Indian banks have sought the option to withdraw a case admitted by the National Company Law Tribunal (NCLT) for insolvency proceedings, two bankers with direct knowledge of the development said. The Indian Banks Association (IBA), on behalf of the lenders, has recently written a letter to the Insolvency and Bankruptcy Board of India (IBBI) suggesting this. At present, a case that has been admitted by the NCLT cannot be withdrawn unless the Supreme Court orders it to be withdrawn. “We want to have the option of being able to withdraw a case that has been admitted by the NCLT if we can decide on a sustainable resolution plan. We feel it will give us more flexibility and help us to resolve some of the cases faster,” a senior banker with a large public-sector lender said. “We are in various stages of discussion with the promoters regarding resolution plans. For various reasons, sometimes the discussions extend beyond the stipulated time. The additional flexibility will enable us to reach a settlement in such cases,” the banker added.
Apart from referring stressed accounts to the NCLT, the banks have been focusing heavily on resolving some of these accounts through one-time settlement agreements. As per the Reserve Bank of India’s (RBI) mandate, the lenders had first referred the top 12 stressed assets, accounting for 25% of the gross bad loans in the system, to the NCLT. Of these, 11 accounts including Jyoti Structures, Essar Steel, Monnet Ispat & Energy, Alok Industries, Electrosteel Steels, Amtek Auto, Bhushan Steel, Bhushan Power and Steel, ABG Shipyard, Lanco Infratech and Jaypee Infratech are currently undergoing insolvency proceedings.
Since the beginning of the year, the lenders have started referring the 28 accounts mentioned in the RBI’s second list of corporate defaulters to the NCLT. The second list includes names such as Visa Steel, Videocon Industries, Jaiprakash Associates and Jayaswal Neco Industies, among others. The RBI had given the banks time till December 13, 2017 to resolve these accounts outside the NCLT. “Only the banks should have the power to withdraw a case. And even then, it should be used extremely sparingly. Only when we feel that a genuine resolution is possible, will we think of recalling a case,” a senior official of another large state-run bank said.
Bankers have been regularly sending their suggestions to the IBBI regarding the Insolvency and Bankruptcy Code, 2016. Recently, the government, through the Insolvency and Bankruptcy Code (Amendment) Bill, 2017 barred promoters of accounts that have been classified as non-performing assets for at least a year from submitting resolution plans. The ordinance on this issue had been issued in November 2017. However, the amendment provides for promoters to make payments of the overdue amount and participate in the resolution process. The promoters have been given a period of 30 days to make the payments.