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The Insolvency and Bankruptcy Code: Creditors Right to Insolvency Proceedings

The Insolvency and Bankruptcy Code: Creditors Right to Insolvency Proceedings

According to IBBI chief M S Saboo, a recent judgment by the Supreme Court will encourage creditors to be more active and responsible for their actions as well as inactions. He further said that the judgment does not affect the rights of creditors in any way. The apex court, on April 2, rejected a circular which was issued by the Reserve Bank of India.

The circular stated that defaulting companies will be referred to the National Company Law Tribunal for insolvency proceedings should there be non-resolution within 180 days from the day of default. This is applicable in cases which involve loans worth Rs. 2000 crore and more. Mr. Sahoo further added that the court’s judgment will not affect the rights of the creditors to initiate insolvency proceedings or any other provision in respect to the IBC.

This judgment will result in asking a bank-creditor when the proceedings need to be initiated. It’s expected that the judgment will bring in behavioural changes in creditors making them far more responsible for their actions.

The circular has also put debtors on a watch and now they will be more careful in an effort to ensure that their company doesn’t land in insolvency. An insolvency proceeding may lead to the dissolution of the company and losing the company – a fact that will not bear well for the promoters.


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