Can a company initiate bankruptcy & insolvency proceedings against another company?

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Answer By law4u team

Yes, a company can initiate bankruptcy/insolvency proceedings against another company under the Insolvency and Bankruptcy Code (IBC). The IBC allows any operational creditor or financial creditor to file an application for initiating the Corporate Insolvency Resolution Process (CIRP) against a corporate debtor (company) if the debt owed by the debtor is in default. An operational creditor is any person to whom an operational debt is owed, while a financial creditor is any person to whom a financial debt is owed. Both types of creditors have the right to initiate CIRP against a corporate debtor if the default amount is above a certain threshold limit. To initiate CIRP, the creditor must file an application before the National Company Law Tribunal (NCLT) along with the necessary supporting documents. If the NCLT is satisfied that there is a default and that the application is complete and in order, it will admit the application and initiate the CIRP process. During the CIRP process, a resolution professional is appointed to take control of the affairs of the corporate debtor and prepare a resolution plan to revive the company. If a resolution plan is not feasible, the company may be liquidated. It is important to note that the initiation of bankruptcy/insolvency proceedings by one company against another company is a serious matter, and can have significant consequences for both parties. Therefore, it is advisable to seek legal advice before initiating or responding to such proceedings.

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