ABOUT INSOLVENCY AND BANKRUPTCY
The Insolvency and Bankruptcy Code, 2016 (IBC) is India's bankruptcy legislation that attempts to unify the current framework by establishing a single law for insolvency and bankruptcy. In December 2015, the Lok Sabha passed the Insolvency and Bankruptcy Code, 2015. It was passed by the Lok Sabha on May 5, 2016, and by the Rajya Sabha on May 11, 2016. On May 28, 2016, the President of India gave his approval to the Code. Certain parts of the Act went into effect on the 5th and 19th of August, 2016. The bankruptcy code provides a one-stop shop for resolving insolvencies, which was formerly a time-consuming procedure that did not provide an economically feasible solution.
CHARACTERISTICS
Insolvency Resolution: The Code establishes distinct insolvency resolution methods for individuals, corporations, and partnership businesses. Either the debtor or the creditors can start the process. For corporations and individuals, a maximum time restriction for completing the insolvency resolution procedure has been established. Companies must finish the procedure in 180 days, which can be extended by 90 days if a majority of creditors agree. For start-ups (other than partnership firms), small businesses, and other businesses (with assets less than Rs. 1 crore), the resolution procedure would be completed within 90 days of the request's commencement, which may be extended by 45 days.
The Insolvency and Bankruptcy Code (Amendment) Act of 2019 extended the obligatory upper time limit to 330 days, including time spent in judicial proceedings, to complete the resolution procedure.
Bankruptcy Regulator: The Code creates the Insolvency and Bankruptcy Board of India to supervise insolvency processes in India and to regulate businesses registered under it. The Board will include ten members, including representation from the Finance and Law Ministries, as well as the Reserve Bank of India..
Insolvency Experts: Licensed professionals will oversee the insolvency procedure. During the insolvency procedure, these specialists will also have authority over the debtor's assets.
Bankruptcy and Insolvency Adjudicator: The Code recommends two distinct tribunals to supervise the insolvency resolution process for individuals and businesses: The National Company Law Tribunal hears cases involving corporations and limited liability partnerships, whereas the Debt Recovery Tribunal hears cases involving people and partnerships.
PROCEDURE
Financial or operational creditors, or the corporate debtor itself, file an insolvency petition with the adjudicating body (NCLT in the case of corporate debtors). The maximum amount of time permitted to accept or reject the plea is 14 days. If the plea is accepted, the tribunal must appoint an Interim Settlement Professional (IRP) within 180 days to prepare a resolution plan (extendable by 90 days). The court then initiates the Corporate Insolvency Resolution procedure. During this time, the company's board of directors is suspended, and the promoters have no voice in the company's management.
IS THE INSOLVENCY AND BANKRUPTCY CODE A PANACEA FOR ALL BANKING PROBLEMS?
The NDA administration proposed the Insolvency and Bankruptcy Code Bill in the Indian parliament in 2015, but it received final approval in the May 2016 session. It was expected that this measure would fix all of the financial difficulties that existed in the economy. The primary objective for introducing this bill was to shorten the lengthy insolvency process, which it achieved. Following the passage of this bill, the insolvency procedure for a corporation is 180 days with a 90-day extension, and for start-ups and small businesses, it is 90 days with a 45-day extension.
The question is whether it will resolve all banking issues, and the answer is no, because India's banking industry is in a difficult phase. Banks are merging owing to poor loans, and this bill would not make things any easier. IBC will only accept bad debts that have been disclosed. Undisclosed bad loans or bad loans disclosed after the victim flees remain unaffected. And there have been several cases in recent years in which creditors fled the nation after being unable to repay the debt that they received. However, the IBC did enhance the economic system, and the results are visible - the economy is definitely more stable.
