Ratio Decidendi Insolvency And Bankruptcy Code

While IBC consolidates scattered and unstructured jurisprudence on insolvency prevalent in the past, in view of various interpretational issues, one is bound to witness a whirlwind of judicial pronouncements that will result in the development of IBC jurisprudence in days to come

The enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) marks a historical step by lawmakers of India in the jurisprudence relating to corporate insolvency. IBC was primarily enacted with the objective of consolidating and amending laws relating to reorganization and insolvency resolution of corporates, firms, and individuals in a time bound manner to maximize the value and potential of their assets.

IBC is inspired by the UK Insolvency Act, and historically, a large part of the insolvency jurisprudence across the world is based on judicial precedents and that is where tribunals and courts sit to create principles that serve as precedents in times to come.

Insolvency in layman’s language means inability of a person or company or corporation to repay its debts when they become due or when the liability of the person or company or corporation exceeds the value of its assets. Bankruptcy is the condition when they have become bankrupt where a revival is not possible and occurs at the end of the insolvency process.

Key Themes Under The Ibc

• Interpretation Of “Dispute”

Sub-section (6) of Section 5 of IBC defines “dispute” to include any suit or arbitration relating to the existence of a debt; quality of goods or services; or breach of a representation or warranty.

• Stages In A Corporate Insolvency Process

IBC provides a two-stage process for corporate insolvency. The first stage is famously described as the Corporate Insolvency Resolution Process (CIRP) under which any of the financial creditors, operational creditors, or the corporate itself can initiate proceedings on a payment default by way of an application before the respective National Company Law Tribunal (NCLT). IBC recognizes two kinds of creditors who can trigger CIRP: operational creditor and financial creditor.

• Timelines