IBC Amendments Needed For Business Conglomerates' Cases: RBI Deputy Governor

New Delhi, Jan 18 (KNN) The resolution of cases involving business corporations under the Insolvency and Bankruptcy Code (IBC) requires further legislative changes due to complexities within the group, according to Swaminathan J, Deputy Governor, Reserve Bank of India (RBI).

Addressing the Conference on Resolution of Stressed Assets and IBC, Swaminathan elaborated on the need for reform in the IBC, particularly when dealing with intricate corporate structures within business groups.

He highlighted the challenges posed by these complex structures, where interconnected related-party relationships often hinder the resolution of individual entities.

Swaminathan also noted the unfinished agenda regarding a comprehensive resolution framework for financial service providers, including banks, non-banking financial companies, and insurance companies.

In the absence of an IBC-like legislative framework for the resolution of financial institutions, Swaminathan mentioned that IBC has been employed for the resolution of Non-Banking Financial Companies (NBFCs).

He acknowledged that introducing new laws often initiates a period of adjustment and interpretation, especially when dealing with the intricate details of the legislation.

The Deputy Governor pointed out that parties involved in insolvency proceedings frequently file appeals and review petitions challenging lower court decisions.

“While there was no objection to any party seeking legitimate legal recourse, these proceedings have often been used as delaying tactics by defaulting borrowers and have significantly contributed to delays in the resolution timeline”, he added.

Swaminathan expressed hope that as the law matures, judicial interpretation and precedents will emerge to navigate the nuances, ultimately reducing delays in the future.

He acknowledged the possibility that certain judicial interpretations may prompt the need for further reforms, aiming to enhance the efficiency and outcomes of the resolution regime.

(KNN Bureau)