pack into regular CIRP, if the debtor is eligible.
• A fast track application must come with proof of default, such as records from an information utility.

Common mistakes

• Treating every supplier as a financial creditor because money is owed. Fix: Ask what created the debt. Goods or services supplied gives an operational creditor.
• Saying the Code came into force on one date for all provisions. Fix: State that the Central Government notified dates, and different provisions can have different dates.
• Saying CIRP starts when the application is filed. Fix: Remember the sections say CIRP commences from the date of admission by the Adjudicating Authority.
• Mixing up the 10-day period in Section 9 with the 14-day period for the order. Fix: 10 days is the wait after the demand notice or invoice is delivered. 14 days is the time for the Adjudicating Authority to decide after receiving the application.
• Stating the approval threshold as 75%. Fix: Write 66% of voting share of financial creditors, as in section 30(4) as amended.
• Saying the RP approves the plan. Fix: The RP only examines compliance and presents plans. The CoC approves. The Adjudicating Authority then considers the approved plan.
• Paying unsecured financial creditors before workmen's dues. Fix: Remember workmen's dues (24 months) are at rung (b), above unsecured financial debts at rung (d).
• Treating Government dues as ranking above unsecured financial creditors. Fix: Under Section 53, Government dues sit at rung (e), below financial debts owed to unsecured creditors at (d).
• Treating every below-market sale as undervalued. Fix: Always test whether the deal took place in the ordinary course of business. If it did, Section 45 does not apply.
• Applying the two-year period to undervalued transactions. Fix: Section 45 refers to the relevant period under Section 46. Do not state a period for it unless you are sure of it. Two years is stated in Section 50 for extortionate credit.

Exam tips

• Learn the definitions nearly word for word. MCQs often change a single phrase such as without compulsion or on the insolvency commencement date.
• For case-based MCQs, classify the debt first, then pick the section and authority.
• Remember the fair value definition changed on 25 February 2026. Use the current wording.
• Write authority functions in one line each so you can answer match-the-following questions fast.
• Cite section numbers only where sure: sections 7, 9, 10 and 21 are safe from the text of the regulations.
• Learn the 7/9/10 comparison in a grid. Questions often ask who can apply, what proof they must give and what ends in rejection.
• In MCQs, watch the numbers: 10 days (Section 9 wait), 14 days (decision), 7 days (rectification and communication of order).
• In case questions, name the creditor type first. The section follows from that.