President Kovind signs Insolvency and Banking Code ordinance

NEW DELHI: An ordinance that bars wilful and habitual defaulters from bidding for stressed assets was promulgated on Thursday with tough provisions to prevent any attempts by them to regain control of companies in difficulty.

President Ram Nath Kovind on Thursday signed the ordinance that amends the Insolvency and Banking Code (IBC) 2016 which was sent to him by the Union Cabinet on Wednesday.

Breaking the news at a meeting of 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.

Giving an example he said: “You can't say my account is NPA (non performing asset) but I have to bid. This is ethically completely unacceptable to the Indian political system.

“I also have a political cost to pay. You can't be a stressed asset and you want to join the process for bidding.”

He said one solution could be that the NPA holder at least comes forward and services the interest by Rs 10 to Rs 15 -thousand crore in an asset of, say, Rs one lakh crore.

The Ordinance aims at putting in place safeguards to prevent unscrupulous, undesirable persons from misusing or vitiating the provisions of the Code.

The amendments aim to keep-out such persons who have wilfully defaulted, are associated with non-performing assets, or are habitually non-compliant and, therefore, are likely to be a risk to successful resolution of insolvency of a company.

In addition to putting in place restrictions for such persons to participate in the resolution or liquidation process, the Amendment also provides such check by specifying that the Committee of Creditors ensure the viability and feasibility of the resolution plan before approving it. The Insolvency and Bankruptcy Board of India (IBBI) has also been given additional powers.

It may be recalled that the Regulations by the IBBI were also amended recently to ensure that information on the antecedent of the applicant submitting the Resolution Plan along with information on the preferential, undervalued or fraudulent transactions are placed before the Committee of Creditors in order for it to take an informed decision on the matter.

An official release said steps towards improving compliances, actions against defaulting companies to prevent misuse of corporate structures for diversion of funds, reforms in the banking sector, weeding-out of unscrupulous elements from the resolution process are part of ongoing reforms initiated by the Government. MUMBAI: Valuation of the stressed assets facing insolvency proceedings is unlikely to be impacted with the Ordinance that debars promoters who have been tagged as willful defaulters from bidding for such assets, SBI chairman Rajnish Kumar said.

"The changes in the law will not bring down the valuation of the assets under resolution because there is lot of interest in these assets. Valuation has nothing to do whether the existing promoters are allowed to bid or not.

Assets will go only on the fair value of the enterprise," Kumar told reporters.

There were some reservation by a few lenders and some bidders over the promoters bidding for their own stressed assets.

In June, the Reserve Bank had asked lenders to refer the 12 largest NPA accounts to the National Company Law Tribunal (NCLT) for resolution under the bankruptcy code. The combined debt of these accounts is Rs 2.4 trillion.

Some of the accounts include Bhushan Steel, Essar Steel, Bhushan Power, Lanco Infra, Amtek Auto among others.

Out of the 12 accounts, 11 are at various NCLTS and interim resolution professional (IRPS) have been appointed.

These resolution professionals have invited expressions of interest for a resolution plan from prospective investors.

Then in August the RBI again tagged 28 more large accounts for resolution through NCLT, which have to be resolved by December 13.

Kumar also said the amendments will not have any impact on the numbers of bidders who want to participate in the bidding process for such stressed assets.

"This presumption that there would be a few bidders is itself not correct. If there is value in any asset then we believe bidders will be very much interested. If you look at the expression of interest for many of the companies that are under NCLT, there is a good interest," he said.

He said the interest from bidders for a stressed account will be driven by the outlook for that industry and the quality of the asset.

Kumar said certain criteria such as credibility of the bidders and a sound resolution plan will be checked before selecting a final bidder.

When asked whether he is happy with the current amendments, Kumar said, "I will be happy when the resolution happens. I don't mind some haircut but I don't want to be bald." COIMBATORE: With increased imports of various types of papers, the Government should ensure a level playing field by entering in Free Trade Agreements with competing countries, Managing Director, Seshasayee Paper and Boards Ltd, K S Kasi Vishwanathan said on Thursday.

The paper exports from thje country also registered a 10 to 15 per cent increase in the last decade due to remarkable improvement in the quality standards of Indian paper, Vishwanathan, former president of Indian Pulp and Paper Technical Association (IPPTA), said.

The news print was largely imported as it was made from wood and India did not have such industrial plantations to meet the print industry's requirement, he said.

IPPTA Secretary General M K Goyal said the paper industry is growing 6 to 7 per cent yearon-year.