THE INSOLVENCY AND BANKRUPTCY CODE, 2016 “Opportunities & Challenges for a Resolution Professional”
INTRODUCTION The Code offers a uniform, After a public consultation comprehensive insolvency process and recommendations from legislation encompassing all a joint committee of Parliament, companies, partnership firms and both houses of Parliament have individuals (other than financial passed the Insolvency and firms). The Government is Bankruptcy Code, 2016 ( Code ). proposing a separate framework While the legislation of the Code for bankruptcy resolution in is a historical development for failing banks and financial economic reforms in India, its sector entities effect will be seen in due course when the institutional infrastructure and implementing rules as envisaged under the Code are formed.
BACKGROUND India ranks 136 out of 189 countries in the World Bank's index on the ease of resolving insolvencies . India's weak insolvency regime, its significant inefficiencies and systematic abuse are some of the reasons for the distressed state of credit markets in India today. The Code promises to bring about far-reaching reforms with a thrust on creditor driven insolvency resolution . It aims at early identification of financial failure and maximizing the asset value of insolvent firms. The Code also has provisions to address cross border insolvency through bilateral agreements and reciprocal arrangements with other countries.
Government Committees on Bankruptcy Reforms Year Committee Outcome 1964 24th Law Commission Amendments to the Provincial Insolvency Act, 1920 1981 Tiwari Committee (DCA) SICA, 1985 1991 Narasimham Committee I (RBI) RDDBFI Act, 1993 1998 Narasimham Committee II (RBI) SARFAESI Act, 2002 1999 Justice Eradi Committee (GOI) Companies (Amendment) Act, 2002, Proposed repeal of SICA 2001 L. N. Mitra Committee (RBI) Proposed a comprehensive bankruptcy code 2005 Irani Committee (RBI) Enforcement of Securities Interest and Recovery of Debts Bill, 2011. (With amendments to RDDBFI and SARFAESI) 2008 RaghuramRajan Committee (Planning Proposed improvements to credit infrastructure Commission) 2013 Financial Sector Legislative Reforms Draft Indian Financial Code which includes a Resolution Commission (MoF) Corporation for resolving distressed financial firms 2014 Dr. T K Vishwanathan chaired Bankruptcy Insolvency & Bankruptcy Code, 2016 (being notified in Law Reforms Committee (DEA,MoF) phases) Source: Volume 1 of BLRC Final Report, Nov 2015 with latest updations
Destination Insolvency & Bankruptcy Code, 2016 Date Event 22-Aug-2014 DEA, MoF, GOI formed Bankruptcy Law & Reforms Committee (BLRC) 05-Feb-2015 Interim Report submitted by BLRC 04-Nov-2015 Final Report in 2 Volumes submitted by BLRC (Vol I Rationale & Design; Vol II Draft Insolvency & Bankruptcy Code) 21-Dec-2015 Code introduced in Parliament 23-Dec-2015 Code referred to JPC...chaired by Sh. Bhupendra Yadav 28-Apr-2016 JPC submitted its report on the Code 05-May-2016 Passed by LokSabha 11-May-2016 Passed by RajyaSabha 28-May-2016 Received President’s Assent
Destination Insolvency & Bankruptcy Code, 2016 (Date of notification of various Provisions ) Date Event 05-Aug-2016 Sections 188 to 194 came into force 19-Aug-2016 Sections 3(1), (5), (22), (26), (28), (37), 221 to 223, 225, 226, 230, 232 to 233, 239 (partly), 240 (partly), 241 & 242 came into force 01-Nov-2016 Provisions relating to powers and functions of IBBI [Sections 3(2) to (4), (6) to (21), (23) to (25), (27), (29) to (36), 196-197, 239 & 240 (partly), 244, 246 to 248, 250, 252] came into force 15-Nov-2016 Provisions relating to Insolvency Professional Agencies. Sections 199 to 207, 208(1)(c) & (e), 208(2), 217 to 220, 251, 253 to 255 came into force 30-Nov-2016 Provisions relating to CIRP [Sections 2(a) to (d) except with regard to Liquidation & Bankruptcy, 4 to 32, 60 to 77, 198, 231, 236 to 238, 239(2) (a) to (f)] Appointed date 1st December, 2016 09 Dec 2016 Provisions relating to liquidation [section 33 to section 54 (both inclusive)] appointed date 15th day of December, 2016
……Destination Insolvency & Bankruptcy Code, 2016 (Date of notification of various Provisions) Date Event 30 Mar 2017 [Provisions of Vol. Liquidation, IU and Cross-Border Insolvency came into force (1) section 59; (2) section 209 to section 215 (both inclusive); (3) sub-section (1) of section 216; and (4) section 234 and section 235] appointed date 1st April, 2017 15 May 2017 Provisions of Voluntary Liquidation or bankruptcy come into force (provisions of clause (a) to clause (d) of section 2 of the Code) appointed date 1st April, 2017 14 Jun 2017 Notification regarding Fast Track Corporate Insolvency Resolution process for (a) a small company ; (b) a Startup (other than the partnership firm) (c) an unlisted company with total assets, as reported in the financial statement of the immediately preceding financial year, not exceeding rupees one crore. 18 Oct 2017 Provisions of section 247 of the Companies Act, 2013 ( Valuation by registered valuers ) come into force. 23 Oct 2017 Delegation of powers and functions under section 247 of the Companies Act, 2013 to the IBBI
Destination Insolvency & Bankruptcy Code, 2016 (Rules Regulations and amendments ) Date Event 28-May-2016 Insolvency And Bankruptcy Code, 2016 IBBI ( Model Bye-Laws and Governing Board of Insolvency Professional Agencies) 21-Nov-2016 Regulations, 2016. 21-Nov-2016 IBBI (I nsolvency Professional Agencies ) Regulations, 2016. 23-Nov-2016 IBBI ( Insolvency Professionals ) Regulations, 2016 30-Nov-2016 IBBI ( Application to Adjudicating Authority ) Rules, 2016. 15-Dec-2016 IBBI ( Liquidation Process ) Regulations, 2016. 31-Jan-2017 IBBI ( Engagement Of Research Associates And Consultants ) Regulations, 2017. 31-Jan-2017 IBBI ( Procedure For Governing Boards Meetings ) Regulations, 2017
Destination Insolvency & Bankruptcy Code, 2016 (Rules Regulations and amendments ) Date Event 31-Mar-2017 IBBI ( Voluntary Liquidation Process ) Regulations, 2017 24-May-2017 Insolvency and Bankruptcy Code ( Removal of Difficulties) Order , 2017 14-Jun-2017 IBBI ( Inspection and Investigation ) Regulations, 2017 24-Aug-2017 IBBI ( Employees Service ) Regulations, 2017 29-Sep-2017 IBBI( Information Utilities ) Regulations, 2017 ( last amended on 29 September 2017) IBBI ( Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 5-Oct-2017 (Amended upto 05 Oct 2017) IBBI ( Insolvency Resolution Process for Corporate Persons ) Regulations, 2016 5-Oct-2017 (Amended upto 05 Oct 2017) 18-Oct-2017 The Companies (Registered Valuers and Valuation) Rules, 2017 25-Oct-2017 Clarification regarding resolution plan under section 30 and 31 of IBC, 2016
For Individuals and Firms Insolvency and Bankruptcy Board of India 9th October, 2017 Press Release IBBI invites public comments on: (i) draft Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Individuals and Firms) Rules, 2017, and (ii) draft Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Individuals and Firms) Regulations, 2017. IBBI invites public comments on these draft rules and regulations by 31st October 2017. For providing comments http://ibbi.gov.in/webadmin/pdf/press/2017/Oct/Press%20release%20modified%20Ind%20In sol.pdf
OBJECTIVE OF THE IBC (‘the Code’) An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation 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.
INSOLVENCY ADJUDICATION PROCESS Insolvency of Insolvency of Individual Corporate Limited Liability Partnership Insolvency Insolvency Partnership Firms National Company law Debt Recovery Tribunal Tribunal (DRT) (NCLT) National Company Debt Recovery Law Appellate Tribunal Appellate Tribunal (DRAT) (NCLAT) Supreme Court
THE REGULATORY MECHANISM The Insolvency and Bankruptcy Board of India Insolvency Information Utilities Professional Agencies Insolvency Professionals
FRAMEWORK OF THE INSOLVENCY AND BANKRUPTCY CODE 2016 Part II- Insolvency Part III- Insolvency Resolution and Resolution and Bankruptcy Part I – Preliminary Liquidation for for individuals and Section 1 to section 3 Corporate Persons partnership firms Section 4 to section 77 Section 78 to section 187 Part IV- Regulation of Insolvency Part V-Miscellaneous professionals, agencies Section 224 to section 255 and information utilities Section 188 to section 223 Eleven schedules (amendment to different legislation)
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