The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015.
One Stop solution
It was passed by Lok Sabha on May 5 the next year. The Code received the assent of the President of India on May 28, 2016. Certain provisions of the Act came into force from August 5 and 19. The bankruptcy code is a one-stop solution for resolving insolvencies which at present is a long process and does not offer an economically viable arrangement.
The Code aimed to repeal the Presidency Towns Insolvency Act, 1909 and Sick Industrial Companies (Special Provisions) Repeal Act, 2003, among others.
The first insolvency resolution order under this code was passed by National Company Law Tribunal (NCLT) in the case of Synergies-Dooray Automotive Ltd on August 14, 2017. The plea for insolvency was submitted by the company on January 23.
The resolution plan was submitted to NCLT within a period of 180-day period as required by the code, and the approval for the same was received on August 2 from the Tribunal. The final order was uploaded on the NCLT website on August 14, 2017.
A plea for insolvency is submitted to the adjudicating authority (NCLT in case of corporate debtors) by financial or operation creditors or the corporate debtor itself. The maximum time allowed to either accept or reject the plea is 14 days.
If the plea is accepted, the Tribunal has to appoint an Insolvency Resolution Professional (IRP) to draft a resolution plan within 180 days (extendable by 90 days), following which the Corporate Insolvency Resolution process is initiated by the court.
During this period, the board of directors of the company stands suspended, and the promoters do not have a say in the management of the company. The IRP, if required, can seek the support of the company’s management for day-to-day operations. if the CIRP fails in reviving the company the liquidation process is initiated