Expected Amendments to the Insolvency and Bankruptcy Code in the Union Budget of 2024-2025
Title: Proposed Amendments to Insolvency and Bankruptcy Code Expected in Union Budget 2024-2025
Since the implementation of the Insolvency and Bankruptcy Code in 2016, India has seen a shift towards a more creditor-friendly approach in resolving debt issues. With the proposed amendments expected in the upcoming Union Budget of 2024-2025, the Code is set to undergo significant changes to streamline the resolution process and enhance efficiency.
1. Introduction of a Creditor-Led Resolution Process:
An expert committee has recommended the introduction of a ‘creditor-led’ and ‘out-of-court’ initiated insolvency resolution process. This approach aims to give more control to creditors and expedite the resolution process, reducing delays and improving cooperation from corporate debtors.
2. Mandatory Admission Based on Information Utilities:
To speed up the admission process for insolvency applications, the Code is expected to mandate the use of information utilities to verify defaults by corporate entities. This will ensure a faster resolution of applications and maintain symmetry of information in the insolvency process.
3. Widening the Scope of Look-Back Period for Avoidance Transactions:
The proposed amendments seek to extend the look-back period for avoidance transactions to include the period from the date of filing the application for initiation of CIRP. This will help capture more transactions and discourage delaying tactics by corporate debtors.
4. Introducing the Concept of ‘Group Insolvency’:
The Code may officially introduce the concept of ‘group insolvency’ to address insolvencies within a group of companies. This will allow for substantive and procedural consolidation of group entities, streamlining the resolution process for interconnected companies.
5. Nullifying Judgements of Rainbow Papers and Vidarbha Industries:
Amendments are expected to nullify the effects of certain Supreme Court judgements that have created ambiguity in the treatment of defaults and statutory dues under the Code. This will provide clarity and consistency in the interpretation of the law.
Overall, the proposed amendments aim to strengthen the Code as a tool for economic recovery and growth, focusing on maximizing asset value, timely resolution of debtors, and protecting creditor rights. Stakeholders will be closely watching the implementation and impact of these changes on India’s economic landscape.
