The Insolvency and Bankruptcy Code, 2015

The Insolvency and Bankruptcy Code, 2015 was introduced by the Minister of Finance, Mr Arun Jaitley, in Lok Sabha on December 21, 2015. The Code seeks to create a unified framework for resolving insolvency and bankruptcy in India. The Code seeks to repeal the Presidency Towns Insolvency Act, 1909 and Provincial Insolvency Act, 1920. In addition, it seeks to amend 11 laws, including the Companies Act, 2013, Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and Sick Industrial Companies (Special Provisions) Repeal Act, 2003, among others.

The Code will apply to companies, partnerships, limited liability partnerships, individuals and any other body specified by the central government. Resolution process for companies and limited liability partnerships will have to be completed within a maximum period of 180 days from the date of registration of the case. This period may be extended by 90 days if 75% of the financial creditors agree. The process will involve negotiations between the debtor and creditors to draft a resolution plan.

Insolvency regulator: The Code seeks to establish the Insolvency and Bankruptcy Board of India, to oversee insolvency resolution in the country. The Board will have 10 members, including representatives from the central government and Reserve Bank of India. The Regulator will register information with regard to insolvency professionals and insolvency professional agencies under it, and regulate their functioning.

Bankruptcy and Insolvency Adjudicators: The Code proposes two separate tribunals to adjudicate grievances related to insolvency, bankruptcy and liquidation of different entities under the law: (i) the National Company Law Tribunal will have jurisdiction over companies and limited liability partnerships, and (ii) the Debt Recovery Tribunal will have jurisdiction over individuals and partnership firms. Appeals against orders of these tribunals may be challenged before their respective Appellate Tribunals, and further before the Supreme Court.

Offences and penalties: The Bill specifies that for most offences committed by a debtor under corporate insolvency (like concealing property, defrauding creditors, etc.), the penalty will be imprisonment of up to five years, with a fine of up to one crore rupees. For offences committed by an individual (like providing false information), the imprisonment will vary based on the offence.