Govt plans pre-packaged IBC deals to ease caseload
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The so-called pre-packaged insolvency procedure, or pre-pack, will also help ease the burden on bankruptcy courts, once the changes to the Insolvency and Bankruptcy Code are approved by Parliament.
A huge backlog of cases at National Company Law Tribunal (NCLT) benches have stretched resources and led to delays in resolution of cases. The current covid-19 crisis has only added to the delays. A pre-pack resolution, experts say, will help shorten the long-winded court process.
It will also help reduce uncertainty on whether the stressed assets will draw interest from bidders and even if they do so, whether lenders will accept their bids.
Till December, bankruptcy courts in India admitted 3,254 companies for resolution. Of this, resolution plans have been approved for 190 cases; 246 cases have been closed on appeal or review and liquidation proceedings have begun in 780 cases.
The plan to bring pre-packaged IBC has been in the works for some time and experts said the current crisis may be a good time to implement it. The ministry of corporate affairs had in April last year sought comments on pre-packaged resolutions from interested parties.
An 11-member panel, headed by former Securities and Exchange Board of India (Sebi) chairman U.K. Sinha, is examining the issue to suggest a suitable framework. It is examining three modes—pre-packaged insolvency resolution, pre-arranged insolvency resolution and pre-arranged sale. #casansaar (Source - LIVEMINT)
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