The Union Cabinet has approved the final amendments to the Insolvency and Bankruptcy Code (IBC), paving the way for its passage in Parliament. The Bill seeks to make limited modifications to the proposals by the Parliamentary select committee, which examined the previous version tabled in the monsoon session.
The government has approved most of the recommendations of the committee, including disallowing the resolution professional of a company to also act as its liquidator in case the rescue plan fails, and prescribing a three-month timeline for the National Company Law Appellate Tribunal (NCLAT) to decide on bankruptcy cases.
The Bill proposes that once a debt resolution plan under IBC has been approved by a tribunal, all claims other than those recognised in the revival plan will get extinguished and shall not be pursued. However, the government has not accepted the suggestion for retrospective application of the 'clean slate' principle in debt resolution.
The reforms aim to speed up debt resolution, cut litigation and improve outcomes for creditors. Key changes include reducing the voting threshold for pre-packaged insolvency resolution from 66% to 51%, decriminalizing certain offences, and introducing a framework for 'group insolvency' and a cross-border insolvency regime.
