{"id":1922,"date":"2023-01-20T00:00:00","date_gmt":"2023-01-20T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/20-01-2023\/changes-to-the-insolvency-and-bankruptcy-code-ibc\/"},"modified":"2025-06-24T16:29:16","modified_gmt":"2025-06-24T10:59:16","slug":"changes-to-the-insolvency-and-bankruptcy-code-ibc","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/20-01-2023\/changes-to-the-insolvency-and-bankruptcy-code-ibc","title":{"rendered":"Changes to the Insolvency and Bankruptcy Code (IBC)"},"content":{"rendered":"<p style=\"text-align: justify;\"><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Recently, the Ministry of Corporate Affairs MCA proposed a broad range of <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>changes to the <\/strong><\/span><\/span><\/span><a style=\"text-decoration: none;\" href=\"https:\/\/www.nextias.com\/current-affairs\/06-10-2022\/insolvency-and-bankruptcy-code\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #1155cc;\"><strong><u>Insolvency and Bankruptcy Code (IBC)<\/u><\/strong><\/span><\/span><\/span><\/a><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Key Proposed Changes<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Empowering National Company Law Tribunal:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The ministry has proposed to empower the National Company Law Tribunal (NCLT) to slap hefty fines on those that contravene IBC rules.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">NCLT\u2019s discretion has been increased in the new measures, so focus will be on strengthening NCLT for effective implementation.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Fast-tracking the Process:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It has also explicitly clarified that the adjudicating authority must admit an insolvency case if the default is established and need not get into other specifics like the reason for the default, etc, which was delaying the admission of applications.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Electronic Platform Minimal Human Interface:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The ministry has suggested developing a state-of-the-art electronic platform that can handle several processes under the Code with minimum human interface.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">This e-platform may provide for a case management system, automated processes to file applications with the Adjudicating Authority (AA), delivery of notices, enabling interaction of IPs (Insolvency Professionals) with stakeholders, storage of records of CDs (Corporate Debtors) undergoing the process, and incentivising participation of other market players in the <a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/11-06-2025\/india-ibc-framework-resolution-recovery\">IBC<\/a> ecosystem.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Recasting Liquidation Process:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The liquidation process is also sought to be made more open, flexible and equitable to provide comfort to the creditors<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Redesigning the Fast-Track Corporate Insolvency Resolution Process (FIRP):<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The ministry has also proposed redesigning the Fast-Track Corporate Insolvency Resolution Process (FIRP) to allow financial creditors to drive the insolvency resolution process for a CD outside of the judicial process while retaining some involvement of the Adjudicating Authority (AA) to improve the legal certainty of the final outcome.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Further, the resolution plan approved through this procedure will have the same sanctity as a regular plan approved during the CIRP (Corporate Insolvency Resolution Process).<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Special framework for real estate:\u00a0<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The ministry has pitched for a special framework for real estate to limit bankruptcy proceedings to only insolvent projects.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Transfer of the Ownership:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Another proposal is to enable a resolution professional to transfer the ownership and possession of a plot, apartment or building to the allottees with the consent of the CoC (Committee of Creditors).<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Multiple Resolution Plans:<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It will allow multiple resolution plans for a single stressed firm (in all sectors).<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The ministry proposed a change in the mechanism to distribute resolution proceeds.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>New Waterfall Mechanism:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The MCA has proposed a new waterfall mechanism under which creditors will receive proceeds up to the stressed firm\u2019s liquidation value in the order of priority already stipulated (secured financial creditors gets precedence over usually unsecured operational creditors).\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">But any surplus over such liquidation value will be proportionately distributed among all creditors in the ratio of their unsatisfied claims.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Extension of Insolvency Framework:<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It extended the so-called prepackaged insolvency framework\u2013meant for only MSMEs\u2013to larger entities.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Significance of Changes<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The changes will <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>streamline<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> various processes and procedures by the <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>introduction of technology <\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">and bringing out clarity in relevant clauses to<\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> ensure smoother implementation.<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It will help <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>cut delays<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> in the resolution process.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It will <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>prevent erosion<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> of stressed asset value, somewhat discipline errant stakeholders.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The recommendations on <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>prepack and out-of-court resolution<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (fast track resolution) with optional moratorium and NCLT sanction will take India <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>closer to overseas prepack regimes<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Conclusion<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Based on the past hurdles faced in various provisions and clauses, the <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>ground level issues <\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">have been identified and proposed to be <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>rectified step by step<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Such recommendations, once implemented properly, would result in <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>effective resolution of insolvency.<\/strong><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">However, insolvency regulator Insolvency and Bankruptcy Board of India (IBBI) should be conscious that these recommendations <\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>should not pave way for further litigations<\/strong><\/span><\/span><\/span><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, which will stall the entire process of resolution.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Source<\/strong><\/span><\/span><\/span><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">: <\/span><\/span><\/span><a style=\"text-decoration: none;\" href=\"https:\/\/www.financialexpress.com\/industry\/changes-to-bolster-ibc-process-but-certain-aspects-need-more-debate-analysts\/2954165\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size: 13pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #1155cc;\"><u>FE<\/u><\/span><\/span><\/span><\/a><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> + <\/span><\/span><\/span><a style=\"text-decoration: none;\" href=\"https:\/\/economictimes.indiatimes.com\/news\/economy\/policy\/govt-proposes-slew-of-changes-to-insolvency-law\/articleshow\/97094004.cms\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size: 12pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #1155cc;\"><u>ET<\/u><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Recently, the Ministry of Corporate Affairs MCA proposed a broad range of changes to the Insolvency and Bankruptcy Code (IBC). Key Proposed Changes Empowering National Company Law Tribunal: The ministry has proposed to empower the National Company Law Tribunal (NCLT) to slap hefty fines on those that contravene IBC rules.\u00a0 NCLT\u2019s discretion has [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[101,100,26,33],"class_list":["post-1922","post","type-post","status-publish","format-standard","hentry","category-current-affairs","tag-applications-effects-on-everyday-life","tag-developments","tag-gs-3","tag-science-technology"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/1922","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=1922"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/1922\/revisions"}],"predecessor-version":[{"id":46066,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/1922\/revisions\/46066"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=1922"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=1922"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=1922"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}