The advent of the Insolvency and Bankruptcy Code, 2016 (“Code”) was much awaited and has been highly appreciated by the investors. It has proved to be fruitful in facilitating the ease of doing business in India by empowering creditors and making certain essential changes in the priority list.
However, the implementation of the Code has not been entirely smooth and requires amends in order to make the structure work with its entire efficiency. The article deals with these points and lays down the issues regarding the same. While doing so, the article also mentions the changes brought about by the recent bankruptcy code amendment ordinance.
The first issue that the article talks about is the lack of adequate manpower and infrastructure. With only 11 benches of the National Company Law Tribunal and combined strength of 26 judges, handling more than 2500 cases under the Code is a difficult task.
The article proceeds to look into the issue under section 29A which provides for disqualification of certain persons from becoming resolution applicants but fails to define the term ‘person acting jointly or in concert’ mentioned therein which has led to fierce litigation in this short span.
Another issue is the role of the guarantors under the Code and whether a creditor can proceed against a guarantor of corporate debtor after institution of corporate insolvency resolution process while under the moratorium.
The article further analyses the status of homebuyers as financial creditors under the Code and the recently released draft intending to introduce a chapter on cross-border Insolvency in the Code.
The article concludes with the authors summarising the abovementioned issues and laying down the current status of the effectiveness of the Code.