IBBI chief: Bankruptcy Code will address honest failures

The Insolvency and Bankruptcy Code (IBC) 2016 provides the ultimate economic freedom to exit, and also a mechanism to address honest, relative failures, said MS Sahoo, Chairperson, Insolvency and Bankruptcy Board of India (IBBI).

Addressing Assocham’s national conference on ‘IBC: Protects interests of stakeholders and promotes ease of doing business’, Sahoo said: “It enables an honest firm, inclusive institution, undeterred by fear of failure to come in, get out, and thereby realising the full potential of every person.”

In the process, the Code improves ease of doing business, promotes entrepreneurship, develops corporate debt market, increases options for corporate debt financing and balances the interest of various stakeholders.

Sahoo further said that for the potential to improve and promote inclusive growth and to address key legal and economic problems — such as insufficient resources for huge needs and adequate freedom to people, subject to regulations of the market failure — the IBC constitutes the biggest economic reforms in recent years.

The IBC endeavours to prevent insolvency, if possible, and allows stakeholders to themselves take the call by providing a market-driven, time-bound mechanism for resolution of insolvency wherever possible, Sahoo said.

He added that wherever the resolution of insolvency is not possible, the Code promotes ease of exit and provides facilitators for quick and effective resolution.

“In the process, it ensures optimum utilisation of resources all the time, either by ensuring efficient utilisation within the firm through resolution of insolvency or by releasing unutilised or under-utilised resources for efficient users for closure of firms,” Sahoo explained.

He said the Code is aimed at promoting continuous 100 per cent utilisation of all resources. “This is possible, if we can somehow put all the productive resources that are currently unutilised or under-utilised... to more efficient uses, and if they can be released seamlessly from less efficient to more efficient users.

“The growth rate may well go up by few percentage points with other things remaining unchanged.”

TB Jayachandra, Karnataka Law and Parliamentary Affairs Minister, said: “The legislation is enacted to promote the ease of doing business in the corporate sector as it applies to insolvency of individuals, partnerships, firms and corporations of companies.”

He also said the IBC is aimed at promoting entrepreneurship as it provides for reorganisation and insolvency of corporates in a time-bound manner for maximising the value of their assets.