Bharat Mobility Expo to be second largest such expo in the world: Goyal (See 'Corp Brief') MY Bharat organises Nationwide Deepotsav and Neighbourhood Youth Parliaments (See 'Corp Brief') India's Deep-Sea Exploration Is Advancing with MATSYA-6000 and Indo-French Collaboration: MoS (See 'Corp Brief') Round 2 for Surface Coal, Lignite Gasification Projects concludes with 2 Applications from NTPC (See 'Corp Brief') DRI recovers two elephant tusks weighing 3.7 kg (See 'Corp Brief') Govt holds Round Table with CPSEs on Enhancing Procurement from SC/ST MSEs (See 'Corp Brief') SARFAESI - Authority must verify statutory declarations & supporting material & on being satisfied that prescribed requirements are fulfilled, must pass appropriate orders for taking possession of secured asset - cannot adjudicate disputed questions falling beyond limited scope of Section 14: HC (See 'Legal Desk') Special Campaign: Waste Disposal generates revenue of Rs 15.74 Crores (See 'Corp Brief') IBC - Provisions of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 contravened where RP unilaterally withdraws higher monthly fee without prior approval of CoC: IBBI (See 'Legal Desk') Delhi Railway Area handles 5 Lakh Passengers Daily - Footfall rises to 8 Lakh during festivals (See 'Corp Brief') IBC- SC exercises power under Article 142 - Borrower firm to pay further sum of 125 crores rupees as full & final settlement of all claims concerning assigned debt: SC LB (See 'Legal Desk') Legislative Department initiates Interaction Series on Personal Effectiveness in Leadership (See 'Corp Brief') National Exercise strengthens India's Preparedness for Foot-and-Mouth Disease (See 'Corp Brief') IBC - Once existence of financial debt & a default is clearly established through unimpeachable evidence & records from information utility, admission of application u/s 7 is mandatory: NCLAT (See 'Legal Desk') NHAI Guidelines to standardise Design and Infrastructure for Multi-Lane Free Flow Tolling (See 'Corp Brief') A & C - Clause 26 of Special Conditions of Contract operates as express contractual bar within meaning of Section 31(7)(a) of the Act, thereby prohibiting arbitral tribunal from awarding pre-reference & pendente lite interest: SC (See 'Legal Desk') Centre reviews progress of AB PM-JAY and ABDM with States (See 'Corp Brief') A&C - Petitioner's deliberate omission of material bank account & failure to disclose operational details, even upon specific judicial inquiry, constitutes incomplete compliance with Rule 41(2) - exercise of discretion under Rule 41(3) to issue arrest warrants is justified: HC (See 'Legal Desk') Reddy calls for expediting Mineral Exploration and Strengthening Centre-State Coordination (See 'Corp Brief') MY Bharat's 'Viksit Bharat Yuva Samvad: Know Your Vote' Campaign reaches Over 1 Lakh Youth (See 'Corp Brief') PBPT - Intention behind benami arrangement may be inferred from surrounding circumstances & material on record, even where such intention is not established through direct evidence: Tribunal (See 'Legal Desk') Ministry of Mines launches 9th Tranche of Critical Mineral Block Auction (See 'Corp Brief') Union Health Minister reviews progress of AIIMS Awantipora; directs expeditious completion (See 'Corp Brief') Competition Act - Relief being of the nature of final relief cannot be sought at a stage when the matter is being investigated by the DG: CCI (See 'Legal Desk') BRE Summit & Expo 2026 reinforces India's Position as Major Global Force in Renewable Energy: Joshi (See 'Corp Brief') A&C - Judicial intervention in arbitral proceedings is warranted only in exceptional cases, such as where party is left remediless under the statute or where clear bad faith is established: HC (See 'Legal Desk') An unsuccessful 'success fee' litigation (See CORP EINSICHT)

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The Insolvency and Bankruptcy Code, 2016 (IBC)

Published: Apr 20, 2017

FEATURES AND INSTITUTIONAL SETUP

The Insolvency and Bankruptcy Code, 2016 (IBC) was passed by the Parliament on 11 May 2016, received Presidential assent on 28 May 2016 and was notified in the official gazette on the same day. IBC aims to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

This act has an overriding effect on multiple laws for the recovery of debts and insolvency and liquidation process like Chapter XIX & Chapter XX of Companies Act, 2013, Chapter XIX & Chapter XX of Companies Act, 2013, RDDBFI Act, 1993, SARFAESI Act, 2002, SICA Act, 1985, The Presidency Towns Insolvency Act, 1909, The Provincial Insolvency Act, 1920, Chapter XIII of the LLP Act, 2008 .

All these laws were inadequate to provide a single clearance or single window resolution system and many a time authorities with different jurisdiction and agencies overlapped and resulted in delayed case solving process and further complexities.

This article covers the key features or requirement of Act and framework of Act.

Key features of the IBC are:

• The code would have an overriding effect on all other laws relating to Insolvency &Bankruptcy. This code includes all persons including corporate, individuals, partnership firms and LLPs as well, however it shall not be applicable to corporate persons who are regulated financial service providers like Banks, Financial Institution (FIs) and Insurance Companies .

• IBC aims at consolidating all existing insolvency related laws as well as amending multiple legislation including the Companies Act. The code has replaced multiple laws covering the recovery of debts and insolvency and liquidation process and provides single window clearance to all the matters pertaining to insolvency and bankruptcy and applicant gets the appropriate relief at the same authority unlike earlier position of law where laws and authorities overlapped each other.

• The code aims to resolve insolvencies in a strict time-bound manner - the evaluation and viability determination must be completed within 180 days. The code provides fixed time frame for insolvency matters for companies and individuals. The process is to be completed within 180 days (Moratorium period) and will be extended by 90 days more. So the matters have to be resolved in not more that 270 days. Also there is a fast-track resolution process for corporate insolvency in 90 days and if it cannot be resolved assets of borrower can be sold in order to repay the creditors.

• Insolvency professionals to take over the management of the Company. IBC proposes a paradigm shift from the existing ‘Debtor in possession' to a ‘Creditor in control' regime.

• There is a simple and clear Framework of authorities under the Act. The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies and Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individual.

• Sets clearly order of priority at the time of liquidation i.e.

• Insolvency related costs

• Secured creditors and workmen dues up to 24 months

• Other employee's salaries/dues up to 12 months

• Financial debts (unsecured creditors)

• Government dues (up to 2 years)

• Any remaining debts and dues

• Equity

Institutional Setup under IEC

The Act provides a time bound process for speedy disposal of the matters and for maximization of value of assets, promotes entrepreneurship, improves ease of doing business and also protects the interest of workman and employees. It provides a base to create a good environment for business and benefit to all. The Implementation of any law not only depends on good framework of law but also on effective and efficient functioning of institutions involved in the administration and execution of the same. The IBC is based on five pillars and they are:

IBB - Insolvency and Bankruptcy Board of India- This is the apex body for regulating, promoting transparency & governance in the administration of the IBC; will be involved in setting up the infrastructure and accrediting IPs & IUs; also perform legislative, quasi-judicial function with respect to IPs & IUs and IPAs.

IUs - Information Utilities: This is the centralized depository of financial and credit information of borrowers; would collect, collate and disseminate financial data provided by creditors.

IPs - Insolvency professional - The persons enrolled with IPA and regulated by Board and IPA will conduct resolution process; to act as Liquidator/ bankruptcy trustee; appointed by creditors and override the powers of board of directors. The role of IP includes a wide range of function which includes adhering to procedure of law, accounting as well as finance related functions.

Adjudicating authority (AA) - This would be the NCLT for corporate insolvency; to entertain or dispose any insolvency application, approve/ reject resolution plans, decide in respect of claims or matters of law/ facts thereof.

IPA - Insolvency Professional Agencies - This is registered by the board and shall enroll IPs as its members in accordance with the Insolvency and Bankruptcy Code, 2016 read with its regulations.

Conclusion: The IBC is not only a well-drafted law but also has a strong institutional set up.

(Author is a Practicing Company Secretary)

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