In order to tackle the problem of unscrupulous debtors escaping and delaying the repayment of debts, the Government of India brought forth the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘IBC’). Not only does it seek to promote the availability of credit in a more transparent and systematic manner, but, it also balances the interests of all stakeholders by making the legal framework stronger in terms of reorganization and insolvency resolution of corporate persons, insolvent entity in a time bound manner and for maximization of the value assets.
Procedure under IBC
With the view to carry out liquidation or resolution process, the following steps are to be followed –
- Apply to National Company Law Tribunal (hereinafter referred to as the “NCLT”);
- The NCLT merely has to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. However, in case of an operational creditor such party needs to first make a demand for his unpaid debt and it is open to the corporate debtor to defend the claim on the basis that there is an ongoing dispute;
- Once the application is admitted, NCLT may issue a moratorium, because a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims or appoint an interim resolution professional (hereinafter referred to as “IRP”) within 14 days of commencement of insolvency to manage the operations of the corporate debtor as a growing concern;
- The IRP shall verify claims of all the creditors; take into his custody or evaluate all the assets, property, effects and actionable claims of the corporate debtor; take measures to protect and preserve the same; carry on the business of the corporate debtor for its beneficial liquidation, etc.
- The corporate insolvency resolution process shall be completed within a period of 180 days from the date of admission of the application to initiate such process.
In the news
On August 30, 2018, the NCLT Mumbai Bench admitted an insolvency petition against Lavasa Corp. Ltd. (subsidiary of Hindustan Construction Co. Ltd) filed by one of its creditors, Raj Infrastructure Development (India) Pvt. Ltd. The tribunal has approved the appointment of Devendra Prasad as the IRP under the provisions of the IBC.
The enforcement of IBC reposed faith of the creditors in the legal mechanism assuring them speedy resolution of their disputes against the debtors who may evade off their liabilities taking recourse to the insolvency proceedings.