India: Heralding a Positive Change – Repeal of SICA, Dawn of New Era of Restructuring & Insolvency under the IBC 2016

Last Updated: 31 March 2017
Practice Guide by Dhir & Dhir Associates

India is heading towards a new era of dealing with insolvencies and bankruptcies, whether corporate or individual, by promulgating a comprehensive Insolvency & Bankruptcy code at par with global standards to facilitate ease of doing business in India.

The Government has synchronized the demise of Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) (SICA) on 30th November 2016 perfectly with putting in place all the enabling structures required to commence the implementation of the restructuring process under the Insolvency and Bankruptcy Code, 2016, (IBC) to provide a viable alternative process for resolving their issues to the concerned stakeholders, w.e.f. 1st December, 2016. Accordingly, the Board for Industrial and Financial Reconstruction (BIFR) and the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) have been dissolved and as such any reference made or inquiry pending to or before the Board or Appeal or any proceeding of whatever nature pending before the Appellate Authority or the Board under the SICA shall stand abated.

However, the SICA Repeal Act provides that a company in respect of which such appeal or reference or inquiry under SICA stands abated, may make reference to the National Company Law Tribunal under the IBC within one hundred and eighty days from the commencement of the IBC in accordance with the provisions of the IBC.


Shri. Arun Jaitley in his Budget speech in 2015 had stressed on reforms of the bankruptcy law as a key priority area for improving the ease of doing business in India. Accordingly, Bankruptcy Law Reforms Committee (BLRC) under the able leadership of Mr. T. K. Viswanathan was set up and its report formed the basis of promulgation of the Insolvency and Bankruptcy Code 2016 (IBC) in May 2016.

Dr. M.S. Sahoo was appointed as the first Chairman of the Bankruptcy Board on 1st October, 2016 and within two months with the support of Mr. Tapan Ray, Secretary, Ministry of Corporate Affairs and Mr. A. S. Bhatia, Joint Secretary, Ministry of Corporate Affairs has been able to operationalize the process of IBC by formulating the notifications and registering 3 Insolvency Professional Agencies and 21 Insolvency Professionals by 30th November, 2016 to enable its implementation from 1st December, 2016.

Impact of the Code

The Code provides that in cases of a default by the corporate debtor, any concerned creditor, be it the financial creditor, the corporate debtor or the operational creditor (after mandatory 10 days demand notice) can file a Corporate Insolvency Resolution Process (CIRP) and recommend its own proposed Insolvency Professional (IP) to be appointed with respect to the corporate debtor.

The Code is drawn on the lines of the UK insolvency laws, envisaging an automatic takeover of management by the Insolvency Professionals (IP) at the inception of the Corporate Insolvency Resolution Process (CIRP) so that during the resolution process the ‘creditor is in possession’ of the assets of the defaulting borrowers as against the old regime of ‘debtor in possession’. The Code proposes the setting up of the Information Utilities as the structured entities to record and certify the existence of debts/defaults for the initiation of the process of restructuring and revival , which is yet to be operationalized. However the non operationalization of the Information utilities would not be a road block in commencing the restructuring process under the IBC.

On admission of the CIRP by the National Company Law Tribunal (NCLT) which is the Adjudicating Authority (AA) under the Code, the Insolvency Professional would take over the affairs of the company by replacing the management, finalize list of creditors and call for meeting of creditors. The IP will have to consider the restructuring schemes formulated by any Resolution Applicant who may desire to put up a resolution proposal for takeover/ revival of the corporate debtor. If the scheme is approved by 75% of the majority of creditors in the meeting of the Committee of Creditors (wherein only the financial creditors have voting rights), then it stands approved, otherwise the corporate debtor would mandatorily go into liquidation.

The Code provides for a statutory period of 180 days (extendable by 90 days) for completion the Insolvency Resolution Process failing which the corporate debtor will mandatorily go into the liquidation process. During the CIRP, complete moratorium is provided to the corporate debtor against recovery proceedings, attachments, SARFAESI etc. to give breathing time to the said corporate debtor to facilitate its restructuring.

The Road Ahead

The new regime is premised on the commercial wisdom of the creditors as the determining factor for restructuring of the Corporate debtor. This places great responsibility on the creditors to act in a pragmatic manner, estimate the real value recoverable from the securities held by them and recognize erosion in value of their debt so that a viable restructuring proposal can be worked out. In case they fail to do so, the case will proceed to liquidation where they may have to suffer greater loss in value.

As such the code is both a threat and an opportunity to the stake holders. Corporate Debtors cannot hold on to the assets in distress while keeping the creditors at bay. Equally the creditors have to take quick and pragmatic decisions to determine erosion in value of their assets and recover their dues to the extent possible, failing which they will suffer further loss in value. The code provides a platform to bona fide borrowers and pragmatic creditors to sit together and prepare a restructuring plan to the benefit of both parties. In case the company cannot be revived, it would go into liquidation and its promoters / Guarantors would have to face Bankruptcy proceedings which will provide them an exit route and after the cooling off period, they may restart their commercial lives.

This article is for information purpose only. It is not intended to constitute, and should not be taken as legal advice, or a communication intended to solicit or establish commercial motives with any. The firm shall not have any obligations or liabilities towards any acts or omission of any reader(s) consequent to any information contained herein. The readers are advised to consult competent professionals in their own judgment before acting on the basis of any information provided hereby.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Contact the Author?
Click here to email the Author
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Other India Advice Centres
Arbitration, Litigation and Conciliation
More Advice Centers
Significant Recent Cases
Highlights of commercially relevant recent news and events.
Recent judgments and court decisions of interest.
Upcoming Events
Media from our most recent events and conferences.
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions