Corporate Insolvency Resolution Process And Pre–Packed Insolvency Resolution Process: A Relative Analysis
Vishnupriya. B, Sastra Deemed University
The scenario before the enactment of IBC:
Earlier the insolvency laws were regulated by the presidency towns insolvency act 1909 and the provincial insolvency act 1920. The earlier was applicable in Kolkata, Chennai and Mumbai while the latter applied to the rest of the states. These, acts covered the insolvency proceedings in relation to individuals and partnerships within its ambit while the insolvency proceedings of corporations remained outside their purview.
Post-independence the bankruptcy and insolvency were covered under entry 9 of concurrent list as per article 246 of our constitution. As a consequence, a plethora of laws like the sick industrial companies act,2002(SICA), companies act, 1956, SARFAESI Act, 2002, companies act, 2013 etc. applied over an insolvent/bankrupt debtor. This resulted in the establishment of various distinguished authorities to deal with matters relating to insolvency and bankruptcy which further led to lack of clarity and certainty in jurisdiction.
One other major issue which is corollary to the above- mentioned predicament is the overlapping of decisions. In the absence of a proper adjudicating authority there was a rise in the number of NPAs as the recovery rate was very poor. Moreover, the non-existence of an enabling environment where the creditors can claim priority over other creditors or exercise any other right was another drawback of the era. The whole process of recovery then was a time consuming and complicated process.
