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It is a widely known and accepted fact that settling a case through litigation is a long and tiring process. Even though the law might provide a fixed time period within which the case must be decided, the involvement of various stakeholders causes a major breach of the set timeline. The cases under the Indian Bankruptcy Code, 2016 (IBC) stand as an example for such prolonged delivery of justice due to the various stakeholders involved. The initial timeline set for completion of insolvency resolution processes under Section 12 of the IBC, was 180 days with the possibility of an extension period of up to 90 days. However, after witnessing the gross breach of the timeline, the government had revised the timeline to the 330-day time period. However, the revised time-period has also been exceeded in a number of cases.
In order to deal with the issue and to curtail the time and cost of the resolution process, a notice proposing the implementation of a pre-packaged insolvency resolution framework under the Indian Bankruptcy Code, 2016, was released by the Ministry of Corporate Affairs (MCA). A sub-committee set up by the MCA have prepared a scheme for the implementation of a per-packaged insolvency resolution process. It was proposed that a hybrid system be adopted where an informal and formal insolvency process can be undertaken pre- or post-default. The proposed pre-packaged resolution process allows the creditor and the debtor an opportunity to work on a resolution informally without the involvement of the court and after a plan is constructed, the parties may approach the court and present it to the adjudicating authority for approval. It was stated in the notice that if the proposal is approved, it must immediately be incorporated into the basic structure of the IBS through an Ordinance and must operate with the same rigor and discipline of the IBC. Addressing the issue of possibility of initiation of multiple proceedings simultaneously, it was stated that since the pre-package is just another option available to Corporate Insolvency Resolution Procedure (CIRP), no two proceedings shall take run in parallel. It was affirmed that if the corporate debtor (CD) would not be entitled to a recourse to a pre-pack while they are undergoing CIRP, similarly a recourse to CIRP would not be available where a CD has opted for a pre-pack method of resolution. Further, taking into consideration NCLTs heavy case load the government is said to consider implementing specific benches solely dealing with pre-packs to eliminate any delays.
The ministry has issued an invitation for comments and recommendations on the proposed insolvency resolution process from the public till 22nd January, 2021.
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