Insolvency & Bankcruptcy Code Needed to Get More Simplified

Insolvency & Bankruptcy Code (IBC) has simplified a lot of things, but a lot more needs to be done, Ms. Vinita Srivastava, Joint Secretary who had directly dealt with bankruptcy procedure said at an ASSOCHAM Insolvency & Bankruptcy Code summit held in New Delhi.

Sharing his perspective, ASSOCHAM's secretary general, Mr Uday Kumar Varma said, "To say that the Insolvency and Bankruptcy Code, 2016 is a game changer or a path-breaking initiative is an understatement."

He added, "It is indeed so because this is for the first time that we have a sound legal framework and also administrative structures in place."

He further said that the one fundamental difference that the IBC had made was that it has changed the bargaining equation between the debtors and the creditors.

"Prior to this code this bargaining equation was loaded in favour of debtors, IBC has made this transformational change where the bargaining equation is now more in favour of creditors, that is a very fundamental advantage," said Mr Varma.

The second very important aspect of this whole thing, he said is that there are definite timelines. "It gives a physical timeframe within which resolution has to be made."

He also said that there is a strong legislative basis to carry out the resolution process, which is essential to bring about such large-scale changes.

Mr Sachin Gupta, Sr. Director, CRISIL Limited, the timing of the code is opportune because of the large level of non-performing assets (NPAs) plaguing the financial sector in India. The objective of this code is to resolve the problem of NPAs in a faster manner and enhance efficiencies in the financial ecosystem.

Currently, about a third of India’s gross non-performing assets have already been referred to National Company Law Tribunal (NCLT) under IBC. This number is expected to go up further with expectation of faster resolution of cases under IBC mechanism, said Mr. Gupta.

However, government has been proactive in taking feedback from the stakeholders and acting upon them. As a result, the code has undergone two major amendments. These amendments in the code will support the overall governance framework and quicken the resolution of NPAs, he added.

Mr. Sanjay Gupta, Director, IPA ICAI said, the recent amendments to IBC are an earnest attempt to address a number of issues faced in the ongoing stressed assets cases and will help reduce timelines, enhance transparency and improve realisations from their resolution. Further, a conducive ecosystem is being developed in the backdrop to quicken the resolution process.