Mukhopadhaya also stressed on the need for more powers to the Insolvency and Bankruptcy Board of India (IBBI), which regulates the insolvency proceedings. The number of insolvency cases has risen following action against banks' NPAs.
The National Company Law Appellate Tribunal (NCLAT) Chairperson was delivering the first annual day lecture to commemorate setting up of IBBI on October 1, 2016.
Mukhopadhaya complimented the IBBI for setting high standards of competence and dedication and achieving significant milestones by upholding the principles and objectives of the Insolvency and Bankruptcy Code (IBC) with utmost sincerity.
Dwelling on dynamic law and governance framework in fast growing economies in the world, he said the basic foundation is economic freedom. He said freedom is needed to start a business (free entry), to continue (free competition) and to stop (free exit).
"This enables new firms to emerge continuously. They do business when they are efficient and vacate the space when they are no longer efficient. This ensures the most efficient use of resources and consequently optimum economic wellbeing," he said.
The Competition Act provides freedom to continue business, the IBC provides freedom to discontinue business, and the Companies Act regulates the conduct of companies, he said, adding these legislations are of recent origin.
IBBI Chairperson M.S. Sahoo said the Code envisages market-led solutions to address honest failures and provides for orderly resolution of failing with the least cost and disruption, and thereby provides the ultimate economic freedom -- the freedom to exit.
The scheme of incentives and disincentives under the Code would bring in behavioural changes on the part of every stakeholder, minimise failures and defaults and hence, in the long run, the best use of the Code would be not using it at all, Sahoo said.
National Company Law Tribunal (NCLT) President M.M. Kumar said the track record of disposal of matters by the NCLT under the Code, both in terms of quantity and quality, has been unparalleled in judicial history.
He also stated that not more than 10 per cent orders of the NCLT are appealed against.
Further, Kumar said that the old regimes such as Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI) or Sick Industrial Companies Act (SICA) had given the powers in the hands of debtors, whereas IBC has strengthened rights of creditors.
"IBC has entrusted the ultimate control of the defaulting firm to a CoC to either resolve or liquidate the debtor's business," he said.
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