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The proposed Insolvency and Bankruptcy Board of India is likely to fall under the purview of Corporate Affairs Ministry. This would end the potential turf war between two Central Ministries – Corporate Affairs and Finance.
A senior official in Corporate Affairs Ministry told BusinessLine , “The board will be constituted by us. We have been given that in writing. It will be a new board.”
While individual insolvency cases are looked into by the Debt Recovery Tribunal (DRT) which falls under the Department of Financial Services (Ministry of Finance), the corporate insolvency cases are dealt by the National Company Law Tribunal (NCLT), which is under Corporate Affairs Ministry.
“DRT will be limited to individual insolvency. Individual, if it is related to corporate – for example has given a guarantee for corporate – then it will come to NCLT. The division is clear now,” he added.
The official further said that it was the Ministry of Corporate Affairs’ proposal that cases related to individual insolvency should remain with the Finance Ministry, adding that “Corporate is our strength/mandate. We will otherwise be flooded with individual cases.”
The plan for a Bankruptcy Code was announced by Finance Minister Arun Jaitley in the Union Budget 2015-16.
Experts dealing in with insolvency cases believe that giving mandate to Corporate Affairs Ministry to handle the Board is the right approach. “There is a thinking that Insolvency and Bankruptcy Board will be operating like the capital market regulator SEBI,” another official said.
Transfer of cases Meanwhile, the Ministry has also started work on transfer of cases from the existing bodies looking into such cases to NCLT.
“The transfer of cases will be done in three phases. Already the NCLT is in operation. Company Law Board (CLB) has got dissolved. All cases of CLB have come to NCLT. This is the first phase. Second phase will be when Board for Industrial and Financial Reconstruction (BIFR) cases appear, fresh filing is done, but for that we need a little bit of coordination with the Finance Ministry. Third, will be when High Court cases are transferred,” he added.
Besides putting in place the physical infrastructure, another challenge before the Ministry is creating a cadre of Insolvency Resolution Professionals, the official said.
“We will have a challenge…how do we train them, design a curriculum, regulate them...lot of work to be done. We will need a new body of professionals which we don’t have currently,” he added.
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