Latest news with #Aldak
Mint
01-07-2025
- Business
- Mint
Debt resolution plans see uptick in June quarter, as NCLT vacancies are filled
New Delhi: Creditors rescued 69 indebted businesses in the June quarter through the Insolvency and Bankruptcy Code (IBC) route, improving upon resolutions in the year-ago period but falling a tad lower sequentially, showed official data. In the June quarter of FY25, 58 sick companies were salvaged by their creditors and new investors, showed data available from the Insolvency and Bankruptcy Board of India (IBBI), the sector's rule-maker. The improvement comes in the wake of the government filling vacancies in the National Company Law Tribunal (NCLT)—the judicial authority that clears debt resolution schemes under the bankruptcy code. As of March this year, it had 60 members out of 63 sanctioned posts, data available from the tribunal showed. That is a major improvement, given that at the end of September 2024, the tribunal had only 43 members, or 30% short of its sanctioned strength, Mint reported on 6 December. The number of debt resolutions achieved in the June quarter, however, is a tad below the 75 resolutions reported in the March quarter of FY25. On an average, 62 cases were resolved in a quarter in FY25, with 247 companies getting their restructure plans approved in the full year, IBBI data showed. Experts said debt resolutions in the recent past have actually improved. 'While the quarter-to-quarter trend may not provide a consistent uptick in the resolutions under the IBC, it is interesting to note that as of December 2024, 60% of all resolution plans approved under the IBC had been approved over the preceding three years. Here, it must also be highlighted that an additional 30,000 cases were settled at the pre-admission stage during the same period," said Yogendra Aldak, partner at Lakshmikumaran and Sridharanattorneys. Corporate debt resolution under the IBC came into force in December 2016. Separately, the ministry of corporate affairs said in its monthly newsletter for May that increased institutional capacity and reduced litigation can help improve the outcomes of debt resolution efforts. Better training and support for insolvency professionals, streamlining procedures and enhancing effectiveness of the committee of creditors, which decides on the future of distressed companies, are important areas for future focus, the ministry stated. Experts also believe legislative and administrative changes will help in improving debt resolution outcomes. 'While these provide an optimistic outlook for the future of resolutions in India, the process continues to be hindered by several procedural and institutional hurdles. In order to achieve a truly reliable and efficient resolution mechanism, both legislative policy and administrative practices will have to be re-evaluated in order to successfully tackle the present challenges," Aldak said. Experts said the recruitment of new members in NCLTs has borne fruit. 'It is imperative that the NCLT functions at full strength so that there are no delays in plan approval. Delays in plan approval may lead to further complications such as bidders expressing inability to execute due to passage of time," said Madhav Kanoria, partner at law firm Cyril Amarchand Mangaldas. A few members are set to retire and it is expected that the government will fill the vacancies sooner than later so that matters are disposed of expeditiously, added Kanoria.
Mint
20-06-2025
- Business
- Mint
IBC's weak spot: Slow, difficult recovery from dubious pre-bankruptcy deals
New Delhi: Companies on the brink of collapse tend to do certain transactions that benefit the promoters or close partners but are detrimental to the organization and its creditors. While such 'dubious transactions' can later be set aside during bankruptcy proceedings by tribunals, getting the money back is proving an uphill task. Data from regulator Insolvency and Bankruptcy Board of India (IBBI) reviewed by Mint showed that in FY25, just ₹1,322 crore or a tenth of the amount involved in 'avoidance transactions' disposed of by tribunals were recovered. And overall, just 12% of the ₹65,650 crore worth voidable deals executed by promoters and management of 368 companies–and where tribunals have given their verdict–were recovered, according to IBBI. Such deals could include paying off a friendly creditor just before bankruptcy proceedings while ignoring others, moving assets to related parties or hiding them, selling assets for less than they're worth, or taking loans on unfair or excessive terms. Also read | A series of court orders changed bankruptcy rules. Now, the govt is amending the law 'There is often misconduct by earlier management pre-insolvency and it might be a reason for the insolvency in some cases," said Dhananjay Kumar, partner (head-insolvency and restructuring) at law firm Cyril Amarchand Mangaldas. 'Recovery of such amounts is a fundamental function of a law like IBC (Insolvency and Bankruptcy Code)," added Kumar. Other challenges pointed out by Kumar include lack of data to challenge these transactions, lack of funds with resolution professionals, and slow movement in National Company Law Tribunal (NCLT). The matter assumes significance because money recovered from dubious transactions adds to the pool of resources available for a corporate restructure plan. According to IBBI's estimates, on a conservative scale, a decision on avoidance transactions by tribunals would add recovery to creditors by at least 10%. Yogendra Aldak, partner at Lakshmikumaran and Sridharan Attorneys, said the high amounts being flagged as avoidance transactions highlight an alarming trend of promoters deliberately using such transactions 'to deprive a company of its resources for self-serving purposes leading to a snowball effect during times of stress". Read this | Scrapping a key bankruptcy rule may yield faster liquidation, better recovery Further, Aldak said IBC has not been designed as a debt-recovery machine and, instead, prioritises resolution of distressed companies. So, to avoid delays in rescuing businesses, taking decisions on avoidance transactions has been kept independent of corporate debt resolution. However, this makes it hard to recover money from avoidance transactions. For example, only deals made within two years before the insolvency process can be reviewed, which means many questionable transactions are never examined, Aldak explained. Another problem, he said, is tracking the money, as it is often moved through shell companies or hidden in other countries, making recovery even harder. Anisha Jhunjhunwala, senior consultant-IBC at NPV Insolvency Professionals Pvt. Ltd, said that despite clear evidence, enforcing clawbacks from avoidance transactions is a lengthy legal battle, with promoters delaying proceedings through litigation, and tracing diverted assets is complex, especially when routed through layers of related entities or parked overseas. Also read | NCLT member crunch slows down bankruptcy resolution 'The high quantum of flagged transactions reflects serious lapses and, in some cases, wilful misconduct by promoters, particularly during the twilight period before insolvency," said Jhunjhunwala. 'It shows that promoters, anticipating distress, often prioritize asset stripping over stakeholder interest, highlighting the need for stricter pre-insolvency oversight and faster adjudication timelines." The fact that it often takes considerable time for a bankruptcy petition by a creditor to be admitted in a tribunal only allows more time for such unscrupulous activities to take place. Till the end of March 2025, close to 1,200 bankrupt enterprises have been restructured under IBC and their creditors got the chance to recover ₹3.89 trillion or about a third of their admitted claims. This is in addition to proceeds from companies liquidated and the recoveries made by lenders who struck settlement deals with corporate borrowers before tribunals initiated insolvency proceedings. And read | Bankruptcy resolution professionals face creditor fury as cases reach courts
Time of India
05-05-2025
- Business
- Time of India
IBC rules under review after scrapping of JSW Steel's BPSL acquisition
India is examining its insolvency rules after a Supreme Court ruling. The review focuses on adherence to processes and timelines by stakeholders. This follows the JSW Steel-Bhushan Power & Steel case. The goal is to prevent violations of the Insolvency and Bankruptcy Code. The IBBI may review the role of resolution professionals. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads CoC Code of Conduct The verdict India is reviewing its insolvency regulations to ensure strict adherence to stipulated processes and timelines by key stakeholders to prevent cases like JSW Steel 's acquisition of Bhushan Power and Steel (BPSL), said people close to the Friday, the Supreme Court (SC) scrapped the ₹19,700-crore acquisition completed four years ago, citing "gross violation" of the Insolvency and Bankruptcy Code (IBC). The top court has observed violations of norms or processes by key stakeholders-JSW Steel, the committee of creditors , and the resolution around the code of conduct for the committee of creditors (CoC) may be up for scrutiny, the people told ET."Both the corporate affairs ministry and the Insolvency and Bankruptcy Board of India (IBBI) are seized of the matter. A final decision will be made soon after detailed deliberations," said one of the people cited above. They are in the process of consulting stakeholders "for the best way forward", said the IBBI could also review regulations around the role of resolution professionals in the corporate insolvency resolution process (CIRP), the people idea is to ensure all the stipulated processes are strictly adhered to and the CoC, too, uses its commercial wisdom , remaining within the confines of the law, they an amendment to the Insolvency and Bankruptcy Code (IBC) for this purpose seems unlikely at this stage, one of the people said. This is because the apex court has, in fact, "upheld the integrity and intent of the Code" and underscored the need to maintain the sanctity of prescribed legal SC's verdict could prompt authorities to stipulate an enforceable code of conduct for the CoC. It could also expedite a decision on whether to set up an oversight body to gauge financial creditors' conduct, one of the persons the Jet Airways liquidation case, the Supreme Court last year observed whether an oversight committee was required to better enforce the CoC's code of IBBI had, in August last year, issued guidelines for the CoC, stipulating how they need to conduct themselves, but these were essentially self-regulatory in Aldak, partner at Lakshmikumaran & Sridharan Attorneys, said it is now important for the CoC to apply its commercial wisdom to assess feasibility of the resolution plan and protect the interests of creditors. "In the absence of the same, the resolution plan may be reopened or set aside by courts opening Pandora's Box of Judicial Reviews, if procedural errors are discovered at a later stage," Aldak Supreme Court last week said JSW's intention was "malafide and dishonest" as it took undue advantage of pending Enforcement Directorate (ED) proceedings and did not implement its resolution plan for BPSL for two years. This delay frustrated the IBC objective, it last week said it would review the order and decide on its further course of action.
