Corporate Insolvency can be defined as the company’s  inability to pay debts to the suppliers and creditors. There are different forms of creditors for a company such as commercial banks, financial institutions, NBFCs. Beside that supplier of raw materials and finished goods can also be considered as creditors to the firm. The definition of insolvency has also been included in Insolvency and Bankruptcy Code, 2016 (IBC 2016). With the globalisation of economy, the issues relating to corporate insolvency have estimated greater significance and there is an urgent need to bring reforms in this branch of law. Many authorities came up with different laws related to insolvency proceedings but it didn’t solve the problems related to recovery of debts. Even the RBI (Reserve Bank of India) came up with resolution plan but it wasn’t  feasible for many lenders. After the enactment of the Insolvency and Bankruptcy Code, 2016 considerable changes were made such as the amount of time for repayment of debt has been reduced to 180 days, which can be extended to a maximum period of 270 days etc. thus, the introduction of IBC, 2016 brought about revolutionary changes to the way in which the insolvency proceedings happen within a company.


The  primary objective of modern insolvency legislation is to remodel the financial and organizational structure of debtors. The law of insolvency is a social legislation which has been enacted to provide relief. Article 19(1)(g) of the Constitution of India states that there is freedom to practice any profession or to carry on any occupation, trade or business to the citizens of India. In the process of deregulation and liberalization number of restrictions on undertaking industrial activity has been withdrawal and relaxed. To undertake reforms in the Insolvency laws the focus shifted from strict regulations to grant freedom to the industry in conducting the business activities smoothly. The insolvency laws are governed by:

  • Transfer of Property Act, 1882
  • The Code of Civil Procedure, 1908
  • The Companies Act, 2013
  • Sick Industrial Companies Act, 1985
  • The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFEASI)  Act, 2002
  • Rules, Policies made by RBI from time to time.


  • Administration: In this process, the company doesn’t  have any assets. The directors and lenders of the company need to appoint insolvency practitioners to manage the business. They run the business in such a manner that is not detrimental to the interests of  lenders and creditors.
  • Compulsory Liquidation: It is a process where the company’s  assets are realized and then distributed to the company’s creditors. The liquidation process is carried out without the consent of the creditors or shareholders.
  • Company Voluntary Liquidation: The decision of the shareholders is taken into consideration. Without prior consent the liquidation process can’t be started. A resolution is taken by the shareholders in the general meeting to wind up the company. There is no courts intervention like other processes.


  • Petition to the NCLT: When a company fails to pay off the debts, then the creditors file a CIRP petition before the adjudicating authority. The tribunal finds merits in the petition such as minimum threshold is 1 Crore as per section 4 as per the code. The NCLT is required to call for a hearing within 14 days of the filing of petition after the tribunal finds the merits in the petition.
  • Appointment of Interim Resolution Professional(IRP): A licensed insolvency professional is appointed by the NCLT. He ensures that the operations of insolvency process need to be carried out smoothly.
  • Moratorium: It is a relaxation period for the corporate debtor in order to avoid any judicial proceedings for recovery, sale of assets and enforcement of security interest etc.
  • Collation and analysis of facts: The IRP is required to constitute a Committee of Creditors(COC) within 30 days of the commencement of the CIRP. The IRP is responsible for categorizing the claims made in the petition by the petitioner systematically and analysis is done .
  • Resolution Plan: After  verification of all the claims , it is announced that the corporate debtor is undergoing insolvency process. So, all the interested candidates or bidders are cordially invited to submit a resolution plan that can be implemented after careful analysis.
  • Decision: The resolution plan approved by the COC is presented before the NCLT. If the NCLT approves the plan then it is executed and binds the corporate debtor including all stakeholders. If NCLT doesn’t sanction the resolution plan within a limited time frame, then the tribunal orders to commence with the liquidation process.


Insolvencylaw can serve as a tool to protect financially distressed debtors, to help them to preserve the value of the firm and restructuring of their debts. Suspending of all the rights of an insolvent cannot be considered as an appropriate measure. Hence, measures to make use of alternative methods of restructuring in the most effective manner has also to be looked into. Insolvency Resolution Process(CIRP) is incorporated under chapter II of the Insolvency and Bankruptcy Code, 2016. The resolution professional will conduct the entire CIRP. They manage and control the operations of the corporate debtor during the CIRP. Once the application is submitted it has to be completed within 180 days which can be extended to 90 more days, but not more than 330 days in total. But concerns come up with respect to pending cases wherein already the resolution plans are approved. Some methods are adopted to screen the genuine and needy cases.


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.

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