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Insolvency Resolution & Role of Insolvency Professional

Government of India has initiated bold steps by introduction of Insolvency & Bankruptcy Code 2016 (IBC) in view to reduce NPA / recovery of dues of the banks / financial institutions. The code provides separate insolvency resolution processes by individuals, companies and partnership firms including LLP and endeavors to provide a speedy and time bound mechanism to deal with the proceedings. IBC passed by the Parliament is a welcome overhaul of the existing framework dealing with insolvency of corporate(s), individuals, partnerships and other entities. It paves the way for much needed reforms while focusing on creditor driven insolvency resolution.

It's a time bound program wherein the IP shall act as an intermediary between the company and its creditors for resolving the Insolvency process within 180 days from the date of appointment. The case of insolvency for Corporate / LLP's shall be taken care by National Company Law Tribunal (NCLT) and for individual and partnership firm by Debt Recovery Tribunal (DRT).

Earlier, there were multiple overlapping laws and adjudicating forums dealing with financial failure and insolvency of companies and individuals in India. The legal and institutional framework did not aid lenders in effective and timely recovery or restructuring of defaulted assets and causes undue strain on the Indian credit system. Recognizing that reforms in the bankruptcy and insolvency regime are critical for improving the business environment and alleviating distressed credit markets.

Corporate Insolvency Resolution Process (CIRP) starts with the admission of the application by the NCLT and appointment of the Interim Resolution Professionals (IRP) who has to perform number of tasks including taking over of the management of debtors, public announcements, invitation, collation and verification of claims, preparation of list of creditors, reporting to adjudicating authority, calling of first meeting of creditors, preparation of memorandum of association and so on.

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