The Chairperson of the National Company Law Appellate Tribunal, Principal Bench, New Delhi, Justice Ashok Bhushan (the former judge of the Supreme Court) said the move to inaugurate an insolvency law regime was one of the two most important changes in Indian legislative policy; the other being the introduction of the goods and services tax which replaced multiple indirect taxes levied by the centre as well as the states. “The prime minister himself is very keen and he has been following all developments, said the NCLAT chairperson, “He also knows every aspect of the matter including shortfalls and modifications that need to be made.”
The Insolvency and Bankruptcy Board of India recently conducted a two-day colloquium with the finance minister in attendance, revealing Justice Bhushan. “All shortcomings in the legislation were discussed and recommendations have been some submitted to the government to bring the necessary changes,” the former judge said. One of the event's most important topics was operational creditors' dues. The Insolvency and Bankruptcy Code distinguishes between various kinds of creditors on the basis of their roles while a company is still solvent, with financial and operational creditors being key entities. Under the extant scheme, financial creditors, as voting members of the creditor’s committee, are given higher priority than operational creditors, who are not members of the committee. “The maximum casualty is of the operational creditor at the very bottom of the distribution chain. The financial creditors take the major share, while the operational creditors get nothing,” Justice Bhushan explained while highlighting the need for an amendment to Section 53 of the code. “The legislature may take a call on this. We hope that this year, we will have more amendments to the code addressing the pertinent issues.”
While speaking about the shortcomings of the insolvency architecture, the chairperson said that professionals were often ‘caught up’ in ‘small things’, causing them to lose sight of the larger objective of the code, which is to provide succour to distressed companies and maximise the overall wealth and welfare of the economy. He said, “There should be a cadre of insolvency professionals so that they are accountable to a body. In fact, we have recommended that the government create a cadre and provide proper training and education. Competent professionals are likely to take insolvency resolution on the right track and prevent liquidation.”