Being in the noble legal profession, and having due regard to the fact “Ignorencia Juris Non Excusit” which connotes ignorance of law is no excuse, I take the opportunity of expressing my views on some of the recent developments in the legal arena. Considering the vital role of economic progress in the wellbeing of a fast developing nation like India, I hereby commence my journey with Steemit with a brief discussion on the Insolvency and Bankruptcy Code, 2016.
Multiplicity of remedies where by the affected party had to decide the appropriate to proceed has often resulted in Indian Judiciary not being very successful in resolving the issue of bad debts in the country. This has led to a definite downfall in the pace of economic development of the nation. Unlike other acts including SICA, RDDBFIA, SARFAESI etc, IBC is a code in itself that consolidates various provisions solving the problem of multiplicity of laws to a great extent.
Why the new code?
Prior to the commencement of the said code, each mode of creditors (secured) and debtors had different laws governing them. Debts to or by individual and companies could not be dealt with by the same law. Similarly, partnership firms and companies were to be handled by different laws. At the same time, despite the existence of various laws, there was an excruciating delay in the judicial process of decision-making, eventually leading to the creditors suffering huge losses and ultimately stood a threat for new start-ups seeking loans hindering innovation and adversely affecting the idea of “Ease of Carrying Business”.
The new Code’s essential objective is to bring all the creditors under one umbrella and also to ensure solving the biggest problem of delay in the Indian judicial system with its time bound mechanism.
Further, the Code also provides remedy to unsecured creditors unlike any other law dealing with the aspect of debt recovery. However, it safeguards the fiscal sector by ensuring prevention only in cases of transactions made through cheques.
Functioning of the Code
It aims at eliminating all sorts of inconsistencies in law. It clearly states the necessity to amend all the existing laws to confer with it. The Code aims rehabilitation and revival of the debtor business entity by appointing an Insolvency professional who carries on the business to endeavour its continuity and prevent the idea of winding up. Another beguiling feature of the Code is that, unlike other laws, including SICA or the Companies Act, it doesn’t wait for the loans to transform into Non Performing Assets. Rather, it strives to prevent the same by putting itself into action from the very day of default.
National Company Law Tribunal is the regulating authority under the Code. It appoints an Insolvency Professional to run and revive the business on with effect from the day of default providing a time limit of 180 days. IP who is a practising Chattered Accountant for not less than 10 years, will have to strive for revival and recovery during the said period. After this specified duration, the assets are liquidated and proportionally distributed to the creditors ensuring at least prevention of loss.
Conclusion
Introduction of IBC is a remarkable step in the travel to enhance economic stability of the country. With its target to reduce NPAs by 50% and bring up India’s ranking by 50 from 130 in world business ranking, IBC so far proved a perfect move. However, effectiveness of any law depends on its implementation. Now that it’s a new stride, it is yet to confront and stand the challenge of timely enforcement to make its place in the nation’s biography