A 14-member panel set up to review the Insolvency and Bankruptcy Code (IBC) has recommended some sweeping changes to the IBC, ranging from the grant of the financial creditor status to home-buyers and allowing promoters of micro, small and medium enterprises who are not wilful defaulters to bid for stressed assets to offering a conditional chance to unsuccessful players to sweeten their offers.

The panel, headed by corporate affairs secretary Injeti Srinivas, also suggested that a case admitted for resolution can be withdrawn (before the plan is approved) by the appellate body if 90% of creditors agree. Since the recommendation is unlikely to be made into law until the next session of Parliament, it may not be applicable to the current legal tussle involving the sale of Binani Cement, where the promoter company, backed by UltraTech Cement, wants to terminate the insolvency proceeding, even though the Dalmia Bharat-led consortium has been declared the highest bidder.

However, in future, unsuccessful bidders may stand a chance to bid for a stressed asset if they come up with better deal, which could ultimately lead to a lower haircut by creditors. The panel also recommended that the vote share required for approving a resolution plan by the committee of creditors be reduced to 66% from the current 75%.

A top government official told FE that the amendments to the IBC, based on the panel’s report, are unlikely to be placed before this session of Parliament that is ending on April 6. The government will first finalise the draft amendments, based on the reports, which will then be sent for vetting by the law ministry.

It will then be placed before Cabinet for approval following which parliamentary clearance will be sought. However, in case the government believes that certain recommendations are so urgent that it can’t wait until the monsoon session of Parliament, it may bring in an ordinance.

While suggesting financial creditor status to home-buyers, the panel observed that “not all forward sale or purchase are financial transactions, but if they are structured as a tool or means for raising finance, there is no doubt that the amount raised may be classified as financial debt under section 5(8)(f)”. Accordingly, home-buyers will form a part of the committee of creditors (CoC) that approves a resolution plan and their voting rights will be in step with their advances. However, the panel said certain members — Shardul Shroff, Sudarshan Sen and B Sriram — differed on this matter.

The committee also said that the power of the central government may be used for “granting relaxations to not only corporate MSMEs but MSMEs in the form of sole proprietorships, partnerships, etc covered under Part III of the Code from time to time, albeit cautiously”. However, the power should be used to make limited exemptions and modifications for MSMEs (or any other class of entities).

While the panel adopted caution in loosening the related party criteria, it said the IBC does not expressly define the persons considered as related party in the context of an individual and recommended that it must be defined in the code. But it hasn’t provided any definition yet.

The law has been made more stringent in recent months after allegations of related-party transactions in some cases reinforced fears of a back-door entry of dubious promoters. The issue of related party came into focus after JSW Steel, in partnership with Aion, emerged as the lone bidder for Monnet Ispat. JSW Group chairman Sajjan Jindal’s sister is married to Monnet Ispat promoter Sandeep Jajodia.