POWERS OF ADJUDICATING AUTHORITY AND COMMITTEE OF CREDITORS UNDER IBC 2016: A CRITICAL ANALYSIS

Abstract

The Banking sector in India has endured many changes and brought regulatory reforms since the post-liberalization. The Insolvency Bankruptcy Code, 2016 (Code) is one of the major economic reforms made under the current government. It is one of the crucial reforms as it creates a framework by constructing single law dealing with insolvency in India. The provisions relating to insolvency and bankruptcy for companies was found in Sick Industrial Companies (Special Provisions) Act1985, the Recovery of Debt due to Banks and Financial Institutions Act, 1993, the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Companies Act, 2013. It was noticed that the laws and regulations set out in these legislations overlapped each other and thus, created confusion regarding the insolvency regimes in India. The framework that existed failed in securing a resolution for the corporate debtor. This led to the failure of business, finance and management by the promoters of the company. Therefore, the then provisions for insolvency and bankruptcy were inadequate, ineffective and unaligned with the market realities. The main objective of the Code is to bring about a mechanism that would consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of value of assets of such persons and to speed up the insolvency process. The Insolvency Bankruptcy Board of India (IBBI) was formed under the code to take due steps to make the code effective for the Corporate Debtor (CD) under the Corporate Insolvency Resolution Process (CIRP) and other creditors by making necessary amendments in the code over the years. The paper will mainly focus on the powers conferred on the Committee of Creditors and the high dependence on the Resolution Professional and COC during CIRP. COC must set aside their personal interest and agree on a resolution plan that would be more beneficial to the CD. In the insolvency resolution process, the powers conferred on the Adjudicating Authority is merely restricted to the extent of ensuring that due process has been followed by the resolution professional. This gives more discretionary powers to the Resolution Professional and the Committee of Creditors and further fails to provide adequate safeguards to the Promoters of the Company. It is also pertinent to note that though the powers of the Adjudicating Authority have been restricted, there has been excessive judicial activism by the Adjudicating Authority in deciding cases and creating a dilemma with respect to its powers. Therefore, this paper will discuss such cases and bring clarity in the powers conferred upon the Adjudicating Authority. The conclusion of the research paper will include recommendations after analysing the present provisions and precedents set by the Adjudicating Authority.