IBC Act, 2016: Business and Insolvency

Submitted by:

Anurag Chauhan Sandeep Singh Bhandari

Chanakya National Law University Chanakya National Law University

7667243726 9582699891

Anuragdb007@gmail.com sandeepsb3724@gmail.com
 IBC Act, 2016: Business and Insolvency
The world has become more competitive than ever due to globalization and advancement in
technology among others. MNC’s calls the shot in the world economy and this led to even stiffer
competition for small and medium enterprises and even harder for Entrepreneurs to get success
as the chance of achieving success is drab for. Ease of doing business is an index which is
published by World Bank every year. The countries are ranked from 1-190 in the index. The
country which is ranked high indicates that the regulatory environment is more suitable for the
starting and operation of local industries. The ranking is done on the basis of various factors
basically on the aggregate of 10 topics. Resolving insolvency is one among those parameters.
Ease of Doing Business not only means a smooth and hassle-free setting up of the company but
also a smooth exit from the market. An Insolvent entity is not good for the economy of a country
as the capital is stuck in the entity and thus there arises a need for a swift and transparent
mechanism to deal with the issue of insolvency. Earlier India’s rank in Ease of Doing Business
was 133 but in 2018, India made a jump of 33 ranks and it was placed at 100th position. In 2019,
India again made a significant improvement in its rank and currently, its rank is 77. The
implementation of Insolvency and Bankruptcy Code (IBC), 2016 was one of the major reasons
for it.

Insolvency and Bankruptcy Code, 2016 is an important step by the Government to take time-
bound and effective measure in cases of insolvency. With a threefold increase in the number of
Non-Performing Assets (NPAs) from the year 2011 to 2016, the creditors were apprehensive.
This Act is very stringent in nature and is seen to be effective to deal with the issue. The Act was
needed to combine various other laws dealing with cases of insolvency covering everyone
including individuals, companies, partnerships, and LLPs. Cases of individuals and Partnership
firms are decided in DRT while those of the companies and LLPs are decided by NCLT. An
appellate body is also set up under this Act.

The IBC Act 2016 has a resemblance to the laws related to insolvency in the UK. The act is not
comprehensive and hence has been amended accordingly. Thus, this research paper will
endeavor to explore the relationship between the act and how it impacts the entrepreneurship as
well as ease of doing business in India. The paper would also shed light on how the laws related
to resolving insolvency has evolved in many years.