Insolvency and Bankruptcy Code (IBC) 2016, is a bankruptcy law in India, which aims at providing speedy resolution process to the creditors for recovery of their money due from the debtors.[1] The Insolvency and Bankruptcy Code was enacted by Parliament in the Sixty-seventh year of the Republic of India. This was enacted for reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons. The Code separates commercial aspects of insolvency and bankruptcy proceedings from judicial aspects. The bankruptcy Code is soup to nuts for resolving insolvencies which previously was a long process that did not offer an economically feasible arrangement. It was done to consolidate all the existing laws with respect to insolvency in India.

Under IBC, any financial creditor, or an operational creditor can initiate corporate insolvency process against a corporate debtor when the corporate debtor commits a default in payment of debts. The Code is regulated by Insolvency and Bankruptcy Board of India (IBBI), and it is adjudicated by National company law tribunal (NCLT), and Debt recovery tribunal (DRT).

INSOLVENCY- Insolvency is the inability of a person or companies to pay their bills as and when they becomes due and payable.

BANKRUPTCY- Bankruptcy is when a person or company is legally declared incapable of paying their due and payable bills.

FINANCIAL CREDITOR – The financial creditor means any person to whom a financial debt is owned and includes a person to whom such debt has been legally assigned or transferred to.[2]

OPERATIONAL CREDITOR – A person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.[3]

DEBT- It means a liability or obligation in respect of a claim which is due from any person and includes financial debt and operational debts.[4]

DEFAULT- It means non- payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be.[5]

ADJUDICATING AUTHORITY- It means National Company Law Tribunal (NCLT) constituted under section 408 of Companies Act 2013 (18 of 2013)[6]

National Company Law Tribunal was setup by the Central Government in 2016. The NCLT has been setup as a quasi-judicial body established in India, that makes a formal judgement on a disputed matter, relating to the companies issues in India. It was set up to govern the companies registered in India and is a successor to the Company law board.[7]

COMMITTEE OF CREDITOR- It comprises of all the financial creditors, operational creditors of the corporate debtor.

CORPORATE DEBTOR- It means a corporate person who owes a debt to any person.[8]

CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP)

 The creditor’s committee will take a decision regarding the future of the outstanding debt owed to them. They may choose to revive the debt owed to them by changing the repayment schedule or sell the assets of the debtor to repay the debts owed to them. If a decision is not taken in 180 days, the debtor’s assets go into liquidation. When a company falls into insolvency, the first step is to try and resolve and not liquidate. An application for CIRP can be filed by a financial creditor, an operational creditor or the corporate-debtor itself.

Steps of CIRP:

1. Application to Adjudicating Authority

2. Appointment of Interim Resolution Professional

3. Public Announcement

4. Submission and Verification of claims

5. Formation of Committee of Creditors

6. Appointment of Resolution Professional by COC

7. Preparation of Information memorandum

8. Negotiation of Resolution Plan

9. Approval or Rejection of Resolution plan.

[1] https://www.brainyias.com/insolvency-and-bankruptcy-code.

[2] S 5(7) of Insolvency and Bankruptcy Code 2016.

[3] S 5(20) of Insolvency and Bankruptcy Code 2016.

[4] S.3 (11) of Insolvency and Bankruptcy Code 2016.

[5] S.3 (12) of Insolvency and Bankruptcy Code 2016

[6] S 5(1) of Insolvency and Bankruptcy Code 2016

[7] https://www.brainyias.com/insolvency-and-bankruptcy-code.

[8] S. 3 (8) of Insolvency and Bankruptcy Code 2016

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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