Insolvency And Bankruptcy Code, 2016 was the Modi Government’s revolutionary step which was passed by the Parliament in May 2016 and by the Council of States in the same month. It aimed to develop the relationship between the debtors and the creditors. Besides, it establishes a comprehensive, time-bound solution and exit strategy for the operation of companies from going bankrupt in India. Similarly, this code gives a roadmap to the legislature for directing creditor-driven insolvency resolution. Organizations, as well as individuals both, may apply for insolvency but there is a thin difference between them, for corporate it is known as corporate insolvency and for individuals, it is called bankruptcy under this Code. If we look at the ease of doing business report made by the World Bank in 2014 then we can see India was in 142nd rank out of the 190 nations of the world. However, India was in 63rd rank in 202d it is a remarkable record made in just six years. The main contributor to this immense achievement of this Code has occurred just the effective and speedily processing of the organizations under this Code. Due to cutting down the overburden on non-performing assets, we have required different types of reforms therefore, an instantaneous change in the Insolvency and Bankruptcy laws was necessary.
- To amend and consolidate the laws concerning re-formation and insolvency resolution of corporate people, partnership companies, and persons.
- To determine the time duration for implementing the laws under a time-bound process of insolvency within 180 days.
- To maximize the price of investments of enthusiastic individuals.
- To emphasize the entrepreneurship in market.
- To boost the obtained of credit.
- To balance every stakeholder’s dividends comprising alteration and balances would be fulfilled as per the preference of expenditure of authority rental.
- To organize an Insolvency and Bankruptcy Board like a controller organ for insolvency and bankruptcy laws in India.
- To give pain-free resurrection instruments for substances.
- To settle the bad debt crisis in India by establishing a database of defaulters.
This code has made clearness to the process of insolvency and bankruptcy strategy that is not known to companies or persons like different entities before a few years back. There have some reasons that insolvency and bankruptcy code are obvious and the problem of ownership is missing their supervision on the companies or enlarged legal process is binding various corporate defaulters to overlook their responsibility even before insolvency would be commenced.
The corporate insolvency resolution procedure resulted in a goal of 94 lawsuits till March 31, 2019, that had taken about the refund of lawsuits money included creditors amounting to rupees 1.73 trillion and those lawsuits contain six out of twelve huge lists wherein insolvency resolution has been commenced by banks to the bearings of the Reserve Bank of India in 2017 and the comprehensive comeback in the event of resolved lawsuits are nearly 43% that is 194% of the liquidation esteem and real estate had the maximum division with 20% of the insolvency lawsuits are being admitted and manufacturing that contains steel, synthetic compounds, and power involved 40% corporate firms similarly approved willful liquidation and one of the objectives of this Code is to permit the institutions to end with no possibility that they cannot do any industry or if the company itself was unviable.
However, it is also beneficial for the banks like they would use the insolvency and bankruptcy code to clean up their investment records. It will similarly elicit a useful development of wealth in the Indian economy and it brings the category of the recent corporations and withdrawal of the sick corporations. Besides, it has also empowered the monetarily strong institutions to improve by clarifying the opportunity to move the institution runs under the insolvency and bankruptcy code, 2016.
This is a very revolutionary code enforced in 2016 and it strives to give one-stop solutions and time-bound processing for all the insolvencies in this Code. Also, the machinery and organizations established under this Code assist to obtain the objective to decide the corporate insolvency or liquidation if there is any requirement. Still, this Code has various difficulties that obstacle its expansion as well as decrease its efficiency of this Code. However, any company that does not hold its functioning due to endless losses time duration and resulting in a difficulty to the economy widely and impacting on the creditors individually but there is a possibility for enacting of this Code be as useful as directed and live up to its legislative goal then it would be acted as effectively.
Author’s Name: Subhajit Samanta (Bikash Bharati Law College, University Of Kolkata)