New Delhi: A Parliamentary panel on Tuesday suggested a raft of measures to improve the insolvency law framework, including putting in place an advance ruling mechanism that will provide legal clarity at the pre-admission stage and help reduce unnecessary litigations.
Besides, the committee has proposed integration of mediation as an alternative dispute resolution mechanism, as that can bring down the burden on the adjudicating authorities concerned in resolving the stressed assets under the Insolvency and Bankruptcy Code.
In its report, the Parliamentary Standing Committee on Finance has also recommended setting up a transparent, online mechanism for issuing ‘no dues’ certificates and statutory clearances immediately upon completion of a resolution plan to ensure that revitalised corporate debtors truly start with a clean slate.
Under the Insolvency and Bankruptcy Code (IBC), a total of 1,194 companies have been successfully resolved and creditors have realised an amount of Rs 3.89 lakh crore, which is over 170 per cent of the liquidation value and more than 93 per cent of the fair value of these companies, as assessed at the time of admission into the resolution process. These figures are till March 31 this year, while the IBC came into force in 2016.
The government has proposed various amendments to the IBC, which provides for a time-bound and market-linked resolution of stressed assets.
“The committee, therefore, recommend that the Ministry of Corporate Affairs and the IBBI should urgently explore the feasibility and applicability of introducing a suitable advance ruling mechanism within the IBC framework. This mechanism should aim to provide stakeholders with pre-admission clarity on key legal or factual issues, thereby significantly reducing unnecessary litigation and safeguarding the time-bound nature of the resolution process,” the report said.
Other suggestions made in the panel’s report on ‘Review of Working of Insolvency and Bankruptcy Code and Emerging Issues’ tabled in Lok Sabha on Tuesday include expediting the establishment of additional NCLT (National Company Law Tribunal) benches as well as accelerating the operationalisation of the proposed Integrated Technology Platform (iPIE) for centralised case management.
The iPIE will help strengthen the capacity and efficiency of the NCLT and NCLAT. “To deter vexatious challenges, the Committee further recommend that the IBBI prescribe a mandatory upfront threshold deposit for unsuccessful resolution applicants filing appeals, and the minimum penalty for frivolous applications should be substantially raised,” the report said.