This research paper examines the insolvency and bankruptcy laws in India and the United States, focusing on their legal structures, procedural mechanisms, and key provisions. It examines the historical evolution, objectives, and scope of the Insolvency and Bankruptcy Code (IBC) in India and the U.S. Bankruptcy Code in the United States.

The paper also discusses the procedural aspects of insolvency proceedings, including initiation, appointment of professionals, formation of creditors' committees, and formulation and approval of resolution plans. It evaluates the effectiveness and efficiency of the systems, identifying challenges and opportunities for improvement.

The paper also discusses recent developments and reforms in both jurisdictions aimed at enhancing the insolvency and bankruptcy frameworks, including legislative amendments, judicial decisions, and policy initiatives. The paper concludes with reflections on the comparative strengths and weaknesses of the insolvency and bankruptcy laws in India and the United States, emphasizing the importance of international cooperation and best practices in addressing insolvency and bankruptcy challenges in an interconnected global economy.

Introduction
This paper must begin by quoting Lord Mishcon, who stated that the topic of insolvency is neither particularly exciting nor humorous. But as renowned English jurist Edward Jenks put it, "...uninteresting as it may be, it is nevertheless a very important subject area.

The Insolvency and Bankruptcy Code (IBC) was enacted in India in 2016 to streamline insolvency resolution and bankruptcy proceedings. The IBC aims to promote entrepreneurship, ease business operations, and provide a systematic solution to financial distress. The process can be initiated by a creditor or a debtor, with the latter voluntarily initiating the process if they believe they are insolvent or anticipate insolvency.

An Insolvency Professional (IP) is appointed to manage the debtor's affairs and facilitate the resolution process. If the process fails, the debtor may be declared bankrupt, and their assets may be liquidated to repay creditors. The IBC ensures a time-bound process for insolvency cases.

Whereas The United States Bankruptcy Code governs insolvency and bankruptcy laws in the country. Chapter 7 involves liquidating assets to repay creditors and discharge remaining debts, commonly used by individuals and businesses with no future earnings. Chapter 11 allows for debt reorganization and business operations under court supervision, often used by large corporations to restructure their debts.

Chapter 13 is available to individuals with regular income who wish to repay their debts over time through a court-approved repayment plan. Bankruptcy processes in the United States can be more complicated and time-consuming than those in India, where the Indian Bankruptcy Code (IBC) aims for a time-bound resolution process, particularly in Chapter 11 cases requiring business reorganization.

What Does Insolvency And Bankruptcy Mean?

Insolvency and bankruptcy are legal terms related to financial distress and the inability to meet financial obligations. Insolvency occurs when an individual or organization cannot pay debts due to economic downturns, mismanagement, or unexpected expenses, affecting their financial state rather than a legal process.

And Bankruptcy is a legal process for insolvent individuals or businesses, involving court proceedings to settle debts. It aims to provide a fair, orderly resolution while protecting debtors and creditors' rights. Thus, insolvency refers to the financial condition of being unable to pay debts, while bankruptcy is a legal process used to address insolvency and provide a framework for debt resolution.

History
To simplify and unify the nation's bankruptcy and insolvency rules, India implemented the Insolvency and Bankruptcy Code (IBC) in 2016. With the IBC, the deficiencies of the existing legislative framework were to be addressed, and a strong system for the prompt resolution of insolvency cases was to be provided. The bill underwent multiple revisions before the Indian Parliament approved it in May 2016 and it became operative in December of the same year.

The bankruptcy and Bankruptcy Code (IBC) has revolutionized the bankruptcy environment in India by instituting a timeline-driven resolution process, advocating for the rights of creditors, and enabling financially troubled enterprises to recover. It has proven crucial in resolving many insolvency issues in a more effective and transparent manner and has considerably raised India's rating in indexes of the ease of doing business.

Compared to the United States, which has a long-standing bankruptcy code that was formed in 1978, India's Insolvency and Bankruptcy Code is a relatively recent addition to the subject of insolvency law. Individuals and businesses may petition for bankruptcy under one of the several chapters provided by the U.S. Bankruptcy Code, each of which addresses a particular set of circumstances and goals. The U.S. Bankruptcy Code and India's IBC share the goal of addressing financial distress and offering a debt resolution tool, but their legal frameworks and procedures differ greatly.

In time-bound Resolution, the IBC in India places a strong focus on the timely resolution of insolvency cases, enforcing stringent deadlines for every phase of the procedure. On the other hand, American bankruptcy procedures can be longer and more intricate. In creditor Rights and Protection by giving creditor claims priority during the resolution process, the IBC in India has reinforced creditor rights and given creditors more protection. Although it may provide [1]additional latitude and discretion in some areas of debt restructuring, the U.S. Bankruptcy Code likewise protects creditors' interests.

In Scope and Coverage, the U.S. Bankruptcy Code contains distinct rules for individuals (Chapters 7 and 13) and corporations (Chapter 11), whereas the Indian Bankruptcy Code applies to both corporate and individual insolvency. And at last, in Judicial Oversight although judicial oversight is a component of both the U.S. Bankruptcy Code and the Indian IBC, the type and degree of court participation may vary. While bankruptcy courts in the US decide issues involving insolvency, the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) supervise insolvency proceedings in India.

Evolution Of Law In Both The Countries

India
Founded in 2005, Go First, formerly known as GoAir, is an Indian low-cost airline. The airline has had to contend with difficulties like exorbitant operating costs, fierce competition, legal problems, and aircraft delivery delays. The COVID-19 pandemic in 2020 caused the airline to face a serious issue that resulted in large financial losses and the carrier's inability to pay debts. Go First completed a major rebranding initiative in June 2021, with an emphasis on debt restructuring and cost-cutting initiatives.

To acquire money for development ambitions and debt repayment, Go First filed for an initial public offering (IPO) with the Securities and Exchange Board of India (SEBI) in July 2021. Nevertheless, because of the IPO's failure, 25 aircraft—or 50% of the fleet as of January 5, 2023—were grounded. With Mr. Abhilash Lal's approval, the airline filed for corporate insolvency resolution process (CIRP) before Delhi Bench of National Company Law Tribunal (NCLT). With Mr. Abhilash Lal's approval, the airline's insolvency resolution procedure was started.

USA
Founded in 1971, Bed Bath & Beyond Inc. is an American retail business that specializes in home goods. With more than 900 locations globally, the corporation must contend with issues like shifting consumer purchasing patterns and heightened competition from internet merchants. The corporation revealed its reorganization strategy in 2019 with the goal of increasing profitability and streamlining operations.

On the other hand, it has declared intentions to close over 200 outlets in the upcoming two years. There were more supply chain problems because of the COVID-19 epidemic. The company filed for bankruptcy under Chapter 11.9 and named Holly Etlin as its Interim Chief Financial Officer. The corporation has serious concerns about its insolvency regime in both the US and India.

Issues:
India
Non-performing assets have been an issue for the Indian banking industry in recent years, which has occasionally contributed to economic slowdown. Despite taking on large loans, several companies or industries opted to declare bankruptcy rather than repay the whole amount of the loan. The employees' share of the recovered sum was insufficient due to the depreciation of the assets. Additionally, there was no efficient mechanism for revival provided by the previous technique.

As a result, the nation's NPA level increased to an astounding degree. The negative effects of the same extended beyond the home market and hurt international investments. As a result, it was essential to modernize the legislation and include global best practices. As a result, the UNCITRAL Legislative Guide served as the basis for the 2016 adoption of the Insolvency and Bankruptcy Code, which combined the previous legal frameworks into a single, comprehensive law.

USA
Whereas in chapter 11 bankruptcy proceedings face challenges such as high costs, lengthy timeframes, and restructuring plans for small businesses. Limited access to bankruptcy relief and specialized procedures for small businesses leads to disparities in treatment. Student loan debt restrictions in bankruptcy contribute to financial burdens. Healthcare sector bankruptcies exacerbate regulatory and reimbursement issues. Tensions between secured and unsecured creditors, municipal bankruptcies, and technology and data privacy are also important issues.

An Overview Of Legal Framework

India
The Indian bankruptcy and Bankruptcy Code (IBC) attempts to harmonize and modify in a timely way the laws concerning the reorganization and bankruptcy resolution of individuals, partnership businesses, and corporate entities. Its objectives are to expedite the resolution of stressed assets, streamline business transactions, and encourage entrepreneurship.

The establishment of the Insolvency and Bankruptcy Board of India (IBBI) to regulate insolvency practitioners, the introduction of time-bound resolution processes, and the creation of a complete framework for bankruptcy resolution are important components.

By streamlining the process of resolving insolvency in India, the IBC has increased creditor recovery rates and decreased non-performing assets (NPAs) in the banking industry. Investors and creditors now have more confidence because of the regulatory monitoring and professional standards that the IBBI has brought to the insolvency profession.

But there are also obstacles to overcome, such as limited capacity in the National Company Law Tribunal (NCLT) and the IBBI, inconsistent application of the law and legal interpretations, operational difficulties due to a lack of infrastructure, qualified personnel, and information utilities, and problems with creditor hierarchy, classification, and treatment.

The IBC may be amended or revised in the future, institutional capacities may be strengthened, the IBC may be harmonized with other laws and regulations, corporate governance, responsible lending, and debtor-creditor relationships may be encouraged, and the insolvency profession's capacity building, training, and professional development will be emphasized.

There are few other Laws also which deal with the insolvency and bankruptcy problem in India:

• Companies Act, 2013
• SARFAESI Act, 2002
• SICA Act, 1985
• Presidency Towns Insolvency Act, 1909
• Provincial Insolvency Act, 1920
• Limited Liability Partnership Act, 2008

USA
A federal legislation known as the U.S. Bankruptcy Code was created to assist people and companies facing financial difficulties in filing for bankruptcy and reorganizing their financial affairs. It is divided into multiple chapters, each of which offers debtors a distinct kind of relief. Chapter 7: A court-appointed trustee will liquidate a debtor's non-exempt assets, with the proceeds going toward paying off creditors.

Chapter 13:
Adjustment of obligations for Individuals with Regular Income is intended for people who make a regular living and have sufficient extra cash on hand to pay back some of their obligations using a repayment plan that has been approved by the court. Chapter 11: Reorganization is mainly utilized by enterprises, although people who owe a lot of money can apply under this chapter as well.

Chapter 12: Fisherman or Farmer in the Family Family farmers and fishermen who are having financial troubles can file for bankruptcy. Municipalities in financial difficulties can file for Chapter 9: Municipality Bankruptcy, which gives them the opportunity to reorganize their debts and create a strategy to become financially stable again while keeping up key services for their citizens.

In Chapter 15, "Cross-Border Insolvency," situations involving foreign debtors or assets are discussed. This chapter helps ensure that international bankruptcy cases are handled fairly and effectively. To choose the best course of action and successfully navigate the bankruptcy process, debtors must speak with an experienced bankruptcy attorney.

Court Proceeding & Corporate Insolvency Resolution Process (CIRP)
India

• Starting Point: In India, a financial creditor, an operational creditor, or the corporate debtor itself can start the insolvency process by submitting an application to the National Company Law Tribunal (NCLT).
• Moratorium: A moratorium term is imposed upon the NCLT's admission of the application, during which time creditors are not allowed to pursue any claims against the corporate debtor.
• Appointment of insolvency professional: The corporate debtor's affairs are managed by an Insolvency Professional (IP) during the CIRP. The IP supervises the resolution procedure and serves as a mediator between the debtor and creditors.
• Interim Resolution Professional (IRP) Appointment: The NCLT appoints an Interim Resolution Professional (IRP) to oversee the corporate debtor's activities during the CIRP.
• Committee of Creditors (CoC) formation: A Committee of Creditors (CoC) made up of the corporate debtor's financial creditors is established by the IRP. During the insolvency process, the CoC makes important choices, such as approving a resolution plan.
• Adjudication by NCLT: The NCLT decides disputes that come up throughout the insolvency process. The tribunal settles any potential legal disputes and guarantees adherence to the IBC's rules.
• Appeal: The National Company Law Appellate Tribunal (NCLAT) and the Indian Supreme Court both accept appeals of NCLT decisions.

USA

• Filling of Bankruptcy: Bankruptcy cases in the United States are filed with the bankruptcy court under the relevant chapter of the U.S. Bankruptcy Code (Chapter 7, Chapter 11, Chapter 13, etc.)
• Autonomous Stay: When a person files for bankruptcy, most creditor collection efforts against them are automatically stopped by an automatic stay.
• Trustee appointment Chapter 7: Assets must be liquidated in Chapter 7 bankruptcy in order to pay creditors back. The liquidation process is supervised by a trustee, and qualifying debts are discharged to provide the debtor a clean slate.
• Creditors meeting: In Chapter 7 and Chapter 13 bankruptcy cases, the debtor is forced to answer questions about their financial affairs under oath at a meeting of creditors.
• Plan confirmation Chapter 11: Businesses can rearrange their debts while operating under Chapter 11 bankruptcy. Usually, the debtor submits a reconstruction plan, which the bankruptcy court and creditors must accept.
• Chapter 13: bankruptcy is mostly intended for people who make a steady living. It is creating a payback schedule to pay back debtors over a certain amount of time, typically three to five years.
• Committees of Creditors: Creditors' committees may be established in Chapter 11 bankruptcy to represent the interests of different creditor groupings and take part in the restructuring process.
• Adversary proceeding: In order to settle disagreements over things like fraudulent transfers or discharge objections, adversary procedures may be started in bankruptcy cases.
• Bankruptcy court Proceedings: bankruptcy judge presides over hearings, motions, and trials in bankruptcy court procedures. Issues pertaining to the bankruptcy case, including as plan confirmation, claims objections, and disagreements between parties, are resolved during these sessions.
• Appeals: The U.S. District Court and, in some circumstances, the U.S. Court of Appeals are the hearing courts for appeals of bankruptcy court decisions.

Resolution Plan

USA
A Debtor Insolvency Plan (DIP) is a business entity that files for bankruptcy and manages assets during the reorganisation process, including operations. The debtor must act as a fiduciary and manage the business in the best interests of all stakeholders, including filing periodic reports with the bankruptcy court. If the debtor is unable to fulfill its responsibilities or if there is evidence of fraud, mismanagement, or misconduct, the bankruptcy court can replace management with a trustee. The DIP negotiates with creditors to create a new reorganisation plan, considering pre-petition and post-petition claims.

India
In India, the resolution plan (RP) prepares an information memorandum and evaluation matrix for potential applicants to submit an expression of interest (EOI). The PRA then formulates a resolution plan, which is approved by the CoC and finalized by the AA. In America, the reorganisation plan is approved by creditors and presented to the bankruptcy court for review. Once approved, the company implements the plan, which may involve selling assets, renegotiating contracts, or restructuring the business.

Debt Recovery And Liquidation

USA
If the reorganization plan is unsuccessful, the bankrupt corporation may liquidate its assets and dissolve the business through a liquidation sale or by converting from Chapter 11 to Chapter 7. A Chapter 11 liquidation sale is the procedure by which an insolvent business sells its assets to settle its debts to creditors. The business may decide to sell off its assets and close its doors, or it may decide to reorganize and carry on with business as usual.

Usually, an auction method is used for the liquidation sale, where interested parties bid on the company's assets. Following the sale, the company's creditors get their share of the proceeds, with the order determined by bankruptcy legislation. As an alternative to just closing its doors and leaving nothing behind, a liquidation sale can enable the business to extract some value from its assets.

India
In India, the RP takes over as the liquidator if the CIRP fails and works to reach a settlement or sell the company as a going concern. When a business is unable to successfully reorganize or continue operations, liquidation is typically the last option. When a business decides to liquidate, it usually hosts an asset sale where its inventory, real estate, and equipment are up for grabs. The waterfall system, as defined by IBC Section 5354, determines how proceeds from sales are distributed in order of priority.

Priority payments are made to the government, preferred shareholders, labour dues, unsecured creditors, secured creditors, and CIRP charges with the proceeds from liquidation. In the United States of America, the payment of legitimate liens and security interests to creditors comes first, with administrative costs spent during the procedure taking precedence. General unsecured creditors are the last to get a portion of the liquidation's proceeds.

Solution And A Rescue Plan

India
A resolution plan is a written document that describes how a debtor wants to reorganize their affairs, including how they expect to pay back creditors and restart their business. In addition to identifying the resolution applicant, it should include a clear implementation roadmap, financial projections, an explanation of the implementation mechanism, a description of how creditors and stakeholders will be treated, a demonstration of compliance with legal requirements, protection of stakeholder interests, and proof of the claims made in the plan. Any regulatory clearances or approvals needed for the plan's effective execution should also be included. Additionally, it needs to guarantee that each stakeholder's rights are upheld and their interests are suitably safeguarded.

USA
An essential step in the bankruptcy process is the creation of a rescue plan, sometimes referred to as a reorganization plan. The plan describes the debtor's strategy for reorganizing its operations, paying back creditors, and emerging from bankruptcy as a financially stable and sustainable organization. A rescue plan's content is flexible, but it must have a number of required components, including the following: a disclosure statement; the acceptance and voting procedures; the classification of claims and interests; and the handling of classes.39.

Cross-Border Insolvency

The Cross-Border Insolvency Regulations, 2016, which were implemented in accordance with the Insolvency and Bankruptcy Code (IBC), regulate India's approach to cross-border insolvency. These rules offer a structure for handling international bankruptcy cases and collaborating with overseas courts and bankruptcy professionals.

Recognition of foreign proceedings, application for recognition, cooperation and coordination, access to Indian courts, and the concepts of comity and cooperation are important aspects of India's cross-border insolvency law. Initiating recognized international proceedings requires the debtor to be in a nation where they own property or carry on business. A foreign representative may submit an application for recognition along with the required paperwork.

In order to make the administration of the debtor's assets and affairs, including asset gathering, exams, and restructuring or liquidation plans, easier, Indian courts can collaborate with international courts and representatives. Whereas Cross-border bankruptcy in the US is covered under Chapter 15 of the Bankruptcy Code. In such circumstances, it offers a framework for coordination and collaboration between American courts and foreign courts.

The acknowledgement of international proceedings, the demand for recognition, redress, and aid, collaboration with foreign courts, and the cooperative and comradery ideals are important elements. Subject to specific requirements, U.S. bankruptcy courts may acknowledge and support international insolvency actions, including main and non-main processes.

They may also cooperate with international courts and representatives, expedite the administration of the debtor's assets in the United States, and provide relief and support to foreign representatives. This method facilitates effective resolution of cross-border insolvency situations and international cooperation.

Conclusion:
The insolvency and bankruptcy laws in India and the U.S. are crucial legal frameworks for addressing financial distress, debt resolution, and economic stability. Both codes provide mechanisms for debt resolution, creditor protection, and liquidation of insolvent entities. However, they face challenges such as delays in resolution, concerns about creditor rights, judicial capacity constraints, and complexities associated with specific types of bankruptcies.

Additionally, they face evolving economic, technological, and regulatory landscapes, affecting the effectiveness of their insolvency regimes. Despite these challenges, insolvency and bankruptcy laws play a vital role in fostering economic resilience, encouraging entrepreneurship, and preserving financial market integrity. And it is impossible to downplay the significance of this topic because it affects so many other areas of the economy, including banking, employment, corporate law, etc. As a result, the development of insolvency law must follow its guiding principles.

References:

1. A comparative study paper by Sharen Joel: https://jlrjs.com/wp-content/uploads/2023/03/67.-Sharen-Joel.pdf
2. Journal article on cross-border gravity of insolvency and bankruptcy: https://typeset.io/papers/the-cross-border-cavity-of-the-insolvency-bankruptcy-code-3rncj1rs
3. Quotes address by Justice NV Ramana, judge, Supreme Court of India: https://www.livelaw.in/pdf_upload/pdf_upload-370976.pdf
4. Article on comparative study on India and America: https://www.scconline.com/blog/post/2023/09/19/insolvency-regime-in-india-and-usa-a-comparative-study/
5. "Bed Bath & Beyond Inc. Announces Extensive Changes to Leadership Team" (bedbathandbeyond.gcs-web.com, 17-12-2019).
6. Sakshi Dhakre, "Go First Airline Insolvency: Why did the Company Crash" (insider.finology.in, 3-5-2023)....
7. Tata Steel Ltd. v. Liberty House Group Pte. Ltd., 2019 SCC Online NCLAT 13....
8. Dr. Binoy J. Kattadiyil and CS. Peer Mehboob, Corporate Insolvency in India and Other Countries- A Comparative Study, IJMER, 7(9), 2020
9. Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Regn. 37.
10. United States Code, T. 11, Ch. 11, S. 1123....
11. particularly in Chapter 11 cases that involve company reorganization