The Insolvency and Bankruptcy Code 2016 (IBC), was introduced in India to bring all the matters relating to insolvency, liquidation, voluntary liquidation or bankruptcy of companies, LLPs, partnership firms and individuals under a single legislation.
The code repeals the Presidency Town Insolvency Act 1909, the Provincial Insolvency Act, 1920 and Sick Industrial Companies (Special Provisions) Act, 1985. It also amends various laws including Indian Partnership Act, 1932, Central Excise Act, 1944, Companies Act, 2013, Limited Liability Partnership Act 2008, etc. The code also provides for establishment of the Insolvency and Bankruptcy Board of India by the Central Government. The board manages the registration of insolvency professionals.
The code consists of 5 main parts:
I. Preliminary
II. Insolvency Resolution and Liquidation for Corporate Persons
III. Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms
IV. Regulation of Insolvency Professionals, Insolvency Professional agencies and Information Utilities
V. Miscellaneous
When a Corporate debtor commits a default, a Financial Creditor, an Operational Creditor or the debtor itself may start Corporate Insolvency Resolution Process (CIRP). The CIRP has to be completed within 180 days from the date of admission of the application by NCLT. The NCLT will appoint an Interim Resolution Professional, within 14 days from the insolvency commencement date. His appointment is not for more than 30 days. The interim Resolution Professional will determine the financial position of the debtor. He will also collate all the claims submitted to him by the creditors and constitute a creditors committee. The first meeting of Committee of Creditors (CoC) will take place within 7 days of its constitution. The Committee of Creditors will appoint a Resolution Professional who may be Interim Resolution Professional also.
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