IBC is key to bolstering start-up ecosystem in India
The Insolvency and Bankruptcy Code (IBC) has been key in releasing entrepreneurship from honest business failures, which is important as India has the third largest start-up ecosystem in the world, Rajesh Verma, Secretary, Ministry of Corporate Affairs (MCA), said in an event organised by the National Company Law Tribunal (NCLT).
Verma said that IBC has several achievements and those include rescue of creditors, providing an orderly exit for companies under distress, helping creditors realize the value of their assets and behavioural change in both creditors and debtors.
Verma emphasized that the IBC Code has seen a roller coaster ride with six amendments have been made in the main legislation so far. Shri Verma further stated that many provisions of IBC have come out unscathed when challenged (in the higher courts) and the Supreme Court of India had settled the jurisprudence on various aspects of this new law at an unprecedented pace and passion.
He further said that in order to enhance the effectiveness of IBC, introduction of a cross border insolvency framework in the IBC is being considered. Leveraging technology and filling up posts are two key factors in increasing the speed, he said.
In his address Ravi Mital, Chairman, Indian Bankruptcy Board of India (IBBI), stated that there are two corner stones of the IBC — timelines in process and the control being given to creditors as against Debtors. He stated that with more standardization, the speed of resolution of cases can be increased. Mital said that IBBI is always ready to collaborate with NCLT in simplification of the process of resolution.
Talking about the importance of technology in early resolution of cases, Chief Justice (Retd.) Ramalingam Sudhakar said that one aspect for early resolution is the development of Artificial Intelligence technology for speedier dispensing of justice. “AI can be used in case resolution, especially in admission of cases,” he suggested.
NCLT is a quasi-judicial authority incorporated for dealing with corporate disputes under the Companies Act. It is the adjudicating authority for insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code, 2016.
Out of a total of 83,838 cases filed before the National Company Law Tribunal since its inception, 62506 (75%) cases have been disposed of by the Tribunal as on February 2022. The cases disposed of comprise of 39,446 cases under Companies Act and 23,060 cases under Insolvency Bankruptcy Code, 2016.
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