Historical background and constitutional allocation of the subject of insolvency and bankruptcy

A shop owner in Vashi cannot pay his supplier, the bank that financed his stock, and the landlord, all in the same month. Who gets paid first, who decides, and how long does everyone have to wait? For most of the twentieth century India answered those questions with a pile of separate laws, each run by a different forum. The Insolvency and Bankruptcy Code 2016 replaced much of that pile with one code. To understand why, you need to know what the pile looked like, and which legislature in India is allowed to make such a code at all.

In two minutes

The Code of 2016 is a consolidating statute: it repealed the two old insolvency Acts, wound up the sick-company regime, amended the recovery and company laws around it, and rests on Parliament’s power over a subject the Constitution places in the Concurrent List.

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