Don’t expect much from insolvency code tweaks
The IBC does need fixing but process efficiency would be served better by human capacity expansion than a raft of proposed changes which include two that could hamper its efficacy
The vexed phenomenon of sickness, bankruptcy and recovery of industrial units has dogged the government and regulators for over 40 years now. India’s promulgation of the Insolvency and Bankruptcy Code (IBC) in 2016 was meant as a magic bullet for a sustainable, legally-sound, democratic and utilitarian solution to a persistent problem that had defied resolution. The Code was hailed as an example of the Centre’s resolve to craft meaningful policy and untangle knotty problems that had eluded us for long. What the Code did not envisage and then fell prey to was India Inc’s ingenuity in not only influencing policy but also subverting due process through legal means. India’s flawed campaign finance system has also allowed wilful defaulters and interlopers to bend and game the system. Add to it India’s capacity problems at the administrative and judicial levels. It is not surprising that the ministry of corporate affairs has proposed a raft of changes to the IBC. Two shortcomings, however, still threaten to stymie it from becoming an effective piece of legislation.