Page 32 - Banking Finance February 2023

ARTICLE

(a) and (b), such CD or person, as the case may be, shall
be punishable with imprisonment for a term which shall
not be less than 3 years, but which may extend to 5
years or with fine which shall not be less than Rs. 1 lakh,
but which may extend to Rs. 1 crore, or with both.
If any Director or Partner of CD deliberately
contravenes the provisions of Chapter III-A, such person
shall be punishable with imprisonment for not less than
3 years, but which may extend to 5 years, or with fine
which shall not be less than Rs. 1 lakh but which may
extend to Rs. 1 crore or with both.

ROADBLOCKS Ahead: mechanism needs to secure transparency so that the MSMEs
could take big advantage of it.
The Plausible Roadblock Ahead for the MSMEs-
Firstly, the proposed plan of the CDs needs to be present In terms of World Bank report of the Ease of Doing Business
at the Committee of Creditor's table before initiation. Report, The lBC along with time to time amendments had
Even though the PPIRP allows the MSMEs to move catapulted India in World Bank's Doing Business rankings
forward without the additional clauses of section 29A, from a lowly 142 in 2014 to 63 in 2019 and gradually to 52
they are unsure if the condition of their NPAs is stressed. as of 2020.
The creditors will be reluctant to proceed.
One of the important objectives of the Code is to bring the
There might be scenario, if the CoC accumulates the
insolvency law in India under a single unified umbrella with
majority vote of 66%, the debtor in possession model
the object of speeding up of the insolvency process.
could get transferred to the IP.
The pre-packaged Insolvency Resolution Process (PPIRP) is
Disruptions in evaluating the past unwanted debts, due
like pre-packaged Food which can be opened and used. It
to the reason that improper valuation transactions ,
may prove a big reform to MSME which is facing financial
Lastly may be in continuation to the distressed units and
difficulties due to pandemic or other issues. It would be cost-
the lenders it would be extremely difficult to match up
effective, fast and result-oriented.
the escalation of PPIRP.
There is no doubt about the concern pertaining to Haircuts
What Next in the Aberrant Path for involved in IBC referred cases for which a lot of churning of
thoughts and models from international standards are
MSMEs?
getting in consideration by the IBBI & GOI. Even at the
It was being expected that PPIRP shall provide speedier beginning of the Aug 2021, a parliamentary standing
resolutions and hence a new Chapter under IBC was added
committee appointed to examine the workings of the
with all checks and balances. With considerable learning and Insolvency and Bankruptcy Code (IBC) has recommended an
maturity of the ecosystem, and a reasonably fair Debtor- overhaul of the present system including a threshold rate
Creditor relationship in place, the ground was ready to of haircut for creditors below. It has also recommended a
experiment new options for resolution of stress under IBC new supervisory body to oversee resolution professionals
in furtherance of its objectives. and suggested that only high court judges be appointed to
the NCLT to ensure quicker disposal of cases.
It would be a significant reform in terms of returns to the
creditors and the potential investors since its inception to On the consensus, the corporate matters are solved through
liquidation. The path ahead would welcome several challenges the regulations of the case law. Experts claim that the process
as it would be essential to take operational creditors into could endeavour a lifeline to the slumping avenues of MSMEs
confidence as per plan. Funds accumulation for repaying the amidst the hard-bitten bearings of the Covid-19 pandemic. At
creditors would impose a different concept of hurdles that need last we can presume that in the impending time, the framework
to be crossed for successfully leading the process. The insolvency envisaged will be cost-effective, fast and result-oriented.

28 | 2023 | FEBRUARY | BANKING FINANCE