Yes, a debtor can file for bankruptcy and insolvency voluntarily in many jurisdictions, including India. Voluntary initiation of insolvency proceedings by the debtor is often referred to as a "voluntary bankruptcy" or "voluntary insolvency." In this scenario, the debtor recognizes its financial distress and chooses to initiate the bankruptcy or insolvency process on its own accord. Here's how it typically works: Eligibility: The debtor must meet the eligibility criteria defined by the relevant insolvency laws. In India, for example, a corporate debtor (a company) or an individual (in cases of personal insolvency) can initiate voluntary insolvency proceedings if they meet the eligibility requirements under the Insolvency and Bankruptcy Code, 2016. Application to the Adjudicating Authority: In India, the debtor, or its authorized representative, can file an application with the National Company Law Tribunal (NCLT) for initiating the insolvency process. The application must provide details of the financial situation, debts owed, and the reasons for seeking insolvency. Moratorium: Once the application is accepted by the NCLT, a moratorium period typically comes into effect. During this period, creditors are prevented from initiating or continuing legal actions, including debt recovery efforts, against the debtor. Appointment of Insolvency Professional: An insolvency professional (IP) or resolution professional (RP) is appointed to manage the debtor's affairs during the insolvency process. The IP/RP takes control of the debtor's assets and operations. Resolution Process or Liquidation: Depending on the circumstances and the debtor's viability, the insolvency process may lead to the formulation of a resolution plan if the debtor intends to continue operating and restructuring its debts. If a resolution plan is not feasible, the process may result in the liquidation of the debtor's assets to repay creditors. Creditor Claims: Creditors are required to submit their claims to the IP/RP for verification. The distribution of assets to creditors is typically carried out in accordance with the priority set by the insolvency laws. Monitoring by the NCLT: The NCLT oversees the insolvency process, including the approval of any resolution plans and the distribution of assets to creditors. Voluntary bankruptcy or insolvency allows debtors to take control of their financial distress and work toward a resolution that may involve restructuring and debt repayment, rather than waiting for creditors to initiate involuntary proceedings. It can also provide a structured and legal framework for dealing with financial difficulties while protecting the interests of both debtors and creditors. However, the specific procedures and requirements may vary from one jurisdiction to another, so it's essential to consult with legal professionals well-versed in the relevant insolvency laws.

Dear client, The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “The Code”), was implemented to mend the broken and unstable system of insolvency. The Code has been corroborated in a manner where it assimilates all aspects of an insolvent or bankrupt company or corporate debtor. The ideology behind framing a law dedicated specifically to this subject was to safeguard the operations of the corporate debtor. The Supreme Court in the landmark judgment of Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors. has defined the primary objective of the Code. It states that the fundamental focus of The Code is to ensure the revival of the corporate debtor. The revival is against the management that led it to defaulted payments and to also safeguard it from corporate death. However, liquidation is the only viable option when all other alternatives exhaust. The Code also provides for the corporate debtor to file an application for insolvency before the adjudicating authority, against itself. The insolvency system requires the parties involved i.e. the Committee of Creditors, to prepare a resolution plan. This is done to rectify the corporate debtor’s consequences for the act of insolvency and to also keep its operations as a going concern. However, not every insolvency proceeding concludes with a successful resolution plan. The Code lays down alternative provisions in the event a resolution plan is not implemented,. When this happens, the adjudicating authority orders to initiate a liquidation proceeding against the corporate debtor. Liquidation of the corporate debtor is the absolute last resort that the adjudicating authority and the Resolution Professional (RP) intend to reach. The fundamental ideology behind such an extensive mechanism is to prevent the corporate debtor from liquidating. However, in certain unavoidable circumstances, to recover the defaulted payment, liquidation has to be initiated. This article will discuss the major aspects leading up to liquidation of a corporate debtor by the adjudicating authority. As mentioned above, the adjudicating authority passes an order for liquidation when all other options have exhausted. In the case of Innoventive Industries v. ICICI Bank Ltd, the Supreme Court ruled that as soon as the liquidation order comes into effect, the moratorium period will end. The following describe the cases in which the adjudicating authority can pass liquidation orders; Resolution plan not submitted in designated time The Corporate Insolvency Resolution Process (CIRP) has a meticulous timeframe in effect of The Code. As per the Code and subsequent amendments, CIRP has to be concluded within 330 days of commencement of insolvency date. The adjudicating authority has the discretionary power to extend the moratorium period of 180 days by 90 days only under special circumstances. Committee of Creditors (COC) has to approve a resolution plan during the moratorium period. Once the COC approves the plan with a minimum majority of sixty-six per cent, it presents the same before the adjudicating authority u/s 30(6). However, if the COC does not submit the plan to the adjudicating authority in the due course, then the court can pass an order for liquidation. Adjudicating authority rejects the resolution plan An approved resolution plan submitted to the adjudicating authority within the required time frame can still anticipate a liquidation order. Section 30(2) of The Code lays down the essential requirements that a resolution plan must comprise. The resolution plan submitted must have a provision that complies with the requirements of section 30(2). On submission, the adjudicating authority assesses the merits of the plan. If it finds that the resolution plan meets the requirements, then it passes an order to execute the resolution plan. However, if it finds that the plan does not meet with the requirements, then it rejects the plan and consequently, pass an order for liquidation. COC does not approve a resolution plan As discussed above, the COC has to approve a resolution plan proposed by bidders, with a majority of minimum sixty-six per cent. However, there is a possibility that the COC does not come to a consensus or reach a majority of sixty-six per cent. However, there could be a scenario, where the COC holds a vote in favour of liquidation of the corporate debtor. In this case, as well, the approval rate must be at a minimum of sixty-six per cent. If the COC approves the vote for liquidation with the said approval rate, then the RP has the authority, to intimate the adjudicating authority of the same. The adjudicating authority can pass an order for liquidation. Violation of resolution plan Once the resolution plan approved by the COC and the adjudicating authority, the RP has to ensure its implementation. All parties and stakeholders involved have to respect the order passed by the adjudicating authority. However, if the corporate debtor acts in a manner which infringes the norms of the resolution plan, then this can be contested. Any stakeholder, whose right stands violated as a consequence of this infringement, can make an application to the adjudicating authority for liquidation of the corporate debtor. On receiving the application, the adjudicating authority examines the same. Court can pass a liquidation order, if the corporate debtor stands in violation of the resolution plan. Since the implementation of The Code, the courts have adjudicated several cases. The purpose has been to bring some clarity on concerned provisions. As a result of the same, liquidation under The Code has also been challenged in numerous cases. The court has successfully set precedents that have to be complied with for future references. However, the area still remains to be a subject of discussion amid the legal community and the stakeholders. Should you have any queries, please feel free to contact us!