The Insolvency and Bankruptcy Code (IBC) of 2016 is a comprehensive legislation enacted by the Government of India to address insolvency and bankruptcy-related matters. It provides a consolidated legal framework for the resolution, liquidation, and reorganization of distressed entities, including individuals, partnership firms, and companies.
The main objective of the IBC is to promote a time-bound and efficient insolvency resolution process, protect the interests of creditors, and maximize the value of distressed assets. It aims to provide a transparent and predictable mechanism for dealing with insolvency, ensuring a fair distribution of assets, and enabling the revival of viable businesses.
The key features of the Insolvency and Bankruptcy Code include:
- Insolvency Resolution Process: The IBC provides for a time-bound insolvency resolution process, typically 180 days (extendable up to 270 days), during which a resolution plan is formulated to revive the distressed entity or sell its assets to repay creditors.
- Insolvency Professionals: The code introduces the concept of insolvency professionals who act as intermediaries between the creditors and the distressed entity. They play a crucial role in managing the insolvency process, conducting the resolution proceedings, and ensuring compliance with the code.
- Insolvency Adjudicating Authority: The National Company Law Tribunal (NCLT) is designated as the adjudicating authority for corporate insolvency matters, while the Debt Recovery Tribunals (DRTs) handle individual and partnership firm insolvencies. The National Company Law Appellate Tribunal (NCLAT) acts as the appellate authority.
- Committee of Creditors: A committee comprising financial creditors is formed to make key decisions during the insolvency process, such as approving or rejecting a resolution plan.
- Liquidation: If the resolution process fails or no viable resolution plan is submitted, the distressed entity goes into liquidation. The code provides for a streamlined and transparent process for liquidation, where the assets of the entity are sold to repay creditors.
- Cross-Border Insolvency: The IBC enables cooperation and coordination with foreign jurisdictions in cross-border insolvency cases, facilitating the resolution of insolvencies involving assets or debtors in multiple countries.
The Insolvency and Bankruptcy Code of 2016 has significantly revamped the insolvency and bankruptcy framework in India, providing a faster and more efficient mechanism for dealing with distressed entities and resolving insolvency issues.