Insolvency and Bankruptcy Code
Beyond the tip of the iceberg
While the Goods and Service Tax (GST) has been widely described as independent India’s biggest tax reform after the economic liberalisation of 1991, the Insolvency and Bankruptcy Code (Code), yet another landmark law, is just beginning to be scrutinised.
Rightly hailed as an important legislative reform, the Code is expected to resolve the prevailing non-performing assets (NPA) crisis, the resultant logjam in availability of credit and the consequential impact on growth.
The Code aims at consolidating all existing insolvency related laws as well as amending multiple legislations covering insolvency implications.
The Code has started an interesting journey and is a step in right direction. It appears that the intention of the legislature has been to not burden a stressed company with tax levies, while it is undergoing reorganisation for survival. While the Finance Act 2018 has provided some relaxation, there exist various areas where more clarifications/ relaxations could be provided. There are various issues/ questions being faced by corporates/ investors who embark on acquisition of these assets. These could go a long way in providing certainty to the acquirer and support the overall intention of timely, faster and efficient resolution of NPAs in India.