IBC legislation under Modi Government is truly a remarkable legislation that has fundamentally changed the credit behavior in the country and has led to revitalization of financial sector in the Country and has immensely contributed to the growth of the economy.
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On a post in social media platform X, Ms Sitharaman said that debt resolution legislations were not comprehensive and did not let to effective resolution. It was Modi Government led IBC Code, that led to comprehensive reforms.
“Prior to the Insolvency and Bankruptcy Code (IBC) introduced by PM Shri @narendramodi – led Government in 2016, corporate distress proceedings were governed by a patchwork of legislations, which worsened rather than resolving issues”
Prior to the Insolvency and Bankruptcy Code (IBC) introduced by PM Shri @narendramodi– led Government in 2016, corporate distress proceedings were governed by a patchwork of legislations, which worsened rather than resolving issues.
— Nirmala Sitharaman (Modi Ka Parivar) (@nsitharaman) May 30, 2024
The need for a modern corporate insolvency… pic.twitter.com/tucS8IFCPG
IBC legislation under Modi Government is truly a remarkable legislation that has fundamentally changed the credit behavior in the country and has led to revitalization of financial sector in the Country and has immensely contributed to the growth of the economy.
However, the process of reforms are continual. On issues related to cross-border bankruptcy, the Insolvency Law Committee (ILC) proposed that the IBC be changed to fully include the UNCITRAL Model Law on Cross-Border Insolvency (Model Law). This was followed by recommendations from the Cross Border Insolvency Rules/Regulations Committee. The recommendations of the ILC and CBIRC have yet to be implemented into legislation. These may serve to alleviate a variety of concerns related to foreign assets, repayment moratoriums, and other matters, as well as provide better clarity and predictability in insolvencies involving numerous jurisdiction. Some of the changes are expected to give relief to foreign investors in parallel insolvencies across countries, as well as domestic creditors seeking to pursue their rights against corporate debtors’ overseas assets.
A strong and comprehensive information flow mechanism in the form of an integrated e-platform for IBC is urgently required. To utilise the benefits of technology, a unified e-platform for coordinating procedures inside the Code that now function across diverse platforms, forming part of IBC ecosystem, may be established. The time required to perform a procedure can be sought to be lowered. In addition, considering the volume and scale of cases submitted to IBC, the number of benches of the Hon’ble NCLT might be increased. Alternatively, establishing a new set of NCLT benches dedicated entirely to addressing insolvency cases, different from the benches that deal with ordinary company law issues, might be explored.
With regard to amendments to the Insolvency and Bankruptcy Code (IBC), particularly for a framework for a group insolvency procedure, stakeholder engagement under umbrella of IBBI may be undertaken, with NCLT specialists participating. Before proposing legislative amendments, the industry, insolvency professionals, and NCLT legal experts may be consulted.
In India, due to unavailability of specified structure on group insolvency resolution, the group insolvency system has evolved under the Courts’ direction. It is now necessary to establish guidelines in this respect through legislative means.
There has been an institutional endeavor to adopt prepackaged schemes, which are essentially debtor-in-possession models. To begin, in India, the Pre-Packaged Insolvency Resolution Process (PPIRP) has been made available to MSMEs. PPIRP may incentivize promoters to actively interact with creditors, maybe even before any default occurs. This would enable faster and easier outcomes, eliminating needless combative litigation. As a result, this might be enhanced and expanded to include larger organisations.
Further easing of stressed asset resolution will go a long way in further bringing liquidity in the system and attracting foreign capital in the Country.
Galactik Views