Providing the first possible avenue to resolve insolvency in a market-determined and time-bound manner, the Insolvency and Bankruptcy Code will help improve ease of doing business as well as develop the debt market, says IBBI Chairperson M S Sahoo.
Less than four months old, the Insolvency and Bankruptcy Board of India (IBBI) has started its work in a mission mode and well over 900 insolvency professionals have already registered with it.
IBBI has been set up under the Insolvency and Bankruptcy Code, which was cleared by Parliament last year. The Code seeks to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.
"We needed a mechanism to resolve the insolvency wherever there was a default at the first possible opportunity and release idle resources for efficient use. The Bankruptcy Code provides these in a market-determined and time-bound manner.
"This will improve the ease of doing business, promote entrepreneurship, develop debt market and consequently, develop the economy," Sahoo told PTI.
In his first interview after taking over as the IBBI chairperson, Sahoo said the insolvency and bankruptcy regime empowers the stakeholders with built-in institutional facilities to hasten the process.
A few cases related to insolvency and bankruptcy have already come up before the National Company Law Tribunal (NCLT), which decides whether a matter is fit to be taken up under the Code or not.
According to Sahoo, IBBI is part of an ecosystem that relies on market forces and aims to achieve certain outcome in a time-bound manner. An insolvency process has to be completed within 180 days from the day it is approved by NCLT.
Provisions related to corporate insolvency resolution and corporate liquidation have already been notified.
IBBI is now working on regulations and developing a competitive market industry for information utilities.
These utilities will be a centralised repository of financial and credit information of borrowers as well as give entities access to financial data provided by creditors.
When asked whether the Code can help in bringing to book defaulters, Sahoo said the Code aims at resolution of insolvency.
"It (Code) alerts both creditors and debtors as and when a default arises... It provides them an opportunity, but does not mandate them to use it. They may have reasons not to use it at the first opportunity.
"It enables them to take the call and empowers them to take the most appropriate call in their best interests," he noted.
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