IBC: Mediation, not bankruptcy, to be key in individual cases : 11-07-2019

MUMBAI: The government is expected to bring in amendments to the Insolvency and Bankruptcy Code (IBC) in individual and crossborder cases, seeking to ensure strict implementation of resolution plans and hasten recovery of cash stuck in bad loans. The concept of “mediation” is likely to be introduced while raising the bar in terms of cases that could be filed, two people familiar with the matter said. 

A threshold may be fixed for individual loan default cases going into mediation instead of bankruptcy administration. Also, there could be a benchmark for total debt of up to a particular level below which cases would first go through “mediation”. 

Efforts are also on to make the implementation of plans rather strict in the wake of lingering cases, such as Essar Steel, said one of the persons cited above. “An amendment in that direction could come soon after the Essar SteelNSE 0.00 % case is resolved finally,” the person told ET. In cross-border cases, proposals such as recognition of overseas court orders, regulatory relief, and approval for resolution professionals from foreign entities are under consideration. 

“Amendments may come soon, perhaps in the next few weeks,” said Sumant Batra, managing partner of law firm Kesar Dass B & Associates. 

“Stricter provisions for implementation of resolution plans may be introduced. Simultaneously, introduction of next-generation laws may commence by incorporation of cross-border insolvency laws.” 


According to analysts and law officials, the proposed set of reforms will strengthen the bankruptcy process and encourage wider participation. 

“With this (set of reforms), we are entering into the second phase of IBC,” said Pradeep Joy, partner, IndiaLaw LLP. “Bringing personal guarantors and foreign assets/subsidiaries under the insolvency regime will make the law more effective.” 

Although still rather slow, IBC is gaining traction with impressive recovery by banks. In the past four years, banks recovered Rs 4 lakh crore of bad loans, financeNSE 0.76 % minister Nirmala Sitharaman said. 

“The government is focusing more on its consolidation, which should flow through a series of amendments in IBC,” said Sumant Batra, managing partner of law firm Kesar Dass B & Associates. The government may prioritise some of the changes 

“There needs to be a lot of clarity that will help people like us to participate in many of these processes,” said a private equity fund manager closely working with some of the cases. 

Source : Financial Express

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