Reports for the 2nd IBBI Working Group on Individual Insolvency
Operationalising the Insolvency and Bankruptcy Code for resolution of personal insolvencies
The insolvency resolution and bankruptcy processes under the Insolvency and Bankruptcy Code, 2016 (Code) allows an over-indebted individual to avail a discharge from her debts by first attempting to restructure her debts with her creditors, and if she fails to successfully do so, by liquidating her assets and distributing the proceeds to her creditors in bankruptcy proceedings. By availing a discharge, the over-indebted individual gets absolved from the obligation of repaying her discharged debts, thus, allowing her to restart her life outside of the debt cycle.
The Insolvency and Bankruptcy Board of India (IBBI) constituted a Working Group in 2017 to recommend the strategy and approach for implementation of the personal insolvency provisions of the Code dealing with insolvency and bankruptcy of (i) personal guarantors to corporate debtors and (ii) individuals having businesses, and submit a report along with the draft rules and regulations. The Working Group released a report in 2017, however, it was subsequently reconstituted as the ‘Second Working Group’ and given a similar mandate. The Second Working Group undertook a review of the 2017 report, and released two reports with revised recommendations for implementation of individual insolvency provisions under the Code.
The Second Working Group recommended phase-wise implementation of personal insolvency provisions under the Code. It recommended implementation of the regime for personal guarantors to corporate debtors before others. It also prepared draft rules and regulations for this purpose.
Most of the recommendations of the Second Working Group have been implemented in the form of two sets of rules and two sets of regulations dealing with insolvency resolution and bankruptcy proceedings of personal guarantors to corporate debtors.