Ready for major changes in India’s bankruptcy code?

A person with knowledge of the matter said that the amendments being drafted are aimed at tackling the challenges faced by distressed companies in timely rescue. They want to address the shortcomings highlighted by a parliamentary panel in August, such as low recovery rates in many cases and delays in resolution proceedings.

IBBI has made submissions to the Ministry regarding the scope of the amendments and the modalities of necessary legislative changes are being studied. “We have got the ideas. Some changes in the regulations and some amendments in the code will be required. The effort is to prepare the bill for the budget session,” said the person above, on the condition of anonymity.

The amendment is expected to mark a major milestone in the evolution of the Bankruptcy Code, which has undergone several changes since its adoption in 2016 in step with the changing economic realities. The next revision will try to “re-imagine” the code to make it work. More effective in terms of its core goals, which include timely resolution of insolvent businesses and maximizing the value of the debtor’s assets.

Some of the concerns raised by the parliamentary panel led by Bharatiya Janata Party leader Jayant Sinha have already been addressed, but some of the recommendations need legislation, experts said.

L Viswanathan, partner at law firm Cyril Amarchand Mangaldas, pointed out that the government has amended the rules by providing the Swiss Challenge Method, as well as limiting requests for proposals to bids to just one. This is expected to result in more timely bid submission, he added.

Viswanathan said, “Many other recommendations (of the parliamentary panel) pertain to institution building and do not require a change in law to implement, except changes to the IBC to enable resolution plans for the whole or business ” The committee suggested that it was not always the case that bidders for insolvent businesses could be interested in the business as a whole. Accordingly it suggested an amendment in the law to allow settlement of a part of the property.

Daisy Chawla, senior partner at law firm Singh & Associates, said the first and foremost amendment the IBC requires is to differentiate between the types of corporate debtors who have to go through the corporate insolvency resolution process, and those who go through with direct liquidation. can go.

The IBC provides for the completion of bankruptcy resolution within 330 days, including litigation time. Chawla said another beneficial amendment would be to define haircut limits, which the committee of creditors can approve in any resolution plan.

Cyril Amarchand Mangaldas K Viswanathan said the institutions which have been mandated with various roles and responsibilities under the IBC will need to evolve with the pace and demand for resolution of stress and lapses.