Understanding of the IBC, 2016

Abstract

The corporate insolvency resolution process (CIRP) in India has in the past involved the simultaneous operation of several statutory instruments. These include the Sick Industrial Companies Act, 1985, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Recovery of Debt Due to Banks and Financial Institutions Act, 1993, and the Companies Act, 2013. Broadly, these statutes provided for a disparate process of debt restructuring, and asset takeover and realization in order to facilitate the satisfaction of outstanding debts. As is evident, the inefficient dealing with insolvency and liquidation led to immense confusion in the legal system, and there was an increased necessity to modify the insolvency process. All of these multiple legal procedures and a court system led to India witnessing a huge piling up of non-performing assets, and creditors waiting for years to recover their money. The Bankruptcy Code is an effort to reform the corporate insolvency process, in order to allow credit to flow more freely and inculcating faith in investors for speedy disposal of their claims. The Code combines the existing laws relating to insolvency of corporate firms and individuals into a single legislation. The Code has unified the law relating to the enforcement of statutory rights of creditors and modifies the manner in which a debtor company can be revived to sustain its debt without suppressing the rights of creditors. To explain the Insolvency and Bankruptcy Code which is the cornerstone of CIRP various cases under different benches have been explained in the paper to understand the rights of various parties in initiating the Corporate insolvency resolution process and how does it benefit the companies involved in it.