Pillars of Insolvency and Bankruptcy Code [Regulatory Bodies]

The Insolvency and Bankruptcy Code, 2016 (IBC) is a landmark reform that created a unified legal framework for insolvency and bankruptcy in India. Before its introduction, the laws were scattered across different legislations, causing delays and confusion. With the IBC, India streamlined the process into a time-bound and transparent system.

The strength of this Code lies not only in the legislation but also in the institutions and supporting bodies that implement it. These pillars of the IBC provide regulatory, professional, and judicial support to ensure the smooth functioning of insolvency resolution.

This article discusses the five major pillars of the Insolvency and Bankruptcy Code, 2016, which include the Insolvency and Bankruptcy Board of India (IBBI), Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs), Adjudicating Authorities (AAs), and Information Utilities (IUs).

Meaning of Regulatory Pillars of the Insolvency and Bankruptcy Code, 2016

Regulatory pillars of the Insolvency and Bankruptcy Code, 2016 refer to the institutions and supporting bodies that ensure the effective functioning of the Code. 

These pillars include the Insolvency and Bankruptcy Board of India (IBBI), Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs), Adjudicating Authorities (NCLT and DRT), and Information Utilities (IUs). 

Each plays a distinct role—regulation, execution, oversight, adjudication, or data management. 

Together, they create a structured framework for resolving insolvency in a transparent and time-bound manner. Without these regulatory pillars, the Code would lack the institutional strength needed for fair and efficient implementation.

Important Institutions under Insolvency and Bankruptcy Code

Insolvency and Bankruptcy Board of India (IBBI): The Apex Institution

The IBBI was established on 1 October 2016 as the primary regulatory institution under the IBC. It is a body corporate with perpetual succession and a common seal. The IBBI is unique as it regulates both professionals and processes under the Code.

The Chairperson and members of the Board hold office for five years or until the age of sixty-five, whichever is earlier. The Central Government has the power to remove members on specified grounds such as bankruptcy, incapacity, or misconduct.

Functions as a Supporting Body

Section 196 of the Code empowers IBBI to:

• Register and regulate Insolvency Professionals, Insolvency Professional Agencies, and Information Utilities.
• Frame regulations, guidelines, and model bye-laws.
• Monitor performance and ensure compliance with the Code.
• Conduct research, publish information, and promote transparency.
• Exercise civil court powers in matters like discovery, summoning, and inspection.

Role as a Pillar

IBBI is the central pillar of the insolvency ecosystem. It sets the standards, enforces discipline, and ensures that the supporting bodies like IPs, IPAs, and IUs function within the framework of law.

Insolvency Professionals (IPs): Operational Pillars of the Code

Insolvency Professionals (IPs) are licensed individuals who conduct the resolution, liquidation, and bankruptcy processes. They are the operational arm of the IBC and serve as intermediaries between debtors, creditors, and adjudicating authorities.

Their roles include:

• Acting as Interim Resolution Professional (IRP) or Resolution Professional (RP).
• Serving as liquidators for corporate entities.
• Acting as bankruptcy trustees for individuals.
• Managing debtor’s assets, convening meetings of creditors, and ensuring compliance with the Code.

Enrolment and Regulation

• Section 206 makes it mandatory to be a member of an IPA and registered with the IBBI to function as an IP.
• Section 207 empowers the IBBI to specify qualifications and experience requirements.
• The IBBI (Insolvency Professional) Regulations, 2016 govern their registration and functioning.

Code of Conduct

IPs must:

• Exercise diligence and care.
• Comply with IPA bye-laws.
• Maintain transparency in proceedings.
• Submit records to IBBI and IPAs.

Place Among the Supporting Bodies

IPs are the supporting bodies that execute the process on the ground. They are often described as the “foot soldiers” of the Code because their role directly affects the success or failure of insolvency resolution.

Insolvency Professional Agencies (IPAs): Institutions for Regulation and Training

An Insolvency Professional Agency (IPA), defined under Section 3(20), is an institution that regulates and develops IPs. It is responsible for:

• Granting membership to eligible professionals.
• Providing training and setting professional standards.
• Monitoring the performance of its members.
• Handling grievances and enforcing discipline.
• Issuing authorisation for assignment, which allows IPs to handle cases.

Registered Agencies

Currently, three IPAs function under the Code:

1. Indian Institute of Insolvency Professionals of ICAI
2. ICSI Institute of Insolvency Professionals
3. Insolvency Professional Agency of Institute of Cost Accountants of India

Role as a Pillar

IPAs are crucial supporting institutions because they maintain the competence and integrity of insolvency professionals. Without strong IPAs, the quality of IPs would decline, weakening the entire IBC framework.

Adjudicating Authorities (AAs): Judicial Pillars of the IBC

For Corporate Persons

The National Company Law Tribunal (NCLT) acts as the Adjudicating Authority for corporate persons, including companies and LLPs. It has jurisdiction over applications, claims, and disputes arising out of insolvency cases. Civil courts do not have jurisdiction in such matters. Appeals go to the National Company Law Appellate Tribunal (NCLAT) and then to the Supreme Court of India.

For Individuals and Firms

For individuals and partnership firms, the Debt Recovery Tribunal (DRT) is the Adjudicating Authority under Section 179. Appeals from DRT orders lie with the Debt Recovery Appellate Tribunal (DRAT) and then to the Supreme Court.

Role as Pillars

Adjudicating Authorities provide judicial pillars of support to the IBC. Their orders give legal backing to the resolution process, ensuring that decisions are enforceable and disputes are resolved in a structured manner.

Information Utilities (IUs): Data Institutions of the IBC

Section 3(21) defines an Information Utility (IU) as an institution registered with the IBBI to collect, collate, authenticate, and disseminate financial information.

IUs create a transparent database of:

• Debt obligations.
• Security interests.
• Repayment and default history.

This information is crucial for quick and accurate decision-making in insolvency cases.

Regulations

The IBBI (Information Utilities) Regulations, 2017 govern the functioning of IUs. The Board ensures their reliability and accuracy.

Importance as Supporting Bodies

IUs are the supporting bodies that provide authenticated financial information to creditors, debtors, and tribunals. By reducing disputes over facts, they make the resolution process smoother and faster.

Conclusion

The Insolvency and Bankruptcy Code, 2016 rests on strong pillars, institutions, and supporting bodies that together ensure its effective implementation.

• The IBBI serves as the apex institution and regulator.
• Insolvency Professionals act as operational pillars, conducting the process.
• Insolvency Professional Agencies regulate and guide these professionals.
• Adjudicating Authorities act as judicial institutions, giving binding force to outcomes.
• Information Utilities provide reliable data as supporting bodies.

By working in harmony, these pillars safeguard the objectives of the IBC – timely resolution, creditor confidence, and economic stability. The Code is not just a piece of legislation but a framework that depends on the strength of its supporting institutions to ensure fairness, transparency, and efficiency.