Govt plans 7 changes in insolvency code for easier resolutions

Govt plans 7 changes in insolvency code for easier resolutions

New Delhi, Jul 18: The government proposed seven amendments to the three-year-old Insolvency and Bankruptcy Code (IBC) to provide easier voting rules for resolution of vexed cases such as Jaypee Infratech, apart from prescribing a 330-day deadline for the process, including litigation and other judicial proceedings.
The surprise moves are part of the IBC (Amendment) Bill that was cleared by the Union cabinet are aimed at resolving some of the cases, including high-profile ones such as Essar Steel and Bhushan Power and Steel, which have been in various legal forums for over two years now.
It also sought to comfort banks, which have been worried about the impact of orders by the National Company Law Appellate Tribunal (NCLAT) in cases involving Essar Steel and Binani Cement, treating secured lenders such as banks and operational creditors like vendors at par. Homebuyers can now hope to get some respite with the new provision that seeks to change the voting pattern to “present and voting” and allows for almost all resolutions to go through if they are backed by over 50% votes. So far, several decisions were held up as 66% votes were required for a resolution to be passed. In addition, those who did not vote were treated as naysayers in the process, further complicating crucial decisions, including deciding on a new buyer for a beleaguered company with the problem more acute in case of real estate where there are thousands of homebuyers.
But at least two of the proposed amendments are meant to signal the government’s backing for timely resolution, which was at the heart of the IBC as it earlier took years for cases to be resolved in debt recovery tribunals. So, the ministry of corporate affairs, which is piloting the bill, is now suggesting that specific reasons have to be given if a case is not admitted within 14 days.