The Insolvency and Bankruptcy Code (IBC) is a law that was enacted in India in 2016. The IBC aims to consolidate and amend the laws relating to insolvency and bankruptcy in India, and provide a time-bound process for resolution of insolvency cases.
The key features of the IBC include the creation of a new institutional framework comprising the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT), and the Insolvency and Bankruptcy Board of India (IBBI). The IBC also provides for a time-bound process for resolution of insolvency cases, with a maximum period of 330 days for completion of the entire process.
Under the IBC, a creditor, including a financial creditor or operational creditor, can initiate insolvency proceedings against a corporate debtor in case of default in repayment of debt. The process begins with the appointment of an insolvency resolution professional (IRP) to manage the affairs of the corporate debtor during the resolution process.
The IRP is required to prepare a resolution plan within a maximum period of 180 days, which can be extended by another 90 days in certain cases. The resolution plan is then submitted to the creditors for their approval, and if approved, it is implemented to resolve the insolvency case.
If the resolution plan is not approved or if the process is not completed within the specified time, the corporate debtor is required to go for liquidation. The proceeds from the liquidation are distributed among the creditors as per the priority laid down in the IBC.
The IBC has been instrumental in improving the insolvency and bankruptcy process in India, and has been credited with reducing the time and cost of resolution of insolvency cases.
