Soon, code of conduct for creditors under IBC

The Ministry of Corporate Affairs (MCA) is working to issue a code of conduct for creditors under the Insolvency and Bankruptcy Code (IBC), said MCA Secretary Rajesh Verma on Friday.

This comes a month after a Parliamentary panel flagged the “disproportionately large and unsustainable ‘haircuts’ taken by the financial creditors over the years”. In some insolvency resolution processes, the haircuts taken by creditors were more than 90 per cent.

The Insolvency and Bankruptcy Board of India (IBBI) is collaborating with the Indian Banks’ Association, the Reserve bank of India and the Department of Financial Services for a code of conduct, Verma said while addressing a Confederation of Indian Industry Conference on 5 years of IBC.

Industry experts are of the opinion that the regulator for the committee of creditors (COC) is the RBI and not the IBBI. “To say there will be a code of conduct coming through IBC is a mismatch, these two cannot be reconciled. The functions of COC can be amended in IBC,” said Shardul Shroff, Chairman, CII task force on IBC.

Verma also said that IBC has helped creditors recover 180 per cent of the liquidation value. “Thirty per cent of the companies resolved were not going concern,” he added.

More than 17,800 cases involving an amount of ~5 trillion were disposed of even before admission under the IBC, according to MCA data. Till July this year, 4,570 cases were admitted for corporate insolvency resolution process, of which less than 10 per cent were resolved with a realisable

K V SUBRAMANIAN Chief Economic Adviser “BEFORE IBC, THERE USED TO BE FEUDALISM WHERE THE CORPORATE DEBTOR TOOK IT TO BE HIS OR HER DIVINE RIGHT TO BE IN CONTROL... THOSE DAYS ARE GONE”

amount of ~2.5 trillion.

Over 1,371 cases went into liquidation and 466 cases were withdrawn till July.

From value erosion of assets and conduct of COC to delays in proceedings and post-resolution difficulties, the MCA is discussing ways to address the challenges of IBC, which is now a five-year-old law. “Many issues have cropped up. We will continue to engage with industry for reimagining IBC in this critical time,” Verma said

The MCA secretary also said that in order to address the delays, the government is filling up the vacancies at the national company law tribunal and ramping up infrastructure with e-courts.

Addressing the seminar, K V Subramanian, chief economic advisor, said IBC has helped in balancing the interests of various stakeholders, thereby creating an optimal as well as fair ecosystem for resolving insolvency in current times.