IBC rules under review after scrapping of JSW Steel's BPSL acquisition

India is examining its insolvency rules after a Supreme Court ruling. The review focuses on adherence to processes and timelines by stakeholders. This follows the JSW Steel-Bhushan Power & Steel case. The goal is to prevent violations of the Insolvency and Bankruptcy Code. The IBBI may review the role of resolution professionals.
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CoC Code of Conduct
The verdict
India is reviewing its insolvency regulations to ensure strict adherence to stipulated processes and timelines by key stakeholders to prevent cases like JSW Steel 's acquisition of Bhushan Power and Steel (BPSL), said people close to the development.On Friday, the Supreme Court (SC) scrapped the ₹19,700-crore acquisition completed four years ago, citing "gross violation" of the Insolvency and Bankruptcy Code (IBC). The top court has observed violations of norms or processes by key stakeholders-JSW Steel, the committee of creditors , and the resolution professional.Guidelines around the code of conduct for the committee of creditors (CoC) may be up for scrutiny, the people told ET."Both the corporate affairs ministry and the Insolvency and Bankruptcy Board of India (IBBI) are seized of the matter. A final decision will be made soon after detailed deliberations," said one of the people cited above. They are in the process of consulting stakeholders "for the best way forward", said the person.The IBBI could also review regulations around the role of resolution professionals in the corporate insolvency resolution process (CIRP), the people said.The idea is to ensure all the stipulated processes are strictly adhered to and the CoC, too, uses its commercial wisdom , remaining within the confines of the law, they said.However, an amendment to the Insolvency and Bankruptcy Code (IBC) for this purpose seems unlikely at this stage, one of the people said. This is because the apex court has, in fact, "upheld the integrity and intent of the Code" and underscored the need to maintain the sanctity of prescribed legal processes.The SC's verdict could prompt authorities to stipulate an enforceable code of conduct for the CoC. It could also expedite a decision on whether to set up an oversight body to gauge financial creditors' conduct, one of the persons said.In the Jet Airways liquidation case, the Supreme Court last year observed whether an oversight committee was required to better enforce the CoC's code of conduct.The IBBI had, in August last year, issued guidelines for the CoC, stipulating how they need to conduct themselves, but these were essentially self-regulatory in nature.Yogendra Aldak, partner at Lakshmikumaran & Sridharan Attorneys, said it is now important for the CoC to apply its commercial wisdom to assess feasibility of the resolution plan and protect the interests of creditors. "In the absence of the same, the resolution plan may be reopened or set aside by courts opening Pandora's Box of Judicial Reviews, if procedural errors are discovered at a later stage," Aldak said.The Supreme Court last week said JSW's intention was "malafide and dishonest" as it took undue advantage of pending Enforcement Directorate (ED) proceedings and did not implement its resolution plan for BPSL for two years. This delay frustrated the IBC objective, it said.JSW last week said it would review the order and decide on its further course of action.

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