Ever since the enactment and enforcement of the Insolvency and Bankruptcy Code (IBC), it has got amended multiple times to sidestep impediments barricading the course of IBC implementation. However, one way or the other, hardships are creeping in hindering the effective implementation of the IBC causing teething troubles to all the stakeholders involved.

The government with the intent to wipeout blockades for effectual enforcement of IBC, constituted an Insolvency committee (Committee) with 14 members to enumerate recommendations to modify IBC to achieve its objective (speedy disposal of insolvency cases).

The Committee has recommended far-reaching modifications to the IBC with objective to shield the interests of the medium and small enterprises and home buyers.

The Committee recommended, inter alia, the following amendments to the IBC:

·       Authorizing the promoters (excluding wilful defaulters) of micro, small and medium enterprises (MSME) to bid during the insolvency process – it will enhance the revival prospects of such MSME and avoid the liquidation of the company along with saving jobs of employees.

·       To treat home buyers as financial creditors and amount raised from buyers in real-estate projects as financial debt with the objective to treat the home buyers equally on par with banks and financial institutions.

·       Operations creditors of MSME (due to their indispensability) should be paid more than liquidation value of the company.

·       No disqualification is pertinent for three years from the date of approval of the prior resolution plan by the NCLT (National Company Law Tribunal) based on the fact that if an NPA (non-performing asset) account is held out of corporate debtor acquisition.

·       Any person convicted of certain crimes as specified in the IBC will be excluded from the insolvency process for a period of 6 years from the date of release from imprisonment.

·       To extend the time duration to maximum of one year period for obtaining necessary approvals post sanction of resolution plans by NCLT.

·       The Real Estate Regulation and Development Act, 2016 (RERA) provisions are applicable to all insolvency resolution plans approved under the IBC.

·       To prohibit certain persons from bidding process who are indulged in the backdoor arrangement with corporate debtors (formally or informally/directly or indirectly).

·       To permit voting via electronic email to speed up the insolvency process based on various representations received from the lenders and creditors community.

·       Section 14 of IBC does not intend to bar actions against assets of guarantors to the debts of corporate debtor i.e right to invoke personal guarantees during the moratorium period is permitted.

It is evident that the proposed amendments are targeted at safeguarding the interests of the MSME and home buyers.

With the serious implementation of the proposed amendments, it is likely to overcome many of the complicated and complex issues road blocking the implementation of IBC – ultimately facilitating the speedy disposal of the insolvency cases.

Research inputs by Paruchuri Baswanth Mohan