The Evolutionary Landscape of the Insolvency and Bankruptcy Code in India – Analysis and Key Observations

The inability to pay debts by a corporation or an individual is termed as “insolvency”. The inability to pay debts could be either ‘cash flow insolvency' or ‘balance sheet insolvency'. Irrespective of the financial context, the paucity of funds whether current or contingent, can result into declaring, in case of an individual “an insolvent” or in case of a corporation, “bankrupt”. A good insolvency and bankruptcy code balances the three interests: (i) to effectively rehabilitate the enterprise and help promote the interest of the debtor in his business; (ii) to protect the interests of the creditors who have supplied credit and (iii) the future creditors who would likely participate in the business. It is difficult to establish a legal system wherein the interests of both the debtor as well as the creditor are maximized