The panel recommended that an amendment to the IBC should me made to clarify that proceedings on dubious transactions made by the erstwhile management of the bankrupt company can continue even after the completion of the insolvency resolution plan.
The panel has also proposed a code of conduct for the representatives of lenders deciding on the future of the bankrupt business.
NEW DELHI : An expert panel led by ministry of corporate affairs secretary Rajesh Verma has recommended changes to the insolvency and bankruptcy framework including introduction of guidelines on evaluating revisions to the bankruptcy resolution plans already filed.
The panel has also proposed a code of conduct for the representatives of lenders deciding on the future of the bankrupt business. In its report submitted to the union finance and corporate affairs minister Nirmala Sitharaman, the panel suggested that submission of unsolicited resolution plans and revisions of resolution plans needed to be curbed.
“Although there are stage-wise timelines provided in the regulations, resolution plans are received by the resolution professional after the stipulated deadlines. In some cases, revisions are made to submitted resolution plans in an attempt to outbid other potential resolution applicants,” the panel said while recommending regulations for reviewing late submission of plans and unsolicited revisions made to plans.
The panel recommended that an amendment to the Insolvency and Bankruptcy Code (IBC) should me made to clarify that proceedings on dubious transactions made by the erstwhile management of the bankrupt company can continue even after the completion of the insolvency resolution plan. “This will ensure that there is clarity amongst stakeholders on the manner in which such proceedings will continue after the approval of the resolution plan,” the report by the insolvency law committee said.
The report also recommended that the period for reviewing questionable past transactions of the suspended management of the bankrupt business should be revised to cast a wider net for catching such transactions. Such review of past transactions should start from the date of filing of bankruptcy petition, rather than the date of commencement of the bankruptcy resolution process. This will not only help increase the scope of ‘avoidable transactions’ but will also discourage any perverse incentives for corporate debtors to delay the admission of bankruptcy applications by creditors, the report said.
The report also said that tribunals should dispose of the resolution plans within 30 days of receiving it. The tribunal should record reasons in writing if it fails to dispose of the plan within this timeline, the report said.
Experts said the panel’s recommendations are in the right direction. A focus area is timely resolution of stressed accounts, said Rajesh Narain Gupta, Managing Partner at law firm SNG & Partners.
“The committee has recommended that the tribunal should dispose of the resolution plan within 30 days and it should record the reasons if it fails to do so. This has been stated in the same breath while recognizing that there is a lot of pendency of cases. While it’s a step in the right direction, only time would tell if we are able to achieve this considering past record and the pressure on National Company Law Tribunal,” said Gupta.
