New Delhi, Nov 23 The government may soon introduce a new pre-packaged resolution plan for stressed assets to provide a seamless system to address bankruptcy issues while also relieving pressure on the National Company Law Tribunal (NCLT) that is saddled with ever-increasing number of corporate insolvency cases.
Sources said that an Insolvency and Bankruptcy Board of India committee looking at the prospects and the framework for pre-packaged restructuring deals under the Insolvency and Bankruptcy Code (IBC) has submitted its report to Ministry of Corporate Affairs.
The Ministry would now initiate the process of public consultation before a legislative exercise is carried out to institute the new process under the IBC.
As per the suggestions, sources said, a two-pronged approach may follow pre-packaged deals. One where creditors and company facing insolvency appoint an specialised agency to do proper assessment of assets of the company and get investors that offer proper value for the stressed assets.
The other may be private discussions between the company and the creditors to find the best course of action to resolve the stressed assets. Once the resolution process is approved under this process, it would go to the NCLT for final clearance. To protect the interest of operational creditors, sources said under this scheme, all dues of such creditors would be cleared first. This, it is felt, would be necessary as a deal between credits and promoters of stressed asset may not involve them and thus they would remain in dark on its contents before the matter is put before the NCLT.
Government sources said that once a consensus is evolved over pre-packaged deals and all legal issues related to the proposed changes examined, it would be taken for Cabinet approval before amendments to the IBC are introduced in the Parliament. Sources said that with Parliament session starting early next year, need for an ordnance on the issue may not be required, but that option is also open.
Experts are of the view that the pre-packaged insolvency framework will help in easing the burden on the NCLT and the National Company Law Appellate Tribunal (NCLAT). Already there is a huge backlog of cases at NCLT benches and most of the CIRP cases have been delayed.
Apart from pre-packaged deals, a special resolution framework for micro, small and medium enterprises (MSME) will also be introduced soon that would look at setting up an administrative system to deal with stress in these segments worst affected by Covid pandemic rather than putting the matter before the insolvency courts. This could speed the process of resolution. The administrative set up for this could either be in the IBBI or the MCA.
( With inputs from IANS )
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