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Soon there may be a provision to withdraw the application for initiating Corporate Insolvency Resolution Process (CIRP), post admission. This is part of the proposed changes that the government is contemplating for the Insolvency and Bankruptcy Code (IBC) through the Ordinance route.
The Union Cabinet will most likely consider an Ordinance for this purpose at its meeting slated for Wednesday, official sources said.
The amendment to IBC will, however, stipulate that an application for initiating CIRP could be withdrawn only if the Committee of Creditors (COC) is to allow this action with a vote share of 90 per cent.
Currently, there is no provision for withdrawal of an application under insolvency process once it has been admitted. If withdrawal of application concept is allowed, then it could help facilitate out-of-court settlement of disputes, said experts.
The other changes to the IBC being considered include reduction in the voting share for approval of a resolution plan and other critical decisions of COC from 75 per cent to 66 per cent or more of the financial creditors.
The recommendations of the Ministry of Corporate Affairs (MCA)-appointed Insolvency Law Committee will be the basis for the proposed Ordinance.
Home buyers, MSMEs
The report, which has been made public by the MCA in early April, had recommended among other things that home buyers should be treated as ‘financial creditors’ for the insolvency process.
The Insolvency Law Committee had also recommended that Centre be allowed to exempt MSMEs from application of certain provisions of the IBC. Promoters of MSMEs, if not wilful defaulters, are likely to be allowed to bid for their companies under resolution process.
Fast track mechanism
However, indications are that the Centre may not accept the Insolvency Law Committee’s recommendation against continuation of fast track mechanism for smooth exit of small firms. Simply put, the fast track mechanism requiring resolution process to end in 90 days for small firms will stay.
Also, the committee’s suggestion that the threshold limit of ₹1 lakh for filing resolution application be increased to ₹10 lakh is unlikely to be accepted, sources added.
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