Why was IBC introduced?

Insolvency and Bankruptcy Code, 2016 (referred to as IBC) which is considered as the biggest insolvency reform, is a central Act enacted for reorganization 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.

The purpose of this act can be divided into the following two goals:

1. Making sure that the insolvency proceedings can be completed within a minimum amount of time.

2. Making sure that the financial risks to foreign investors are decreased.

Benefits of IBC

To this day, the IBC has recovered more than 3 lakhs crores of debt. Out of which:

1. 1.2 lakhs crores at the pre-admission stage: even before the insolvency petition was admitted

2. 1.2 lakhs crores from resolved cases: Cases where the insolvency has been resolved.

3. 60,000 crores from Non-Performing Assets.

As a result of this, with rank 77, India now ranks among the top 100 countries around the globe with whom doing business is easier.

Obstacles faced due to IBC

However, the code isn’t yet perfect and as of 2018, there are some more amendments made to the act. More amendments are about to arrive until every little glitch of this code is fixed. A number of frivolous petitions at the National Company Law Tribunal (NCLT), which administers the Insolvency and Bankruptcy Code (IBC), is a cause for anxiety among bankers and promoters over whether the tool, supposed to be a lubricant for the economy, is becoming an obstacle.

Conclusion

Insolvency and Bankruptcy Code brought quite a few changes in the big business scenario in the country. Brought forward to reduce the time it takes to deal with the issue of bankruptcy, the code has morphed into something that is driving this country towards a new age of economy. However, what this road of growth might lead to is yet to be seen. The best we can do is making sure that our finances are in order and we never go insolvent.

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