Modern Corporate Insolvency Regime in India: A Review

Insolvency and Bankruptcy Code (IBC), Corporate Insolvency Resolution Process (CIRP) in particular, has emerged as one of the most successful regulations in India for a number of reasons and this paper would explore these very reasons and present the major factors, which contributed towards success of the Code so far.  Since the constitution of the Expert Committee on the subject in August 2014, a great level of transformation has happened in the law, policy and practice in dealing with financial distress.  The reference points have changed to the extent that a default in payment of debt, which was considered routine before IBC, is now a major concern for enterprises.  It has contributed towards evolving a ‘culture of compliance’, which is termed as the ‘modern corporate insolvency regime’.  The regime witnesses a change from ‘debtor-in-possession’ to ‘creditor-in-possession’, clarity on the concept of ‘default’, concept of financial creditor, and a predictable framework of timely, efficient and fair resolution; the hallmark of the modern regime.  The institutional pillars under the Code make the process of CIRP smooth, handled by professionals trained to handle stressed assets as a going concern.  A regulator with a difference facilitates creation of an ecosystem to further the objectives of the Code.  This paper would briefly trace the development of the modern corporate insolvency regime in India, elaborate the functioning of the institutional pillars and analyze some of the major jurisprudential developments.  At the end, some major areas which require further progress or the unfinished agenda, will be brought forward.  The paper intends to provide a general overview of the modern corporate insolvency regime in India.