The grey areas

■ The standstill provisions of the ICA should be on similar lines as moratorium under the IBC. The current draft permits lenders to take charge of the money lying with them as margin, fixed deposit or cash collateral. Giving an option of recovery to a lender defeats the premise of collective action. This is also not in sync with a fundamental principle of ICAS recognised globally — of monies recovered being held in trusts, and excess amounts being turned over for the benefit of all lenders.

■ The ICA is silent about the means and timing of payment of liquidation costs to dissenting creditors. Further, it is not clear what the rationale is to permit a dissenting creditor to become an assenting creditor during implementation of an RP. What happens if such a creditor has received part-payment in priority to assenting financial creditors. The ICA is silent on the clawback in this scenario.

■ Default with NBFCS does not trigger the review while it does with other entities covered under the RBI’S June 7 circular. The rationale for this exclusion is not clear. This is leading to diverse interpretations in the market that the 180-day timeline from the review period or reference date is not applicable to NBFCS.

■ Voting percentage gets determined as of the reference date. The ICA should factor in the fact that the voting percentage can be dynamic if the lenders trade distressed debt.

■ Requirement for mandatory review of an RP which envisages restructuring by an overseeing committee (constituted by Indian Banks Association) where the existing promoter is continuing. The rationale for this is not clear. It adds another layer of bureaucracy and creates uncertainty on the contours of a resolution plan.

■ The ICA should not have any element of subjectivity or discretion. If alternative financiers and foreign currency lenders are to sign up, the ICA has to be very specific and detailed.