• Rajasthan

    Cong 99
    BJP 73
    RLM 3
    OTH 24
  • Madhya Pradesh

    Cong 113
    BJP 110
    BSP 2
    OTH 5
  • Chhattisgarh

    Cong 68
    BJP 15
    JCC 7
    OTH 0
  • Telangana

    TRS-AIMIM 95
    TDP-Cong 21
    BJP 1
    OTH 2
  • Mizoram

    MNF 26
    Cong 5
    BJP 1
    OTH 8

* Total Tally Reflects Leads + Wins

Pay up or make way, FM Arun Jaitley warns borrowers

By: | Published: August 20, 2017 7:12 AM

Cautioning corporate defaulters, finance minister Arun Jaitley on Saturday said the old regime by which “lenders would get tired chasing errant borrowers and end up recovering nothing” was over.

Arun Jaitley, corporate defaulters, borrowers warned, Insolvency and Bankruptcy CodeCautioning corporate defaulters, finance minister Arun Jaitley on Saturday said the old regime by which “lenders would get tired chasing errant borrowers and end up recovering nothing” was over.

Cautioning corporate defaulters, finance minister Arun Jaitley on Saturday said the old regime by which “lenders would get tired chasing errant borrowers and end up recovering nothing” was over. He warned that if a borrower has to survive, he will have to service the debt or make way for somebody else. “I think this is the only correct way by which businesses would now be done,” Jaitley said, adding that for endless years, a system existed that effectively protected the debtors and allowed assets to rust away, as there was hardly any law for individual and partnership insolvencies. He added that if one takes the cumulative effect of all the laws (DRT, SARFAESI and Insolvency and Bankruptcy Code), the message was loud and clear that the debtors will certainly have to make sure that their debts are serviced. “The ultimate object is not the liquidation of the assets, but to save these businesses and get either the existing promoters, with or without partners, or new entrepreneurs to come in and make sure that these valuable assets are preserved,” Jaitley said.

He said the government is trying to ensure that the infrastructure is also strengthened and is in consonance with the requirements of the Insolvency and Bankruptcy Code (IBC). “The legislation has strict timelines and it is important to adhere to these timelines,” he said. He said some of the existing laws aimed at bad debt resolution have not been able to achieve their objective. “You had insolvency laws in the state that were almost ineffective. You had a provision in the Companies Act that provided for commercial insolvencies and remedial action, but was an extremely slow-moving process that would result in some form of settlement in court,” Jaitley said.

The Sick Industrial Companies Act (SICA) experiment, he said, was an absolute failure. He said that while SICA was brought in with an idea that sick companies would be revived, it ended up providing borrowers an iron curtain and disallowing lenders to make recoveries for indefinite periods. Jaitley said though the Reserve Bank of India (RBI) created certain regulations to give banks a lot of flexibility in debt recast and resolution of stressed assets, it was still extremely difficult for creditors to be effectively chasing defaulting debtors.

According to him, a nine-month period (since the IBC was formed) would be too short to get any knee-jerk reaction on what improvements were further required. “We probably have to wait over a period of time and then ensure as to how much of this law has been made effective by the various pronouncements of the tribunals and the appellate tribunals,” he said, adding that its effectiveness would be assessed over a period of time.

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