Even as some high-profile cases like Essar Steel and Jet Airways are being dealt with by the National Company Law Tribunal (NCLT) for insolvency resolution under the Insolvency and Bankruptcy Code (IBC), the government has come up with amendments to IBC. The Insolvency and Bankruptcy Code (Amendment) Bill 2019 was introduced in the Rajya Sabha by the Finance Minister Nirmala Sitharaman on Wednesday. The larger objective of these amendments is to speed up the entire process of bankruptcy resolution and setting deadlines for completion.
While there are all of seven amendments sought to be made to the original IBC, the key ones relate to fixing the limit of 330 days for the completion of the Corporate Insolvency Resolution Process or CIRP within 330 days, which includes any litigation and other judicial processes, if involved.
The other significant amendment is that if an application is made before an authority in connection with the insolvency resolution, the adjudicating authority will have to respond within 14 days of such an application being received, detailing why the application is rejected or accepted, in writing. No oral observations will be acceptable.
The Committee of Creditors, a body that gets formed in each case, will now have the power to liquidate the corporate debtor. This could be to avoid the stalling of the process by the promoters through any loopholes available in the system.
The new amendments proposed include a provision to make it clear that the resolution arrived at under the IBC by the appropriate body will be binding on all the stakeholders, even if some of the entities to whom moneys are owed may be governments at the central or state levels or other local authorities.
It is hoped that these amendments will also put to rest the confusion on how the settlement of dues after resolution under IBC should be made between the financial creditors and operational creditors. This included the provision being proposed for all financial creditors in a company to have a voting right under Section 21 (6A).
The amendment bill, once passed should help in completing the insolvency resolution process expeditiously.