INSOLVENCY AND BANKRUPTCY CODE, 2016: A CRITIQUE OF ITS CORPORATE RESOLUTION PROCESS
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Abstract
Insolvency is when an individual, corporation, or other organization cannot meet its financial obligations for paying debts as they are due. Insolvency can occur when certain things happen, some of which may includepoor cash management, increase in cash expenses, or decrease in cash flow. The law of insolvency is a social legislation which has been enacted to provide respite and relief to the honest debtors who due to any unfortunate or unforeseen circumstances become incapable of paying back their debts.
Its object is also of securing distribution of a debtor‘s estate among his creditors equitably and thereafter to release him under certain conditions from liability in respect of his debts and obligations.
In the case of Yenamulla Malludora vs P.Seetharatnam[1], the Hon’ble Supreme Court of India observed that the object of the law of insolvency is to seize the property of an insolvent before he can squander it and to distribute it amongst his creditors. It is however not every debtor who has borrowed beyond his assets or even one whose property is attached in execution of his debts, who can be subjected to such control. Thejurisdiction of the Court commences when certain acts take place which are known as acts of insolvency and which give a right to his creditor to apply to the Court for his adjudication as an investment. The enactment of Insolvency and Bankruptcy Code, 2016 is a progressive step towards good governance and will improve the investor confidence and ease of doing business. The possible demerits can be addressed through discussions and consensus building.
[1] AIR 1966 SC 918
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