Month: March 2024

Thresholds in insolvency resolution: Rationale for different yardsticks for financial and operational creditors

Corporate Disputes

The Insolvency and Bankruptcy Code (IBC) is a crucial part of India’s economic and financial changes. It helps resolve situations where a corporate entity cannot pay its debts. The IBC sets rules to make sure this process is balanced, fair and effective. In order to avoid misuse, the IBC has laid down certain ‘thresholds’ for a proceeding to be initiated before the National Company Law Tribunal. Such a threshold helps focus on more important cases which are of economic importance. This way, it stops the system from getting too busy with a multitude of cases involving smaller issues and defaults. In this article, we will discuss a significant difference between the process for operational creditors, compared to financial creditors, for initiating proceedings despite having a common threshold limit under the IBC.

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