The Insolvency & Bankruptcy Code (IBC)enacted in 2016 has proved to be a game changer in more ways than one, as it seeks to protect last-mile funding, boost investments in financially distressed sectors, speed up the corporate insolvency resolution process, and give failed promoters a decent exit route,said CA Snehal Kamdar an insolvency professional & expert on the subject while addressing a largely attended Webinar organised by COSIA,Vidarbha.He further said that timebound outer limit of 330 days that is a big step forward.
The other speaker CA Prasad Dharap also an Insolvency Professional said that the IBC gives the highest priority to those who have brought interim finance to meet the costs of resolution or liquidation, followed by dues to workers for the past two years and dues to secured creditors in equal priority, making it fair to all concerned stakeholders.He also shared that earlier Insolvency resolution petitions could be initiated immediately on default of Rs 1 lakh or above,but this limit has been revised to Rs 1 crore & above recently. As per section 6 of the code if any corporate debtor commits a default, a financial creditor, operational creditor and corporate debtor may initiate corporate insolvency resolution process,he added.
Moderating the session Member of Insolvency & Bankruptcy Code Committee of ICAI & Vice Chairman COSIA CA Julfesh Shah said that the IBC was one of the major reform in Indian Corporate World & the Code is infact the demand of the modern era which seeks to provide one stop solution to resolving of insolvencies and boost the process of recoveries of debt extended by the Banks, Public Financial Institutions and other stakeholders &helps India to improve its ranking in Ease of Doing Business.The major contention of the investors and banks who extend credit to the Corporates is the recovery of their dues, if borrower is not able to run its business profitably then the credit is put on high risk and the recovery process of the debt is very slow particularly in India which take on an average,a decade which leads to substantial erosion in the value of the assets over the period and lenders often lands on bad deal, but with the advent of the IBC all such matters are taken in cognizance and is drafted in such a manner to phase-out all the difficulties faced by the Corporate lenders.
It was also discussed in the webinar that the moment the resolution plans moves to the NCLT, bidder starts demanding heavy haircut and the success of the resolution plans largely depends on the compromise and haircut on the part of the resolution. Although it is difficult to say anything about its effectiveness, but it is believed amongst the banker, experts and the corporate chambers that the code in the long run would emerge as a game changer.Initial trend shows that there is as much as average 60% haircut demanded by the bidders on the NPA of banks, a success of the resolution plan is highly depends on the compromised and haircut on the part of the Bankers, thus it hurt the sentiment of bank in particular and economy in general.
At the outset ,Mr Mayank Shukla,Chairman,COSIA extended a warm welcome to the eminent speakers & delegates and said that Webinar on IBC was much needed at this juncture.The code seeks to mitigate one of the major worries of the investors and other stakeholders who invested their money in the business, winding-up or wrap-up of the business affairs in India was not easy to process earlier, even a voluntary winding-up takes an average four years to complete & thus in the event when business failed it becomes an unfruitful venture exit option earlier remained very cumbersome for the investors.Mr Pranav Ambaselkar,Core Committee Member coordinated the question answer sessions . The webinar evoked a good response from all sections of trade, commerce,industry & professionals.
