August 30, 2017
These old Acts will, however, be repealed once the new individual insolvency regulations are finalised and notified under the overarching IBC 2016, an official source told FE.
The government on Tuesday said provisions of the two old Acts that deal with individual insolvency and bankruptcy haven’t been repealed yet, despite the introduction of the Insolvency and Bankruptcy Code (IBC) 2016. So individuals (not companies) can still tap provisions of the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920. These old Acts will, however, be repealed once the new individual insolvency regulations are finalised and notified under the overarching IBC 2016, an official source told FE. While the corporate insolvency ecosystem got a huge boost with the formulation of regulations under the IBC, the individual insolvency framework hasn’t kept pace.
This is because regulations for individual insolvency under the IBC are still being finalised. Until then, the two British-era Acts will continue to guide the legal framework in this regard. Analysts say the application of these old Acts is divided geographically. The Presidency Insolvency Act, 1909 is applicable to the erstwhile presidency towns such as Calcutta, Bombay and Madras, while the Provincial Insolvency Act, 1920 is applicable to the whole of India, except these towns. The content of the two Acts is similar, if not the same.
In a statement on Tuesday, the finance ministry said: “It has come to notice of the ministry that writ petitions are being filed before some high courts stating that ‘The Presidency Towns Insolvency Act, 1909’ and ‘The Provincial Insolvency Act, 1920’ (enactments)have been repealed in view of enactment of the Insolvency and Bankruptcy Code, 2016 (Code). On this basis, the litigants are claiming that matters related to individual insolvency and bankruptcy should now be dealt under provisions of the Code.” So it is hereby clarified that Section 243 of the IBC, which provides for the repeal of these old laws, has not been notified yet and provisions related to insolvency resolution and bankruptcy for individuals and partnerships, as contained in the Part III of the IBC, are yet to be notified.
[The Financial Express]