Centre tables insolvency amendment bill, seeks to introduce creditor-initiated process

The bill also introduces a penalty for initiating frivolous or vexatious proceedings before the adjudicating authority to deter persons from initiating such proceedings and delay the insolvency resolution and liquidation processes.

In another proposed amendment, the bill also includes liquidator and IRP assignments alongside RPs within the 10-assignment limit, as this will help ensure a more equitable distribution of work.

Ashutosh Narang, partner, CMS INDUSLAW, said that for fairness across the ecosystem, similar safeguards should also be considered for IPEs, such as capping the number of assignments routed through them to avoid concentration of cases in a few entities.

Clause 22 of the Code of Conduct (First Schedule to IP Regulations) limits an IP to 10 assignments as a RPs in CIRP, with a sub-limit of three cases having claims above Rs 1,000 crore. This cap was not applicable to other roles like IRP, RP to PG and liquidator.