The government is unlikely to seek Parliament’s approval for the amendments it had prepared over year ago to the Insolvency and Bankruptcy Code (IBC) during its tenure, as “it is not on the priority list,” an official source said. The relevant Bill which was said to be withdrawn from the agenda of the Monsoon session at the last minute, is unlikely to be tabled even in the Winter Session, the source added.
The clutch of amendments proposed include the one seeking to extend the so-called pre-packaged scheme to larger firms and a customised regime for the real estate sector.
“All the discussions (on the amendments) with the relevant stakeholders have taken place, and the suggestions from the Insolvency and Bankruptcy Board of India (IBBI) have been given to the Ministry of Corporate Affairs, but it seems the Bill may not be introduced in Parliament anytime soon,” the official said. The Bill may see the light of the day only after the 2024 general elections, the source added.
The Corporate Affairs Ministry had proposed changes to the IBC to expedite the resolution process and prevent erosion of stressed asset value, as recovery for creditors has taken a knock in recent years.
The pre-packaged insolvency process which is now available to MSMEs allows the extant promoter to remain in the saddle till the final stage of debt resolution, and this is seen to have helped in preventing the pace of asset erosion during the corporate restructuring process.
The ministry has also suggested a special insolvency regime for real estate under which the resolution process would be restricted to only those projects where the default has occurred, and won’t extend to the entire company or other solvent projects. It could also propose the adoption of a system of single transferable vote for creditors to decide on resolution bids for bankrupt companies, in a move aimed at maximising the chances of the plans getting approved.
Also, there is a proposal to make home-buyers, who already have the status of financial creditors, secured financial creditors.
A total of six amendments have been brought into the IBC, since its inception in 2016, to enhance its efficiency.
Earlier this month, Corporate Affairs Secretary Manoj Govil had said that the government is ready to make necessary amendments in the IBC to make the process of resolution faster and smooth.