Corporate debtor is someone who owes a debt to any person. A corporate person is defined under section 3(7) of the Code.
Section 3(7) CORPORATE PERSON: means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider;
As per section 7 and 9 of the Code, it is not compulsory to give opportunity of being heard to the corporate debtor, before the admission of IBC application. And as per section 14, once IBC application is admitted, the management of the company goes in the hands of IRP. So even a small debt may trigger a situation where the management goes out of hands.
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Defence to be taken:
- To deny and support non-existence of default with necessary documents
- Defence can be taken by verifying the accounts and identify whether the claim is genuine.
- To check and verify the Limitation as per the cause of action and date corresponding it the same was upheld in B K Educational Services Pvt Ltd.
- The veracity of claim can be checked viz procedural means also. The Debtor has to check if any demand notice was served to him which is very essential to establish default.
- Pendency of any proceedings already pending between he creditor and the debtor
Voluntary insolvency under the Code:
If the debtor is unable to discharge its debt and liabilities and does not have enough money resources to revive the corporate debtor, one can voluntarily file the insolvency petition.
Conclusion: the basis of CIRP is built on the fact of mutual settlement between the creditor and debtor, even though on paper the Code looks harsh on the Debtor regime, the truth is that it is a debtor friendly mechanism once adduced and supported with enough evidence and documentation.
