Page 42 - Banking Finance December 2019

ARTICLE

The road to success is always under construction and so is for delay in admission or rejection of application, by
the Insolvency and Bankruptcy Code. Since its inception in financial creditors beyond 14 days.
2016, there had been certain challenges faced by IBC in its 3) Corporate Insolvency Resolution Process will not take
implementation also, like: more than 330 days.
1) Application to initiate Corporate Insolvency Resolution
4) In all cases, except for withdrawal of CIRP proceedings,
Process, is taking more than 14 days.
the authorized representative will cast the vote for all
2) Time limits prescribed in the code, have not been financial creditors.
adhered to in a number of cases, e.g. in case of Essar 5) The Committee of Creditors will consider the manner
steel, the Corporate Insolvency Resolution Process has
of distribution of proceeds and can take into account
completed more than 700 days. the order of priority amongst creditors.
3) In cases of a home developer, the Committee of 6) The Bill provides for payment to operational creditors,
Creditors (CoC) was composed of thousands of home of an amount that is the higher of the: (i) liquidation
buyers who did not vote on the resolutions. value of their debt or (ii) Amount to be distributed under
4) NCLAT also said that the Committee of Creditors (CoC) the resolution plan.
are interested parties in the process and should have 7) Statutory authorities cannot raise litigation against
no say in manner of distribution of proceeds of a successful bidders, for recovery of pre Corporate
resolution plan among creditors (which include both Insolvency Resolution Process, dues.
Financial and operational creditors). 8) Committee of creditors may choose to liquidate, the
5) Statutory authorities are raising litigation against corporate debtor any time before the confirmation of
successful bidders, for recovery of pre Corporate resolution plan.
Insolvency Resolution Process dues.
6) NCLAT has held that the haircut should be similar for Conclusion:
financial and operational creditors, and there should be Going by the above discussion we can deduce that the code
no discrimination amongst financial creditors, on the is a healthy step in the right direction. This will help improve
basis of security interest. NPA recovery rate. It will also instill a sense of financial
discipline among the borrowers who
were hitherto under no pressure to
return the loans taken from bank.
Overall, this augurs well for Indian
Economy and Indian Banking sector
in particular. Code is still evolving and
may undergo a few iterations and
corrections.

References:
1) National Company Law Tribunal
(NCLT) & National Company Law
Appellate Tribunal (Practice and
Procedure) by CS Ajay Kumar.
Recent Amendments 2) Corporate Restructuring, Valuation and Insolvency by
Sangeet Kedia.
To address some of the above issues and challenges that
Government of India passed Insolvency and Bankruptcy 3) Strengthening the Code, A study by Assocham and CRISIL
Amendment Bill 2019 in August 2019, which has some of 4) https://corporate.cyrilamarchandblogs.com
the following, key points: 5) http://prsindia.org
1) Redefining the resolution plan 6) https://www.crisil.com

2) To prevent the inordinate delay in admission, the 7) https://www.business-standard.comhttps://
adjudicating authority has to provide reasons in writing, www.livemint.com/

42 | 2019 | DECEMBER | BANKING FINANCE