The Insolvency and Bankruptcy, 2016 (IBC) was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on 5 May 2016 and by Rajya Sabha on 11 May 2016. The code got the assent of the Leader of India on 28 May 2016. Certain game plans of the demonstration have come into power from 5 august and 19 august 2016. The Code has been amended a couple of times till June , 2020. The IBC is a one stop answer for settling liquidations which prior was a long cycle that didn't offer a fiscally appropriate strategy. IBC hopes to consolidate the current framework by making a single law for indebtedness and liquidation. The time frame before IBC had diverse scattered laws relating to indebtedness and chapter 11 which caused inadequate and deficient results with baseless deferrals.

The public authority presented insolvency and bankruptcy chapter code 2016 to determine claims which included wiped out organizations. The code was a gigantic upheaval in the insolvency and bankruptcy chapters, since it made a committee of banks and committed settling experts for bankruptcy goal it additionally acquired legal control the interaction. The IBC is the chapter law of India which tries to consolidate the current structure by making of a solitary law for both insolvency and bankruptcy in this way IBC resembles a summation of every single existing demonstration and consequently it is a code and not a law.

Besides suggesting a proper judicial framework the code also established the insolvency and bankruptcy board of India as the regulator, a licensed professional administrator facilitates the insolvency resolution the person will act as liquidator they are appointed by creditors, the adjudication of the resolution for the companies is done by national companies law tribunal(NCLT) and for individuals it is done by debt recovery tribunal(DRT), the code also has 10 members from ministry of finance law and RBI.

The NCLT earlier existed as a forum for adjudication of disputes for companies but after the ibc came into force it became the adjudicating authority for corporate insolvency resolution and resolution.An enormous caseload especially at the NCLT seats in Delhi and Mumbai, has regularly prompted delays in settling of questions. According to the government, as of December 31, 2020, as many as 21,259 cases were pending in with the NCLT. Under the IBC, more than 2,270 cases were filled in court under the IBC in the first 9 months of the fiscal year. (PTI, 2021)

Notwithstanding, with new NCLT seats set up across different states and an increment in seat strength at the Delhi and Mumbai seats, the circumstance is probably going to improve.

Objectives Of The Insolvency And Bankruptcy Code, 2016

The objectives of IBC are to consolidate and amend all laws related to insolvency in India, to expediate the insolvency and bankruptcy proceedings in the country, to protect the interest of creditors and stakeholders of a company, revival of company, promotion of entrepreneurship, increase the credit supply in the economy, new speedy recovery system for banks, increasing the values of assets of corporates, promotion of entrepreneurship.

According to sec. 2 of the code shall be applied for insolvency, voluntarily liquidation or bankruptcy of any company, any limited liability partnership, personal guarantors to corporate debtors, partnership firms and proprietorship firms, individuals, such other body incorporated under any law for the time being in force, as the central govt. may by notification specify in this behalf the threshold limit for initiation of corporate insolvency resolution process is Rs 1 crore and above.

Procedure To Resolve Insolvency In The Code

On occurrence of default resolution process can be initiated, it can be initiated by the debtor or the creditor, the insolvency professional administrates the process The professional gives monetary data of the indebted person from the data utilities to the creditor and deal with the account holder's resources. Sec. 12 of the Code expresses that any Insolvency Resolution Process will be finished inside a period of 180 days from the date of confirmation of the application to start the process Be that as it may, the NCLT may provide one expansion which will not expand over 90 days.

After the initiation process A committee comprising of the creditors who loaned money to the debtors will be framed by the insolvency professional. The creditors panel will take a choice in regards to the fate of the debt owed to them. They may decide to resuscitate the debt owed to them by changing the reimbursement schedule, or sell (liquidate) the resources of the account holder to reimburse the debt owed to them.

If a choice isn't required in 180 days, the debt holder's assets go into liquidation. If the debtor goes to liquidation an insolvency professional regulates the liquidation process . Continues from the offer of the borrower's resources are circulated in a order of priority- 1) insolvency fixing costs, including the compensation to the insolvency professional, 2) creditors who are secured, whose loans are sponsored by collateral, dues of workers, different employees, 3) creditors who are not secured, 4) dues to the state, 5) priority shareowners 6) equity shareowners.

Amendments In The Insolvency And Bankruptcy Code, 2016

The government and the IBBI have likewise been proactive in explaining and settling issues as and when they show up through the execution of the enactment. This discloses regular amendments to both the IBC and different guidelines given under it. The code has been amended 5 times The President has consented to the proclamation of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 on June 6, 2018. The two main amendments would help both the real estate and the for micro, small and medium enterprises (MSMEs).

Homebuyers recognized as financial creditors giving them due in the committee of creditors. Accordingly, presently home purchasers will be a necessary piece of the dynamic interaction. Extraordinary provisions for MSMEs now the advertisers of MSMEs are permitted to offer for their organizations as long as they are not defaulters at will and don't draw in some other related preclusion. This has amended the irregularity in the segment 29A of the current act which had banned promoters of defaulting resources from bidding for their resources.

Impact Of Covid 19

Covid-19 had a threatening influence all over the world. The era of pandemic has forced the government authority to bring combating measures such that they can cure the increasing rates of havoc. Moreover they hold a strong intention to blow out all the increasing Covid -19 cases worldwide. Therefore focusing over the above mentioned objectives, a nationwide lockdown was declared by our Hon’ble Prime Minister.

The government of India passed Insolvency and Bankruptcy Code (Amendment) Ordinance,2020 by suspending action of Sections 7, Section 9 and Section 10.The outbreak of Covid-19 has created vast economic melt down which in turn has directly resulted in downfall of many sectors such as MSMEs, tourism, health care automobile. Therefore to cure the court matters in terms for IBC shifted the gravity towards reconstruction and protection of several stakeholders in the corporate world.

Highlights of the Amendment

1. Insertion of Section 10A, which states that no application for initiation of CIRP under Sections 7, 9 and 10 of IBC, shall be filed for any default occurred on or after 25 March, 2020, for a period of six (6) months. This period can be further extended, by notification, up to a maximum of one (1) year.
2. A Proviso to Section 10A states that no application under Sections of 7, 9 and 10 shall “ever” be filed for initiation of CIRP for defaults occurring during the said period, which is occurring between 25 March, 2020 to 24 September, 2020.
3. No Resolution Professional (RP) appointed for an already initiated CIRP is allowed to file an application under Section 66 of the Code (for fraudulent or wrongful trading). since as per the new Section 10A, the already commenced CIRPs for defaults occurred after 25 March, 2020 are suspended from the date of the Ordinance.

The government announced a pre-packaged insolvency resolution mechanism for micro, small, and medium enterprises in the IBC (amendment) Ordinance, 2021. The inclusion of a pre-packaged insolvency resolution mechanism for MSMEs in the Code is intended to alleviate the pain felt by MSMEs as a result of the pandemic's effects and the special nature of their businesses, appropriately understanding their needs. It offers a cost-effective, prompt, and reliable alternative insolvency resolution mechanism for corporate persons categorised as MSMEs, ensuring a positive signal to the debt market, job security, ease of doing business, and the preservation of enterprise resources.

Case Laws
A three-judge bench of the Supreme Court held in P. Mohanraj & Ors. v MS Shah Brothers Ispat Pvt Ltd that the institution or continuation of a proceeding under Section 138/141 of the Negotiable Instruments Act 1881 ('NI Act') will be protected by the moratorium under S. 14 of the Insolvency and Bankruptcy Code, 2016 ('Code'). The National Company Law Tribunal ('NCLT') had temporarily halted proceedings stemming from criminal charges filed against the corporate debtor for dishonour of cheques.

The National Company Law Appellate Tribunal, Delhi ('NCLAT, New Delhi') overturned the NCLT's decision, holding that a criminal law provision does not fall within the scope of 'proceedings' under Section 14 of the Code. The Supreme Court stated that the object of a moratorium, as stated in the Insolvency Law Committee's February 2020 report, was to avoid the depletion of the corporate debtor's assets during the Corporate Insolvency Resolution Process ('CIRP').

As a result, quasi-criminal proceedings that could result in the depletion of assets as a result of having to pay penalties for cheque dishonour would affect the CIRP in the same way that a civil court action for the value of a debt or other responsibility would. As a result, the Supreme Court decided that the concept of "proceedings" under S.14 could not be limited to civil cases. The Supreme Court also pointed out that S. 32A (which extinguishes criminal liability with a change of management) included all offences committed prior to the CIRP's inception, including S. 138 trials, which would no longer be an offence qua the corporate debtor if new management was brought in.

The Supreme Court held in Laxmi Pat Surana v. Union Bank of India & Anr. that an application under Section 7 of the Code may be filed against a corporate guarantor to a loan even if the principal borrower is not a corporate individual, and that the debt owing will be a "financial debt" under Section 5(8) of the Code.

The Supreme Court has stated that when the principal creditor defaults on its loan, the guarantor's status changes to that of a corporate debtor. The Supreme Court also held that the limitation period for filing an application under Section 7 of the Code must be calculated anew each time the principal creditor, as well as the corporate guarantor, acknowledges the debt.

Conclusion
As any legislation will have a transformative impact, the IBC has achieved that objective. not like its precursor regimes, the IBC has been adopted well by the system and utilized in a fashion that's increasing stakeholder value.

The government has been proactive in guaranteeing that issues are dealt with therefore the courts have also with the exception of some occasional stray orders avoided overturning the choices of the COC. Sanguinely after the Coronavirus pandemic is managed considerably the government will pull together its endeavours on guaranteeing that the code is executed decisively and made completely operational.

Bibliography:

• Lexology.com. 2021. India’s Insolvency and Bankruptcy Code: An Overview | Lexology. [online] Available at: https://www.lexology.com/library/detail.aspx?g=3fd828a8-8b4e-4826-a572-d552c9bda4f8
• Drishti IAS. 2021. In Depth - Insolvency and Bankruptcy Code Act. [online] Available at: <https://www.drishtiias.com/loksabha-rajyasabha-discussions/in-depth-insolvency-and-bankruptcy-code-act>
• ETBFSI.com. 2021. What is Insolvency and Bankruptcy Code (IBC) 2016? - ET BFSI. [online] Available at: <https://bfsi.economictimes.indiatimes.com/news/banking/what-is-insolvency-and-bankruptcy-code-ibc-2016/74235436>
• PRSIndia. 2021. The Insolvency and Bankruptcy Code: All you need to know. [online] Available at: <https://www.prsindia.org/theprsblog/insolvency-and-bankruptcy-code-all-you-need-know>
• LLP, T., 2021. Basics of Insolvency and Bankruptcy Code, 2016. [online] TaxGuru. Available at: https://taxguru.in/corporate-law/basics-insolvency-bankruptcy-code-2016.html
• The Economic Times. 2021. Over 21,250 cases pending before NCLT at end of December 2020. [online] Available at: <https://www.google.co.in/amp/s/m.economictimes.com/news/economy/policy/over-21250-cases-pending-before-nclt-at-end-of-december-2020/amp_articleshow/80754041.cms>
• Mohanty, P., 2021. Rebooting Economy 65: IBC has failed; will a bad bank succeed?. [online] Google.co.in. Available at: <https://www.google.co.in/amp/s/m.businesstoday.in/lite/story/rebooting-economy-65-ibc-has-failed-will-a-bad-bank-succeed/1/430537.html>

Cases:

• P. Mohanraj & Ors. v MS Shah Brothers Ispat Pvt Ltd., AIR 2021 SC 152.
• Laxmi Pat Surana v. Union Bank of India & Anr., Civil Appeal no. 2734 of 2020.
  

Written By: Vivek Sharma - GIBS (Guru Gobind Singh Indraprastha University)

Author id: 12786