Insolvency and Bankruptcy Code

May 09, 2016

Registrationwala

There was an idea in 1992, an idea whose motive was to shake the Indian economy and push it in a positive direction. However, the idea was way too bold. Its boldness stopped the idea from taking any shape. Fast forward in the year 2016, and we all witnessed the legislation of the Insolvency and Bankruptcy Code in India. And it has in fact, shaken up the Indian economy.

The Insolvency and Bankruptcy Code was introduced in 2016 to create a creditor friendly financial atmosphere. Through the introduction of a time constrained insolvency resolution process, it has helped India grow up financially. Read this blog to know about the accomplishments of the IBC code 2016 and more.

Purpose of Insolvency and Bankruptcy Code

The Indian start-up atmosphere is filled to the brim with innovation and new ideas. These ideas are quite lucrative in the financial world. Therefore, several foreign investors are attracted towards it. However, there was one point that repelled the investors: the earlier Insolvency laws in India. They tended to be:

Partial towards protecting the debtors
Ensuring that the debtors never went bankrupt
Hang the insolvency resolution process for decades
Creating a lot of non-performing assets.
Uncaring towards the plight of the creditors.

With the changing face of India during the Start-up “uprising”, it was time to do something drastic. And therefore, Insolvency and Bankruptcy Code 2016 was introduced.

Launched in 2016, the purposes of the insolvency and bankruptcy act are the following:

To resolve the hanging issues of insolvency
To create a time limited way of insolvency resolution
To create a singular body to take care of the insolvency proceedings
To free the banks from the unnecessary burden of the NPA (Non Performing Assets).
To create separate tribunals for the resolution of personal insolvency and corporate insolvency.
To remove the old insolvency laws that are considered outdated
To modify the existing laws of Insolvency and Bankruptcy that can be considered to be

The Insolvency and bankruptcy code of India, ever since its introduction, has been able to meet most of its purposes.

This brings us to the Insolvency and Bankruptcy Code 2016 benefits. How fruitful has it been for India since the code’s introduction?

How to File for Bankruptcy in India

The Insolvency and Bankruptcy Code, 2016 (IBC) provides the framework for the bankruptcy process in India. The bankruptcy process takes place in the following manner:

An application needs to be filed for insolvency with the National Company Law Tribunal.
The NCLT will admit the application and appoint an interim resolution professional to manage the affairs of the company.
A committee of creditors will be formed by the interim resolution professional to examine the assets and liabilities of the company.
The committee of credits will invite resolution plans from interested parties. For final approval, the plan with the most votes will be filed with NCLT.
The company may be liquidated if the resolution plan fails to get approval. The assets of the company will be sold and its proceeds will be distributed amongst the creditors.

Benefits of Insolvency and Bankruptcy Code 2016

As we have already stated, IBC 2016 was able to meet most of its expectations. However, it has been quite beneficial to the corporate creditors. Following are the benefits of insolvency code:

Fast resolution of insolvency
Separate tribunals for personal and Corporate Insolvency Resolution process (CIRP).
Creditor centric code.
Financial creditors now have a say in the matter.
Proper distribution of assets among the creditors.
An expedited way to liquidate the company.
India now ranks among the countries which are easy to do business with.

Conclusion

The Insolvency and Bankruptcy Code was introduced by the Central Government in 2016 to provide a more creditor centric approach of insolvency resolution. It remains one of the biggest insolvency reforms in India’s economic history.

Frequently Asked Questions (FAQs)

Q1. Which Act deals with insolvent and bankrupt companies in India?

A. Insolvency and Bankruptcy Code 2016 deals with insolvent and bankrupt companies.

Q2. Before insolvency and bankruptcy code was introduced, which act provided the framework for insolvency?

A. Prior to the enactment of IBC 2016, the legislative framework for insolvency was fragmented across multiple legislations like Companies Act 2013, Sick Industrial Companies (Special Provisions) Act, 1985, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Recovery of Debts due to Banks and Financial Institutions Act (RDDBFI Act), 1993.

Q3. Which authority oversees insolvency proceedings in India?

A. The Insolvency and Bankruptcy Board of India (IBBI).

Q4. Where to download insolvency and bankruptcy PDF?

A. You can download insolvency and bankruptcy PDF by visiting the official portal of Insolvency and Bankruptcy Board of India (IBBI).

To download the PDF click here

Post updated on: 15-10-2024