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IBC (PROVISIONS (TIME PERIOD:The Code creates time-bound processes for…
IBC
PROVISIONS
TIME PERIOD:The Code creates time-bound processes for insolvency resolution of companies and individuals. These processes will be completed within 180 (extended to 270) days.
INSOLVENCY PROFESSIONALS:: The resolution processes will be conducted by licensed insolvency professionals (IPs). These IPs will be members of insolvency professional agencies (IPAs).
ADJUDICATION: The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies. The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.
Given that many corporate transactions and businesses involve an international element, the Code attempts to address this by including provisions for cross border insolvency.
INSOLVENCY REGULATOR:The Insolvency and Bankrupty Board of India. This body will have regulatory over-sight over the Insolvency Professional, Insolvency Professional agencies and information utilities.
INSOLVENCY-RESOLUTION PLAN:All such resolution plans are placed before the financial creditors. When at least 75% of the financial creditors approve, the plan is implemented by way of an order by the NCLT. If the financial creditors fail to arrive at a consensus, the default plan is to liquidate the company.
INFORMATION UTILITIES(IUs):IUs will be established to collect,collate and disseminate financial information to facilitate insolvency resolution.
SIGNIFICANCE
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It aims to overhaul laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals
Attempts to ease the process of recovery of money by operational and financial creditors in a timely manner.
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The time period prescribed under the Code was held to be procedural in nature, a tool in the expeditious dispensation of justice and is directory.
ISSUES
Clogging Tribunals - The NCLT started off well but they are clogging up now, they’re taking much longer than they did earlier.
More than 9,000 cases are before the 11 NCLT tribunals that have been set up around the country and that includes more than 2,500 insolvency cases.
Concerns with time stipulation - Regarding the time stipulation, in few cases the tribunal laid down that the 14-day period is only directive and not mandatory.
Also, the NCLAT has held that the provisions of the Limitation Act, which sets out the time-limits under which a complainant can approach the courts for redress, do not apply to proceedings under the Insolvency Code.
Authoritative IRPs - The IBC’s provision to throw the management out and replacing them with IRPs is consider to be draconian.
IRPs are a mix of chartered accountants, cost accountants, MBAs and retired public sector executives but there are many concerns has raised over the quality of the IRPs.
Drafting loopholes - Inevitably, there are loopholes in the Insolvency Act and some lawyers complain of poor drafting too.
For instance, the act has no provision for an amicable settlement once a case has been admitted.
INTRODUCTION
The IBC was enacted in 2016 to find a time-bound resolution for ailing and sick firms, either through closure or revival, while protecting the interests of creditors
A successful completion of the resolution process was expected to aid in reducing rising bad loans in the banking system
MEASURES TO BE TAKEN
There is need for setting up more tribunals in different parts of the country to handle the greater-than-expected volume of cases.
Parliament has passed Insolvency and Bankruptcy Code (Amendment) Bill, 2018 to bring relief to the home buyers and MSMEs. The Bill replaces ordinance promulgated in this regard and amends the Insolvency and Bankruptcy Code, 2016.