Govt clears changes to insolvency law; secured lenders to get preference

Resolution gets maximum 330 days including litigation

In a big relief for banks, the government is bringing in multiple reforms to the three-year-old Insolvency and Bankruptcy Code (IBC), providing clarity about preference to secured lenders over operational creditors, to be applicable retrospectively; strict timelines for the resolution and litigation process; and powers of the committee of creditors (CoC).

Lenders and legal experts say that the amendments, especially regarding the treatment of operational creditors, will help end the uncertainty around recovery for the financial creditors of Essar Steel.

“The amendments aim to fill critical gaps in the Code and clarify the intent of the law,” Union minister Piyush Goyal said