Court orders reset the bankruptcy rules. Now the government amends the law

Copyright © HT Digital Streams Limit all rights reserved. Creditors insured have a lien or a legal claim on the assets of a bankrupt company. (Mint) Summary While the IBC was issued to create the most effective framework in which each factor is in line with the achievement of the primary goal of rapid debt solution of a bankruptcy, policymakers believe that some of the court rulings are not aimed at achieving this goal. The center plans to amend the bankruptcy law for greater clarity after the recent court rulings added the priorities and procedures, two people who are familiar with the case said. The changes will set out who qualifies as a safe creditor, one of the two people quoted above, on condition of anonymity. Insured creditors have a lien or a legal claim on the assets of a bankrupt company. Claims from an insured creditor take precedence over those of other creditors such as material suppliers. “The bill to amend the insolvency and bankruptcy code (IBC) is likely to be submitted in the Monsoon session of Parliament. A cabinet letter is now being finalized. One of the amendment areas is the classification of central and state tax authorities,” the person said, and the idea is to clarify the circumstances when a government can get a government. While the IBC has been issued to create the most effective framework in which each factor is in line with the achievement of the primary purpose of rapid debt solution, policymakers believe that some of the court rulings are not aimed at achieving this goal. Rainbow case in 2020, the Supreme Court ruled in the case ‘State Tax Officer vs Rainbow Papers Ltd’ that tax authorities in Gujarat Creditors are insured simply by the operation of a statute. The Ministry of Corporate Affairs then asked public feedback on a proposal to explain that state agencies, whether central or state, could be a security creditor only if they entered into a transaction with the debtor who assets, funds, etc. Transfer, and not merely by operating a law. The proposed bill is likely to make clear on this matter on the basis of the public feedback and the views received from consultations within the government, the person said. The status of state agencies that provide land for real estate development projects is also likely to be clarified. “After a long guard, the much -needed amendments must bring effectiveness of operation, clarity, consistency and reliability in the implementation of IBC,” says Anop Rawat, partner (insolvency and bankruptcy) at law firm Shardul Amarchand Mangaldas & Co. “The uncertainties about the supreme” fees, “says RAWAWE. Article 53 of IBC gives an explanation of the order in which the returns of a bankrupt debtor are distributed, a pattern called the claims waterfall. After the manufacturing sector, under the insolvency and bankruptcy code. For Institute of Insolvency, which has also set up an expert. This meant that government agencies that rented land for housing projects should be treated as secure creditors. However, in the order of priority of the payment of fees set out in IBC, government fees are arranged under those of insured creditors, along with unsecured creditors. CCI in the photo In the latest case, in January, the Apex Court ruled with a majority of 2: 1 that the debt solution plans involving mergers and acquisitions must be approved by the Competition Commission of India (CCI) before the creditors record them. The court rejected the debt resolution of Hindustan National Glass and Industries Ltd, a market leader in glass packaging, as CCI approval was not obtained when borrowers approved the corporate rescue. Policymakers believe that in some cases the mandate of preceding CCI nods can mean a longer time horizon for borrowers to approve the rescue of emergency companies. CCI has now shifted the peak court for a review, the first person above quoted. Haldia said real estate projects are implemented by several closely linked businesses, and in the interests of optimal outcomes, a united approach to handling assets and obligations of the group is needed, which may maximize the value and the resolution process streamline. During corporate insolvency resolution process, the execution of the ongoing projects should get the top priority, Haldia said. Rawat of Shardul Amarchand Mangaldas said that the most important changes are expected that a creditor-led resolution framework would be introduced to enable faster and more effective resolution. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Insolvency and Bankruptcy Code Mint Special