Big­ger role for op­er­a­tional cred­i­tors in res­o­lu­tion process wor­ries bankers

The Hindu Business Line - - FRONT PAGE - K RAM KU­MAR

Bankers are wor­ried that the cor­po­rate in­sol­vency res­o­lu­tion process (CIRP) could turn chaotic and face de­lays as the In­sol­vency and Bank­ruptcy Board of In­dia (IBBI) may amend the rules, giv­ing op­er­a­tional cred­i­tors (OCs) a larger say in the res­o­lu­tion process.

Their fear stems from the ob­ser­va­tions of a two-judge Supreme Court Bench last month that OCs should have vot­ing rights in pro­por­tion to their ex­po­sure, just like the com­mit­tee of cred­i­tors (CoC), in the CIRP. Bankers say the IBBI may amend the In­sol­vency and Bank­ruptcy Code (IBC) rules in the wake of these ob­ser­va­tions.

An OC is a per­son/en­ter­prise to whom an op­er­a­tional debt (a claim in re­spect of pro­vi­sion of goods and ser­vices) is owed by a cor­po­rate debtor and in­cludes any per­son to whom such debt has been le­gally as­signed or trans­ferred.

The CoC com­prises all the fi­nan­cial cred­i­tors of a cor­po­rate

Bankers fear that com­pany pro­mot­ers may ma­noeu­vre op­er­a­tional cred­i­tors to de­rail or de­lay the in­sol­vency res­o­lu­tion process

debtor. All the de­ci­sions of the CoC per­tain­ing to the in­sol­vency res­o­lu­tion re­quire a 66 per cent quo­rum.

Merg­ing cred­i­tors

“To fur­ther the cause of nat­u­ral jus­tice, the IBBI is be­lieved to be think­ing of in­clud­ing OCs as part of the CoC. Right now OCs are kept out of the CoC and they are dealt with sep­a­rately by the in­sol­vency res­o­lu­tion pro­fes­sional,” said a pub­lic sec­tor bank of­fi­cial.

The banker ob­served that re­cently a large tele­com com­pany was close to set­tling the ₹40,000 crore it owed to fi­nan­cial cred­i­tors through sale of spec­trum. But the OC took the com­pany to court, de­mand­ing that its ₹550-crore dues be set­tled, and the bank could not get back its dues.

There is a lin­ger­ing fear among bankers that com­pany pro­mot­ers could ma­noeu­vre OCs to de­rail/de­lay the CIRP).

De­lays in the res­o­lu­tion process are a con­stant cause of worry. Of the 816 on­go­ing CIRPs, about 30 per cent have al­ready ex­ceeded the IBC’s 270day time­line, ac­cord­ing to rat­ing agency ICRA. An­other 20 per cent has crossed the 180-day time­line.

Ab­hishek Dafria, Vice-Pres­i­dent & Co-Head, Cor­po­rate Rat­ings, ICRA, said: “Of the 12 large de­fault­ing ac­counts iden­ti­fied by the RBI in June 2017, only four have been re­solved so far, while the oth­ers re­main un­re­solved even after more than 450 days have passed since be­ing ad­mit­ted by the NCLT (Na­tional Com­pany Law Tri­bunal).”

Per ICRA’s anal­y­sis, the lenders of these 12 com­pa­nies have lost out on about ₹4,000 crore in ad­di­tional in­come due to the de­lays in the cor­po­rate in­sol­vency res­o­lu­tion process.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.