Changes to insolvency law to be prospective, says MCA official

With a high-level panel suggesting a slew of changes to the insolvency law, Corporate Affairs Secretary Injeti Srinivas said today that the amendments, as and when implemented, would be prospective in nature.

However, he indicated that revised bids which are submitted under the insolvency resolution process after the amendments are in force will have to follow the new requirements.

The 14-member panel, headed by Srinivas, has recommended various changes to the Insolvency and Bankruptcy Code (IBC).

Responding to a question on whether the amendments would come into force retrospectively, he said that typically the changes are "prospective".

"If the format has changed, it is not the same bid," he said. His response came to a query related to applicability of amended norms on revised bids.

Citing the panel's report, Srinivas said where resolution plans have been submitted, those should not be affected by the changes even if they were to come into place.

Against the backdrop of various ongoing insolvency cases, he said, "we are observing the developments" and asserted that the sanctity of the framework would have to be respected.

He was speaking on the sidelines of a conference organised by industry body CII.

Regarding the Binani Cements matter where the National Company Law Appellate Tribunal (NCLAT) has asked the parties in dispute to amicably settle the conflict, Srinivas said it is not the intention of the government to interfere with an ongoing process where a quasi judicial body and an empowered body are looking at a live case.

"But we have to respond to emerging challenges... the ultimate objective is to rescue the company," he added.

To a query on whether the government might opt for ordinance to amend the Code in the wake of the panel's suggestions, Srinivas said the competent body has to take the decision.

He said the government would take a call on the panel's recommendations on "how many are essential, (how many) are not necessary and (how many) are desirable but (there is) no urgency".

Noting that there are more than five crore Micro, Medium and Small Enterprises (MSMEs), Srinivas said there cannot be a "one-size fits all" system as he pitched for a special dispensation.

"There can be a special dispensation for a class of companies like MSMEs," he said.

Relaxations for MSMEs and treating home buyers as financial creditors are among the recommendations made by the panel.