Corporate insolvency resolution process: A critical analysis

Arya Krishnakumar
8th Semester Student, B.Com, LL.B (Hons.),
School of Legal Studies, CUSAT

Ann Thomas
8th Semester Student, BBA, LL.B (Hons.),
School of Legal Studies, CUSAT


In 2016, parliament passed the insolvency and bankruptcy code in order to improve the business environment and to alleviate distressed credit markets. The code offers a uniform, comprehensive insolvency legislation comprising all companies, partnerships and individuals. In the absence of a bankruptcy law, a firm’s assets would be sold as a scrap and its value would be lost. Now the situation has changed. This law helps to rescue business through speedy liquidation process without any further depletion in the value of assets. The code consists of a regulator, insolvency professionals, information utilities and adjudicatory mechanisms to facilitative a speedy insolvency resolution process and liquidation, thus resulting in a new institutional frame work compared to earlier one. It is the responsibility of the creditor to initiate insolvency resolution process against the corporate debtor. In this paper, we will be dealing mainly with corporate insolvency resolution process. To initiate an insolvency process for corporate debtors, the default should be at least INR 100000. At first comes insolvency resolution process where the creditors assess the debtors business and takes a decision whether to wind up or rescue. If the decision is to wind up then comes the liquidation stage .Either a financial creditor or an operational creditor can initiate an insolvency resolution process against a corporate debtor at National company law tribunal (NCLT).The NCLT orders a moratorium on debtors operations for the period of insolvency resolution process. Then NCLT appoints an insolvency professional or resolution professional to administer the insolvency resolution process. The resolution professional identifies the financial creditors and constitute a committee. Their decisions are binding on the corporate debtors and all its creditors. They consider proposal for the revival of debtor and must take decision regarding it within a period of 180 days.

Our paper would like to throw light in the minds of the reader by raising the following questions:

  1. What is the root cause of developing the code?
  2. How has the corporate resolution process helped in uplifting the standard of business?
  3. What are the challenges faced in the corporate insolvency process?

India has a distressed state of credit markets .It is due to a weak insolvency regime, its inefficiency and systematic abuse. Due to this Act an early identification of financial failure is possible thus helping to maximise the asset value of insolvent firms. The goal of this paper is to address, in detail, the concept of corporate insolvency resolution process, the various steps involved in it, its impact on business and the challenges faced.

Keywords: IBC, Corporate insolvency resolution process, insolvency resolution process, NCLT

Preferred Citation:

Arya Krishnakumar & Ann Thomas, Corporate insolvency resolution process: A critical analysis, The Lex-Warrier: Online Law Journal (2019) 5, pp. 293 – 318, ISSN (O): 2319-8338

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