Insolvency Law

Insolvency law in India primarily governs the processes and procedures related to the insolvency and bankruptcy of individuals, partnerships, and corporate entities. The Insolvency and Bankruptcy Code, 2016 (IBC), is the primary legislation that regulates insolvency proceedings in India. It replaced various existing laws and created a consolidated framework for dealing with insolvency and bankruptcy matters.

Key features of insolvency law in India and the legal support available include:

1. Insolvency Resolution Process: The IBC provides for a time-bound process to resolve insolvency cases. When a debtor defaults on its debts, creditors can initiate insolvency proceedings. A licensed Insolvency Professional (IP) is appointed to manage the debtor’s assets and liabilities during this process.
2. Adjudicating Authority: The National Company Law Tribunal (NCLT) is the primary adjudicating authority for corporate insolvency cases, while the Debt Recovery Tribunals (DRTs) deal with individual and partnership insolvency cases.
3. Corporate Insolvency: For corporate entities, the IBC provides for a corporate insolvency resolution process (CIRP) where creditors, including financial and operational creditors, participate in the resolution of the company’s insolvency. If a resolution plan is approved by the creditors, it is implemented to revive the company. In case no resolution plan is viable, liquidation may be ordered.
4. Individual Insolvency: The IBC also covers personal insolvency of individuals and partnership firms. The process involves the filing of an application for insolvency by the debtor or creditors, and an IP is appointed to oversee the process. A fresh start, repayment plan, or bankruptcy order can be issued based on the individual’s financial condition.
5. Cross Border Insolvency: India has adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, which facilitates cooperation with foreign courts and foreign representatives in cross-border insolvency cases.
6. Appeals: Parties dissatisfied with decisions made by the NCLT or DRT can appeal to higher courts, such as the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court of India.
7. Regulatory Bodies: The Insolvency and Bankruptcy Board of India (IBBI) is the regulatory authority overseeing insolvency professionals, insolvency professional agencies, and information utilities.
8. Stakeholder Protection: The IBC aims to balance the interests of various stakeholders, including creditors, debtors, and employees, by ensuring a transparent and equitable insolvency resolution process.