INSOLVENCY AND BANKRUPTCY CODE 2016
INSOLVENCY AND BANKRUPTCY CODE 2016
INTRODUCTION:
The insolvency and bankruptcy code, 2016 is a major economic reform, has been initiated by Government of India in 2015. There were Multiple overlapping laws and adjudicating authorities dealing in financial failure and insolvency resolution of corporate persons, partnership firms and individuals. The existing laws were not aligned with market realities and were inadequate. To overcome these difficulties and to make easy and time bound resolution of insolvency s strong bankruptcy law is required. The Insolvency and Bankruptcy code 2015 was introduced in Lok Sabha on 21 December 2015 and which was referred by Lok Sabha to Joint Committee of Insolvency and Bankruptcy code 2016. The joint committee made its recommendations in modified bill and finally bill was passed by both houses of Parliament in May 2016 as INSOLVENCY AND BANKRUPTCY CODE,2016.
DIFFERENCE BETWEEN INSOLVENCY AND BANKRUPTCY:
Insolvency is a state where liabilities exceeds assets i.e. having insufficient assets to meet out liabilities. Whereas Bankruptcy is a conclusion where application has been filed to adjudicating authority declaring insolvent and seeking to be declared as bankrupt. All Bankruptcies are always insolvent but All insolvencies may not be bankrupt.
PURPOSE OF THIS CODE:
1. The preamble of this code lays down following purposes: - 2. To Promote Entrepreneurship 3. To Consolidate and amend laws relating to reorganization and insolvency resolution of corporate persons, individuals and partnership firms. 4. To fix time of resolution of insolvency in a time bound manner. 5. To increase availability of credit. 6. To balance interest of all stakeholders including alteration in the order of priority of payment of Government dues. 7. To maximize value of assets of interested persons. 8. To establish a board as INSOLVENCY AND BANKRUPTCY CODE, 2016 BOARD for regulating insolvency and bankruptcy resolution.
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BASIC FEATURES OF THIS LAW:
1. ONE WINDOW CLEARANCE : The Code has been drafted to provide one window clearance to the applicant whereby he gets the appropriate relief by the same authority unlike the earlier position of law wherein case the company is not able to revive the procedure for winding up and liquidation, has to be initiated under separate laws governed by separate authorities. 2. COMPREHENSIVE LAW : Insolvency Code is a comprehensive law which envisages and regulates the process of insolvency and bankruptcy of all persons including corporates, partnerships, LLPs and individuals. 3. ONE CHAIN OF AUTHORITY : There is one chain of authority under the Code. It does not even allow the Civil Courts to interfere with the application pending before the adjudicating authority, thereby reducing the multiplicity of litigations. The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies. The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals. 4. WITHERING AWAY MULTIPLICITY OF LAWS : The Code has withered away the multiple laws covering the recovery of debts and insolvency and liquidation process and presents singular platform for all the reliefs relating to recovery of debts and insolvency. 5. PROTECTS THE INTEREST OF WORKMEN DUES AND EMPLOYEES : The Code also protects the interests of workman and employees. It excludes dues payable to workmen under provident fund, pension fund and gratuity fund from the debtor’s assets during liquidation. 6. NEW REGULATORY AUTHORITY : It provides for constitution of a new regulatory authority, ‘Insolvency and Bankruptcy Board of India’ to regulate professionals, agencies and information utilities engaged in resolution of insolvencies of companies, partnership firms and individuals. The Board has already been established and has started functioning. 7. LOW TIME RESOLUTION : The Code provides a low time resolution and defines fixed time frames for insolvency resolution of companies and individuals. The process is mandated to be completed within 180 days, extendable by maximum of 90 days. Further, for a speedier process there is provision for fast track resolution of corporate insolvency within 90 days. If insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors 8. ESTABLISHMENT OF INFORMATION UTILITIES (IUs) : A unique feature of code is establishment of Information Utilities (IUs) which are intended to function as a databank to collect, collate and disseminate financial information and to facilitate insolvency resolution. It is envisioned that in the long run, IUs will have data on debts and credits of all the business houses and it will be able to create an automatic trigger in case of default by any debtor and the authority may initiate the insolvency process as required. Such a system will reduce the risk of credit in the economy. 9. CLARITY IN PROCESS: There is a clear and unambiguous process to be followed by all stakeholders. There is also shift of control from shareholders and promoters to creditors. For any assistance in GST or Income Tax return filing, you may mail us at [email protected]. Geetika Goyal (Team Itslyf) THE INSOLVENCY AND BANKRUPTCY CODE 2016 THE INSOLVENCY AND BANKRUPTCY CODE 2016 Read the full article
