How will another change help improve IBC?

What has been the impact of IBC so far?

The IBC came into existence in May 2016 because the earlier legal system under the Board for Industrial and Financial Reconstruction (BIFR) was used by shareholders of dormant firms to prevent lenders from taking recovery action. This showed that the defaulters would not only lose control of the companies, but would also be prevented from winning them back until the dues were paid. IBC’s operations have been marked by intense litigation involving promoters, lenders and investors, some spectacular successes, and in many cases, the liquidation of firms. The code is set for another change.

What is the latest change needed?

A large number of old cases could not be saved. In many cases, the delay proved redundant as stakeholders fought a protracted court battle. Of the 1,682 ongoing cases, nearly three quarters were pending for more than 270 days by the end of June. The Jayant Sinha-led Parliamentary Standing Committee on Finance had in August flagged the steep cuts taken by lenders in several settled cases and recommended a review of the IBC to see if it served its purpose. Was. Further, 47% of the 2,859 cases were settled, though these cases accounted for three-fourths of the property value in 14% of the cases saved.

At what stage is the IBC review currently?

The Insolvency and Bankruptcy Board of India (IBBI), the Ministry of Corporate Affairs, and two advisory committees on company law and insolvency matters are working on amendments to the IBC. A bill to amend the code will be introduced in the upcoming budget session of Parliament. IBBI has already made some changes in the bidding process for distressed properties.

What can one expect from a makeover?

The most important issue is the major haircuts in insolvency resolution, which can be attributed to either lack of regulatory certainty on certain assets, lack of appetite for assets in the market or lack of marketing, said Anup Rawat, partner. The delay in admission to the law firm Shardul Amarchand Mangaldas & Company Tribunal also needs to be addressed. Experts are expecting automatic admission of insolvency petitions based on the record of default.

What is the future direction of IBC?

The IBC has been amended regularly to rebalance the rights of the stakeholders with competing interests based on the need of the hour. This trend is set to continue. In 2018, homebuyers were defined as financial creditors and subsequently the payment default limit was raised to trigger bankruptcy proceedings ₹from 1 lakh ₹1 crore. Yogendra Eldak, partner at law firm Lakshmikumaran and Sreedharan, said the IBC is still evolving and will need to be reviewed periodically over the next few years to bridge the gap.