IBBI expected to introduce two key changes to the Insolvency Law: Report
New Delhi, November 22, 2022
The decision was made during meetings between IBBI officials, lawyers, consultants and some officials from the finance ministry
The law governing insolvency proceedings in India may soon undergo two key amendments. According to a report in the Economic Times (ET), the Insolvency and Bankruptcy Board of India (IBBI) may enable quicker debt resolutions and distribution of recovery proceedings despite the continuation of litigation.
According to the report, stakeholders agreed that banks must be allowed to restart the insolvency proceedings if a successful resolution applicant backs off.
"The finance minister addressed the gathering following which there were frank discussions with different groups that were formed," a person who attended the sessions was quoted by ET as saying.
"Two points to emerge clearly were the need to amend the law to allow banks more flexibility in case a bidder pulls out, and to allow distribution of proceeds even if there is pending litigation," they added.
The brainstorming sessions were also attended by lawyers, consultants, IBBI officials and officials from the finance ministry.
Now, the suggestions from the sessions would go to a wider audience for deliberations and discussions. Keeping in mind their suggestions, the IBBI will recommend amendments to the government.
The law is only amended when there is no ambiguity between the ministry, the industry and other stakeholders.
There have been instances when banks have sought approval from the courts to distribute the proceeds from a sale despite pending litigation. People familiar with the matter, however, told ET that the new changes would give more power to the creditors.
[The Business Standard]