{"id":88624,"date":"2026-11-13T17:55:18","date_gmt":"2026-11-13T12:25:18","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=88624"},"modified":"2026-11-13T17:55:50","modified_gmt":"2026-11-13T12:25:50","slug":"personal-insolvency-under-ibc-2016","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/13-11-2026\/personal-insolvency-under-ibc-2016","title":{"rendered":"Personal Insolvency under the Insolvency and Bankruptcy Code (IBC), 2016"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/ Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Videocon\u2019s former promoter Venugopal Dhoot has been declared bankrupt by the National Company Law Tribunal (NCLT) on personal guarantees for loans of \u20b912,668 crore taken by Videocon firms.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Insolvency<\/strong> is the inability of a person or company to pay debts as they come due.<\/li>\n\n\n\n<li><strong>Bankruptcy <\/strong>is the formal legal process through which an insolvent individual is declared bankrupt, allowing their assets to be distributed among creditors to repay outstanding debts.<\/li>\n\n\n\n<li><strong>The Insolvency and Bankruptcy Code (IBC), 2016<\/strong>, provides a time-bound framework for resolving insolvency and maximising asset value.\n<ul class=\"wp-block-list\">\n<li>The provisions relating to insolvency resolution and bankruptcy of personal guarantors to corporate debtors were brought into force in December 2019.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Categories of Insolvency under the IBC<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Corporate Insolvency:<\/strong> Applicable to companies and Limited Liability Partnerships (LLPs).\n<ul class=\"wp-block-list\">\n<li>When a company defaults on its debt, <strong>financial or operational creditors can approach the NCLT<\/strong> to initiate the Corporate Insolvency Resolution Process (CIRP).<\/li>\n\n\n\n<li>The objective is to resolve the company&#8217;s financial distress through a resolution plan rather than immediately liquidating it.<\/li>\n\n\n\n<li>If resolution fails, the company may undergo liquidation, with its assets sold to repay creditors.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Personal Insolvency:<\/strong> Personal insolvency deals with individuals and partnership firms unable to repay their debts. Under the IBC, it broadly covers two categories:\n<ul class=\"wp-block-list\">\n<li><strong>Personal Guarantors to Corporate Debtors: <\/strong>Individuals (usually promoters or directors) who personally guarantee loans taken by a company. If the company defaults, lenders can initiate insolvency proceedings against the guarantor.\n<ul class=\"wp-block-list\">\n<li><strong>NCLT handles<\/strong> insolvency proceedings of personal guarantors to corporate debtors.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Other Individuals and Partnership Firms:<\/strong> Individuals unable to repay personal borrowings and partnership firms unable to meet their financial obligations.\n<ul class=\"wp-block-list\">\n<li><strong>Debt Recovery Tribunal (DRT)<\/strong> handles proceedings relating to other individuals and partnership firms.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Process of Personal Insolvency of a Guarantor<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Initiation: <\/strong>Creditors can initiate proceedings under Section 95, while the guarantor can apply voluntarily under Section 94.<\/li>\n\n\n\n<li><strong>The NCLT appoints a Resolution Professional<\/strong> to examine the application, verify the debt and submit a report.<\/li>\n\n\n\n<li><strong>Repayment Plan:<\/strong> The guarantor may submit a repayment plan outlining how the outstanding debt will be repaid.\n<ul class=\"wp-block-list\">\n<li>Creditors consider the plan and may approve or reject it.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>If the repayment plan fails or is rejected<\/strong>, bankruptcy proceedings may be initiated under Section 121 of the IBC.<\/li>\n\n\n\n<li><strong>A bankruptcy trustee administers <\/strong>and realises the guarantor&#8217;s assets to repay creditors according to the prescribed priority.\u00a0<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-group has-background\" style=\"background-color:#fff2cc\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<h3 class=\"wp-block-heading\"><strong>Insolvency and Bankruptcy Code (IBC) 2016<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>IBC was introduced in 2016<\/strong> to address rising Non Performing Assets and ineffective debt recovery mechanisms in India.<\/li>\n\n\n\n<li>Objectives of the IBC resolution are;\n<ul class=\"wp-block-list\">\n<li><strong>Business Revival: <\/strong>To save businesses through restructuring, changes in ownership, or mergers,<\/li>\n\n\n\n<li><strong>Maximization of Asset Value:<\/strong> To preserve and maximize the value of the debtor&#8217;s assets,<\/li>\n\n\n\n<li><strong>Promoting Entrepreneurship and Credit:<\/strong> To encourage entrepreneurship, improve credit availability, and balance the interests of stakeholders, including creditors and debtors.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Currently a maximum <strong>330 days <\/strong>is allowed to find a resolution for a company admitted into the insolvency resolution process.\n<ul class=\"wp-block-list\">\n<li>Otherwise, the company goes into<strong> liquidation.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Institutional Framework&nbsp;<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Insolvency and Bankruptcy Board of India (IBBI):<\/strong> The apex regulatory body established to oversee the functioning of insolvency professionals, insolvency professional agencies, and information utilities.<\/li>\n\n\n\n<li><strong>National Company Law Tribunal (NCLT): <\/strong>The adjudicating authority that takes up insolvency applications, imposes moratoriums and sanctions resolution plans for firms and LLPs.<\/li>\n\n\n\n<li><strong>Insolvency Professionals (IPs): <\/strong>IPs are the people who deal with the affairs of troubled entities, protect assets and convene meetings of creditors.<\/li>\n\n\n\n<li><strong>Committee of Creditors (CoC): <\/strong>The top decision-making body that includes the distressed entity\u2019s financial creditors. They examine, vote on and adopt the resolution plan.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/venugopal-dhoot-bankruptcy-videocon-nclt-ibc-case-explained-10959905\/\" target=\"_blank\" rel=\"noopener\"><strong>IE<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Context  <\/strong><\/p>\n<li class=\"ms-5\"> Videocon\u2019s former promoter Venugopal Dhoot has been declared bankrupt by the National Company Law Tribunal (NCLT) on personal guarantees for loans of \u20b912,668 crore taken by Videocon firms. <\/li>\n<p><\/p>\n<p><strong> About <\/strong><\/p>\n<li class=\"ms-5\"> \u00a0Insolvency is the inability of a person or company to pay debts as they come due. <\/li>\n<li class=\"ms-5\"> Bankruptcy is the formal legal process through which an insolvent individual is declared bankrupt, allowing their assets to be distributed among creditors to repay outstanding debts. <\/li>\n<p><a href=\" https:\/\/www.nextias.com\/ca\/current-affairs\/13-11-2026\/personal-insolvency-under-ibc-2016 \" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-88624","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/88624","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=88624"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/88624\/revisions"}],"predecessor-version":[{"id":88626,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/88624\/revisions\/88626"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=88624"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=88624"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=88624"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}