The government will bring about "necessary amendments" in the Insolvency and Bankruptcy Code (IBC) to enhance corporate resolution and facilitate cross-border insolvency process, Finance Minister Nirmala Sitharaman proposed in the Union Budget 2022-23.
The main objective of the Code is to resolve the corporate debtors (CDs) in distress. "Necessary amendments in the Code will be carried out to enhance the efficacy of the resolution process and facilitate cross-border insolvency resolution," Sitharaman said while presenting the Budget 2022-23 in Parliament on Tuesday.
The government had suspended the initiation of the corporate insolvency process under IBC for one year from March 25, 2020, to March 24, 2021, to provide relief to the firms undergoing stress due to the pandemic. It also increased the minimum threshold for the insolvency process from Rs 1 lakh to Rs 1 crore.
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A pre-packaged insolvency resolution process was introduced under IBC as an alternative insolvency resolution process for corporate micro, small and medium enterprises in April 2021.
The Code has created a cohesive and comprehensive insolvency ecosystem.
It has also opened possibilities of the resolution, including merger, amalgamation and restructuring of any kind besides opening opportunities to a host of professional service providers, the government said in the Economic Survey 2021-22 a day earlier. As many as 421 CDs were rescued as of September 30, 2021, through resolution plans, while a total of 1,419 CDs were referred for liquidation. In value terms, around 74 per cent of distressed assets were rescued.
The resolution of these 421 cases helped recover Rs 2.55 lakh crore against the total debt of Rs 7.94 lakh crore, reflecting a success rate of over 32 per cent.
The Survey said the Insolvency and Bankruptcy Code (IBC) has brought about behavioural changes among corporate debtors with thousands of them opting to resolve the distress at early stages wherever default is imminent.
According to the Survey, as many as 18,629 applications for initiation of CIRP (Corporate Insolvency Resolution Process) of CDs having underlying default of Rs 5,89,516 crore were resolved before their admission till September 2021. Also, 527 cases of CIRPs were withdrawn until September 2021. Almost three-fourths of these CIRPs had claims of less than Rs 10 crore and 701 CIRP cases have been closed on appeal/ review/ settled.
On the resolution front, as many as 421 cases of corporate debtors were resolved under the IBC by September 2021 while a total of 1,419 CDs were referred for liquidation.
The Survey also suggested a standardised framework for cross-border insolvency, aimed at helping the lenders of debt-ridden companies to claim and recover the corporations' assets and liabilities on foreign shores.
As of now, foreign creditors can make claims against a domestic company in India. However, the IBC does not allow for automatic recognition of any insolvency proceedings in other countries.
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The Survey has also advocated for the simplification of the voluntary liquidation process as well as to create a single window for the entire process.
A portal that combines all the steps of the liquidation process altogether, starting from the application by companies to processing by all departments, will prove to be useful, the Survey said on Monday.
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