The Insolvency and Bankruptcy Code, more commonly referred to as the IBC, is a set of regulations that were developed by the centre to address the problem of failing businesses. You might be wondering, what companies are insolvent companies? Well, this is a business that is unable to repay its debts.
IBC was first implemented in that year by the central government via an act of parliament. It puts down norms and procedures for organizations which are insolvent when earlier it was a lengthy process and wasn’t economically feasible.
Its goals are to protect the interests of individual retail investors and to streamline the business operations process to make it more efficient. The IBC is broken up into 11 Schedules and 255 individual sections.
In the beginning, the purpose of the code was to combat the sickness of bad loans that had wreaked havoc on the banking sector.
The debtor-creditor dynamic has undergone a dramatic transformation as a result of the IBC procedure. Under the umbrella of the IBC, a total of 421 cases with a total realizable value of 2.55 lakh crore were successfully resolved.
Companies are given a total of 180 days to complete the insolvency process which complies and adheres with the IBC, 2016. The deadline may be pushed back, but only if the creditors do not raise any concerns.
Nirmala Sitharaman, the Minister of Finance, stated on Saturday that the government will not be hesitant to make changes to the current IBC of 2016 to make it more robust. This statement was made in response to the growing criticism that the government has received regarding a sluggish resolution process and decreasing recovery for creditors.
The Finance Minister (FM) stated, “There has always been a bit of animosity outside about the benches not being filled sooner with both judicial and technical members.” The FM was speaking about the delays that have occurred in the appointment of tribunal benches. If only these members were appointed promptly and the cycle was maintained in a well-oiled mechanism. Then, the goal of holding the NCLAT itself would be served better. The administration has given this issue a great deal of attention, and as a result, a significant number of appointments have been hastily completed recently.
In addition to this, she said, “That has been repeatedly proven that the suggestion comes from the judiciary and we have taken it up from the government’s side frequently, and without any hesitation, we go to Parliament and have more and more amendments which only fine-tune the Act.” This was said in reference to the fact that the previous statement had been proven true on multiple occasions.
This statement was made at a time when the parliament may be presented with an additional set of amendments. For example, the corporate ministry has proposed expanding the scope of the pre-packaged insolvency scheme, which is presently only available to micro, small, and medium enterprises (MSMEs).
