The term “Insolvent” may be defined as a person who cannot or does not pay his debt in full or has committed an act of insolvency and against whom an order of adjudication has been passed by insolvency court.
The term “Insolvency” may be defined as the proceeding by which the state takes possession of the property of a debtor who cannot pay his debts or discharging his liabilities, and distributes it equitably among his creditors.
Objects of law of Insolvency
The modern law of insolvency is based upon the principle that if a person is unable to meet his debts fully, efforts should be made to receive from such state. This is achieved by realising and distributing his property equitably among creditors and relieve him from all future liability as to his part debts and obligations. There are two main objects of insolvency
(I) To protect the insolvency against the harassment of creditors
(II) And relieving him from all his such a position.
The main object of law of insolvency are as follows –
1. To give relief to the embarrassed debtor who is unable to discharge his debts and obligations and to protect him from harassment by the creditors and this, to enable him to make a fresh start and
2. Both the insolvency statutes provide a machinery to secure an expeditious, fair and equitable distribution of the assets of the insolvent among the creditors.
Insolvency & Bankruptcy code, 2016 (IBC) of India
The Insolvency and Bankruptcy Code is a comprehensive and systematic reform, which will give a leap to the functioning of the credit market. It would take India from among relatively weak insolvency regimes. It lays the foundation for the development of the corporate bond market, which would finance the infrastructure projects for the future. This code will give a boost to ease of doing business in India.
The salient features of Insolvency and Bankruptcy Code, 2016 are given below :
1. Clear, coherent and speedy process for early identification of financial distress and resolution of companies and limited liabilities entities if the underlying business is found capable of working successful.
2. Two distinct process for resolution of individuals, namely – “Fresh start” and “Insolvency Resolution”.
3. Debt recovery tribunal and national company law tribunal to act as adjudicating authority and deal with the cases related to insolvency, liquidation and Bankruptcy process in respect of individuals and unlimited partnership firms and in respect of companies and limited entities respectively.
4. Establishment of insolvency and Bankruptcy board of India to exercise regulatory oversight over insolvency professional agencies and information utilities.
5. Insolvency professionals would handle the commercial aspects of insolvency resolution process. Insolvency professionals agencies will develop professionals standards, code of ethics and be first level regulator for insolvency professionals members leading to development of a competitive industry for such professionals.
6. Information utilities would collect, combine, authenticate and spread financial information to be used in insolvency, liquidation and Bankruptcy proceedings.
7. Enabling provisions to deal with cross border insolvency.
The vision of the new law is to encourage entrepreneurship and innovation. Some business ventures will always fail, but they will be handled rapidly and swiftly. Entrepreneurs and lenders will be able to move on, instead of being go away with decision taken in the past.