Insolvency and Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code, 2016 (IBC) is an amalgamation of the existing legislations related to bankruptcy and insolvency. It has simplified the resolution of insolvencies and aims at making business more convenient. It also aims at protecting the interests of small-scale business owners. The IBC was introduced with the aim of helping tackle loan issues which were burdening the banking system. The IBC has been a gamechanger of sorts when it comes to debt recovery. Initially in case the creditor had to make decisions with relation to the process of resolving insolvency after taking control of the debtor’s property. But now both the creditor and debtor can start a ‘recovery process’ against each other. The IBC, 2016 repeals the Presidency Towns Insolvency Act, 1909 and Sick Industrial Companies (Special Provisions) Repeal Act, 2003 beside others.

There is a huge number of instances of non-performing assets in the banking sector. This has an adverse impact on the economy as it slows down the pick-up rate. Recovery of bank dues is also a major issue that affects the profitability of banks. Keeping in mind this, it is to be understood that there were no laws in the corporate realm that could deal with this issue. It is in this backdrop that the IBC, 2016 acts as a game changer.

How does the IBC, 2016 do this? The IBC sets up a time frame that ought to be complied with that help with both revival and closure of any corporates who have a long-standing debt to the banks. The steps are as follows:[1]

  • Insolvency resolution petitions can be initiated immediately on default of Rs 1 lakh or above, as per section 6 of the code if any corporate debtor commits a default, a financial creditor, operational creditor and corporate debtor may initiate corporate insolvency resolution process. Such resolution process requires to be file with the adjudicating authority i.e. NCLT (for corporate applicant) DRT (for individual and partnership)
  • The resolution professional proposed to be appointed as Interim resolution professional, such professional must possess requisite qualification and experience as mandated by the Code.
  • The plan submitted by the IRP requires 75% approval of the committee of Creditors (CoC) which is now being reduced to 66% approval of CoC after president approval to the promulgation of I& B (Amendment) Ordinance, 2018.
  • The Adjudicating Authority shall, within 14 days of the receipt of the application, by an order- (i) admit the application, if it is complete in all manner or (ii) reject the application if it found any incompleteness.
  • The resolution professional should submit the plan of resolution within 180 day once it is accepted by the authority, which may be further extended for 90 days thus aggregate time in any situation may not exceed 270 days. If the CoC agree to accept the resolution plan then corporate entity would be revived else it would be liquidated.

For businessmen, before the introduction of the IBC closing down of a business was a cumbersome process that took up to 4 years. With the introduction of the Code, there is an ‘early exit option’ that was created which made it easier for the closure of businesses. The provisions of the Code have also been successful in monitoring the actions of the Promotors and defaulters by holding them liable as under Section 29. All these provisions have made the IBC stand out in as a gamechanger, especially in terms of the resolution process.


[1] Insolvency and Bankruptcy Code: A Game changer, CS Udbhav, available at https://www.caclubindia.com/articles/insolvency-and-bankruptcy-code-a-game-changer-33405.asp

The Insolvency and Bankruptcy Code, 2016 (IBC) is an amalgamation of the existing legislations related to bankruptcy and insolvency. It has simplified the resolution of insolvencies and aims at making business more convenient. It also aims at protecting the interests of small-scale business owners. The IBC was introduced with the aim of helping tackle loan issues which were burdening the banking system. The IBC has been a gamechanger of sorts when it comes to debt recovery. Initially in case the creditor had to make decisions with relation to the process of resolving insolvency after taking control of the debtor’s property. But now both the creditor and debtor can start a ‘recovery process’ against each other. The IBC, 2016 repeals the Presidency Towns Insolvency Act, 1909 and Sick Industrial Companies (Special Provisions) Repeal Act, 2003 beside others.

There is a huge number of instances of non-performing assets in the banking sector. This has an adverse impact on the economy as it slows down the pick-up rate. Recovery of bank dues is also a major issue that affects the profitability of banks. Keeping in mind this, it is to be understood that there were no laws in the corporate realm that could deal with this issue. It is in this backdrop that the IBC, 2016 acts as a game changer.

How does the IBC, 2016 do this? The IBC sets up a time frame that ought to be complied with that help with both revival and closure of any corporates who have a long-standing debt to the banks. The steps are as follows:[1]

  • Insolvency resolution petitions can be initiated immediately on default of Rs 1 lakh or above, as per section 6 of the code if any corporate debtor commits a default, a financial creditor, operational creditor and corporate debtor may initiate corporate insolvency resolution process. Such resolution process requires to be file with the adjudicating authority i.e. NCLT (for corporate applicant) DRT (for individual and partnership)
  • The resolution professional proposed to be appointed as Interim resolution professional, such professional must possess requisite qualification and experience as mandated by the Code.
  • The plan submitted by the IRP requires 75% approval of the committee of Creditors (CoC) which is now being reduced to 66% approval of CoC after president approval to the promulgation of I& B (Amendment) Ordinance, 2018.
  • The Adjudicating Authority shall, within 14 days of the receipt of the application, by an order- (i) admit the application, if it is complete in all manner or (ii) reject the application if it found any incompleteness.
  • The resolution professional should submit the plan of resolution within 180 day once it is accepted by the authority, which may be further extended for 90 days thus aggregate time in any situation may not exceed 270 days. If the CoC agree to accept the resolution plan then corporate entity would be revived else it would be liquidated.

For businessmen, before the introduction of the IBC closing down of a business was a cumbersome process that took up to 4 years. With the introduction of the Code, there is an ‘early exit option’ that was created which made it easier for the closure of businesses. The provisions of the Code have also been successful in monitoring the actions of the Promotors and defaulters by holding them liable as under Section 29. All these provisions have made the IBC stand out in as a gamechanger, especially in terms of the resolution process.


[1] Insolvency and Bankruptcy Code: A Game changer, CS Udbhav, available at https://www.caclubindia.com/articles/insolvency-and-bankruptcy-code-a-game-changer-33405.asp

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

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