good evening my dear friends I am Deepanshu Sarkar and I am here today to present a topic on insolvency and
bankruptcy, basically insolvency and bankruptcy and it’s legal journey, the
new code the insolvency and bankruptcy code 2016 which was enacted on 11th May
when the Presidential assent was given so I would to talk about
that and … I would like to throw some light upon the flow of discussion
which I would be telling so I would like to start
what is insolvency and bankruptcy insolvency and bankruptcy means when a
person or an entity like a legal entity, a company, a partnership firm, an
individual or a proprietorship fails to meet its cash or financial obligations
towards its creditors or lenders. That is the entity is the borrower of some money
and the creditor is the lender of the money. So when an entity cannot meet its
financial obligations it becomes bankrupt. So when does a company declare bankruptcy. In a company there are workmen, there are creditors, so there are
so many people who are actually working towards the development of the company
and when a company becomes insolvent it actually becomes difficult to pay the
workman, the employees, their salaries and the creditors they cannot get back their
money so that is why there has to be a tribunal or an institution where these
insolvency and bankruptcy related issues has to be solved so it’s very necessary
to file an insolvency petition. Now.. I would like to discuss that people the
creditors who like the employees the employees the workmen are the most
important and the prior priority holders in a creditor because they put their
blood and sweat for the company to develop and reach its Heights and the
second is the secured creditors that is the banks and the non-financial
institutions who are lending their money so that the company develops and
the third are the unsecured creditors like the shareholders of the company who
buy the shares of the company so that the company can develop okay so what
does an entity do when it becomes bankrupt in for the like in the previous
laws there was a national company law tribunal set in CLT according to the
company’s law Companies Act 2013 where all these company related proceedings
shall be held there is no Civil Code regarding to this companies the NC LT is
formed which is mandated by the Section four zero eight of the Companies Act
okay now the previous laws and the new law
governing bankruptcy the Companies Act 1956 SiC companies act 1985 the recovery
of debts nineteen eight 1993 at the surface he at the companies at two
thousand thirteen the reason behind a mentioning companies at nineteen fifty
six and two thousand thirteen separately is that the Companies Act 1956 in part
six a and part seven and section three ninety one mentions 1956 and in the 2013
Act the chapter 19 and chapter 20 separately mentioned insolvency and now
comes our new code the insolvency and bankruptcy code it is actually a
consolidation of all the bankruptcy related laws in a in one box that is
what it is like all the same product in a new packaging so this is our
insolvency and bankruptcy code I would like to talk something about this
insolvency and bankruptcy code why was the law enacted actually our company is
going through a phase where 150 million dollars or
bad debts are actually overhanging above us and the recovery rate by the lenders
is just twenty percent which is one of the worst recovery rates of the world so
and our country is a blue booming country of the young entrepreneurs who
have to form their new entrepreneurship so some reforms are actually needed for
the entrepreneur dynamism to improve in our country that is why insolvency and
bankruptcy code was formed like it’s mentioned here this is the the previous
laws did not have a proper negotiation between the creditors and the debtors
the previous laws are so redundant they did not have a proper mentioning of
insolvency and bankruptcy so the people what you what they used to do they used
to make an out-of-court settlements so which were not very effective and the
workmen they the companies they were shut down and the workmen did not get
their equal pays and wages and remuneration and the secured creditors
also could not get their loans back so and this code actually forms a process
in which proper negotiation and the supervision would be done by a
resolution professional who would be supervising all the insolvency
proceedings canipe now I would like to explain how this process actually
happens the insolvency and bankruptcy court actually revolves around this
ecosystem this is the insolvency and bankruptcy board of India it is an apex
body which actually looks at the transparency of the proceedings so that
there is no cheating involved in the proceedings the insolvency professional
agency this agency is a finds and finds a place in Section two two zero one of
the insolvency and bankruptcy court 2016 this agency is used to recruit the
insolvency professionals the insolvency professionals are the people who when
and petition is filed in a company they the powers of the board of directors are
completely wasted in the insolvency professional this person finds a place
in section two zero seven of IBC 2016 and
information utility this is a repository in which all the information of the
creditors the debtors the borrower’s every every information about the
corporate form is mentioned in information utility section two one zero
of insolvency and bankruptcy food ok then this is the committee of creditors
the creditor committee it is a committee formed when there is an insolvency
petition file so what they do is they actually decide how to evolve the
company from insolvency or the further proceedings which I will be talking in
the subsequent presentation the NC LT the edge adjudicating authority this is
the authority which actually accepts the petition of insolvency or rejects
repetition or it rejects the resolution plan or helps in implementing the
resolution plan which is being formed in the form for the company when it is
insolvent ok now I would like to explain the corporate insolvency resolution
process see IRP so what happens is when a company applies for default or a debt
to the adjudicating authority that is a a what they do is they appoint an
interim resolution professional for the IP and this IP is IP conducts a meeting
with the committee of the creditors within the first seven days and the
Committee of the creditors actually determines whether this insolvency
professional would be fine for our company or not so if it’s fine then he
will move forward and then the resolution plan would be implemented and
the date when which from which the company applies for the default and the
insolvency professional is recruited or appointed for that company that date is
known as insolvency commencement date and from that date all the powers of the
board of directors of the company is vested in the insolvency professional he
and the board of directors would not function they are just a party in the
Committee of the creditors they can sit and vote this is the moratorium period what the
moratorium period is actually 180 days that is approximately six months this is
a very important factor which has been actually made by the IBC that is all the
company insolvency related proceedings will be solved within six months in the
previous loss there was no such special date and the proceedings were means they
were running and all and there was no solution so that’s what the new code has
has been proposed and within this period the committee of the creditors forms and
the 75% of the creditors if they approve of the resolution plan which is being
formed by the committee of credit creditors and the insolvency
professional then the implementation of the resolution plan would take place
otherwise the company would goal go into liquidation so what happens in
liquidation is if the resolution plan is implemented the it is finished within
180 days all the proceedings and if it evolves it’s fine
if it does not involve or the resolution plan is not passed then the company will
go into liquidation in liquidation what happens is a very great thing which has
been mentioned in the IBC is there is a proper order of priority when the
company goes into liquidation the how the distribution of assets would takes
take place so that is mentioned in section 53 of the insolvency and
bankruptcy code the and in a very important thing is that earlier the
earlier the secured creditors and workmen were kept in a I would like to
explain this like with a latin maxim also known as peri passu which is that
equal footing of secured creditors and the workman but now what has happened is
since the workman has put his most energy in making his growth and the
company’s growth the workman dues are the topmost priority now and then is the
secured creditor so this is a very great thing and now I would like to explain so
key takeaways that is the key highlights of IBC it is actually a paradigm shift
which in the previous position it was all the rights were given to the debtor
so now it is a shift from debtor in position to the creditor in control now
the creditor has the control whether to implement all the insolvency proceedings
and everything now is in the creditors hands and now the creditors are actually
more protected they feel more safe that are their money will not go waste and
finally they will get back their money and as I earlier I mentioned that it is
a strict time frame of 180 days and in the rarest of the rarest cases it
extends by 90 days that is 270 days is the maximum limit within which they have
to finish the insolvency proceedings at any cost and also I mentioned that the
it is a consolidation of all the pre-existing laws and according to
Section 238 of insolvency and bankruptcy code it has an overriding effect on all
the previous laws so I would like to conclude by saying that IBC is an just
it has been enforced in 2016 so we hope that it it is a good and good code in
solving the bankruptcy process thank you and in the subsequent videos we will be
talking about voluntary liquidation and insolvency proceedings for India