The government is considering a proposal to extend the time limit for the bankruptcy resolution process by up to 60 days. This follows recent changes in the Insolvency and Bankruptcy Code (IBC) that have led to a reset of the process in many cases, according to an Economic Times report citing officials aware of the matter.
This could mean more time for 12 big cases undergoing resolution that were on the first list sent by the Reserve Bank of India (RBI) to banks in June, calling on them to be referred to the National Company Law Tribunal (NCLT). These companies account for about 25 per cent of all non-performing loans.
Apart from this, the government has also reassured potential investors over concerns such as forest clearances and stamp duty exemptions, telling them these will be addressed and that they should participate in bids for bankrupt companies.
The current law allows a maximum 270 days for resolution - an initial 180 days and a further 90 days extension. The 270-day deadline for the 12 companies ends in February. The resolution process for the dozen firms is at various stages, with bids having been submitted for some of them.
The extension of 60 days will be provided only to the companies currently under insolvency resolution, the officials said.
The amendments to IBC approved last month made significant changes to the law aimed at curbing promoters of insolvent companies from bidding for them and regaining control. "A lot of due diligence needed to be done as rules were revised after the ordinance," a senior government official told ET. "We can give some more time to account for that."
Ministry of corporate affairs (MCA) officials recently met bankers, chairman and managing directors, resolution professionals to discuss the time taken for approvals, demands for stamp duty exemption for transfer of insolvent companies, and forest clearance among other subjects.
The government has told stakeholders that these factors should not dissuade them from submitting higher bids.
"We have assured bidders that all legitimate concerns will be addressed," said the official.
MCA has also directed the Competition Commission of India (CCI) to expedite permissions related to insolvency resolution in line with provisions.
"Most approvals are already in place. There is no real issue there but if required government can issue a clarification regarding approvals," the senior official said. The government will also look at operational issues raised by stakeholders in the circular on easing provisions for minimum alternate tax (MAT).
"The amount of total loss brought forward (including unabsorbed depreciation) shall be allowed to be reduced from the book profit for the purposes of levy of MAT (minimum alternate tax) under Section 115JB of the Act," the Central Board of Direct Taxes (CBDT) had said in a clarification on January 5.
The 14-member IBC law committee formed to identify issues that may impact efficiency of corporate insolvency resolution meanwhile will submit its recommendations before the end of February.