“It is a must that the process be made time-bound. It is economic legislation. We have defended all the eight changes made to the Code,” a senior government official told Business Standard.
The SC will hear the matter on October 22.
The operational creditors of Essar Steel, in August, had challenged the latest amendments made to the IBC which gave preference to financial creditors over operational creditors.
They also challenged other amendments such as the extension of the corporate insolvency resolution period to 330 days from 270 days.
The Sick Industrial Companies Act did not work, the senior official said, because there was no time frame set for resolution of stressed companies.
Finance Minister Nirmala Sitharaman had on July 29 told the Rajya Sabha that the new changes to the IBC had been brought to clarify the interpretation problems that had arisen due to the National Company Law Appellate Tribunal (NCLAT) ruling in thear Steel insolvency case.
“There have been judicial precedents which states that the 180- and 270-day timeline prescribed under the IBC is only ‘directive’ and not ‘mandatory’ in nature. While the regulatory intention has always been to complete the entire insolvency process in a time-bound manner, how this will be interpreted and implemented by tribunals, is something that will only be tested in due course,” said Anshul Jain, partner — regulatory services, PwC.
There are 16 Benches of the National Company Law Tribunal (NCLT), a quasi-judicial body, in the country. As of June this year, 335 corporate insolvency cases went on for more than 330 days and have to be completed in the next three months.
“The work of NCLT Benches is to adjudicate...it is not litigation. In that sense we have kept to the deadline in most cases,” S J Mukhopadhyaya, chairman, National Company Law Appellate Tribunal, said.