Lacunae In The Insolvency & Bankruptcy code: Call For The Third Amendment

Although the intent of IBC is undoubtedly right, its execution is a matter of concern

India is currently witnessing a situation where for the first time, the three pillars of democracy: the Executive, Legislature and Judiciary are working in tandem, to clean out the plague of non-performing assets, saddling the Indian economy, this is being done through the ‘Insolvency & Bankruptcy Code, 2016’ (“IBC”). But, though the intent of IBC is undoubtedly right, its execution is a matter of concern.

IBC has now been amended twice to tackle its shortcomings as well as that of erstwhile prevailing laws. But, have all the wrinkles been ironed out yet?

Two important scenarios under IBC are bound to create a furore. Firstly, the overlap of arbitration proceedings and IBC and secondly, the impact of IBC on the subsidiaries of corporate debtor companies.

Moratorium, the most ‘hailed’ and ‘controversial’ provision under IBC is enforced to observe a calm on the assets of the debtor company undergoing resolution. For its enforcement, strict measures are imposed by adjudicating authorities. One of them being stay on arbitration proceedings ‘against’ the debtor company.