New Delhi: Over two years since a new Insolvency and Bankruptcy Code (IBC) was passed by Parliament, bankers and lawyers have expressed their concerns about a marked slowdown in proceedings as expectations of adherence to the 270-day timeline have been dashed. According to the code's framework, companies, once admitted, go into liquidation if cases have not met their 270-day resolutions. The new law has, however, improved credit discipline among large borrowers, all participants of the code unanimously observed.
The IBC set off after the Reserve Bank of India (RBI) had identified 12 of India's largest borrower accounts and said creditors must pursue proceedings of bankruptcy against them, dragging them to the National Company Law Tribunal (NCLT) — a court that deals with corporate cases.
Just five of these 12 accounts have been resolved yet, with Tata Steel bagging Bhushan Steel, Vedanta buying Electrosteel Steels, Aion-JSW Steel winning Monnet Ispat bid, and Lanco Infra heading for liquidation.
"The delays are there but the more important thing is that IBC has begun to change creditor behaviour. Payment discipline has improved because the regulator has imposed zero tolerance. The fact that we have IBC and owners can lose complete control of their company is beginning to change behaviour which is fantastic because even though it is delayed or uncertain creditors have the ability to enforce their rights and borrowers recognise that they cannot take creditors for granted," said Jaideep Khanna, CEO, Asia Pacific at Barclays.