INSOLVENCY AND BANKRUPTCY CODE, 2016: A REVIEW

 OBJECTIVE
a) The insolvency and bankruptcy code, 2016 is the law which seeks to consolidate the existing
framework by creating a single law for insolvency and bankruptcy.
b) Could replace all the existing insolvency laws like the SICA, 1985, Securitizations and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002, Recovery of debts due to Banks and Financial Institution Act, 1993
c) Faster debt recovery and improve the ease of doing business in India

 APPLICABILITY

According Section 2 of the Insolvency and Bankruptcy Act 2016, the provisions in this act
is applicable to companies, limited liability entities, firms and individuals (i.e. all entities
other than financial service providers).

 CHANGES BROUGHT BY IB CODE,2016

According to the World Bank’s Ease of Doing Business report, it takes more than four years on an
average to resolve insolvency in India. The IB Code , 2016(hereinafter referred as “code”) cut
down the time to less than a year. This will not only improve the ease of doing business in India,
but also facilitate a better and faster debt recovery mechanism in the country. It is widely believed
that this legislation will change the negative perception of recovery and litigation associated with
India.

 IMPORTANT FEATURES OF THE CODE

a) The fast track corporate insolvency resolution process. It is mentioned u/s/55 of the code. Under
this process the resolution process gets completed by 90 days from the insolvency commencement
date as mentioned in section 56(1)
b) The offences and penalities for corporate persons are mentioned in Chapter VII of Part II of the
code from sections (68 – 77) of the code.

c) Whereas the punishments and offences of individuals and partnership firms are dealt under
sections (184 – 187) of the code.
d) Chapter IV of PART III of the code deals with bankruptcy order for Individuals And Partnership
Firms of which section 124 deals with the effect of application filed under section 123, section
122

 BANKRUPTCY ORDER
The bankruptcy order (section 126) is passed by the Adjudicating Authority within fourteen
days of receiving the confirmation or nomination of the bankruptcy trustee under section 125.
Section 127 of the code says “ The bankruptcy order passed by the Adjudicating Authority
under section 126 shall continue to have effect till the debtor is discharged under section
 138”. On passing the order, the estate of the bankrupt shall be divided among his creditors
(section 128(1)(b).

 EXPEDIOUS DISPOSAL OF APPLICATION

Section 183 deals with the speedy disposal of application which is the most important feature
of this code. Also u/s/180 the code clearly says that the civil court has no jurisdiction to
entertain any suit or proceedings in respect of any matter on which the Debt Recovery
Tribunal or the Debt
Recovery Appellate Tribunal has jurisdiction under this Code.

 THE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

Section 188 provides provision for establishment and incorporation of IBBI. The owers and
functions of the board is well dealt in sections 196 – 198.