IBC – A ray of Hope

 

The insolvency proceedings in one of the emerging business destination have been in past involved and operated through various legal instruments. Legislations ranging from RDDBFI Act, 1992, Sick Industrial Act,1985 or the SARFAESI Act,2002 enumerated and dealt with  various disparate process for assets takeover, assets restructuring or the satisfaction of the outstanding debts. Despite these legal conundrums, their inefficient implementation and the bottlenecks led India to witness huge piling up of NPA’s and creditors holding back for the recovery of money. The hiccups in the earlier legal mechanism did not proved and provided for better results and let to emergence of resentment amongst the creditors.

This demanded for a better resented and a technically sound consolidated framework involving a proper and speedy recovery mechanism. Insolvency & Bankruptcy Code which is the second most important legal reform enacted in 2016 was a step in the direction of addressing all these issues and reposting the faith of the investors In order to have a free – flow and a well regulated market economy. This legal mechanism is a combination of various existing commercial laws and corporate laws creating a sound resolution system.  It has proved to be a revolution in present business scenario. The code has provided for unified laws directing to protect the rights of the creditors and modifying the way in which a debtors assets could be revived without hampering the rights of the creditors proving to be a sustained 2 way mechanism.

The dogmatic economy of one of the biggest developing nations provides for having a strong legal mechanism as it gives a direction  to a more viable and brawny economic development . The formation and the implementation of a strong legal background provides for a more emphatic global recognition. In the wake of LPG policy in 1991, the initiation of ease of doing business was at par, it suddenly grew and with time the entry of foreign players proves to be fatal w.r.t. destruction of domestic players. There were wide range of legislation surrounding the operations of organizations but their contradictory provisions paved the way for misuse of accounting standards henceforth leading to financial scams in the economy. In the wake of changing economic condition, there was a dire need of a consolidated framework of legal provision which provided for restructure of the organization in case they become financial distressed, thereby uplifting the confidence of creditors.

Amidst all these, the second most significant reform after GST was the introduction of Insolvency and Bankruptcy Code, 2016 which provided transparency and expeditious answers to overwhelming NPA’s (Non – Performing Assets) conundrum thereby providing  consolidated and a one - step solution for insolvency and bankruptcy. It is one of the most arousal move in the wake of avoiding further financial failures, providing a painless insolvency mechanism for the corporation, the code has value for the stakeholders including all the financial institution. It has proved to be a game changer in the corporate sector in India and has witnessed several amendments according to the changing trends of the economy. The passing of the enactment has led to drastic change in the economic as well as non- economic front proving it to be lucrative for the creditors. The framework has not only led to global reputation but is also the reason behind increased Mergers & Acquisition deals, enhanced ranking in ease of doing business etc. it has significantly led to protection of small investor and made operation of business more transparent. Thereby the code has been recognized as one of the major catalyst reforms in the Indian history limiting the risk of credit and changing the debtors behavior.