In also have voting rights during the insolvency

In
India, before IBC, there were many laws for resolving insolvency such as
Companies Act 2013, Sick Industrial Companies Act 1985, Recovery of Debts Due
to Banks and Financial Institutions Act 1983, etc. It was a fragmented legislative
framework to resolve insolvency but IBC is a single law to resolve such cases
for both retail and corporate borrowers. In the earlier regime, it took about
4.3 years to settle insolvency proceedings in India but under IBC, this period
has decreased significantly. Also, the recovery rate which was earlier around
25.7 (cent/dollar) is expected to increase. In 2016, the non-performing assets
were 9.19% of total loans issued by banks. It is a huge burden on the banking
system and the economy. After the implementation of IBC, the NPAs are expected
to come down. After the promulgation of IBC Act, the ease of doing business
ranking of India has improved to 100th position. This can be
attributed to the improvement in the ranking of one of the ten parameters
considered by the world bank which is resolving insolvency, India’s ranking on
this parameter has improved from 136 to 103. 

 

Recommendations

Insolvency
and Bankruptcy code is a revolutionary reform which will reduce the
non-performing assets but it has certain issues and following are our
recommendations to rectify those issues:

·        
More than 1000 cases have
been filed under IBC in the last one year and out of these, 32% cases have been
filed by financial creditors (secured creditors) and 47% cases have been filed
by operational creditors (unsecured creditors). So, more number of insolvency
cases are filed by operational creditors but during the insolvency process only
financial creditors form the committee of creditors and have the right to vote.

We recommend that
the committee of creditors should also include operational creditors so that
they can also have voting rights during the insolvency process.

·        
Under the UK’s insolvency
code, the insolvency professional has to provide a bond with value equivalent
to the value of the asset under consideration. This provision is implemented to
prevent the insolvency professional from getting involved in any kind of
fraudulent activity. 

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