A Critical Analysis of Transaction Avoidance in Insolvencies with Special References to Extortionate Credit Transactions Under the Insolvency and Bankruptcy Code, 2016
The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC” or “Code”) is the extant law and an assimilated Code unifying the different legal regimes dealing with insolvencies and bankruptcies in India. The IBC is a good-piece of legislation and has recently been declared constitutionally valid in its entirety by the Apex Court in Swiss Ribbons Pvt. Ltd. & Anr. V. Union of India & Ors 1. It is a significant effort in addressing the concerns of the creditors whose interest are adversely affected due to asymmetry of information that exists between the creditors and corporate debtors. When an entity is financially distressed, the promoters and the directors of the company are the first to get alarmed at the situation, and not the creditors. Thus, there exists a high probability that they may alienate the assets of the company to the detriment of the creditors by reducing the liquidation estate, which is against the principle of anti-deprivation rule quite popular in England 2. Hence, transaction avoidance laws are important for regulating such evasive behavior of the debtors and restraining them from entering into transactions for a certain time prior or during the insolvency, which might adversely affect the rights of all the creditors or a few of them.Among various forms of avoided transactions, this paper focuses on the ‘extortionate credit transactions’ and highlights that the existing provisions 3 faces various challenges and issues related to interpretation and implementation. S50 of the IBC provides for avoiding such transactions entered into by the debtor in the two years preceding the insolvency commencement date in order to keep the asset value intact and secure the interest of all the creditors at par with the interests of the creditor involved in the said transaction. Though the term 'extortionate credit transaction' is not defined in the IBC, necessary indication is provided under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 [hereinafter referred to as "IBBI Regulations"]. The remedies envisaged under the IBBI Regulations are inadequate, ineffective, and too stringent in nature and create absurd legal fictions Therefore; this paper is an attempt to holistically study the foundations of the IBC and, particularly S50
Year of publication: |
[2022]
|
---|---|
Authors: | Varendyam, Jahnawi Tiwari |
Publisher: |
[S.l.] : SSRN |
Subject: | Insolvenz | Insolvency | Indien | India |
Saved in:
freely available
Extent: | 1 Online-Ressource (26 p) |
---|---|
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | In: National Law School Journal , Volume 14, 2018 Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 31, 2018 erstellt |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013298229
Saved in favorites
Similar items by subject
-
Environmental claims under Indian insolvency law : concepts and challenges
Mohan, M. P. Ram, (2023)
-
Mehta, BaLraj, (1974)
-
Repayment frequency and default in microfinance : evidence from India
Field, Erica Marie, (2008)
- More ...