Centre steps in to put IBC cases back on track

Our Bureau New Delhi | Updated on July 17, 2019 Published on July 17, 2019

Piyush Goyal, Union Minister for Commerce and Industry and Railways   -  ASHOKE CHAKRABARTY

Cabinet approves new statutory deadline of 330 days for resolution

Faced with the prospect of inordinate delays beyond the 270-day deadline for completion of resolution process derailing the utility of the IBC framework, the government has stepped in to ensure that the entire framework is not thrown into a creative disarray and resolution does take place in a timely manner.

As part of the seven significant amendments now proposed to the Insolvency and Bankruptcy Code, the Union Cabinet on Wednesday approved a new deadline of 330 days for completion of the corporate insolvency resolution process (CIRP).

This 330-day time frame will be an overarching limit and would include litigation and other judicial processes, Piyush Goyal, Union Minister for Commerce and Industry and Railways, clarified at a post Cabinet press briefing.

He also said that all ongoing litigation (like the infamous Essar Steel case) will be covered under the proposed amendments, once they are enacted into law.

The seven amendments to the IBC are aimed at filling a critical gap in the corporate insolvency framework, while at the same time maximising value from the resolution process. They would enable the government to ensure maximisation of value of a corporate debtor as a going concern while simultaneously adhering to strict timelines, an official release said.

It may be recalled that delivering resolution in a time-bound process was one of the key benefits that IBC promised when it was enacted in 2016. However, the actual story has been quite different on the ground with loopholes being found and bizarre interpretations being drawn on the law, leading to litigation and inordinate delays in some of the large cases.

About 30 per cent of the more than 800 ongoing CIRP cases have exceeded the 270-day statutory timeline. An additional 20 per cent has crossed the six-month deadline.

Experts’ take

Tarun Bhatia, MD and Head of South Asia, Kroll, said the 330 days of maximum time allowed for bankruptcy resolution, including for litigation and other judicial processes, will ensure that there is a timely resolution.

If the revised overall limit of 330 days is effectively enforced, the CIRP could actually become what it was envisaged as — a means for time-bound resolution based on financial creditor decisions, according to Bikash Jhawar, Partner, L&L Partners.

Published on July 17, 2019
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