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THEME IF THE ARTICLE: INSOLVENCY AND BANKRUPTCY CODE, 2016 BANE

OR BOON
TITLE OF THE ARTICLE: INSOLVENCY AND BANKRUPTCY CODE 2016: A
GUARDIAN ANGEL OR PERIL TO THE CORPORATES:
NAME OF THE AUTHOR : JEEVAN LANCY PEREIRA
AFFILIATED INSTITUTION: VAIKUNTA BALIGA COLLEGE OF LAW
COURSE AND SEMESTER: BA,LLB (10th semester)
INSOLVENCY AND BANKRUPTCY CODE, 2016 BANE OR BOON

INSOLVENCY AND BANKRUPTCY CODE 2016: A GUARDIAN

ANGEL OR PERIL TO THE CORPORATES:
Background of the Insolvency and Bankruptcy Code, 2016:
India as one of the fastest growing economy with more concentrated on corporate sectors a
important part of the nation’s economy playing its vital role in the development of the
country there are many legislation to promote and control the various corporates sectors when
you start a business a nightmare is going under loss! When the business graph shows
downwards in order to uplift go for credit when in a situation where a business complete fails
to recover the situation of the corporation is like fish out of the water!! Liabilities will be
more to the assets default in repayment of credit it effects on the each and every person. It
depends on it the creditors, the suppliers, the employee. There was much need for the
legislation that deals with the Bankruptcy and Insolvency. In 2016 the central government
introduced this Insolvency and Bankruptcy Code, 2016 a well deserving legislation for the
process of the bankruptcy and Insolvency. Before this Act came in to force the companies
Act 2013( amended) under section 270 describes the process of the winding up
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270. Modes of winding up.— (1) The winding up of a company may be either—
(a) by the Tribunal; or
(b) voluntary.
(2) Notwithstanding anything contained in any other Act, the provisions of this Act with
respect to
winding up shall apply to the winding up of a company in any of the modes specified under
sub-section this code repealed many other statues, by passing this Code a Board has been
established also the National Company Law Tribunal was made Adjudicating Authority to
deal exclusively for the process of bankruptcy resolution process.
Whether this Insolvency and bankruptcy code 2016 is guardian angel or peril to the
corporates?
This question arises because there it’s about the Bankruptcy and Insolvency. How this
legislation will be guardian angel or peril by understanding the legislation. Before that how
the process of resolution takes place in very simple way
Process of resolution of bankruptcy
The bankruptcy process all begins where a corporate is in debt and cannot come over of it
either the corporate creditor or the corporate debtor can file an application before the National
company Law tribunal which is a adjudicating authority under the Insolvency and bankruptcy
code 2016then resolution professional disappointed then the resolution professional has to
take the charge he has to who appoint committee of creditors then there is three options

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Sec 270 of the Companies Act 2013
  Sale
 Liquidation
 Litigation
With all these process the in bankruptcy resolution process the similar process has been
followed in insolvency resolution process let us see the overview of the Code
The success story at the beginning
Initially to check the working of the cod the Reserve Bank of India had listed out the 12
biggest loan defaulters for this process here we found the huge corporations like Bhushan
steel, Essar steels. There were more housing and steel industry’s in the list. These 12
corporates owned a debt in thousands of crores rupees to the financial creditors like banks.
The trial process succeeded many company were sold and the company’s which weren’t sold
they went for liquidation only one had filed litigation
Secures the debt money
The Insolvency and Bankruptcy Code protects the creditors on their money. Once application
is made for the resolution then and the process under this will begin once all the necessary
steps had completed, then surely the creditors will get back their money most of the financial
institutions mainly the banks have got their money back from this process. Even the
operational creditors also been protected not only the financial creditors where the
operational creditors who supplies goods, or sells something to the corporate and they got not
paid under this Code everyone had made equal for the recovery of debt
Committee of creditors
The committee of creditors is one of the important step involved in the bankruptcy process
where the resolution professional who is an independent person appointed for the process of
bankruptcy shall make the committee of creditors and the committee of creditors once
company is sold or went for liquidation it is the duty of creditors to distribute the reciverd
value among themselves on the basis of hierarchy of high to low the creditors can not further
file litigation on this they have to settle the share of sale value in their meeting once majority
gives consent then it has to be followed.
protects all type of business
The Code explains who are all included under this bankruptcy insolvency code are company,
LLP's, Partnership firm, Hindu joint family almost all type of business establishments are
protected eligible for the resolution of bankruptcy. Section 2 of Insolvency and Bankruptcy
Code explains as follows:
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(a) any company incorporated under the Companies Act, 2013 or under any
previous company law;
(b) any other company governed by any special Act for the time being in force,
except in so far as the said provisions are inconsistent with the provisions of such
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Sec 2 of Insolvency and Bankruptcy Code, 2016
special Act;
(c) any Limited Liability Partnership incorporated under the Limited Liability
Partnership Act, 2008;
(d) such other body incorporated under any law for the time being in force, as
the Central Government may, by notification, specify in this behalf; and
(e) partnership firms and individuals,
The code is not only concentrates on the huge corporates it also look after Proprietor, a
Limited Liability Partnership, a Partnership firm, business of Hindu joint family... this scope
of the Code is wide. Each and every person in the field of business establishment has been
protected
Quick process
The process of the resolution of bankruptcy begins the day of filing application to the NCLT
the entire process has to take place with in 270 days the legislatures more concentration was
on sale and liquidation the result of it previous year Moreover 4000+ resolution has been
settles. Presently 27 additional judges were appointed to NCLT where now the NCLT have
more judges than the supreme court of India
A real guardian angel to the creditors?
The Code protects the person who had gone insolvent. The precious profit for him during
resolution is time! Yes during the resolution there will be a stay on all other legal proceedings
related to the debt he can initiate any legal proceeding. For a good businessman to recover or
to think for good he needs time and the time which he gets during the resolution
Failed? Start over again!!
The Insolvency and bankruptcy code 2016 gives a second chance to a corporate personality.
A bankruptcy and insolvency is not the end where in India we have a belief that once a
bankrupt or insolvent he is just pretended to alive but legally dead! But this new legislation
gives back a new life just in video games to start-up a fresh under chapter II of this Code. A
person can apply under sec 80 under clause (1) and (2)
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80. (1) A debtor, who is unable to pay his debt and fulfils the conditions specified in
sub-section (2) , shall be entitled to make an application for a fresh start for discharge of his
qualifying debt under this Chapter.
(2) A debtor may apply, either personally or through a resolution professional, for a
fresh start under this Chapter in respect of his qualifying debts to the Adjudicating Authority
if —
(a) the gross annual income of the debtor does not exceed sixty thousand rupees;

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Section 80 of the Insolvency and Bankruptcy Code, 2016
(b) the aggregate value of the assets of the debtor does not exceed twenty
thousand rupees;
(c) the aggregate value of the qualifying debts does not exceed thirty-five
thousand rupees;
(d) he is not an undischarged bankrupt;
(e) he does not own a dwelling unit, irrespective of whether it is encumbered or
not;
(f) a fresh start process, insolvency resolution process or bankruptcy process is
not subsisting against him; and
(g) no previous fresh start order under this Chapter has been made in relation to
him in the preceding twelve months of the date of the application for fresh start.
These conditions under sec 80(2) fulfilled by the person who went insolvent
A grey cloud and the major comeback
It’s so happened that the initial process itself Essar steels were listed out by Reserve Bank of
India for the process of bankruptcy resolution and all the process has gone smoothly Arcelor
Mittal have made proposal for the purchase of the company for 42000+ crores where Coc
creditor committee approached the appellant authority for seeking highest amount of
recovery of should go to the financial creditors more then operational creditors so they
approached the appellant authority and to the supreme court of India the learned judge
Rohinton Fali Nariman. J, made the following observation: “
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“ I might add here that the commercial wisdom of the lenders who are voting for the
resolution of the COC is evidenced by the fact that they had created securities on the project
assets of the Corporate Debtor after assessing the commercial risk involved. In the case of
SCB, however, there seems to have been gross under security for the large amount of
Rs.3000 crores by merely seeking a corporate guarantee from the Corporate Debtor along
with a charge only on the shares of the offshore company held by the Corporate Debtor,
wherein the liquidation value of such shares is a mere Rs.60.71 crores. In fact, in view of the
fact situation, I find it hard to understand whether SCB can really be treated as a secured
creditor in the first place. I am of the opinion that even if the corporate guarantee were to
be enforced, SCB would at best stand as a secured creditor only to the extent of the value of
the shares of the offshore company as on the date of enforcement of the guarantee and as
an unsecured creditor with respect to the rest of the loan advanced by it. This is an equally
valid consideration which might have moved the COC while approving the resolution plan by
which the ultimate discretion for distribution is left to the COC with a declaration that such
allocation to the financial creditors will be binding on all stake holders, which also would
include SCB This was a biggest draw back of the code the litigation. In India the litigation
process is lengthy process some misuse the this right in order to get delay in process”
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Committee Of Creditors Of Essar ... vs Satish Kumar Gupta on 15 November, 2019
And passed the judgement stating that the operational creditors will also equally liable to get
the debt back this is one of the landmark judgement on Insolvency and Bankruptcy
Code,2016
The major comeback :
Looking up all these problems the central government made an amendment to the Code
under 5section 12 of the principal Act, in sub-section (3), after the proviso, the following
provisos shall be inserted, namely:––
“Provided further that the corporate insolvency resolution process shall
mandatorily be completed within a period of three hundred and thirty days from the
insolvency commencement date, including any extension of the period of corporate
insolvency resolution process granted under this section and the time taken in legal
proceedings in relation to such resolution process of the corporate debtor:
Provided also that where the insolvency resolution process of a corporate debtor
is pending and has not been completed within the period referred to in the second
proviso, such resolution process shall be completed within a period of ninety days
from the date of commencement of the Insolvency and Bankruptcy Code (Amendment Act,
2019) by giving 60 more days for the complete process of resolution . Before it was 270 days
now adding 60 days the whole process has to be finished with in 330 days no matter whether
the litigation is pending in the court the resolution process will continue and the whole
process shall be finished 330 days. So from this new amendment filing litigation to make
process delay will not be possible and however the process has to be taken place within 330
days.
Conclusion:
The Insolvency and bankruptcy code 2016which is very needed legislation in India. The
corporates who avails thousands of crore rupees some fail some may conquer but the
important financial debtors are banks where do they get money from a honest taxpayer, a
person who saves his money in banks so there is need of protection of the creditors also code
protects the debtor it is more like win-win process. Nobody is the looser this legislation had
gone through amendment for to protect interest of everyone. The process is actually in its
way more than 18000+ companies were refferd for bankruptcy resolution more than 4000+
process has been finished. In a country like India where the corporate thinking is developing
the legislature place it’s very important role. More likely to be a guardian angel!

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Section 12(3) of Insolvency and Bankruptcy Code Amendment Act 2019