Insolvency and Bankruptcy code, 2016, a game changer

Insolvency and Bankruptcy code, 2016

1. Insolvency and Bankruptcy code, 2016 10/15/2025 1

2. This is considered as the biggest economic reform next only to GST 10/15/2025 2

3. HISTORY OF THE LEGISLATION SICA, 1985 In 1999 , Justice V.B. Eradi committee was set up by GOI to examine and make recommendation relating to: changes in existing laws relating to winding up of companies transparency and avoid delays in final liquidation of companies In 2000 , the committee submitted its report and recommended that the jurisdiction, power, and authority relating to winding up of companies should be vested in a National Tribunal instead of the High Court In December 2002 , Companies (Second Amendment) Act, 2002 was passed to restructure the Companies Act, 1956 including the setting up of NCLT and NCLAT. 10/15/2025 3

4. In 2004 , Govt constituted Dr. JJ Irani Committee to provide India with a modern Company Law to meet the requirements of a competitive economy The committee submitted its Report on 31 st May, 2005 and submitted its recommendations. Companies Bill, 2008 Companies Bill, 2009 Companies Bill, 2011 Supreme Court Judgement 2010 Companies Act, 2013 Sickness redefined, provision for constitution of NCLT & NCLAT Supreme Court Judgement 2015 10/15/2025 4

5. Bankruptcy Law Reforms Committee Report (November 2015- T.K. Viswanathan , former Law Secretary who has also held the post of secretary general of the 15th Lok Sabha) The Report was presented in two parts: Volume I: Text of the findings and recommendations Volume II: Draft Insolvency and Bankruptcy Code Insolvency and Bankruptcy Bill, 2015 10/15/2025 5

6. Summary of the Recommendations of the Bankruptcy Law Reforms Committee (BLRC) The major recommendations of the Report are: Insolvency Regulator Insolvency Adjudicating Authority Insolvency Professionals Insolvency Information Utilities To revamp   Bankruptcy and Insolvency Processes for Companies and Limited Liability Entities Fast track insolvency resolution process Bankruptcy and Insolvency Processes for Individuals and Unlimited Liability Partnerships Transition Provision Transfer of proceedings 10/15/2025 6

7. Insolvency and Bankruptcy Bill, 2015 to Insolvency and Bankruptcy Code, 2016 10/15/2025 7

8. THE NEED FOR THE CODE Record of extraordinary delays and poor returns to creditors. Destruction of asset value, as winding up in India took an average of around 8 years as against the international average of around a year. 10/15/2025 8

9. Analysis of companies under liquidation as on April, 2016 0-5 years - 1118 5-10 years - 875 10-20 years - 1709 >20 years - 1479 Total - 5181 DRT - 67974 BIFR - 881 10/15/2025 9

10. THE INSOLVENCY AND BANKRUPTCY CODE, 2016 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. 10/15/2025 10

11. DIFFERENCE BETWEEN INSOLVENCY, BANKRUPTCY AND LIQUIDATION 10/15/2025 11

12. SCOPE & APPLICABILITY Companies, Notified Bodies Insolvency Liquidation LLPs Individuals Insolvency Partnership firms IBC Voluntary Liquidation Bankruptcy 10/15/2025 12

13. ECOSYSTEM OF THE CODE NCLT DRT NCLAT DRAT Supreme Court 10/15/2025 13

14. APPLICANTS UNDER THE CODE 10/15/2025 14

15. WHO IS FINANCIAL CREDITOR ? Financial Creditor: Financial Creditor means any person to whom a financial debt is owed – Assigned or transferred. Financial Debt: Means a debt along with interest which is disbursed against the consideration for the time value of money 10/15/2025 15

16. WHO IS OPERATIONAL CREDITOR ? Operational Creditor: A person to whom a Operational Debt is owed – legally assigned or transferred. Operational Debt: Means a Claim in respect of provision of Goods or Services including: Employment Debt in respect of dues arising under any law for the time being in force and payable to the Central Government, any State Government or local authority 10/15/2025 16

17. WHO IS CORPORATE DEBTOR? CORPORATE DEBTOR: A Corporate Person who owes a Debt to any person. Corporate Person: Company LLP Any other person incorporated with Limited Liability. Does not include any financial service provider. 10/15/2025 17

18. Insolvency and Bankruptcy Board of India 10/15/2025 18

19. Role and Functions of IBBI Regulating all matters related to insolvency and bankruptcy process Setting out eligibility requirements of insolvency intermediaries i.e., Insolvency Professionals, Insolvency Professional Agencies and Information Utilities. Regulating entry, registration and exit of insolvency intermediaries. Making model bye laws for Insolvency Professional Agencies. Setting out regulatory standards for Insolvency Professionals. Specifying the manners in which Information Utilities can collect and store data. Overseeing the functioning of insolvency intermediaries and the resolution process. 10/15/2025 19

20. Insolvency Professional Agency(IPA) 10/15/2025 20

21. INSOLVENCY PROFESSIONAL AGENCY -PRINCIPLES Principles Professional Development & Regulation of IPs Promote the services of competent IPs Promote good professional and ethical conducts of IPs Protect interest of Debtors, Creditors, etc. Promote growth of IPA 10/15/2025 21

22. IPAs REGISTERED TILL DATE ICSI Insolvency Professionals Agency Indian Institute of Insolvency Professionals of ICAI Insolvency Professional Agency of Institute of Cost Accountants of India 10/15/2025 22

23. Insolvency Professional(IP)-1770 10/15/2025 23

24. ELIGIBILITY OF IPS Not Minor, Resident in India, not convicted for imprisonment exceeding 6 months or moral turpitude (5 years) Not an undercharged insolvent or applied for Not declared to be of unsound mind Fit and Proper person 10/15/2025 24

25. Registration of IPs-Qualifications and Experience An individual shall be eligible for registration as IP, if he has: passed the National Insolvency Examination; or passed the Limited Insolvency Examination and has: 10 years of post qualification experience as CA, CS, CWA or an Advocate enrolled with a Bar Council; or 15 years of experience in management, after he received a Bachelor’s degree from a university established or recognised by law 10/15/2025 25 Passed NIE, LIE+15/10 years of experience

26. INSOLVENCY PROFESSIONAL ENTITY (IPE-76 ) LLP or Registered Partnership or Company may be recognized as IP Entity Majority of Partners / WTDs are Regd. IPs Application for Registration in Form C Jointly and severally liable for acts or omissions 10/15/2025 26

27. CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP) 10/15/2025 27

28. Section 238 - Non-obstante provision The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 15-10-2025 28

29. Process For insolvency resolution/liquidation of a Corporate Debtor Application may Be filed before NCLT by Financial Creditor [ section 7 of IBC] , Operation Creditor [ section 9 of IBC], or Corporate Debtor [ section 10 of IBC] for insolvency resolution 29

30. Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. Date of Order: 21.09.2017 – Supreme Court Question of law: What can be considered as a dispute for an operational creditor ? The Apex Court emanated the difference between ‘Dispute’ and ‘Existence of Dispute’. The relevant excerpt of the judgement is as follows: “ 40. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties . Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the “dispute” is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. ” 15-10-2025 30

31. Interim Resolution Professional (IRP) NCLT to appoint Interim Resolution Professional (IRP) within 14 days from the Insolvency Commencement date i.e. the date of admission of an application for initiating corporate insolvency resolution process by the Adjudicating Authority under sections 7, 9 or section 10, as the case may be. [ Section 16 of IBC] IP (IRP or RP) and all partners and directors of the IPE of which he is a partner or director have to be independent of CD. 31

32. Moratorium Once the application is admitted, a moratorium will be declared till the completion of the resolution process. During the moratorium: No suits or proceedings can be filed or if filed, be proceeded against the corporate debtor/company; The company cannot transfer its assets; No action under SARFAESI be taken The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. If an order for approval of resolution process or for liquidation of the company is passed, the moratorium will cease to exist. 10/15/2025 32

33. Public Announcement Public announcement of the corporate insolvency resolution process to be made inviting claims from the creditors. Form A Selection of newspapers-Registered office and principle place of business Website of CD Website of IBBI Last date is 14 days from the date of his appointment Who will bear cost of the advertisement? 10/15/2025 33

34. Affairs to vest in IRP From the date of his appointment: The affairs of the company will vest in the IRP; Powers of the Board shall stand suspended and be executed by IRP Officers and Staff will report to the IRP; Financial institutions (Banks) will act as per the instructions of the IRP IRP shall execute documents in the name of the company and he may take actions as may be specified by Board; IRP can have access to books of accounts and other relevant records of the company [ Section 17 of IBC]. 10/15/2025 34

35. Duties of Interim Resolution Professional (IRP) IRP will: collect information with regard to the assets, finances and operations of the company for determining the financial position; receive claims submitted by creditors; constitute creditors committee; take control of the assets of the company ensure that the company remains a going concern to run the business by appointing professionals raise interim finance (any financial debt to be raised by the resolution professional during the insolvency resolution process period) 10/15/2025 35

36. Committee of Creditors (COC) Committee of creditors will take decisions based on majority which shall not be less than 75%. COC will hold first meeting within 7 days of constitution of COC. They may confirm the IRP as Resolution Professional (RP) in the first meeting or propose another name as RP which will be decided by NCLT on confirmation from Board. 10/15/2025 36

37. Information Memorandum (IM) RP will prepare an information memorandum containing relevant information Resolution Plan Based on the IM, a resolution plan to be prepared RP will submit the resolution plan to COC COC may approve the plan The COC approved resolution plan will be submitted to NCLT 10/15/2025 37

38. Resolution Plan The resolution plan should at least consist of Payment of costs of RP/IRP/cost of supply of essential goods/ amounts due to persons affected by moratorium and costs directly related to CIRP in priority of repayment of other debts of corporate debtors. Repayments to operational creditors, which should not be lesser than the amount to be received by them in case of liquidation of the corporate debtor Provide for management of corporate debtor, implementation and supervision of the resolution plan after its approval Should not contravene any of the provisions of the law for the time being in force The resolution plan must comply with applicable requirements as specified by the Board Term of the Plan and its implementation schedule Management and control of the business of the CD during this term Adequate means for supervisions its implementation 10/15/2025 38

39. Approval of resolution plan by NCLT If NCLT approves the resolution plan, the same is binding on the company, its employees, creditors, guarantors and other stakeholders. NCLT may reject the resolution plan if the same is not in accordance with the provisions of IBC. Appeal An appeal may be filed against the order of NCLT as above before NCLAT and then with Supreme Court from the order of NCLAT 10/15/2025 39

40. CIRP 10/15/2025 40

41. CIRP 10/15/2025 41

42. Throughout the new law, the emphasis is on:- Timely resolution Timely liquidation Early identification of financial failure Maximising the asset value of insolvent firms Smooth and efficient exits Viable business environment India’s ranking by the World Bank about ease of business will go up by many points The key word in this Code is ‘speed’ 10/15/2025 42

43. THANK YOU 10/15/2025 43