Page 41 - Banking Finance December 2019

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collate all the claims submitted to him by the creditors and 26%, under previous dispensations. It is estimated that,
constitute a creditors committee. The first meeting of the IBC has addressed stressed assets worth approximately
Committee of Creditors (CoC) will take place within 7 days Rs 3 Lakh Crore directly or indirectly, since December
of its constitution. The Committee of Creditors will appoint 2016.
a Resolution Professional who may be Interim Resolution
Professional also. IBC has also provided the opportunity, to financially sound
investors, to acquire business, where Greenfield investments
The Resolution Professional can appoint a Resolution are not possible or not feasible. For e.g. Tata steel
Applicant for preparing Resolution plan. The Resolution acquisition of Bhusan steel for about Rs 37000 Crore in 2018.
Professional shall present to Committee of Creditors, the IBC process had been dubbed as hugely successful by
Resolution Plan for its approval. After its approval by erstwhile Finance Minister Sh Arun Jaitely.
Committee of Creditors, the Resolution Agent will submit
the resolution plan to the NCLT. In 2019, these cases are either resolved or are in process of
resolution- Essar Steel, Bhushan Power and Steel, Videocon
If NCLT approves the Resolution plan, it will be binding on Group, Monnet Ispat Co. Ltd, Amtek Auto Ltd, Ruchi Soya
the corporate debtor, its employees, members, creditors, Ltd, Lanco Infratech Ltd and Jaypee Infratech. Tata Steel,
guarantors and other stakeholders involved in the resolution Vedanta group and Aditya Birla-led UltraTech Cement Ltd
plan. The first step is to revive and revitalize the Corporate etc had been some of the successful bidders. Jaypee
person however if it fails, the next process is liquidation. Infratech, Jyoti Structures, Alok Industries, RCom, Videocon
group, Lanco Infratech, and ABG Shipyard are other major
How the code has fared? cases being handled by NCLT.

In fiscal 2019, the IBC has recovered Rs 70,000 Crore which
was more than Rs 35,500 Crore recovered through Challenges faced by the Code
mechanism like DRT, SARFAESI, Lok Adalats in Fiscal 2018. Having made the above observations, we also note that
The power has now shifted from Borrower to Creditors. This there are several challenges in the entire process. Like in
has led to instilling a sense of financial discipline in the minds the bidding process, it is difficult to obtain the information
of borrowers. about the assets especially when the promoters may not
cooperate. Another issue is pertaining to stamp duties.
As per the Insolvency and Bankruptcy Board of India’s Multiple state-level jurisdictions and complications arise, in
report, more than Rs 2 Lakh Crore worth of debt pertaining tax issues, when structuring the deal. Another challenge is
to around 4500 cases was resolved, even before admitting financing the acquisitions.
to IBC. The average recovery rate was 47%, as against the
There are group level exposure
norms prescribed by RBI for
banks. During IBC process, there
is consolidation and the group
exposure norms get invoked
while lending to the acquirer.
Because the capital markets are
not deep enough, financing
through the bond markets is also
difficult. Besides, more hands are
needed at NCLT and NCLAT, the
number of benches needs to be
increased sufficiently. The
resolution timelines are also not
adhered to, with around 32% of
cases taking more time than the
maximum stipulated time of 270
days.

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