22 January, 2021

Default Sinkholes

The regulatory tool seeking to minimise damage from the menace of mounting NPAs was given new teeth, but it will be a long and hard road to recovery

Illustration by Sajith Kumar
Default Sinkholes
outlookindia.com
2018-04-21T10:37:57+05:30

The Insolvency and Bankruptcy Code, or IBC, is in the news again. This time, some are wondering whether the code is ­being diluted to soften the blow of NPA (non-performing ­assets) resolutions on defaulting companies. Over 4,700 cases have been referred to the National Company Law Tribunal (NCLT): these include cases under BIFR (Board of Industrial and Financial Reconstruction) and in various high courts. The prime tool in this marathon exercise—to get back lakhs of crores of bank funds stuck in debt- laden companies through asset sale—is the IBC 2016, which was amended last year to debar promoters of the ­defaulting companies from re-acquiring the distressed assets. As with all efforts to get corporates to repay their bad debts, IBC implementation too is not without its share of pulls and pressures. It raises the question of whether the industry is out to stall the process of auction or liquidation of bankrupt companies.

“I don’t see it (as stalling the process) that way,” says Rakesh Bharti Mittal, president, Confederation of...

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