• Supreme Court has upheld the Insolvency & Bankruptcy Code’s constitutional validity in its ‘entirety’, and rejected petitions challenging the bankruptcy laws, in a major setback to defaulting promoters hoping for a chance to remain in control of their firms.

About Insolvency & Bankruptcy Code:

• Previously the average time to resolve the insolvency was around four years which is cut down to six months by this code.
• This insolvency and bankruptcy code 2016 will attract further foreign investment with proven results of effective and speedy functioning of the insolvency and liquidation process. Hence it will be a key factor to sustain economic growth in the country through foreign investments. This would also give banks and other investors’ confidence in putting their money into Indian entrepreneurs.
• The code is applicable to companies, limited liability firms, other firms, and individuals. 
• This insolvency and bankruptcy code 2016 includes two processes that is Insolvency Resolution and second is liquidation.
• The properties considered for insolvency resolution and liquidation under the code are money, goods, actionable claims, land. This could be either in India or outside. With help of Central Government, the code can also be re-enforced outside the country. 
• It consolidates and surpasses all the laws of revival, restructuring, winding up and reorganization of any sick or debt oriented industry.
• The insolvency and bankruptcy code 2016 also provide an opportunity for professionals like advocates, lawyers, Chartered Accountants, Company Secretaries, Cost Accountants and Valuers to become Resolution Professionals by obtaining the license under the code and practice.
• The code includes the process to be followed to declare an individual, company or a partnership firm to be insolvent. Under insolvency and bankruptcy code 2016 both debtor and creditor can initiate the recovery procedure of the bad loans.
• Insolvency and bankruptcy board is the regulator for governing the insolvency and bankruptcy code 2016 proceedings. IBBI includes ten members who are from finance ministry and law ministry.
• Insolvency and bankruptcy code 2016 have announced two tribunals who shall be authorized to resolve the insolvency issues and thus will pronounce the judgement. One of them is National Company Law Tribunal which will take care of insolvency and bankruptcy code 2016 proceedings for companies and another is Debt Recovery Tribunal which will govern the insolvency and bankruptcy code 2016 proceedings for the individuals.

Analysis:

• The endorsement of the law and its provisions by the Supreme Court would come as a boost to the government which pushed for a modern bankruptcy law in the first half of its term and managed to get an exit mechanism which would help the reallocation of capital and ease the huge debt burden of banks in India.
• In the working of the code, the flow of resources to the commercial sector in India has increased exponentially as a result of financial debts being repaid, the Supreme Court said.
• Crucially, the judgement upheld Section 29A of the code. The section specifies a broad range of criteria that would disqualify potential bidders from bidding for assets undergoing the corporate insolvency resolution process and, among other things, bars promoters of a company facing insolvency proceedings from bidding to regain its control.