THE INSOLVENCY AND Bankruptcy Board of India (IBBI) has proposed the adoption of system of single transferable vote for creditors to decide on resolution bids for bankrupt companies, in a move aimed at maximising the chances of the plans getting approved. In a discussion paper floated by it, the regulator suggested a preferential voting method wherein the creditors can rank their preference on bids received, rather than merely vote for or against one or more bids, as at present.
Effectively, this would result in an elimination process, and increase the chances of plans securing the 66% voting threshold for approval.
Experts, however, called the proposed system not only "complicated", but also "bad in law." "It amounts to forcing the creditors to approve one of the plans on offer. The proposal is also not in conformity with the Insolvency and Bankruptcy Code," said a source familiar with the evolution of bankruptcy law and regulation in India, asking not to be identified.
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