The Insolvency & Bankruptcy Code 2016 is considered to be the transformational legislation in India to address all kinds of insolvency and bankruptcy matters.
The need for an entrepreneur-friendly legal framework for insolvency has been mentioned by Shri Arun Jaitely, Hon’ble Finance Minister, in his union budget for FY 2014-15. Since August 2014, matters have moved at a great pace with the constitution of Bankruptcy Law Reforms Committee under the Chairmanship of Shri TK Vishwanathan to the enactment of IBC in May 2016.
The objective of the IBC is quick and timely resolution of insolvency, single legislation to deal with all kinds of insolvency matters and the maximization of value, among other things. The IBC institutional framework is founded on four pillars :
- Insolvency & Bankruptcy Board of India
- Insolvency Professionals
- Insolvency Professional Agencies
- Information Utilities
While Information Utilities are yet to become functional the rest of the institutional framework is set in place.
The provisions governing corporate persons (i.e. companies and limited liability partnerships) were notified and the first matter under corporate insolvency resolution process (CIRP) was admitted on 16th January 2017 by the National Company Law Tribunal, Mumbai bench, against Innoventive Industries Limited (corporate debtor) on the application made by ICICI Bank (financial creditor). As of 31st Aug 2017, around 250 matters have been admitted into the corporate insolvency resolution process. According to the first Resolution Plan, the ideal outcome for CIRP has been approved in the matter of Synergies Dooray Automative Limited on 2nd August 2017 by the National Company Law Tribunal, Hyderabad bench.
The provisions governing voluntary liquidation was notified in Dec 2016 and 21 companies have commenced voluntary liquidation proceedings as of 31 Aug 2017.
The Insolvency Professional is a key player who has an enormous amount of obligation to discharge the role of resolution professional and liquidation professional. While IBC mandates that only individuals can be appointed as a resolution professional or liquidator, it recognizes Insolvency Professional Entities to build competency, evolve best practices, leverage pool of resources, accumulate know how, etc.
The Government and IBBIis showing huge sincerity andcommitment to implement IBC in letter and in spirit. Lets hope in the years to come IBC becomes one of the best insolvency frameworks which will be looked upon by rest of the world.
Mr. M.S. Sahoo, Chairman, IBBI, articulates the goal of IBC as – Markets need freedom at three stages of business – to start a business (free entry), to continue the business (fair competition) and to discontinue the business (free exit).