The government has no immediate plan to extend the period of insolvency resolution from a maximum of 270 days now, a senior official said on Saturday, adding that a separate law was in the making to create a competent pool of regulated registered valuers. Speaking at an event organised by industry lobby CII in Mumbai, corporate affairs secretary Injeti Srinivas said even the Insolvency and Bankruptcy Code (IBC) is stabilising, proper valuers are the critical missing link in the process now as “most of the insolvency professionals are poorly equipped it being a new area for them”.
“We are assessing whether we can have a full-fledged law to regulate them (registered valuers) as they are most critical in the success of the insolvency process,” he said. Srinivas justified the current timeline for resolution process — 180 days after a case is triggered which can be extended by another 90 days with the approval of the National Company Law Tribunal — saying timely reference of default cases to the regulator and their time-bound disposal were critical to preserving the value of the stressed assets.
While NCLTs in most cases have relented and given the additional 90-day window so far, many stakeholders have demanded the resolution period be extended to 360 days given the complexities of the process and practical difficulties. The secretary said acceptance of late bids by NCLTs was unlikely to be repeated now, with the introduction of Section 12 A in the Code.
“The bid that was accepted preceded the recent change. In the second ordinance, Section 12A was introduced precisely to deal with this problem, stating that once the deadlines are over, you cannot accept a late bid,” he said. Dispelling the criticism that IBC is anti-promoter, he said the first amendment to the code in November 2017 was influenced by a Supreme Court order which had said deeply trenched promoters must realise that for them to continue in management they have to pay back. “This amendment has actually given a window of opportunity to the promoters — yet another chance for them to clear the dues. The law is not anti-promoter as the restriction is not on promoters but on resolution applicants,” the official said.
Speaking at the event, Insolvency and Bankruptcy Board of India (IBBI) chairman MS Sahoo said the IBC process’s focus was on timely resolution rather than recovery. “Recovery leads to a firm’s death, while resolution is adopted to rescue the company. We should not be focused on recovery… focus remains on resolution but while working on resolution, the possibility of recovery should not be ruled out. IBC is not a recovery tool, neither is it a tool to maximise the value for the creditors ,” Sahoo said.
According to data compiled by IBBI, creditors have recovered Rs 49,783 crore, or almost 56% of their admitted claims, from 32 stressed companies where insolvency resolution plans were approved by the NCLTs by the end of June. An average 44% haircut the creditors in general had to take in these cases. However, analysts said the ratio may change for the worse in the coming weeks once the resolution process of some of the large stressed companies such as Bhushan Power and Steel, Lanco Infratech and Alok Industries are factored in, as haircuts in these cases are expected to be much higher.
