NCLAT Chairperson Calls For IBC Amendment To Ensure Due Share For Operational Creditors; Stresses On Need To Train IRPs
Former judge of the Supreme Court and current chairperson of the National Company Law Appellate Tribunal, Justice Ashok Bhushan, said the move to inaugurate an insolvency law regime was one of the two most important changes in Indian legislative policy; the other being the introduction of the goods and services tax which replaced multiple indirect taxes levied by the centre as well as the states. “The prime minister himself is very keen and he has been following all developments, said the NCLAT chairperson, “He also knows every aspect of the matter including shortfalls and modifications that need to be made.”
Justice Bhushan was invited as the chief guest at the book launch of the second edition of Eastern Book Company’s ‘Insolvency and Bankruptcy Code’ by A.K. Mittal. The guest of honour at the virtual book launch was Justice Rajiv Shakdher of the Delhi High Court. Also in attendance were other eminent personalities in the legal fraternity.
The Insolvency and Bankruptcy Board of India recently conducted a two-day colloquium with the finance minister in attendance, revealed Justice Bhushan. “All shortcomings in the legislation were discussed and recommendations have been some submitted to the government to bring the necessary changes,” the former judge said. One of the most important topics at the event was the dues of operational creditors. The Insolvency and Bankruptcy Code distinguishes between various kinds of creditors on the basis of their roles while a company is still solvent, with financial and operational creditors being key entities. Under the extant scheme, financial creditors, as voting members of the creditor’s committee, are given higher priority than operational creditors, who are not members of the committee. “The maximum casualty is of the operational creditor who are at the very bottom of the distribution chain. The financial creditors take the major share, while the operational creditors get nothing,” Justice Bhushan explained, while highlighting the need for an amendment to Section 53 of the code. “The legislature may take a call on this. We hope that this year, we will have some more amendments in the code addressing the pertinent issues.”
While speaking about the shortcomings of the insolvency architecture, the chairperson said that professionals were often ‘caught up’ in ‘small things’, causing them to lose sight of the larger objective of the code, which is to provide succour to distressed companies and maximise the overall wealth and welfare of the economy. He said, “There should be a cadre of insolvency professionals so that they are accountable to a body. In fact, we have recommended that the government create a cadre and provide proper training and education. Competent professionals are likely to take insolvency resolution on the right track and prevent liquidation.”
In this connection, Justice Shakdher said that one of the problems faced by India was cross border insolvency. “The reason that this code was brought in and the government was very keen on pushing it was that on a global index on ease of business, India had a dismal position. But we are very far from achieving what was envisaged in 2016.” The government was also sitting on the UNCITRAL recommendations, the judge said. He cautioned, “Do not expect people or multinationals to invest in the country in a big way unless they are sure that there is easy access if the country fails.” Justice Shakdher further pointed out that personal insolvency was also an aspect that required greater legislative attention.Proposed Overhaul of Insolvency and Bankruptcy Code is an Important Change in Indian Legislative Policy: Former SC Judge and NCLAT Chairperson