The government is set to do a complete review of the insolvency law with a view to reduce the time taken for the corporate insolvency resolution process (CIRP), according to a senior government official. Non-adherence to timelines under the Insolvency and Bankruptcy Code (IBC) is an issue that has been repeatedly raised by lenders and the government has repeatedly sought to address it through amendments to the IBC.
The Code requires that the resolution process for a corporate debtor be completed within 330 days. In the 190 resolutions completed under the IBC till December 2019, the average time taken for resolution has been 394 days.
“The government is doing a complete review of the IBC (to reduce time taken for resolution). The leadership of the National Company Law Tribunals is also seized of the matter,” said a senior government official, adding that the Centre expected to reduce the average number of days taken for resolutions.
The official added that the government would consider allowing the use of information utilities (IUs) to verify claims by creditors to allow faster admission of cases to the CIRP.
The official further said that the government would also consider placing rules to require resolution professionals to provide more regular updates to the Insolvency and Bankruptcy Board of India (IBBI), the insolvency regulator, to monitor progress under the resolution process. The government is aiming to bring down average time take for resolutions by 60 days, the official said.
Separate benches of NCLTs to speed up process
The government is seeking to speed up corporate insolvency through monitoring by the insolvency regulator IBBI and verification of claims through independent information utilities. It is also planning to set up separate benches of NCLTs for insolvency cases to reduce the average time for a resolution from 394 days to around 330 days.
The government had earlier passed provisions in the IBC requiring tribunals to pass orders explaining why decision on an admission had been delayed in case such a decision is not made within 14 days. An IU is an organisation which collects and authenticates information regarding debts from stakeholders and makes this information available to all stakeholders.
Experts said the move would be able to improve admission times, if registration of a debt with an IU was made mandatory and filing of false information was penalised. Daizy Chawla, managing partner of law firm Singh and Associates, welcomed the government’s efforts to speed up the resolution process but noted that “unless it is made mandatory that true and correct information be filed with information utilities by corporate debtor as well as creditors … it will leave scope for challenging the information available at information utilities”.
She also suggested that the government should provide binding guidelines of committees of creditors as well as resolution professionals to ensure that they work in a time-bound manner.
Another government official said that enhancing the capacity of the National Company Law Tribunals (NCLTs) was a key focus of the Corporate Affairs Ministry and that the government was considering setting up dedicated benches of the NCLT to deal with insolvency cases. Manoj Kumar, partner at law firm Corporate Professionals, said that a move towards dedicated benches of the NCLT to deal with insolvency cases would help speed up corporate insolvency cases.
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