‘IBC ordinance will affect pending suits’ (TH)

 ‘IBC ordinance will affect pending suits’ (TH)

Context

Concerns regarding changes introduced in IBC code

What are the concerns?

• Disruption: Changes will cause disruption in pending proceedings because earlier the resolution plan had to qualify for consideration. Now, the bidder has also to qualify
• If the total time of 270 days has lapsed in these cases or no bidder comes forward, the debtor will be pushed into liquidation
• In cases, where the creditors have not approved the criteria for inviting of bids by the resolution professional, their approval would have to be obtained
• Unduly harsh: Amendments are being viewed as unduly harsh because an account has turned non-performing, does not render its promoter dishonest. Every default cannot be equated to malfeasance (wrongdoing)
• Identification of wilful defaulters by banks: Identification of wilful defaulters has been left to the banks. Though this might be on the basis of RBI guidelines, the risk is that the promoter will challenge it in court and seek stay of insolvency proceedings till the challenge is decided. It is possible that the court does not stay the insolvency process and the promoter loses his company. But later, if the bank’s decision is found to be illegal by the court, the promoter would become entitled to claim damages from the bank
• Foreign bidders at advantageous position: The amendments place foreign bidders in an advantageous position as the concept of wilful defaulters may not exist in other countries and the disqualification criteria in corresponding situations may also be different or even harsher. This will pose a challenge for resolution applicant in determining eligibility of foreign bidders