&w=3840&q=100)
IBC Bill proposed wider look-back period for preferential transactions
The Centre on Tuesday introduced the IBC Bill in the Lok Sabha, proposing a wide range of reforms from group and cross-border insolvency to creditor-initiated insolvency resolution process.
The Bill has been referred by the government to a select committee.
In cases where the admission of an application takes longer than 14 days, as required under the Code, the look-back period for preferential transactions may not be able to capture a significant portion of transactions that occurred before the filing of an application.
The government was concerned that this could give corporate debtors a perverse incentive to delay admission of the application for commencement of the insolvency resolution process to reduce the scope of an avoidable transaction.
'The threshold for the look-back period for preferential transactions, therefore, has been adjusted to more effectively capture a broader range of pre-filing transactions, particularly those undertaken in anticipation of the commencement of the insolvency resolution process to exclude assets from the process,' the Bill stated.
'The resolution professional and liquidators should do a careful analysis so that genuine business transactions do not get counted as preferential transactions. And, everything is not pushed as avoidance or fraudulent. There are a huge number of such cases already pending in the National Company Law Tribunals (NCLTs),' said Surendra Raj, Partner, Grant Thornton Partner.
Aligning with the recent regulations introduced by the Insolvency and Bankruptcy Board of India (IBBI) — allowing part resolution of assets — the Bill has also inserted a similar provision to Section 5 of the Act. It is to allow 'merger, amalgamation, demerger and sale of one or more assets of the corporate debtor.'
An important clarification brought in the Bill relates to the assurance that government concessions such as licence, permit, registration and quota, by the Centre, state, local authority or sectoral regulator would continue as part of a resolution process.
'Several similar assets are languishing before the courts, suffering value erosion and being prejudicial to all stakeholders. Apart from enhancing the efficacy of IBC, this should also make these projects bankable by project financiers. This is indeed a significant step, and in absolute consonance with the stated objectives of the IBC,' Soumitra Majumdar, partner, JSA Advocates & Solicitors, said.
The amendments have provided for a continued supervisory role of the committee of creditors (CoC) even during liquidation.
In order to address delays on account of inter-creditor disputes, the Bill has said that the adjudicating authority may, before rejecting the resolution plan, give notice of an additional 30 days to the CoC to rectify any defects in the resolution plan.
The proposed amendments enable the adjudicating authority to first approve implementation of the resolution plan. Then, by a separate order, it can approve the manner of distribution, thereby segregating the two issues.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
a minute ago
- Mint
States to ease off-budget borrowings amid fiscal discipline push
New Delhi: After a year of sharp increases, Indian states are expected to keep their off-budget borrowings largely flat in FY26, signaling a shift toward tighter fiscal discipline even amid persisting pressures for welfare spending, according to two people familiar with the matter. The restraint comes after years of heavy reliance on off-budget borrowings, which had ballooned during the pandemic with both the Centre and states scrambling to finance emergency spendings. Off-budget borrowings by states rose to ₹ 29,335 crore in FY25 from ₹ 21,251 crore the year before, finance ministry data shows. In FY21, at the height of covid-related spending, such borrowings had touched ₹ 67,181 crore. 'States have been told to enforce fiscal discipline. Even access to the Centre's 50-year, interest-free loans, which are popular among states, comes with conditions requiring greater financial prudence,' said the first person mentioned above, on the condition of anonymity. Many states, the person said, are increasingly turning to the Centre's Special Assistance to States for Capital Investment (SASCI) scheme, which provides long-term, interest-free loans for infrastructure projects, rather than relying on off-budget borrowing mechanisms. Off-budget borrowings by states are likely to slow down in FY26, the person added. On its part, the Centre had itself discontinued off-budget borrowings in FY23. Since FY22, it has tightened rules for states by counting debt raised through state-owned entities, where repayment is backed by state budgets, taxes, or other revenues, toward their overall borrowing limits under Article 293(3) of the Constitution. 'States are realizing that excessive off-budget borrowing undermines fiscal credibility. By reining it in, they not only improve transparency and discipline but also preserve space for future borrowing at lower costs,' said the second person mentioned above. 'Curbing off-budget borrowings also reassures investors and credit agencies that states are serious about managing debt sustainably,' the person added. There was no response to queries emailed to a finance ministry spokesperson. A recent report by CareEdge Ratings noted that the budgets of 13 major states, representing 83% of India's GDP, project an aggregate fiscal deficit of 3.2% of GDP in FY26, broadly in line with the previous fiscal year. The report also highlighted sharp differences in states' financial resilience: richer states such as Haryana, Telangana, Karnataka, Tamil Nadu, and Maharashtra finance more than three-fourths of their budgets through their own revenues, while states including Madhya Pradesh, West Bengal, and Uttar Pradesh rely heavily on central transfers. In FY25, Maharashtra topped the list of states relying on off-budget borrowings at ₹ 13,990 crore, followed by Karnataka ( ₹ 5,438 crore), Telangana ( ₹ 2,697 crore), and Kerala ( ₹ 983 crore), according to finance ministry data. In FY24, Maharashtra had raised ₹ 7,700 crore through off-budget borrowings, followed by Kerala ( ₹ 4,688 crore), Telangana ( ₹ 2,546 crore), Punjab ( ₹ 1,675 crore), Tamil Nadu ( ₹ 1,560 crore), and Assam ( ₹ 1,102 crore). States often turn to off-budget borrowings to fund welfare schemes and infrastructure without breaching deficit targets or borrowing caps. While this offers short-term flexibility, high borrowings raise concerns over transparency and fiscal discipline. Keeping such borrowings in check will ease debt pressures and help ensure that India's broader consolidation roadmap stays credible. States have been increasing their open market borrowings over the past five years. According to finance ministry data, Maharashtra and Tamil Nadu lead the pack, each breaching the ₹ 1.2 lakh crore mark in FY25, underlining the scale of state-level investment and spending priorities. Karnataka and Uttar Pradesh have also recorded substantial increases. Smaller states, including those in the northeast, have maintained modest borrowing profiles.
Mint
29 minutes ago
- Mint
Centre working on framework to help panchayats become financially-autonomous
New Delhi: The government is working on a framework to help village councils (panchayats) generate their own revenue and become financially autonomous, carrying out development works without relying on funds from the Centre or states. The Union Panchayati Raj ministry has set up a panel, consisting of senior officials from various state governments, which is tasked with formulating a blueprint that can act as a guide for states and Union territories (UTs) in creating and amending their model OSR (Own Source of Revenue) rules. "We have constituted a committee comprising senior officials from various state governments, to prepare a model OSR framework of panchayats, which can serve as a benchmark for the states in formulating and amending their OSR rules," Vivek Bharadwaj, secretary, ministry of panchayati raj, said. The template, to be shared with states and UTs, aims to plug the gaps in existing regulations and guide local bodies in mobilising revenue, which mainly comes from taxes, fees and other charges. The development assumes significance, as nearly a dozen states and UTs don't have OSR rules. The 22 states and UTs that have already formulated the rules need to update them, said Bharadwaj. Own Source Revenue (OSR) refers to the revenues that panchayats generate on their own, from sources such as property tax, water charges, market fees, trade licence fees and building permit fees. OSR rules help regulate, standardize, and empower panchayats to collect and manage the revenues efficiently. The OSR rules are crucial to panchayat as they empower them to function independently and also reduce over-dependence on central and state grants. Additionally, they support local development projects with locally-generated funds. According to Bharadwaj, there are 11 states and UTs that have not yet framed OSR rules. These include Arunachal Pradesh, Bihar, Jharkhand, Manipur, Nagaland, Sikkim, Uttar Pradesh, Andaman & Nicobar Islands, Dadra and Nagar Haveli and Daman and Diu, Ladakh and Lakshadweep. Twenty two states and UTs have already developed and implemented OSR-based regulations, allowing panchayats to levy and collect taxes, fees, tolls, or other local sources of revenue. Among these states are Andhra Pradesh, Assam, Chhattisgarh, Goa, Gujarat, Haryana, Kerala, Maharashtra, Tamil Nadu, and Karnataka. Some States have detailed guidelines on fixing OSR rates. In many instances across the states, it has been observed that much more efforts need to be made towards fulfilment of these requirements. "Financial rules related to OSR generation were prepared long ago in states, and hence have been suffering from various deficiencies like use of incomprehensible legal jargons and lack of updating," Bharadwaj added. Panchayats, which act as grassroots-level bodies to implement government programmes and for achieving the sustainable development goals, get grants from the Centre, state governments, as well as raise their own revenue in a limited way through internal sources like local-tax revenues and user charges. "Self-sufficiency is an ideal state for gram panchayats as they can have more funds to carry out developmental works. However revenue collection is conditional as it depends on economic activities in a particular area," said Sri Hari Nayudu, economist, National Institute of Public Finance and Policy (NIPFP), New Delhi. "Most of the time we are dependent on state government grants for developmental works, since most of us doen't know how to increase revenue. The proposed rules can guide us in that direction," said Gurcharan Singh, Panch-Charik Patti Sarkar, a rural local body in Moga district of Punjab. In 2021-22, the average per capita OSR collected by panchayats at all-India level was ₹ 100. Also, the average OSR for gram panchayat was ₹ 230,000 per year, with 42% of gram panchayats having less than ₹ 100,000 revenue per year. "The key reasons behind low revenue collection are over-dependence on grants, underutilization of tax powers, weak administrative systems and trust deficit with citizens which limit the revenue," said an economist who requested not to identified.
Hindustan Times
2 hours ago
- Hindustan Times
Reforming the GST regime
The Goods and Services Tax (GST), when it was finally implemented after decades of labour, was India's largest ever indirect tax reform. It created a nationally unified market and a unique federal forum for governing it. Doing away with state-level bumps in the indirect tax regime, however, was only one of the GST's promises. It was also expected to make the tax regime simple, especially in terms of slabs. Prime Minister Narendra Modi's Independence Day speech has raised hopes of this promise being fulfilled eight years after GST's roll out. Speaking from the ramparts of Red Fort — the directional changes were later shared by finance ministry officials — Modi said that the Union government has sent a proposal to the Group of Ministers (GoM) constituted by the GST Council to unleash second generation reforms in GST, which, among other things, will bring most items under just two slabs of 'standard' and 'merit' with some exceptions being put under 'special rates'. HT reported earlier that the Centre has been mulling this, but also pointed out how the GST Council has not met for a long time now. While Modi announced that the reforms, especially on the slab front, would likely be rolled out before Diwali (second half of October), a GST Council meeting is yet to be notified. The idea, at least in principle, ought to be welcomed unequivocally. It will simplify the tax regime and take politicking out of setting tax slabs. However, the devil may very well lie in the details. Any large-scale revision in GST slabs will have to take into account its revenue implications as well as a possible inflationary impact. These two are likely to work in opposite directions and are critical factors for the fiscal and political health of the governments in charge, both in the Centre and the states. One would like to believe that a large part of this homework has been done by the GoM and state governments are on the same page with some of these salient findings. We will know more when these proposals are discussed in the next GST Council. A simplified GST is a much-needed step in India's long, even if gradual, road to reforms. Ideally, this reform should have happened earlier and definitely not in the current environment of global economic turmoil. But that's what political friction to reform sometimes entails.
