Amendment Under The Insolvency And Bankruptcy Code

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What has happened?

The Insolvency and Bankruptcy Board of India (IBBI) has amended the regulations for liquidation under
the Insolvency and Bankruptcy Code (IBC)
By which it effectively allowed the liquidator to assign or transfer a “not readily realisable asset” to any person in consultation with the stakeholders’ consultation committee.

Insolvencyis when individuals or companies are unable to repay their outstanding debt.
Bankruptcy is when a court has declared a person or other entity insolvent, having passed appropriate orders to resolve it and protect the rights of the creditors.
It is a legal declaration of one’s inability to pay off debts.

Enacted in 2016, it applies to companies and individuals.
As of 2015, insolvency resolution in India took 4.3 years on an average.
Thus enacted to streamline and speed up the resolution process of failed businesses.
The Code consolidates provisions of previous legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency.

The code stipulates that the resolution process of a stressed company will have to be completed
in a maximum of 270 days.

The IBBI has said that in order to ensure quick liquidation of companies which are unable to find bidders under IBC,
The liquidator can “assign or transfer a not readily realisable asset” to any person.
The said transfer or assignment of the asset must be done in consultation with the stakeholders committee.

It include any assets of the corporate debtor, which could not be sold through the available options.
Any or all assets of the company under liquidation, which is facing some dispute or is involved in some fraudulent transaction, can be sold by the liquidator.
The IBBI has also amended the regulation to allow certain creditors,
Who do not want to wait for the liquidation process to be over,
To exit the process by assigning or transferring the debt due to them, to other creditors of the company.

Among all, the changes to expedite the liquidation norms are likely to benefit real estate companies
the most, legal experts said.
The changes means that the liquidator for a company would not have to wait for the entire assets of the company to be sold in one go.
Thus it can be disposed of to different bidders as and when they come.

The new regulations will have to be tested in a court of law or an appropriate forum as its definition of “a not readily realisable asset” is contentious.
Can IBBI, under a delegated legislation, by way of amending a regulation, affect anybody’s substantive rights?

Q) Writ of Quo Warranto can be issued?