The Insolvency and Bankruptcy Board of India (IBBI) has recently announced its intention to seek public comments on its existing rules with the aim of plugging any loopholes in the Insolvency and Bankruptcy Code, 2016. The IBBI believes that crowdsourcing ideas from stakeholders is necessary to create a more conducive regulatory framework in a dynamic environment. The move comes as the rules will soon be severely tested in the case of Wadia-owned Go First, which recently filed for voluntary insolvency.

The IBBI statement highlights that despite the best of efforts and intentions, a regulator in a novel and emerging regulatory regime may not always be able to address ground realities. This is why the IBBI welcomes public comments on the regulations already notified under the code. By seeking input from stakeholders, the regulator hopes to identify any issues that hinder transactions and offer alternate solutions to address them.

Comments from the public have been sought until May 31 on the regulations notified under the IBC to date, and they will be received until December 31. Following this, the regulations will be modified to the extent considered necessary. The IBBI aims to notify modified regulations by March 31, 2024, and bring them into force on April 1, 2024.

The efficacy of the IBC was called into question in August 2017 when the country’s first corporate resolution plan under the code resulted in a 94% haircut to lenders. This was because Synergies-Dooray Automotive promoters retained the firm by paying just Rs 54 crore to the creditors against dues of over Rs 900 crore. The move prompted the government to arm the IBC with Section 29A, making it difficult for promoters of bankrupt companies to regain control of their firms by inflicting injuries to creditors.

In conclusion, the IBBI’s move to seek public comments on its existing rules and regulations is a welcome development. By crowdsourcing ideas, the regulator hopes to create a more conducive regulatory framework that will enable it to address ground realities in a dynamic environment. The move is necessary as the rules will soon be severely tested in the case of Wadia-owned Go First, which recently filed for voluntary insolvency. The IBBI aims to notify modified regulations by March 31, 2024, and bring them into force on April 1, 2024.