The Insolvency and Bankruptcy Board of India (IBBI) has notified norms for fast-tracking insolvency resolution process for specified category of corporate debtors.
This will include small companies, start-ups (other than partnership firms), or unlisted companies with total assets — as reported in the financial statement of the immediately preceding financial year — not exceeding ₹1 crore.
“The process in these cases shall be completed within a period of 90 days, as against 180 days in other cases,” according to an official statement on the notification of the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017.
However, it added that the adjudicating authority may, if satisfied, extend the period of 90 days by a further period of up to 45 days for completion of the process.
The Ministry of Corporate Affairs has notified the relevant sections of the Insolvency and Bankruptcy Code (IBC), 2016 pertaining to the Fast Track Process, the statement said. These regulations provide the process from initiation of insolvency resolution of eligible corporate debtors till its conclusion with approval of the resolution plan by the Adjudicating Authority. A creditor or a corporate debtor may file an application, along with the proof of existence of default, to the Adjudicating Authority for initiating fast track resolution process.
Appointing IRP
After the application is admitted, the interim resolution professional (IRP) is appointed. If the IRP is of the opinion, based on the records of corporate debtor, that the fast track process is not applicable to the corporate debtor, he shall file an application before expiry of 21 days from the date of his appointment, to the Adjudicating Authority to pass an order to convert the fast track process into a normal corporate insolvency resolution process, the government said.
India was ranked 136th out of 190 countries in the indicator ‘resolving insolvency’ in the last edition of the World Bank’s (ease of) Doing Business Report. In a bid to improve this ranking, the government had carried out the reform of bringing in the IBC and the new elements of the Indian corporate insolvency ecosystem – including the National Company Law Tribunal (NCLT) and its appellate body as well as the Insolvency and Bankruptcy Board of India.
About 67 cases have been filed across 11 NCLT benches and some of them involve large defaults (above ₹10 billion). IBBI Chairperson M.S. Sahoo had said recently that the IBC will usher in ‘freedom to exit’ businesses, help in efficient and optimum utilisation of resources, develop debt market, and lead to a more inclusive growth. IBC can help push GDP growth from 7%-plus to over 9%, he said.