Objective & Relationship between Bankruptcy, Insolvency & Liquidation - Definition / Legal Terminology and Intorduction - IBC

Purpose Relationship between Bankruptcy, Insolvency Liquidation Relationship between Bankruptcy, Insolvency Liquidation Bankruptcy is legal proceeding involving a person or business that us unable to repay outstanding debts. The bankruptcy process begins with a petition field by debtor, or by the creditors. All of the debtors assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt. Liquidation:- is winding up of a corporation or incorporated entity. there are many persons that can initiate proceeding to cause the liquidation, those being The regulatory bodies The directors of a company The share holder of a company and An unpaid creditor of a company Insolvency is common to both bankruptcy and liquidation. Not being able to pay debts as and when they become due and payable are the leading of liquidations and is the only way that can cause a natural person to become a bankruptcy. Purpose of enactment of the Insolvency and Bankruptcy Code, 2016 As per Preamble to the Code, the purpose of this Act is as follows:- To consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals. To fix time periods for implementation of the Code in a time bound manner. To maximize the value of assets of stakeholders. To promote entrepreneurship. To increase/stimulate availability of credit. To balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues. To establish an Insolvency and Bankruptcy Board of India as a regulatory body for the Code. Judicial pronouncements with regard to Objectives of Code The Supreme Court in case of Innoventive industries Ltd. Vs. ICICI Bank Anr. 2017 (9) TMI 58 - SC dated 31.08.20017 One of the important objective of the Code is to bring the insolvency law in India under a single unified umbrella with the objective of speeding up the insolvency process. The Code seeks to provide legal framework for timely resolution of insolvency and bankruptcy which would support development of credit market and encourage entrepreneurship and facilitate more investment leading to higher economic growth and development, and facilitate more investment leading to higher economic growth and development. In case of Swiss Ribbons Pvt. Ltd. Anr Vs. Union of India Ors . 2019 (1) TMI 1508 - SC dated 25.01.2019 The code is a beneficial legislation which puts the CD back on its feet and is not a mere recovery legislation for creditors. The interests of the CD have, therefore, been bifurcated and separated from that of its promoters/those who are in management. The defaulter s paradise is lost. In its place, the economy s rightful position has been gained. Action Ispat Power Pvt. Ltd. Vs. Shyam Metalics Energy Ltd. Ors. 2019 (10) TMI 378 - DELHI- HC dated 10.10.2019 The proceedings under Code are independent and have an object different from the one envisaged under the scheme of liquidation provided in the company law. The former aims for resolution by way of revival in a manner that benefits all stakeholders, the creditors as well as the CD. Kridhan Infrastructure Pvt. Ltd. (now known as Krish Steel and Trading Pvt. Ltd.) Vs. Venkatesan Sankaranarayan Ors . 2021 (3) TMI 281 - SC dated 01.03.2021 Time is a crucial facet of the scheme under the Code and to allow such proceedings to lapse into an indefinite delay will plainly defeat the object of the Code. K.N. Rajakumar Vs. V. Nagarajan Ors. 2021 (9) TMI 733 - SC date 15.09.2021 One of the principal objects of the Code is providing for revival of the CD and to make it a going concern. Every attempt has to be first made to revive the concern and make it a going concern, liquidation being the last resort.