Govt likely to table revised IBC Amendment Bill in Budget session, says official

The CIIRP is an out-of-court initiation mechanism for genuine business failures to facilitate faster and more cost-effective insolvency resolution, with minimal business disruption. Once implemented, this will help ease the burden on judicial systems, promote ease of doing business and improve access to credit, says the Bill’s statement of object and reasons.

The group insolvency framework seeks to efficiently resolve insolvencies involving complex corporate group structures, minimising value destruction caused by fragmented proceedings and maximising value for creditors through coordinated decision-making. And the cross-border insolvency framework seeks to lay the foundation for protecting stakeholder interests in domestic and foreign proceedings, promoting investor confidence and aligning domestic practices with international best practices.

The new Bill also amends Section 7 of the IBC, to ensure insolvency applications are admitted by the National Company Law Tribunal (NCLT), within 14 days. Presently, an average of over 434 days is being taken to admit applications, leading to considerable value loss for the corporate debtor.
Now, Section 7 is being modified to specify that an application for initiating the corporate insolvency resolution process by the financial creditors shall be admitted if a default exists, and no other grounds shall be considered for deciding such an application.

Experts say the proposed IBC Amendment Bill, while aiming to refine processes and plug loopholes, falls short of addressing structural bottlenecks like prolonged delays, and value erosion in asset-light sectors such as services.

“To deliver real reform, the new Bill must incorporate provisions for a genuine Pre-Pack Insolvency, a streamlined, out-of-court creditor-driven process that ensures certainty of timelines and minimises judicial intervention, unlike the over-engineered 2021 Pre-Packed framework that added layers of NCLT approvals, public bidding, and the costs of process borne entirely by MSMEs, resulting in barely three or four admissions in over four years,” said Mukesh Chand, Senior Counsel, Economic Laws Practice.

Siddharth Srivastava, Partner at Khaitan & Co says that if the CIIRP is not introduced, the existing pre-packaged insolvency resolution process (PPIRP) should be extended to larger companies. Currently PPIRP is only applicable to MSMEs.

"Separately the existing provisions regarding admission of insolvency should be amended to clarify that if there is debt and default, application 'must' be admitted. The current language uses the term 'may' be admitted. This will ensure that element of subjectivity is removed making admission process quicker and smoother," added Srivastava.