Introduction: This law which I am going to discuss is mainly for the benefit of Individual to Corporate Sector who are dealing with the Corporate Sector i.e. Public Limited Companies, Private limited Companies & Limited Liability Partnerships(LLPs).
The dawn of this law took place in only December 2016.
It is said to be one to be one of the two big reforms after GST, Modi Govt. ushered in this tenure of BJP govt.
Previously, the Indian Economy saw the free entry of the business in year 1992 and then Competition law somewhere in year 2002 and now free exit in year 2016 by enacting law on Insolvency and Bankruptcy i.e. Insolvency and Bankruptcy Code 2016. With this, cycle of reforms so far business is concerned, is over. Thus, now business has to perform.
Now, what is this law and how it is beneficial to the lending individual and the Corporate Sector. The salient features of this law are:
1. It is a time bound law i.e. it is to be resolved with 180 days of admission of an application with 90 days of further extension. If the dispute is not resolved, the debtor company goes into liquidation.
2. It is applicable against the solvent companies also which are not paying the debts deliberately to its creditors, Vendors (i.e. Operational Creditors), Depositors, Debenture Holders, etc.
3. It is also applicable to home buyers.
4. It is applicable for as low as debt of merely Rs. 1,00,000/-.
5. It is applicable to financial creditors and operational creditors(providers of services and goods).
6. It is also applicable for recovery under court decrees.
7. It is also applicable to unpaid salary and dues of workers and employees.
8. This law is seen an easy, timely and effective substitute to the laws on recovery of money, arbitration, cheque bouncing, etc
9. The Court fees for operational creditors is merely Rs.2000/- and for financial creditors is Rs. 25000/- for any amount of claim.
And the adverse side of this law is:
It is expensive initially but since the amount spent by the applicant / lender is ratified by Committee of Creditors, later, the expenses mostly are paid back to the applicant / lender.
The information on this law is available on the website of ibbi.gov.in
Till ending September 2017, more than 300 cases have been admitted and around 10-15 have been decided, some of them withdrawn as settled or settled before or during Court proceedings and some of them have been resolved and only two of them (around 14%) have gone into liquidation.
Liquidation means less funds available to unsecured creditors to be disbursed which however depends on case to case.
The author is a practicing CA based in Delhi and is Registered Insolvency Professional. He can be reached at email@example.com
Disclaimer: The views expressed in this article are strictly personal. The content of this document are solely for informational purpose. It doesn’t constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.
Tags Corporate Law