Bankruptcy law as the name suggests relates to closure of the entities in a speedy and time-bound manner. Under the existing regime, closing down of entities is a very long and tedious process which causes destruction of value for all stakeholders.
Why Insolvency and Bankruptcy Code:
- Development of Credit Market:
- Promote Entrepreneurship:
- Ease of doing business in India.
As per the proposed legislation, the corporate insolvency would have to be resolved within a period 180 days, extendable by 90 days. It also provides for fast-track resolution of corporate insolvency within 90 days.
This indicates the speedy disposal of cases of private limited, public limited companies and other entities as described under the code.
Need to Pass Bankruptcy Code:
Under the existing system, four different agencies which deal with companies revival, winding up and other restructuring process : the high courts, the Company Law Board, the Board for Industrial and Financial Reconstruction (BIFR), and the Debt Recovery Tribunals (DRTs), have overlapping jurisdictions, which rises to delays and make process more complex. Therefore, there is necessity to table bankruptcy law which can help to overcome these challenges.
Tribunals handle the insolvencies of Private and Public Limited Companies and other entities:
National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT) shall be adjudicating authorities for private limited and public limited companies and firms and individuals for resolution of insolvency, liquidation and bankruptcy.