Govt introduces IBC tweaks in Lok Sabha, bill referred to select committee

Finance and corporate affairs minister Nirmala Sitharaman on Tuesday introduced a bill in the Lok Sabha for amendments to the Insolvency and Bankruptcy Code (IBC).

The bill is now referred to a select committee of parliament, which will submit its report on the proposed amendments by the first day of the next session of Parliament, according to the Lok Sabha’s supplementary list of business.

The names of the members of the committee and its terms and conditions will be decided by Lok Sabha speaker Om Birla.

ET had on June 26 reported that the corporate affairs ministry had finalised the amendments, which include a framework for each of the three types of bankruptcy resolutions under the IBC—creditor-led resolution, cross-border insolvency and corporate group bankruptcy. The government was aiming to introduce the bill in the ongoing monsoon session.

This comes after months of deliberations and is aimed at expediting the resolution of bankrupt firms and bolstering recoveries by creditors.

Between its launch in May 2016 and 2021, the IBC has been amended six times to respond to emerging challenges in resolving bankrupt firms. The government had since then refrained from further tinkering to allow the bankruptcy ecosystem to take root.

The planned creditor-led resolution framework will largely involve out-of-court arrangements. This will lower the workload of the National Company Law Tribunal (NCLT) by enabling the committee of creditors to take on greater responsibility and expedite stressed asset resolution, ET has reported.

The cross-border insolvency framework will be tailored around a model United Nations law and aim to ensure easier access for creditors to overseas assets of stressed companies, according to the people familiar with the details. Such a framework would enable India to seek cooperation from foreign countries to bring defaulters’ assets there under consideration for insolvency proceedings.

The ‘voluntary’ group insolvency framework will facilitate a joint resolution of stressed entities of a domestic corporate group, given the interconnected nature of their operations.