Insolvency Act, 2006

Chapter 2

Insolvency Proceedings

3. Insolvency Proceedings Not to Be Initiated Without Court Order: No person shall initiate insolvency proceedings against any company except pursuant to an order from the Court under this Act. 4. Petition to Be Filed for Initiating Insolvency Proceedings: (1) If insolvency proceedings are to be initiated against a company, any of the following persons may file a petition in the prescribed format before the Court to proceed with such proceedings:

(a) The insolvent company itself,
(b) A creditor or creditors holding at least ten percent of the total debt among all creditors of the insolvent company,
(c) A shareholder or shareholders holding at least five percent of the total shares among all shareholders of the company,
(d) A debenture holder or debenture holders holding at least five percent of the total debentures among all debenture holders of the company,
(e) A Liquidator appointed for the dissolution of the company, or
(f) In the case of a company operating a specific type of business mentioned in section 8, the body authorized to administer and regulate such business.

(2) For filing a petition under subsection (1), thirty-five days must have elapsed from the date the notice issued for payment of debt under section 5 was duly served on the concerned company.

(3) While filing a petition under subsection (1), the reason for filing such petition, a brief description of the company's financial position, and evidence proving the company's insolvency shall be attached, and the following details shall also be submitted:

(a) If the insolvent company itself files such a petition:-
(1) A document certified by the Board of Directors of the company stating the fact that the company is insolvent,
(2) A special resolution passed by the company's Board of Directors to initiate insolvency proceedings under this Act, and
(3) A certified copy of the company's balance sheet and auditor's report available at the time of filing the petition for insolvency proceedings.

(b) If a creditor of the insolvent company files a petition:-
(1) Details of the principal and interest amount of the debt claimed by the creditor as remaining unpaid by the company,
(2) The date on which the company incurred the debt claimed by the creditor and the reasons for incurring such debt,
(3) Details showing that the amount under sub-clause (1) remains outstanding and is immediately payable,
(4) The grounds and basis upon which the creditor believes that the company in respect of which insolvency proceedings are sought is insolvent.

(c) If the Liquidator files a petition:-
(1) Evidence that the company in respect of which the petition for insolvency proceedings is made has appointed a Liquidator for the purpose of dissolving the company, and
(2) The opinion expressed by the Liquidator regarding the company's insolvency in respect of which the petition for insolvency proceedings is made, and the basis thereof.

(4) Notwithstanding anything contained elsewhere in this section, a shareholder or debenture holder of a company filing a petition for insolvency proceedings under clause (c) or (d) of subsection (1) must obtain the permission of the Court, and upon obtaining such permission, such person may file a petition subject to the conditions specified by the Court.

(5) The Court shall not grant permission under subsection (4) unless sufficient evidence is submitted to prove the company's insolvency.