GN Bajpayi Committee report on Insolvency and Bankruptcy Code

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Recently the report of GN Bajpayi Committee on Insolvency and Bankruptcy Code (IBC), 2016 has been released.

This committee has identified the following goals for the IBC process-

  • Resolution of distressed assets,
  • Promoting entrepreneurship,
  • Credit availability and
  • Balancing the interests of the stakeholders.

Key recommendations:

  • A standardized framework has been suggested to assess the success of IBC and improve its implementation.
  • Reliable real-time data is essential to assess the performance of the insolvency process.
  • Both quantitative and non-quantitative outcomes of the Code should be measured and monitored.
  • Non-quantitative results introduced by the Code, such as behavioral changes in debtors and creditors, need to be confirmed by research and quantitative proxy indicators.
  • IBC provides resolution for the stress of a company, a limited liability partnership, a proprietorship, or partnership firm or an individual.

Earlier, the Parliamentary Standing Committee had also made some recommendations to strengthen the IBC such as:

  • Establishment of special “National Company Law Tribunal” (NCLT) benches to hear only IBC cases,
  • Creating a professional code of conduct for the committee of creditors
  • Strengthening the role of solution professionals
  • Digitization of the IBC platform to speed up the resolution process and maximize the realizable value of the assets, etc.

Major issues related to IBC

  • Low recovery: Banks have done an average of 80% “haircut” in over 363 major offers since 2017. Long pendency of cases, delayed resolution process etc.

“Haircut” is the difference between the actual amount due from a borrower and the amount settled by him with the bank.

Source – The Hindu

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