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India's insolvency and arbitration laws evolving: Vivek Sood
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Vishnu Makhijani | 15 Aug, 2021
India's laws relating to insolvency and arbitration are in sync with
global practices, but are not a "cure for all problems" and would
undergo reform over time to keep pace with the needs of the economy,
says Vivek Sood, a Senior Advocate of the Supreme Court who has authored
the first comprehensive book on the two statutes.
Indicative of
the movement ahead are the recent amendments in the Insolvency and
Bankruptcy Board of India Regulations which "are in the right direction
as they strengthen the CIRP (Corporate Insolvency Resolution Process),"
Sood, the author of "Emergence Of Commercial Justice - Insolvency And
Arbitration" (Bloomsbury), told IANS in an interview
The
amendments "should pave the way for corporate India into the future",
Sood said, adding: "Of course, many other areas need reform too" and the
Insolvency and Bankruptcy Code and the Arbitration and Conciliation Act
"are not a cure for all problems".
"Free play in the joints
ought to be given to the legislature and the executive while making
economic laws and regulations. Economic regulations are an ever-evolving
process that must keep pace with the needs of the economy," Sood noted.
Elaborating on the benefits of the amendments, he said the
duty imposed on the IP (Insolvency Professional) to find the changing
names and registered offices of corporate debtors "is in public
interest".
This is because stakeholders "may not be able to
track the changing names and registered offices of corporate debtors and
hence may not be able to participate in the CIRP. In order to plug this
problem, the IP has been enjoined upon to track the changing names and
registered offices of corporate debtors so that all stakeholders such as
homebuyers and others can be parties to the CIRP".
Also, the
amendments empower the IP to engage professionals for valuation of the
assets, etc. of the corporate debtors. Valuation is a specialised field
where professionals ought to be engaged and the IPs cannot be expected
to delve into valuation exercises, Sood explained.
"This
amendment would go a long way to professionalise the process of
valuation of corporate debtors. Finding murky transactions of corporate
debtors such as under invoicing, under valuation, and other fraudulent
transactions will henceforth be the duty of the IP and place the same
before the NCLT for appropriate reliefs.
"It's a significant
step forward in public interest especially in the interests of creditors
and resolution applicants who wish to stake their claims to take-over
the corporate debtor," Sood added.
The book builds on the theme
of Commercial Justice through the Insolvency and Bankruptcy Code of
2016 and the amendments in the same year in the Arbitration and
Conciliation Act of 1996 "that brings the arbitration law in sync with
the prevalent laws in advanced economies. The governments in the past
also endeavored to bring in the concept of Commercial Justice through a
gamut of laws but they failed on the ground," Sood said.
While
Chapter 1 talks of earlier legislations and the change brought about by
the IBC, Chapters 2 to 16 give instances of the effective application of
the IBC and the Arbitration Act.
However, the cases of Vijay
Mallya and Nirav Modi "are of different nature", though "dimensions" of
Commercial Justice, and not the subject matter of the book as they are
white collar crimes governed by other Indian laws. Sood explained.
"Extradition
issues are not part of this book. Those are also dimensions of
Commercial Justice. Hope the laws would evolve so as to effectively
bring these economic offenders before the justice system to face the
trial," Sood added.
He also disagreed with a perception in some
quarters that the two laws merely target the small fish while the larger
fish get away.
"There can't be parity in law with a wrong.
Merely because the big fish are not netted and they get away, it doesn't
make action against the small defaulters illegal. Each case has to be
seen on its own merits. Also, the big fish are being caught these days.
Hundreds of builders are languishing in jails across the country without
bail. For e.g., PGF Directors have been in jail for over 5 years now.
Similarly, Directors of Vigneshwara Developers too are in jail for over 4
years," Sood asserted.
Interestingly, the Parliamentary
Standing Committee on Finance, chaired by BJP leader Jayant Sinha, in a
report tabled in the Lok Sabha last week said that the IBC had deviated
from its aim of offering a quick resolution to stressed companies and
suggested a review due to this, as also low recovery rates and rising
cases of liquidation.
If accepted by the government, this could lead to further reform of the Code.
(Vishnu Makhijani can be reached at vishnu.makhijani@ians.in)
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