SME Times News Bureau | 24 Oct, 2017
The President's
assent to the ordinance to amend the Insolvency and Bankruptcy Code (IBC) that
will bar defaulters from bidding for the stressed assets on Friday received
thumbs up from stakeholders who described it as a major step towards
"providing comfort to incoming new investors."
Breaking the news of the Presidential approval at a meeting here with select
editors, Finance Minister Arun Jaitley said: "The ordinance disentitles
the big defaulters and makes it difficult for them to bid for distressed assets
which was of their own making."
He said the ordinance does not ban them from bidding for the stressed assets
but would make it difficult for them and disentitles them from doing it.
Shardul Amarchand Mangaldas & Co Executive Chairman Shardul Shroff noted
that the ordinance identifies 10 categories of people as those disqualified
from submitting resolution plans as resolution applicants.
"Promoters who are persons whose account is classified as non-performing
asset (NPA) in accordance with RBI guidelines, and who have failed to make
payment of all overdue amounts within a period of one year or more from the
date of classification as an NPA, cannot participate unless they pay all
overdue amounts with interest thereon and charges relating to the NPA before
submission of the resolution plan," Shroff said in a statement.
"Another impact of the ordinance is to treat personal guarantors to
corporate debtors in the same way as the corporate debtor.
"These amendments will save the Government 'blushes' in a situation where
promoters of existing corporate debtors seeks massive haircuts in the guise of
a resolution applicant in relation to a resolution plan," he added.
The Insolvency and Bankruptcy Code, being implemented by the Corporate Affairs
Ministry, became operational in December 2016 and provides for a time-bound
insolvency resolution process.
The changes proposed are expected to help streamline the process of selecting
buyers for stressed assets.
"The ordinance is a major step towards creating a level playing field and
providing comfort to incoming new investors, foreign players that process of
resolution would be very transparent," British consulting multinational
KPMG in India Partner Manish Aggarwal said.
"It also signals that resolution process will ensure that existing
sponsors who are covered by these amendments directly or indirectly cannot
retain control of their companies at the cost of lenders by seeking huge hair
cuts and being back in business," he added.
NPAs, or bad loans, in the Indian banking sector have crossed the staggering
level of Rs 8 lakh crore, of which more than Rs 6 lakh crore are in the books
of state-run banks.