Insolvency and Bankruptcy Code, 2016 (in short IBC) is one of the best examples of Modern-day Codified Laws.

Objective:

The key objective of the IBC was to consolidate and amend the existing laws relating to re-organization and insolvency resolution of Corporate persons, partnership firms and individuals by creating an effective time bound mechanism for compliance of law and for creating ease of doing business, borrowing and lending in India. The idea behind the formation of the code was to keep the company under the insolvency process alive and running, but at the same time with a moto that the defaulting management of the company should bear in mind, that their irresponsible conduct in running of the company, they will loose their positions once the resolution process is initiated.

IBC bill was introduced in Lok Sabha in December 2015 and was passed by the Lok Sabha on 5th may, 2016 and was passed by Rajya Sabha on 11th May, 2016 and after the Presidential Assent, was published in the Gazette of India 28th May, 2016.

Section 243 of IBC, 2016 repealed Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920.

Section 238 provides that the provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

IBC provides for a separate insolvency process for individuals, Companies, LLP’s and Partnership firms. The process may be initiated either by the debtor or the creditor.

Under IBC four major arms are carved out for the compliance of various provisions:

1. Insolvency and Bankruptcy Board of India:Established under Sub-section (1) of Section 188 of IBC, 2016, for the purpose of acting as the Insolvency regulator, to oversee the insolvency proceedings and to regulate the entities registered under it. This board constitutes of 10 members, which includes representatives of Ministries of Finance and Law and the RBI.

2. Adjudicatory Authority: for the purposes of this Code, means National Company Law Tribunal (NCLT) constituted under section 408 of the Companies Act, 2013 (18 of 2013). The role of Adjudicatory Authority is limited to the extent of overseeing that the applicant has rightly moved an application for initiating the insolvency resolution process and the applicant is competent to invoke the process and once the process is invoked, than to oversee that the provisions and the time lines provided in the code are being adhered to by the IRP.

3. Resolution Process: for the purpose of carrying out the resolution process, the Interim Resolution Professional are appointed by the adjudicatory authority, once the application under section 7,9, or 10 of IBC, 2016 is admitted and the moratorium is announced. IRP is enrolled under section 206 and registered under section 207 of the Code. IRP on appointment shall control the assets of the Corporate debtor during the resolution process (in terms of section 17) and shall make every endeavor to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. IRP also issues a public notice calling upon all the financial and operational creditors of the corporate debtor to submit their claims before him in a stipulated period. The process is as under:

(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.

4. Committee of Creditors (CoC): Interim resolution professional, in terms of section 18 constitutes a CoC which acts in terms of section 21. The committee of creditors shall comprise all financial creditors of the corporate debtor:

Provided that a 1[financial creditor or the authorised representative of the financial creditor referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor,] shall not have any right of representation, participation or voting in a meeting of the committee of creditors.

On 13th March, 2020 the Insolvency and Bankruptcy Code (Amendment) Act, 2020 [No. 1 of 2020] was accorded Presidential Assent and the amendments in Sections 5, 7, 11, 14, 16, 21, 23, 29A, 32A, 227, 239 and 240 of IBC were deemed to have come in force with effect from 28th December, 2019.

Owing to Covid-19 pandemic outbreak, the Government of India by bring an Ordinance inserting Section 10A, suspending filing of fresh applications by Financial Creditors, Operational Creditors and the company itself during the period of applicability of Section 10A for insolvency and bankruptcy proceedings. The amendments to IBC were promulgated by President Ramnath Kovind through the Insolvency and Bankruptcy Code Ordinance, 2020. The new rules come into effect immediately, as of June 5.

These changes have been made by inserting Section 10A in the Code, which says,
“Notwithstanding anything contained in Sections 7, 9 an 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020, for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf.
Though this insertion of 10A is temporary in nature as of now as the language suggests but at the same time is very tricky in respect of certain categories of claims in which though default has occurred before 25th March, 2020 but the cause of action is in the nature of continuing one.