Watch this video to understand the basic Legal and Commercial foundation of the Insolvency and Bankruptcy Code, 2016.
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In the year 2015, India was ranked 130 out of 189 countries with respect to Ease of Doing Business (2015) and 136 out of 189 countries so far as Resolving Insolvency (2015) was concerned. The Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920 had become archaic, with the former being about century old legislation. Moreover, corporate bad debts constituted about 56% of the total bad- debts of the Nationalized Banks. Multiplicity of laws and adjudicating authorities for Insolvency and bankruptcy of various entities were a hindrance towards resolution of recovery problems of creditors and declaration of insolvency, their revival plan and liquidation of corporate entities.
It was in the wake of the following factors that in November, 2015, the Government set in motion a plan to overhaul the existing bankruptcy laws and replace them with one that will facilitate easy and time-bound closure of businesses. The draft legislation was based on the report of a high-level panel headed by former law secretary T.K. Viswanathan. The Finance Ministry put up the Insolvency and Bankruptcy Bill, 2015 on its website for public comments and it was passed on 05th May, 2016 by the Parliament as the Insolvency and Bankruptcy Code, 2016 (“the Code” or “IBC”) and came into force vide notification dated 28th May, 2016.
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Video Source: The Print