Skip to main content

Insolvency code could take time to resolve cases


When the Centre constituted the insolvency and bankruptcy board, the intention was timely restructuring of a company’s finances. Six months since the initial cases were filed, some corporates have willingly chosen the code, while others have resisted the proceedings.

The Insolvency and Bankruptcy Board of India (IBBI) chairman M S Sahoo, in a recent interaction with Business Standard, said the Insolvency and Bankruptcy Code (IBC) would only be successful in the long run. Sahoo said, “I don’t expect many cases to successfully complete resolution within 180 days right in the beginning. It will take time. In the long run, things will stabilise.”

On the right track

“Synergy Doo ray, one of the earliest companies that went in for insolvency is right on track. The company has a resolution prepared,” according to insolvency professional Mamta Binani. Binani, who is working on a number of insolvency cases, is of the opinion that banks are absorbing the code slowly. “Banks are being cautious while taking decisions. They are keeping a close eye on how things are shaping up. One or two success cases will help them gain confidence.”

Turbulent ride

Gupta Coal India, an ailing coal manufacturer, had filed for insolvency in an attempt to get rid of its debt of Rs 2,500 crore. The company has been trying hard to find a valuator so that insolvency proceedings can begin. However, they are finding it difficult to bring all the bankers on-board. A company official told Business Standard, “The committee of creditors has disapproved the company’s appointment of IDBI’s subsidiary for finalising the valuations. The source pointed out, “Banks opposed the company’s plan to appoint IDBI’s subsidiary for Rs 20 lakh to finalise the valuation. Because of this there is no valuation and the insolvency proceedings cannot begin.” A company official also stated that bankers have been sending assistant manager-level officers for the committee of creditors meetings because of which there is decision paralysis.

Forced trip

While most cases in the past six months were filed by corporate debtors aiming to recast debt, here is one debtor that resisted it. ICICI bank had filed an insolvency case against Innoventive Industries to get back the money it had lent the company. ICICI Bank vs Innoventive Industries was one of the first cases to be filed under the new Insolvency and Bankruptcy Code (IBC). Innoventive’s total debt, at the time of filing for insolvency, was Rs 900 crore to all bankers. The case against Innoventive Industries has been moving from one court to the other for the last five months. ICICI Bank, one of the creditors, had filed for insolvency against this company at the National Company Law Tribunal (NCLT) and was admitted. The company appealed at the Bombay High Court which was later referred to the National Company Law Appellate Tribunal (NCLAT). The appellate body had finally taken a call to admit the case.

Not on radar

In fact, the first case to be admitted for insolvency by the NCLT — Vijay Mallya-led UB Engineering — has not yet begun restructuring as a resolution professional has been appointed only recently. According to the provisions, if a company doesn’t complete resolution within six months, the company will have to go for liquidation.

Business Standard New Delhi, 07th June 2017

Comments

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Healthy balance sheets augur well for economy: RBI Governor Sanjay Malhotra

  Large tariffs by the United States administration and elevated geopolitical risk have increased near-term global financial stability risks, and along with weather events pose downside risks to domestic growth, Reserve Bank of India(RBI) Governor Sanjay Malhotra said in the foreword to the Financial Stability Report released today.Noting that domestic growth momentum is buoyed by strong domestic drivers, sound macroeconomic fundamentals and prudent policies, Malhotra said: “External spillovers and weather-related events could pose downside risks to growth.”On the other hand, he said the outlook for inflation is benign, and there is greater confidence in the durable alignment of inflation with the Reserve Bank’s target.Commenting that the structural shifts reshaping the global economy are making policy intervention challenging, the Governor emphasised the need for central banks and financial sector regulators to remain vigilant, prudent and agile in safeguarding their economies and...