Insolvency and Bankruptcy Code, 2016: Suspension of Initiation of CIRP

Here are the notes on the Insolvency and Bankruptcy Code, 2016 (IBC): Suspension of Initiation of Corporate Insolvency Resolution Process (CIRP), with MCQs and answers:

Note 1: The IBC allows for the suspension of the initiation of CIRP in certain cases.

Note 2: The suspension of CIRP can be ordered by the Adjudicating Authority on the application of the corporate debtor or any other person.

Note 3: The Adjudicating Authority may order the suspension of CIRP if it is satisfied that the initiation of CIRP would be likely to cause significant harm to the corporate debtor or to the public interest.

Note 4: The Adjudicating Authority may also order the suspension of CIRP if it is satisfied that the corporate debtor is taking necessary steps to address its financial difficulties.

Note 5: The suspension of CIRP can be for a period of up to 6 months.

MCQs:

  1. Which of the following can apply for the suspension of CIRP?
    • The corporate debtor
    • Any person
    • Only the financial creditors
    • Only the operational creditors

The answer is (a). The corporate debtor or any person can apply for the suspension of CIRP.

  1. What are the grounds for the suspension of CIRP?
    • The initiation of CIRP would be likely to cause significant harm to the corporate debtor or to the public interest.
    • The corporate debtor is taking necessary steps to address its financial difficulties.
    • Both (a) and (b)

The answer is (c). Both (a) and (b) are grounds for the suspension of CIRP.

  1. What is the maximum period for which the CIRP can be suspended?
    • 3 months
    • 6 months
    • 12 months
    • 18 months

The answer is (b). The CIRP can be suspended for a maximum period of 6 months.

  1. What happens after the suspension period expires?
    • The CIRP will be automatically terminated.
    • The Adjudicating Authority will decide whether to initiate the CIRP.
    • The corporate debtor will be liquidated.
    • The financial creditors will have to write off their debts.

The answer is (b). The Adjudicating Authority will decide whether to initiate the CIRP after the suspension period expires.

  1. Can the corporate debtor challenge the order of suspension of CIRP?

Yes, the corporate debtor can challenge the order of suspension of CIRP by filing an appeal with the National Company Law Appellate Tribunal (NCLAT).