- Supreme Court has upheld the Insolvency & Bankruptcy Code’s constitutional validity in its ‘entirety’.
- The IBC was enacted in 2016, replacing a host of laws, with the aim to streamline and speed up the resolution process of failed businesses.
- The code covers all individuals, companies, Limited Liability Partnerships (LLPs) and partnership firms. It provides for a time-bound process to resolve insolvency. When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency within a 180-day period.
- The Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency.
IBC creates various institutions to facilitate resolution of insolvency.
These are as follows:
- Insolvency Professionals: A specialised cadre of licensed professionals is created. These professionals will administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.
- Insolvency Professional Agencies: The insolvency professionals will be registered with insolvency professional agencies.
- Information Utilities: Creditors will report financial information of the debt owed to them by the debtor. Such 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), for companies; and the Debt Recovery Tribunal (DRT), for individuals.
- Insolvency and Bankruptcy Board: The Board will regulate insolvency professionals, insolvency professional agencies and information utilities set up under the Code. The Board will consist of representatives of Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law.