Analysis of the Recent Case Laws on Definition and Scope of Financial Debt
Insolvency and Bankruptcy Code, 2016 (the “IBC”) was enacted because the earlier legislations were lopsided and favoured the corporate debtors resulting into huge outstanding debts to banks and financial institutions. Say for example, according to section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the protection also extended to the guarantors and therefore, creditors could not proceed against the guarantors if the debtor company was declared ‘sick’ under the said Act. The IBC further facilitates the resolution of corporate bankruptcy in a time bound manner.
