Common man as a stakeholder in the Indian insolvency and bankruptcy ecosystem can now help modify the regulations and enhance the overall efficiency of the IBC framework.
Insolvency regulator IBBI has resorted to an exercise of ‘crowdsourcing ideas’, inviting the public and stakeholders of IBC to suggest changes that may be required to the regulations already put in place till date since the enactment of IBC in 2016.
The regulator is crowdsourcing ideas to understand the important issues in the extant regulatory framework that hinder transactions and has sought alternative solutions to address them. More than a dozen regulations issued by IBBI are expected to be reviewed/overhauled.
This window will be open for comments from the public, including stakeholders, between May 6 and December 31. The regulator intends to notify the modified regulations by March 31 next year and bring them into force from April 1, 2024, according to IBBI.
With crowdsourcing, the universe of ideas available to the regulator would be much larger and the possibility of a more conducive regulatory framework would be much higher.
Therefore, IBBI has invited public comments on the regulations already notified under the Code.
‘In right direction’
Aseem Chawla, Managing Partner, ASC Legal, said: “This recent phenomenon of outreach of institutions of soliciting public comments is a constructive in not only being able to garner comments in the form of crowdsourcing but in the long term would gain confidence of public at large and the societial buy in. From a public policy perspective this is a welcome move.”
It may be recalled that IBBI had introduced this concept of crowdsourcing ideas in 2021 to get stakeholders’ views on the regulatory changes that may be needed.
Since it came into being in 2016, the Insolvency and Bankruptcy Board of India (IBBI) has effectively engaged stakeholders in the regulation-making process. The process factors in ground realities secure ownership of regulations and produces regulations robust and precise, relevant to the market needs at a particular time.
Experts see crowdsourcing suggestions as a move in the right direction for a regulator to fill in the gaps on the ground. Similarly, collective consultation will assist in tying the loose ends in the regulations.
Legislation and regulations are one thing and ground realities are another. Crowdsourcing suggestions can make any legislation more effective and pragmatic, they said.
There are several issues including cross-border insolvency, group insolvency that are awaiting regulatory action and legislative changes. The regulation relating to pre-packaged insolvency needs to be amended to ensure that it is available for all categories of corporate debtors (not just MSMEs), insolvency law experts said.
Mukesh Chand, Senior Counsel, Economic Laws Practice, said : “Most of the Regulations under the Code were issued during 2016-17 and after that many amendments have been done several times especially in relation to CIRP and Liquidation process. Certain gaps under the Code were tried to be filled by way of regulations, so it is quite necessary to streamline such regulations and fill the gap in the light of experience gained and difficulties faced during such process under IBC.”
This is on account of Corporate Insolvency Resolution Process (CIRP) not yielding the desired results, and also because Pre-Packaged Insolvency Resolution Process (PPIRP) would only be an additional option available to the creditors which provides greater flexibility to all stakeholders on account of being a mix of a formal and informal process and also easing the burden on the already overburdened Adjudicating Authorities.