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Overview of Insolvency and Bankruptcy Code 2016

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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