IBC – Page 3 – IFSCCodeof.in

A total of 4,541 CIRPs (Corporate Insolvency Resolution Process) were initiated till end of June and out of them, 2,859 were closed. Out of them, 1,349 CIRPs ended in liquidation while 396 ended in approval of resolution plans, as per the latest quarterly newsletter of the Insolvency and Bankruptcy Board of India (IBBI).

Liquidation

“About 47 per cent of the CIRPs, which were closed, yielded orders for liquidation, as compared to 14 per cent ending up with a resolution plan. “However, 75 per cent of the CIRPs ending in liquidation (1,011 out of 1,349) were earlier with Board for Industrial and Financial Reconstruction (BIFR) and / or defunct. The economic value in most of these CDs (Corporate Debtors) had almost completely eroded even before they were admitted into CIRP.

“These CDs had assets, on average, valued at around 7 per cent of the outstanding debt amount,” the newsletter said. In recent times, there have been concerns raised in certain quarters about the number of companies going into liquidation and steep haircuts taken by creditors under the Insolvency and Bankruptcy Code (IBC), which has been in force for nearly five years. IBBI is a key institution in implementing the Code.

Realisation by creditors

“However, about 80 per cent of CIRPs having an underlying default of less than Rs 1 crore, were initiated on applications by OCs, while about 80 per cent of CIRPs, having an underlying default of more than Rs 10 crore, were initiated on applications by FCs,” it noted. According to the newsletter, the share of CIRPs initiated by CDs is declining over time and they usually initiated the process with very high underlying defaults

Also read the latest developments in IBC

[ad_2]

CLICK HERE TO APPLY

Leave a comment board for industrial and financial reconstruction, CIRPs, Corporate Debtors, financial creditors, IBBI, IBC, Insolvency and Bankruptcy Board of India, liquidation

Govt considers operational changes in IBC following expert panel recommendations, BFSI News, ET BFSI

August 23, 2021 root Banking & Finance

[ad_1]

Read More/Less

India is considering several operational changes in the Insolvency and Bankruptcy Code (IBC), harnessing digital technology to help remove seemingly insurmountable obstacles of distance or time – and speed up the resolution of bad loans.

The Indian Institute of Insolvency Professional of ICAI (IIIPI), which constituted a study group, has recommended greater adoption of digital modes, such as holding virtual meetings of courts and CoC (committee of creditors) and deploying AI (Artificial Intelligence), even after eventual restoration of normality due to the time-saving benefits of digital technology.

Under the aegis of Insolvency and Bankruptcy Board of India (IBBI), IIIPI regulates insolvency professionals, who play a key role in the execution of bankruptcy resolution plans. It has submitted a set of recommendations made by the study group to the ministry of corporate affairs and IBBI.

The Ministry of Corporate Affairs did not respond to ET’s mailed query.

“In addition to sprucing up the infrastructure, the NCLT should consider continuing ‘virtual courts’ even after normalcy restores,” IIIPI said in a note viewed by ET. “In virtual courts, senior officials can participate without travelling from remote offices, which helps in fast decision making and reduces pendency.”

It is necessary to learn from every crisis, which is what the said report seems to be doing on recommending best practices.

Virtual meetings during Covid restrictions, according to IIIPI’s study, resulted in quick decision making as senior officials used to participate.

“This should be continued as a ‘best practice’ even after normalcy resumes,” said the note.

Dewan Housing Finance (DHFL) is a classic case in point. The troubled non-banking finance company, for which the government amended the law to bring it under the IBC, has finally been sold. The resolution process ended successfully, albeit after multiple litigations.

The study group report by the largest body of insolvency professionals also urged the authorities to nip in the bud the menace of frivolous cases, often intended to cause delays in resolutions.

Section 60(5)(a) of IBC gives NCLT the jurisdiction to entertain and dispose of any application or proceeding by or against the corporate debtor or corporate person.

This may be amended to restrict and specify the grounds on which any applicant can approach NCLT for rectifying grievances. IBBI is urged to take up the issue on priority, said one of the recommendations in the report.

DHFL received about 40-50 cases challenging decisions by either the central bank-appointed administrator or the CoC.

“Artificial Intelligence (AI) based facilities should be used for people tracing, asset tracing and transaction tracing,” it recommended.

[ad_2]

CLICK HERE TO APPLY

Leave a comment bad loans, corporate insolvency, covid, IBC, Insolvency and Bankruptcy Board of India, ministry of corporate affairs, nclt

Jayant Sinha, BFSI News, ET BFSI

August 16, 2021 root Banking & Finance

[ad_1]

Read More/Less

As the Indian Bankruptcy Code (IBC), one of the crucial reforms that gives India Inc the ‘right to exit’ and start afresh, completed five years, ETCFO spoke with Jayant Sinha, former union minister and Chairman of the parliamentary standing committee on finance, to know if liquidation is a scam under IBC? And more.

“Liquidation should not be a benchmark. And that is why we have to think carefully about what should be the benchmarks and a resolution process particularly for secured financial creditors,” said Jayant Sinha.

Almost half of the closed cases by lenders under IBC in FY21 ended in liquidation, as per the Insolvency and Bankruptcy Board of India (IBBI), while only 13 per cent were resolved. In most of the cases under IBC, by the time they are resolved, their asset value depreciates leading to 90% haircuts, according to IBBI

Specifically from the secured creditors perspective, when they lend against collateral they expect 100 per cent value back instead of “salvage or the liquidation value”.

“If that was to be the case, the kind of loans a company would be able to get would be very modest, because everybody’s just lending against liquidation value. We can’t have that,” Sinha said, underscoring the importance of having benchmarks.

These benchmarks are for secured financial creditors as there should be a very high level of confidence that they’re going to get the vast part of their loan back, he said.

But the question is how to decide the benchmark?

Sinha points to global benchmarks, the major economies that we compete with like Germany, Japan, China, the US, the UK. What secured financial creditors typically get through the resolution process should be the benchmark, he said.

Benchmark the quantum of haircut

In one of the recommendations, the parliamentary standing committee in its report titled, ‘Implementation of Insolvency and Bankruptcy Code: Pitfalls and Solutions’ was to benchmark the quantum of haircuts to avoid a 90 per cent haircut situation.

As per IBBI, in the resolved cases, the haircut, or the loss to banks on their claims, rose to 60 per cent in FY 2021, from 55 per cent average in the previous years. While in the March 2021 quarter alone, haircuts rose to a whopping 74 per cent of the claims made by the lenders against the defaulters.

While it is a matter of concern, how will benchmarking haircuts work?

Benchmarking haircut is not a prescription. It’s not a number that you have to meet. But it is something that should guide the committee of creditors in terms of how and how quickly they should go through the resolution process..

He believes that the system needs to gear up to deliver better outcomes. He feels there are many reasons why 40% recovery is happening. He ascribed these low recoveries to companies close to liquidation coming to IBC, processes that dragged on for a long time eventually eroding the value of the assets, apart from other reasons.

“Going forward, 40% cannot be the benchmark. It is not good enough. Whereas 5% is not good enough either. We need to do better for secured financial creditors. And the changes that we are suggesting are in support of all of that,” he said.

Role of NCLT

As far as delays in the process are concerned, one aspect is counter litigation by promoters. This costs money and time to the whole system. How should IBC deal with such issues, especially when NCLT is facing the challenge of capacity?

Sinha suggested three steps to reduce litigation.

Firstly, fill the vacancies at NCLT as quickly as possible because then there is more time to adjudicate a case well and come up with a good resolution.

If judges don’t have enough time and rush through cases, they won’t give good judgments, and then things will end up in litigation. Therefore, adding capacity as soon as possible is one way in which we can deal with these endless litigation type issues.

Secondly, improve the quality of NCLT members. The parliamentary committee has recommended that the NCLT should at least have high court judges so that we can benefit from their experience and their wisdom. That’s another way to prevent litigation.

The third way of preventing litigation is to ensure when people submit the resolution plan as per the deadline, they do not have an opportunity to come in with another resolution plan after that. Because not doing so, will again rest in litigation, and a lot of contentions back and forth.

“So these are three very concrete steps that we have suggested to reduce litigation as it is one of the reasons a lot of these timelines are being extended,” he said.

ALSO READ: RBI Governor and Jayant Sinha to discuss IBC

[ad_2]

CLICK HERE TO APPLY

Leave a comment bankruptcy, Bankruptcy Code, IBBI, IBC, IBC Law, insolvency, jayant sinha, liquidation, nclt

NCLT orders liquidation of Siva Industries, BFSI News, ET BFSI

August 13, 2021 root Personal Finance

[ad_1]

Read More/Less

The National Company Law Tribunal (NCLT) Chennai has dismissed the C Sivasankaran application and ordered the liquidation of Siva Industries.

NCLT said that Sivasankaran application under section 12 (A) does not stand. NCLT has also dismissed the SBI application.

Siva Industries and Holdings Limited (Siva Industries) will go into liquidation after the NCLT rejected the application.

This is as per provisions of the Insolvency and Bankruptcy Code where 90 per cent of the lenders had not given approval.

Lenders of Siva Industries and Holdings Limited (Siva Industries), founded by C. Sivasankaran (the former promoter of Aircel) had filed application under Section 12A of Insolvency and Bankruptcy Code 2016 (IBC) in National Company Law Tribunal (NCLT), Chennai Bench for withdrawing the insolvency proceedings against Siva Industries.
Siva Industries and Holding owes Lenders approx Rs 5,000 crore.

The settlement

The lenders to Siva Industries had told the National Company Law Tribunal that they will get 26% of their dues after taking into account third-party guarantors. Operational creditors were to get part of their dues under the settlement plan.

The deal had raised eyebrows as such offers by promoters were rejected in the past.
On the reason why they approved the 12A petition of promoters banks had told the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out.

Also, the IDBI Bank‘s claim of Rs 644 crore will be paid while Blackstone-backed International ARC will get an additional amount of Rs 510 crore via land sale, they had said.

Unusual deal

Bankruptcy experts had termed the settlement unusual, citing the rejection of such offers by promoters in the past.
The acceptance of Sivasankaran’s offer differed from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.
In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

[ad_2]

CLICK HERE TO APPLY

Leave a comment essar steel, holdings limited (siva industries, IBC, idbi bank, National Company Law Tribunal, nclt, sbi, Siva Industries

RBI Governor and Jayant Sinha to discuss IBC and various issues, BFSI News, ET BFSI

August 12, 2021 root Banking & Finance

[ad_1]

Read More/Less

After five years of its operation, the most famous tool of lenders, the Insolvency and Bankruptcy Code (IBC) will see more amendments. The parliamentary standing committee on finance has recommended many changes in the IBC, including strengthening the NCLT bench, obeying the stipulated time frame, liquidation process, extending the pre-pack to large corporations etc. The committee is also going to meet the Governor of the Reserve Bank of India very soon.

“There’s something very important on our radar, the Governor of the RBI is coming to meet with the committee to discuss RBI’s role and how RBI has been handling its various important responsibilities,” said Jayant Sinha, former union minister, and the chairman of the Parliamentary Standing Committee told ETCFO.

Sinha has been leading the standing committee on issues around Indian Bankruptcy Code (IBC). They have submitted their recommendations to the government in the report titled ‘Implementation of Insolvency and Bankruptcy Code: Pitfalls and Solutions’ in August 2021.

With regards to the subject of IBC, the committee has been meeting various stakeholders like the finance ministry, as well as homebuyers.

[ad_2]

CLICK HERE TO APPLY

Leave a comment Bankruptcy Code, IBC, jayant sinha, Liquidation prcess, Parliamentary Standing Committee, Pitfalls of IBC, policy, Pre pack POlicy, RBI Governor, reserve bank of india

NSE, Insolvency and Bankruptcy Board of India ink pact for research collaboration, BFSI News, ET BFSI

August 6, 2021 root Personal Finance

[ad_1]

Read More/Less

Leading stock exchange NSE on Friday said it has joined hands with the Insolvency and Bankruptcy Board of India (IBBI) for research collaboration. The objective of the collaboration is to create a research ecosystem in the area of insolvency and bankruptcy in the country, the exchange said in a statement.

It further said that an efficient insolvency and bankruptcy resolution system enables timely resolution of financial stress, balances interests of all stakeholders, promotes entrepreneurship and increases availability of credit at optimal costs. This, in turn, improves growth prospects and builds institutional strength in an economy.

IBBI is a unique regulator, which regulates insolvency professionals as well as insolvency processes.

Under this collaboration, NSE and IBBI will focus on enhancing the existing research efforts in the areas related to insolvency and bankruptcy in India, promoting studies that explore interlinkages between the development of the insolvency process, financial markets and economy, the statement noted.

Also, they will analyse the effectiveness of insolvency laws and practices across the world and fostering evidence-based policy recommendations to strengthen the insolvency framework in India.

IBBI Whole-time Member Sudhaker Shukla said that in an evolving area such as insolvency and bankruptcy, there is a dire need to promote credible research on the best practices and outcomes.

To this effect, IBBI has collated a dynamic data set relating to processes and outcomes under the IBC and encouraged evidence-based research in the insolvency space, he said.

“To further this research, our endeavour is to explore new avenues and possibilities in the sphere of research collaboration. In this context, the partnership between IBBI and NSE will go a long way in plugging the research void in such an important area of distressed assets and its resolution,” he added.

Vikram Limaye, MD and CEO, NSE, said the exchange has always been at the forefront in encouraging research in relevant and emerging issues that are important for effective policy making and promote development of markets.

[ad_2]

CLICK HERE TO APPLY

Leave a comment bankruptcy board of india, IBBI, IBC, Insolvency and Bankruptcy Board of India, md, nse, Vikram Limaye

Parliamentary panel that includes former PM Manmohan Singh wants IBC overhaul, BFSI News, ET BFSI

August 5, 2021 root Personal Finance

[ad_1]

Read More/Less

A parliamentary standing committee led by former Union minister Jayant Sinha set up to examine the workings of the Insolvency and Bankruptcy Code (IBC) has recommended an overhaul of the present system including a threshold rate of haircut for creditors.

The 29 member committee includes former prime minister Manmohan Singh.

Low recovery rates with haircuts as much as 95% and 71% of the cases pending beyond the 180 days timeframe envisaged by the law point towards a

deviation from the original objective of the Code.

“As the insolvency process has fairly matured now, there may be an imperative to have a benchmark for the quantum of “hair-cut”, comparable to global

standards,” the committee said without specifying what this benchmark could be.

It noted that though the new code has helped in substantially improving credit culture, there are long delays in cases due to the time taken to admit cases, allowing bidders even after the deadline and various challenges to the NCLT judgements.

The committee also expressed apprehension about fresh graduates being appointed as resolution professionals (RPs) expressing doubts over their handling of large cases. It pointed out that regulatory action has been taken in 123 out of the 203 cases examined by the Insolvency and Bankruptcy Board of India (IBBI).

The panel’s suggestions

Only high court judges be appointed to the National Company Law Tribunal (NCLT) to ensure quicker disposal of cases.

Instead of having multiple insolvency professional agencies (IPAs) a single body may be formed to oversee and regulate RPs.

Bring a professional code of conduct for the committee of credtors (CoC) the main decision making body approving a resolution plan and also a set of guidelines for the appointment of RPs to ensure transparency in the CoC.

NCLT should accept defaulters within 30 days and transfer control to a resolution process within this time period.

IBC needs to be amended so that no post hoc bids are allowed during the resolution process.

Involving national law schools so that conduct research, training and also provide support in the form of law clerks.

It has suggested dedicated benches of the IBC within the NCLT and also special benches for micro and small enterprises for quicker disposal of cases.

RPs should also be allowed to sell company assets depending on the demand, in parts to multiple bidders rather than in a block to get maximum value.

[ad_2]

CLICK HERE TO APPLY

Leave a comment ibbi).the, IBC, Insolvency and Bankruptcy Board of India, jayant sinha, manmohan singh, National Company Law Tribunal, nclt

Financial creditors’ insolvency plea valid even after three years, rules SC, BFSI News, ET BFSI

August 5, 2021 root Banking & Finance

[ad_1]

Read More/Less

The Supreme Court has ruled that plea by a financial creditor for initiation of insolvency resolution process against a corporate debtor before the adjudicating authority will not get time barred on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account as NPA.

A two-judge bench set aside an order of National Company Law Appellate Tribunal (NCLAT) by which it had said that application under section 7 of Insolvency and Bankruptcy Code (IBC) of Dena Bank (now Bank of Baroda) for initiation of insolvency process was time barred.

The bench said, “To sum up, in our considered opinion an application under Section 7 of the IBC would not be barred by limitation, on the ground that it had been filed beyond a period of three years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of three years, in which case the period of limitation would get extended by a further period of three years”.

It said that the impugned judgement and order of NCLAT is unsustainable in law and facts and allowed the appeal of Dena Bank.

The case

Dena Bank has moved the top court in appeal against December 18, 2019 order of NCLAT setting aside an order of March 21, 2019 passed by NCLT, Bengaluru admitting the application of the bank for initiation of insolvency proceedings against company Kaveri Telecom Infrastructure Limited and its director C Shivakumar Reddy.

By a letter dated December 23, 2011 the Bank had sanctioned term loan and Letter of Credit Cum Buyers’ Credit in favour of the company, with an upper limit of Rs 45 Crores.

The said term loan was to be repaid in 24 quarterly instalments of Rs 187.50 lakhs, which were to commence two years after the date of disbursement, and the entire term loan was to be repaid in eight years, inclusive of the implementation period of one year and the moratorium period.

On September 20, 2013 the corporate debtor defaulted in repayment of its dues to the bank and the loan account of the company was therefore declared Non Performing Asset (NPA) on December 31, 2013

The rationale

The bench said that there is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under the provision of the IBC in Form-1.

“In the absence of any express provision which either prohibits or sets a time limit for filing of additional documents, it cannot be said that the adjudicating authority committed any illegality or error in permitting the appellant bank to file additional documents,” it said.

The top court, however, said that depending on the facts and circumstances of the case, when there is inordinate delay, the adjudicating authority might, at its discretion, decline the request of an applicant to file additional pleadings and/or documents, and proceed to pass a final order.

“In our considered view, the decision of the adjudicating authority to entertain and/or to allow the request of the appellant bank for the filing of additional documents with supporting pleadings, and to consider such documents and pleadings did not call for interference in appeal,” it said.

Fresh cause of action

The top court said that a judgment and/or decree for money in favour of the financial creditor, passed by the DRT, or any other Tribunal or Court, or the issuance of a Certificate of Recovery in favour of the financial creditor, would give rise to a fresh cause of action, to initiate proceedings under Section 7 of the IBC for initiation of the Corporate Insolvency Resolution Process, if the dues remain unpaid.

It said that in the instant case the balance sheets and financial statements of the Corporate Debtor for 2016-2017, constitute acknowledgement of liability which extended the limitation by three years, apart from the fact that a Certificate of Recovery was issued in favour of the appellant bank in May 2017.

It said that the National Company Law Tribunal (NCLT), Bengaluru had rightly admitted the application of the bank by its order dated March 21, 2019.

Limitation Act

It said that there is no specific period of limitation prescribed in the Limitation Act, 1963, for an application under the IBC, before the NCLT but an application for which no period of limitation is provided anywhere else in the Schedule to the Limitation Act, is governed by Article 137 of the schedule of the said Act.

“There can be no dispute with the proposition that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default,” it said.

[ad_2]

CLICK HERE TO APPLY

Leave a comment bank of baroda, dena bank, IBC, Insolvency & Bankruptcy Code, national company law appellate tribunal, National Company Law Tribunal, nclat, nclt, npa, supreme court

« 1 2 3 4 5 … 8 »