Since same purpose. Before the enactment of this act,

Since the act
came into existence in 2016, not much action has been taken so far. Lenders have been using solvency processes
however, these processes been used to resolve smaller cases and are yet to do
it in any large corporate account. Another reason for lenders staying away is because
the RBI hasn’t given any clarification as to how the provisioning on accounts
would work when they are under the insolvency process.

A
number of companies had often filed their petitions before the National Company
Law Tribunal, but before the application was admitted, withdrew the case. This
showed that most of these companies preferred an out-of-court settlement due to
the amount of time and resources involved. Under the previous Civil Code, the
issues remained unresolved for years.

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According to statistics, recovery
is only 20 per cent in India and in global ranking, the country is ranked in
the 136th position with respect to the time taken for resolving disputes.

 

Before the IBC code came into existence, India had
numerous acts to punish the defaulters

1.     
Indian Contract Act, 1872

This was the
first law enacted by British India, and based on the principles of English common
Law. The Indian Contract Act embodied the simple and elementary rules relating
to Sale of goods and partnership.

2.     
Presidency-Towns Insolvency Act, 1910

During the colonial rule, India
had been divided into Presidency towns for better administration. The PTI Act
laid down provisions wherein High Court had the powers to decide matters
relating to insolvency and decided on all questions pertaining to insolvency

3.     
Recovery of debts due to Banks
and Financial Institution Act 1993

The
Recoveries of Debts due to Banks and Financial Institutions Act, 1993 was set
up to counter the ever-growing NPA problems in India. A special Debt Recovery
Tribunal (‘DRT’) was set up for the same purpose. Before
the enactment of this act, banks and financial institutions were facing challenges
in recovering debts from the borrowers. Since the courts were overburdened with
large numbers of regular cases, they were neither able to prioritize the
important cases nor expedite the existing cases.

4.     
The Securitizations and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002

Even after
the establishment of the RDBFI act, the government was unable speed up the
recovery of debts and the balance sheet of the financial institutions continued
to be red. The securitization act aimed to solve this problem by securitising
and reconstructing the financial assets through two special purpose vehicles
viz. ‘Securitisation Company (‘SCO’)’ and ‘Reconstruction Company (RCO). The
aim of this act was to make adequate provisions for the recovery of the loans
and also to foreclose the security.

5.     
The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)

The SICA act had 2
objectives
a. Determining industrial companies in struggling financial conditions (sick
units) and
b. Expedite the revival of potentially viable companies

The government expected that through reviving these units, idle investments
will become productive and by closure, the money that had been locked-up in
unviable units would get released and be used elsewhere. The government knew
that timely detection of sick and potential sick companies could lead to speedy
determination and expeditious enforcement of preventive measures. It set up a
body of experts for the preventive, ameliorative, remedial and other connected
matters.

As far as IBC is
concerned, the following steps are currently under review

·        
Existing cases
are being transferred from Company Law Board(CLB) to the IBC where the National
Company Law Tribunal judicial members and technical members will review them.
The cases amount to 4200 with every new year bringing in additional 4000 cases.
The government is currently deciding on the capacity of the benches so that the
180 days timeline can be efficiently met

·        
Smooth
transitioning of cases from pre-IBC regime to the IBC regime so that there is
no conflict

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