To provide the text and quick legal orientation for the Insolvency and Bankruptcy Code, 2016, used for insolvency resolution, liquidation, voluntary liquidation and bankruptcy-related proceedings in India.
Overview #
The Insolvency and Bankruptcy Code, 2016 is India’s central insolvency statute for resolving default by corporate persons and, where the relevant provisions apply, individuals and partnership firms. It replaced a fragmented recovery and winding-up framework with a structured, time-bound process for insolvency resolution, liquidation and bankruptcy.
The Code is especially relevant to banks, financial institutions, operational creditors, companies, suppliers, investors, resolution professionals and legal researchers dealing with default, restructuring and recovery. For businesses in regulated sectors, including pharmaceutical and healthcare enterprises, the Code may become relevant where unpaid loans, supplier dues, lease liabilities, distribution debts or corporate guarantees trigger insolvency proceedings.
Object of the legislation #
The core object of the Code is to consolidate and amend the law relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner. Its legislative purpose is not merely recovery of debt, but resolution of insolvency while preserving value where possible.
Key policy goals include maximisation of asset value, promotion of entrepreneurship, improvement in availability of credit, balancing the interests of stakeholders and creating an institutional insolvency framework through adjudicating authorities and insolvency professionals.
Scope and relevance #
The Code covers corporate insolvency resolution, liquidation of corporate debtors, fast track corporate insolvency resolution, voluntary liquidation of corporate persons, and a separate framework for insolvency and bankruptcy of individuals and partnership firms. The PDF text available on this page shows Part II dealing with insolvency resolution and liquidation for corporate persons and Part III dealing with insolvency resolution and bankruptcy for individuals and partnership firms.
In practice, the Code is used to initiate proceedings by financial creditors, operational creditors or the corporate debtor itself; impose a moratorium; appoint an interim resolution professional or resolution professional; constitute a committee of creditors; invite and approve resolution plans; and, if resolution fails, proceed to liquidation and distribution of assets.
It should be read with allied banking and debt recovery laws where secured lending, enforcement of security interest, bank evidence, debt recovery proceedings and insolvency proceedings overlap.
Selected important provisions and themes #
- Section 1 states the short title, extent and commencement of the Insolvency and Bankruptcy Code, 2016.
- Section 2 sets out the application of the Code, while Section 3 contains general definitions used across the Code.
- Sections 6 to 10 identify who may initiate the corporate insolvency resolution process, including financial creditors, operational creditors and the corporate applicant.
- Section 12 prescribes the time-limit for completion of the corporate insolvency resolution process, and Section 12A deals with withdrawal of an admitted application under Sections 7, 9 or 10.
- Sections 13 and 14 deal with declaration of moratorium and the legal effect of moratorium during corporate insolvency resolution.
- Sections 16 to 25 cover appointment, tenure and duties of the interim resolution professional and resolution professional, including management of the corporate debtor as a going concern.
- Sections 21, 24, 28, 29, 29A, 30 and 31 are central to the committee of creditors, eligibility of resolution applicants, submission of resolution plans and approval of a resolution plan.
- Sections 33 to 54 deal with liquidation, including appointment of liquidator, liquidation estate, claims, secured creditors, distribution of assets under Section 53 and dissolution of the corporate debtor.
How to use this Bare Act #
- Use this Bare Act page to locate the relevant Part first: corporate insolvency and liquidation under Part II, or individual and partnership insolvency provisions under Part III.
- For a creditor’s application, begin with the initiation provisions: Section 7 for financial creditors, Sections 8 and 9 for operational creditors, and Section 10 for corporate applicants.
- When analysing the consequences of admission, read Sections 13 and 14 on public announcement and moratorium with the provisions on interim resolution professional and management of the corporate debtor.
- For resolution plan issues, consult the provisions on committee of creditors, eligibility under Section 29A, submission under Section 30 and approval under Section 31.
- For liquidation questions, read Sections 33 to 54 together, especially provisions on liquidation estate, claims, secured creditors and priority of distribution.
Related Bare Acts and statutes #
- Recovery of Debts and Bankruptcy Act, 1993
- SARFAESI Act, 2002
- Banking Regulation Act, 1949
- Reserve Bank of India Act, 1934
- Bankers’ Books Evidence Act, 1891
The PDF available on this page indicates last update as 01-6-2020. The Insolvency and Bankruptcy Code, 2016 has been amended and supplemented by rules, regulations and notifications over time. Users should verify the latest amended text, commencement status of specific provisions and applicable IBBI regulations before relying on this material in proceedings, opinions or compliance work.
