NEW DELHI: The Corporate Insolvency Resolution Process (CIRP), which has been marred by delays and lower recoveries, is set for an overhaul as the Insolvency Law Committee has recommended several changes.
The panel has suggested the National Company Law Tribunal (NCLT) should not take over 30 days after receiving a request for approval or rejection of a resolution plan. The committee noted delays in approval of the resolution plan is one of the major reasons for slowing down the process.
The committee, therefore, suggests if the NCLT bench fails to pass an order approving or rejecting a resolution plan within 30 days, and in case of delay, it will have to give reason in writing. As per the insolvency laws, once the panel of creditors approvees a resolution plan by a certain bidder, the same has to be approved (or rejected) by the NCLT for closure of the process. In order to curb unsolicited and continuous revision of resolution plans, which is another major reason for delay in the resolution process, the law committee recommends that insolvency regulations clearly lay down a mechanism for reviewing late submissions of (or revisions to) resolution plans.
Though insolvency regulations do not give a right to the applicants to unilaterally revise or improve resolution plans, adjudicating authorities, in order to ensure value maximisation, have allowed revisions to plans submitted if it is during the stipulated period and a plan has not yet been approved by the CoC. The panel also suggested that the insolvency regulator should issue guidelines providing the standard of conduct of the Committee of Creditors (CoC), which has critical commercial decision-making powers under the insolvency laws. It said instances of improper conduct by members of CoCs, which led to delay and depletion of value of assets.
The panel also recommended inclusion of a section in the regulations that makes it mandatory for the liquidator to consult with Stakeholders Consultation Committee so that the latter is able to provide commercial inputs on the functions of the liquidator as well as conduct oversight over the liquidator.
Panel suggests if the NCLT bench fails to pass an order approving or rejecting a resolution plan within 30 days, for any delay, it will have to give reason in writing