INSOLVENCY AND BANKRUPCY CODE 5 PILLARS.
(a) The Insolvency Regulator
The Code provides for the constitution of a new insolvency regulator i.e., the Insolvency and Bankruptcy Board of India (Board). Its role includes:
- overseeing the functioning of insolvency intermediaries i.e., insolvency professionals, insolvency professional agencies and information utilities; and
- Regulating the insolvency process.
(b) Insolvency Resolution Professionals
The Code provides for insolvency professionals as intermediaries who would play a key role in the efficient working of the bankruptcy process. The Code contemplates insolvency professionals as a class of regulated but private professionals having minimum standards of professional and ethical conduct.
In the resolution process, the insolvency professional verifies the claims of the creditors, constitutes a creditors committee, runs the debtor’s business during the moratorium period and helps the creditors in reaching a consensus for a revival plan. In liquidation, the insolvency professional acts as a liquidator and bankruptcy trustee.
(c) Information Utilities
A notable feature of the Code is the creation of information utilities to collect, collates, authenticate and disseminate financial information of debtors in centralised electronic databases. The Code requires creditors to provide financial information of debtors to multiple utilities on an ongoing basis. Such information would be available to creditors, resolution professionals, liquidators and other stakeholders in insolvency and bankruptcy proceedings. The purpose of this is to remove information asymmetry and dependency on the debtor’s management for critical information that is needed to swiftly resolve insolvency.
(d) Insolvency and Bankruptcy Board of India-
To perform legislative, executive and quasi- judicial functions with respect to the Insolvency Professionals, Insolvency Professional Agencies and Information Utilities. It was established on October 1, 2016
(e) Adjudicatory authorities
The adjudicating authority for corporate insolvency and liquidation is the National Company Law Tribunal (NCLT). Appeals from NCLT orders lie to the National Company Law Appellate Tribunal (NCALT) and thereafter to the Supreme Court of India. For individuals and other persons, the adjudicating authority is the Debt Recovery Tribunal (DRT), appeals lie to the Debt Recovery Appellate Tribunal and thereafter to the Supreme Court.
In keeping with the broad philosophy that insolvency resolution must be commercially and professionally driven (rather than court driven), the role of adjudicating authorities is limited to ensuring due process rather than adjudicating on the merits of the insolvency resolution.