Changes aim to halt abuse of insolvency proceedings

A rise in high-profile banking frauds led to the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. The ordinance, effective from 6 June, presses for greater transparency in the corporate insolvency resolution process (CIRP), to prevent unscrupulous persons from misusing or vitiating the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC).

The ordinance brings in some major changes, mainly in the real estate and financial sectors, and seeks to encourage sustainable growth of the credit market in India. Anyone with banking interests in India needs to evaluate and analyse the current insolvency law.

Key highlights of the ordinance are:

Applicability of Limitation Act: To resolve unclarity arising from various orders of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), section 238A has been inserted in the IBC, making the Limitation Act, 1963, applicable in proceedings or appeals before the NCLT, NCLAT, Debt Recovery Tribunal and Debt Recovery Appellate Tribunal.

Deepak Sabharwal is the managing partner of Deepak Sabharwal & Associates.