The Insolvency and Bankruptcy Code 2016 has been criticised for liquidating rather than rescuing the companies. Do you agree with this criticism of the Act? Give reasons in support of your argument. 10 marks

Mentor’s comment-

  • In the intro, briefly mention the objective the IBC 2016.
  • In the body, mention that IBC enables the market to attempt to resolve the stress through a resolution plan, when it concludes that there is no feasible resolution plan it proceeds for liquidation, in value terms 75 per cent of the assets were resolved, the SC has said that “defaulters’ paradise is lost” which results in resolution at various stages even before it reaches to IBC etc.
  • Conclude by stating that liquidation or rescue is an outcome of the market forces; the law is only an enabler giving choices and nudging a company towards value maximising outcomes.
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