INSOLVENCY AND BANKRUPTCY CODE 2016

INTRODUCTION

Apropos to the aforementioned topic, it is imperative to have a succinct introduction of the basic terminologies of the topic and about the concerning law.

To start with, let us start with the very basic term ‘Act’. An Act is a statute which is passed by legislature i.e. Parliament of India/State Legislatures and it comes into effect as and when it is notified by the Official Gazette of India. Such law is also known as statutory law. The statutory law regarding insolvency and bankruptcy which has recently been passed is the Insolvency & Bankruptcy Code, 2016.

The term ‘insolvency’ means a financial condition of an individual or entity who is unable to meet the financial obligations i.e. dues of payments, debts, etc. The term ‘bankruptcy’ is when a Court of Law declares a person or entity as insolvent by passing an order along with the measures to be undertaken for paying the debts owed to the creditors.

As India is one of the fastest growing economies in the world, therefore ensuring economy’s stability and health is the most important concern today. However, India’s juxtaposition in terms of ease of doing business is contradictory. India ranks 136th among 190 countries in resolving ‘insolvency’ as per World Bank’s report, which is due to low recovery rate and time consuming insolvency resolution process. Likewise, it is beyond all reasonable doubt that in order to secure its quintessential state of current economy and in order to prosper like top notch economies of the world, it is exigent to take steps for improving such sad state of affairs of Indian Economy. However, every act of a Government is required to be balanced with proper checks and balances vis-à-vis inviting proper opining from the people who would be directly affected with such measures such as people working in corporate sector i.e. CEOs’, Charted Accountants, Lawyers, etc.

Recently in the month of June 2017, the Reserve Bank of India(hereinafter to be referred as ‘RBI”) notified 12 mega defaulters who owed debts of almost One Lakh Crore in total and therefore the RBI directed the banks to initiate the proceedings of recovery against those defaulters under the Insolvency & Bankruptcy Code, 2016. Interestingly, the said defaulters include giant brands also which the common public is unaware until their names were declared by RBI, which are as under:- Essar Steel, Lanco Infratech, Bhushan Steel, Bhushan Power, Alok Industries, Monnet Ispat, Era Infra Engineering, ABG Shipyard, Japyee Infratech, Electrosteel Steel, Amtek Auto and Jyoti Structures.

The Insolvency & Bankruptcy Code, 2016 provides for establishment of a Board i.e. Insolvency and Bankruptcy Board (hereinafter to be referred as ‘IBB’). IBB is the apex body governing under the ambit of Insolvency and Bankruptcy Code whereby the necessary infrastructure, Insolvency Professionals (hereinafter to be referred as ‘IPs’) and Information Utilities (hereinafter to be referred as ‘IUs’) have been set up. IPs’ are licensed professionals registered with Insolvency Professional Agencies who would act as resolution professional/liquidator/bankruptcy trustee in an insolvency resolution process.

Adjudicating Authority (hereinafter to be referred as ‘AA’) is the authority empowered with the exclusive jurisdiction to deal with insolvency related matters. National Company Law Tribunal (hereinafter to be referred as ‘NCLT’) is the AA for ‘Corporate and LLP’ insolvency and Debt Recovery Tribunal (hereinafter to be referred as ‘DRT’) is the AA for individual or partnership insolvency.

CONCLUSION

The preamble of the Insolvency and Bankruptcy Code, 2016 provides for the cardinal purpose and its aim, to which it stands committed, which is as under:-

An act to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

For brevity, it is pertinent to note that the concerns highlighted in the act are of vital nature which would help the economy on a longer run. The institutions who have been entrusted with the responsibility of adjudicating are NCLT and DRT. Doing justice is not just the only task which a Court of Law is entrusted. Justice must also seem to be done. But there are multifarious challenges involved for the Courts to encounter which seems apparent with the ongoing scenario.

Considering the foregoing manifold submissions, my personal opinion towards the present law follows hereinafter. I consider, the Insolvency and Bankruptcy Code 2016 is a capable law, there is no iota of doubt. I am of such opinion because laws so far has been enacted with the greatest care, concern and caution. It is the Court of law who has to adjudge the matter while also considering that the law involved is not archaic and tyrant. If it impedes the path of justice, surely Courts would while remaining in its jurisdiction would try to remedy the same to do justice. I am also of the view that a ‘role model’ law would be a law which remedies the situation. The person who passionately incorporates a company is like a heart and soul of that person. No one wishes to fall prey to losses and debts. Circumstances and situations are at times one of the reasons for losses and debts. A big brand or a small brand, doesn’t matter of what size it is in terms of market share, is required to be supported in its tough times.

Therefore, a role model law would be something which would help in revival of a company who owes debts and not killing it. However, if there is no other manner in which a company can revive to pay its owed debts then there is no other option for the Courts but to pull off the switch by appropriate directions as a measure to pay debts to its creditors. It has to be done because the interest of the people at large is more important and it is also important to maintain the sense of security in the investors.

The best way to bolster and augment investment in an economy is by harboring the sense of security in the investors.

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