A Study Of Insolvency And Bankruptcy Code And

Its Impact On Macro Environment Of India

Prerna Tomar

Abstract—
IBC is the most crucial reform in the legal setting of India. It is because IBC is not only making
India emphatically powerful in the field of the legal environment but also provides a new
identification and recognition at the global platform economically. The Insolvency and
Bankruptcy Code, 2016 is the bankruptcy law of India which seeks to consolidate the existing
framework by creating a single law for insolvency and bankruptcy. The paper studies
distinguish features and the legal framework of the code. The study is descriptive in nature.
In line with that, the paper also presents the impact of Insolvency and Bankruptcy code on
macro environment of India.
Keywords—IBC 2016, Macro Environment, Insolvency, Bankruptcy, Legal Environment of
India, Liquidation.
INTRODUCTION
Legal environment of any country always play a vital role in its economic development. If the
legal environment of that country is well-built and implemented then definitely the global
background of the country will be strong. After the introduction of Goods and Services Tax,
IBC is the second most crucial reform in the legal setting of India. It is because IBC is not only
making India emphatically powerful in the field of the legal environment but also provides a
new identification and recognition at the global platform economically. On both economic
and non-economic front, this code leaves a positive impact. Since the code is passed, the
global economic image of India is drastically enhanced, through Enhancement of the FDI,
Increased M&A deals, Improving India’s Ease of doing business ranking, etc. The Insolvency
and Bankruptcy Code, 2016 is considered to be one of the biggest economic reforms
introduced in India and is assumed to play a significant role in limiting the risks of credit. IBC,
2016 consolidates and amends the law relating to insolvency resolution process in India. The
effects of the advent of the Code seems to be far reaching to lenders, financial institutions,
corporate and also for professionals, giving them scope to act as resolution professionals.
Bankruptcy law aims at providing a rescue mechanism for distressed entities, facilitating
faster windup of insolvent entities and providing an easier exit route to investors.
In the present situation, creditors (Financial/ Operational) have numerous alternatives to
recover debts. The IB Code gives an extra alternative to resolve insolvency. The first case in
India under the IB Code was filed by ICICI Bank against Innovative Industries Ltd. The applicant
of insolvency resolution process is also required to propose a plan for resolution, however,
regardless of the resolution process applicant, the resolution plan requires the sanction of
financial creditors constituting the committee of creditors. Another imperative part of the
Code is that it gives criteria for establishing that default has been made (under Companies
Act 1956/2013, the only criteria given was the inability to pay debts to the corporate debtor)
i.e. Rs. 1 Lakh. This gives a chance to the defaulting corporate debtor to think of alternative
solutions in the initial phase of default preventing accumulation of default amount to risky
extents. Secondly, unless totally avoidable, the corporate debtor is kept from defaulting as a
result of dread of losing control over the company. This will diminish the frequency of default
and swelling of NPAs.
The second case is of Bharati Defence and Infrastructure Ltd against which Edelweiss Asset
Reconstruction Co filed insolvency resolution process in the National Company Law Tribunal
(NCLT) under the IB Code to pre-empt winding-up petitions by unsecured creditors. This step
by Edelweiss has been possible due to the repeal of SICA that dissolved the Board for
Industrial and Financial Restructuring (BIFR). Though recently, Bharati Defence and
Infrastructure (formerly Bharati Shipyard) has been given support by the creditors, led by
Edelweiss BSE 0.46% Asset Reconstruction Co, as they have proposed a revival package under
the IB Code 2016(1).
II. OBJECTIVES OF THE STUDY
The study has been undertaken to contribute towards the following broad objectives:
1. To study the distinguish features and regulatory framework of the Insolvency and
Bankruptcy Code, 2016.
2. To find out the impact of Insolvency and Bankruptcy code on macro environment of India
III. NEED OF THE STUDY - The purpose of this paper is to examine the main provisions of The
Insolvency and Bankruptcy Code, 2016. This paper highlights the perspectives of several
stakeholders, various challenges faced and the numerous advantages of implementing the
reform in India. This paper also highlights how IBC is highly resourceful in improving India’s
image on the global stand.
IV. INSOLVENCY AND BANKRUPTCY CODE (IBC), 2016
a. Background:
In India, the legal and institutional machinery for dealing with debt defaults has not yet been
in line with global standards. The recovery action of the creditors, either through the Contract
Act or through the special laws such as the *Recovery of Debts due to Banks and Financial
Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, has not been able to get the desired outcomes.
_______________________________________________________________________
1.R. Joel, ‘‘Creditors throw lifeline to help sinking Bharati. Economic Times’’ 11 April 2017 at
http://economictimes.indiatimes.com/
articleshow/58122027.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cp
pst [last retrieved on 20-4-2021]

*. Debt Recovery Tribunals are set up under RDDBFI Act, 1993

Similarly, action through the Sick Industrial Companies (Special Provisions) Act, 1985 and the
winding up provisions of the Companies Act, 1956/Companies Act, 2013 have neither been
able to aid the recovery for lenders nor aided in the restructuring of firms. Laws dealing with
individual insolvency, Presidential Towns Insolvency Act, 1909 and the Provincial Insolvency
Act, 1920 are almost a century old. This has hampered the confidence of the lenders over the
period of time.
The ‘Insolvency and Bankruptcy Code, 2016’is considered the biggest economic reform next
to GST. The Insolvency and Bankruptcy Code 2016 is landmark legislation consolidating the
regulatory framework governing the restructuring and liquidation of persons (including
incorporated and unincorporated entities).
The objective of the new law is to promote entrepreneurship, availability of credit, and to
balance the interests of all stakeholders by consolidating and amending the laws relating to
reorganization and insolvency resolution of corporate persons, partnership firms and
individuals in a time-bound manner and for maximization of value of assets of such persons
and matters connected therewith or incidental thereto. It aims to consolidate the laws
relating to insolvency of companies and limited liability entities (including limited liability
partnerships and other entities with limited liability), unlimited liability partnerships and
individuals, presently contained in a number of legislation, into a single legislation. Such
consolidation will provide for greater clarity in the law and facilitate the application of
consistent and coherent provisions to different stakeholders affected by the business failure
or inability to pay the debt.
MEANING
Insolvency can be defined as ‘‘a state that prompts one to file for bankruptcy’’. An entity—a
person, family, or company—ends up as an insolvent when it cannot pay its loan back on time.
In general, this occurs when the entity’s cash flow in falls beneath its cash flow out. For
individual debtors, this implies that their incomes are too low for them to pay off their debts.
For companies, this implies that the money flow into the business and its assets are less than
its liabilities.(2)
Bankruptcy is not precisely the same as insolvency. In fact, bankruptcy occurs when a court
has determined insolvency, and given orders for its resolution. Insolvency describes
circumstances where the debtor is unable to meet their commitments of repaying debts.
Bankruptcy is a legal procedure through which an insolvent debtor seeks relief.(3)
___________________________________________________________
2.https://www.greenwaybankruptcy.com/articles/the-difference-between-insolvency-and-
bankruptcy/ [last retrieved on 20-4-2021]
3. http://www.mbcindia.com/image/18%20.pdf [last retrieved on 20-4-2021]
 The fundamental explanations behind insolvency are principally poor management and
financial constraints. The following can e the reason for the same:
1. The situation of the market changes and the company did not perceive the need for change
as per market requirements.
2. The failure on the part of the management to acquire adequate skills, imprudent
accounting practices and absence of data frameworks. .
3. Loss of long-term finance or lack of cash flow. .

V. INSOLVENCY LAWS IN INDIA

The Insolvency laws in India have their origin in English Law. The provisions that dealt with
insolvency law were initially found under ss.23 and 24 of the Government of India Act 1800.
In 1828, a Statute was passed marking the beginning of insolvency specific legislation in India.
This statute applied to Presidency towns namely Bombay, Madras and Calcutta. Then the
Indian Insolvency Act 1848 was enacted that made distinction between traders and non-
traders. The jurisdiction relating to insolvency was transferred to High Courts, limiting its
jurisdiction to presidency towns. In 1909, the Presidency Towns Insolvency Act 1909 was
passed. Till 1907, there was no legislation dealing with insolvency in no presidency areas,
therefore, in 1907, the Provincial Insolvency Act was passed which was later replaced by the
Provincial Insolvency Act 1920. These two legislations continued in force until recently and
were repealed by the IB Code.
As ‘‘Bankruptcy & Insolvency’’ is in the Concurrent List in the Indian Constitution,(4) both
Centre and State Governments have power to legislate on this subject. Entry 43 of List I deals
with incorporation, regulation and winding up of trading corporations, including banking,
insurance and financial corporations, but not including co-operative societies whereas Entry
44 of List I deals with ‘‘incorporation, regulation and winding up of corporations, whether
trading or not, with objects not confined to one State, but not including universities’’. Entry
32 of List II deals with ‘‘incorporation, regulation and winding up of corporations, other than
those specified in List I ...’’. With these powers given under the Union List, the Parliament
enacted the first legislation dealing with corporate insolvency in India viz. the Companies Act
1956. However, the Act did not refer to insolvency or bankruptcy of corporates it only referred
to its ‘‘inability to pay debts’’.(5)
_______________________________________________________
4. Entry 9 of List III of the Seventh Schedule, (art.246 –Seventh Schedule to the Constitution).
Subject matter of laws made by Parliament and by the Legislatures of States
(1) Notwithstanding anything in clauses ( 2 ) and ( 3 ), Parliament has exclusive power to
make laws with respect to any of the matters enumerated in List I in the Seventh Schedule
(in this Constitution referred to as the Union List)
With the globalisation of the economy, corporate insolvency has attained great significance.
A need was therefore felt to bring about reforms in the sphere of insolvency laws. The main
objectives for bringing about reforms in the laws of insolvency were:
1. To restore the debtor company to profitable trading where it is practicable.
2. To expand the return to creditors as a whole where the company itself cannot be spared.
3. To build up a fair and even-handed framework for the positioning of claims and the
dispersion of assets among creditors, including a redistribution of rights.
4. To give an instrument by which the causes of failure can be identified and those guilty of
mismanagement brought to book.
VI. Recent evolution
The present law in force on insolvency and bankruptcy in India has evolved over a period of
time after the recommendations and suggestions given by different committees constituted
from time to time. Some of the relevant and recent committees are as follows.
T. Tiwari Committee
In 1981, the RBI showed deep concern over blocking of huge funds and non-performing assets
of sick industrial companies that led to loss in production, revenue as well as employment. To
address this, a committee was constituted under the chairmanship of T. Tiwari. The
committee came up with suggestions to secure the timely detection of sick and potentially
sick industrial companies, speedy determination of the preventive and remedial measures
and enforcement of such measures recommending the enactment of the Sick Industrial
Companies (Special Provisions) Act 1985 (SICA). A Board for Industrial and Financial
Reconstruction was established which failed to fulfil the purpose in the long run.

___________________________________________________________
(2) Notwithstanding anything in clause ( 3 ), Parliament, and, subject to clause ( 1 ), the
Legislature of any State also, have power to make laws with respect to any of the matter
enumerated in List III in the Seventh Schedule (in this Constitution referred to as the
Concurrent List)
(3) Parliament has power to make laws with respect to any matter for any part of the
territory of India not included (in a State) notwithstanding that such matter is a matter
enumerated in the State List
5. See s.271 of the Companies Act 1956.
Justice V.B. Balakrishna Eradi Committee
The Tiwari Committee was followed by the recommendations of Justice V.B. Balakrishna
Eradi Committee Report in 1999, setting up of a National Company Law Tribunal (NCLT in
short) to be vested with the functions and power with regard to rehabilitation and revival of
sick industrial companies. It also suggested amendments to be made in the Companies Act
1956 that were enacted but not notified. Other recommendations were adoption of
UNCITRAL Model Law for Cross Border Insolvency; need to encourage voluntary winding up
of companies and criteria of sickness of companies to include inability to pay debts.
The insolvency and bankruptcy code repealed two pieces of legislation ;the presidency towns
insolvency act 1909 and the provincial insolvency act 1920[6] and amended 11 others:
1) Indian partnership act 1932
2) Central excise act 1944
3) Income tax act 1962
4) Companies act 2013
5) Limited liability partnership act 2008
VII. Distinguish Features of the Code:
Comprehensive Law: Insolvency code is a comprehensive law which envisages and regulates
the process of insolvency and bankruptcy of all persons including corporate, partnership, LLP’s
and individuals
No multiplicity of law: The code has withered away from the multiple laws covering the
recovery of debt and insolvency and liquidation process and present singular platform for all
the relief’s relating to recovery of debts and insolvency.
Low time resolution: The code provides a low time resolution and defines fixed time
frames for insolvency resolution of companies and individuals. The process is mandated
to be completed within 180 days, extendable to a maximum of 90 days. Further, for a
speedier process, there is a provision for fast track resolution of corporate insolvency
within 90 days. If insolvency cannot be resolved, the assets of the borrowers may be sold
to repay the creditors.
One window clearance: It has been drafted to provide one window clearance to the
applicant whereby he gets the appropriate relief at the same authority unlike the earlier
position of law where in case the company is not able to revive the procedure for winding
up and liquidation has to be initiated under separate law governed by separate
authorities.
Clarity in the process: The code provides for a clear-cut process with respect to the
insolvency and bankruptcy. The structure of the code is very specific and 180 days is
mandated for the complete insolvency resolution process.
_________________________________________________________
[6]. . Section 243 of the IB Code 2016
One chain authority: There is one chain of authority under the code. It does not even
allow the civil courts to interfere with the application pending before the adjudicating
authority, thereby reducing the multiplicity of litigation. The National Company Law
Tribunal (NCLT) will adjudicate the insolvency resolution for companies and the Debt
Recovery Tribunal (DRT) will adjudicate the insolvency resolution for individuals.

Priority to the interest of workmen and employees: The code also protects the interest
of workman and employees. It excludes dues payable to workmen under the provident
fund, pension fund and gratuity fund from the debtor’s assets during liquidation.

New regulatory authority: It provides for constitution of a new regulatory authority

“insolvency and bankruptcy board of India” to regulate professionals, agencies and
information utilities engaged in the resolution of insolvencies of companies, partnership
firms and individuals. The board has already been established and has started
functioning.

Promote entrepreneurial activity: The code promotes entrepreneurial activity in India

because of its revival mechanism and fast resolution process.

VIII. REGULATORY FRAMEWORK OF INSOLVENCY AND BANKRUPTCY CODE, 2016

Insolvency and Bankruptcy Code, 2016 is expected to play a vital role in the economic
system of the country. The law is to cover insolvencies of “corporate persons” (covering
companies, limited liability partnerships, and all other entities having limited liability), as
also individuals, firms etc. While the law is admittedly a code for insolvent companies, it
covers INDIAN PARTNERSHIP ACT, 1932 COMPANIES ACT, 1956 SICK INDUSTRIAL
COMPANIES ACT, 1985 RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL
INSTITUTIONS ACT, 1993 SRFAESI ACT, 2002 COMPANIES ACT, 2013 © International
Journal of Engineering Development and Research (www.ijedr.org) 30 liquidation of
solvent companies as well, and thereby, serves as a complete code on liquidation of
companies. The Code has been divided into five parts comprising 255 sections and 11
schedules . The code provides for the establishment of a regulator who will oversee these
entities and perform legislative, executives and quasi-judicial functions with respect to
the insolvency professionals, insolvency professional agencies and information utilities.

IX. CORPORATE INSOLVENCY RESOLUTION PROCESS

Corporate insolvency resolution(7) is a process during which financial creditors assess

whether the debtor’s business is viable to continue and the options for its rescue and
revival. If an insolvency resolution fails or financial creditors decide that the business of
debtor cannot be carried on profitably and it should be wound up. The debtor will be
undergoing liquidation process and the assets of the debtor are realized and distributed
by the liquidator.
The insolvency resolution process provides a collective mechanism for lenders to deal
with the overall distressed position of the corporate debtor. This is a significant departure
from the existing legal framework under which the primary onus to initiate a
reorganization process lies with the debtor and lenders may pursue distinct actions for
recovery, security enforcement and debt restructuring.
In order to above these facts the regulations regarding “The Corporate Insolvency
Resolution Process are as follows: [8]
The corporate insolvency resolution process[9] may be initiated on application
to NCLT:
✓ By a financial creditor, either by itself or jointly with another financial creditor,
meaning a creditor for the financial facility (which is a broadly worded expression
including financial lease and hire purchase transactions, which are treated as
financial transactions under applicable accounting standards).
✓ By an operational creditor, meaning a creditor other than a financial creditor
or a person whom an operational debt.
✓ By the corporate debtor himself, that is the company itself.
ii. The occurrence of Default: Default means non-payment of debt when whole
or any part of the installment has become due and not repaid by the debtor. The
minimum amount of default by the debtor is Rs 1 lakh.
iii. Roadmap after Admission of Application: The insolvency resolution process,
after an application has been admitted by the adjudicating authority will entail
the following steps-
• Declaration a moratorium period-
This will prohibit actions such as, institution of suits, continuation of pending
suits/ proceedings against the corporate debtor including execution of any
judgment, decree or order; disposal/encumbering of corporate debtor’s assets or
rights/interests therein; any action to foreclose, recover or enforce any security
interest created by the corporate debtor, etc.
_____________________________________________________
[7]Chaudhary, V.K. & Kapoor, Alka. “Corporate Insolvency Resolution Process – Brief
analysis and challenges”, The Journal of Corporate Professionals (ICSI), Vol-46, Issue-9,
ISSN 0972-1983, September 2016
[8] Sharma, H.K. “Insolvency and Bankruptcy Code, 2016 - Fast Track Corporate
Insolvency Resolution Process”, ICSI 2016.
(https://www.icsi.edu/WebModules/LinksOfWeeks/ICSI_CS_SEP2016.pdf)
[9] see section 6 of the IB code Where any corporate debtor commits a default, a
financial creditor, an operational creditor or the corporate debtor itself may initiate
corporate insolvency resolution process in respect of such corporate debtor in the
manner as provided under this Chapter.
 One of the most important features of bankruptcy law is the grant of the moratorium during
which creditor action will remain stayed, while the bankruptcy court takes a view on the
possibility of rehabilitation. In the chapter on Sick Companies under the Companies Act 2013,
there is no provision for an automatic moratorium – it merely empowers the NCLT[10] to
grant a moratorium up to 120 days. The Code talks about a mandatory moratorium – thereby,
it serves almost like the automatic moratorium under global bankruptcy laws. [11] The
moratorium will continue throughout the completion of the resolution process – which is 180
days as mentioned above. However, if in the meantime, the creditors’ committee resolves to
approve liquidation of the entity, then the moratorium will cease to have an effect. Explicitly,
the moratorium before liquidation applies to the enforcement of security interests under the
SARFAESI Act as well. A moratorium also applies when an order for liquidation has been
passed by the adjudicating authority.
• Appointment of an Interim IP- Issuance of the public announcement of the initiation of
insolvency resolution process and call for the submission of claims. Interim IP inter alia takes
over the management and powers of the board of directors of the corporate debtor, and
collects all information relating to assets, finances and operations of the corporate debtor for
determining its financial position; collates all claims submitted by the creditors and
constitutes a Committee of Creditors ("COC").
The Committee of Creditors thereafter either resolves to appoint the interim IP as
the IP or replaces the interim IP by appointing a new IP, in accordance with the
prescribed procedure. This IP shall be appointed as the liquidator for the process.
The IP will then take over the management and assets of the corporate debtor,
and can exercise the wide powers granted to it, in the manner prescribed under
the Code. It will prepare an information memorandum in relation to the corporate
debtor, on the basis of which the resolution applicant will prepare a resolution
plan. IP will scrutinize the resolution plan and present it to the Committee of
Creditors. The Committee of Creditors approved plan will be submitted to the
adjudicating authority, for its acceptance, and it is only when the adjudicating
authority, gives it a final nod that the resolution plan becomes binding upon all
the stakeholders and the insolvency resolution process of the corporate debtor is
initiated. In case the adjudicating authority rejects the plan, the liquidation
process of the corporate debtor.

______________________________________________________________
[10] National company law tribunal constituted under s.408 of companies act,2013
[11] The neutral third party here is the insolvency resolution professional; As per
s.5(27) of the IB Code 2016 ‘‘resolution professional’’, for the purposes of Pt II
(Insolvency resolution and liquidation for corporate persons), means ‘‘an insolvency
professional appointed to conduct the corporate insolvency resolution process and
includes an interim resolution professional’’.
 • Timeline for the process:
Resolution Professional is appointed, after the Admission of an application by the
adjudicating authority, to conduct the entire corporate insolvency resolution
process and manage the corporate debtor during the period. Resolution
Professional shall prepare information memorandum for the purpose of enabling
resolution applicant to prepare a resolution plan.

A resolution applicant means any person who submits a resolution plan to the
resolution professional and upon receipt of resolution plans, Resolution
Professional shall place it before the creditors’ committee for its approval.
Once a resolution is passed, the creditors’ committee has to decide on the
restructuring process that could either be a revised repayment plan for the
company, or liquidation of the assets of the company. If no decision is made
during the resolution process, the debtor’s assets will be liquidated to repay the
debt. The resolution plan will be sent to NCLT for final approval and implemented
once approved.[12]

CORPORATE LIQUIDATION PROCESS[13] : The process starts with winding up order

involving the realization of the assets and distribution of proceeds among
creditors and other stakeholders. As mentioned in figure, according to Section 14
of IBC no suit can be instituted against the Corporate Debtor. Based on the priority
a security creditor may receive proceeds from the sale of assets by enforcing with
the secured assets as per applicable laws. Claims of the creditor will be considered
subordinate to the unsecured creditors to the extent of the deficit. All the
distribution shall be done in the manner laid down in the Code. Once all the assets
of the Corporate Debtor are liquidated the NCLT passes an order to finally liquefy
the corporate debtor.
__________________________________________________________
[12]see section 13 of insolvency and bankruptcy code 2016
13.1 The Adjudicating Authority, after admission of the application under section
7 or section 9 or section 10, shall by, an order-

(a) declare a moratorium for the purposes referred to in section 14;

(b) cause a public announcement of the initiation of corporate insolvency resolution

process and call for the submission of claims under section 15; and

(c) appoint an interim resolution professional in the manner as laid down in section
16.

(2) The public announcement referred to in clause (b) of sub-section (1) shall be made
immediately after the appointment of the interim resolution professional.

[13]. Part II of the IB code provides for insolvency resolution and liquidation for
corporate person.
X. IMPACT OF IBC ON MACRO ENVIRONMENT OF INDIA -
Insolvency and Bankruptcy Code was primarily introduced with the aim to
mitigate the losses of NPAs borne by the Indian Banking System. Though it is highly
doubtful that it can bring back the amount already stuck in stressed assets in the
form of NPAs but it can, to a large extent help to avoid the overall crisis. Apart
from its legal impact, IBC has also played a great role in macroeconomic objectives
providing India a strong stand in the global platform. Following mentioned are
some of the broader impacts of The Insolvency and Bankruptcy Code (IBC) of
India, 2016:

• Management of NPA’s-
Indian Banking Structure is currently dealing with the chronic problem of rising
NPAs[14]and its management has been one of the key focus areas for the banks
ever since. In such a case, the introduction of Insolvency and Bankruptcy Code can
prove to be a major milestone in reducing NPA stress building up on the Indian
Banking System. According to the Corporate Affairs Secretary Injeti Srinivas,
Insolvency and Bankruptcy Code
(IBC) has, directly and indirectly, helped resolve stressed assets worth Rs 3 lakh
crore and disposed of about 50 per cent (4,400 to be exact) of the 9,000-odd cases
that it received in the last two years, including those transferred from the Board
for Industrial and Financial Reconstruction.
• Increase in FDI-
As per the following table, it is shown that after the enactment of the code the
FDI has substantially increased in amount. In 2012-13 the FDI of India was 34298
US$ Million and just after enactment of the code it rose to 61463 US$ Million in
2017-18 which is growing by approximately 80%.There are so many reasons
behind this growth but one of the components is IBC because the Code provides
the very clear-cut process with reference to Insolvency and Bankruptcy and
priority to the employees, workmen and creditors is also provide a strong legal
frame to India.

[14]. Non-Performing Assets (NPAs) and Restructuring of Advances of 21

November 2012 (RBI No.RBI/2012-13/304/). See
www.rbi.org.in/Scripts/Notification[ last retrieved on 20-4-2021]
Increase in M & A Deals- Mergers and Acquisition (M&A) activity in the country
has increased exponentially and deals worth $14.3 billion have been completed
in the past two years, Mint has reported. Insolvency and Bankruptcy of India (IBC)
have been credited for this flurry in mergers and acquisitions. IBC has driven
massive M&A momentum in the country, led by deals involving Bhushan Steels
($7.4 billion), Reliance Communications($3.7 billion), Fortis Healthcare ($1.2
billion), India’s Insolvency and Bankruptcy Code (IBC) has accelerated activity in
distressed merger and acquisitions (M&As) in India with the transaction involving
Indian companies reaching $104.5 billion in 2018 .
Improved ‘Ease of Doing Business’ Ranking - In addition to the introduction and
implementation of Goods and Services Tax, which is considered as one of the
biggest economic reforms in the country, Insolvency and Bankruptcy Code is next
in line. These have greatly influenced India’s“World Bank’s Ease of Doing Business
(EODB)” that moved up 23 notches in last two years and now ranks 77 among 190
global economies. The World Bank has also listed India among the “top 10
improvers” for the second time in a row. It occupies the fifth spot, while China is
at third.[15]
Development of Credit Market of India- The code established an Information
Utilities (IUs). It is a Centralized repository of financial and credit information of
borrowers; would validate the information and claims of creditor’s vis-à-vis
borrowers, as needed. Thus, through the establishment of IUs credit market of
India developed and works more effectively.

• Reduction of Crony Capitalism in India - Quoting Amitabh Kant, the CEO of Niti
Aayog “IBC will ensure that the world of crony capitalism comes to an end. Earlier,
you could borrow and not repay. Now if you don’t pay, you lose your business.”
(htt1) Crony Capitalism can be defined as an economy in which businesses thrive
on the return of money accumulated through an affiliation between business
houses and political class and not due to risk-taking. With stricter laws post
introduction of IBC, it has become exceptionally difficult for promoters, shady or
otherwise, to regain control of their companies after their firm goes into
bankruptcy and also to over-leverage their balance sheet. The new states to either
perform or perish.

______________________________________________________________
[15]Ease of Doing Business, World Bank Group at
http://www.doingbusiness.org/rankings?region=south-asia [last retrieved on 20-
4-2021]

*
• Easy Exit and Reduced Duration of Liquidation-As per statistics provided by
World Bank, in comparison to other progressive nations it takes much longer time
in India to resolve Insolvency issues (An average of four years). With the
introduction of Insolvency and Bankruptcy Code, it has become easier for
companies to make an easy exit or liquidate (180+90 days resolve-or-liquidate
measure) *16]their business which was not the case earlier in the Indian
Corporate Structure (on an average of 3-4 years).This would be beneficial in
attracting foreign investors to set in their business in India. It would also lead to
an increase in innovation in India.
• Cross-Border Insolvency-Cross-Border Issues deals with Indian firms having
claims over default committing global firms, or vice-versa. Given the complex
nature of the issue the IBC has been trying to blend in some of the best efforts
taken for Cross-Border Insolvency in the world but these are not adequate to
effectively deal with the default cases. But in such a scenario where domestic
insolvency laws have seen recently reformed daylight, it is prudent to take one
step at a time. A draft bill is in progress and hopefully, it will soon be enacted after
due diligence.
• Right to the Operational Creditors- In previous, no law prevented the
operational creditors but under the code, there is a provision that the operational
creditors (domestic as well as international) have been right to file suit against the
default. Thus, the code provides right to the foreign creditors which will enhance
the economic transactions of India and others.

Relation with Trading Blocs- If the legal environment of any country is strong,
well-structured and suitable for other countries then its relation with trading blocs
such as SAARC, ASEAN, EU, NAFTA, etc will be fruitful. It is because IBC is the code
which has fulfilled all the above stated criteria, therefore, we can say that it will
enhance the relations of India with the trading .
_____________________________________________________-
[16] see section 12 0f the IB code 1)Subject to sub-section (2), the corporate
insolvency resolution process shall be completed within a period of one
hundred and eighty days from the date of admission of the application to
initiate such process.
2)The resolution professional shall file an application to the Adjudicating
Authority to extend the period of the corporate insolvency resolution
process beyond one hundred and eighty days, if instructed to do so by a
resolution passed at a meeting of the committee of creditors by a vote
of [sixty-six] per cent. of the voting shares.
(3) On receipt of an application under sub-section (2), if the Adjudicating
Authority is satisfied that the subject matter of the case is such that
corporate insolvency resolution process cannot be completed within one
hundred and eighty days, it may by order extend the duration of such
process beyond one hundred and eighty days by such further period as it
thinks fit, but not exceeding ninety days
XI .Covid 19 and the IBC

On June 5, 2020, the Ministry of Law and Justice, after various deliberations have
finally notified the Insolvency and Bankruptcy Code (Amendment) Ordinance,
2020. [18]This Amendment has inserted a new Section 10A titled “Suspension of
initiation of the corporate insolvency resolution process.” The amendment has
suspended any fresh CIRP processes to be initiated for defaults arising on or after
25th March 2020 for a period of six months, or such further period as may be
notified, which shall not be more than one year. The COVID-19 pandemic has
impacted the business globally, and the nationwide lockdown has disrupted
normal activities. Thus, to ensure continuity of business and to protect MSMEs,
such a step has been taken by the Government. However, the move has its pre-
packed challenges and issues which would need proper implementation.
Nevertheless, there have been contradictory views in the industry about the
suspension of IBC. Only time will tell if the move is in the right direction or not.

XII. CONCLUSION

2016 has definitely been the year of reforms (GST & IBC). India has been plagued
with mounting NPAs [10.25 lakh crores INR (approximately 150 billion US$) as on
31 March 2018 ] since quite a few time, and from the above study, it is concluded
that the IBC Code 2016 has established a framework for time-bound resolution
for delinquent debts with the objective of improving the ease of doing business in
India. As per M.S. Sahoo, Chairperson Insolvency and Bankruptcy Board of India
(IBBI) that around 40 corporate debtors cases have been taken under the IBC
terms and the creditors have got over 50,000 crores i.e. the average realization
has been over 50% till date. This shows the benefit of having this code. By the end
of January 2018, it was reported that at least 2,434 fresh cases have been filed
before the National Company Law Tribunal (NCLT) till 30 November 2017 and at
least 2,304 cases seeking the winding-up of companies have been transferred
from various high courts. This again is delaying the overall resolution process.
Cross-border insolvency and non-recognition of Indian laws in overseas
jurisdictions, and vice-versa, has created certain challenges.

Provided that any extension of the period of corporate insolvency resolution

process under this section shall not be granted more than once.
[17]. SAARC; south Asian Association of regional Cooperatio.
[18]. Ibbi.gov.in
 The process is unclear for such dealings. Few analysts have argued that IBC has
excessive government interference due to its role in the appointment, termination
and inspection of professionals. It is observed that till today, there is a lack of
infrastructure to deal with high value and a large number of insolvency cases.
Apart from the above-mentioned challenges, the IBC Code has helped in
improving the global rank of India in the ease of doing business. For the first time,
India has a rank within the top 100 in the world. This jump is because of economic
reforms like; IBC and GST. Due to this development, we can also expect a growth
in FDI and GDP in the country. It has also given an immense thrust to M&A drive
in India. The success of ‘Make in India’ campaign will only be possible if an
environment is created in India where the failures of entrepreneurs and financiers
are handled and treated cautiously on time. The smooth functioning of a credit
market in an economy will ensure that all the stakeholders are collectively
contributing to the success of the entrepreneurial growth of a country. IBC Code
is one step in this direction. This paper delves into the various perspectives of the
IBC code and highlights its major issues and its impact on the Indian Economy both
on the domestic and global front. IBC has been undoubtedly landmark legislation
and still evolving so that it can meet with several unforeseen challenges.