INTRODUCTION
The importance of the Sustainable Development Goals as enumerated by the United Nations General Assembly plays a crucial role in many policy decisions made by countries. The Sustainable Development Goals, in a nutshell provide the methods and necessities which are to be considered by each nation for development, keeping in mind balanced utilisation of resources without creating a burden upon the future generations. As is mentioned by the United Nations, these are the goals which provide a “blueprint for a prosperous and more sustainable future for all.”[1] Hence, these goals are a pathway towards a balanced, yet a progressive global society. The aim of achieving these goals has been set for the year 2030, the advent of which took place in the year 2015. Specifically, it has to be understood that each goal has some importance in its field and many legislations in the developed as well as developing countries are formulated by giving due importance to these goals.
Economic Growth is a goal under SDG 8,[2] which is the basis for bringing out the new IBC Ordinance which has brought a positive change in the insolvency regime of the Country.
SDG – 8 : DECENT WORK AND ECONOMIC GROWTH
The SDG-8 has been laid down by the UNGA to ensure and develop economic growth of the world at large by pushing the world towards a better and systematic technological advancement along with development of opportunities of jobs and entrepreneurship for the younger minds who can lead this goal into a success in the future.[3] The importance of the same can be understood in the wake of two stark data present for the growth of the world at large and how both of them are in some or the other manner connected to the SDG.
Firstly, it becomes pertinent to note that there has been a steep decline in the overall global GDP which came down to 3.2% in the year 2017, which shows the dismal situation of the economy in various countries.[4] Though the data shows that there has been a successful recovery from the crisis of 2008, and there are more job opportunities than before.[5] However, in actuality, the picture is not so lucid and there are many unfavourable situations faced by unemployed people. The ground reality clearly shows that the poor of the whole world are not getting development benefits as compared to the wealthy and privileged. It is the underprivileged who are suffering in all regards. Either they don’t have any job opportunities, or even if they get work, the remuneration provided is not enough to bring them out of the vicious cycle of continued poverty. Hence, in a broader consideration, it has to be understood that the people or entities lying in the lower strata are the ones who always suffer.
The situation was further exacerbated by the Covid-19 Pandemic and the status of the less privileged only declined. Further, smaller industries had to bear the impact owing to graver vulnerabilities as compared to bigger establishments and businesses.[6] It is in the wake of this consideration that the New Insolvency Ordinance has been brought by the Indian Government; to ensure that the businesses not operating on large scale and not having enough funds to pay off their legitimate dues to the creditors for long are supported through a legislative mandate.
NEW INSOLVENCY ORDINANCE & PRE-PACKAGED DEALS
The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021[7] has recently been assented by the President, which seeks to amend the Insolvency and Bankruptcy Code, 2016 for the benefit of the Micro, Small and Medium Enterprises (MSMEs). The Ordinance has been brought to provide the MSMEs with an alternative method of insolvency resolution which is a robust, cost-effective and time-bound process to ensure minimal suffering to the MSMEs, many of which are on the verge of collapse due to the repercussions of Covid-19 .
The Ordinance introduces the concept of Pre-package deals for insolvency resolution process which has been brought through Chapter -III A in the Act.[8] In this kind of resolution process, there is a deviation from the normal CIRP proceeding in as much as that the time and the resources invested in the normal CIRP proceedings are reduced through the introduction of this concept. In this process a resolution plan is prepared by the borrower and is submitted directly to the creditor, rather than being taken to the court. In this process a pre-planned offer is put before the creditor to come to the settlement and till the time the process is completed, the control of the company is not taken away from the borrower or the actual owner as opposed to the normal CIRP Proceedings.
Here, the acceptance of the pre-packaged deal helps the company to resolve the insolvency without auctioning and a systematic yet quick resolution is arrived at. The focal point in this regard is also the time frame provided through introduction of Section 54D, where it is stated that the completion of the pre-packaged insolvency resolution shall be done within 120 days from the commencement days. This reduces the stipulated time for completion of such process substantially. Also, Section 54H mentions that even when such resolution process is carried on the management of the Corporate Debtor entity shall be in the hands of the BoD or the partners and hence the people who are obligated and responsible towards re-flourishing of the entity are the ones who shall be holding the reigns throughout. These are a few important provisions which entails the objective which the amendment aims to achieve.
Hence, the process and its non-necessities have been cut-off to ensure that the Small Enterprises already bearing the brunt of the natural catastrophe do not suffer more at the hands of its creditors who shall break upon them as soon as the Insolvency Proceedings, which were suspended, reinitiates.
THE NEW ORDINANCE AND THE SDG-8
It is only after a thorough understanding of the concepts brought in through the ordinance and the necessity of bringing the same, that the interplay between this change and the SDG can be understood. As has been stated earlier, the MSMEs have faced the brunt of the pandemic and have faced a lot of sufferings due to the same. It is pursuant to their preservation that this change has been brought in the IBC.
It has to be noted that the SDG 8 aims at ensuring higher productivity through the introduction of technological innovation and promotion of policies that encourage job creation and entrepreneurship. It is in this regard that the interplay between SDG 8 and the new ordinance has to be seen. The new ordinance in certain terms is an assurance that the Small Enterprises which provides and creates jobs for many skilled and unskilled workers in the country shall be protected from the threats it faces due to certain conditions.
In true sense, it is the implementation of the SDG 8 that has been carried on by the Indian Legislature, ensuring that there is no reduction in the jobs due to any natural calamity and hence ensuring the economic prosperity and development of the lower strata of the society. The pandemic though had brought many small, medium and micro enterprises in shackles but the recourse measure formulated through the Pre-package Insolvency resolution process shall not only allow these stakeholders to strengthen their position but shall also bring them out of any financial crunch through a systematised mechanism.
[Naman Sharma is a 4th year B.A.LL.B. (Hons.) student at Institute of Law, Nirma University, Ahmedabad]
[1] Transforming Our World : The 2030 Agenda for Sustainable Development, A/RES/70/1. (Accessed through https://sdgs.un.org/2030agenda).
[2] https://sdgs.un.org/goals/goal (Accessed on 13th April, 2021).
[3] Target 8.2, Sustainable Development Goal 8. (https://www.globalgoals.org/8-decent-work-and-economic-growth).
[4] https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate. (Accessed on 10th May, 2021).
[5] The Global Economic Recovery 10 Years After the 2008 Financial Crisis, Wenjie Chen, Mico Mrkaic, and Malhar Nabar, IMF Working Paper, WP/19/83.
[6] https://www.nytimes.com/2020/03/15/world/europe/coronavirus-inequality.html (Accessed on 10th May, 2021).
[7] http://www.mca.gov.in/Ministry/pdf/IBCAmedOrdinanceBill_06042021.pdf.
[8] Chapter IIIA, The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, No. 3 of 2021.
NUALS Restructuring and Insolvency Law Journal 