The government is seriously looking into the proposal to extend time limit for the bankruptcy resolution process by up to 60 days post recent changes in the Insolvency and Bankruptcy Code (IBC) that have led to a reset in the process in many cases.
If the time limit happens to actually get extended, this could mean more time for the 12 big cases undergoing resolution that were on the first list sent by the Reserve Bank of India (RBI) to banks in June, calling on them to be referred to the National Company Law Tribunal (NCLT). These companies account for about 25% of all non-performing loans.
Apart from this, the government has also reassured investors over concerns such as forest clearances and stamp duty exemptions, telling them these will be addressed and that they should take part in bids for bankrupt companies.
The current law allows a maximum 270 days for resolution — an initial 180 days and 90 days of extra time on top of that. The 270-day deadline for the 12 companies ends in February. Their resolution processes are at various stages, with bids having been submitted for some of them. The extension of 60 days is likely to be provided only to the companies currently under insolvency resolution. The amendments to IBC approved last month made considerable changes to the law aimed at restricting promoters of insolvent companies from bidding for them and regaining control.
Ministry of Corporate Affairs (MCA) officials recently met bankers, chairman and managing directors, resolution professionals to discuss time taken for approvals, demands for stamp duty exemption for transfer of insolvent companies, and forest clearance among other subjects. The government has told stakeholders that these factors should not dissuade them from submitting higher bids. The Ministry officials assured bidders that all legitimate concerns will be addressed. MCA has also directed the Competition Commission of India (CCI) to expedite permissions related to insolvency resolution in line with provisions.
“Most approvals are already in place. There is no real issue there but if required government can issue a clarification regarding approvals,” said a senior official. The government will also look at operational issues raised by stakeholders in the circular on easing provisions for minimum alternate tax (MAT).
“The amount of total loss brought forward (including unabsorbed depreciation) shall be allowed to be reduced from the book profit for the purposes of levy of MAT (minimum alternate tax) under Section 115JB of the Act,” the Central Board of Direct Taxes (CBDT) had said in a clarification on January 5.
The 14-member IBC law committee formed to identify issues that may impact efficiency of corporate insolvency resolution meanwhile will submit its recommendations before the end of February.