Govt to amend Insolvency & Bankruptcy Code, 2016 to reduce the time taken for the resolution process

The Central Government is looking to amend the insolvency law in order to reduce the time taken for or completion of the resolution process of stressed assets and prevent significant erosion of the value of the assets.

The amendments to the Insolvency and Bankruptcy Code (IBC) which came into force in 2016 for the timely resolution of stressed assets are likely to be introduced in the Budget session of Parliament early next year.

The Ministry of Corporate Affairs has decided to amend the insolvency and bankruptcy law comes against the backdrop of concerns in various quarters that many of the corporate insolvency resolution processes (CIRPs) are taking a long time due to litigations and other issues.

There are consultations are going on with various stakeholders, including bankers and lawyers, and the changes are expected to be finalised in the coming weeks, reported PTI.

The focus is now on how to speed up the whole resolution process by reducing the time taken in CIRP. One of the options being looked at is how fast a company undergoing the resolution process can be handed over to the winning bidder as that would help in preserving the value of the assets concerned, according to a senior official.

There is a Resolution Professional (RP), who takes care of the company’s affairs when a company goes under CIRP. And the role of an RP ends only when the winning bidder takes over. To ensure that there is no significant value erosion, the amendments will look at putting in place provisions whereby the assets can be handed over to the winning bidder at the earliest, the official said.

Table shows the no. of cases resolved and the average time taken in a particular tenure

Year	No. of Cases resolved	Average Time Taken
Up to 12 December 2022	553 Cases	473 Days
1st April to 30 September 2022	57 Cases	679 Days
2021-22	143 Cases	560 Days
2020-21	120 Cases	468 Days
2018-19	78 Cases	326 Days
2017-18	19 Cases	230 Days

On the basis of data from the Insolvency and Bankruptcy Board of India (IBBI) till the end of September this year, the ministry informed the Lok Sabha on 12 December 2022 that a total no. of 553 cases have been resolved under IBC and the average time taken for the resolution was 473 days.

In the current fiscal up to September, 57 cases were resolved under IBC and the average time taken was 679 days. The higher time taken for resolution is mainly on account of associated litigation as with time, the average number of interlocutory applications has increased, which is considered to impact the realisable value of assets, the ministry told the Lok Sabha.

As per the Insolvency and Bankruptcy Code, 2016 time frame for the CIRP is 330 days (inclusive of the time taken for litigation). As per the IBBI data, the 517 cases that yielded resolution plans took an average of 460 days for conclusion till the end of June 2022 while the recovery rate for creditors against the claims made was around 31 per cent.