- Introduction
1.1 Overview of the IBC
The Insolvency and Bankruptcy Code (IBC), introduced in 2016, is a major reform to India’s bankruptcy laws. It aims to streamline and expedite the process of insolvency resolution for companies, individuals and partnership firms. A brief overview of the IBC is as follows:
- Objectives:
- Timely resolution of insolvency cases
- Maximisation of value of assets of debtors
- Promotion of entrepreneurship and easy credit availability
- Fair treatment of creditors
- Key features:
- Time-bound process for insolvency resolution
- Introduction of Insolvency and Bankruptcy Board (IBBI) to regulate insolvency professionals
- Provisions for Corporate Insolvency Resolution Process (CIRP) to revive stressed companies
- Liquidation process for companies that cannot be revived
The Companies Act of 2013, the Sick Industrial Companies (Special Provisions) Act of 1985, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002, the Recovery of Debts due to Banks and Financial Institutions Act (RDDBFI Act), 1993, and other laws comprised the fragmented legislative framework for insolvency and restructuring prior to the IBC. The IBC was passed by the Lok Sabha on May 5, 2016 and the Rajya Sabha on May 11, 2016. President Pranab Mukherjee subsequently gave his assent, and it was published in The Gazette of India on May 28, 2016. Innoventive Industries Ltd. v. ICICI Bank and Anr. was the Supreme Court’s first case under Indian insolvency legislation. [1][2][3]
The IBC envisions that the entire Corporate Insolvency Resolution Process (CIRP) must take place within 180 days of the admission of the application. A CIRP must be mandatorily completed within 330 days, including any extension or litigation period
[1] Gupta, S. (2018) The Journey of Insolvency & Bankruptcy Code. https://www.mondaq.com/advicecentre/content/3750/The-Journey-of-Insolvency-Bankruptcy-Code (Accessed: 07 April 2024).
[2]Beniwal, V. and Antony, A. (2016) India overhauls century-old bankruptcy laws, Bloomberg.com. https://www.bloomberg.com/news/articles/2016-05-11/india-overhauls-century-old-bankruptcy-laws-in-key-win-for-modi (Accessed: 07 April 2024).
[3]Insolvency and bankruptcy code, 2016 (2024) Wikipedia. https://en.m.wikipedia.org/wiki/Insolvency_and_Bankruptcy_Code,_2016#cite_note-3 (Accessed: 07 April 2024).