The Applicability of the Insolvency and Bankruptcy Code (2016) to Insurance Companies - NCLT Order in the matter of Aviva Life - An Analysis

Abstract

Recently, the National Company Law Tribunal (NCLT) admitted an insolvency petition under the Insolvency and Bankruptcy Code, 2016 (IBC) against Aviva Life Insurance Company India Ltd. In this article, we analyse the NCLT decision from the perspective of the Expert Committee recommendations that led to the enactment of IBC, legislative intent, text of IBC, the rule of harmonious construction and case law. We argue that, as of now, no insolvency application against an insurance company is maintainable under IBC. Therefore, it is respectfully submitted that the NCLT decision in Aviva requires reconsideration. Insurance companies can be brought under the ambit of IBC only through a notification under Section 227 of IBC. Moreover, the article also points out certain implementation challenges to applying IBC framework to insurance companies. Thus, if the Central Govt., at a future point of time, intends to bring insurance companies under the ambit of IBC, these challenges need to be addressed.