CDS (II) 2022 General Knowledge · Question 108 of 120

Correct — C, 2016. The Insolvency and Bankruptcy Board of India was established on 1 October 2016, in the same year as the statute that created it. The Insolvency and Bankruptcy Code was passed by the Lok Sabha on 5 May 2016 and the Board was set up under it within months, so year and statute go together — which is the easiest way to hold the fact. The Board regulates insolvency proceedings and the three new classes of institution the Code brought into being: insolvency professional agencies, insolvency professionals, and information utilities. It works from Mayur Bhawan at Connaught Circus in New Delhi, and Ravi Mital has been its chairperson since 2022. It is an unusual regulator in that it writes the rules for an entire profession that did not exist before the Code.

• (a)2014 — Two years early. In 2014 the Bankruptcy Law Reforms Committee under T. K. Viswanathan had only just been constituted; its report, which produced the draft Code, came in November 2015.
• (b)2015 — The year the Bankruptcy Law Reforms Committee reported and the Bill was introduced in the Lok Sabha, but the Code was not enacted and the Board did not exist until 2016.
• (d)2017 — A year late. 2017 is when the Code's corporate insolvency process moved into full operation and the Reserve Bank directed banks to refer the first large defaulters to it — memorable events, but after the Board's establishment.

Before 2016 an Indian company in distress could be pursued under several overlapping laws at once, and creditors, courts and tribunals fought over precedence while the value of the business drained away. The Insolvency and Bankruptcy Code consolidated that mess into a single, time-bound process run by a licensed insolvency professional, with a committee of creditors deciding whether to accept a resolution plan or send the company to liquidation. The Board is the regulator that makes such a system possible — it registers and disciplines the professionals and agencies, prescribes the process regulations, and maintains the information infrastructure.

Year questions are won by tying the institution to the law rather than memorising a bare date, and here the two coincide in 2016. A second anchor helps: the National Company Law Tribunal, which adjudicates corporate insolvency under the Code, was itself constituted on 1 June 2016. The Code has been amended repeatedly since — most significantly by inserting section 29A in 2017 to bar defaulting promoters from bidding for their own companies, by adding the homebuyers' status as financial creditors, and by introducing pre-packaged insolvency resolution for small companies in 2021 — so treat the 2016 date as the founding fact and the amendments as a separate, moving list. It is also worth being precise about the vocabulary the Code uses, since papers test it: default is the failure to pay a debt when due, while bankruptcy is a status conferred by an order of the adjudicating authority, not merely an inability to pay.

• The Insolvency and Bankruptcy Board of India was established on 1 October 2016.
• It was created under the Insolvency and Bankruptcy Code, 2016, which the Lok Sabha passed on 5 May 2016.
• It regulates insolvency professionals, insolvency professional agencies and information utilities, and the insolvency process itself.
• Its headquarters are at Mayur Bhawan, Connaught Circus, New Delhi; Ravi Mital has been chairperson since 2022.
• Corporate insolvency under the Code is adjudicated by the National Company Law Tribunal, constituted on 1 June 2016.

• Confusing the year the Bankruptcy Law Reforms Committee reported, 2015, with the year the Code and the Board arrived, 2016.
• Using default and bankruptcy as synonyms; under the Code bankruptcy follows an order of the adjudicating authority.
• Assuming the Board decides insolvency cases — it regulates, while the National Company Law Tribunal adjudicates.

As a year-of-establishment recall, or as a statements item on what the Board regulates and which authority adjudicates.

• practice — not a real PYQ

  Under the Insolvency and Bankruptcy Code, 2016, corporate insolvency resolution is adjudicated by which authority?

  • (a)The Insolvency and Bankruptcy Board of India
  • (b)The National Company Law Tribunal
  • (c)The Debt Recovery Tribunal
  • (d)The Securities Appellate Tribunal

  Answer(b) The National Company Law Tribunal — the Board is the regulator; the Debt Recovery Tribunal is the adjudicating authority for individuals and partnership firms.

• practice — not a real PYQ

  The committee of creditors constituted in a corporate insolvency resolution process consists principally of which class of creditors?

  • (a)Operational creditors
  • (b)Financial creditors
  • (c)Government revenue authorities
  • (d)Employees and workmen

  Answer(b) Financial creditors — those to whom a financial debt is owed; operational creditors participate but ordinarily have no vote unless there are no financial creditors.