Bikky Khosla | 06 Apr, 2021
The central government has introduced
pre-packaged insolvency resolution process (pre-pack) for companies classified
as Micro, Small and Medium Enterprises (MSMEs). By an order issued in June last
year, it had constituted a sub-committee
of Insolvency Law Committee,
which submitted its report after a few months, and now the
Ordinance route was taken to make this framework a reality. It is welcome news
as lakhs of MSMEs are expected to potentially benefit from the move.
Simply speaking, in this arrangement an informal plan is to be worked out by the
creditor and debtor for debt resolution, before submitting the plan
to NCLT for formal approval. The objective is to provide a quicker outcome for
stressed MSMEs. The sector has been hit hard by the ongoing pandemic, and the new
amendment to Insolvency and Bankruptcy Code
as a big relief. It will be less time-consuming and inexpensive as
against current corporate insolvency proceedings.
The Centre has introduced the regime with procedural
checks and balances, and first for the MSMEs as these units are critical for
the economy and they are also the worst affected during the pandemic
point out that if successful, the regime may be extended to other corporate
borrowers as well. The ordinance specifies a maximum time period of 120
days for completion of the pre-pack process and the debtor will continue to
have control over the enterprise till resolution happens.
in another positive development, merchandise exports in March, 2021 increased
58.5 percent y-o-y to $34 billion. It is also encouraging that 28 out of 30 major
product group of exports showed positive growth. In contrast, the IHS Markit
India Manufacturing Purchasing Managers' Index fell to a seven-month low of
55.4 in March. However, overall the economy seems to be doing well as of now –even
amid the resurgence of a second Covid wave.
I invite your opinions.