New 👉 Ask your RBI Grade B 2025 Preparation Queries Here!!

    Question

    Which of the following statements best describes the

    relationship between the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 , and the Insolvency and Bankruptcy Code (IBC), 2016 in relation to MSMEs?
    A The MSMED Act solely focuses on regulating the financial structure of MSMEs, while the IBC provides a framework for insolvency resolution for non-financial firms, excluding MSMEs. Correct Answer Incorrect Answer
    B Both the MSMED Act and IBC emphasize financial assistance for MSMEs, but only the IBC allows MSMEs to file for insolvency with a greater degree of protection against creditors. Correct Answer Incorrect Answer
    C The IBC only allows MSMEs to file for insolvency after exhausting all resources under the MSMED Act, while the MSMED Act does not have any provisions for insolvency. Correct Answer Incorrect Answer
    D The MSMED Act lays down a regulatory framework for the growth and development of MSMEs, whereas the IBC provides a structured insolvency resolution process for MSMEs, offering special provisions for their protection. Correct Answer Incorrect Answer
    E The MSMED Act and IBC are entirely separate, with no overlapping provisions or connections for MSME legal or regulatory protection. Correct Answer Incorrect Answer

    Solution

    The MSMED Act, 2006 focuses on the promotion and development of MSMEs in India by providing a legal framework for their growth, facilitating access to finance, and ensuring easier registration. In contrast, the Insolvency and Bankruptcy Code (IBC), 2016 provides a detailed insolvency resolution process for firms, including MSMEs. Section 240A of the IBC specifically offers MSMEs a special protection in the insolvency process, providing them with a different resolution approach as compared to other companies. The MSMED Act facilitates growth, while the IBC addresses insolvency concerns with provisions specially designed for MSMEs, balancing protection and debt resolution.

    Practice Next