BT Buzz: IBC to get its mojo back
As per the existing provisions of the law, the IBC cases should be resolved within 270 days. But there are cases which have not been resolved even two years after they were admitted due to appeals and litigation
- Jul 23, 2019,
- Updated Jul 24, 2019 2:14 PM IST
The Insolvency and Bankruptcy Code (IBC), one of Narendra Modi-led government's most under-stated reforms, was losing its soul and spirit to many judicial pronouncements, so much so that experts had started writing its obituary. Not only were the cases not being resolved on time - within the 270-day limit prescribed in the law - unnecessary judicial 'interventions' were changing the law's basic character, defeating its purpose.
In order to reverse this trend and reinstate the trust of financial institutions and investors, the government has proposed some changes/clarifications. Of course, these changes have to be passed by Parliament, but for now, the government seems to have sent a strong signal that it will not allow one of its biggest reforms to die due to judicial overreach. We look at the impact of the proposed changes.
Time-bound completion of resolution process: As per the existing provisions of the law, the IBC cases should be resolved within 270 days. But there are cases which have not been resolved even two years after they were admitted due to appeals and litigation. Till the end of March 2019, there were 1,143 ongoing insolvency cases, of which 362, or 32 per cent, had already breached the 270-day deadline. The amendments try to address this issue by increasing the time limit to 330 days to account for delays due to litigation and other judicial processes.
"The judiciary, in the name of principal of natural justice and giving all parties fair hearing, kept giving indefinite dates. Judges used to think that they can exclude the litigation period from the stipulated time. Now, the amendment says that whatever happens, it has to finish in 330 days," says Mamta Binani, a high court lawyer and a resolution professional.
But what is the rationale for increasing the timeline to 330 days? L. Charanya, Partner, Lakshmikumar & Sridharan, says the 330-day figure is not arbitrary. "There was a report submitted in the court during the Swiss Ribbons (insolvency) case and I think it says that the average time taken for completion of a case is 300-odd days. That's why they increased the timeline to 330 days," she says
The Insolvency and Bankruptcy Code (IBC), one of Narendra Modi-led government's most under-stated reforms, was losing its soul and spirit to many judicial pronouncements, so much so that experts had started writing its obituary. Not only were the cases not being resolved on time - within the 270-day limit prescribed in the law - unnecessary judicial 'interventions' were changing the law's basic character, defeating its purpose.
In order to reverse this trend and reinstate the trust of financial institutions and investors, the government has proposed some changes/clarifications. Of course, these changes have to be passed by Parliament, but for now, the government seems to have sent a strong signal that it will not allow one of its biggest reforms to die due to judicial overreach. We look at the impact of the proposed changes.
Time-bound completion of resolution process: As per the existing provisions of the law, the IBC cases should be resolved within 270 days. But there are cases which have not been resolved even two years after they were admitted due to appeals and litigation. Till the end of March 2019, there were 1,143 ongoing insolvency cases, of which 362, or 32 per cent, had already breached the 270-day deadline. The amendments try to address this issue by increasing the time limit to 330 days to account for delays due to litigation and other judicial processes.
"The judiciary, in the name of principal of natural justice and giving all parties fair hearing, kept giving indefinite dates. Judges used to think that they can exclude the litigation period from the stipulated time. Now, the amendment says that whatever happens, it has to finish in 330 days," says Mamta Binani, a high court lawyer and a resolution professional.
But what is the rationale for increasing the timeline to 330 days? L. Charanya, Partner, Lakshmikumar & Sridharan, says the 330-day figure is not arbitrary. "There was a report submitted in the court during the Swiss Ribbons (insolvency) case and I think it says that the average time taken for completion of a case is 300-odd days. That's why they increased the timeline to 330 days," she says