The government is currently working on amendments to the Insolvency & Bankruptcy Code to avoid a repeat of the JSW Steel-Bhushan Power & Steel saga.
As part of these amendments, the government is currently working on special limits on how an approved insolvency case, where a plan has been implemented, can be challenged.
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According to two people in the know, the government is considering putting in rules which may require an insolvent company's promoter to settle its outstanding dues, before they can challenge any plans.
Moreover, in cases where a resolution plan has been implemented and later found to have some flaws, the resolution applicant may be required to make financial reparations to the aggrieved parties. This will ensure that there is some legal recourse for those seeking it, without jeopardising the entire insolvency process.
Presently, any objections against an approved resolution plan must be filed at the National Company Law Tribunal within 30 days of a plan's approval. In case of the appellate tribunal, an additional 15 days are provided.
According to the second person quoted above, the timelines for these objections are managed quite strictly by the tribunals managing insolvency proceedings. However, the government feels that further support might be needed. If the amendments do pass through, frivolous objections can be blocked, the people quoted above said.
The Ministry of Law & Justice is currently reviewing the amendments and is looking at the legal ramifications, the two people quoted above said.
Over the last six months there had been a flurry of discussions on various issues plaguing the IBC. However, the drafting work became a lower priority as other issues caught up.
In May, after the Supreme Court reversed a resolution plan by JSW Steel for Bhushan Power & Steel Ltd. nearly six years after it was first approved, the discussions once again caught some speed, the first person quoted above said.
The Supreme Court order followed objections by multiple parties, including Bhushan Power & Steel promoter Sanjay Singhal.
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