Last week, the Union Cabinet approved amendments to the Insolvency and Bankruptcy Code, 2016 (IBC) and has definitely exhibited serious concerns about the bankruptcy resolution process ongoing in the country for the last three years or so. There have been some of the big ticket matters going on in different courts and tribunals, obviously delaying the insolvency proceedings and not serving the true purpose of IBC. Unsurprisingly, these matters have been disputed and highly contested in different fora. The present amendments are aimed at tweaking the law, and filling the critical gaps noticed by the business and legal fraternity during the application of the code to real cases. It was expected at the time of enactment of this law that the going shall not be smooth as several vested interests were and are involved and would be decimated, particularly of the self-perpetuating promoters and unscrupulous lenders, especially some dishonest bankers, wheeler-dealers, and almost everyone getting a sizeable slice of the pie, including some getting even the crumbs. One of the important amendments is to increase the time fixed for resolution from 270 days to 330 days, which is going to certainly give more time for the judicial decision making, however, the increase is not going to be cutting any ice as the proceedings usually have gone far beyond this time limit and it is ultimately at the discretion of the court to give any extension. Judicial decision making cannot be done in a mechanical manner and, hence, the increase in time limit to 330 days will, in all probability, not have any serious impact. What is really required is an attitudinal change which is difficult by the fixation of a time limit, until and unless it is practised in totality. Other important changes which have been suggested pertain to the hierarchy of financial and operational creditors who are going to be benefited by the amount reafter liquidation. Banks, as secured creditors, must get their due, however, it is to be remembered that the vulnerable class – workmen and other lowly paid employees who have not been paid their salary for months, and in certain cases years – have to be protected by assuring them some amount which can ensure their subsistence. Institutional lenders have the wherewithal to protect themselves and take calculated risks. Legislation for social good should be aimed at complete protection of the weaker sections and that can happen only when the strong institutions and lenders are made to take care of themselves, though in a legal manner, which also includes preparation for a free fall. It is not the role of the lawmakers to provide a security blanket for such lenders. Often it has been seen that certain promoters try to take control of distressed businesses by the backdoor and the IBC has been quite clear about their role, or rather no role at all, in the insolvency proceedings. The fact of the matter is that most of such promoters are typically well placed in society and have already developed a large network of sympathisers – at times the sympathy can be easily a matter of quid pro quo – very often placed at powerful positions in the government and other significant organisations. Somehow, this game of give and take has to be stopped, and transparency and accountability have to be brought in fully. Half-hearted implementation of any well-intentioned legislature normally ends in a disaster. One has to go the whole hog. Obstacles to true implementation of the IBC will be faced on several occasions, and the original legislative intent may be put at the back burner, either through corporate lobbying, judicial interventions, and above all by simply diluting the strength of the law by the lawmakers themselves. IBC is facing very strong opposition powers, and a concerted effort on the part of the legislature, the executive and the judiciary only can be effective. After all, actions speak louder than words. The author is a professor at IIM-A, akagarwal@iima.ac.in

Stay updated with all the Ahmedabad Latest News headlines here. For more exclusive & live news updates from all around India, stay connected with NYOOOZ.