{"id":16883,"date":"2023-11-10T10:13:31","date_gmt":"2023-11-10T04:43:31","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=16883"},"modified":"2025-04-05T00:40:51","modified_gmt":"2025-04-04T19:10:51","slug":"ibc","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/ibc\/","title":{"rendered":"What is Insolvency and Bankruptcy Code, 2016?"},"content":{"rendered":"<h2>About Insolvency and Bankruptcy Code, 2016<\/h2>\n<ul>\n<li>It is the\u00a0bankruptcy law of India which seeks to consolidate the existing framework by creating a\u00a0single law for insolvency and bankruptcy.<\/li>\n<li>It\u00a0provides for a\u00a0time-bound process to resolve insolvency.<\/li>\n<li>Applicability: The provisions of the Code are applicable to\u00a0companies, limited liability entities, firms, and individuals (i.e. all entities other than financial service providers).<\/li>\n<li>Timeframe for completion of the exercise:\n<ul>\n<li>Companies\u00a0have to complete the entire\u00a0insolvency exercise\u00a0within\u00a0180 days under the IBC. The deadline\u00a0may be extended if the creditors do not raise objections to the extension.<\/li>\n<li>For smaller companies, including startups with an annual turnover of Rs 1 crore,\u00a0the whole exercise of insolvency\u00a0must be completed in 90 days, and the deadline\u00a0can be extended by 45 days.<\/li>\n<li>If debt resolution doesn&#8217;t happen, the\u00a0company goes for liquidation.<\/li>\n<\/ul>\n<\/li>\n<li>Who regulates the IBC proceedings?\n<ul>\n<li>The Insolvency and Bankruptcy Board of India (IBBI) has been appointed as a regulator and it can oversee these proceedings.<\/li>\n<li>IBBI has\u00a010 members appointed by the Central Government.<\/li>\n<li>IBBI\u00a0regulates insolvency professionals,\u00a0insolvency professional agencies,\u00a0and\u00a0information utilities set up under the Code.<\/li>\n<\/ul>\n<\/li>\n<li>Who facilitates the insolvency resolution?\u00a0A\u00a0licensed professional administer\u00a0the resolution\u00a0process, manage the assets of\u00a0the\u00a0debtor, and\u00a0provide information for creditors\u00a0to assist them in decision-making.<\/li>\n<li>Who adjudicates over the proceedings?\n<ul>\n<li>The proceedings of the resolution process will be adjudicated\u00a0by the National Companies Law Tribunal (NCLT) for companies and the\u00a0Debt Recovery Tribunal for individuals.<\/li>\n<li>The\u00a0courts approve initiating the resolution process,\u00a0appointing the\u00a0insolvency professional, and\u00a0giving nod to the final decision of creditors.<\/li>\n<\/ul>\n<\/li>\n<li>What is the procedure to resolve insolvency under the Code?\n<ul>\n<li>When a default occurs, the\u00a0resolution process may be\u00a0initiated by the debtor or creditor.<\/li>\n<li>The\u00a0insolvency professional administers the process.<\/li>\n<li>The\u00a0professional provides financial information of the debtor\u00a0from the information utilities to the creditor and manages the debtor\u2019s assets.<\/li>\n<li>This process\u00a0lasts for 180 days, and\u00a0any legal action against the debtor is prohibited\u00a0during this period.<\/li>\n<\/ul>\n<\/li>\n<li>What does the committee of creditors do?\n<ul>\n<li>A\u00a0committee consisting of the\u00a0financial creditors who lent money to the debtor\u00a0is formed by the insolvency professional.<\/li>\n<li>The creditors&#8217; committee\u00a0decides the future of the outstanding debt owed to them.<\/li>\n<li>They\u00a0may choose to revive the debt owed to them\u00a0by changing the repayment schedule or selling the assets\u00a0of the debtor\u00a0to get their dues back.<\/li>\n<li>If a decision is not taken in 180 days, the debtor\u2019s\u00a0assets go into liquidation.<\/li>\n<\/ul>\n<\/li>\n<li>What happens under liquidation?\n<ul>\n<li>If the debtor goes into liquidation, an\u00a0insolvency professional administers the liquidation process.<\/li>\n<li>Proceeds from the sale of the debtor\u2019s assets\u00a0are distributed in the following\u00a0order:\u00a0First, insolvency resolution costs,\u00a0including the\u00a0remuneration to the insolvency professional;\u00a0second, secured creditors, whose loans are backed by collateral; and\u00a0third, dues to workers, other employees;\u00a0forth, unsecured creditors.\u00a0<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1) What is Insolvency and Bankruptcy ?<\/h3>\n<p>Insolvency is when an individual or company can no longer meet their financial obligations to lenders as debts become due. Bankruptcy is a legal process that provides protection and relief for individuals who are unable to pay off their debts. Insolvency is a financial state whereas bankruptcy is a legal declaration and process.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.barandbench.com\/news\/supreme-court-upholds-validity-key-provisions-insolvency-and-bankruptcy-code\" target=\"_blank\" rel=\"nofollow noopener\"><u>Supreme Court upholds validity of key provisions of Insolvency and Bankruptcy Code<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Insolvency and Bankruptcy Code, 2016 is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.<\/p>\n","protected":false},"author":5,"featured_media":16884,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-16883","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/16883","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=16883"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/16883\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/16884"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=16883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=16883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=16883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}