In order to maximise the liquidation value of stressed assets under the insolvency law and enhance recovery for creditors, the Insolvency and Bankruptcy Board of India (IBBI) has now mandated the auction process of these assets to be conducted through a centralised electronic platform.
In a circular, dated October 29, the IBBI said that it has collaborated with the Indian Banks’ Association (IBA) to facilitate the auction of assets through the “eBKray platform” which is presently owned and managed by PSB Alliance Private Limited (a consortium of 12 public sector banks). eBKray has been conducting auctions for assets mortgaged to public sector banks under the SARFAESI Act for the past five years.
At present, the liquidators, who are resolution professionals appointed for the insolvency resolution process, are selling the assets through various auction platforms; and the details of a company’s assets are typically made public only at the time of the auction notice. “This practice leads to information asymmetry, as potential buyers have limited time to assess the value of the assets, often resulting in lower recovery rates,” noted the IBBI.
Thus, a centralised listing and auction platform where details of all assets under liquidation of CD are continuously available to the public provides an effective solution to these problems, it said.
As per the latest IBBI newsletter, the amount distributed to stakeholders till June 2024, post completion of the insolvency process, stood at 91% of the liquidation value of the stressed assets; but the distributed amount was merely 3% of the admitted claims.
Anjali Jain, partner, Areness said that even though there are already multiple digital platforms listing and facilitating sale of distressed assets, which includes platforms under SARFAESI Act and investIndia, yet investment opportunities under IBC still remain aloof with a large proportion of perspective resolution applicants, “feeling defeated” by the pace of the IBC process.
Piyush Agrawal, partner, AQUILAW said a centralised auction platform would boost transparency and bidder access by listing liquidation assets in advance, including detailed information such as photos and coordinates amongst others.
The IBBI said that the PSB Alliance has developed a module within the eBKray platform to facilitate the listing and auction of assets under IBC. “This centralized platform offers detailed information on corporate debtor assets, including photographs, videos, and geographical coordinates,” it said. This platform will require liquidators to list all assets of the corporate debtor (CD) as mentioned in the Asset Memorandum, including comprehensive details such as the status of the attachment or lien, geographical coordinates, and the likely date of auction.
Initially, the platform is envisioned to be deployed on a pilot mode and it will be improved based on the experiences of usage. The full-fledged roll-out of the platform will be notified thereafter, said IBBI.
Jyoti Prakash Gadia, managing director at Resurgent India said: “The proposed mechanism has already been tried and tested under the operation of IBA and is expected to bring better transparency and clarity.”