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Framework for cross-border insolvency, Code of Conduct high on IBBI's agenda

Jan 21, 2022

NEW DELHI, 21 January 2022: Dr Mukulita Vijayawargiya, Whole Time Member, IBBI yesterday said that a framework for cross-border insolvency would be announced soon under the Insolvency & Bankruptcy Code.

Addressing the virtual Conference on '5 Years of Insolvency and Bankruptcy Code - Looking Forward and Beyond' organized by FICCI under the aegis of the Insolvency and Bankruptcy Board of India (IBBI), Dr Vijayawargiya also asserted on the need for a Code of Conduct for each stakeholder involved in the insolvency and bankruptcy ecosystem.

"A Code of Conduct establishes transparency and accountability for the creation of a robust compliance mechanism in India - critical for good governance," she added.

Dr Vijayawargiya further stated that the IBC regime provides for a resolution process which is time bound and infuses technology with professional expertise with minimum judicial intervention and supervision.

She also added, "In the last five years, new processes have been developed keeping in mind the changing needs of the economy, be it pre-packs or the cross-border insolvency, which would be finalized shortly."

Emphasizing that every default should not be treated as a base for litigation, she added that there is a technology-driven process under the Code to determine an authentic record of default. This is a key enabler for reducing the time involved in judicial processes as well as enhancing transparency and accountability.

Dr Vijayawargiya highlighted that the procedures under the Insolvency and Bankruptcy Code have created a paradigm shift in the debtor-creditor dynamics.

Delivering the Special Address at the Conference, Mr Swaminathan J, Managing Director - Risk, Compliance and Stressed Assets Resolution Group, State Bank of India applauded IBC's contribution in strengthening the resolution framework and said that it has become the preferred resolution mechanism. He suggested that for a more effective regime there should be an increase in the number of NCLT benches and allocation of more resources to the existing benches.

"To reduce delays, Tribunals should discourage frivolous petitions and successful resolution applicants must implement plans in a time-bound manner since the absence of time-bound resolution severely impacts timely recovery," he added.

Mr Subhrakant Panda, Senior Vice President, FICCI, in his welcome address congratulated IBBI for its achievements and accredited the IBC regime for promoting efficiency in credit markets, boosting entrepreneurship, optimizing valuation of assets, and also creating an opportunity for foreign investors in the Indian market. He further suggested, "With the current demand for stressed assets ebbing due to uncertainties created by the pandemic, the existing restrictions on buyers of stressed assets may be rationalized." He also highlighted that strict adherence to timelines, augmenting NCLT infrastructure, continuing with the digital mode of hearings going forward would be critical for the success of the insolvency regime.

"Enabling a swift admission process, reducing the time period for approval of resolution plans and other procedural delays, developing a Code of Conduct for Creditors are some of the key steps to ensure a more efficacious IBC regime," said Mr Shardul Shroff, Chairman, FICCI National Committee on Stressed Assets and Executive Chairman, Shardul Amarchand Mangaldas & Co.

Alluding to the next phase of reforms, Mr Shroff said that the focus should be on making IBC all-weather legislation and ensuring that the Code's interface with other legislations is seamless. Highlighting the pivotal role played by the judiciary in the evolution of IBC, he emphasized the landmark judgments of the Supreme Court have settled contentious issues in detail and have paved the way for amendments to close loopholes arising in the implementation of the Code. He also stressed that once a resolution plan has attained finality, authorities should not raise any further demands for prior period claims. He pointed out that despite the Supreme Court's verdict on the binding effect of the resolution plan, its implementation remains a challenge.

Detailed deliberations were held on the Reforms and Way Forward during the Panel Discussion that followed the inaugural session. The conference was well attended by corporates, bankers and professionals.

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