Blog Details

Author - Aarti Bhalla

Recovery proceedings against debt are essential. Thus, for that one can approach the National Company Law Tribunal (NCLT) which utilizes the authority to dispose the cases under the Insolvency and Bankruptcy Code.

Default is normally the non-payment of debt when the whole or any part of the deferred payment of debt amount has become due and payable and is not reimbursed by the debtor or corporate professional, as the case may be.

On the admission of a default by the debtor or entrepreneur the following person can imitate the Recovery Process:

Financial Creditor (Financial creditor means any person who owes liabilities.)

Operational Creditor (Operational creditor means any person who owes operational liabilities.)

As per earlier rules and regulation, initiate the process of resolution lies with the borrower (debtor), and beneficiary (creditor) may chase separate actions for debt recovery, security enforcement and debt restructuring. Because of Insolvency and Bankruptcy Code, noticeable withdrawal from the current resolution domain by shifting the authority on the creditor to imitate the insolvency resolution process against the borrower.

Helpfulness of code for Recovery of Debt:

Under this law, anyone who has supplied goods or provides any services to any corporate borrower and such borrower makes default as non-payment of financial obligation or any part of due installments then creditor can initiate action against corporate defaulter by filing petition in NCLT.

Recovering Period:

Demand notice will be issued by beneficiary (creditor) to borrower. If Beneficiary does not receive any remittance due within 10 days of the notice then creditor can file an application in NCLT for starting the recovery procedure (Corporate insolvency resolution.)  Within 14 days of receiving application NCLT either accept or reject the application.

Within 24 days from the date of issuing demand notice, the petition filed by the beneficiary either accept or rejected by NCLT.A structured and time bound consolidate regime anticipated  under this new Insolvency and Bankruptcy code.

Benefit of Code:

Improving ease of doing business in India and enhance a better and speedy recovery mechanism.

It would take care of the current defaulters in a time bound action due to these new stringent acts.

This new code address the issues face excitingly in the reference of insolvency and closing up.

There is no need to go to High court for debt recovery as the Insolvency and Bankruptcy code, can recover faster.

Small Enterprise:

As per guideline mentioned in code act, for supplying of goods and services, creditor has control to start the process in the NCLT for recovery of the financial obligation with time bound and cost effective ways.

Initially small enterprise used to avoid starting recovery procedure against borrower due to following basis:

• Due to no time bound rule it will take a long time to admit the case by the arbitrate authorities.
• Previously filling a matter in court was costly affair.
• Previously the primary responsibility to start the resolution process was under the control of the borrower.

Small enterprisers used to avoid filling application in the court against the borrower to recover the pending payment due to the above mentioned reasons like time, money etc.

Due to this Insolvency and Bankruptcy Code within 24 days of filling the demand notice, beneficiary will come to know that his petition is accepted or rejected. Compare to court fees it is less expensive.

This act grants a great opportunity on the small enterprise to file an application for recovery of their debts.

Work force and workmen dues:

In this code, work force and work men are also considered as the operational creditor. If a Company fails to do salaries of work force and work men and this value of payment is more than one lacks, then the workforce can file the application against Company with NCLT for starting the process of recovery.

Thus this act grants a great opportunity to work force of the companies to file an application for recovery of their rightful dues.

Conclusion:

Considering the purpose of the law, one can submit that Insolvency and Bankruptcy Code, 2016 is revolutionary for the corporate borrowers. To initiate insolvency process against the corporate borrower powers are lies with the beneficiary (creditor) also along with corporate borrowers. The law promises to bring about extensive reforms with a thrust on beneficiary (creditor) operated insolvency resolution. The purposes of the law are early identification of financial failure and boost the asset value of insolvent firms.

This law foresees a structured and time-bound process for insolvency resolution and liquidation, which should significantly improve debt recovery rates and re-energize the delicate Indian corporate bond markets.

Once the Code is fully executed, it is going to be one of the best resourceful initiatives by the legislatures and blessing to the economy in the wider sense.