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Comments on the MCA Discussion Paper on changes being considered to IBC, 2016

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– Team Resolution, Vinod Kothari and Company | resolution@vinodkothari.com

The Ministry of Corporate Affairs (‘MCA’) issued a Discussion Paper on 18th January, 2023 on changes being considered to the Insolvency and Bankruptcy Code, 2016 (‘Discussion Paper’). Since the very inception of the Insolvency and Bankruptcy Code, 2016 (‘IBC’), it has undergone six amendments besides, several amendments in the respective regulations. However, the proposals in this Discussion Paper seem to be the most comprehensive one – covering all major aspects of the law.

Broadly speaking, the amendments proposed in the Discussion Paper can be categorized as follows:

  1. Proposals that try to overcome past difficulties:
    1. Voting in CoCs, direct dissolution, etc
    2. Enhancing the scope of pre-packs and fast track insolvency
  2. Proposals that codify amendments in regulations already done or IBBI circulars:
    1. Mandatory filing of information of default with IU
    2. Presumption of relinquishment of security interest
  3. Proposals to override or respond to some court rulings:
    1. Vidarbha Industries Power Limited v. Axis Bank Limited
    2. State Tax Officer v. Rainbow Papers Limited
    3. Gujarat Urja Vikas Nigam Limited v. Amit Gupta & Ors
  4. Fundamental or progressive amendments:
    1. Partial resolution
    2. Collapsing the levels in the waterfall
    3. Separation of resolution and distribution
    4. Resurrection of entity from liquidation to resolution
    5. Aggregation of assets of guarantors
    6. Collaboration for the purpose of group insolvency
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