Insolvency law is a game-changer but non-adherence to timelines and inordinate delay in admission of cases are major concerns, Corporate Affairs Secretary Injeti Srinivas said.
Describing the implementation of the Insolvency and Bankruptcy Code (IBC) as a "mixed story", he said the law has already impacted the behaviour of borrowers and lenders.
The code, which became fully operational in December 2016, provides for a market-determined and time-bound insolvency resolution process.
Noting that the law has certainly proven to be a game-changer, Srinivas cited pre-admission settlements and turning non-performing assets (NPAs) into performing assets.
"So about Rs 1.2 lakh crore has been settled pre-admission, about Rs 40,000 crore NPAs have been converted to performing assets by way of payment by the borrowers. There is a decline in new NPAs which are developing," he told PTI in an interview.
A large number of cases, including those pertaining to huge amounts of stressed assets, have come under insolvency proceedings.
"I think one of the areas where it has not succeeded in a manner we thought it would is adherence to timelines.
"This is an area which is causing deep concern; and even after the apex court has given such a speaking order about the sanctity of timelines, we find that even today a number of big 12 cases also appear to be locked up in unending litigation," Srinivas said.
At least 12 cases involving huge amounts of bad loans were referred for resolution under the IBC.
According to him, there are litigations which should not be entertained going by the yardsticks laid down by the Supreme Court and that is causing a lot of concern.
"There is also a concern about inordinate delay in admission of cases where debt is well established and you don't have to determine the quantum of debt. You have to determine whether there is a default. When 14 days' time is given in the law, it should be done in 14 days. Whereas, it is seen that it is taking three months or more," he noted.
Further, the Corporate Affairs Secretary said there could be a possibility of disputes when it is about operational creditors but no room for confusion with financial creditors.
To ensure that decisions on admission of cases under the IBC are done within 14 days, he suggested that there could be a "provision of deemed admission".
"Here the fundamental theme is time-bound disposal. This is a very special law, it is extraordinary," he added.
The IBC, implemented by the Insolvency and Bankruptcy Board of India (IBBI), comes under the Corporate Affairs Ministry.