New Delhi: The government is set to take adequate measures to make sure ‘frivolous bids’ are not placed under the insolvency and bankruptcy code (IBC), Corporate Affairs Secretary Injeti Srinivas said. The government was looking at initiating criminal proceedings against those not implementing resolution plans, or barring them from bidding for any other company in the process of resolution under the IBC, Srinivas said on Tuesday.
The government is also considering making a defaulting applicant pay for the costs incurred during resolution to stop frivolous bids. Earlier, the government was considering seeking a way to bar those not honouring the order of the National Company Law Tribunal (NCLT) on resolution plans.
In the recent past, there have been cases where resolution applicants have refused to pay up after the plan being approved by NCLT.
Pre-packaged resolutions to be ready in 2 years
In about two years, pre-packaged resolutions are likely to be in place, said Srinivas, who added that Section 12(A) permitted out-of-court settlement if 90 percent lenders allowed the withdrawal of the insolvency application against a borrower in the pre-pack insolvency arrangement. However, the UK insolvency law on this kind of arrangements needed NCLT’s approval, he said.
“It will take time to reach the UK model but that is being worked out,” Srinivas said.
Borrowers started becoming conscious of loans they had taken following the inception of the IBC, said Srinivas. He added that Rs 2 trillion worth of loans had been settled out of court, while insolvency proceedings were being triggered against a company. Close to Rs 3 trillion has been recovered under the insolvency regime.