Constituting a 14-member panel to suggest changes to a law little more than a year after its promulgation reflected the government’s keenness to correct mistakes in the original legislation, while also shining the spotlight on an impatient New Delhi that seemed unwilling to give more time.
Even as some of the recommendations rush through the system to become law, the practitioners and lenders – for whom the law was made – believe these changes could engender more issues than helping settle some of the conflicts.
Inconsistencies, dilution in the spirit of the law, sounding more politically right than confronting the reality and bringing in constituencies that do not figure in the bankruptcy laws of mature countries appear to be hallmarks of the recommendations.
Provisions worrying bankers and lawyers include the panel taking an apparent cue from the government’s knee-jerk reactions to home buyers’ agitations, barring promoters from bidding for assets and bringing in the need for shareholder approvals. These aspects, if adopted, could weaken a law that was about to end decadesold corporate chicanery of judicial processes that crippled banks.
“My disappointment comes from the fact that some real issues have not been confronted,” says Sumant Batra, managing partner at Kesar Dass, a law firm specialising in bankruptcies. “There may not be empirical evidence but surely there is a strong case to address key issues like cross-border insolvency law and group of companies insolvency.”
A panel headed by corporate affairs secretary Injeti Srinivas has submitted a 100-page report that suggested ways to improve the functioning of the Insolvency and Bankruptcy Code, a report that shook both the business as well as the banking communities. Its other key recommendations are allowing MSME promoters who are not wilful defaulters to bid for their companies, streamlining section 29A and barring only those who contributed to the defaults made by the company, and allowing a company to withdraw from the IBC process if 90% lenders rule in favour
source : Economic times