Insolvency Proceedings & Impact of Covid-19: Insolvency & Bankruptcy Code, 2016, Divulging the Loopholes

Abstract

Perpetual Succession of the business is the most common want & necessity for any corporation or business. It is the basic aim of any corporation to grow more and more. This is the reason that this term has also been mentioned in the Companies Act, 2013- Perpetual Succession: The base. In a developing country like India starting, a business is easy yet challenging. Also winding, up of the same is still confusing, basically winding up of corporations. Several attempts have been made but, India is still facing the problem of an ineffective Insolvency Resolution framework. Insolvency & Bankruptcy are a common phenomenon in corporate sector, startups fail, merger & acquisition go wrong there are various such examples available for the same such as Kingfisher failure, Jet airways and so on. But to regulate such insolvencies needs a consolidated code for efficient regulating. In India insolvency proceedings are quite challenging and cumbersome process. Also if we trace the existing previous resolution regimes we find that they had a major flaw of several overlapping of regimes governed by various acts like Sick Industrial Company Act 1985, Presidency Towns Insolvency Act 1909, Limited Liability Partnership Act 2008, Companies Act 2013 which resulted in undue delays in resolving insolvency cases. In effort to ease out the problems of the legislative framework then finance minister Mr. Arun Jaitley presented a bill on Insolvency and Bankruptcy in Dec 2015 in Lok Sabha. It was approved on 5th May 2016 in Lok Sabha and on 11th May 2016 it was accepted in Rajya Sabha. The code got Presidential consent on 28th May 2016 and got functional since Dec 2016.The Insolvency and Bankruptcy Code 2016, amalgamated the scattered and nebulous statute on bankruptcy predominant inside the different covering laws taking care of monetary disappointments and indebtedness in India which made the goal interaction extremely long and unwieldy. This IBC code was then considered as major reformation in curtailing the cumbersome and time taking process of insolvency and major effort in resolving the issues of NPAs- Non Performing Assets which had been plaguing the Indian Banking industry and the rising corporate borrowing defaults. In today‟s scenario of Covid-19 there is change coming in corporation‟s working so it be crucial to see the insolvency proceedings and complexities of winding up in terms of IBC code. This paper will discuss and analyze the merits and challenges of IBC- Insolvency & Bankruptcy Code in insolvency proceedings in the present Covid-19 scenario. Also this paper tries to analyze the existing loopholes in the current statue and how it can impact the insolvency process in pandemic situation as well as the recommended amendments to facilitate the efficient insolvency proceedings. It specifically indicates whether the use of IBC is sufficient or reforms has to be done the existing code and what would be the impact of introducing technology in the proceedings. This paper begins with the latest challenges and implications as a result of pandemic, specifically for corporations. Then cites and refers the latest Reports, vi Articles, Insolvency Laws and Conventional Rules and Regulations, Proposed Amendments which draws the merits and challenges concerning cost and delay. Further this paper would analyze the conflict in jurisdiction and ambit of treaties linking laws and amendments together in corporate restructuring and possible challenges in implementing the same