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Recent Developments In The Insolvency And Bankruptcy Laws In India

This article analyses the recent developments in the Insolvency and bankruptcy laws in India. This article explains the emerging developments to the Insolvency and Bankruptcy Code, 2016 with the ambit of Covid-19 pandemic. It also provides the procedure for the insolvency laws in India. The modern business era brought many changes to business society.

But some companies might use unethical ways to compete in emerging business and establish a position in the market by borrowing more money and putting the creditors in a hardship situation and this increases the burden for the judiciary Thus with this help of the code all these practises can be regulated and curtailed.

Introduction:
In general terms the Insolvency and bankruptcy means a position in which a business or business man is not in a position to discharge the debts or pay off the debts. The term Insolvent means not able to repay the debts and also it has a wider meaning in terms of criminal aspects.

In recent times our Indian economy is a developing economy and there is a tremendous developments in the markets and new business. There is a large scope for new markets. Thus In this article we will be discussing about the recent and trend developments in the bankruptcy laws in India in detail.
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Background For Enactment Of Bankruptcy Laws:

To start a business capital management is a significant one. But due to some unavoidable circumstances the debtors who borrowed the money are in a sorrowful situation to repay the money and they are made insolvent. This might also result in suicidal attempts of the debtors as there are not in a situation to pay back the debts. The Secured and unsecured creditors, employees, regulatory authorities had different and often competing rights with no common regulatory process to determine the priority of claims.

To curtail all these issues A complete piece of legislation was brought into light, widely known as the Insolvency and Bankruptcy Code, 2016 (called the Code but not an Act) to consolidate and amend all insolvency statutes and laws relating to reorganisation and insolvency resolution of corporate.[1]

The main objective of the code is to protect the interest of creditors including stakeholders in a company, to revive the company in a time bound manner, to maximize value of assets of corporate persons, to get necessary relief to the creditors who have been waiting for payments since long. In light of the losses sustained by the creditors, in consequence to the non-payment of debt in due course of time because of non-existence of a legally binding procedure, the parliament introduced this code on December 2016.

The Insolvency and Bankruptcy Code, 2016: In the Light of Covid-19:

The Insolvency and Bankruptcy Board of India (IBBI) acts as an regulator for the laws relating to Insolvency. It was established on 1 October 2016 and given the statutory powers through the IB Code, which was passed by LokSabha on 5 May 2016. [2]

With this Board and code it aims to solve all the issues relating to the bankruptcy in India. Also recently during the Covid-19 pandemic the Board helped in many areas of bankruptcy and also extended as well as reduced the credit repayment and liquidation of assets time period.

Also recently on 2020,The Insolvency and Bankruptcy Code, 2016 amendment bill was passed in the parliament regarding fresh up the proceedings after post covid. The Covid-19 in India made the closure of business and there was downturn structure in the Indian Economy. This made the business and individuals struck in between to repay the loan amount.

Contemporary Developments To The Existing Insolvency And Bankruptcy Code, 2016 Code In The Ambit Of Covid-19:
  • The Pecuniary limit for filing the petition has been increased to Rs.1 crore from Rs. 1 Lakh in India.
  • The Insolvency and bankruptcy Board was reorganized and constituted with new regulations and rules,
  • There provided an exclusion of liquidation process in the Lockdown times.
  • Several amendments were bought to the Code for giving the breathing time to the businesses and debtors.
Thus these developments aims at protecting the interests of the general public and business in the Indian market .

Improvements in the Insolvency Resolution Process Stages:
  1. Stage 1: Filing the Petition to the NCLT: Once filed, the NCLT reviews the merits of the petition considering whether the petition holds a locus standi before the tribunal or not. The complaint can also be filed online.
  2. Stage 2: Appointment of Interim Resolution Professional.
  3. Stage 3:Analysis of the case in the light of the Insolvency and Bankruptcy Code, 2016.
  4. Stage 6: Decision: Improvement in speedy trial of cases.[3]

Way Ahead:

The IBC has reformed the Indian insolvency law landscape to a great deal of extent. It has contributed to the development of disciplined borrowing amongst companies and the firms in the India. A whopping 18,629 applications seeking more than Rs.5,29,000 crore are noted to have been resolved even prior to being admitted.[4]

As per reports, a total of ₹2.5-lakh crore has been introduced back into the banking system from 2016 upon resolution of insolvencies under Insolvency and Bankruptcy Code. The IBC has undoubtedly revived India's insolvency regime.

Conclusion:
Thus the Insolvency and Bankruptcy Code, 2016 and The Insolvency and Bankruptcy Board of India (IBBI) aimed at resolving and addressing the issues in the areas of Insolvency and Bankruptcy in Business. But still it's a matter of question whether it solved the issues in depth.

Of the 1,298 instances / cases accepted only 52 (4%) were disposed of with authorized resolution plans, 259 (20%) were in liquidation and 987 (76%) were continuous.[5] It would be better if there is an Alternative way of solving these disputes as this code are more procedural in nature which is time consuming process.

End-Notes:
  1. Emerging Value of the Insolvency and Bankruptcy Code, 2016, CNLU LJ (9) [2020] 108
  2. Article title: Insolvency and Bankruptcy Board of India: Wikipedia
  3. IndiaFilings Private Limited
  4. https://www.thehindubusinessline.com/
  5. https://blog.ipleaders.in/recent-developments-insolvency-bankruptcy-code-2016/


Award Winning Article Is Written By: Mr.Gnanavel.L
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