Objectives of IBC

 To consolidate and amend all existing insolvency laws in India.

 To simplify and expedite the Insolvency and Bankruptcy Proceedings in India.
 To protect the interest of creditors including stakeholders in a company.
 To revive the company in a time-bound manner.
 To promote entrepreneurship.
 To get the necessary relief to the creditors and consequently increase the credit
supply in the economy.
 To work out a new and timely recovery procedure to be adopted by the banks,
financial institutions or individuals.
 To set up an Insolvency and Bankruptcy Board of India.
 Maximization of the value of assets of corporate persons.

Salient features of the Insolvency and Bankruptcy Code, 2016

 Covers all individuals, companies, Limited Liability Partnerships (LLPs) and

partnership firms.
 Adjudicating authority:

o National Company Law Tribunal (NCLT) for companies and LLPs

o Debt Recovery Tribunal (DRT) for individuals and partnership firms
 Establishment of an Insolvency and Bankruptcy Board of India to exercise
regulatory oversight over insolvency professionals, insolvency professional
agencies and information utilities.
 Insolvency professionals handle the commercial aspects of insolvency
resolution process.
 Insolvency professional agencies develop professional standards, code of
ethics and be first level regulator for insolvency professionals members leading
to development of a competitive industry for such professionals.
 Information utilities collect, collate, authenticate and disseminate financial
information to be used in insolvency, liquidation and bankruptcy proceedings.
 Enabling provisions to deal with cross border insolvency.

REASON FOR ENACTMENT OF IBC

After the Independence, bankruptcy and insolvency were specified in Entry 9 of the Concurrent
List of the Seventh Schedule, under Article 246 of the Constitution. So, now in the present, we
had numerous Acts to govern Insolvency and bankruptcy issues and matters such as the Sick
Industrial Companies (special provision) Act, 1985 (“SICA”), SARFAESI Act, 2002, the Recovery of
Debts due to Banks and financial institutions Act, 1993 (“RDDBFI Act”), Companies Act, 1956 as
well as Companies act, 2013. But these regulations have not yielded satisfactory results. These
regimes are high fragmented, borne out of multiple judicial forums resulting in lack of clarity
and certainty of jurisdiction. Further, we had various adjudicatory bodies/Tribunals to deal with
such issues and matters under different Acts stated above.
So, this led to the unclear knowledge about the authority as to whom the parties should
approach in the related matters. Hence, this resulted in overlapping of decisions. There was no
common regulatory authority to regulate the rights of the secured or unsecured creditors,
employees etc. or to determine the priority of their claims. Large number of stressed assets
such as NPAs with low recovery rates due to a lack of enabling environment for the
enforcement of creditor’s rights. Moreover there was no adequate or credible data regarding
the assets, indebtedness etc. of companies which further heighten the problems. Hence large
number of legislations and non-statutory guidelines have made the recovery of debt a complex
and time consuming process.
In Oswal Foods Limited case[1], situation arose where the debtor company had made two
references to the BIFR, while a creditor filed a winding up petition in the High Court. Hence
leading to multiplicity of cases under different Acts in the same case. Further in Jeevan Diesels
and Electricals v. HSBC[2], the Calcutta High Court had to consider whether a creditor could file
a winding up petition in the High Court while another creditor had initiated enforcement action
in the DRT under the RDDBFI Act. So, for the same matter, proceedings were going on in
different Tribunals and courts and by different parties. This is because of lack of clarity and
uniform act.
So, the problems stated above are actual reasons for the enactment of IBC, 2016.

Overview on the Legal and Procedural framework relating to Corporate Insolvency in India.
https://www.dvara.com/research/blog/2012/05/17/the-corporate-insolvency-framework-in-
india/
https://blog.ipleaders.in/role-and-duties-of-resolution-professional-under-the-insolvency-and-
bankruptcy-code-2016/
https://corpbiz.io/learning/winding-up-of-a-company-by-tribunal/#:~:text=Under%20section
%20357%2C%20the%20winding,the%20resolution%20has%20been%20passed.
Functions of an Insolvency Professional
The primary function of an Insolvency Professional is to assess the financial position of the
company, partnership, LLPs, individual etc and to ensure smooth process of its dissolution.
These professionals, in certain possible cases look for opportunities to rescue businesses.
Otherwise the main functions of an Insolvency Professional are:

Analyse the financial statement of the company and understand the position.
Make arrangements to sell all the assets of the liquidating Individual or company.
Understand the receivables position of the company/Individual and look after the collection
process.
Conduct formal discussions with debtors/creditors and manage their settlement process.
Check and agree on the creditors’ claims as per the available funds. This is one of the main
duties of Insolvency professionals.
Involve in the fund distribution process after setting aside money required to pay the cost of
liquidation.
Deal with the other competing interest, if any.
Insolvency professionals are required to prepare and submit report to the National Company
Law Tribunal with respect to the following:
Liquidation plan and process: This has to be submitted within 75 days of commencement of the
process by the insolvency professional.
Detailed report on the asset memorandum.
Interim report on how the liquidation process is progressing from time to time.
Details about the sale of all the assets.
Discussion with the Debtors and Creditors and the conclusions arrived.
Final report prior to the dissolution of the company, partnership and others.

https://ibclaw.in/analysis-of-power-of-committee-of-creditors-mr-shivani-kumari/#:~:text=The
%20committee%20of%20creditors%20is%20the%20supreme%20decision%2Dmaking
%20body,in%20favor%20of%20the%20company.

https://insolvencyandbankruptcy.in/article/powers-and-functions-under-ibc/
National Company Law Tribunal enjoys a wide range of powers. Its powers
include:

 Power to seek assistance of Chief Metropolitan Magistrate.

 De-registration of Companies.
 Declare the liability of members unlimited.
 De-registration of companies in certain circumstances when there is
registration of companies is obtained in an illegal or wrongful manner.
 Remedy of oppression and mismanagement.
 Power to hear grievance of refusal of companies to transfer securities and
rectification of register of members.
 Protection of the interest of various stakeholders, especially non-promoter
shareholders and depositors.
 Power to provide relief to the investors against a large set of wrongful
actions committed by the company management or other consultants
and advisors who are associated with the company.
 Aggrieved depositors have the remedy of class actions for seeking
redressal for the acts/omissions of the company which hurt their rights as
depositors.
 Powers to direct the company to reopen its accounts or allow the
company to revise its financial statement but do not permit reopening of
accounts. The company can itself also approach the Tribunal through its
director for revision of its financial statement.
 Power to investigate or for initiating investigation proceedings. An
investigation can be conducted even abroad. Provisions are provided to
assist investigation agencies and courts of other countries with respect
to investigation proceedings.
 Power to investigate into the ownership of the company.
 Power to freeze assets of the company.
 Power to impose restriction on any securities of the company.
 Conversion of public limited company into private limited company.
 If the company cannot or has not held an Annual General Meeting as
required under the Companies Act or a required Extraordinary General
Meeting, then the Tribunal has powers to call for a General Meetings.
 Power to alter the financial year of a company registered in India.

https://lawx.in/news/view/powers-and-functions-of-the-insolvency-and-bankruptcy-board-of-
india-ibbi
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