Amendments in Insolvency and Bankruptcy Code underway:

The Code follows an evidence-based policy-making method for bringing amendments. This method is followed in most economic legislations, however, the IBBI has been the most successful after the Securities and Exchange Board of India and other such bodies in suggesting real-time difficulties faced by the bar and the bench in making the Code a success. The ILRC has made some important recommendations in its fifth report some of which have been brought forth as amendments to the Code.

Some of the future developments that could be brought in the Code are discussed below:

  • Time Taken for approval of Resolution Plan: The time taken in approval of the Resolution Plan by the adjudicating authority is much longer and it affects the condition in which a Resolution Applicant proposes a plan.
  • Look Back period to start from the date of application for initiation of Insolvency: The look-back period for preferential and undervalued transactions should be increased and the date from which the look-back period should start should ideally be from the date of application for initiation of CIRP and not from the date of admission order is passed. The admission order date for the start of the lookback period gives undue incentive to the CD and the suspended management to delay the proceedings of initiation of insolvency.
  • Recognition of initiation of Insolvency Proceedings from enforcement of a foreign award: The NCLT Mumbai and NCLT Hyderabad have interpreted this aspect in their respective judgments in a contradictory manner and a lot of clarity is required in this regard. The recognition of the foreign award is a sine qua non for initiation of any proceedings of enforcement in the domestic law prescribed under the Arbitration and Conciliation Act, 1996. Clarity on the enforcement of foreign awards through the means of insolvency is likely to be brought by the Supreme Court in the near future.
  • Introduction of a new chapter in the code on cross-border insolvency: A new chapter has been tabled before the Parliament to make the position on neutrality and parity between domestic and foreign creditors for improving the investment climate in India.
  • Amendment for Insolvency of Real estate entities: Recent reports suggest that some amendments tailored to the Insolvency of real estate entities would be brought. The amendments are likely to cover the aspect of project-wise insolvency of real estate entities, the continuation of construction projects, and several other amendments in this regard.
  • Provisions for Replacement/Removal of Authorised Representative: The current law does not have any provision for a replacement of an Authorised Representative appointed for representing the interest of homebuyers. Such provisions are likely to be brought in the near future.
  • Settling the debate for the plight of Operational Creditors under the Code: The Operational Creditors get haircuts of even 100% where they have no means to challenge the mandate where they have no major say. The balance in the treatment of the creditors of a different class is necessary.
  • Pre-Pack for MSMEs: The Pre-Pack amendment for MSMEs brought in 2021 has been a lesser-explored domain for the MSMEs.Therefore, with the number of rising registrations of entities as MSMEs, the number of recourses to Pre-Packs might increase in 2023.
  • Payment to workmen and statutory dues should not be a reason to avoid the Resolution Plan: The Supreme Court recently held that the dues of the workmen and the statutory dues cannot be ignored by the successful resolution applicant and the provision for payment of such dues ought to be included in the Resolution Plan.
  • Clean Slate after Resolution Plan is passed: Mandating discontinuation of Preferential, Undervalued, Fraudulent, and Extortionate Transaction cases even after the CIRP is over / Resolution Plan is approved and the Plan does if the Plan should not be hit by surprise events.

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