Tag: IBBI

No objection certificate from IT dept not required for voluntary liquidation: IBBI

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Insolvency regulator IBBI has clarified that an Insolvency Professional (IP) handling voluntary liquidation process will not be required to seek any No Objection Certificate (NOC) or No Due Certificate from the Income Tax department for compliance with any such process.

Th position was laid down in a circular by the Insolvency and Bankruptcy Board of India (IBBI) which held that the process of applying such NOC/NDC from the IT Department is time-consuming and defeats the objective of time-bound completion of process under the Insolvency and Bankruptcy Code (IBC), the IBBI said.

Currently, the voluntary liquidation regulations mandates the liquidator to make the public announcement within five days office appointment, calling for submission of claims by stakeholders within 30 days from the liquidation commencement date. The regulations also obligate all the financial creditors, operational creditors including government and other stakeholders to submit their claims within the specified period. If the claims are not submitted in time, the corporate person may get dissolved without dealing with such claims and such claims may consequently get extinguished.

It has been noticed that even after providing an opportunity for filing of claims, the liquidators seek NOC/NDC from the income tax department despite the fact that the code or the regulations do not envisage seeking such NOC/NDCs.

Experts’ take

Yogendra Aldak, Partner, Lakshimkumaran and Sridharan Attorneys, said “It brings necessary assurance to the stakeholders and makes sure that the stakeholders are not required to comply with a procedure not contemplated under the Code.”

Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas and Co, said “ Negating the practice of seeking a NOC/NDC from the IT department would operationally ease the process of voluntary liquidation. The liquidators can strike off this requirement from their checklist of obligations.”

Maneet Pal Singh, Partner, I.P. Pasricha & Co, said that in recent times we have seen that the objective of time-bound completion of liquidation process gets defeated primary due to the process of obtaining NOC from the Income Tax Department by the Insolvency Professional since that consumes substantial amount of time against the express provisions of the Insolvency and Bankruptcy Code, 2016.

“In order to tackle the same, the IBBI clarified that an Insolvency Professional handling voluntary liquidation process is not required to seek any NOC from the Income Tax Department and with this we believe that the process will be handled smoothly in a time bound manner”, Singh said.

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SBI chief, BFSI News, ET BFSI

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Mumbai: SBI chairman Dinesh Khara has said that the bank has full confidence in the judiciary and that former SBI chairman Pratip Chaudhury would be released unconditionally soon. He also said that the banking community, through the Indian Banks’ Association, has taken up the matter with the government.

“The arrest of Mr Chaudhury is extremely unfortunate. There have been several reactions in the public space of the banking community as well as previous chairmen. It appears that an opportunity was not given to him to be heard before the arrest. We have utmost faith in the country’s judicial system and are confident that he will be released unconditionally at the earliest,” Khara told reporters here on Wednesday.

Banking sources said that the complainant in the same case had filed a false FIR against the resolution professional (RP) who had been appointed to take charge at the defaulting company. This had resulted in a landmark judgment that said a case against the RP can be filed only with the Insolvency and Bankruptcy Board of India (IBBI).

Khara denied that there were any irregularities in the sale of the loan by SBI. “As far as SBI is concerned, we adhere to the best practices in corporate governance and there has been no irregularities in the instant case and the prescribed rules and process were followed by the bank in dealing with this account.” Khara indicated that the decision on the sale of the NPA was unlikely to have been taken by Chaudhury. “Issues of this magnitude are invariably dealt with at a local level and the top management of the bank, including the chairman, are not involved in decision making. We have got the structure in place and we are confident that people across the hierarchy can take decisions in such matters,” Khara said.

Banking sources said that the complainant in this case was politically connected. They said that it appeared to be a premeditated case as most of the higher courts are on vacation for Diwali.

Meanwhile, SBI sources said that the valuations mentioned in the order are irrelevant as the properties were not sold by the bank. They said that the bank had sanctioned a term loan of Rs 24 crore and a cash credit limit of Rs 1 crore was sanctioned in 2008 and the loan had to be restructured within a year itself. Despite restructuring, the loan turned into a non-performing asset in 2010. This prompted the bank to send a recall notice for Rs 34 crore in 2012 and a suit was filed in the debt recovery tribunal in 2013 for Rs 40 crore.

As the bank was not successful in attaching the property under the Securitisation Act, the loan was sold to Alchemist Asset Reconstruction Company (ARC) for Rs 25 crore in 2014. The ARC too could not recover the loan and finally invoked the IBC.

The promoters had filed an FIR against the RP, who was arrested. It was in this case that the landmark order was passed requiring complaints against the RP to be filed only with the IBBI. Banking sources said that both NCLAT and the Supreme Court have passed strictures against the promoters.



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Delay in resolutions raise questions on IBC regime, BFSI News, ET BFSI

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According to the IBBI, of the 4,500 cases that have been admitted, only 14% of cases have been resolved, 38% are still ongoing and 63% have been closed. Experts say, there is a destruction of the value of assets due to delays.

When the Insolvency and Bankruptcy Code (IBC) came into force five years ago, it was hailed as a landmark reform. However, many questions have been raised due to the delay in the resolutions of companies.

The five-year old regime that follows a creditor-in-control model has side lined systems like SARFAESI, Lok Adalats and Debt Recovery Tribunals. Under IBC’s model, the promoter loses control over the management and debt is auctioned to other interested parties.

However, the supreme court fears that the IBC would also fail like its predecessor because of judicial delay.

“Judicial delay was one of the major reasons for the failure of the insolvency regime that was in effect prior to the IBC. We cannot let the present insolvency regime meet the same fate,” Justice DY Chandrachud observed in a 190-page judgment.

Litigations by promoters not wanting to let the company out of their hands is one of the major factors under judicial delay.

The Supreme Court on Monday had urged the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal to adhere to the the 330-day deadline for clearing pending resolution plans.

According to the Insolvency and Bankruptcy Board of India, of the 4,500 cases that have been admitted, only 14% of cases have been resolved, 38% are still ongoing and 63% have been closed. Of these, 75% ended up in liquidation, but were already sick or defunct, which made chances of recovery lower. Of the ongoing cases, 75% have already exceeded 270 days and took more than 400 days on average.

The IBC was passed as a law in June 2016, with Jayant Sinha as one of the main proponents of the regime. The IBC requires a corporate insolvency resolution process (CIRP) to be completed in 180 days, which can be extended by another 90 days to a maximum of 270 days.

Who is affected? Delay in resolutions raise questions on IBC regime
Operational or financial creditors, the company undergoing the CIRP and its employees are among the parties affected due to the delay.

“The recent ruling of Ebix Singapore Private Limited v. Committee of Creditors of Educomp Solutions Limited and Anr highlighted difficulties experienced by parties by reason of a slow CIRP, which affects the subsequent implementation of the plan. These delays, if systemic and frequent, have an undeniable impact on the commercial assessment that the parties undertake during the course of the negotiation. Delay in CIRP increases non performing assets and destroys the value of assets,” said Ashok Paranjpe, managing partner at legal firm MDP & Partners.

What are the reasons for delay in resolutions?

Delay in resolutions raise questions on IBC regime
According to Paranjpe, delays are due to three reasons. First, the NCLT taking considerable time in admitting CIRPs, second the late and unsolicited bids by resolution applicants after the original bidder becomes public upon passage of the deadline for submission of the resolution plan, and third due to the multiplicity of litigation and appellate process to the NCLAT and the Supreme Court.

“Such inordinate delays cause commercial uncertainty, degradation in the value of the Corporate Debtor and makes the insolvency process inefficient and expensive,” he said.

The COVID-19 pandemic has also played its role in causing delays in the IBC process. The recovery rate fell to 39.3% as of March 2021 from 46% as of March 2020. Of the total outstanding amount of Rs 1.32 lakh crore, only around Rs 25,944 crore was recovered in fiscal 2021, or a rate of 19.7%.

Why is timely resolution important?

The main of goal of IBC is a time bound insolvency resolution, value maximization of assets, promotion of entrepreneurship and availability of credit, Paranjpe points.

“The Ebix Singapore matter has effectively highlighted the importance of a faster resolution process, otherwise which would either result in a down-graded resolution amount of the corporate debtor or a delayed liquidation with depreciated three assets, which frustrates the core aim of the IBC,” he said.

Why are banks accepting steep haircuts?
Delay in resolutions raise questions on IBC regime
Recently, Jayant Sinha, chairperson of the standing committee on finance, informed the Parliament last month that there were steep haircuts, as high as 95%, and over 71% of the cases were pending for more than 180 days, indicating that there has been a deviation from the original objectives of the IBC.

“Slowing economic growth and inordinate delays in the completion of CIRP proceedings are the two biggest reasons forcing lenders to accept very steep haircuts,” Paranjpe said.

In terms of recovery value under IBC, mostly big companies, situation is unsatisfactory and there are several major cases in which corporates have suffered whopping haircuts of over 70% and in some cases, even 95% due to delay, he added.

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47% closed cases under IBC end in liquidation, many due to value erosion, BFSI News, ET BFSI

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Nearly 47 per cent or 1,349 cases closed under the insolvency law ended up in liquidation till the end of June this year but economic value in majority of the cases had eroded even before commencement of the corporate insolvency resolution process, according to IBBI.

A total of 4,541 CIRPs (Corporate Insolvency Resolution Process) were initiated till end of June and out of them, 2,859 were closed. Out of them, 1,349 CIRPs ended in liquidation while 396 ended in approval of resolution plans, as per the latest quarterly newsletter of the Insolvency and Bankruptcy Board of India (IBBI).

Liquidation

“About 47 per cent of the CIRPs, which were closed, yielded orders for liquidation, as compared to 14 per cent ending up with a resolution plan. “However, 75 per cent of the CIRPs ending in liquidation (1,011 out of 1,349) were earlier with Board for Industrial and Financial Reconstruction (BIFR) and / or defunct. The economic value in most of these CDs (Corporate Debtors) had almost completely eroded even before they were admitted into CIRP.

“These CDs had assets, on average, valued at around 7 per cent of the outstanding debt amount,” the newsletter said. In recent times, there have been concerns raised in certain quarters about the number of companies going into liquidation and steep haircuts taken by creditors under the Insolvency and Bankruptcy Code (IBC), which has been in force for nearly five years. IBBI is a key institution in implementing the Code.

Realisation by creditors

“Till June 30, 2021, realisation by FCs (Financial Creditors) under resolution plans in comparison to liquidation value is 167.95 per cent, while the realisation by them in comparison to their claims is 36 per cent. It is important to note that out of the 396 CDs rescued through resolution plans, 127 were in either BIFR or defunct,” the newsletter added.
Around 51 per cent of the CIRPs were triggered by Operational Creditors (OCs) while nearly 43 per cent were initiated by FCs.

“However, about 80 per cent of CIRPs having an underlying default of less than Rs 1 crore, were initiated on applications by OCs, while about 80 per cent of CIRPs, having an underlying default of more than Rs 10 crore, were initiated on applications by FCs,” it noted. According to the newsletter, the share of CIRPs initiated by CDs is declining over time and they usually initiated the process with very high underlying defaults

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Jayant Sinha, BFSI News, ET BFSI

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As the Indian Bankruptcy Code (IBC), one of the crucial reforms that gives India Inc the ‘right to exit’ and start afresh, completed five years, ETCFO spoke with Jayant Sinha, former union minister and Chairman of the parliamentary standing committee on finance, to know if liquidation is a scam under IBC? And more.

“Liquidation should not be a benchmark. And that is why we have to think carefully about what should be the benchmarks and a resolution process particularly for secured financial creditors,” said Jayant Sinha.

Almost half of the closed cases by lenders under IBC in FY21 ended in liquidation, as per the Insolvency and Bankruptcy Board of India (IBBI), while only 13 per cent were resolved. In most of the cases under IBC, by the time they are resolved, their asset value depreciates leading to 90% haircuts, according to IBBI

Specifically from the secured creditors perspective, when they lend against collateral they expect 100 per cent value back instead of “salvage or the liquidation value”.

“If that was to be the case, the kind of loans a company would be able to get would be very modest, because everybody’s just lending against liquidation value. We can’t have that,” Sinha said, underscoring the importance of having benchmarks.

Liquidation can’t be a benchmark under Insolvency and Bankruptcy Code: Jayant SinhaThese benchmarks are for secured financial creditors as there should be a very high level of confidence that they’re going to get the vast part of their loan back, he said.

But the question is how to decide the benchmark?

Sinha points to global benchmarks, the major economies that we compete with like Germany, Japan, China, the US, the UK. What secured financial creditors typically get through the resolution process should be the benchmark, he said.

Benchmark the quantum of haircut

In one of the recommendations, the parliamentary standing committee in its report titled, ‘Implementation of Insolvency and Bankruptcy Code: Pitfalls and Solutions’ was to benchmark the quantum of haircuts to avoid a 90 per cent haircut situation.

As per IBBI, in the resolved cases, the haircut, or the loss to banks on their claims, rose to 60 per cent in FY 2021, from 55 per cent average in the previous years. While in the March 2021 quarter alone, haircuts rose to a whopping 74 per cent of the claims made by the lenders against the defaulters.

While it is a matter of concern, how will benchmarking haircuts work?

Benchmarking haircut is not a prescription. It’s not a number that you have to meet. But it is something that should guide the committee of creditors in terms of how and how quickly they should go through the resolution process..

He believes that the system needs to gear up to deliver better outcomes. He feels there are many reasons why 40% recovery is happening. He ascribed these low recoveries to companies close to liquidation coming to IBC, processes that dragged on for a long time eventually eroding the value of the assets, apart from other reasons.

“Going forward, 40% cannot be the benchmark. It is not good enough. Whereas 5% is not good enough either. We need to do better for secured financial creditors. And the changes that we are suggesting are in support of all of that,” he said.

Role of NCLT

As far as delays in the process are concerned, one aspect is counter litigation by promoters. This costs money and time to the whole system. How should IBC deal with such issues, especially when NCLT is facing the challenge of capacity?

Sinha suggested three steps to reduce litigation.

Firstly, fill the vacancies at NCLT as quickly as possible because then there is more time to adjudicate a case well and come up with a good resolution.

If judges don’t have enough time and rush through cases, they won’t give good judgments, and then things will end up in litigation. Therefore, adding capacity as soon as possible is one way in which we can deal with these endless litigation type issues.

Liquidation can’t be a benchmark under Insolvency and Bankruptcy Code: Jayant SinhaSecondly, improve the quality of NCLT members. The parliamentary committee has recommended that the NCLT should at least have high court judges so that we can benefit from their experience and their wisdom. That’s another way to prevent litigation.

The third way of preventing litigation is to ensure when people submit the resolution plan as per the deadline, they do not have an opportunity to come in with another resolution plan after that. Because not doing so, will again rest in litigation, and a lot of contentions back and forth.

“So these are three very concrete steps that we have suggested to reduce litigation as it is one of the reasons a lot of these timelines are being extended,” he said.

ALSO READ: RBI Governor and Jayant Sinha to discuss IBC



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NSE, Insolvency and Bankruptcy Board of India ink pact for research collaboration, BFSI News, ET BFSI

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Leading stock exchange NSE on Friday said it has joined hands with the Insolvency and Bankruptcy Board of India (IBBI) for research collaboration. The objective of the collaboration is to create a research ecosystem in the area of insolvency and bankruptcy in the country, the exchange said in a statement.

It further said that an efficient insolvency and bankruptcy resolution system enables timely resolution of financial stress, balances interests of all stakeholders, promotes entrepreneurship and increases availability of credit at optimal costs. This, in turn, improves growth prospects and builds institutional strength in an economy.

IBBI is a unique regulator, which regulates insolvency professionals as well as insolvency processes.

Under this collaboration, NSE and IBBI will focus on enhancing the existing research efforts in the areas related to insolvency and bankruptcy in India, promoting studies that explore interlinkages between the development of the insolvency process, financial markets and economy, the statement noted.

Also, they will analyse the effectiveness of insolvency laws and practices across the world and fostering evidence-based policy recommendations to strengthen the insolvency framework in India.

IBBI Whole-time Member Sudhaker Shukla said that in an evolving area such as insolvency and bankruptcy, there is a dire need to promote credible research on the best practices and outcomes.

To this effect, IBBI has collated a dynamic data set relating to processes and outcomes under the IBC and encouraged evidence-based research in the insolvency space, he said.

“To further this research, our endeavour is to explore new avenues and possibilities in the sphere of research collaboration. In this context, the partnership between IBBI and NSE will go a long way in plugging the research void in such an important area of distressed assets and its resolution,” he added.

Vikram Limaye, MD and CEO, NSE, said the exchange has always been at the forefront in encouraging research in relevant and emerging issues that are important for effective policy making and promote development of markets.



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IPs to face penalty for non-compliances

Banking & Finance

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Insolvency regulator IBBI has come up with a novel step to ensure Insolvency Professionals ( IPs) better discharge their duties and at the same time help distinguish the performers and non-performers amongst them. It has come up with a graduated system of levy of monetary penalty for minor non-compliances by the IPs.

For this purpose, the Insolvency & Bankruptcy Board of India (IBBI) has now directed the three Insolvency Professional Agencies (IPAs) to amend their bye-laws so as to provide maximum and minimum monetary penalty for certain non-compliances by IPs registered with such agencies.

Till date, there are three IPAs registered with the IBBI. These are ICSI Institute of Insolvency Professionals, Indian Institute of Insolvency Professionals of ICAI and Insolvency Professional Agency of Institute of Cost Accountants of India.

Monetary penalty

The IPAs have now been directed to provide for the maximum and minimum monetary penalty in the interest of objectivity and uniformity. The penalty will be imposed where the Disciplinary Committee of the IPAs decides to impose such penalty on its professional members.

As many as 14 contraventions have now been listed out by the IBBI in a circular along with the minimum and maximum penalty that can be imposed.

The contraventions include failure to submit disclosures, returns etc. to IPAs or incorrect disclosures, returns relating to any assignment as required under IBC (penalty of upto ₹1 lakh or 25 per cent of fee, whichever is higher, subject to a minimum of ₹50,000); accepting an assignment having conflict of interest with stakeholders (upto ₹ 2 lakh or 25 per cent of fee, whichever is higher, subject to a minimum of ₹1 lakh), etc.

Experts’ views

Ashok Haldia , Chairman of Indian Institute of Insolvency Professionals of ICAI, said “Prescription of a graduated system of monetary penalty for minor non compliances is welcome as it would bring in objectivity and uniformity in dealing with cases within an IPA and across all the IPA. It differentiates between non compliances and violations.”

Abhishek Saxena, Co-founding Partner, Phoenix Legal, said this marks a welcome step to ensure better diligence and integrity in the system.

Nakul Sachdeva, Partner, L&L Partners, said “The circular would lead consistency in the quantum of penalty imposed”.

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IBBI puts more onus on RP, says dutybound to find frauds, BFSI News, ET BFSI

Banking & Finance

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Seeking to enhance transparency in the insolvency process, IBBI has amended regulations for corporate insolvency proceedings wherein a resolution professional will be required to provide details about his or her opinion about avoidance transactions pertaining to a corporate debtor.

The Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations.

The amendments to the regulations are aimed at enhancing “the discipline, transparency, and accountability in corporate insolvency proceedings”.

A resolution professional is duty-bound to find out if a Corporate Debtor (CD) has been subject to avoidance transactions, namely, preferential transactions, undervalued transactions, extortionate credit transactions, fraudulent trading and wrongful trading, and file applications with the adjudicating authority seeking appropriate relief.

This not only claws back the value lost in such transactions increasing the possibility of reorganisation of the CD through a resolution plan, but also disincentivises such transactions preventing stress to the CD.

“For effective monitoring, the amendment requires the RP to file Form CIRP 8 on the electronic platform of the Board, intimating details of his opinion and determination in respect of avoidance transactions,” the release said.

The IBBI has put out the format of form CIRP 8 and it needs to be filed in respect of every CIRP ongoing or commencing on or after July 14.

Intimation of changes

With the amended regulations, an insolvency professional conducting CIRP will also have to disclose all former names and registered office address(es) so changed in the two years preceding the commencement of insolvency along with the current name and registered office address of the CD, in all its communications and records.

CIRP refers to the Corporate Insolvency Resolution Process.

The amendment takes into account the possibility where a CD may have changed its name or registered office address prior to commencement of the insolvency process. In such cases, the stakeholders may find it difficult to relate to the new name or registered office address and consequently fail to participate in the CIRP.

Roping in professionals

Under the insolvency regulations, an interim resolution professional or a resolution professional may appoint any professional, including registered valuers, to assist him in the discharge of his duties in the conduct of the CIRP.

“The amendment provides that the IRP/RP may appoint a professional, other than registered valuers if he is of the opinion that the services of such professional are required and such services are not available with the CD.

“Such appointments shall be made on an arm’s length basis following an objective and transparent process. The invoice for a fee shall be raised in the name of the professional and be paid into his bank account,” the release said. The amendments have come into effect from July 14.



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IBC cases per RP may be capped, Code of ethics strengthened, BFSI News, ET BFSI

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The Indian Institute of Insolvency Professionals of ICAI (IIIPI) is working on a four-point plan for insolvency professionals.

The plan includes setting limits on the number of permissible assignments for each executive and their role in the prepack package for MSMEs.

The plan

IIPI has conducted study groups on four matters of contemporary topics on enhancing the role of small-sized IPs, response of insolvency regime to Covid, clarifying roles of IPs in respect of prepack framework for MSMEs, and creating code of ethics for our professional members.

The reports of these study groups are may take a month to complete.

The self-regulator and IBBI are aiming to strike a balance between resolution professionals coming from large institutions and standalone individual IPs, with the latter often finding themselves at a relative disadvantage in comparison with executives from top-draw consultancies.

IIIPI is also set to recommend urgent covid-response measures that IPs will likely follow in proposing any resolution plan. The quasi-judicial body is also defining a prudent role of IPs in the pre-packs.

IIIPI is drawing on best practices to craft a role for MSMEs, where promoters face default occasions due to macroeconomic environment or policy changes.

It has tapped legal expertise in the UK where prepack packages are a hit.

IIIPI is drawing a code of ethics by adding more clauses to the IBBI statute already available.

The recommendations would need to be approved by both the Insolvency and Bankruptcy Code of India (IBBI) and the government.

There are 3,500 insolvency professionals, three insolvency professional agencies, 80 insolvency professional entities, 4,000 registered valuers, 16 registered valuers’ organisations and one information utility.

IBC cases per RP may be capped, Code of ethics strengthened

IBC so far

Since the provisions of the Corporate Insolvency Resolution Process (CIRP) came into force on December 1, 2016, a total of 4,376 CIRPs have commenced till the end of March this year.

Out of the total, 2,653 have been closed, including 348 CIRPs that ended in approval of resolution plans. As many as 617 CIRPs were closed on appeal or review or settled, while 411 were withdrawn and 1,277 ended in orders for liquidation, as per IBBI’s latest quarterly newsletter.

Significant improvements in the score for resolving insolvency made doing business in India easier and the emergence of new markets for resolution plans, interim finance and liquidation assets are among others.

Apart from the few missing elements such as cross border and group insolvency to complement corporate insolvency, an institutional framework for grooming a cadre of valuers is sometime away.

As compared to the previous regime which took nearly five years for a conclusion, the process under the Code yielding a resolution plan takes on average 400 days. It, however, falls short of intended 180/270 days.



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As Covid-led bankruptcies loom, govt readies pre-packaged insolvencies, BFSI News, ET BFSI

Banking & Finance

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The government is likely to bring a pre-packaged insolvency resolution process across the board in light of an anticipated rise in bankruptcies due to the pandemic.

According to reports, the government is likely to start with micro, small and medium enterprises.

As bad loans are feared to top 13.5% of total advances due to the pandemic such a move has become urgent, experts said.

The government has been mulling the introduction of the provision for pre-packaged (pre-pack) corporate insolvency resolution plan wherein a restructuring plan would be agreed upon in advance between the company and its creditors.

In the Budget for 2021-22, Finance Minister Nirmala Sitharaman said the government will introduce alternative methods of debt resolution and a special framework for micro, small and medium enterprises.

What is pre-packaged insolvency?

Under the pre-packaged process, main stakeholders like creditors, shareholders and the existing management or promoter can come together to identify a prospective buyer and negotiate terms of a resolution plan, before submitting it to NCLT for formal approval.

Experts say it will help expedite the resolution process for stressed assets as well as reduce the number of insolvency-related cases before the National Company Law Tribunal (NCLT).

Last year, the corporate affairs ministry sought comments on pre-packaged resolution plans.

The pre-pack process will cut short time spent at the NCLT, and the consequent delay in implementation of a workable resolution plan.

Help for MSMEs

A sub-committee of the insolvency law panel had recommended making available pre-pack for all corporate debtors in a phased manner. It had highlighted its need for micro, small and medium enterprises, which have simpler structures and fewer liabilities than the large corporates.

Cut load, timelines

A pre-packaged insolvency resolution scheme would drastically reduce the timeline for the corporate insolvency resolution process thereby saving time, money and resources.

It would also cut the workload of overburdened NCLT significantly as there would be a reduction in unnecessary pleas from stakeholders during proceedings.

It will, in turn, have a positive effect on the value maximisation for the creditors.

Mounting cases

From December 1, 2016, till the end of September last year, total 4,008 CIRPs (Corporate Insolvency Resolution Processes) have commenced under the IBC.

Out of the total, 473 CIRPs have been closed on appeal or review or settled, 291 have been withdrawn, 1,025 have ended in orders for liquidation and 277 have ended in approval of resolution plans, as per data compiled by the IBBI.

Post the pandemic, there will be an urge to close the pending cases and there will be a significant increase in new stressed cases and introducing the pre-packaged IBC at this time will boost the economy and allow quick closure of the pending and upcoming cases.



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