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Bankruptcy Code

Jan 20, 2020, 09.32 AM IST

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  • The bill seeks to amend the Insolvency and Bankruptcy Code (IBC) so successful bidders of insolvent companies will be ring-fenced from any risk of criminal proceedings for offences committed by previous promoters of companies concerned. It was passed by the Cabinet and subsequently introduced in the Lok Sabha during the Winter session earlier this month.

    Now, those who were ineligible are barred from being part of any arrangement at the stage of liquidation.

    Hinduja is seeking a partner to bid, one of the people told Bloomberg.

    The govt needs to make the Insolvency and Bankruptcy Code speedier, more transparent and hazard-free.

    As a percentage of claims, banks recovered on average 42.5% of the amount filed through the IBC in the financial year 2018-19, against 14.5% through the Sarfaesi resolution mechanism, 3.5% through Debt Recovery Tribunals and 5.3% through Lok Adalats. Against Rs 1.66 lakh crore claims involved under IBC, the recovery was Rs 70,819 crore.

    Speaking at the Bharat Chamber of Commerce, Niti Aayog distinguished fellow Ramgopal Agarwala said, "In my personal opinion, the country is in a difficult situation but not in a crisis. The reforms implemented were necessary but hastily implemented."

    The Insolvency and Bankruptcy Code (IBC) provides for time-bound and market-linked resolution process for stressed corporates.In case the resolution process does not materialise, then the entity goes for liquidation. An official release on Tuesday said the IBBI has notified changes to liquidation process regulations.

    On December 12, the govt introduced a bill in the Lok Sabha to amend the Code. The bill, introduced in the Lok Sabha, seeks to remove bottlenecks and streamline the corporate insolvency resolution process, wherein successful bidders will be ring fenced from any risk of criminal proceedings for offences committed by previous promoters of companies concerned.

    The conglomerate submitted the EOI after several extensions of the deadline to submit one. The conglomerate had last time submitted an expression of interest in August after the August 10 deadline set by the resolution professional running the bid process. The group hasn’t, according to people in the know, submitted a binding bid for the airline.

    “The size, speed, and breadth of the latest debt wave should concern us all. It underscores why debt management and transparency need to be top priorities for policymakers—so they can increase growth and investment and ensure that the debt they take on contributes to better development outcomes for the people,” said World Bank Group President.

    MS Sahoo, Chairperson of IBBI, said the companies resolved under the code fetched 210% of their liquidation value and if the companies were liquidated, they would have got at the best 100% and the additional 110% is a bonus."

    The IBC was amended twice in 2018 to disqualify undesirable persons from regaining control of companies undergoing resolution and to balance the interests of various stakeholders in the Code, especially interests of home buyers and micro, small and medium enterprises.

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