Study of section 29A of insolvency and bankruptcy code on the eligibility of resolution applicants

Abstract

The Insolvency and Bankruptcy Code was introduced in India on 11th May 2016 to resolve India's growing NPAs. It is celebrated as one of the most extensive insolvency reforms in Indian economic history, whereby it aimed at timely reorganization and insolvency resolution of individuals, partnership firms, and corporate persons. The act is a paradigm shift from the current ‘Debtor in Possession’ to a ‘Creditor in Control’ regime. It is imperative to understand the context under which such reform was introduced to appreciate its relevance and impact of the same. As of 23rd April 2016, India had 37000+ corporate defaulters constituting a significant proportion of the INR 4.33 trillion Net NPA as of 2016-17. The continuous deterioration of the Bank’s P&L has a long-term impact on the country's economic growth by disrupting the credit and investment cycle, even leading to a banking failure. Additionally, it took 4.3 years on average for insolvency resolution in India compared to 1 year in the United Kingdom and 1.5 years in the United States of America, which clearly highlights the inefficiencies in the then-existing resolution measures.