INSOLVENCY AND BANKRUPTCY CODE, 2016 (CODE)
The Insolvency and Bankruptcy Code, 2016 (Code) is a comprehensive legislation that seeks to consolidate and amend the laws relating to insolvency resolution and bankruptcy in India. The Code provides a time-bound framework for insolvency resolution of companies, limited liability partnerships, and individuals.
The Code aims to promote entrepreneurship, availability of credit, and balance the interests of all stakeholders, including the debtor, the creditor, and the employees. It seeks to maximize the value of assets of the debtor, promote the rescue of viable businesses, and ensure speedy resolution of insolvency cases.
The Code establishes two main bodies for insolvency resolution: the Insolvency and Bankruptcy Board of India (IBBI) and the National Company Law Tribunal (NCLT). The IBBI is responsible for regulating the insolvency resolution process and the professionals involved in it, while the NCLT is the adjudicating authority for insolvency resolution and bankruptcy cases.
The Code provides for three main processes for insolvency resolution: corporate insolvency resolution process (CIRP), individual insolvency resolution process (IIRP), and liquidation. The CIRP is initiated by the creditors of a corporate debtor, while the IIRP is initiated by an individual debtor or his/her creditors. Liquidation is the last resort when other processes fail.
The Code has significantly improved the insolvency resolution and bankruptcy regime in India by introducing a time-bound process, enhancing transparency and accountability, and providing for the resolution of stressed assets. It has also facilitated the recovery of bad debts, improved the ease of doing business, and attracted foreign investment.
The Code provides for two main mechanisms for the resolution of insolvency:
- Corporate Insolvency Resolution Process (CIRP): It is a process initiated by financial creditors, operational creditors, or the corporate debtor itself, to resolve the insolvency of a corporate entity. The CIRP involves the appointment of an insolvency professional to manage the affairs of the company, and a committee of creditors to make decisions regarding the insolvency resolution process.
- Individual Insolvency Resolution Process (IRP): It is a process initiated by an individual or partnership firm to resolve their insolvency. The process involves the appointment of a resolution professional who works with the debtor to prepare a repayment plan for creditors.
The Code has significantly improved the insolvency and bankruptcy ecosystem in India by bringing transparency, efficiency, and accountability in the resolution process. It has also provided a level playing field to all stakeholders, including creditors, debtors, and investors, and has boosted investor confidence in the Indian economy.
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