Purpose of the Insolvency & Bankruptcy Code, 2016

 The code gets its consent on-

1. By Lok Sabha- 5th May 2016
2. By Rajya Sabha- 11th May 2016
3. By President- 28th May 2016

Thus the code came into force on 28th May 2016, as notified by the Central Government in the Official Gazette.

The code has extended to the whole of India.

Four Pillars of the Code

The IBC, 2016 is based on a four-pillar institutional framework, comprising-

• NCLT and NCLAT, the adjudicating authority,

• Insolvency and Bankruptcy Board of India, the regulator of insolvency professionals and insolvency professional agencies,

• Insolvency professionals, the class of regulated persons responsible for the efficient execution of the processes specified under IBC, and

• Information utilities, the new industry to electronically store facts about lenders and terms of lending.

The main purpose of the code is-

1. to reach a level where there would be the time-bound settlement of insolvency.
2. to resolve India's bad debts problem by creating a database of defaulters.
3. to deal with cross-border insolvency.
4. to safeguard the interest of various stakeholders including Government Regulators.
5. to establish the Insolvency and Bankruptcy Board of India.
6. to facilitate the easy exit of bankrupt corporates and individuals; and
7. to provide a painless revival mechanism for entities.

Looking at the Indian Bankruptcy regime in the past, a company's revival process has been sluggish and cumbersome, which often leads to productive assets lying dormant and getting wasted.

The code has come up with the expeditious insolvency resolution/ revival process for corporate persons, firms, and individuals that balance the interest of various stakeholders. The code provides a time-bound mechanism for coming up with the resolution plan approved by the creditors. The process is mandated to be completed within 180 days, further extendable by a maximum of 90 days.