Government considers time limit for withdrawal of cases under IBC
Companies referred to bankruptcy courts may not be allowed to leave the process once bids have been invited or a resolution plan has been accepted.
The government is considering setting a time limit for withdrawing cases admitted for insolvency resolution, ending ambiguity on a key aspect of the procedure. A 14-member law committee on the Insolvency and Bankruptcy Code had recommended allowing retraction of applications if 90% of the creditors voted in favour of withdrawal. However, the panel had not specified a time limit for withdrawal of such cases. The government now wants to set a clear cut-off time, after which a reference under the code cannot be withdrawn.
“After a resolution plan has been accepted, no such withdrawal should be allowed… even after you have received all bids, such a move should not be permitted,” a senior government official told ET. This means that a settlement outside the insolvency resolution process may not be allowed once bids have been invited.