Next Move: Resolve Personal Insolvency
Deemed as a transformational reform, the Insolvency and Bankruptcy Code (IBC), 2016, has passed the behavioural test with flying colours with majority of the cases settled.
“The speed at which the cases have been disposed by the NCLT has been commendable. But the IBC should be invoked only as a last resort,” said Injeti Srinivas, Secretary, Ministry of Corporate Affairs.
He was addressing the CII-British High Commission organised National Conference on IBC, 2016, in New Delhi on 25 Mar 2019. The Conference focus was on personal and cross-border insolvency.
Elaborating further on the subject, he informed that a majority of corporate insolvency, which has led to burgeoning of NPAs, has been settled and the accent is now on resolving personal insolvency.
In this context, an analysis of the outstanding non-food credit shows that the industry tops the list followed by services sector, housing finance and vehicle loans.
On dealing with personal insolvency, Srinivas elucidated on two routes namely the insolvency resolution process followed by bankruptcy and secondly making a fresh start.
Stressing on the need for a planned approach, he said for a fresh start or a waiver of a loan should be considered for debtors based on a certain criteria such as income levels, assets, possession of dwelling unit etc. “Fresh start or loan waiver is especially recommended as a large number of debtors have small outstanding loans.”
The UK example for personal insolvency should be emulated, a counsellor should be available to address the concerns and the process should be made online.
On cross-border insolvency, Srinivas stated that this is a new and complex area which relates to resolving insolvency of companies which have a global footprint and have assets spread across the globe.
Elaborating on the different processes available to enforce the judicial order on insolvency, he said that the UNCITRAL model law on cross–border insolvency gives a possible framework for addressing the issue of addressing cross border insolvency and is slated to be approved by the Parliament shortly.
But this is still work in progress and more is required to tie up the loose ends, he added.
Dr. M.S Sahoo, Chairman, Insolvency and Bankruptcy Board of India, stressed on the role and responsibility of the Committee of Creditors (CoC) in the resolution process.
He was firmly of the view that the challenge before the CoC is the ability to recognise and distinguish between a company which is potentially viable and unviable, design a feasible resolution plan for the reorganisation of viable entities while ensuring that the value of the firm does not get further eroded in the process.
The CoC should be willing to restructure its liability and delay liquidation if the company has the potential to be restored to health. However, the rescue plan should be confined only to viable companies, he said.
Bahram N Vakil, Founder and Senior partner, AZB & Partners, stressed on the role of public policy and issue of centre of main interest on cross border insolvency.
He further advocated that best practices around the world should be emulated.
Sumit Mazumder, Past President and Chairman, Task Force on Ease of Doing Business, CII, mentioned that he was quite hopeful that the momentum of success in resolving insolvency will be sustained and the pending issues will continue to be resolved expeditiously.
He further mentioned that the implementation of the cross –border Model Law will prove to be a game changer in the existing insolvency regime in India.
Earlier, Srinivas released CII report titled ‘Cross –Border & Personal Insolvency in India – Roadmap for Implementation’ which highlights the proposed provisions in the arena of cross-border and personal insolvency in India, and discusses some of the further aspects, for the smoother implementation of the laws. fiinews.com