More Amendments Likely In Insolvency Law
The insolvency law might be amended depending on recommendations of the panel reviewing issues related to the legislation, including those of homebuyers, a senior government official said.
While everything is time-bound under the Insolvency and Bankruptcy Code, Corporate Affairs Secretary Injeti Srinivas said the issue is how the interests of stakeholders are to be balanced. A 14-member panel, also chaired by Srinivas, is working to identify and suggest ways to address issues faced in the implementation of the IBC – which came into force in December 2016.
There is a feeling that this law is skewed a little too much in favour of financial creditors. It is not adequately addressing the requirements or expectations of other stakeholders. It is a serious area we have to look at. The committee is looking at all the issuesInjeti Srinivas, Corporate Affairs Secretary
According to him, competition, regulatory clearances, tax liabilities and other aspects would also be looked at.
“It was felt that there was enough reason to have a comprehensive stock-taking even though it is a one-year-old law... Based on recommendations of the Insolvency Law Committee, in the future there may be changes in the IBC,” Srinivas said.
A large number of cases have been filed under the IBC, which provides for a market-determined and time-bound insolvency resolution process.
“There are also apprehensions on whether this system (insolvency law) can be abused. Can somebody trigger this system for some wrongful intent?” the secretary said.
Among others, issues such as whether the insolvency process should be governed by liquidation value or enterprise value would also be looked into. “What are the rights of home buyers? What is the capacity of insolvency professionals? These are among the issues that have to be seen,” he said.
In recent months, there have been concerns about incomplete realty projects and consequent hardships faced by homebuyers. Some real estate firms are also facing insolvency proceedings.
There have also been suggestions from certain quarters about having provisions that would help provide relief to homebuyers.
Responding to a query about homebuyers' rights, Srinivas said, “Whatever you do, it has to be calibrated in a way that public interest is not affected. You maximise benefits and minimise losses.”
The panel members include Insolvency and Bankruptcy Board of India Chairperson MS Sahoo, RBI Executive Director Sudarshan Sen, former Lok Sabha Secretary General TK Viswanathan, Edelweiss Group Chairman and CEO Rashesh Shah, Shardul Amarchand Mangaldas and Co-Executive Chairman Shardul Shroff and Xpro India Chairman Sidharth Birla.
Earlier this month, Parliament cleared amendments to the IBC that would prevent unscrupulous persons from misusing the law.
Wilful defaulters and those whose accounts have been classified as non-performing assets, among others, are barred from bidding for stressed assets under the IBC.