The Insolvency and Bankruptcy Code (IBC), 2016, transformed the insolvency landscape in India. It replaced a fragmented and inefficient system with a single, consolidated framework designed to resolve insolvency in a time-bound manner.
Why the IBC Matters
Before the IBC, insolvency proceedings could take years, leading to significant value erosion. The IBC prioritizes business rescue and creditor recovery, providing a clear roadmap for both financial and operational creditors.
The Resolution Process
- Initiation: A creditor or the corporate debtor itself can file an application before the National Company Law Tribunal (NCLT).
- Moratorium: Once admitted, a moratorium is declared, preventing any lawsuits or asset transfers.
- Committee of Creditors (CoC): A CoC is formed, primarily consisting of financial creditors, who decide the future of the company.
- Resolution Plan: Potential bidders submit resolution plans, which are evaluated and voted on by the CoC.
The IBC has significantly improved the ease of doing business in India and has led to the successful resolution of several large-scale insolvency cases. However, challenges remain, particularly around the time taken for NCLT admissions and the overall recovery rates.
In this blog series, we will delve deeper into specific aspects of the IBC and explore how it continues to evolve through judicial interpretations and legislative amendments.