The Insolvency and Bankruptcy Code, 2016: Problems & Challenges

Introduction:

A person is said to have become “insolvent” when he becomes incapable of recompensing his debts in the ordinary course of business, or he becomes incapable of disbursing his debts as they become due, whether or not, he has committed an act of insolvency.[1] However, a debtor who does certain acts, tending to defeat or delay his creditors, may be adjudged bankrupt, and so be made liable to the bankruptcy laws.[2]

There is no single umbrella legislation in India that governs the insolvency and bankruptcy proceedings. There is a slew of legislation governing the legal framework albeit insolvency and bankruptcy in India, namely: The Companies Act, 2013; The Sick Industrial Companies (Special Provisions) Act, 1985; The Recovery of Debts Due to Banks and Financial Institutions Act, 1993; The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Amendment Bill of 2016 has already been passed by the Lok Sabha on 01.08.2016 and by the Rajya Sabha on 09.08.2016); The Presidency Towns Insolvency Act, 1909; and The Provincial Insolvency Act, 1920.   

For individual insolvency and bankruptcy, the law had been legislated under the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920. The High Courts had the jurisdiction over insolvency related matters in the former presidency towns of: Bombay, Madras & Calcutta.[3] Subordinate courts were to hear cases related to individual bankruptcy in all other areas except for the presidency towns, with the District Court being the court of appeal.[4]

So far as corporate insolvency and bankruptcy is concerned, the Companies Act, 1956 & the Companies Act, 2013 along with the Sick Industrial Companies (Special Provisions) Act, 1985 dealt with the restructuring of distressed “industrial firms”. Under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, the Board of Industrial and Financial Reconstruction (BIFR) assessed the viability of the industrial company, and referred to the High Court unviable companies for liquidation. Although the Sick Industrial Companies (Special Provisions) Act, 1985 stands repealed, and, the repealing enactment was notified by the Central Government on 25.11.2016. The provisions of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 came into force on 01.12.2016.

If the loan which is granted by a bank to a debtor is backed by security, then, the Recovery of Debts due to Banks and Financial Institutions Act, 1993 bestows the banks and the financial institutions with greater power to recover the same by disposing of the collaterals when default in repayment of the loan is committed by the debtor. The 1993 Act provides for the establishment of the Debt Recovery Tribunals (DRTs) to enforce recovery of debts by these institutions. The Debt Recovery Appellate Tribunal (DRAT) is the appellate forum which entertains appeals from the Debt Recovery Tribunal (DRT). Moreover, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) enables the secured creditors (usually, the Banks) to take possession of the collaterals without requiring involvement of a court or tribunal.

Broadly, the bankruptcy reforms in India from 1981 to 2013 can be encapsulated as under:

In the year 1981, regards being had to the Tiwari Committee (Department of Company Affairs), the Sick Industrial Companies Act, 1985 came to fore. Thereafter, in the year 1991, regards being had to the Narasimham Committee I (Reserve Bank of India), the Recovery of Debts due to Banks and Financial Institutions Act, 1993 came to fore. Similarly, in the year 1998, regards being had to the Narasimham Committee II (Reserve Bank of India), the advent of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was witnessed. In the year 1999, Justice Eradi Committee (Government of India) proposed the repealment of the Sick Industrial Companies Act, 1985 and this led to the enactment of the Companies (Amendment) Act, 2002. Later, in the year 2001, L.N. Mitra Committee (RBI) proposed a comprehensive bankruptcy code. In the year 2005, Irani Committee (RBI) came up with the Enforcement of Securities Interest and Recovery of Debts Bill, 2011 and proposed amendments to the Recovery of Debts due to Banks and Financial Institutions Act, 1993 and the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. In the year 2008, Raghuram Ranjan Committee (Planning Commission) proposed certain steps which could result in improvement of the credit infrastructure of the country. Lastly, in the year 2013, the Financial Sector Reforms Commission (Ministry of Finance) came up with the draft of the Indian Financial Code which in fact provided for a corporate-resolution-mechanism for resolving financial problems of the distressed firms.

Wind of Change:

In the wake of the following ground realities, namely: (a) India being ranked 130 out of 189 countries so far as Ease of Doing Business (2015) is concerned; (b) India being ranked 136 out of 189 countries so far as Resolving Insolvency (2015) is concerned; (c) The Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920 being archaic, with the former (the 1909 Act) being about a century old legislation; and (d) Corporate bad-debts constituting about 56% of the total bad-debts of the Nationalized Banks;  it was as late as in November, 2015 (precisely, 04.11.2015) that the BLRC (Bankruptcy Law Reforms Committee), Chaired by the Former Secretary General, Lok Sabha and Former Union Law Secretary,  Mr. T.K. Viswanathan submitted the final report prepared by the BLRC, which recommended the passage of the Insolvency and Bankruptcy Code, 2015.

The Insolvency and Bankruptcy Code was introduced in the Lok Sabha on December 21, 2015.[5] A reference was made to the Standing Committee, which gave its report on April 28, 2016. The Insolvency and Bankruptcy Code was passed by the Lok Sabha on May 05, 2016, and by the Rajya Sabha on May 11, 2016. The Insolvency and Bankruptcy Code received the assent of the President of India on May 28, 2016.

The Long Title of the 2016 Code states as under:

“A Code to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner, for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balancing the interest of stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.”

The 2016 Code focuses on the following two main objectives, namely, first– equal, expeditious and economic distribution of assets of the debtor, and second– liberation of the person from the demands of the creditor.

Structure of the 2016 Code:

The 2016 Code comprises of 255 Sections, divided into Five (5) Parts- Part I deals with the preliminary aspects of the Code, comprising of one chapter and Sections 1 to 3; Part II deals with the corporate insolvency resolution process, comprising of seven chapters and Sections 4 to 77; Part III deals with the insolvency resolution and bankruptcy for individuals and partnership firms, comprising of seven chapters and Sections 78 to 187; Part IV deals with the regulation of insolvency professionals, insolvency resolution professional agencies and information utilities, comprising of seven chapters and Sections 188 to 223; and Part V deals with miscellaneous provisions, running from Sections 224 to 255 (Sections 245 to 255 enable amendments in other statutes such as the Companies Act, 2013).

The Insolvency and Bankruptcy Code, 2016 comprises of 11 Schedules, which provide for amendments to be carried out in following statutes: the Indian Partnership Act, 1932 (First Schedule annexed to the 2016 Code); the Central Excise Act, 1944 (Second Schedule annexed to the 2016 Code); the Income Tax Act, 1961 (Third Schedule annexed to the 2016 Code); the Customs Act, 1962 (Fourth Schedule annexed to the 2016 Code); the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (Fifth Schedule annexed to the 2016 Code); the Finance Act, 1994 (Sixth Schedule annexed to the 2016 Code); the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Seventh Schedule annexed to the 2016 Code); the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (Eighth Schedule annexed to the 2016 Code); the Payment and Settlement Systems Act, 2007 (Ninth Schedule annexed to the 2016 Code); the Limited Liability Partnership Act, 2008 (Tenth Schedule annexed to the 2016 Code); and the Companies Act, 2013 (Eleventh Schedule annexed to the 2016 Code); so that all provisions as contained in the Insolvency and Bankruptcy Code, 2016 can be brought to effect in a comprehensively manner.

It is pertinent to note that vide notification dated 05.08.2016 (S.O. 2618 [E]) Sections 188 to 194 under Chapter I of Part IV of the 2016 Code have been brought into effect, similarly, vide notification dated 19.08.2016 (S.O. 2746 [E]) Sections under Chapter VII of Part IV and Sections under Part V of the 2016 Code have been brought into effect. Insolvency and Bankruptcy Board of India has been constituted and Sh. M.S. Sahoo has been appointed as the Chairperson of the Insolvency and Bankruptcy Board of India vide notification dated 01.10.2016 (S.O. 3110 [E] & S.O. 3111 [E]). Moreover, vide notification dated 01.11.2016 Sections under Chapter II, Chapter VII of Part IV and Sections under Part V have been brought into effect. Also, vide notification dated 15.11.2016 (S.O. 3453 [E]) Sections under Chapter III, Chapter IV, Chapter VI of Part IV and Sections under Part V have been brought into effect. Notification dated 30.11.2016 (S.O. 3594 [E]) marked the commencement of Sections related to corporate insolvency, further, notification dated 09.12.2016 (S.O. 3687 [E]) marked the commencement of Sections 33 to 54 (both inclusive) under the 2016 Code, and, notification dated 30.03.2017 (S.O. 1005 [E]) marked the commencement of Sections dealing voluntary liquidation and information utilities under the 2016 Code.

There are four prime pillars upon which the 2016 Code rests itself; these are: Insolvency Professionals[6]; Information Utilities[7]; Adjudicating Authorities[8]; and Insolvency and Bankruptcy Board of India[9].

The Insolvency and Bankruptcy Code, 2016- Key Aspects:

(a) The 2016 Code proposes a paradigm shift from the existing regime of ‘Debtor-in-Possession’ to ‘Creditor-in-Control’; (b) The 2016 Code aims at consolidating all the existing insolvency related laws as well as amending multiple legislation including the Companies Act, 2013 (See: The 11 Schedules annexed with the 2016 Code); moreover, the 2016 Code by virtue of Section 238 of the Code has an overriding effect on all other laws relating to insolvency and bankruptcy; (c). Part II of the 2016 Code deals with insolvency resolution and liquidation of corporate entities, with most of the work concerning the insolvency resolution/liquidation been dealt with by the registered insolvency professionals under the supervision of the NCLT. Once the corporate insolvency process is initiated, the insolvency professional will be required to form a Committee of Creditors, and with their consensus efforts will be made to bring forth a plan to revive the corporate entity; (d) The corporate insolvency resolution process is to last for 180 days with further maximum period of extendable time of 90 days more, whereby efforts will be made to evolve a resolution plan to revive the ailing entity, however, if the efforts fail, the corporate person will be liquidated in time-bound manner. A ‘Fast Track Corporate Insolvency Resolution’ will be available to small corporate entities; (e) As far as the corporate insolvency resolution process is concerned the NCLT is the adjudicating authority and NCLAT is the appellate authority; (f) Part III of the 2016 Code deals with insolvency resolution process and liquidation proceedings qua the individuals and the firms. There are two distinct processes, namely, fresh start and insolvency resolution, for the individuals and the firms; these processes are followed by the ‘bankruptcy order’. It is the DRT which will be the adjudicating authority and DRAT which will be the appellate authority for the individuals and the firms so far as insolvency resolution and liquidation proceedings are concerned; (g) The mechanism of ‘fresh start’ is applicable only to those individuals whose income is below Rs. 60,000/- per annum and the debt amount does not exceed Rs. 35,000/-. Here the insolvency resolution will be handled by insolvency professional with the DRT having a supervisory role; (h) The 2016 Code is not applicable to the corporate entities in the financial sector such as the Asset Reconstruction Companies; (i) Section 196(1) (f) of the 2016 Code empowers the Insolvency & Bankruptcy Board of India to carry out inspections and investigations on insolvency professional agencies, insolvency professionals and information utilities and thereafter pass such orders as may be required for compliance of the provisions of the 2016 Code and regulations issued there under. Further, Section 196(3) of the 2016 Code states that the Insolvency & Bankruptcy Board of India shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit in respect of: discovery and production of books of accounts at such place and such time as may be specified by the Board; summoning and enforcing the attendance of persons and examining them on oath; inspection of books, registers and other documents of any person at any place; and lastly, issuing commissions for the examination of witnesses or documents; (j) Adjudicating authority for corporate persons so far as insolvency resolution is concerned is NCLT, while the appellate authority is NCLAT. Against the orders of NCLAT an appeal can be preferred to the Supreme Court of India within 45 days of the receipt of the impugned order, Section 62 of the 2016 Code is very clear on this aspect. By virtue of Section 63 of the 2016 Code, the jurisdiction of the civil court is expressly barred; (k) Adjudicating authority for individuals and firms so far as insolvency resolution is concerned is DRT, while the appellate authority is DRAT. Against the orders of DRAT an appeal can be preferred to the Supreme Court of India within 45 days of the receipt of the impugned order, Section 182 of the 2016 Code is very clear on this aspect. By virtue of Section 180 of the 2016 Code, the jurisdiction of the civil court is expressly barred.           

Ground Reality- India & the World: Insolvency & Bankruptcy:

The average time taken in the U.S. to complete the insolvency proceedings is 1.5 years; in India it is 4.3 years.[10] A summation of four indices i.e. Commencement of Proceedings Index; Management of Debtor’s Assets Index; Reorganisation Proceedings Index; and Creditor Participation Index, is testimony to the fact that, India lags behind most of the nations so far as time and effort to carry out insolvency proceedings are concerned. Following is a comparative analysis, based on the information provided by the World Bank:

*Sum of four indices- Commencement of Proceedings Index; Management of Debtor’s Assets Index; Reorganisation Proceedings Index; and Creditor Participation Index. Source: World Bank

According to World Bank (2015), average time taken to complete insolvency related proceedings in some of the other countries around the world is as follows: Japan- 6 months (approximately); United Kingdom- 1 year; Russia- 2 years; Brazil- 4 years; and China- 1.5 years (approximately). Also, as against India’s recovery rate of 25.7 Cents per Dollar (that is, approximately 26% of debt value), recovery rate in some other economies of the world is as follows: Japan- 90 Cents per USD; United Kingdom- 85 Cents per USD; Russia- 40 Cents per USD; Brazil- 20 Cents per USD; and China- 35 Cents per USD.  

As of April, 2016, approximately 72,841 cases were pending in the country’s 33 Debt Recovery Tribunals. In 2014-15, the 33 DRTs in the country disposed of cumulatively 14,033 cases involving Rs. 5,826.47 crore.[11] In 2014-15, the Company Law Board (CLB) had 13,090 cases for adjudication (inclusive of 7,269 fresh cases); CLB disposed of 8,925 cases, with 4,165 cases still pending as on March, 2015.[12] At the end of June, 2015, the gross non-performing assets of Indian banks were Rs. 3.3 lakh crore (or 4.49% of total advances).

Predicaments as regards the 2016 Code:

1. The SARFAESI Act, under Section 17, empowers debtors to file an appeal against any action taken by creditors with the Debt Recovery Tribunal; and the Debt Recovery Tribunal is required to decide such applications within 4 months. There is not a single case till date, according to Mr. Vivek Kumar Singh- President of DRT Bar Association (Delhi) that has been decided within a span of 4 months by the DRT.[13] To expect that the 2016 Code will turn around things in a way that will make insolvency resolution a smooth and time-effective stroll to recovery or liquidation is too much to expect.
2. The minimum single default for triggering the insolvency proceedings is merely a sum of Rs. 100,000/-. This can be a menace, especially under a corporate regime, as any employee for non-payment or late payment of salary (temporary turbulence in company’s cash-flows) or any small vendor for unexpected non-payment of dues, will be in a position to trigger insolvency proceedings although the default is miniscule due to temporary disturbance in cash-flows. In the U.S., three or more creditors can start insolvency proceedings against a company if the company owes them more than USD 12,300 (approximately Rs. 800,000/- as per the current exchange rate). However, in India the 2016 Code sets the minimum threshold as low as of Rs. 100,000/-.
3. According to some experts, there isn’t any significant evidence that confirms that, stowing entire faith in creditors will accelerate the recovery process or will improve the chances of efficient restructuring; that is, by axing the equity-holders from the entire decision making process will eventually result them to be more apprehensive and less supportive of viable insolvency resolution mechanism.
4. The Insolvency and Bankruptcy Code, 2016 is applicable to both corporate and non-corporate persons. According to Section 6 of the Code, where any corporate debtor commits a default, then- financial creditor, operational creditor or the corporate debtor by itself, can initiate the “corporate insolvency resolution process” in respect of such corporate debtor. According to the 2016 Code, any creditor: financial[14] or operational[15], will be able to start the insolvency resolution process by giving the proof of default. If the adjudicating-agency, that is, the National Company Law Tribunal or the Debt Recovery Tribunal, gives a clean-go-signal, then, the entity will be taken over by the ‘Committee of Creditors’ and ‘Insolvency Professionals’. The applicant creditor will prepare a resolution plan and will submit it to the Insolvency Resolution Professional. The plan will then have to be approved by 75% of the creditors (by value) in the Committee of Creditors (operational creditors will not be the part of the committee). There is no certainty that 75% of the creditors will agree to the resolution plan. Thus, as it will not be easy to get 75% creditors on board, much likely, the resolution/revival plan will be in doldrums and there will be eventual rise of litigation. Necessarily, as the operational creditors are denied seat in the Committee of Creditors as per the 2016 Code, thus, the NCLT while reviewing the resolution plan will have to ensure that the operational creditors are treated fairly.
5. The insolvency resolution mechanism has to be completed within 180 days of the takeover by the insolvency professionals; though in some cases 90 additional days can be provided. If the plan provides for action to ensure the “continuation of corporate debtors as a going concern”, and the same is accepted by the adjudicating agency, the debtor shall survive, provided it complies with its provisions. If the revival plan is rejected, then the entity will go into liquidation. There is no time limit specified for the liquidation process.
6. Under the U.S. Chapter 11 insolvency resolution process, the resolution plan is initially proposed by the ailing company itself; in the U.S., the law gives the debtor 120 days to file a revival plan. This period of 120 days can be increased or reduced by the court, but in no case can this period exceed 18 months (that is, 1.5 years). If the debtor fails to file a revival plan, within this stipulated period, the task is undertaken by the Committee of Creditors. Taking this into account, with much deliberation it can be said that the period of 180 days/ 270 days provided for by the 2016 Code is highly inadequate. Insolvency Resolution Professional would need considerable time to understand the dynamics of the ailing/defaulting company, its cash-flows, essential financial and operational creditors, before it can chart out an Information Memorandum/Resolution Plan.
7. So far as the mechanism of ‘fresh start’ is concerned, the same is applicable to those individuals whose monthly income is below Rs. 5000/- and the debt amount is not more than Rs.35, 000/-. This amount is so meagre that very few individuals will be able to take benefit of this mechanism.
8. If the value of the loan taken over by the Asset Reconstruction Company albeit the defaulting company, is more than 75%, then it will be able to run the company along with the Insolvency Resolution Professional. This area of the mattress is most concerning and is least talked about. There has to be an adequate system in place to keep a check over the functions and modalities of ARCs, given the fact that, as per Section 3(7) of the 2016 Code, the term ‘corporate person’ shall not include any ‘financial service provider’ such as banks, insurance companies, mutual funds and ARCs.
9. The real challenge lies in ensuring that, the new system is run by judicial experts who see bankruptcy as a commercial problem and not as a legal problem. It will be important to sternly train the judges for the new system, as the 2016 Code has a certain philosophy behind it, that is, a judge or a lawyer, no matter how well-versed he/she is in legal matters, should not decide, whether a business enterprise should survive or evaporate; it is for the creditors to take the call.
10. There are no special provisions or exemptions provided for the companies in the “stressed sectors”. A sector in stress might see multiple insolvency cases; there are no special provisions for these sectors in stress in the 2016 Code.
11. No qualification per se has been specified for the Insolvency Resolution Professionals in the 2016 Code. Looking into their scope of work and the responsibilities they shall be shouldering, an Insolvency Resolution Professional is to require skills of a lawyer, a chartered accountant, a management professional, a company secretary and a cost accountant, which by itself not an easy standard to meet.
12. The Insolvency Resolution Professionals will carry out the following functions: collection of financial information about the debtor; verification of claims of creditors; formation of committee of creditors; running the business of the debtor; and working out a rescue plan agreeable to both, the creditors and debtors. Given the fact that there function shall be central to the rescue/revival of the business of the drowning enterprise, it is discomfit to see the lack of clarity on who these professionals would be in terms of their qualifications and necessary experience; and whether they would be empowered enough to accomplish the task given to them.
13. Lack of necessary infrastructural facilities: Adjudicating authorities under the Insolvency and Bankruptcy Code, 2016 are the DRTs (Debt Recovery Tribunals) for individuals and partnership firms; and the NCLT (National Company Law Tribunal) for the companies. The Government has, however, already notified the formation of NCLT and NCLAT (National Company Law Appellate Tribunal), which have now become functional with the retired Supreme Court Judge, Justice S.J. Mukhopadhaya appointed as the Chairperson of NCLAT, and, Justice M.M. Kumar appointed as the President of NCLT.
14. Number of cases pending in the DRTs in India as on March, 2013 were 42,819, and as on December, 2015, this figure went up to 69,658. Similarly, number of cases pending with the DRATs (Debt Recovery Appellate Tribunals) as on March, 2013 were 3,405 cases. In Delhi, approximately, each presiding officer of the DRT handles 70-80 cases per day. Given the stretched infrastructure and number of pending cases, DRTs will not be very effective.[16] This in turn will have a direct bearing on the question, how far is the 2016 Code effective? Is it too ambitious a legislation which has been floated at a wrong time when already India is facing ‘adjudication infrastructure’ crises, or, will it be correct to say that there is no right time to do the right thing taking into consideration the low ranking that India suffers from in the Global Ease of Doing Business? Answers to these questions will be revealed over a period of time, once all provisions and rules of the 2016 Code get notified and receive judicial interpretation and withstand the constitutional scrutiny.
15. Section 224 of the 2016 Code states that a fund, namely, the Insolvency and Bankruptcy Fund is to be created for the purposes of insolvency resolution, liquidation and bankruptcy of persons under the 2016 Code, and any person can voluntarily make contributions to the fund and in any event of insolvency proceedings been initiated against such person, such person can withdraw funds not exceeding the amount contributed by him to the fund to make payments to the workmen or for protecting his assets or to meet the incidental costs incurred during the insolvency proceedings and for any other or such other like purpose. However, the moot question is this, that, if a person will get only that which he has contributed to the fund, then why at all a person will make contributions of the fund and not deposit the amount he has in a bank-account over which he will earn interest as per the specified rates.     

Concluding Remarks:

The 2016 Code is a major step taken in the right direction to provide umbrella legislation for the laws relating to bankruptcy, liquidation and insolvency resolution, concerning both individuals/firms and corporate entities. The idea behind the 2016 Code is to boost foreign direct investment in India by improving India’s score and ranking in the Ease of Doing Business Index. The difficulty with the Code however is this that it seems to be over ambitious for on one hand this Code is aiming to cause major amendments in over 11 statutes and on the other hand it aims to establish institutions in the likes of the NCLT, NCLAT and the Insolvency and Bankruptcy Board of India despite the fact that India is facing a massive infrastructure crises. The Code cannot and in fact does not disturbs the constitutional powers vested in the High Courts and the power of the Supreme Court to allow a special leave petition, thus, there is a likelihood that, orders of DRT and NCLT can be challenged in the High Courts and the Supreme Court is some cases of peculiar urgency despite the availability of alternative remedy of appeal to DRAT and NCLAT respectively. Further, Supreme Court will witness appeals coming to it from both ends, that is, from DRAT and NCLAT. Thus, in sum and substance the docket explosion is here to stay with added burden on the legislative wing of the State to cause amendments to all the enactments which the 2016 Code touches upon by virtue of the 11 schedules annexed to it.  

[1] See: Section 2(8) of the Sale of Goods Act, 1930 (30 of 1930)

[2] See: Wharton’s Concise Law Dictionary, Universal Law Publishing Co., Sixteenth Edition, p.109

[3] See: Section 3 of the Presidency Towns Insolvency Act, 1909

[4] See: Section 3 of the Provincial Insolvency Act, 1920

[5] The 2016 Code was introduced in the Lok-Sabha by the Finance Minister, Mr. Arun Jaitley on 21.12.2015; and on 23.12.2015 the 2016 Code was referred to a Joint Committee of Parliament, the Chairperson being Mr. Bhupender Yadav.

[6] The 2016 Code provides for a class of regulated persons, the “Insolvency Professionals”; they would play a key-role in the efficient working of the bankruptcy process; they would be regulated by the “Insolvency Professional Agencies”.

According to Section 2(19) of the Code, insolvency professional means a person enrolled under Section 206 of the Code with an insolvency professional agency as its member and registered with the Board as an insolvency professional under Section 207 of the Code.

According to Section 2(20) of the Code, insolvency professional agency means any person registered with the Board under Section 201 of the Code as an insolvency professional agency.

[7] The 2016 Code provides for a new industry of “Information Utilities”. These would store facts about lenders and terms of lending in electronic databases. This would eliminate delays and disputes about facts when default takes place.

According to Section 2(21) of the Code, information utility means a person who is registered with the Board as an information utility under Section 210 of the Code.

According to Section 2(23) of the Code, “person” includes: an individual; a Hindu Undivided Family; a Company; a trust; a partnership; a limited liability partnership; any other entity established under a statute, and includes a person resident outside India.

[8] The National Company Law Tribunal (NCLT) is the forum where matters pertaining to corporate insolvency will be heard. The Debt Recovery Tribunals will be the forums where matters pertaining to individual insolvency and insolvency proceedings pertaining to partnership firms will be heard.

[9] This body will have regulatory over-sight over the Insolvency Professionals; Insolvency Professional Agencies; and Information Utilities.

[10] Time to resolve insolvency in terms of years for United Kingdom is 1 year; for South Africa it is 2 years; for Pakistan it is 2.7 years; and for Brazil it is 4 years. See: Time to Resolve Insolvency, World Bank, 2015

[11] See: Insolvency Code to fast-track 75,000 cases pending before debt tribunals, Business Line (The Hindu), May 06, 2016

[12] Ibid

[13] See: Dipak Mondal, Going For Broke, Business Today, Vol. 25, Issue: 13, p.32, July 03, 2016

[14] Financial creditors are those whose relationship with the entity is purely financial, in the form of a loan or a debt security.

[15] Operational creditors include employees, vendors and suppliers of the ailing/defaulting company.

[16] Supra 11