{"id":22662,"date":"2023-04-26T17:47:47","date_gmt":"2023-04-26T12:17:47","guid":{"rendered":"https:\/\/gstguntur.com\/?p=22662"},"modified":"2023-04-26T17:48:33","modified_gmt":"2023-04-26T12:18:33","slug":"fresh-start-process-cs-professional-insolvency-law-and-practice-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/fresh-start-process-cs-professional-insolvency-law-and-practice-study-material\/","title":{"rendered":"Fresh Start Process &#8211; CS Professional Study Material"},"content":{"rendered":"<p>Chapter 16 Fresh Start Process &#8211; <a href=\"https:\/\/gstguntur.com\/cs-professional-insolvency-law-and-practice-study-material\/\">CS Professional Insolvency Law and Practice Notes<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n<h2>Fresh Start Process &#8211; CS Professional Insolvency Law and Practice Study Material<\/h2>\n<p>Question 1.<br \/>\nOn what grounds, an aggrieved debtor or creditor, may make an application to the Adjudicating Authority against the action taken by the Resolution Professional under the Fresh Start Process ? Also elaborate the restrictions imposed on a debtor during moratorium period of Fresh Start Process. (Dec 2021, 3 + 3 = 6 marks)<br \/>\nAnswer:<br \/>\nGrounds on which the aggrieved debtor or creditor may make an application to the Adjudicating Authority against the action taken by the Resolution Professional under the Fresh Start Process<br \/>\nSection 87 of the Insolvency and Bankruptcy Code, 2016 provides that debtor or the creditor who is aggrieved by the action taken by the Resolution Professional under Section 86 may within ten days of such decision may make an application to the Adjudicating Authority challenging such action on any of the following grounds, namely:-<br \/>\n(a) that the Resolution Professional has not given an opportunity to the debtor or the creditor to make a representation; or<br \/>\n(b) that the Resolution Professional colluded with the other party in arriving at the decision; or<br \/>\n(c) that the Resolution Professional has not complied with the requirements of Section 86.<br \/>\nThe Adjudicating Authority shall decide the application referred within fourteen days of such application and make an order as it deems fit. Where the application has been allowed by the Adjudicating Authority it shall forward its order to the Board and the Board may take such action as may be required against the Resolution Professional.<\/p>\n<p>Restrictions imposed on a debtor during moratorium period of Fresh Start Process<br \/>\nThe following restrictions are imposed on debtor during the moratorium period of Fresh Start Process, as provided under section 85(3) of the IBC:<br \/>\na. shall not act as a director of any company, or directly or indirectly take part in or be concerned in promotion, formation or management of the company.<br \/>\nb. shall not dispose-off or alienate any of the assets.<br \/>\nc. shall inform his business partners that he is undergoing a fresh start process.<br \/>\nd. shall be required to inform prior to entering into any financial or commercial transaction of such value as may be notified by the Central Government, either individual or jointly, that he is undergoing a fresh start process.<br \/>\ne. shall disclose the name under which he enters into business transactions, if it is a different name then the one under the application.<br \/>\nf. shall not travel outside India except with the permission of the Adjudicating Authority.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Fresh Start Process - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 2.<br \/>\nExplain the concept of \u2018fresh start\u2019 under IBC,2016.<br \/>\nAnswer:<br \/>\nFresh Start is a new concept introduced under sections 80 to 93 in Chapter II of Part III of the Insolvency and Bankruptcy Code, 2016. In this process,<\/p>\n<ul>\n<li>Eligible debtors get discharged from certain debts (not exceeding a specified threshold) by applying to the Adjudicating Authority and can start afresh without any liabilities.<\/li>\n<li>It is available only to debtors having gross annual income less than sixty thousand rupees; the aggregate value of the assets not exceeding twenty thousand rupees; the aggregate value of the qualifying debts not exceeding thirty-five thousand rupees and do not have a dwelling unit.<\/li>\n<li>Application can be filed only by the debtor for fresh start for discharge of his debt.<\/li>\n<li>Application is then examined by a resolution professional (RP) who then submits a report to the DRT, recommending acceptance or rejection of the application.<\/li>\n<li>DRT passes an order, either admitting or rejecting the application.<\/li>\n<li>If the application is admitted, the creditors have an opportunity to object to the process on limited grounds.<\/li>\n<li>On conclusion of the process, the DRT passes an order for the discharge of the debtor or revokes the admission of the application.<\/li>\n<li>The discharge order writes off the unsecured debts, allowing the debtor to start afresh, subject to an entry in the credit history.<\/li>\n<\/ul>\n<p>Question 3.<br \/>\nAre there any statutory regulations introduced by IBBI for initiating the fresh start process?<br \/>\nAnswer:<br \/>\nNo, since the provisions of fresh start process have not been notified under the Code therefore no statutory regulations providing the form and manner for initiating fresh start process have been introduced yet by the Insolvency and Bankruptcy Board of India (\u201cBoard\u201d).<\/p>\n<p>Question 4.<br \/>\nWho can apply for fresh start process?<br \/>\nAnswer:<br \/>\nSection 80 of the Insolvency and Bankruptcy Code, 2016 provides that a debtor who is unable to pay his debt and fulfils the below mentioned conditions shall be entitled to make an application for a fresh start process for discharge of his qualifying debt.<br \/>\nA debtor may either personally or through a Resolution Professional may apply for fresh start process if he fulfills the following conditions:<br \/>\n(a) The gross annual income of the debtor does not exceed sixty thousand rupees:<br \/>\n(b) The aggregate value of the assets of the debtor does not exceed twenty thousand rupees.<br \/>\n(c) The aggregate value of the qualifying debts does not exceed thirty -five thousand rupees;<br \/>\n(d) He is not an undischarged bankrupt;<br \/>\n(e) He does not own a dwelling unit, irrespective of whether it is encumbered or not;<br \/>\n(f) A fresh start process, insolvency resolution process or bankruptcy process is not subsisting against him; and<br \/>\n(g) No previous fresh start order under these provisions has been made in relation to him in the preceding twelve months of the date of the application for fresh start.<\/p>\n<p>Question 5.<br \/>\nWhat is included in Qualifying Debt?<br \/>\nAnswer:<br \/>\nQualifying Debt means any amount due, which includes interest or any other sum due in respect of the amounts owed under any contract, by the debtor for a liquidated sum either immediately or at certain future time but does not includes<\/p>\n<ul>\n<li>an excluded debt;<\/li>\n<li>a debt to the extent it is secured; and<\/li>\n<li>any debt which has been incurred three months prior to the date of the application for fresh start process where excluded debt means<\/li>\n<li>liability to pay fine imposed by a court or tribunal;<\/li>\n<li>liability to pay damages for negligence, nuisance or breach of a statutory, contractual or other legal obligation;<\/li>\n<li>liability to pay maintenance to any person under any law for the time being in force;<\/li>\n<li>liability in relation to a student loan;<\/li>\n<li>any other debt as may be prescribed.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Fresh Start Process - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 6.<br \/>\nState the process of filing of applications for fresh start process and its effect.<br \/>\nAnswer:<br \/>\nAn application for a fresh start process shall be in such form and manner and accompanied by such fee as may be prescribed by the regulations after their enforcement and shall contain the following information supported by an affidavit namely:<br \/>\n(a) List of all debts owed by the debtor till the date of application along with details of amount of each debt and the names of the creditors;<br \/>\n(b) The interest payable on the debts and the rate thereof stipulated in the contract;<br \/>\n(c) A list of security held in respect of any of the debts;<br \/>\n(d) The financial information of the debtor and his immediate family for up to two years prior to the date of the application;<br \/>\n(e) The particulars of the debtor\u2019s personal details;<br \/>\n(f) The reasons for making the application;<br \/>\n(g) The particulars of any legal proceedings which, to the debtor\u2019s knowledge has been commenced against him; and<br \/>\n(h) The confirmation that no previous fresh start order under the provisions of the Code has been made in respect of the qualifying debts of the debtor in the preceding twelve months of the date of the application.<br \/>\nWhen an application is filed under Section 80 by a debtor, an interim-moratorium shall commence on the date of filing of said application in relation to all the debts and shall cease to have effect on the date of admission or rejection of such application-, as the case may be.<br \/>\nDuring the interim-moratorium period if any legal action or legal proceeding is pending in respect of any of debts of the debtor then same shall be deemed to have been stayed and no creditor shall initiate any legal action or proceedings in respect of such debt.<\/p>\n<p>Question 7.<br \/>\nWhat is the process of appointment of Resolution Professional?<br \/>\nAnswer:<br \/>\nSection 82 of the IBC, 2016 provides that where an application under Section 80 is filed by the debtor through a Resolution Professional, the Adjudicating Authority shall direct the Board within seven days of the date of receipt of the application to seek confirmation that there are no disciplinary proceedings against the Resolution Professional submitting such application. The Board shall then communicate the confirmation or rejection of the Resolution Professional to the Adjudicating Authority. In case of rejection, the Board shall nominate a Resolution Professional suitable for the fresh start process.<br \/>\nWhere the debtor himself has filed an application under section 80, the Adjudicating Authority shall direct the Board to nominate a Resolution Professional for the fresh start process. The Board shall nominate a Resolution Professional within ten days of receiving the direction issued by the Adjudicating Authority. The Adjudicating Authority shall by order appoint the Resolution Professional recommended or nominated by the Board.<\/p>\n<p>Question 8.<br \/>\nWhat are the contents of the report given by resolution professional?<br \/>\nAnswer:<br \/>\nThe report by Resolution Professional shall contain the details of the amounts mentioned in the application which in the opinion of the Resolution Professional are (a) qualifying debts; and (b) liabilities eligible for discharge under sub-section (3) of Section 92.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Fresh Start Process - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 9.<br \/>\nState the grounds on which the Resolution Professional may accept the application.<br \/>\nAnswer:<br \/>\nThe Resolution Professional shall presume that the debtor is unable to pay his debts at the date of the application if in his opinion:<br \/>\n(a) information supplied in the application indicates that the debtor is unable to pay his debts and he has no reason to believe that the information supplied is incorrect or incomplete; and<br \/>\n(b) there is no change in the financial circumstances of the debtor since the date of the application enabling the debtor to pay his debts.<\/p>\n<p>Question 10.<br \/>\nState the grounds on which the resolution professional may reject the application.<br \/>\nAnswer:<br \/>\nThe Resolution Professional shall reject the application in the following cases:<br \/>\n(a) The debtor does not satisfy the conditions specified under Section 80; or<br \/>\n(b) The debts disclosed in the application by the debtor are not qualifying debts; or<br \/>\n(c) The debtor has deliberately made a false representation or omission in the application or with respect to the documents or information submitted.<br \/>\nThe Resolution Professional shall record the reasons for recommending the acceptance or rejection of the application in the report to the Adjudicating Authority and shall give a copy of the report to the debtor.<\/p>\n<p>Question 11.<br \/>\nExplain the process after the acceptance or rejection of an application.<br \/>\nAnswer:<br \/>\nAcceptance of application-<\/p>\n<ul>\n<li>In case application has been accepted by the Adjudicating Authority then the order shall state the amount which has been accepted as qualifying debts by the Resolution Professional and other amounts eligible for discharge under Section 92 for the purposes of the fresh start order.<\/li>\n<li>A copy of the order passed by the Adjudicating Authority along with a copy of the application shall be provided to the creditors mentioned in the application within two days of the passing of the order.<\/li>\n<li>Section 85 of the Insolvency and Bankruptcy Code, 2016 provides that on the date of admission of the application the moratorium period shall commence in respect of all the debts of the debtor.<\/li>\n<li>During the moratorium period any pending legal action or legal proceeding in respect of any debt shall be deemed to have been stayed and pursuant to the provisions of Section 86 the creditors shall not initiate any legal action or proceedings in respect of any debt.<\/li>\n<li>The moratorium ceases to have effect at the end of the period of one hundred and eighty days beginning with the date of admission unless the order admitting the application is revoked under sub-section (2) of section 91.<\/li>\n<li>During the moratorium period, the debtor shall:<\/li>\n<li>not act as a director of any company, or directly or indirectly take part in or be concerned in the promotion, formation or management of a company;<\/li>\n<li>not dispose of or alienate any of his assets;<\/li>\n<li>inform his business partners that he is undergoing a fresh start process;<\/li>\n<li>be required to inform prior to entering into any financial or commercial transaction of such value as may be notified by the Central Government, either individually or jointly, that he is undergoing afresh start process;<\/li>\n<li>disclose the name under which he enters into business transactions, if it is different from the name in the application admitted under Section 84 and<\/li>\n<li>not travel outsides India except with the permission of the Adjudicating Authority.<\/li>\n<\/ul>\n<p>Question 12.<br \/>\nExplain Section 86 of Insolvency and Bankruptcy Code, 2016.<br \/>\nAnswer:<br \/>\nSection 86 of the Insolvency and Bankruptcy Code, 2016 provides that any creditor mentioned in the order of the Adjudicating Authority under Section 84 to whom a qualifying debt is owed may within a period of ten days from the date of receipt of the order under Section 84, object only on the following grounds, namely:<br \/>\n(a) inclusion of a debt as a qualifying debt; or<br \/>\n(b) incorrectness of the details of the qualifying debt specified in the order under Section 84.<\/p>\n<ul>\n<li>A creditor may file an objection by way of an application to the Resolution Professional.<\/li>\n<li>The application shall be supported by such information and documents as may be prescribed.<\/li>\n<li>The Resolution Professional shall consider every objection made under this Section.<\/li>\n<li>The Resolution Professional shall examine the objections and either accept or reject the objections within ten days of the date of the application.<\/li>\n<li>The Resolution Professional may examine on any matter that appears to him to be relevant to the making of a final list of qualifying debts for the purposes of Section 92.<\/li>\n<\/ul>\n<p>On the basis of the examination the Resolution Professional shall:<br \/>\n(a) prepare an amended list of qualifying debts for the purpose of the discharge order;<br \/>\n(b) make an application to the Adjudicating Authority for directions under section 90; or<br \/>\n(c) take any other steps in relation to the debtor.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Fresh Start Process - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 13.<br \/>\nState the provisions related to application against decision of Resolution Professional.<br \/>\nAnswer:<br \/>\nSection 87 of the Insolvency and Bankruptcy Code, 2016 provides that any debtor or the creditor aggrieved by the action taken by the Resolution Professional under Section 86 may within ten days of such decision apply to the Adjudicating Authority challenging such action on any of the following grounds, namely:<br \/>\n(a) that the Resolution Professional has not given an opportunity to the debtor or the creditor to make a representation;<br \/>\n(b) that the Resolution Professional colluded with the other party in arriving at the decision; or<br \/>\n(c) that the Resolution Professional has not complied with the requirements of Section 86.<br \/>\nThe Adjudicating Authority shall decide the application referred within fourteen days of such application and make an order as it deems fit. Where the application has been allowed by the Adjudicating Authority it shall forward its order to the Board and the Board may take such action as may be required against the Resolution Professional.<\/p>\n<p>Question 14.<br \/>\nState the general duties of debtor filing for a fresh start.<br \/>\nAnswer:<br \/>\nThe duties of the debtor during fresh start process are prescribed under Section 88 as follows:<br \/>\n(a) To make available to the Resolution Professional all information relating to his affairs, attend meetings and comply with the requests of the Resolution Professional in relation to the fresh start process.<br \/>\n(b) To inform the Resolution Professional as soon as reasonably possible of any material error or omission in relation to the information or document supplied to the Resolution Professional or any change in financial circumstances afterthe date of application, where such change has an impact on the fresh start process.<\/p>\n<p>Question 15.<br \/>\nWhat is the procedure in case of replacement of Resolution Professional?<br \/>\nAnswer:<br \/>\nWhere the debtor or the creditor is of the opinion that the Resolution Professional appointed under section 82 is required to be replaced, they may apply to the Adjudicating Authority for the replacement of such Resolution Professional.<\/p>\n<ul>\n<li>The Adjudicating Authority shall apply within seven days of the receipt of the application to the Board for such replacement.<\/li>\n<li>The Board shall within ten days recommend the name of insolvency professional to the Adjudicating Authority against whom no disciplinary proceedings are pending.<\/li>\n<li>Adjudicating Authority shall appoint another Resolution Professional for the purposes of the fresh start process on the basis of the recommendation by the Board.<\/li>\n<li>The Adjudicating Authority may give directions to the replaced Resolution Professional to share all information with the new Resolution Professional in respect of the fresh start process; and to co-operate with the new Resolution Professional in such matters as may be required.<\/li>\n<\/ul>\n<p>Question 16.<br \/>\nHow can an order admitting application be revoked ?<br \/>\nAnswer:<br \/>\nResolution Professional may submit an application to the Adjudicating Authority seeking revocation of its order made under Section 84 on the following grounds, namely:<br \/>\n(a) the debtor is ineligible for a fresh start process due to any change in the financial circumstances of the debtor;<br \/>\n(b) non-compliance by the debtor of the restrictions imposed under sub-section (3) of section 85; or<br \/>\n(c) he has acted in a mala fide manner and has wilfully failed to comply with the provisions of this Chapter.<br \/>\nThe Adjudicating Authority shall within fourteen days of the receipt of the application may by order admit or reject the application. On passing of the order admitting the application the moratorium and the fresh start process shall cease to have effect.<br \/>\nA copy of the order passed by the Adjudicating Authority under this Section shall be provided to the Board for the purpose of recording an entry in the register referred to in section 196.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Fresh Start Process - CS Professional Study Material\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 17.<br \/>\nExplain the provisions related to the discharge order.<br \/>\nAnswer:<br \/>\nSection 92 of the Insolvency and Bankruptcy Code, 2016 provides that the Resolution Professional shall prepare a final list of qualifying debts and submit such list to the Adjudicating Authority at least seven days before the moratorium period comes to an end.<br \/>\nThe Adjudicating Authority shall discharge the debtor from the following liabilities namely:<br \/>\n(a) penalties in respect of the qualifying debts from the date of application till the date of the discharge order;<br \/>\n(b) interest including penal interest in respect of the qualifying debts from the date of application till the date of the discharge order; and<br \/>\n(c) any other sums owed under any contract in respect of the qualifying debts from the date of application till the date of the discharge order.<br \/>\nThe discharge order shall be forwarded to the Board for the purpose of recording an entry in the register referred to in section 196. A discharge order shall not discharge any other person apart from the debtor from any liability in respect of the qualifying debts.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Chapter 16 Fresh Start Process &#8211; CS Professional Insolvency Law and Practice Notes is designed strictly as per the latest syllabus and exam pattern. Fresh Start Process &#8211; CS Professional Insolvency Law and Practice Study Material Question 1. On what grounds, an aggrieved debtor or creditor, may make an application to the Adjudicating Authority against &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/gstguntur.com\/fresh-start-process-cs-professional-insolvency-law-and-practice-study-material\/\"> <span class=\"screen-reader-text\">Fresh Start Process &#8211; CS Professional Study Material<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[165],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/22662"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=22662"}],"version-history":[{"count":3,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/22662\/revisions"}],"predecessor-version":[{"id":22666,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/22662\/revisions\/22666"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=22662"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=22662"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=22662"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}