Parliamentary panel suggests review of insolvency code
The Parliamentary Standing Committee on Finance (PSC) has suggested a review of the Insolvency and Bankruptcy Code (IBC).
- According to the Parliamentary Standing Committee on Finance (PSC), the Insolvency and Bankruptcy Code (IBC) has deviated from the original objective of offering quick resolution options to stressed companies and protecting the rights of creditors.
- The PSC has outlined low recovery rates with haircuts up to 95% (the original price cut).
- More than 71 percent of the cases before the National Company Law Tribunal (NCLT) are pending for more than the 180 days mandated by the IBC. This is delaying the process of resolution of these cases.
Issues identified by PSC:
- Concerns have been raised over fresh graduates being appointed as Insolvency Professionals (RPs) and their ability to handle large and complex corporate affairs.
- The very slow pace of the NCLT in accepting cases and approving resolution plans is the main reason for the delay in insolvency resolution.
- There are more than 50% vacancies in the sanctioned workforce for NCLT.
- Some rules should be laid down for RPs so that proper standards are enforced and fair self-regulation is ensured.
- High Court judges should be judicial members of NCLT and better training should be arranged for other members also.
- Standards in line with global standards should be developed for determining the quantum of haircuts to be charged by the creditors.
Source – The Hindu
