The Insolvency and Bankruptcy Code (IBC), despite being welcomed as a very good piece of legislation, appears to have overlooked certain glitches which are likely to arise post the sanction given to a resolution plan, according to analysts.
According to P.H. Arvind Pandian, senior advocate who practices corporate law, the code has been silent on the treatment of issues that could occur during the implementation phase of a resolution plan. What if a deviation from the sanctioned plan happened due to business-related exigences? In such a situation, can they revisit NCLT (National Company Law Tribunal) for a modification in the plan? Or, will that be tantamount to failure of the resolution plan? If that happens, will the company be pushed into liquidation? These issues remain grey areas as of now in the IBC.
According to corporate analysts, the erstwhile BIFR (Board for Industrial and Financial Reconstruction) used to offer adequate opportunity to modify, amend and extend the terms of resolution in line with the evolving situation. No such relief is available under the IBC, they point out.
Also, the code, according to them, does not clarify the status of a creditor who, for whatever reason, has failed to stake his/her claim prior to the sanctioning of the resolution plan. Do such creditors have any right to seek settlement of their financial obligations under the sanctioned plan? Similarly, there is no clarity on whether a creditor has the the right to revisit NCLT should there be a payment default post the sanctioning of resolution plan and the cool-off period thereof if any. “As we go along, these practical issues will need to be addressed. At least, the code needs to be revisited to bring clarity,’’ Mr. Pandian said.
Role of IPs
A view gaining ground is that the role and responsibility of the insolvency professionals (IPs) need to be redefined. At the moment, IPs focus only on compliance, creditors and the like. IPs without domain knowledge of the business, analysts feel, may prove counter-productive in the whole exercise.
Commercial sense is as much a requirement for IPs if the process were to throw up a workable, approved-resolution plan, they aver.
