Rs 60,000 Crores Have Been Realized Through Successful Resolution Plans Under IBC : Justice S K Kaul

The central promise of the IBC has been to guarantee a time bound resolution of bad debt, said Justice Sanjay Kishan Kaul, judge of the Supreme Court of India, while giving a talk at the Symposium on 'Recovery and Resolution- Emerging Challenges before Recovery Tribunals & NCLTs' on Saturday at Chennai."The central promise of the IBC has been to guarantee a time bound resolution of bad debt, which, if left unresolved for extensive periods of time, can have a degrading effect on lenders, investors, liquidity and market sentiment. The Code attempts to strike a balance between creditors' interests and the debt ridden company, by not only providing for a partial recovery of dues, but also recovering the maximum assets of a failing company, after meeting debt obligations, thereby allowing the company to start afresh.", he said.His lecture was on the topic "Jurisprudence-Emerging Perspectives on Recovery v. Resolution and Bracing up to the new Insolvency Regime".The move to Insolvency and Bankruptcy code was made to cement the concept of 'creditor in control' as opposed to the 'debtor in possession', in order to ensure higher chances of resolution of the insolvency of a firm, said Justice Kaul, who was formerly the Chief Justice of Madras High Court."The soul of the code was stated to be in ensuring the resolution of the insolvency of a firm, wherein a collective attempt was to be made to keep an insolvent firm as a going concern and to maximize the value of its assets. The effort was to embellish a system where the focus was to ensure a partnership of creditors, who would work together to not only recover their dues, but also fortify the life and health of the insolvent company. This was as opposed to a system where recovery was the preferred course of action by the economic and legal set up."Reviewing the journey of IBC over past three years, the judge said :With the IBC providing a robust framework for market driven and time bound resolution processes, since its inception, 80 cases have been resolved by accepted resolution plans and an amount of Rs. 60,000 crores has been realised through these resolution plans. The change is behavioural too. Having created an apprehension in the minds of the management of companies of losing control over their companies, various promoters have been prompted to settle or resolve their dues before a formal process is started. Further, promoters are eager to re-negotiate/ restructure debt at the earliest sign of distress, which helps in the value preservation of the corporate entity. This has also provided an impetus to corporate entities partnering with new investors to resolve earlier signs of distress, before approaching the NCLT. This is witnessed in the 3300 cases that have been disposed of by the Adjudicating Authority, based on out-of-court settlements between corporate debtors and creditors, which led to recovery of amounts over INR 1,20,390 crores.In 2016, while the IBC was still in the process of kicking in, the World Bank released data which revealed that in India, insolvency resolution took 4.3 years on an average, as opposed to the United Kingdom and the United States, which took 1 year and 1.5 years respectively. Additionally, the World Bank, in its Ease of Doing Business Index, 2015 ranked India 137 out of 189 countries on the 'ease of resolving insolvency' based on varying elements. In 2019, this ranking improved considerably as India was ranked 108 out of 190 countries.He added that a key element of a modern corporate insolvency resolution processes is the provision of 'breathing space' to a debtor to enable assessment of its viability and sale of its assets or restructuring of its debts. In this period, therefore, the aim is to help businesses continue trading, while a resolution that maximizes value for all creditors, is reached. To enable this, it is key that 'critical suppliers', without the supply of whose goods and services the debtor cannot function, continue their supplies without interruption. The judge also elaborated on the 'success' stories under IBC, such as that Bhushan power resolution. A comparison between insolvency law regimes in other jurisdictions with Indian practices was also undertaken.Justice Mr. Senthil Kumar Ramamoorthy (Judge, Madras High Court), Justice Mr. Tarun Kumar Kaushal (Retd.) (Chairperson DRAT, Chennai), Mr. T. Manoharan (Padma Shree Awardee, Non Executive Chairman, Canara Bank, Mr. S. Ramann (MD & CEO, NeSL) were also present at the Symposium. Read the full text of speech of Justice Kaul : Respected Judges of the Madras High Court, Chairperson, DRAT, Presiding Officer and Members of the DRT, And other panelists, special invitees, and organisers, and my dear friends, welcome! It gives me pleasure to be part of this discussion today, which brings together some of the leading minds dealing with the ever evolving landscape of bankruptcy and insolvency laws. This symposium comes at an opportune moment, with the recent ...

Rs 60,000 Crores Have Been Realized Through Successful Resolution Plans Under IBC : Justice S K Kaul

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