The Corporate Insolvency Process was set up with an aim to protect the interest of the creditors by reorganizing viable businesses to a possible extent while at the same time liquidating unviable businesses at the earliest. An efficient corporate insolvency regime enables the growth of the economy by allocating resources that were otherwise not being used or were closed entities.
Under the new insolvency resolution process, the responsibility now lies with the creditor to initiate the insolvency resolution process against the corporate debtor. Application for insolvency resolution is applicable against corporate debtors with a minimum amount of default of one lakh rupees. Opposed to the earlier legal framework, where the primary onus to initiate a resolution process was with the debtor, and creditor could pursue separate actions for recovery, security enforcement and debt restructuring.