I02 — CIRP Basics

I02 CIRP Basics decoded in simple Finin2min style.

I02 — CIRP Basics

Default, application, moratorium, IRP/RP, claims, CoC and resolution plan

1. Legal provision map

This page maps the core Act/Code/regulation theme for CIRP Basics. It should be read with the latest official rules, circulars, master directions and amendments listed in the source note.

2. Simple explanation

CIRP runs as a sequence, not a single event: a default triggers an application to the NCLT (by a financial creditor under Section 7, an operational creditor under Section 9, or the corporate debtor itself under Section 10); on admission, a moratorium under Section 14 freezes all recovery actions, suits and asset transfers against the corporate debtor; an IRP takes over management within that moratorium and invites claims from all creditors; once the CoC confirms the IRP (or appoints a different Resolution Professional), that RP runs the resolution-plan process; and the process ends either in an approved resolution plan or, failing that, in liquidation.

3. Rule/circular overlay

Rules, regulations, notifications, master circulars and FAQs convert the main statute into operational compliance. The upload workflow should refresh this page whenever the regulator releases a new amendment, circular or format.

4. Practical examples

Example: Once an admission order is passed and the Section 14 moratorium kicks in, a supplier who was mid-litigation to recover dues from the corporate debtor must stop that suit and instead file a claim with the IRP/RP within the process itself — continuing the original suit after the moratorium starts is not a valid parallel route to recovery.

5. Exceptions and risk flags

Do not apply central guidance without checking entity/category/state-specific applicability.
Check effective dates and transition provisions.
Maintain evidence trail: board notes, HR/payroll records, KYC files, exchange filings, claim documents or legal notices as applicable.

6. Q&A and exam points

Question	Finin2min answer
What is the first step?	Identify applicability and legal source hierarchy.
What is the common mistake?	Using a summary without checking the latest official text and specific facts.
What should students remember?	Definition + threshold + timeline + authority + consequence.

7. Finin2min cheat sheet

I02 memory line: CIRP Basics is best understood through four lenses — who is covered, what obligation applies, by when, and what evidence proves compliance.

8. The 180/270/330-day timeline, and why 330 is not an absolute deadline

Section 12 gives CIRP a base period of 180 days from admission, extendable once by up to 90 days (making 270 days) on the CoC's request and the NCLT's approval. The Insolvency and Bankruptcy Code (Amendment) Act, 2019 added a proviso capping the process, including any time spent in litigation connected to it, at an overall 330 days. In Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, the Supreme Court held that while 270 days remains the core statutory timeline, the 330-day figure operates as a directory outer limit rather than an absolute, mandatory one — the NCLT retains limited discretion to permit a short overrun in exceptional cases, rather than every process beyond day 330 becoming automatically void. This distinction matters for a creditor tracking a live case: exceeding 330 days is a serious red flag calling for scrutiny of the delay's cause, but it is not, by itself, conclusive proof the process has become legally invalid.

9. Section 29A — not everyone can submit a resolution plan

Section 29A bars specific categories of person from submitting a resolution plan at all, most importantly a wilful defaulter (as classified under RBI guidelines) and any "connected person" acting individually or jointly with an ineligible person — a term drafted deliberately widely to catch promoters, directors, relatives and related entities, not just the corporate debtor itself. The Supreme Court explained the purpose plainly in Arun Kumar Jagatramka v. Jindal Steel and Power Ltd.: a person who contributed to the company's insolvency should not be permitted to buy it back cheaply through the very process meant to resolve that insolvency. Practically, this means a CoC evaluating a resolution plan must verify the applicant's Section 29A eligibility before the plan is even considered on its commercial merits — an otherwise excellent plan from an ineligible applicant cannot be approved.

10. What the RP is investigating in the background — avoidance transactions

Alongside running the resolution process, the RP has an independent duty under Section 25(2)(j) to examine the corporate debtor's pre-insolvency transactions for four categories of "PUFE" transaction and apply to the NCLT to have them reversed: preferential transactions (Section 43 — payments or transfers that unfairly favoured one creditor over others, looked back 2 years for a related party or 1 year for anyone else, both counted from the insolvency commencement date), undervalued transactions (Section 45 — assets transferred for materially less than their worth), extortionate credit transactions (Section 50 — credit extended on terms that were exorbitant given the risk), and fraudulent or wrongful trading (Section 66 — business carried on with intent to defraud creditors, or continued despite no reasonable prospect of avoiding insolvency). A successful avoidance application returns value to the estate for distribution — which is exactly why a creditor's own recovery can depend on transactions that happened well before the CIRP itself began, not just on the resolution plan's headline number.