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The Pros And Cons Of Bankruptcy

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Premise of enacting the Insolvency and Bankruptcy Code, 2016
The Insolvency and Bankruptcy Code, 2016 came into force in August 2016. It is believed that the acid test for the Insolvency and Bankruptcy Code 2016 would come when the case involving Kolkata based Nico Industries is adjudicated. The adjudication process signals whether a sick company can be shut down within 180 days of the case being registered. While more than 1000 applications have been filed, 100 of them have been admitted by the arbiter in the National Company Law Tribunal or NCLT that is expected to decide the fate of these non-financial firms within 180 days. That aside, one begs to examine the nitty-gritties of the Code itself.
What is Bankruptcy?
Firstly, we must define as to what bankruptcy is? Bankruptcy is a legal status imposed by a firm or individual unable to meet obligations. Before the passing of the Bankruptcy Code, the legal framework in India with regard to this sphere suffered from a lack of clarity and certainty in jurisdictions. Decisions were often appealed, overstayed or overturned by judicial forums with concurrent jurisdictions. This has led to unnecessary delays often leading to misuse of this shortcoming by debtors. Therefore in this regard, the need for a new legislation was recognised. There were many reasons for this;
1.
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Firstly, that Indian banks are ridden with debt. There is also a significant rise in Non-Performing Assets as well as restructured loans while the bad debts amount to 11% of the lending.
2. There was a growth in loans from 3.49% in 2013 to 8.3% in 2015.
3. Corporate bad loans constituted 56% of the total bad loans of state-run banks.
4. The number of companies pending litigation was
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