ABSTRACT
The enactment of the IBC in 2016 revolutionized India’s corporate insolvency system, aiming to offer an immediate and effective resolution process. However, the practical execution of the Corporate Insolvency Resolution Process (CIRP) under the IBC has encountered different legal hurdles, posing challenges to its effectiveness. This juridical analysis delves into the practical legal issues surrounding the CIRP in India, shedding light on problems faced by stakeholders.
The ambiguity relating to the adjudicating authority’s interpretation and application of the provisions of the IBC always leads to delays and inconsistent rulings, hampering the resolution process. The issues and challenges arise concerning the admission of operational creditor petitions, particularly regarding the sufficiency of evidence and the determination of operational debt, which impacts the initiation of the CIRP.
Despite the statutory timelines prescribed by the IBC, delays in various stages of the CIRP, such as the appointment of resolution professionals, submission of resolution plans, and approval processes, raise concerns about the expeditiousness of the resolution mechanism. Securing interim finance during the CIRP poses challenges, especially concerning the priority of such claims amidst competing creditors, leading to uncertainties and reluctance from potential financiers.
The absence of comprehensive frameworks for managing cross-border insolvency matters creates complexities in cases involving MNCs, necessitating clarity and alignment with international best practices. Practical hurdles such as stakeholder coordination, information sharing, and management of distressed assets further complicate the CIRP proceedings. Identifying these practical legal issues requires concerted efforts from lawmakers, regulators, insolvency professionals, and other stakeholders. Enhancing clarity, streamlining processes, and strengthening institutional mechanisms are imperative to realize the objectives of the IBC and foster a healthy corporate insolvency resolution system in India.