Parliamentary panel flags 'ambiguities' in IBC; govt mulls amendments

Following the status quo put on BPSL's liquidation, a parliamentary panel has deemed the existing IBC not up to the mark

A parliamentary committee on Thursday flagged “ambiguities” in the Insolvency and Bankruptcy Code (IBC), with sources stating that the government appears to be in the process of considering amendments to address concerns, according to a report in Press Trust of India.

 

Sources said the recent Supreme Court (SC) judgement rescinding JSW Steel’s resolution plan for Bhushan Power and Steel Ltd (BPSL) was also brought up in the deliberations of the Standing Committee on Finance led by Bharatiya Janata Party (BJP) MP Bhartruhari Mahtab, an order which has led to a debate over the efficiency of the insolvency mechanism in place.

 

On Monday, the apex court put a status quo on BPSL's liquidation based on a plea by JSW Steel, as the company argued that the liquidation would be damaging to it, its lenders, and its employees.

 

Corporate affairs secretaries and representatives of multiple banks appeared before the committee on Thursday while its members discussed the agenda of the “review of working of the Insolvency and Bankruptcy Code and Emerging Issues.”

 

Sources said certain committee members flagged inadequacies, such as delays in the resolution process. It was noted that the preceding panel, headed by Jayant Sinha, had also highlighted certain gaps in the law and recommended changes. The government had accommodated some of the said suggestions in an initial amendment of the law.

 

"We believe that the government is very much in the thick of things as far as addressing the issues related to the IBC are concerned. We got the view that there may be more amendments in the offing," a source said.

 

The source added that the IBC has, on many occasions, served the company and its creditors in distress.

 

"Any law is a dynamic process. It evolves with time," said the source, adding that the IBC, enacted in 2016, has proved helpful in various cases.

What is the Insolvency and Bankruptcy Code?

Enacted in 2016, the IBC lays down a basic framework for the insolvency and bankruptcy-related resolution of individuals, partnership firms, and corporate entities. The aim of this code is to revive businesses undergoing financial distress in a timely manner, aiding creditors to recover their dues.

 

The central goal of the IBC is the streamlining of the insolvency process, protection of interests of stakeholders involved, and ultimately enriching the efficiency of the Indian economy as a whole.