Misuse of Insolvency and Bankruptcy Code by loan defaulters has tendency to badly impact economy: HC

The effectiveness of the IBC is crucial for the health of the Indian banking sector. Judicial support for its intended purpose is a significant positive.

• •The Bombay High Court has strongly condemned loan defaulters and guarantors for exploiting the Insolvency and Bankruptcy Code.
• •This practice allows them to seek immunity by triggering a moratorium, thereby stalling recovery efforts by secured creditors.
• •The court highlighted that such actions frustrate the IBC's core objectives and negatively affect the nation's economy.
• •Risk flag: Continued attempts by defaulters to exploit loopholes
• •Risk flag: Slow pace of judicial process in some cases