Key Highlights of Report of ‘Standing Committee on Finance - MCA’ on Insolvency and Bankruptcy Code

Key highlights of report of ‘Standing Committee on Finance-MCA’ on Insolvency and Bankruptcy Code

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Key highlights of report of ‘Standing Committee on Finance-MCA’ on Insolvency and Bankruptcy Code The Standing Committee on Finance’- MCA has issued a 32nd report titled ‘Implementation of IBC-pitfalls and solutions’ whereby it has recommended for a benchmark for the quantum of ‘haircut by Financial creditor to be comparable to global standards. The committee proposed the establishment of ‘Institute of Resolution Professionals’ to oversee and regulate the functioning of RPs. It also proposed more transparency in the appointment of RPs by the Committee of Creditors, the inclusion of a more flexible resolution plan, the Adoption of a crossborder insolvency framework, etc. This write-up aims to highlight key recommendations of the committee.

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1. Quantum of hair-cut at par with global standards The Committee found that a low recovery rate with 95% hair cut and delay in the resolution process with more than 71% cases pending for more than 180 days deviates from the objective of the Code. The Committee recommended a benchmark for the quantum of “hair-cut” comparable to global standards.

2. Transparency in the appointment of RPs The committee noted that during CIRP, the committee of creditors decides whether to continue with IRP as the RP or to replace the IRP with another RP without any guidelines. The committee suggested that IBBI should fame guidelines for the selection of the RPs by the CoC in a more transparent manner.

3. Establishment of ‘Institute of Resolution Professionals’ The Committee recommended putting in place a professional selfregulator like ICAI for RPs. “An Institute of Resolution professionals may be established to oversee and regulate the functioning of Resolution Professionals so that there are appropriate standards and fair selfregulations,” the committee said.

4. Inclusion of flexible resolution plan The committee highlighted that resolution professional currently doesn’t have flexibility with the IBC to dispose of the corporate defaulter across multiple bidders. The Committee recommended that the IBC be amended to clarify that the resolution plan can be achieved through any of the means prescribed under regulation 37 of the CIRP Regulations.

5. Digitisation of IBC ecosystem The committee recommended the NCLT and NCLAT should completely digitize their records and operations with provisions for a virtual hearing to get through the backlog and deal with the pending cases swiftly. “All available data should be in a machine-readable format. There should be a broader built-in consultation mechanism and an ecosystem for regular feedback on the performance of NCLT” said the committee.

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6. Pre-pack insolvency resolutions The Committee recommended that the pre-pack framework may be gainfully employed while strictly adhering to the timelines to achieve swift and cost-effective resolutions. The committee recommended that a pre-pack resolution framework for corporates may be rolled out to aid the existing insolvency framework in facilitating quicker and more effective resolutions. Currency MSME are considered operational creditors and come after secured creditors in the ‘waterfall mechanism’.

7. Cross border insolvency The committee recommends that the adoption of a crossborder Insolvency framework should be expedited as once the recommendations of the ‘cross border insolvency committee’ are adopted, the cross border insolvency framework would go a long way in ensuring coordination and communication between jurisdictions to successfully address the resolution of the cross border insolvency cases.

8. Strengthing home buyers The Committee recommended that once a single homebuyer decided to initiate insolvency proceedings in NCLT, the real estate owner should be obligated to provide details of other home buyers of the project to the concerned home buyer so that he can mobilise 10% or 100 homebuyers. This move would safeguard the interest of the homebuyer.

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Insolvency and Bankruptcy Code Ready Reckoner AUTHOR

:

V.S. DATEY

PUBLISHER

:

TAXMANN

DATE OF PUBLICATION

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JULY 2021

EDITION

:

1ST EDITION

ISBN NO

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9789390831722

NO. OF PAPERS

:

556

Rs. 1195 | USD 49

Description Insolvency & Bankruptcy Code Ready Reckoner is a comprehensive, topic-wise commentary on laws governing Insolvency & Bankruptcy in India [as amended by the Insolvency and Bankruptcy Code (Amendment) Ordinance 2021]. This book covers an analysis of the following Laws: u Insolvency and Bankruptcy Code, 2016 u Recovery of Debts and Bankruptcy Act, 1993 u Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFESI Act) The book intends to provide answers to the practical issues faced by professionals on a routine basis. It provides complete and accurate information about all provisions of Insolvency and Bankruptcy Laws.

The Present Publication is the Latest Edition, authored by V.S. Datey, updated till 30th June 2021, with the following noteworthy features: u [Topic-wise Commentary] on the Insolvency & Bankruptcy Code, 2016 u Analysis of all provisions of the Insolvency and Bankruptcy Code, 2016 with relevant Rules/Regulations, Judicial Pronouncements, Circulars and Notifications u [Previous Amendments] made by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 u [Short Commentary] on Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021

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