New Delhi An expert panel led by Rajesh Verma, Secretary, Ministry of Corporate Affairs, has recommended changes in the insolvency and bankruptcy framework, including guidelines on evaluation of amendments to already filed bankruptcy resolution plans.
The panel has also proposed a code of conduct for representatives of lenders to decide on the future of insolvent businesses. In its report submitted to Union Finance and Corporate Affairs Minister Nirmala Sitharaman, the panel suggested that there is a need to curb submission of unwanted resolution plans and revision of resolution plans.
“Though a phase-wise time frame has been provided in the rules, the resolution plans are received by the resolution professional after the stipulated time frame. In some cases, amendments are made to the submission of resolution plans in an attempt to weed out other potential resolution applicants,” the panel said while recommending rules for late submission of plans and review of unwanted amendments made to plans. Told.
The panel recommended that by amending the Insolvency and Bankruptcy Code (IBC), I should clarify that proceedings on suspicious transactions undertaken by the then management of the insolvent company can continue even after the completion of the insolvency resolution plan. “This will ensure that there is clarity among stakeholders on how to continue such proceedings after the approval of the resolution plan,” the report of the Insolvency Law Committee said.
The report also recommended that the period for review of suspicious past transactions of suspended management of insolvent business should be revised so as to cast a wider net to catch such transactions. Such review of past transactions should commence from the date of filing of the bankruptcy petition and not from the date of initiation of the insolvency resolution process. This will not only help widen the scope of ‘avoidable transactions’, but also discourage any adverse incentives to corporate debtors to delay the acceptance of bankruptcy applications by creditors, the report said. .
The report also states that tribunals should dispose of resolution plans within 30 days of receipt. If the tribunal fails to settle the plan within this time frame, it should record reasons in writing, the report said.
Experts said the panel’s recommendations are in the right direction. Rajesh Narayan Gupta, managing partner of law firm SNG & Partners, said the focus area is timely resolution of stressed accounts.
“The committee has recommended that the tribunal should dispose of the resolution plan within 30 days and failing to do so should record the reasons. This has been said in the same breath, assuming that there are a lot of cases pending. While this is a step in the right direction, only time will tell whether we are able to achieve this given the past record and pressure on the National Company Law Tribunal,” Gupta said.