IBC AMENDMENT BILL, 2021 – THE ROAD THIS FAR

In this article, I intend to provide a summary of some of the key amendments/changes sought to be brought about by the Insolvency and Bankruptcy Code (Amendment) Bill, 2021 promulgated on April 4, 2021. In order to understand the merits and impact of the newly sought legislation, I intend to delve into some of the basics on the subject encompassing Insolvency and Bankruptcy.

- Adv Sherry Samuel Oommen

What it means

Insolvency: Insolvency is a situation where individuals or companies are unable to repay their outstanding debts or other outgoings on time or in full. In many ways, insolvency can be seen as bankruptcy for businesses. A company is classed as insolvent when its liabilities (or debts) outweigh its assets; or when it can no longer meet its outgoings as and when they are due.

Background

A brief reading of the history of the Indian economy gives us the understanding that India, during the early years of 2000 and the decade thereafter was in the state of experiencing a thriving growth in its economy. The banks during this period (specifically the public sector banks) would lend out extensively to the corporates and individuals. However, due to the slowdown in the global economy post-2010 and due to multiple bans imposed on the mining projects, and delays in various environment-related approvals the slowdown primarily began to affect the power, iron, and steel sector, thereby increasing the price of raw material as well as their availability.

As a result, the ability of the corporates to pay back their loans was negatively impacted. This, among others, ultimately led to the increase in Non-Performing Assets (NPA) across India.