The government is planning to incorporate changes to the Insolvency and Bankruptcy Code (IBC), in the wake of the recent scrapping of RBI circular pertaining to non-performing assets as well as disputes in some of the major insolvency cases.
“IBC is a recent and evolving law, and changes will be incorporated. In last few weeks, there were many instances of lender-creditor dispute, which delayed resolution of many big cases. So, a review of the existing law is on the card, with a target to implement it in the next fiscal year,” a senior official from the Ministry of Corporate Affairs told TMS.
The Insolvency and Bankruptcy Board of India (IBBI) on Saturday has already invited comments from various stakeholders in the insolvency process on making changes to the current regulations notified under the IBC, 2016.
“In a dynamic environment, the stakeholders could play a more active role in making regulations. They may contemplate at leisure the important issues in the extant regulatory framework that hinders transactions and offer alternate solutions to address them, in addition to responding urgently to draft regulations proposed by the regulator,” IBBI said.
Another reason cited by the IBBI is also the recent Supreme Court order, which scrapped the February 12 circular of the RBI. The RBI circular had made it mandatory for banks to initiate insolvency proceedings against companies having stressed assets of Rs 2,000 crore or above.
“Recent developments like the Supreme Court striking down the RBI circular last year on banks resolving their massive non-performing assets (NPAs) has also made a case for review of certain criteria in the overarching laws of IBC,” the IBBI notice said.
Some of the areas where the government seeks regulatory changes are Liquidation Process 2016 and Voluntary Liquidation Process, 2017; Fast Track Corporate Insolvency Resolution Process regulations, 2017; and Insolvency Resolution Process for Corporate Persons, 2016.
Apart from this, more clarity is required over the role of lenders and operational lenders, as also issuing fresh guidelines for resolution professionals, especially in light of the recent Essar case. The Standard Chartered bank has challenged ArcelorMittal’s resolution plan for Essar Steel in the Supreme Court.
Earlier this month, Bankruptcy Regulator chairperson MS Sahoo had already said that IBBI is working to providing accountable and competent valuation professionals. All the changes will be implemented from April 1, 2020.
“The comments received between April 20, 2019 and December 31, 2019, shall be processed together, and following due process, regulations will be modified to the extent considered necessary. It will be the IBBI’s endeavour to notify modified regulations by March 31, 2020, and bring them into force on April 1, 2020,” IBBI said.
IBBI has invited comments from stakeholders on changes to regulations under the IBC
Some areas where the government seeks regulatory changes are Liquidation Process 2016 and Voluntary Liquidation Process, 2017; Fast Track Corporate Insolvency Resolution Process regulations, 2017; and Insolvency Resolution Process for Corporate Persons, 2016
Clarity sought on role of lenders and operational lenders, and fresh guidelines for resolution
professionals