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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