Mentors Comments:
1. Introduce by defining IBC
2. Touch upon its key provisions
3. Mention the significance of IBC. Highlight the limitations
4. Discuss the ESSAR case and it’s link to IBC mechanism
Answer:
The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India that seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
Key aspects of the Insolvency and Bankruptcy Code
- IBC proposes a paradigm shift from the existing ‘Debtor in possession’ to a ‘Creditor in control’ regime.
- IBC aims at consolidating all existing insolvency-related laws as well as amending multiple legislation including the Companies Act.
- The code aims to resolve insolvencies in a strict time-bound manner – the evaluation and viability determination must be completed within 180 days.
- Moratorium period of 180 days (extendable up to 270 days) for the Company. For startups and small companies, the resolution time period is 90 days which can be extended by 45 days.
- Introduce a qualified insolvency professional (IP) as intermediaries to oversee the Process
- Establishment of Insolvency and Bankruptcy board as an independent body for the administration and governance of Insolvency & Bankruptcy Law; and Information Utilities as a depository of financial information.
IBC helped
- Due to the institution of IBC, we have seen that many business entities are paying upfront before being declared insolvent. The success of the act lies in the fact that many cases have been resolved even before it was referred to NCLT.
- 4452 cases were dismissed at the pre-admission stage. Hence, it shows the effectiveness of IBC.
- Presently, there are 1332 cases before NCLT.
- Realization by creditors around Rs 80,000cr in resolution cases.
- Banks recovered Rs 5.28 lakh crore in 2017-18, compared to just Rs 38500 cr in 2016-17.
- The maximum amount recovered was Rs 4, 92,500 cr from 21 companies.
- 12 big cases are likely to be resolved this year, and the realization in these cases is expected to be around Rs 70000 Cr.
Significance of the Judgment:
- Easing the NPAs of the Banks: The profitability of banks is set to get a major boost in the current quarter, with the Supreme Court paving the way for the acquisition of Essar Steel by ArcelorMittal. Banks have an exposure of about ₹50,000 crores to Essar Steel
- Upholding the primacy of CoC: Now that the Committee of Creditors (CoC) has the final say, it will lead to more certainty when a plan is accepted and there will be less challenge to the orders of NCLTs.
- The impetus to financial creditors: The recognition of the superior right of the financial creditors in proportion to their security interest in an insolvency resolution process would show a positive attitude of such class of financial creditors in taking the insolvency resolution process to its logical end
- Impact on operational creditors: This landmark judgment will bring a paradigm shift in the way operational creditors now deal with companies for their supplies in the eventuality of default to secure their interest.
- Upholding the spirit of IBC: The SC has struck down the ‘mandatory’ time-limit of 330 days for completion of the resolution process. It is marked as a violation of Article 14 (right to equal treatment) of the Constitution and an “excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution”.
- Impact on the steel sector: The Supreme Court’s decision in the Essar Steel case sets a precedent for other cases under the Insolvency and Bankruptcy Code (IBC) especially for the steel sector which is under stress and this judgment will show the way ahead for the sector.
MOJO9a31K00N58111047
Your answer has all the necessary elements.
The structure is to the points.
Decent discussion in the main body.
The SC Judgment is well explained.
Good discussion all in all.
Underline key points
MOJO9930Q00N64198657
Good intro.
Detailed discussion all in all in each part.
The 1st part is the gem of this answer.
The detailed discussion on the IBC and its significance is very good.
Good language.
The explanation and statements are short and crisp.
Good 2nd part of the answer.
Please review.
Payment id- MOJO9a05700D19953140
Very good intro.
The 1st part of the answer is dealt with nicely.
Good use of the diagram to explain the basic principles of the IBC.
It is good that you discussed the limitations of the IBC. This gives balance to your explanation and structure.
Very good discussion of the SC’s judgment on Essar matter.
Perfect conclusion.
The language is apt and the content is well explained.
Very good presentation
MOJO9a02U00D28381180
The overall content is in the right direction.
The structure is decent.
Could have given more content in the first part. For that, your presentation needs to be better. You could use a flowchart to discuss the basic provisions of the IBC. This will give you more space to discuss other content deeply. Plus it will bring the X-factor in your answer as well.
The discussion in the Essar judgment is good.
Decent language
Read the answer of Akankhya for the flowchart/diagram in the 1st part.
MOJO9903H00A58015579
A very good intro.
The discussion done through the flowchart in the 1st part is very good.
Keep using these little tricks to enhance your answers.
It is good that you discussed the significance of the IBC in terms of various players and markets. Good structure.
Decent discussion in the limitations of the IBC. It is giving perfect balanced to your answer.
The discussion on the SC judgment could have been more to the point.
What is the significance of the judgment on the overall IBC proceedings? Read the model answer for these talking points.
Payment ID:MOJO9b01O00A90839766
Please review
Perfect discussion.
Your treatment of the question is very good.
The discussion entailing the various aspects of the IBC is nice.
The structure is well placed.
It is good that you discussed the issues with the IBC proceeding. It is giving the perfect balance to your content.
Good and detailed discussion on the Essar judgment.
The way forwards are nicely laid down.
The coherency with each preceding discussion is decent in the answer.
It is because of the detailed structure and presentation
A very good language
MOJO9828N00A10807750
The discussion in the main body is good.
The overall content is decent.
The elements discussed are to the point and according to the demand of the question.
The 2nd part is very good.
Briefly discuss the issues with the IBC before discussing the Essar judgment. That will give a perfect balance to your structure.
The language is decent and the explanation is perfect.
MOJO9b03K00A07920521
You discussed the SC judgment of the Essar case but did not discuss the significance it will have on the overall IBC proceedings and its +ves.
*Easing the NPAs of the Banks: The profitability of banks is set to get a major boost in the current quarter, with the Supreme Court paving the way for the acquisition of Essar Steel by ArcelorMittal. Banks have an exposure of about ₹50,000 crores to Essar Steel
*Upholding the primacy of CoC: Now that the Committee of Creditors (CoC) has the final say, it will lead to more certainty when a plan is accepted and there will be less challenge to the orders of NCLTs.
*The impetus to financial creditors: The recognition of the superior right of the financial creditors in proportion to their security interest in an insolvency resolution process would show a positive attitude of such class of financial creditors in taking the insolvency resolution process to its logical end
*Impact on operational creditors: This landmark judgment will bring a paradigm shift in the way operational creditors now deal with companies for their supplies in the eventuality of default to secure their interest.
*Upholding the spirit of IBC: The SC has struck down the ‘mandatory’ time-limit of 330 days for completion of the resolution process. It is marked as a violation of Article 14 (right to equal treatment) of the Constitution and an “excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution”.
*Impact on the steel sector: The Supreme Court’s decision in the Essar Steel case sets a precedent for other cases under the Insolvency and Bankruptcy Code (IBC) especially for the steel sector which is under stress and this judgment will show the way ahead for the sector.
These are the talking points in that part.
The rest of the answer is decent.
Your coverage of the IBC and its significance in the 1st part is very good.
Could use flowcharts to discuss the details in a short and crisp manner.
The language is decent in the answer.