How to make IBC fool-proof: Govt crowd sourcing for ideas as delays hit insolvency resolutions

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New Delhi | Updated: October 14, 2019 7:22:25 AM

The Insolvency and Bankruptcy Board of India has an electronic facility using which stakeholders can submit their feedback on even clauses or words of a particular regulation throughout the year.

Insolvency, E marketplace, toxic assets, delay in resolution, IBBI, e marketplace solution, e marketplace insolvency, insolvency and bankruptcy codeOver the last weekend, it organised four programmes with senior income tax officials in Mumbai, Kolkata, Bengaluru and Ahmedabad and discussed in detail various contours of the insolvency law.

The insolvency regulator is undertaking a massive drive to “crowd-source” ideas to bolster the evolving architecture of insolvency rules and regulations. The move comes at a time when most high-profile cases, including Essar Steel and Bhushan Power and Steel, are still mired in litigation, threatening to derail the time-bound resolution process that the Insolvency and Bankruptcy Code (IBC) seeks to ensure.

The Insolvency and Bankruptcy Board of India (IBBI) held consultations with valuers last Monday, followed by one with close to a dozen of key companies (resolution applicants) on Friday, sources told FE. Over the last weekend, it organised four programmes with senior income tax officials in Mumbai, Kolkata, Bengaluru and Ahmedabad and discussed in detail various contours of the insolvency law. In fact, the regulator has got into a pact with the Central Board of Direct Taxes (CBDT) to hold as many as 100 such programmes with senior officials in CBDT offices across the country this fiscal. These apart, it has been holding meetings with insolvency resolution professionals. More consultations are being planned with other stakeholders, too.

While the IBBI regularly engages with key players as part of its efforts to improve the regulation-making process, the latest consultations suggest the regulator’s increasing emphasis on making the system fool-proof so that no unscrupulous element can manipulate the IBC processes, said a source, who attended one of these consultations. “They want to expedite the resolution process and further strengthen processes,” he said.

The IBBI also has an electronic facility using which stakeholders can submit their feedback on even clauses or words of a particular regulation throughout the year.

Although the law stipulates time-bound resolution within a maximum of 270 days, litigation in many cases – thanks to defaulting promoters’ dogged pursuit to hold on to their companies — has delayed resolution. According to the latest data, the resolution of as many as 34% of the 1,292 ongoing cases in the bankruptcy courts until June 30 were delayed beyond 270 days, up from 26% a year ago and 31% in the March quarter.

Five of the 12 large non-performing asset (NPA) accounts recommended by the RBI in 2017 for resolution under the IBC are yet to see finality in resolution. The government and the regulator have had to face criticism for the delay in resolution, caused by litigation, that has cost lenders dearly. Scores of frustrated bankers have put their bad loan accounts on sale, fearing that the long-drawn litigation process will further bleed them.

State-run banks put up around `10,000 crore worth of non-performing assets for sale to asset reconstruction companies by up to mid-September in the second quarter, way higher than their bad debt sale of `4,000 crore to ARCs in the April-June period.

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