Topic 1: Historical Context of IBC

Introduction:
The Insolvency and Bankruptcy Code (IBC), 2016, was introduced as a comprehensive law to address the
issues of insolvency and bankruptcy in India. Before IBC, India’s insolvency framework was scattered
across multiple laws, leading to inefficiency and delays in resolving distressed assets.

The Journey from 1985:

1. SICA, 1985 (Sick Industrial Companies Act):

○ SICA was enacted to detect and revive sick industrial companies.

○ It created the Board for Industrial and Financial Reconstruction (BIFR).

○ However, due to slow processes, legal delays, and lack of effective enforcement, SICA
failed to meet its goals.

2. RDDBFI Act, 1993 (Recovery of Debts Due to Banks and Financial Institutions):

○ This Act set up Debt Recovery Tribunals (DRTs) to recover debts from defaulters.

○ While DRTs reduced the burden on civil courts, the process remained recovery-focused,
lacking mechanisms for restructuring or reviving businesses.

3. SARFAESI Act, 2002 (Securitization and Reconstruction of Financial Assets and

Enforcement of Security Interest Act):

○ SARFAESI allowed financial institutions to recover non-performing assets (NPAs) by

seizing and selling assets of defaulters without court intervention.

○ Despite improving recovery rates, SARFAESI did not provide a holistic framework for
resolving insolvency.

Challenges with Previous Laws:

● These laws had overlapping jurisdictions, creating confusion and inefficiency.

● The focus was primarily on debt recovery, neglecting business revival.

● India’s average resolution time for insolvency cases was 4.3 years, and creditors recovered only
26% of their dues.

● The lack of a unified, time-bound approach resulted in value erosion of distressed assets.
Introduction of IBC:
The IBC was enacted in 2016 to address these gaps. It consolidated insolvency laws into a single code,
streamlining processes for individuals, partnerships, and companies. Its objectives included:

● Promoting a time-bound resolution of insolvency cases.

● Ensuring the revival of viable businesses.

● Protecting the rights of creditors and other stakeholders.

● Maximizing the value of assets to reduce losses for all parties.

Objectives of SARFAESI vs. IBC:

● SARFAESI Act: Focused on recovering loans by empowering financial institutions to seize

assets.

● IBC: Broader scope, focusing on business revival and balancing the interests of creditors,
employees, and shareholders.

Conclusion:
The IBC was a game-changer for India’s insolvency framework. By replacing outdated laws like SICA
and building on mechanisms like SARFAESI, it created a robust and efficient system. The IBC has not
only improved recovery rates but also enhanced India’s global ranking in the Ease of Doing Business
index.
Topic 2: Motive and Goal of IBC

Introduction:
The Insolvency and Bankruptcy Code (IBC), 2016, was introduced to resolve the challenges of delayed
insolvency proceedings and inefficient recovery mechanisms. It aims to establish a framework that is fair,
transparent, and time-efficient for resolving financial distress.

Primary Motives of IBC:

1. Providing a Time-Bound Process:

○ Before IBC, insolvency proceedings in India often dragged on for years, leading to asset
value erosion.

○ The IBC mandates resolution within 180 days, with a one-time extension of 90 days,
ensuring speedy outcomes.

2. Maximizing Value of Assets:

○ The IBC ensures that distressed assets are preserved and used efficiently.

○ By resolving cases quickly, it minimizes loss of value and promotes fair distribution
among stakeholders.

3. Encouraging Revival of Viable Businesses:

○ The IBC prioritizes the revival of financially distressed companies through reorganization
and restructuring.

○ Liquidation is considered a last resort, used only when no viable resolution plan is
possible.

4. Balancing Stakeholder Interests:

○ The Code protects the rights of all stakeholders, including secured and unsecured
creditors, employees, and shareholders.

○ The Committee of Creditors (CoC) plays a crucial role in decision-making, ensuring

collective action.

5. Strengthening Credit Markets and Economy:

○ By reducing non-performing assets (NPAs) and ensuring fair treatment of creditors, the
IBC improves credit availability.

○ It has enhanced India’s position as a reliable and attractive destination for investment.
Key Goals of IBC:

● Resolution-Focused Approach: Unlike previous laws that focused on recovery, the IBC
prioritizes resolution to keep businesses running.

● Institutional Framework: The IBC is supported by institutions like NCLT (National Company
Law Tribunal), IBBI (Insolvency and Bankruptcy Board of India), and insolvency professionals,
ensuring smooth implementation.

● Moratorium: A period during which creditors cannot initiate or continue legal proceedings,
allowing the corporate debtor to focus on restructuring.

Impact of IBC:
The IBC has significantly improved India’s financial ecosystem:

● It has increased creditor confidence and reduced litigation delays.

● Improved recovery rates for financial institutions have helped strengthen their balance sheets.

● India’s ranking in the World Bank’s Ease of Doing Business has risen due to the IBC’s
streamlined insolvency framework.

Conclusion:
The IBC has revolutionized India’s insolvency resolution mechanism, transitioning from a fragmented,
delay-prone system to a transparent, efficient, and time-bound framework. Its focus on resolution and
revival, rather than mere recovery, has made it a cornerstone of India’s economic reforms.
Topic 3: Ease of Doing Business and IBC

Introduction:
The Insolvency and Bankruptcy Code (IBC), 2016, has significantly contributed to improving India's
global ranking in the World Bank’s Ease of Doing Business Index. Before IBC, insolvency proceedings
were plagued with delays, inefficiencies, and low recovery rates, making India an unattractive destination
for investors. IBC introduced a time-bound and transparent resolution process, reducing the risks
associated with doing business in India.

Challenges Before IBC:

● The fragmented legal framework with laws like SICA, RDDBFI, and SARFAESI lacked
coordination.

● The average resolution time for insolvency cases was over 4 years, resulting in value erosion.

● Overlapping jurisdiction of multiple forums (High Courts, BIFR, DRTs) caused delays.

● Low recovery rates (around 26%) disincentivized creditors.

Role of IBC in Enhancing Ease of Doing Business:

1. Time-Bound Resolution:

○ The IBC mandates the resolution of insolvency cases within 180 days, extendable by 90
days.

○ This prevents delays and ensures quicker turnaround times for distressed assets.

2. Clarity in Processes:

○ IBC provides clear and uniform procedures for insolvency resolution, reducing
uncertainty for stakeholders.

3. Improved Recovery Rates:

○ Creditors now recover a higher percentage of dues, thanks to competitive bidding and
asset preservation.

4. Global Investor Confidence:

○ The Code instills trust among global investors by providing a robust mechanism to
address financial distress.

5. Strengthened Credit Culture:

○ It has promoted responsible borrowing and lending practices by ensuring creditors’ rights
are protected.
Impact on Rankings:
India’s rank in the Ease of Doing Business Index improved significantly due to IBC reforms. In the
"Resolving Insolvency" parameter, India moved from 136th in 2017 to 52nd in 2020, showcasing the
Code's effectiveness in transforming insolvency processes.

Conclusion:
IBC has addressed critical bottlenecks in India’s insolvency framework, creating a more business-friendly
environment. By reducing delays and ensuring fair resolution, it has enhanced India’s appeal as a global
investment hub.
Topic 4: Salient Features of IBC

Introduction:
The Insolvency and Bankruptcy Code (IBC), 2016, is a landmark reform aimed at resolving financial
distress efficiently. It consolidates and amends laws relating to reorganization, insolvency resolution, and
liquidation for corporates, partnerships, and individuals.

Key Features of IBC:

1. Time-Bound Resolution:

○ IBC prescribes a resolution period of 180 days, with a one-time extension of 90 days.

○ It ensures that financial distress is addressed promptly to preserve asset value.

2. Unified Framework:

○ IBC integrates fragmented insolvency laws into a single Code, applicable to companies,
partnerships, and individuals.

3. Focus on Resolution over Recovery:

○ The Code prioritizes business revival through restructuring. Liquidation is considered

only when revival is not feasible.

4. Moratorium Period:

○ Section 14 imposes a moratorium during the Corporate Insolvency Resolution Process

(CIRP), halting all legal proceedings and preserving the corporate debtor’s assets.

5. Committee of Creditors (CoC):

○ CoC comprises financial creditors who make critical decisions regarding the resolution
plan, ensuring stakeholder-driven processes.

6. Hierarchy of Claims:

○ The Code establishes a structured distribution process during liquidation, prioritizing

secured creditors, workmen dues, and financial creditors.

7. Institutional Framework:

○ Supported by key institutions:

a. Insolvency and Bankruptcy Board of India (IBBI): Regulator of insolvency processes.
b. National Company Law Tribunal (NCLT): Adjudicating authority for corporates.
c. Insolvency Professionals (IPs): Manage resolution and liquidation processes.
d. Information Utilities (IUs): Centralize financial data for transparency.
 8. Eligibility for Resolution Applicants:

○ Section 29A restricts participation of willful defaulters and related parties to prevent
misuse of the process.

9. Cross-Border Insolvency Framework:

○ While in its nascent stages, IBC lays the foundation for addressing insolvencies involving
foreign assets or creditors.

Conclusion:
The IBC is a transformative legislation designed to resolve financial distress efficiently and fairly. Its
salient features promote transparency, accountability, and stakeholder participation, ensuring a robust
insolvency ecosystem in India.
Topic 5: Four Pillars of IBC

Introduction:
The success of the Insolvency and Bankruptcy Code (IBC), 2016, hinges on its robust institutional
framework, referred to as the "four pillars." These pillars—IBBI, NCLT, Insolvency Professionals, and
Information Utilities—work cohesively to ensure the effective implementation of the Code.

1. Insolvency and Bankruptcy Board of India (IBBI):

● Role:

○ Established as the regulatory authority under IBC.

○ Frames regulations and guidelines for insolvency resolution and liquidation.

● Functions:

○ Registers and monitors Insolvency Professionals (IPs) and Information Utilities (IUs).

○ Enforces compliance with the Code and imposes penalties for violations.

○ Promotes transparency and accountability in insolvency proceedings.

2. National Company Law Tribunal (NCLT):

● Role:

○ Serves as the adjudicating authority for corporate insolvency cases.

● Functions:

○ Admits or rejects insolvency applications filed under Sections 7, 9, and 10.

○ Approves resolution plans and orders liquidation if necessary.

○ Ensures that CIRP proceedings adhere to IBC timelines.

● National Company Law Appellate Tribunal (NCLAT):

○ Hears appeals against NCLT decisions.

3. Insolvency Professionals (IPs):

● Role:

○ Act as intermediaries managing insolvency resolution or liquidation processes.

● Functions:

○ Conduct CIRP, including managing assets, facilitating claims, and overseeing resolution
plans.
 ○ Serve as liquidators, ensuring fair asset distribution during liquidation.

○ Maintain neutrality and adhere to professional ethics.

4. Information Utilities (IUs):

● Role:

○ Centralize and maintain financial data for creditors and debtors.

● Functions:

○ Authenticate and verify claims of creditors.

○ Reduce information asymmetry among stakeholders.

○ Enhance transparency in insolvency proceedings.

Conclusion:
The four pillars of IBC provide the structural and procedural support needed for effective insolvency
resolution. Each institution plays a critical role in ensuring transparency, efficiency, and stakeholder
confidence, making IBC a cornerstone of India's economic reforms.
Topic 6: CIRP Process (Sections 7, 9, and 10)

Introduction:
The Corporate Insolvency Resolution Process (CIRP) is the core mechanism under the Insolvency and
Bankruptcy Code (IBC), 2016, aimed at resolving corporate insolvency in a time-bound manner. Sections
7, 9, and 10 govern the initiation of CIRP by financial creditors, operational creditors, and corporate
applicants, respectively.

Initiation of CIRP:

1. Section 7: Application by Financial Creditors

○ A financial creditor or a group of creditors can file an application before the National
Company Law Tribunal (NCLT) for initiating CIRP.

○ Requirements:

■ Proof of default by the corporate debtor.

■ Submission of relevant evidence such as loan agreements or financial statements.

○ NCLT Admission Timeline:

■ Must admit or reject the application within 14 days of filing.

2. Section 9: Application by Operational Creditors

○ An operational creditor can initiate CIRP if the corporate debtor fails to pay undisputed
dues.

○ Procedure:

■ Issue a demand notice under Section 8.

■ If no payment or dispute response is received within 10 days, the application can

be filed.

○ Requirements:

■ Evidence of debt, invoices, and correspondence supporting the claim.

○ NCLT Admission Timeline:

■ Application must be admitted or rejected within 14 days.

 3. Section 10: Application by Corporate Applicant

○ A corporate debtor can initiate CIRP voluntarily if it is unable to pay its debts.

○ Requirements:

■ Special resolution by shareholders or approval by at least three-fourths of

partners in case of partnerships.

○ This provision allows proactive restructuring efforts by companies.

Key Steps in CIRP:

1. Moratorium (Section 14):

○ Declared upon CIRP admission, halting all legal proceedings, asset transfers, and
recovery actions.

2. Public Announcement:

○ IRP (Interim Resolution Professional) makes a public announcement inviting claims from
creditors.

3. Committee of Creditors (CoC):

○ Financial creditors form the CoC, which decides on the resolution plan.

4. Resolution Plan:

○ Prospective resolution applicants submit plans for approval by CoC (requires 66% vote).

Timeline of CIRP:

Step Timeline

Filing of CIRP application Day 0

Appointment of IRP Within 14 days

Submission of claims by creditors 7–14 days after public announcement

Approval of Resolution Plan Within 180 days (extendable by 90 days)

Case Laws on CIRP:

1. Innoventive Industries Ltd. v. ICICI Bank (2017):

○ Established that financial creditors do not need to prove their claims beyond evidence of
default.

2. Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017):

○ Clarified that operational creditors cannot initiate CIRP if there exists a valid pre-existing
dispute.

Conclusion:
The CIRP process ensures a fair and efficient resolution of corporate insolvency while balancing the
interests of creditors and debtors. With strict timelines, it avoids delays and maximizes value recovery.
Topic 7: Liquidation Process (Sections 33–42)

Introduction:
Liquidation under IBC is the last resort when the resolution process fails. Sections 33 to 42 outline the
liquidation process for corporate debtors, detailing the role of liquidators, creation of liquidation estates,
and distribution of assets.

Initiation of Liquidation (Section 33):

1. Scenarios for Liquidation:

○ CIRP fails to produce a resolution plan within stipulated time.

○ CoC rejects all resolution plans.

○ NCLT determines violations of the approved resolution plan.

2. Role of Liquidator:

○ The Resolution Professional (RP) usually acts as the liquidator unless replaced by NCLT.

Liquidation Estate (Section 36):

● Definition:

○ Includes all assets owned or controlled by the debtor at the liquidation commencement.

● Exclusions:

○ Personal assets of directors, employee welfare funds, and operational creditors' claims
post-commencement.

Distribution of Assets (Section 53):

The proceeds from liquidation are distributed in the following priority:

1. Insolvency costs and liquidation expenses.

2. Secured creditors and workmen dues (up to 24 months).

3. Other employee wages.

4. Unsecured creditors.

5. Government dues.
 6. Equity shareholders and other residual stakeholders.

Key Features of Liquidation:

● Claims Verification (Sections 38–42):

○ Liquidator consolidates, verifies, and admits claims by creditors.

● Avoidance Transactions:

○ Liquidator can avoid preferential, undervalued, or fraudulent transactions.

● Completion and Dissolution:

○ After the liquidation estate is distributed, the liquidator files a dissolution report with
NCLT for closure.

Case Laws on Liquidation:

1. Swiss Ribbons Pvt. Ltd. v. Union of India (2019):

○ Highlighted that liquidation is the last resort under IBC, emphasizing the resolution-first
approach.

2. K Sashidhar v. Indian Overseas Bank (2019):

○ Upheld CoC’s decision-making power in rejecting resolution plans, leading to

liquidation.

Conclusion:
The liquidation process under IBC ensures equitable distribution of assets while adhering to a transparent
and orderly mechanism.
Topic 8: IBBI and Insolvency Professionals

Introduction:
The Insolvency and Bankruptcy Board of India (IBBI) serves as the regulator under the IBC, overseeing
insolvency proceedings and insolvency professionals. Insolvency Professionals (IPs) are intermediaries
responsible for managing resolution and liquidation processes.

Role and Functions of IBBI:

1. Regulation and Oversight:

○ Registers and monitors IPs, IP agencies, and Information Utilities (IUs).

○ Frames regulations to ensure the effective implementation of IBC.

2. Disciplinary Authority:

○ Handles grievances against IPs and imposes penalties for non-compliance.

3. Training and Development:

○ Conducts examinations for IP certification and ensures continuous skill development.

Role of Insolvency Professionals:

1. Management of Corporate Debtor:

○ Act as Interim Resolution Professional (IRP) or Resolution Professional (RP) during

CIRP.

○ Manage the debtor’s assets and oversee business operations.

2. Resolution Plan Approval:

○ Evaluate and present resolution plans to the CoC for approval.

3. Liquidation Proceedings:

○ Act as liquidators, verifying claims and distributing assets.

Powers of IBBI and IPs:

1. IBBI Powers:

○ Issue regulations and guidelines for insolvency resolution.

○ Suspend or cancel IP registrations for non-compliance.

2. IPs’ Powers:

○ Take control of the debtor’s management.

○ Conduct investigations into transactions to avoid fraudulent claims.

Case Laws on IBBI and IPs:

1. State Bank of India v. V Ramakrishnan (2018):

○ Reiterated the responsibilities of IPs to ensure compliance with moratorium provisions.

2. Kumar Vats v. Jenson and Nicholson Ltd. (2020):

○ Highlighted IBBI's authority to take disciplinary actions against defaulting IPs.

Conclusion:
IBBI and Insolvency Professionals are pivotal to the success of IBC. While IBBI ensures regulatory
compliance, IPs ensure the smooth execution of insolvency and liquidation processes. Together, they
uphold the Code’s objectives of transparency, efficiency, and fair resolution.
Topic 9: Moratorium (Section 14)

Introduction:
The moratorium is one of the most significant provisions under the Insolvency and Bankruptcy Code
(IBC), 2016. Section 14 imposes a moratorium upon the admission of the Corporate Insolvency
Resolution Process (CIRP) by the National Company Law Tribunal (NCLT). Its primary objective is to
ensure asset preservation and provide the corporate debtor with a breathing space during insolvency
proceedings.

Scope of Moratorium (Section 14):

1. Prohibitions Under Moratorium:

○ Legal Proceedings:
Initiation or continuation of suits or proceedings against the corporate debtor is
prohibited.

○ Execution of Judgments:
Enforcement of any judgment, decree, or order is barred.

○ Transfer of Assets:
Sale, disposal, or alienation of corporate debtor’s assets is restricted.

○ Recovery Actions:
Prohibits creditors from taking possession or enforcing security interests, including
repossession of collateral.

2. Exceptions to Moratorium:

○ Transactions relating to the supply of essential goods and services (electricity, water, gas,
etc.) are excluded.

○ Criminal proceedings and proceedings before the Supreme Court or High Courts are not
covered.

Purpose of Moratorium:

● Ensures a calm period for stakeholders to focus on resolution rather than litigation.

● Prevents asset stripping or piecemeal recoveries that could hinder a holistic resolution.

● Encourages creditors to work collectively through the Committee of Creditors (CoC).

Duration of Moratorium:

● Begins from the date of admission of CIRP and lasts until:

○ CIRP is completed (180 days, extendable by 90 days).

○ NCLT passes an order approving a resolution plan or initiating liquidation.

Case Laws on Moratorium:

1. Alchemist Asset Reconstruction Company Ltd. v. Hotel Gaudavan Pvt. Ltd. (2017):

○ Clarified that moratorium prohibits continuation of proceedings under SARFAESI.

2. Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019):

○ Upheld the importance of moratorium in preventing multiplicity of proceedings against

the corporate debtor.

Conclusion:
The moratorium under Section 14 ensures the effective functioning of CIRP by protecting the corporate
debtor’s assets and maintaining order during insolvency proceedings. It plays a critical role in achieving
IBC’s objective of maximizing value and resolution.
Topic 10: Payback (Section 53)

Introduction:
Section 53 of the Insolvency and Bankruptcy Code (IBC) establishes a systematic hierarchy for the
distribution of liquidation proceeds. This ensures fairness in satisfying claims during liquidation,
prioritizing secured creditors, workmen, and employees.

Hierarchy of Claims:

The liquidation proceeds are distributed in the following order:

1. Insolvency Resolution Process Costs and Liquidation Costs:

○ These costs are paid in full before distributing proceeds to creditors.

2. Secured Creditors and Workmen’s Dues:

○ Secured creditors and workmen dues (for the preceding 24 months) are paid on parity.

3. Other Employees' Dues:

○ Unpaid wages and salaries of employees (excluding workmen) for the preceding 12
months.

4. Unsecured Creditors:

○ Claims of unsecured financial and operational creditors.

5. Government Dues and Remaining Secured Creditors:

○ Dues to the Central or State Government and secured creditors whose claims remain
unsatisfied from the enforcement of security interests.

6. Equity Holders and Residual Stakeholders:

○ The residual funds, if any, are distributed to shareholders and other stakeholders.

Significance of Payback Hierarchy:

● Ensures fairness and clarity in asset distribution during liquidation.

● Protects the interests of workmen, employees, and financial creditors.

● Promotes creditor confidence by prioritizing secured claims.

Case Laws on Payback:

1. ICICI Bank Ltd. v. SIDCO Leathers Ltd. (2020):

○ Reiterated the priority given to secured creditors and workmen under Section 53.

2. Jet Airways (India) Ltd. v. State Bank of India (2019):

○ Highlighted the importance of adhering to the hierarchy for fair distribution of proceeds.

Conclusion:
The payback mechanism under Section 53 reinforces IBC’s commitment to equitable distribution,
protecting the interests of various stakeholders and ensuring transparency during liquidation.
Topic 11: Difference Between IBC and Companies Act

Introduction:
While the Insolvency and Bankruptcy Code (IBC), 2016, and the Companies Act, 2013, govern corporate
affairs in India, their objectives, scope, and focus differ significantly. The IBC focuses on insolvency
resolution and liquidation, while the Companies Act addresses governance, incorporation, and functioning
of companies.

Key Differences Between IBC and Companies Act:

Aspect IBC Companies Act

Objective Resolve insolvency and maximize Corporate governance and

asset value administration

Focus Financial health of corporate entities Incorporation, compliance, and

regulation

Scope Deals with distressed assets Covers all aspects of corporate

functioning

Adjudicating NCLT (with NCLAT for appeals) NCLT (limited to company matters)
Authority

Liquidation Process Comprehensive process for Winding up under specified

liquidation conditions

Time-bound CIRP mandates resolution within No strict timelines for

Resolution 180–270 days company-related disputes

Complementary Roles of IBC and Companies Act:

1. IBC: Addresses insolvency and restructuring of distressed businesses.

2. Companies Act: Provides the framework for incorporation, functioning, and voluntary
winding-up of companies.
Case Laws Highlighting the Difference:

1. Swiss Ribbons Pvt. Ltd. v. Union of India (2019):

○ Distinguished between governance under the Companies Act and financial resolution
under IBC.

2. MCA v. Union of India (2018):

○ Clarified that NCLT’s jurisdiction under IBC is distinct from its powers under the
Companies Act.

Conclusion:
While the Companies Act governs the lifecycle of a company, the IBC serves as a safety net for financial
distress. Together, they ensure the orderly functioning and resolution of corporate entities in India.