ABSTRACT: Insolvency and bankruptcy code, 2016 was enacted by the Indian parliament with intention of bringing uniformity to India’s bankruptcy laws. It deals with the bankruptcy of corporations, partnership firms, and individuals. IBC has also established INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (IBBI), as a regulatory body to regulate all the matters relating to insolvency and bankruptcy.
There were various statutes passed by the Government of India, But they did not prove much effective to rehabilitate the corporate debtors. IBC provides a complete insolvency resolution process in a fast and effective manner. This code has been enacted to simplify the proceedings of insolvency and bankruptcy in India and to protect the interest of creditors. The main aim of the code is to revive the company in a time-bound manner.
- INSOLVENCY – When a person or company is unable to pay the debts on time which has been owed from the lenders. It is a state of the inability of a person or corporation to pay their dues when they become payable.
- BANKRUPTCY – It is a legal process through which a person or company who cannot pay their dues to the creditors seek relief from the authority. Generally, the court imposes bankruptcy through relief claimed by debtors.
The concept of the Act underlines the sole purpose of the Act, that is to fast forward and clock makes the entire process of insolvency resolution.
The Act takes care of the establishment and amending procedure of the laws that is in general in association with restructure and throw light on the insolvency of institutions like partnership firms, individuals, and corporate persons. The act makes sure the commitment is taken under the strict time tangent which gives rise to the promotion of entrepreneurship in India. Maximizing the convenience of credit in the Indian market with the establishment of Insolvency and Bankruptcy Board in India. This gives the idea of balancing the interests of the stakeholders including alteration in the prescribed order of priority of government fees payment.
The code is implemented by the Parliament sights to de-clutter the necessitated pile of debts that were non-performing since ages, with the mechanism that is time-bound, followed by strict deadlines. The consolidated code seeks to fix the error of the crippled financial situation with a speedy mechanism to curb the long-listed pending cases.
MAIN ADVANTAGES OF IBC
- This code is to provide a time-bound process to resolve insolvency. Earlier when default occurs in repayment of dues, there were not certain prescribed rules to resolve the matter. But now creditor and debtor both can start recovery proceedings against each other.
- The inclusion of cross border insolvency framework provides foreign investors security and enhance the ease of doing business. With this cooperation between India and other countries in the area of insolvency resolution will increase.
- The code has an overriding effect over all other prevailing laws relating to IBC, as it provides separate insolvency resolution procedure for companies, an individual and partnership firms.
- Another advantage of the code is that it provides the right to exit. Earlier when foreign investors established their company in India and somehow that company faces any loss or wanted to leave the Indian state there were no certain rules prescribed under any law which provide an easy exit. They have to file a suit in court for the liquidation process. It was a lengthy process and did not attract investors to establish their firm in India. But now, IBC code lays down a provision for an easy to exit.
- The code provides an insolvency professional agency under which qualified insolvency professionals are enrolled which involves in the resolution of insolvent individuals, companies, or partnerships.
- There are two adjudicating bodies under the IBC code: NCLT and DRT which ensures accountability and vigilance.
IBC code is effective legislation that regularizes the insolvency process. It brought a change in the business scenario in the country. It reduces the time it takes to deal with the issues of bankruptcy. It also enables providers to deal with cross-border insolvency which encourages foreign direct investments and secures the interest of creditors. The code also simplifies the proceedings of insolvency and bankruptcy in India.
The code marks its way to make it very simpler for personals & ventures both to get in the process of liquidation which becomes painless and the settlement time bounded and faster respectively. The Bankruptcy law lets the entrepreneurs make a new start without any hindrances, giving options to wind up painlessly and majorly paves the way to resurrection giving a palpable sense of relief.
Therefore, the highlighted advantage of the Insolvency and Bankruptcy Code are faster resolution and value maximization.