Proposal for ordinance amidst concerns about Code, including possibility of promoters wresting back control of firm under bankruptcy process.
New Delhi : The government will soon promulgate an ordinance to amend the Insolvency and Bankruptcy Code, aimed at tightening the current framework amid a rising number of insolvency cases. The Cabinet on Wednesday approved bringing in an ordinance to make “some changes” in the Code, Corporate Affairs Minister Arun Jaitley said. The Code, which became operational in December 2016, provides a market-determined and time-bound insolvency resolution process. Over 300 cases have already been approved by the National Company Law Tribunal (NCLT) to be taken up under the law, implemented by the Corporate Affairs Ministry. Briefing reporters after the Cabinet meeting, Jaitley said some changes are proposed in the Code and it is being done by way of an ordinance. He did not divulge specific details about the proposed ordinance. The proposal for the ordinance also comes at a time when there are concerns in certain quarters about various aspects of the Code, including the possibility of promoters wresting back control of a company under the insolvency process. “The whole process (about the ordinance) is at an advanced stage and therefore you want the process to go on the right track,” Jaitley said without providing further details. He was responding to a query as to why the government was promulgating an ordinance when Parliament session is to be convened next month.
The Corporate Affairs Ministry has already set up a 14- member committee to identify and suggest ways to address issues faced in implementation of the law. The Insolvency Law Committee, chaired by Corporate Affairs Secretary Injeti Srinivas, will take stock of the implementation of the Code. More than 300 cases have been admitted for resolution under the Code by the National Company Law Tribunal. A case is taken up for resolution under the Code only after receiving approval of the NCLT for the same.
KPMG India’s Partner Sanjay Doshi said that insulating the insolvency process from undue influence is very critical for its success. “One of the key aspects will be to ensure wilful defaulters do not get control of the company. Also, certain other matters especially around tax efficiency, exchange compliances etc which could be an impediment to the process would need amendment,” Doshi said.