Powers and Functions of Insolvency and Bankruptcy Board of India

Abstract

In the light of the newly developed legislation, the Insolvency and Bankruptcy Code which was passed by the Lok Sabha on 5th May 2016, the purpose of this paper is to discuss the various functions of the regulatory body envisaged by the code. The need for the existence of the present code in force can be traced from the crisis faced by the Indian Banking Industry where there has been a stagnant flow of cash having the Non-Performing Assets pile up. An unbalanced input and output of cash hinted the possibilities of the entire market system caving in. With this fear of collapsing in mind, the Government, in order to create an equilibrium in the economy, sought to adopt measures to recover the debts of the Companies and protect the interests of the financial institutions. This issue was handled with the aid of many broken statutes in which the Securitization and reconstruction of Financial Assets and Enforcement of Security Interest Act fall as one. With many fragmented statutes at hand, the need for a more comprehensive statute arose to simplify the procedures for the recovery of money in cases of default payment and subsequently the Insolvency and Bankruptcy Code, 2016 was enacted by the Central Government. The paper also addresses the various limitations faced by the statutes enacted before the enactment of IBC.

The paper chooses the functions and powers of the Insolvency and Bankruptcy Board of India, an institutional arrangement that plays a multifaceted role in maintaining the equilibrium of the market economy, for its main study. IBBI was established on October 1 2016 as incorporated under the Insolvency and Bankruptcy Code, 2016. This in itself has three faces; Firstly- it plays the role of regulator of profession, Secondly- the regulator of transactions, Thirdly the role of consolidating and amending the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms, and individuals for the maximisation of value of assets of such persons, for the promotion of entrepreneurship and for the promotion of availability of credit and balance of interest of all shareholders. The research aims in re-assuring the scope of the Board and its role in various business arenas.

The paper uses data on insolvency and bankruptcy to draw the reader’s attention to the crisis and issues which led to the need of the establishment of a regulatory body and also observations made by commentators on the newly established regulatory body along with official papers and relating statues. The authority of NCLAT to hear the appeals of the cases passed by the Board with respect to the insolvency professionals or information utilities will be analysed. This paper will highlight the objectives of the Board reckoned by the Bankruptcy Law Reforms Committee set up by the external affairs ministry of finance on August 22, 2014. It will also provide important views on the similar regulatory bodies under the Code.

Keywords: IBC, NCLAT, NCLT, Insovency Professsional, IBBI

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