NewsBytes
    Hindi Tamil Telugu
    More
    In the news
    Mukesh Ambani
    WhatsApp
    Reliance Jio
    OPPO
    Vivo
    Sensex
    Bitcoin
    NewsBytes
    Hindi Tamil Telugu
    NewsBytes
    User Placeholder

    Hi,

    Logout


    India Business World Politics Sports Technology Entertainment Auto Lifestyle Inspirational Career Bengaluru Delhi Mumbai Visual Stories Find Cricket Statistics Phones Reviews Fitness Bands Reviews Speakers Reviews

    Download Android App

    Follow us on
    • Facebook
    • Twitter
    • Linkedin
     
    Home / News / Business News / Know all about the Insolvency and Bankruptcy Code 2016
    Business

    Know all about the Insolvency and Bankruptcy Code 2016

    Know all about the Insolvency and Bankruptcy Code 2016
    Written by Deepali Aggarwal
    Jun 06, 2018, 05:29 pm 4 min read
    Know all about the Insolvency and Bankruptcy Code 2016
    Credits

    Insolvency and Bankruptcy Code 2016 is one of the biggest economic reforms adopted by India. It is a rare example of a much-needed law which has witnessed speedy roll-out and implementation. Being a one-stop solution which addresses all insolvencies in a time-bound and economically viable setup, the law has significantly helped India in achieving the historic 30-spot jump in the ease of doing business rankings.

    Major positive recent events happened due to IBC

    Vedanta recently acquired bankrupt Electrosteel Steels, which made a loan default of Rs. 10,273cr, for Rs. 5,320cr under the IBC. Further, last month, Tata Steel bought bankrupt Bhushan Steel for Rs. 35,500cr. Bhushan Steel had a loan default of Rs. 44,478cr to banks. The two companies were among the RBI's list of 12 corporate borrowers which account for 1/4th of Indian banking industry NPAs.

    What exactly is the Insolvency and Bankruptcy Code 2016?

    IBC 2016 lays the insolvency processes for individuals, companies and partnership firms. The law has brought a significant change in the power-sharing equation between creditors and debtors by giving both of them the power to initiate proceedings against each other. The legislation is expected to bring the long-awaited respite to the Indian banking industry, plagued with at least Rs. 8.41 lakh crore bad loans.

    The four pillars of the IBC framework

    Adjudication: In the case of insolvency of companies, the adjudication authority is the National Company Law Tribunal (NCLT), while the cases involving individuals and limited liability partnerships are dealt by the Debts Recovery Tribunals (DRTs). Insolvency Professional (IP): They play a key role in resolution, liquidation and bankruptcy processes. Information Utilities (IU): Electronically store data about lenders. Regulator: Insolvency Bankruptcy Board of India.

    Part A: How it works in case of a company?

    When a company makes a payment default of at least Rs. 1 lakh, an insolvency application can be made either by the company's creditors or debtors to the NCLT. Then, the NCLT appoints an interim insolvency resolution professional (IRP), placing the company under a moratorium. Upon the appointment of IRP, the board of the company gets suspended till the completion of the resolution process.

    Part B: How it works in case of a company?

    IRP then creates a committee of creditors of the company, which appoints the final insolvency resolution professional (IP). IP drafts a resolution plan which requires the approval of the committee of creditors within 180 days, with a grace period of another 90 days, and the final approval of the NCLT. If the plan doesn't get approved in 270 days, the company goes into liquidation.

    How IBC is helping ailing Indian banking industry to recover?

    To avoid losing the control of their business under the IBC, promoters of as many as 2,100 companies have cleared their bank dues of Rs. 83,000cr. By now, at least 2,434 fresh cases have been filed before NCLT and at least 2,304 other cases seeking the winding-up of companies have been transferred from various high courts. Of these, 2,750 cases have been disposed of.

    Who's paid first when a company is liquidated under IBC?

    Under IBC, the proceeds of a liquidation are distributed in the following order of priority: Insolvency resolution process, liquidation costs Workmen' dues pending 24 months, secured creditors Unpaid dues owed to employees other than workmen for 12 months Unsecured creditors Any amount due to the Central Government and the State Government Any remaining debts/dues Preference shareholders Equity shareholders, partners

    Editor's take: IBC should lead India to a brighter future

    Considering the successful resolutions of Electrosteel Steels and Bushan Steel, we believe IBC will repair the NPA-ridden Indian banking sector. IBC has expedited insolvency and bankruptcy proceeding by bringing in just 1 law in place of 4 different acts and by ensuring time-bound resolution process.

    Share this timeline
    Facebook
    Whatsapp
    Twitter
    Linkedin
    Latest
    India
    Reserve Bank Of India (RBI)
    National Company Law Tribunal
    Tata Steel

    Latest

    How to introduce your new cat to your existing cat Pets
    Hero Xoom v/s Honda Dio: Which is better? Hero MotoCorp
    Premier League 2022-23, Tottenham beat Manchester City 1-0: Key stats Harry Kane
    Harry Kane smashes his 200th Premier League goal: Key stats Harry Kane

    India

    Tom Cook 'bullish' on India as Apple posts record revenue Tim Cook
    Air India Express flight makes emergency landing after engine fire Air India Express
    India questions World Bank's stand on Indus Waters Treaty Ministry Of External Affairs
    Centre aims to eliminate sickle cell anemia by 2047 Union Budget

    Reserve Bank Of India (RBI)

    RBI is looking into Indian banks' exposure to Adani Group Adani Group
    ICICI bank fraud case: Videocon's Venugopal Dhoot gets interim bail Venugopal Dhoot
    World's biggest ship skips India amid lack of port infrastructure Adani Ports
    Meet BV Nagarathna, SC judge who dissented from demonetization verdict Supreme Court Of India

    National Company Law Tribunal

    Senior management and pilots quit Jet Airways amid uncertain future Jet Airways
    CBI books Gujarat firm for Rs 22,842 crore loan fraud India
    Jet Airways to resume domestic services in Q1 of 2022 Jet Airways
    NCLT approves Jalan-Kalrock consortium's plan for Jet Airways Jet Airways

    Tata Steel

    'Steel man of India' JJ Irani passes away at 86 Tata
    Sensex closes at 57,107 points, Nifty settles at 17,007 Stock Market
    Sensex climbs to 59,196 points, Nifty settles at 17,622 Bitcoin
    Sensex rises to 59,085 points, Nifty settles at 17,604 NASDAQ

    Love Business News?

    Subscribe to stay updated.

    Business Thumbnail
    Indian Premier League (IPL) Celebrity Hollywood Bollywood UEFA Champions League Tennis Football Smartphones Cryptocurrency Upcoming Movies Premier League Cricket News Latest automobiles Latest Cars Upcoming Cars Latest Bikes Upcoming Tablets
    About Us Privacy Policy Terms & Conditions Contact Us Ethical Conduct Grievance Redressal News News Archive Topics Archive Download DevBytes Find Cricket Statistics
    Follow us on
    Facebook Twitter Linkedin
    All rights reserved © NewsBytes 2023