The Insolvency and Bankruptcy Code, 2016 is listed for passage in Rajya Sabha. Lok Sabha passed the Code with latest changes recommended by the Joint Parliamentary Committee(JPC) that examined the Code. The 2016 Code of Insolvency and Bankruptcy applies to companies and individuals in India. It provides for a time-bound process to resolve insolvency cases. When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency within a 180-days period. To ensure an uninterrupted resolution process, the Insolvency and Bankruptcy Code also provides immunity to debtors in India from resolution claims of creditors during this period. The Insolvency and Bankruptcy Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency.
The Insolvency and Bankruptcy Code creates various institutions to facilitate resolution of insolvency. These are as follows:
Insolvency Professionals: A specialised cadre of licensed legal professionals is proposed to be created. These legal professionals will administer the resolution process, manage the assets of the debtor, and provide legal information for creditors to assist them in decision making.
Insolvency Professional Agencies: The insolvency legal professionals will be registered with insolvency professional agencies. The agencies conduct examinations to certify the insolvency professionals and enforce a code of conduct for their best performance.
Information Utilities: Creditors will report legal financial information of the debt owed to them by the debtor. Such legal information will include records of debt, liabilities and defaults.
Adjudicating authorities: The proceedings of the resolution process will be adjudicated by the National Companies Law Tribunal (NCLT) of india, for companies; and the Debt Recovery Tribunal (DRT), for individuals. The duties of the legal authorities will include approval to initiate the resolution process, appoint the insolvency professional, and approve the final decision of creditors.
Insolvency and Bankruptcy Board: The Insolvency and Bankruptcy Board will regulate insolvency professionals, insolvency professional agencies and information utilities set up under the Insolvency and Bankruptcy Code. The Board will consist of representatives of Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law.