There is a need to maximise the value of an entity

Does the highest bidder maximise value? This is the objective. It is not the question that you get the maximum money. What is not intended as the main objective is the recovery. What is intended is to maximise the value of an entity. All these things have been driven to the background and we think only in minute monetary terms.

That is not the purpose. I happened to be the Corporate Affairs Minister when we drafted the Companies Law. This was the objective. Otherwise, there are recovery agents or recovery mechanisms. We tried so many mechanisms and some failed while others succeeded. I think this is the extension of that, the recovery principle. This is a very laudable objective.

The second question is, should the resolution process be changed to open bidding? Of course, there is already a comment from one of the very important industrialists who just came to start an industry. In the beginning itself, he said that the Insolvency Law is a frustrate. This is the observation by one of the persons who recently wanted to come, open an industry and settle in India. This is the impression which has been created in the market world over.

How do you remove this kind of an impression? One of the major idea is to have ease of doing business. But, is this helping us to facilitate ease of doing business? Rather, this kind of an arrangement is making the business difficult. This is a question on which we require total clarification. Why is the need for secrecy? The country should know about it because it is a question of the trust money of the people of this country. How is the trust money of the people being looted, exploited and misutilised? The people would like to know about it. This has to be built into in this Code. That was the idea.

Then, should the High Court be excluded from the appeal process? Now, it is excluded. Why should it be excluded? There should be checks and balances at every stage. The idea is not to walk away with whatever you would like to have. If you do not have checks and balances, the people will just loot the money and go away. You will not be preventing it.

Further, should the promoters be allowed to bid for their companies? That is another question. I think it is for the honourable Minister to answer this question and clarify. Should home buyers be treated as financial creditors? You have brought the amendment through Ordinance. You have given a partial answer. But, that is not just adequate. There are a number of things that are open for interpretation or defining it and again it will go to the court. When you are bringing a law of this kind, you need to define it properly with absolute clarity. Even though some answer is given to this question, but the answer is partial, confusing and it is with ambiguity. I will come back to you with some more details.

Then, are the minority shareholders protected? In the concept of democracy — whether of an entity or of any Republic — the minorities become important. If they are not protected, democracy is negated. The democracy is meant for such people who need protection. Like that, minority shareholders will have to be protected. I do not think that in the scheme of things, this has been addressed. Another question is this. Are operational creditors protected? That is also in doubt.

Then what happens to companies with overseas assets? The companies do not confine their operations not only to this country, but they also go abroad. What happens to that? Do laws need alignment? It is mandatory for a resolution plan to comply with all provisions of the law. For instance, take the case of approval of shareholders under the Companies Act and Sebi for changes in capital structures under the Resolution Plan. As per the resolution, regulations approval under shareholder agreements and incorporation of accord documents are exempted. The shareholders may block any part of the resolution plan, especially matters such as capital reduction. Similar alignment is required between Sebi regulations regarding requirement. It is not a standalone resolution. It cannot be. The company law is not a standalone law. It has to be aligned with Sebi, RBI and many others. After all, we are not working in a vacuum or in an isolated way or in a vertical way. In view of the fact that it is a company law connected with the financial regulations, it needs to be connected and collated with others.

The workload has increased in IBC immensely. We also find that banks are not taking any efforts on their own for recovery or resolution even though they have 180 days or 260 days time lag. I feel they think that this is a god sent instrument and they resort to it. They cannot afford to do it also because their decision making power itself is questioned by various agencies of this Government. They have created a fear-psychosis wherein decision-making power or a commercial decision taking power of the banking institutions is threatened. Their autonomy is threatened. Earlier, there were Vigilance Commissions and now the CBI. Even the state investigating officers are also investigating. The chairman of Maharashtra Bank was arrested by the state government. I think tomorrow anybody can go to some court and obtain some warrant and any chairman arrested or an executive of a bank. This kind of uncertainty is there.

Then, of course, I will come to the larger question of how the banks are functioning. A stock answer with you is that the NPAs are all of previous legacy. But what have you done to correct that legacy except raising your hand? They are now amounting to ~11 trillion or ~12 trillion. I will come back to that. It is galloping. There is geographical progression now and not geometric progression. This is what is happening today. The NCLT has become an easy instrument now. They feel that the corporate houses with deep pockets can bid for multiple distressed assets under the insolvency process without getting themselves disqualified under Section 29 of the Insolvency and Bankruptcy Act. They are free to do it. All these monopoly Acts have gone and now they have a free play including a defaulting party. This is a holistic law.