NEW DELHI: It looks like the recent outrage over very low recovery by banks and 'unscrupulous' promoters trying to use one-time-settlement provision to get control of their companies back, has forced the government to look for large-scale changes in the insolvency regulations.
Towards this, the insolvency regulator has sought public and stakeholder comments on general and specific changes they want in the law. In a statement, the Insolvency and Bankruptcy Board of India has said that the public consultation is an endeavour to effectively engage stakeholders in the regulation making process.
"The participation of the public, particularly the stakeholders in the insolvency ecosystem ensures that the regulations are informed by the legitimate needs of those interested in and affected by the regulations," the statement read.
Public as well as stakeholders like insolvency professionals, corporate debtors, personal guarantors, etc can submit their comments between 17 June 2021 and 31 December 2021. The comments and inputs from different stakeholders will, then, be collated and processed following the due process, and regulation would be accordingly modified 'to the extent considered necessary'.
The regulator has said that it would try to notify the changes made after the consultation process by 31 March 2022 and bring them into force on 1 April 2022. Comments can be made by visiting the IBBI’s website.
The recent resolution of Videocon Group's insolvency process, whereby the resolution applicant Vedanta Ltd paid a meagre Rs 2,900 crore against creditors’ claim of Rs 61,000 crore.
This, along with DHFL's resolution where fixed depositors received only 25 per cent of their deposits with the housing finance company, caused a lot of public outrage and raised the call for changes in the insolvency laws.
IBBI chairperson MS Sahoo had recently told The New Indian Express that large haircuts by banks are not uncommon in any insolvency regime. "Two things are on the ground - one is the available assets in the books of the corporate debtor, and the amount due in the books of creditors. Often, most amounts due under IBC have already been written off by the lenders," said Sahoo justifying the sharp haircuts by bankers.