Dhananjay Kumar and Hamraj Singh suggest ways to speed up insolvency resolution
The Insolvency and Bankruptcy Code, 2016 (IBC) emphasizes the importance of “time-bound” reorganization and resolution for distressed entities and it is touted as one of its defining features. The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP regulations) provide for a detailed milestone-based timeline for the process. The corporate insolvency resolution process (CIRP) is required to conclude within 180 days beginning from the insolvency commencement date and may be extended only once by the National Company Law Tribunal (NCLT) for up to 90 days. However, the 90-day extension has become a routine exercise in IBC cases.
According to data put out by the Insolvency and Bankruptcy Board of India (IBBI), out of the 94 cases in which resolution plans have been approved as of March 2019, around 72 have exceeded 270 days, of these 22 have exceeded 300 days, nine have exceeded 400 days, four have exceeded 500 days and three have exceeded 600 days. The 270-day period for completion of CIRP is very important for the stakeholders and investors and any delay needs to be addressed resolutely.
Further, the second level of delay has been in admitting cases, which has taken more than the 14 days as directed under the IBC. The delay in initiation and completion of the CIRP has proven detrimental to the interests of the stakeholders due to a loss in the valuation of the corporate debtor and driving away potential resolution applicant(s) or withdrawal of resolution plans in some cases.
The delay in admission and completion of the CIRP can be attributed to multiple reasons, each of which needs creative and constructive solutions. This article examines two such reasons and suggests solutions.
Dhananjay Kumar is a partner and Hamraj Singh is an associate at Cyril Amarchand Mangaldas.