UNDERSTANDING THE FOUR PILLARS OF THE INDIAN BANKRUPTCY CODE 2016

Understanding the Four Pillars of the Indian Bankruptcy Code 2016

The Insolvency and Bankruptcy Code (IBC) of India, established in 2016, stands on four fundamental pillars that form the cornerstone of the country’s insolvency resolution framework. These pillars ensure an effective and efficient mechanism for dealing with insolvency and bankruptcy cases, aiming to promote economic growth and ease of doing business. Let’s delve into these four pillars:

1. Reorganization and Insolvency Resolution:

• Objective: The primary goal is to ensure the revival and continuation of a viable business, or in case of non-viability, a swift liquidation process.
• Key Points:
  • Corporate Insolvency Resolution Process (CIRP): This process allows for the resolution of corporate debtors through a time-bound and structured approach.
  • Reorganization: Encourages the rescue of viable businesses by restructuring their operations, debts, and management.

2. Insolvency Professionals (IPs) and Insolvency Professional Agencies (IPAs):

• Objective: To have skilled professionals manage insolvency proceedings effectively.
• Key Points:
  • Insolvency Professionals: Licensed individuals tasked with administering the insolvency resolution process fairly and transparently.
  • Insolvency Professional Agencies: Entities that regulate and develop professional standards for IPs.

3. Insolvency and Bankruptcy Board of India (IBBI):

• Objective: Oversee the implementation of the IBC and promote development in the insolvency profession.
• Key Points:
  • Regulatory Body: IBBI serves as the regulator for IPs, IPAs, and other entities involved in insolvency resolution.
  • Policy Formulation: It formulates regulations and guidelines to streamline insolvency proceedings.

4. Adjudicating Authority:

• Objective: To ensure a fair and timely resolution of insolvency cases.
• Key Points:
  • National Company Law Tribunal (NCLT): Empowered to adjudicate insolvency cases for companies and Limited Liability Partnerships (LLPs).
  • Debt Recovery Tribunal (DRT): Handles cases related to individual and partnership firm insolvencies.

The IBC’s foundation on these pillars emphasizes a comprehensive and time-bound approach to address insolvency, aiming to protect the interests of all stakeholders, maintain business continuity where feasible, and swiftly liquidate non-viable entities. These pillars work collectively to streamline the insolvency resolution process, fostering a more robust and efficient business environment in India