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This video is about the Insolvency and Bankruptcy Wecome to Nagraj Educational Services
This video is about the Insolvency and Bankruptcy Code (IBC). The content in this video is useful
to students of banking at graduate, UG and Code (IBC). The content in this video is useful
to students of banking at graduate, UG and PG levels and also for people appearing for
banking examinations PG levels and also for people appearing for
banking examinations PLEASE SUBSCRIBE TO my channel and watch the
video till the end. PLEASE SUBSCRIBE TO my channel and watch the
video till the end. This gives an introduction to the whole process
of the IBC. So watch the video till the end. This gives an introduction to the whole process
of the IBC. So watch the video till the end. The background of IBC: The banking industry
in our country is bogged down by huge NPAs The background of IBC: The banking industry
in our country is bogged down by huge NPAs and over Rs 10 lakh crore are stuck up in
major industries like Steel, Cement, Infrastructure, and over Rs 10 lakh crore are stuck up in
major industries like Steel, Cement, Infrastructure, housing and jewellery
So with this background, the Government has housing and jewellery
So with this background, the Government has introduced IBC in 2016 and amended in 2018.
Now, before we proceed further, we need to introduced IBC in 2016 and amended in 2018.
Now, before we proceed further, we need to understand the terms INSOLVENCY and LIQUIDATION.
It is a misconception that companies going understand the terms INSOLVENCY and LIQUIDATION.
It is a misconception that companies going for liquidation are insolvent. Even solvent
companies can go for liquidation..an example for liquidation are insolvent. Even solvent
companies can go for liquidation..an example ..voluntary liquidation. However, consent
of shareholders, directors and creditors is ..voluntary liquidation. However, consent
of shareholders, directors and creditors is necessary. But insolvent companies can go
for liquidation. necessary. But insolvent companies can go
for liquidation. INSOLVENCY AND BANKRUPTCY: Insolvency is a
state of customer not being able to pay the INSOLVENCY AND BANKRUPTCY: Insolvency is a
state of customer not being able to pay the debt on time. Insolvency is a status. So this
state of inability to pay arises on two counts—one debt on time. Insolvency is a status. So this
state of inability to pay arises on two counts—one is cash flow insolvency and another is the
Balance Sheet Insolvency. When the cash inflow is cash flow insolvency and another is the
Balance Sheet Insolvency. When the cash inflow is inadequate to make the outflow, naturally
the company goes on defaulting. When the position is inadequate to make the outflow, naturally
the company goes on defaulting. When the position is inadequate to make the outflow, naturally
the company goes on defaulting. When the position is such that they are not able to pay at all,
it becomes cash flow insolvency. Balance Sheet Insolvency is when the assets
are totally insufficient to pay off the liabilities, Balance Sheet Insolvency is when the assets
are totally insufficient to pay off the liabilities, it is Balance Sheet insolvency. Bankruptcy
is again a state of customer but it is determined it is Balance Sheet insolvency. Bankruptcy
is again a state of customer but it is determined by the court that the company is not able
to pay off the debts. Normally it is by way by the court that the company is not able
to pay off the debts. Normally it is by way of a court order.
As I told earlier, IBC was introduced in 2016 of a court order.
As I told earlier, IBC was introduced in 2016 and amended in the year 2018.
Then, who can file a case? and amended in the year 2018.
Then, who can file a case? A financial creditor, an operational creditor
or a corporate debtor can file a case by submitting A financial creditor, an operational creditor
or a corporate debtor can file a case by submitting an application to NCLT where the debt is over
Rs 1 lakh. Then the NCLT appoints an Insolvency an application to NCLT where the debt is over
Rs 1 lakh. Then the NCLT appoints an Insolvency Resolution Professional (IRP) and declare
a moratorium period of 180/270 days. Resolution Professional (IRP) and declare
a moratorium period of 180/270 days. The Insolvency Resolution Professional will
form a committee of creditors to revive or The Insolvency Resolution Professional will
form a committee of creditors to revive or liquidate. Revival is the priority
If 75 % of the creditors vote for revival, liquidate. Revival is the priority
If 75 % of the creditors vote for revival, the revival plan has to be worked out and
it has to be put into action. If revival is the revival plan has to be worked out and
it has to be put into action. If revival is not possible, then compulsory liquidation.
Under compulsory liquidation, consent of directors, not possible, then compulsory liquidation.
Under compulsory liquidation, consent of directors, shareholders is immaterial. Then the IRP can
be appointed as the liquidator. NCLT can replace shareholders is immaterial. Then the IRP can
be appointed as the liquidator. NCLT can replace shareholders is immaterial. Then the IRP can
be appointed as the liquidator. NCLT can replace him.
Let us go further now. him.
Let us go further now. The Supreme Court has upheld the IBC which
helps in reduction of NPAs of the large borrowers. The Supreme Court has upheld the IBC which
helps in reduction of NPAs of the large borrowers. So, the admission under Corporation Insolvency
Resolution Plan (CIRP) has to be decided within So, the admission under Corporation Insolvency
Resolution Plan (CIRP) has to be decided within 14 days and to be approved within 180 days
and NCLT can extend it to 270 days. 14 days and to be approved within 180 days
and NCLT can extend it to 270 days. The four pillars of IBC framework: a) Insolvency
Resolution Professional plays a very important The four pillars of IBC framework: a) Insolvency
Resolution Professional plays a very important role but he has powers only to determine but
he has no power for adjudication. He has to role but he has powers only to determine but
he has no power for adjudication. He has to apply for adjudication.
b) The Information Utilities..Electronic records apply for adjudication.
b) The Information Utilities..Electronic records of data about the lenders is a source.
c) Then, the adjudication authorities of data about the lenders is a source.
c) Then, the adjudication authorities are NCLT and DRT and the appellate authorities
are NCLAT and DRAT. NCLT and DRT and the appellate authorities
are NCLAT and DRAT. d) The Regulator is the IBBI—Insolvency
and Bankruptcy Board of India. d) The Regulator is the IBBI—Insolvency
and Bankruptcy Board of India. We need to understand the difference between
Financial Creditors and Operational Creditors. We need to understand the difference between
Financial Creditors and Operational Creditors. A Financial Creditor is one who assesses the
credit needs of the debtors and directly engages A Financial Creditor is one who assesses the
credit needs of the debtors and directly engages himself in credit appraisal, documentation
and extending finance. Whereas an Operational himself in credit appraisal, documentation
and extending finance. Whereas an Operational Creditor is one who provides raw-materials,
goods or services or other support services Creditor is one who provides raw-materials,
goods or services or other support services on credit.
Then, in the amendment, voting powers have on credit.
Then, in the amendment, voting powers have been liberalized.
Routine decisions in the meeting—voting been liberalized.
Routine decisions in the meeting—voting power is reduced from 75 % to 51% and Key
decisions re: Resolution Plan or Liquidation power is reduced from 75 % to 51% and Key
decisions re: Resolution Plan or Liquidation 75 % to 66 2/3 percent
The other important points on Financial Creditors 75 % to 66 2/3 percent
The other important points on Financial Creditors and Operational Creditors:
The Financial Creditors—the records are and Operational Creditors:
The Financial Creditors—the records are well documented, defaults are easily verifiable
and are involved right from the pre-sanction well documented, defaults are easily verifiable
and are involved right from the pre-sanction stage to the end utilization of the funds
and the operation of the business. stage to the end utilization of the funds
and the operation of the business. In case of an Operational creditor, disputes
or disagreements may arise on the quality In case of an Operational creditor, disputes
or disagreements may arise on the quality of the product sent, or settling of bills
of any other business decisions…there may of the product sent, or settling of bills
of any other business decisions…there may be disputes and disagreements which makes
the debtor not to pay. But these are to be be disputes and disagreements which makes
the debtor not to pay. But these are to be argued and proved.
However, last but not the least— argued and proved.
However, last but not the least— IBC is a new mechanism not directly involved
in the recovery by the IBBI or by authorities IBC is a new mechanism not directly involved
in the recovery by the IBBI or by authorities of IBC itself but this a mechanism provided
to the creditors and other interested parties of IBC itself but this a mechanism provided
to the creditors and other interested parties to recover the amount. However, NPAs in the
banking sector is likely to come down. to recover the amount. However, NPAs in the
banking sector is likely to come down. And if I go by statistics, I think for the
last three years, 1484 cases have been filed And if I go by statistics, I think for the
last three years, 1484 cases have been filed under IBC. Around 500 cases have been resolved.
Thanks for watching this video. No doubt it under IBC. Around 500 cases have been resolved.
Thanks for watching this video. No doubt it is a lengthy video and it is only an introductory
part. The case laws, the companies are all is a lengthy video and it is only an introductory
part. The case laws, the companies are all to be studied by the students who are taking
up the examinations. This is the basic framework, to be studies by the students who are taking
up the examinations. This is the basic framework, I wanted to give to the students for their
benefit. I wanted to give to the students for their
benefit. Thanks for watching this video.
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Thanking you once again. done.
Thanking you once again.