Circular resolving IBC-PMLA clashes soon, says IBBI chief Ravi Mital

The problems related to interface between Insolvency and Bankruptcy Code (IBC) and Prevention of Money Laundering Act (PMLA) have been resolved and a circular detailing the manner of handling such issues is expected to be issued within a month, the Insolvency and Bankruptcy Board of India (IBBI) chairman Ravi Mital said on Wednesday.

 

Speaking at the ninth annual day celebrations of the insolvency regulator Mital said, “We have had discussions with the Enforcement Directorate (ED) and we have arrived at a solution that would be good and maintain the sanctity of both the laws.”

 

IBC and PMLA have often clashed with each other in cases where the assets of an entity undergoing insolvency have been attached by the ED for money laundering activities. IBC promises a clean slate to the winning resolution applicant and aims at resolving stressed companies by giving a moratorium on assets during insolvency proceedings.

   

The IBBI chief also said that it has taken note of various observations made by the Supreme Court (SC) about the IBC and would take action to implement all its suggestions within 2-3 months.

 

The SC in a recent judgment, while suggesting a revamp of real estate insolvency, has called for a nuanced approach in admitting cases of real estate insolvency calling to distinguish between genuine homebuyers and speculative investors.

 

MCA secretary Dipti Gaur Mukerjee, speaking at the same event, said that the government is taking steps to streamline the real estate insolvency regime.

 

Mukerjee highlighted that going forward there was a need to create a system for professional development of insolvency professionals and encourage them to self-regulate.

 

“This is not the time for policing everybody. It is time for a lot of introspection and coming up with possibly a very effective self-regulating mechanism for insolvency professionals and valuers,” she said.

 

Stressing the need to improve reports submitted by IPs about Preferential, Undervalued, Extortionate and Fraudulent transactions, the MCA secretary said that IPs need to be made future ready.

 

There are more than 4,500 registered insolvency professionals and 6,000 registered valuers under the Code.

 

She said that the older reports on cross border and group insolvency for which the proposed Bill has put an enabling clause need to be recalibrated with changing scenarios and called for a fresh discussion by IBBI on the same. 

 

Improving the CoC’s performance

 

Speaking on the occasion, M Nagaraju, secretary, Department of Financial Services said that several advisories have been issued for implementation of IBC to the banks. The banks, he said, have been asked to avoid unnecessary adjournments and be present and prepared for all hearings at the Tribunal.

 

“Once a decision is taken in the committee of creditors, individual banks should stick to it. They should also have a proper evaluation matrix of IPs and valuers,” Nagaraju said.

 

The DFS secretary said banks have also been asked to ensure working capital for companies undergoing insolvency proceedings.

 

“Insolvency law is a story of second chances for capital, for companies and for the workers. It is also a story of responsibility that credit must be honoured,” Nagaraju said while highlighting how banks’ NPA were at a decadal low and IBC had acted as a deterrent for defaulting debtors.

 

A Committee of Creditors (CoC) in IBC consists of financial creditors in insolvency cases and can also include operational creditors with limited participation and voting rights.

 

The IBBI in August 2024 had brought self-regulating guidelines that required the CoC to maintain integrity, confidentiality, objectivity during decision making process and disclose any conflict of interest. SC however, in its Jet Airways order, suggested the need for better enforcement of code of conduct for the CoC.  

Select committee to examine IBC appointed; Company Law Bill likely in next Parl session

 

The select committee to examine the Insolvency and Bankruptcy Bill, tabled in the monsoon session of the Parliament, was constituted on Wednesday with BJP MP Baijayant Panda appointed as the chairman of the panel.

 

The 24-member panel is expected to finalise its report before the commencement of the Winter Session of the Parliament. In

 

a complete overhaul of the insolvency regime, the IBC Bill has proposed major reforms including Group and Cross Border Insolvency and pre-packaged insolvency for large corporations.

 

The Ministry of Corporate Affairs is also expected to table the Companies Amendment Bill in the Winter Session, sources said.

 

Circular resolving IBC-PMLA clashes soon: IBBI chief

 

Govt working on streamlining real estate insolvency, implementing SC’s suggestions