{"id":9711,"date":"2024-08-23T09:08:00","date_gmt":"2024-08-23T09:08:00","guid":{"rendered":"https:\/\/www.nextias.com\/blog\/?p=9711"},"modified":"2024-08-23T12:14:39","modified_gmt":"2024-08-23T12:14:39","slug":"insolvency-and-bankruptcy-code-ibc","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/","title":{"rendered":"Insolvency and bankruptcy code 2016 (IBC 2016)"},"content":{"rendered":"\n<p><em>The <strong>Insolvency and Bankruptcy Code 2016 (IBC 2016)<\/strong> is a landmark reform aimed at addressing multiple challenges in the Indian economy. By addressing the inefficiencies in India&#8217;s insolvency and bankruptcy processes, it has improved the resolution of stressed assets along with promoting entrepreneurship. This <strong>article aims to study in detail the Insolvency and Bankruptcy Code 2016 (IBC 2016), its needs, provisions, achievements, concerns and other related concepts.<\/strong><\/em><\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_56_1 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#What_is_Insolvency_and_Bankruptcy_Code_2016_IBC_2016\" title=\"What is Insolvency and Bankruptcy Code 2016 (IBC 2016)?\">What is Insolvency and Bankruptcy Code 2016 (IBC 2016)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#What_is_Insolvency\" title=\"What is Insolvency?\">What is Insolvency?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#What_is_Bankruptcy\" title=\"What is Bankruptcy?\">What is Bankruptcy?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Objectives_of_Insolvency_and_Bankruptcy_Code\" title=\"Objectives of Insolvency and Bankruptcy Code\">Objectives of Insolvency and Bankruptcy Code<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Need_for_Insolvency_and_Bankruptcy_Code_IBC\" title=\"Need for Insolvency and Bankruptcy Code (IBC)\">Need for Insolvency and Bankruptcy Code (IBC)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Institutional_Mechanism_of_IBC\" title=\"Institutional Mechanism of IBC\">Institutional Mechanism of IBC<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Insolvency_Professionals_IPs\" title=\"Insolvency Professionals (IPs)\">Insolvency Professionals (IPs)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Insolvency_Professional_Agencies\" title=\"Insolvency Professional Agencies\">Insolvency Professional Agencies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Information_Utilities\" title=\"Information Utilities\">Information Utilities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Adjudicating_Authorities\" title=\"Adjudicating Authorities\">Adjudicating Authorities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Committee_of_Creditors_CoC\" title=\"Committee of Creditors (CoC)\">Committee of Creditors (CoC)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Insolvency_and_Bankruptcy_Board\" title=\"Insolvency and Bankruptcy Board\">Insolvency and Bankruptcy Board<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Insolvency_Resolution_Process_under_IBC\" title=\"Insolvency Resolution Process under IBC\">Insolvency Resolution Process under IBC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Priority_of_Claims_under_IBC\" title=\"Priority of Claims under IBC\">Priority of Claims under IBC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Achievements_of_Insolvency_and_Bankruptcy_Code_2016_IBC_2016\" title=\"Achievements of Insolvency and Bankruptcy Code 2016 (IBC 2016)\">Achievements of Insolvency and Bankruptcy Code 2016 (IBC 2016)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Challenges_for_Insolvency_and_Bankruptcy_Code\" title=\"Challenges for Insolvency and Bankruptcy Code\">Challenges for Insolvency and Bankruptcy Code<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.nextias.com\/blog\/insolvency-and-bankruptcy-code-ibc\/#Insolvency_and_Bankruptcy_Amendment_Act_2021\" title=\"Insolvency and Bankruptcy (Amendment) Act, 2021\">Insolvency and Bankruptcy (Amendment) Act, 2021<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-bba9de8786e578854a8d92585371cf5f\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"What_is_Insolvency_and_Bankruptcy_Code_2016_IBC_2016\"><\/span><strong>What is Insolvency and Bankruptcy Code 2016 (IBC 2016)?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Insolvency and Bankruptcy Code<\/strong> is a <strong>legislation enacted in 2016<\/strong> based on the \u2018T.K Vishwanathan Committee Report\u2019.<\/li>\n\n\n\n<li>It consolidates various laws pertaining to the resolution of insolvency of businesses and firms.<\/li>\n\n\n\n<li>It establishes streamlined and expedited insolvency procedures to assist creditors, such as banks, in recovering dues and mitigating bad loans, which are a significant burden on the economy.<\/li>\n\n\n\n<li>It is also known as the exit law of India.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-024866b1251b9bce58010d4b2a4ea059\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"What_is_Insolvency\"><\/span><strong>What is Insolvency?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Insolvency<\/strong> refers to a situation where individuals or companies cannot repay back their outstanding debt obligations.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-a420b05977a0cd2d871fa6001abad869\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"What_is_Bankruptcy\"><\/span><strong>What is Bankruptcy?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Bankruptcy<\/strong> refers to a legal status declared by a court of competent jurisdiction for a person or entity that is insolvent i.e. unable to pay off debts.<\/li>\n\n\n\n<li>The court issues appropriate orders to resolve the insolvency and protect the rights of creditors.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-c274f376f9169e55fe18ea8e30b5efd7\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Objectives_of_Insolvency_and_Bankruptcy_Code\"><\/span><strong>Objectives of Insolvency and Bankruptcy Code<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Major objectives of the Insolvency and Bankruptcy Code<\/strong> are as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>To consolidate and amend all insolvency laws that are existing in India.<\/li>\n\n\n\n<li>To simplify and expedite the process of resolution of Insolvency and Bankruptcy in India.<\/li>\n\n\n\n<li>To protect the interest of creditors, including stakeholders in a company.<\/li>\n\n\n\n<li>To revive the company in a time-bound manner.<\/li>\n\n\n\n<li>To promote entrepreneurship.<\/li>\n\n\n\n<li>To get the necessary relief to the creditors and consequently increase the credit supply in the economy.<\/li>\n\n\n\n<li>To work out a new and timely recovery procedure to be adopted by the banks, financial institutions or individuals.<\/li>\n\n\n\n<li>To set up an Insolvency and Bankruptcy Board of India.<\/li>\n\n\n\n<li>Maximization of the value of assets of corporate persons.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-29120ac16848e1bbe77d4f21455a0739\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Need_for_Insolvency_and_Bankruptcy_Code_IBC\"><\/span><strong>Need for Insolvency and Bankruptcy Code (IBC)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>need for a new Insolvency and Bankruptcy Code<\/strong> can be seen as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Previously, India had several overlapping laws and adjudicating forums aimed to address financial failure and insolvency of companies and individuals.\n<ul class=\"wp-block-list\">\n<li>This led to undue delays in the recovery of the <a href=\"https:\/\/www.nextias.com\/blog\/non-performing-assets-npas\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/non-performing-assets-npas\/\"><strong>NPAs<\/strong><\/a> by the Banks.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The Insolvency and Bankruptcy Code (IBC Code) was needed to consolidate all the laws related to Insolvency and Bankruptcy resolution and to simplify the process of insolvency resolution.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-d80f5a38d8fc960103cbf5cbb81590a5\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Institutional_Mechanism_of_IBC\"><\/span><strong>Institutional Mechanism of IBC<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>institutional mechanism of the Insolvency and Bankruptcy Code<\/strong> includes the following:<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-51717f8815c6cd38b38bb1bf061b6df9\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Insolvency_Professionals_IPs\"><\/span><strong>Insolvency Professionals (IPs)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong>Insolvency Professions (IPs)<\/strong> are a specialized cadre of licensed professionals who administer the process of insolvency resolution, manage the debtors\u2019 assets, and provide information for creditors to assist them in decision-making.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-1dd6a2700f31f5c939b57297ba2f5651\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Insolvency_Professional_Agencies\"><\/span><strong>Insolvency Professional Agencies<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong>Insolvency Professional Agencies<\/strong> are tasked with conducting examinations to certify the Insolvency Professionals (IPs) and enforcing a code of conduct for their performance.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-e2c9c02ced891f381c27b83b7746d830\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Information_Utilities\"><\/span><strong>Information Utilities<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The creditors would report financial information of the debt owed to them by the debtor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-f4b619b4a2d60360b929e8338a9324ce\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Adjudicating_Authorities\"><\/span><strong>Adjudicating Authorities<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The proceedings of the resolution process are to be adjudicated by\n<ul class=\"wp-block-list\">\n<li>National Companies Law Tribunal (NCLT) in case of companies; and<\/li>\n\n\n\n<li>Debt Recovery Tribunal (DRT) in case of individuals.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The duties of the authorities includes the approval to initiate the process of resolution, appointing the insolvency professional, and approving the final decision of creditors.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-9e2c8b3df384e2e8740f7879abb8d63f\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Committee_of_Creditors_CoC\"><\/span><strong>Committee of Creditors (CoC)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>During the insolvency resolution process, a committee of lenders is formed to make decisions on the resolution process through voting.<\/li>\n\n\n\n<li>The CoC may either decide to restructure the debts of the debtors by preparing a resolution plan or liquidate the assets of the debtors.<\/li>\n\n\n\n<li>However, such a decision must be approved by at least 66% of the total votes in the Committee of Creditors (CoC).<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading has-text-color has-link-color wp-elements-e79df8e0c7856ee9a879aab585b1db1e\" style=\"color:#ff6a00\"><span class=\"ez-toc-section\" id=\"Insolvency_and_Bankruptcy_Board\"><\/span><strong>Insolvency and Bankruptcy Board<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Insolvency and Bankruptcy Board is mandated with regulating the Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs), and Information Utilities (IUs).<\/li>\n\n\n\n<li>The Board would comprise of representatives of the <a href=\"https:\/\/www.nextias.com\/blog\/reserve-bank-of-india-rbi\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/reserve-bank-of-india-rbi\/\"><strong>Reserve Bank of India (RBI)<\/strong><\/a>, along with the Union Ministries of Finance, Corporate Affairs and Law.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-7f28f3135045690aa53471f1555f5c7b\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Insolvency_Resolution_Process_under_IBC\"><\/span><strong>Insolvency Resolution Process under IBC<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>chronological order of resolution process under the Insolvency and Bankruptcy Code (IBC Code)<\/strong> is as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>When a default occurs, either the debtor or creditor may initiate the resolution process before the adjudicating authority.<\/li>\n\n\n\n<li>The NCLT appoints an Insolvency Professional (IP) to administer the Insolvency Resolution Process (IRP).<\/li>\n\n\n\n<li>The Insolvency Professional (IP) identifies the financial creditors and then constitutes a Committee of Creditors (CoC).<\/li>\n\n\n\n<li>The CoC prepares the plan of resolution for the restructuring the loans of the defaulted borrower which may be in the form of extending the maturity period of the loan, reducing the rate of interest on loans etc.<\/li>\n\n\n\n<li>Such a resolution plan must be approved by at least 66% of the total votes in the Committee of Creditors (CoC).<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"552\" height=\"336\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/07\/working-of-insolvency-and-bankruptcy-code-ibc.png\" alt=\"Working of IBC\" class=\"wp-image-9723\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/07\/working-of-insolvency-and-bankruptcy-code-ibc.png 552w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/07\/working-of-insolvency-and-bankruptcy-code-ibc-424x258.png 424w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/blog\/uploads\/2024\/07\/working-of-insolvency-and-bankruptcy-code-ibc-150x91.png 150w\" sizes=\"auto, (max-width: 552px) 100vw, 552px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-88e1628b2432b72da7413e86c7431444\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Priority_of_Claims_under_IBC\"><\/span><strong>Priority of Claims under IBC<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Insolvency and Bankruptcy Code significantly changes the priority waterfall for the distribution of liquidation proceeds.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Insolvency resolution process costs and the liquidation costs to be paid in full.<\/li>\n\n\n\n<li>Claims of secured creditors and workmen are due up to 24 months.<\/li>\n\n\n\n<li>Employees\u2019 salaries upto 12 months.<\/li>\n\n\n\n<li>Financial debt owed to unsecured creditors.<\/li>\n\n\n\n<li>Government dues (2 years) and unpaid dues to secured creditors.<\/li>\n\n\n\n<li>Any remaining debt and dues.<\/li>\n\n\n\n<li>Equity.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-3c610ccc7f5fecac6dcd62c7a7f0d9cf\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Achievements_of_Insolvency_and_Bankruptcy_Code_2016_IBC_2016\"><\/span><strong>Achievements of Insolvency and Bankruptcy Code 2016 (IBC 2016)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Improved Legal Provision:<\/strong> Insolvency and Bankruptcy Code (IBC Code) is a vast improvement on the two earlier laws for recovering bad loans:\n<ul class=\"wp-block-list\">\n<li>Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), and<\/li>\n\n\n\n<li>Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB).<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Addressing Chakravyuha Challenge:<\/strong> It addresses the Chakravyuha challenge of Indian Economy\n<ul class=\"wp-block-list\">\n<li>1991 LPG Reforms has enabled easier entry of private sector but made the exit difficult.<\/li>\n\n\n\n<li>Old Inefficient firms continue to operate with highly efficient firms leading to misallocation of factors of production.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Speedier Resolution:<\/strong> Introduction of Insolvency and Bankruptcy Code has brought down the average time for resolution processes from earlier 4-6 years to just around 317 days at present.<\/li>\n\n\n\n<li><strong>Higher Recoveries:<\/strong> Recoveries are also higher: 45% after its introduction, against 26% before it.<\/li>\n\n\n\n<li><strong>Ease of Doing Business (EoDB):<\/strong> Post introduction of the Insolvency and Bankruptcy Code (IBC Code), many business entities can be seen paying up front before being declared insolvent. Moreover, many cases have been resolved even before it was referred to NCLT.<\/li>\n\n\n\n<li><strong>Behavioural Change:<\/strong> The Fear of losing control of the company forces the promoters to operate at highest level of efficiency. This encourages the borrowers to settle dues at the earliest.<\/li>\n\n\n\n<li><strong>Overall Improved Performance:<\/strong> India\u2019s Ranking in resolving insolvency has improved significantly from 136 in 2017 to 52 in 2020, as reported by World Bank.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-029bfb11b268d4b652a52d35644d6487\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Challenges_for_Insolvency_and_Bankruptcy_Code\"><\/span><strong>Challenges for Insolvency and Bankruptcy Code<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Lack of operational NCLT benches:<\/strong> Most of the single and division benches of NCLT remain non-operational or partly operational on account of a lack of adequate support staff and proper infrastructure.<\/li>\n\n\n\n<li><strong>Low approval rate of resolution plans:<\/strong> As per the Insolvency and Bankruptcy Board of India\u2019s data, only 60% of the cases have been closed, and the majority of the cases have been closed through liquidation, only a few cases have been closed due to resolution.\n<ul class=\"wp-block-list\">\n<li>High number of liquidations is a cause for major worry as it violates IBC\u2019s principal objective of resolving bankruptcy.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Delay in Process:<\/strong> Delay in admission of Applications and Approval of Resolution plans and slow judicial process in India allows the resolution processes to drag on.<\/li>\n\n\n\n<li><strong>Low Recovery Rate:<\/strong> Recovery rates have, on average, been low.\n<ul class=\"wp-block-list\">\n<li>Moreover, when a few large recovery cases are excluded from accounting, a recovery rate of around 35-36% is observed.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-d0adc4bd9eb2e9b9b187dc32f0e06642\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>Insolvency and Bankruptcy Code (IBC)<\/strong> has led to significance improvements in India&#8217;s insolvency landscape, providing a robust framework for the resolution of distressed assets. By fostering a culture of credit discipline, promoting entrepreneurial ventures, and ensuring the efficient use of resources, it has set the stage for a more resilient and dynamic economy. Ongoing efforts to refine and strengthen the code will be crucial for managing the complexities of insolvency and bankruptcy in the future.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-1eb9069ed4eb99bc9fcae158bc20efaf\" style=\"color:#015aa7\"><span class=\"ez-toc-section\" id=\"Insolvency_and_Bankruptcy_Amendment_Act_2021\"><\/span><strong>Insolvency and Bankruptcy (Amendment) Act, 2021<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong>Insolvency and Bankruptcy (Amendment) Act, 2021<\/strong> introduced an alternate insolvency resolution process for <strong>Micro, Small and Medium Enterprises (MSMEs)<\/strong> with defaults up to \u20b91 crore called the Pre-packaged Insolvency Resolution Process (PIRP).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Insolvency and Bankruptcy Code (IBC) is a landmark reform aimed at addressing multiple challenges in the Indian economy.<\/p>\n","protected":false},"author":9,"featured_media":9721,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[62],"tags":[72],"class_list":["post-9711","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-indian-economy","tag-gs-3"],"_links":{"self":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/9711","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/comments?post=9711"}],"version-history":[{"count":7,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/9711\/revisions"}],"predecessor-version":[{"id":10635,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/posts\/9711\/revisions\/10635"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/media\/9721"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/media?parent=9711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/categories?post=9711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/blog\/wp-json\/wp\/v2\/tags?post=9711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}