Answer By law4u team
India’s Insolvency and Bankruptcy Code (IBC), enacted in 2016, was designed to overhaul the insolvency resolution framework by introducing time-bound processes, creditor-driven resolution, and enhanced transparency. The IBC incorporates several international best practices, aligning India’s insolvency regime more closely with global standards and improving ease of doing business.
How IBC Aligns With International Best Practices
Time-Bound Resolution Process
IBC mandates a strict timeline of 270 days (extendable up to 330 days) for insolvency resolution, promoting efficiency and reducing delays, aligning with global emphasis on speedy resolutions.
Creditor-Centric Approach
The formation of a Committee of Creditors (CoC) comprising financial creditors to decide on resolution plans is consistent with international models where creditors play a central role.
Transparency and Accountability
IBC requires detailed disclosure, public announcement of insolvency, and transparency in the bidding and approval of resolution plans, reflecting global standards of openness.
Professional Insolvency Practitioners
The role of Insolvency Professionals (IPs) under IBC ensures skilled management of insolvency processes, akin to practices in jurisdictions like the UK, US, and Australia.
Legal Framework and Judicial Oversight
IBC establishes dedicated tribunals—the National Company Law Tribunal (NCLT) and appellate bodies—to oversee proceedings efficiently, mirroring specialized insolvency courts in other countries.
Cross-Border Insolvency Provisions
Though still developing, the IBC recognizes the importance of cross-border insolvency cooperation, working towards adopting frameworks such as the UNCITRAL Model Law to handle international cases.
Facilitation of Corporate Rescue
IBC prioritizes resolution over liquidation, encouraging restructuring and business continuity, which is a key principle of international insolvency regimes.
Areas for Further Improvement
- Strengthening cross-border insolvency laws to handle multinational cases more effectively.
- Enhancing the capacity and expertise of insolvency professionals and judicial bodies.
- Broadening stakeholder participation, including operational creditors and employees.
- Addressing complexities in the valuation and distribution of assets.
Example:
A large Indian infrastructure firm enters insolvency under the IBC.
- The CoC, led by financial creditors, approves a resolution plan within 270 days.
- An Insolvency Professional manages the process transparently under NCLT supervision.
- The company undergoes restructuring to continue operations rather than liquidation.
- If the firm has foreign creditors or assets, emerging cross-border frameworks aid cooperation.
