The Insolvency and Bankruptcy Code, 2016 is
one of the major economic reform Code initiated by the Government in the year
2015.
1.
There were multiple
overlapping laws and adjudicating forums dealing with financial failure and
insolvency of companies and individuals in India.
2.
The existing laws also were
not aligned with the market realties, had several problems and were inadequate.
3.
As per that legal
framework, provisions relating to insolvency and bankruptcy for companies could
be found in the Sick Industrial Companies (Special Provisions) Act, 1985, the
Recovery of Debt Due to Banks and Financial Institutions Act, 1993, the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 and the Companies Act, 2013.
4.
Resolution and jurisdiction
vesting with multiple agencies with overlapping powers was leading to delays
and complexities in the process.
5.
To facilitate easy and time
bound closure of business in India and to overcome these challenges, a strong bankruptcy
law was required.
6.
The Insolvency and
Bankruptcy Code, 2015 was introduced in the Lok Sabha on 21st December, 2015
and referred to the Joint Committee on the Insolvency and Bankruptcy Code,
2016. The Committee had presented its recommendations in the modified Bill
based on its suggestions.
7.
Further, the Insolvency and
Bankruptcy Code, 2016 was passed by both the Houses of Parliament and notified
in May 2016. Being one of the major economic reforms it paves the way focussing
on creditor driven insolvency resolution.
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