Reverting Back: A Critical Analysis of the Insolvency and Bankruptcy Code

Abstract

The Insolvency and Bankruptcy Code was enacted in 2016 with an intention to consolidate the existing framework by creating a single law for insolvency and bankruptcy. It may be noted that one if the major objectives of the Code is to protect the interests of the creditors. The Code sought to remedy the various ‘illnesses’ suffered by the insolvency laws in the previous regime by shifting away from the debtor-in-possession model, prevalent in the previous regime, to the one where both the creditors and the debtors operate within a framework of equity and fairness to all stakeholders to preserve the value of the Company. However, the Code was not perfect by all means, it is still a work under progress. Furthermore, in light of the COVID-19 pandemic, the government has shifted its focus to protecting the interests of the businesses. Although, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 seems have promulgated with the intention of protecting companies and promoters from no fault liability due to the COVID-19 pandemic, the ambiguities in the legislation seem to raise more questions than answers. In fact, the recent ordinance seems to indicate a transition to the earlier model which was detrimental to the interests of the creditors. Therefore, this essay seeks to address analyze the issues and ambiguities with specific reference to the 2020 Ordinance.

Keywords: Insolvency and Bankruptcy Code