Govt starts interministerial discussions on the upcoming IBC Amendment Bill
New Delhi, June 19 2023
MCA is aiming to bring the bill in the monsoon session of the parliament if the discussions are concluded by then
The government has started interministerial discussions on the upcoming Insolvency and Bankruptcy (IBC) amendment Bill, which proposes an overhaul of the law, senior officials told Business Standard.
The Bill proposes a separate framework for real estate insolvency with certain exemptions. The draft Bill has also inserted an enabling clause to allow the government to increase the ambit of prepackaged insolvency for larger companies in the future.
However, the prepackaged scheme for insolvency is not being opened up for larger companies just yet. The voting threshold for initiating the pre-packaged insolvency is also being lowered from 61 per cent to 51 per cent of the unrelated financial creditors. The Bill takes off from the discussion paper floated by the corporate affairs ministry (MCA) in January.
The ministry aims to table the Bill in the monsoon session of Parliament if the discussions are concluded by then. Once the talks are over, it will prepare a Cabinet note.
For real estate insolvency, the draft Bill has made a provision for homebuyers to transfer ownership and possession of a plot, apartment, or building to the allottees with the consent of the committee of creditors. It has also been suggested to allow project-wise insolvency in certain real estate insolvencies instead of initiating insolvency for the entire company.
Some of the other changes that were proposed by the ministry in its discussion paper include giving more power to the adjudicating authority and mandating the admission of insolvency applications filed by financial creditors.
Most of the proposals, it is learnt, have been incorporated in the draft Bill. Since its inception in 2016, the IBC has been amended six times to improve the efficiency of the Code.
The amendments could also address cases where the assets of the company and the guarantor often intermingle by proposing a mechanism to include such assets of the guarantor in the general pool of assets available for the Corporate Insolvency Resolution Process.
A special window may also be created in the corporate insolvency resolution for the sale of secured assets, whose possession has been taken by the secured creditor under the SARFAESI Act, 2002. This would be done if the guarantor’s and corporate debtor’s assets are linked.
The government has proposed a state-of-the art e-platform to provide a case management system, automated processes to file applications, delivery of notices, enabling interaction of insolvency professionals with stakeholders, storage of records of corporate debtors undergoing the process, and incentivising participation of other market players in the IBC ecosystem.
"It may also allow regulators and the AAs to exercise better oversight over their respective domains of functioning through the consolidated information available on the e-platform," the MCA said.
[The Business Standard]
