In a growing economy like India, a healthy credit flow and generation of new capital are essential, and when a company or business turns insolvent or “sick”, it begins to default on its loans. In order for credit to not get stuck in the system or turn into bad loans, it is important that banks or creditors are able to recover as much as possible from the defaulter and as quickly as they can.

The business can either get a chance, if still viable, to start afresh with new owners, or its assets can be liquidated or sold off in a timely manner. This way fresh credit can be pumped into the system and the value degeneration of assets can be minimised.

Insolvency and Bankruptcy Code (IBC) provides for a time-bound process to resolve insolvency. When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency. Under IBC debtor and creditor both can start ‘recovery’ proceedings against each other.

IBC is a new area of practice for everyone but in a few years it has developed into one of the most exciting and important aspects of Business in India.
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