Page 51 - Banking Finance May 2023

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650 firms that underwent resolution

under IBC doing very well

nsolvency regulator IBBI has commissioned IIM majority of cases, Mital said. The Supreme Court ruling in
I Ahmedabad to undertake a study on how the IBC’s 650 the personal guarantors’ case — which could impact
resolutions (since its inception) involving Rs.•2.7lakh
personal guarantees worth Rs. 12.5 lakh crore — is expected
crore have led to a change in the economy, IBBI
Chairman Ravi Mital said. in the next two months, Mital said, asking promoters to
gear up for the apex court pronouncement that could impact
their cases before NCLT.
Giving a sneak preview of the findings of the study — which
is expected to be made public in the next two months — Put simply, the IBBI Chief has nudged promoters to work on
Mital said 650 companies that underwent resolution have a mechanism that freezes their debt in cases where the
seen a “manifold” increase in their sales, EBIDTA, profit after payment against guarantee will fall on their heads, Shardul
tax (PAT), and market capitalisation post-resolution. Shroff, Executive Chairman, Shardul Amarchand Mangaldas
& Co., later told.
“I hope in the next two months, once this report comes out,
we will have a better understanding of what the IBC means “He is nudging promoters to go along the route of voluntary
for resolution,” Mital said at a CII-organised conference on liquidation so that the liability on the guarantee is capped.
the Insolvency and Bankruptcy Code (IBC) in the Capital. It’s a good suggestion. You stop the meter of interest
running when you stop the clock through voluntary
IBC’s performance in fiscal 2022-23 was much better than
liquidation by opting for Section 10,” Shroff• added.
that in the previous fiscal.
Ashok Haldia, Chairman, Indian Institute of Insolvency
“We have done better in 2022–23 than in the previous year.
Professionals of ICAI, said that in the IBC model, where the
Our performance is improving. But there is a lot of room
creditor is in control, the promoter loses control over the
for improvement. If you (creditors) reduce delays by a year,
company and faces the consequences, acting as a persuasive
you will gain 5 to 10 per cent in valuation,” he said.
force to resort to Section 10 and get the benefi•t of the
Voluntary Liquidation moratorium available under IBC. “Clarity on the promoter’s
personal guarantee invocation in an effective manner will
Mital also underscored the need to encourage innovation
add to that. The promoter, without fraudulent or malicious
in taking the entire IBC process forward. Mital urged
intention, may take advantage of Section 10 for expeditious
promoters to initiate early adoption of Section 10 (voluntary
resolution,” Haldia said.
liquidation) under the IBC, to ensure that they face fewer
problems later. Aseem Chawla, Managing Partner, ASC Legal, said a
businessfriendly ecosystem should facilitate bonafi•de cases
“My experience is that industrialists know when their
of voluntary liquidation, which would unlock capital and bring
company is going bad. Why don’t promoters take the
resources back into the economic mainstream, thereby
initiative under Section 10. The advantage in coming early
ensuring timely payments to lenders and ensuring that the
is that your moratorium starts and debt stops,” he said.
interests of all stakeholders are protected. This gives room
The promoters have given personal guarantees in the for setting up more new businesses, he added. (Source: BL)
48 | 2023 | MAY | BANKING FINANCE