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IBC (Reason for success (Resolution of large accounts RBI recommended 12…
IBC
Reason for success
Resolution of large accounts RBI recommended 12 large accounts (accounting for 25% NPA- Bhushan (Tata Steel bought some assets) and Essar on advanced stages too
Reduced time for resolution As per IBBI average resolution outer timeline is 270-day far below WB 2015 estimate of 4.3 years
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Uniform and universal application withdrawal of earlier schemes like SDR, S4A etc.
Impact of Section 29(A): prohibits willful defaulters, disqualified directors, company management with non-performing debt over a year not allowed to participate in resolution process
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Focus on Outcome Neutrality both revival and liquidation unlike previous acts which avoided liquidity
Challenges
Perceived Bias against liquidation eg. CoC majority threshold from IBC amendment lowering the vote threshold (from 75% to 66%) favours debt restructuring
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Substantive issues nascent law with evolving jurisprudence, eg. validity of 29A yet to decided by court
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IPC process
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If CoC doesn't agree debt rezig plan in 180 days through vote, company/borrower's asset will be liquidated
Creditor/Debtor can reach to DBT/NCLT for initiating insolvency process. Appeal to be accepted/rejected in 14 days
SC Judgement
Case appeal dues of operational creditors rank below those of financial creditors (purely financial transactions or transactions related to day to day operations defined under IBC law)
SC decision- legislation is not violative of Article 14 as financial creditors are more important for economy
IBC structure
Insolvency and Bankruptcy Board of India Insolvency Professional Agencies (IPAs); Insolvency Resolution Professionals (IRPs); Information Utilities
Adjudicators
National Company Law Tribunal: For corporate entities such as companies, LLPs
Debt Recovery Tribunal: For non-corporate entities such as individuals, partnership funds