Corporate insolvency resolution process under insolvency and bankruptcy code a critical study

Abstract

A robust legal system is essential for corporations to carry on business smoothly. Previously in India, winding up and corporate rescue were dealt in multiple legislations for different entities. Provisions relating to winding up of companies were found in The Indian Companies Act 1913, Indian Companies Act, 1956 and further in the Companies Act, 2013. These provisions did not ensure expeditious winding up procedures and the same affected the interest of stakeholders. newlineThe increase in NPA compelled the need to bring an efficient framework to protect the rights of creditors and debtors. As a solution to this IBC was enacted in 2016, to facilitate timely resolution of insolvency and bankruptcy. This research aims to critically analyze the provisions of corporate insolvency resolution process, to examine whether IBC is facilitating newlinerehabilitation of insolvent corporations and protecting the interest of creditors, so as to balance their interests. It further aims to outline a draft policy for a better insolvency resolution process in India. Primary data for the study was collected through a structured interview of stakeholders and conclusion was drawn through a qualitative thematic analysis using NVivo software. The findings showed that, through CIRP there is debt recovery for financial creditors, but it is not expeditious. There are multiple reasons for the delay. The operational creditors are not able to newlinerecover from the process and as a result, many of them are turning insolvent. The rights of the corporate debtor are protected under the Code but they are not adequately protected under the Code as there is no value maximization under the Code. There are many delays in the process, resulting in more companies going into liquidation. IBC is a debtor friendly legislation. Both resolution and liquidation benefit the corporate debtor as it helps the company to resolve its newlineinsolvency.