Despite 70 years of independence, businesses in India had no clear cut or defined exit strategies. Companies, mostly MSME’s were the worst hit as these had to fend for themselves in case of businesses going downhill. There was no definite link up and the vaguely defined bankruptcy code clauses were not sufficient to aid the judiciary. As a result, the pressure on the judiciary mounted with tens of thousands of cases directly or indirectly linked to this malaise, piling up in courts without hope of ever getting justice. The ultimate sufferers were the Directors or owners of such MSME’s and firms that unfortunately were loss making and not in a position to garner enough capital to get bailed out. The infamous KingFisher Airlines case bears some testimony to what I write.
Today one can say that a big road block in the smooth running of businesses in the country has been identified and in the process of being streamlined, albeit slowly. The Government has now come out with another set of draft rules, including for liquidation of insolvent corporate persons, under the Insolvency and Bankruptcy Code.
As part of implementing the Code, the government has already constituted the Insolvency and Bankruptcy Board of India (IBBI) while the draft norms will be finalised after taking into consideration views of the stakeholders.
Notified by the government in May, the Code seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.
The latest set of draft regulations relate to liquidation of insolvent corporate persons, insolvency resolution process for corporate persons and application to judicial authority. Views of stakeholders have been sought till October 31 on these draft norms, according to a public notice issued by the corporate affairs ministry.
Last week, the ministry issued draft regulations pertaining to registration of insolvency professionals, agencies and model bye-laws. A working group of experts, set up by the ministry, has prepared these regulations.
Meanwhile, IBBI, chaired by M S Sahoo, held its first meeting last Friday and it was addressed by Minister of State for Finance Arjun Ram Meghwal.
The board will have 10 members. Apart from the chairman, currently there are four government-nominated members and the rest are expected to be appointed in coming months.
Now that the things are on track, one can hope to have a streamlined process related to Bankruptcy and Insolvency in place, sooner than later. However given the Indian acumen in exploiting loopholes very professionally, much seems to be seen once the implementation phase starts off. It indeed will need a Ninja of a government for a successful implementation, much to the relief of business community and their stake holders.