Taking Control: Voluntary Initiation Of Corporate Insolvency

IBC was enacted to expedite insolvency proceedings and to facilitate timely and effective resolution of insolvency by involving relevant stakeholders such as creditors. Creditors, both financial (under s. 7) and operational (under s. 9), can initiate CIRP against a corporate debtor. Importantly, a company can also voluntarily initiate insolvency proceedings by approaching the NCLT under s. 10 of IBC. Additionally, IBC empowers the NCLT to initiate liquidation in cases where debt restructuring is not possible, and the liabilities of the company are overwhelming. This analysis examines the circumstances when a corporate debtor can use s. 10 of IBC, and whether the same is a desirable route for a corporate debtor with enormous debt and liability, as compared to liquidation under IBC.