The Government is now working on the measures to deal with the stress in business that is going on in the corporate sector. That happened once after the suspension that happened of the bankruptcy proceedings that was against the defaulters and which expires on 24th March.
The corporate of the affairs ministry has also not ruled out for extending the suspension of the bankruptcy proceedings that was against the defaults that occurred during the time of the pandemic and that it is likely to assess the situation that happened early in the month of March and that was before taking a final call.
A government official said on the condition of the anonymity that the ministry of the office is also considering to raise the capacity of the courts of the bankruptcy to deal with the rise in petitions.
The government officials said for extending the suspension of the Insolvency and Bankruptcy Code which is the IBC that they would require another Bill to be given in the Parliament or the issuance of an ordinance as the law right now at present allows its suspension only up till a year.
The Insolvency and Bankruptcy Code (Second Amendment) Act for 2020, was notified in the month of September had blocked the fresh bankruptcy action for a year, this had started from 25th March in this year. The defaults during that happened during this period will never be placed before any tribunal.
It also said that the ministry is also preparing to make sure that the National Company Law Tribunal which is known as the NCLT meets its bench strength which is currently consisting of 44 members to 63 members. They also said that their work right now is on to hire the rest and that most of them would be kept in the metro cities.
Experts have also expressed their fears for a wave of bankruptcy petitions once after the suspension of the IBC proceedings were done against the defaults during the time when covid-19 ends. The NCLT also continues to hear the cases where the defaults had occurred before 25th March.
A section of experts has also questioned for the continuation of the ban, while other few of the, are with the opinion that at least the shareholders of the distressed firms should be allowed to voluntarily call on the IBC if they can see any merits in the process of the resolution.
Sunita Batra who is the managing partner of the law firm for Kesar Dass B. and the Associates said that the government should go back to the drawing board and that they should redraw their vision and also their roadmap for the IBC for atleast three-four years. She also said that they need to bring changes in the code to not only to plug the gaps that were exposed from the functioning that was made in past but also to look and address for the changed geopolitical and the economic realities of the world.
She said that it is a harsh reality that there are not a lot of investors with the plans for the resolution for the stressed assets. The IBC needs to be filled with fresh energy and the momentum for backing of the highest political leadership so that they can play a meaningful role.
Daizy Chawla who is the senior partner of the law firm for Singh Associates said that extending the suspension of the IBC, instead of the blanket suspension they can also be an option with some criteria.
The policy of the Centre is to save the capable businesses till there is sufficient investor for the stressed assets. Because lifting the ban could be like a death warrant for both the unviable and also the viable businesses in the absence of the bidders.