Insolvency & Bankruptcy Code
Recently, the Supreme Court has ruled in favor of maintaining complete bankruptcy while rejecting the demand for change in Indian Bankruptcy and Insolvency Code-IBC. During the hearing on January 16, the court had reserved its decision in this case. In the petition, Swiss Ribbons, Shivam Water Treaters and Ganesh Prasad Pandey challenged the provisions of various sections, especially 7, 12 and 29 of this law. The petitioners alleged that IBC only preserves the rights of the lenders.
Please tell you that under this law, there has been a ban on the company’s promoter’s involvement in the auctioned companies. The Supreme Court said that the only change in the code will be in the definition of the person and according to the new definition, the same person will be considered related, which will be related to the lender or defaulted company. Justice R.F. The bench chaired by Nariman said that they recognize the constitutional validity of this code in ‘totality’.
Sections 7, 12 and 29
Section 7 of this Code is related to the beginning of the bankruptcy process against any company i.e. when a lender, institution or company issues an appeal to the bankrupt court against the non-repaying company.
Section 12 determines the deadline to complete the bankruptcy process. Under this section, the entire process is mandatory to be completed within 180 days.
In Section 29 the person and the company have been defined. The government had amended this code and decided that any person coming under the auctioned company would not be able to participate.
Common working processes of IBC
If a company does not repay the loan, then the company is declared bankrupt to recover the loan under IBC.
For this, the NCLT special team talks with the company and the company is declared bankruptcy after the company’s management is ready.
After this, the bank gets possession of his entire property and the bank can recover the loan by selling the property to another company.
There is a provision of insolvency solution process under market based and time-bound in IBC.
Section 29 of IBC provides that an external person (third party) can buy the company only.
Constitution of Bankruptcy Law Committee
On November 16, 2017, the Central Government constituted the Bankruptcy Law Committee for the implementation and implementation of the bankruptcy and bankruptcy code under the chairmanship of Central Corporate Affairs Secretary Injeeti Srinivas. This committee was given the responsibility of identifying topics that affect the efficiency of Corporate Bankruptcy Resolution and Liquidity Framework. This committee gave some recommendations, making it possible to use this code effectively. Apart from this, effective implementation of this code has also been ensured with the increase in the efficiency of the prescribed procedures.
Why did this code need to be done?
The Parliament passed a new Bankruptcy Code Bill 2016, taking action in the direction of economic reforms.
Public sector banks’ NPA had increased to worrisome levels until the Indian Bankruptcy and Refinance Disability Code (IBC), 2016. This law was enacted to overcome these concerns and it was implemented and action was taken under it.
The Code of Bankruptcy and Bankruptcy, repeals the 1909 Presidency Town Insurgency Act and the Provincial Insurgency Act 1920, and amends several laws including the Companies Act, Limited Liability Partnership Act and the ‘Secuation Act’.
This code has made significant changes in the relationship between the borrowers and borrowers in the country. It is now seen that a large number of such debtors, who fear that they are approaching the Red Line and will be in NCLT soon, are now avoiding being declared bankruptcy.
The implementation process of this code is governed by certain terms and conditions. In some cases, due to appeals and appeals against them and litigation, this process often interferes, but this obstacle has been overcome after the Supreme Court’s decision.
Actually, the company or partnership firm can go bankrupt due to loss in business and if an entity is bankrupt, then it means that it is unable to repay its loans on the basis of its resources. In such a situation, even if there is no clarity in the law, the lenders also suffer, and the person or the firm themselves also have to be subject to different kinds of problems. There were at least 12 laws related to bankruptcy before the country, some of which are more than 100 years old.
IBC Assistant to Solve NPA Problems
When a debtor is unable to repay his liabilities to the bank, the loan taken by him is called a non-performing asset (NPA).
Under the rules, when the principal or interest of a loan is not paid within 90 days of the fixed period, then it is put in the NPA.
Many times the debtor becomes insolvent, in such a way that the bank can compensate for its loss by selling its assets.
According to IBC, after a debtor gets bankrupt, after completing a certain process, his assets can be taken in full.
According to IBC, if 75 percent of the debtor agree, then action can be taken on such a company within 180 days (with a grace period of up to 90 days), which can not repay their debts.
With the introduction of IBC, the unnecessary delay in recovery of loans and the losses arising from them will be avoided.
In case of non-repayment of loan, the company will be given an opportunity to pay the loan in a fixed time period or declare itself as bankrupt.
Formation of NCLT and NCLAT
On June 1, 2016, the government constituted the National Company Law Tribunal-NCLT and the National Company Law Appellate Tribunal-NCLAT. They were made under section 408 of the Companies Act, 2013. The Ministry of Corporate Affairs had issued notification for them and this is the 11th consecutive year of NCLAT, of which two of its branches including in New Delhi and in Ahmedabad, Allahabad, Bangalore, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai There is a back. After the formation of NCLAT, the Company Law Board was constituted under the Companies Act, 1956. It is significant that the Companies Act, 1956 has been replaced by the Companies Act, 2013.
Not only the credit of bank loans by a businessman but also the poor health of the banks, but the economy of the country is also weak; Because the loss of public sector banks and financial institutions has to be compensated by the public exchequer. Therefore, wherever possible, for the solution of loan disabilities under this code, there is a market mechanism where evacuation facilities are being provided where necessary. This code is postponing the payment, and the revising of the loan and the non-term loan culture is changing.