Insolvency and Bankruptcy Code 2016 in Sustaining Indian Economy

Abstract

There are numerous overlapping laws in India that deal with financial loss and insolvency of both organisations and individuals. Under the current legal and institutional framework, lenders are unable to collect or restructure defaulted assets in a timely and effective manner, imposing an undue strain on the Indian credit system. The framework intended to combine a time-bound and scientific approach to insolvency resolution with the goal of maximising value for all stakeholders and balancing knowledge asymmetry, while also protecting the interests of all parties involved. In 2000, the amount of Non-Performing Assets (NPAs) grew rapidly. Banks made indiscriminate loans between 2008 and 2014, resulting in a high number of NPAs, as revealed by Asset Quality Reviews of the Reserve Bank of India (RBI), causing the government to act immediately. A Committee was formed, and its report, in which the IBC was recommended, was delivered in 2015. Following that, a bill was introduced in the Lok Sabha and referred to a Parliamentary Joint Committee for examination. On May 5, 2016, the Indian Broadcasting Corporation (IBC) was approved by both Houses of Parliament and received presidential assent on May 28, 2016. Indian insolvency rules have their origins in English law. Sections 23 and 24 of the Government of India Act 1800 established the first laws governing insolvency. In 1828, India passed a statute establishing the first expressly tailored insolvency legislation. This act was extended to include the Presidency towns of Bombay, Madras, and Calcutta. A few years later, the Indian Insolvency Act 1848 was introduced, which established a division between traders and non-traders. The High Courts were given jurisdiction over insolvency, with the High Courts' jurisdiction confined to presidential towns. This statute, known as the Presidency Towns Insolvency Act 1909, was enacted in 1909. Due to the absence of legislation governing insolvency in non-presidency areas before to 1907, the Provincial Insolvency Act was enacted in 1907 and was eventually succeeded by the Provincial Insolvency Act 1920, which is in force today.