We have heard a lot about the insolvency and bankruptcy code bill passed in the parliament, but very few people know about it at length. There is a lot of confusion and misunderstandings about it.
Some people feel that it is very much necessary and important whereas many people consider it just another code which has hardly any significance on the ground.
Well, one thing is pretty sure. The implementation of this code will ensure that the cases like Vijay Mallya will not be repeated in future if we implement the bankruptcy and insolvency act properly.
People will not have room to make huge frauds and simply fly away without paying a penny. They will be liable and responsible for the people they deal with and their money.
The government knows that the big fraudsters make use of the loop hole and fly away. Hence, the code tries to bridge all the gaps and make it foolproof.
It will save the banks from the so-called “bad loan crisis”
Though people feel that the banks are solely responsible for their own problems, it is not a right assumption. Banks are bound to the norms, rules, and regulations. If a person takes a loan by submitting all legal papers, then they have no reason to deny it.
Moreover, there are many limitations in recovering the default loan amounts. With the proposed code, many benefits are expected.
From speedy winding up of insolvent companies to the redeployment of capital productivity and the reduction in defaulters to lowering down npa in india; the list of benefits is pretty long.
What does bankruptcy mean?
Fundamentally, bankruptcy is the stage when a company is not able to repay its debts to the creditors. Because of the proposed law, a debtor will be called bankrupt when he will be adjudged by an adjudicating authority.
A bankruptcy order will be passed by the authority. Typically, it will be nclt Mumbai (National Company Law Tribunal Mumbai) for limited liability partnerships and listed companies.
For partnership firms and individuals, the authority will be drt Mumbai (Debt Recovery Tribunal).
IBC is the need of the day
We have seen many hiccups and shake-ups in the banking industry recently. It is not an exaggeration if we say that the banking industry is in a state of deep crisis.
Stressed assets are increasing at an alarming speed, and bad debts are piling up. In such situation, IBC proves to be a sigh of relief.