Insolvency and Bankruptcy Bill | Business Upturn

CRISIL report highlights IBC success to India’s bankruptcy landscape

Mahita Jain — Fri, 24 Nov 2023 12:33:51 +0000

The introduction of a focused bankruptcy law in India, known as the Insolvency and Bankruptcy Code (IBC), has been instrumental in transforming the credit culture in the country. However, recent years have witnessed a decline in recoveries and a significant extension of resolution timelines, according to a report by CRISIL Ratings.

As of September 2023, the recovery rates have dropped to 32%, down from 43% in March 2019. Concurrently, the average resolution time has surged from 324 days to 653 days, well beyond the stipulated 330 days. CRISIL Ratings notes that the IBC has successfully resolved debt amounting to Rs 3.16 lakh crore in 808 cases over the past seven years, making it a critical tool in the corporate loan landscape.

Mohit Makhija, senior director at CRISIL, hails the IBC as the “most potent code” in India’s corporate loan history, attributing a notable behavioral change in borrowers to the fear of losing companies. He highlights that over Rs 9 lakh crore of filed debt has been settled even before reaching the IBC doorstep for admission, indicating a deterrent effect that is three times the stressed debt resolved through the code in the same period.

Despite its success, CRISIL Ratings points out challenges that need to be addressed. The limited judicial bench strength and delays in identifying and acknowledging defaults are identified as impediments leading to extended resolution timelines. Delays in the pre-IBC admission stage have significantly impacted recovery rates, with the period increasing from 450 days in fiscal 2019 to 650 days in FY22.

The report emphasizes that 90 amendments have been made to the IBC thus far, including recent ones like approving the sale of assets/resolution plans on a segregated basis, increasing the number of National Company Law Tribunal benches to 16, and extending timelines for filing claims. Sushant Sarode, director at CRISIL, suggests solutions to current challenges, advocating for capacity augmentation, digitalization, and expanding pre-pack resolutions to large corporates to enhance the efficiency of the IBC.

However, despite its successes, there is a backlog of 13,000 cases under the IBC, including 2,073 ongoing corporate insolvency resolutions. CRISIL Ratings underscores that the recoveries from the IBC still outperform earlier debt resolution mechanisms, which typically yielded between 5-20% recovery rates.

No question of filing for insolvency, says SpiceJet

United News of India (UNI) — Thu, 11 May 2023 10:52:16 +0000

New Delhi, May 11: Amid concerns over its financial health, low-cost carrier SpiceJet on Thursday stated that there is no question of it filing for insolvency.

Instead, the airline said it is reviving its grounded fleet and expanding network.

“There is absolutely no question of filing for insolvency. Any rumour regarding the same is completely baseless. We are focussed firmly on reviving our grounded fleet and getting more and more planes back into the air,” airline Chairman and Managing Director Ajay Singh said.

“Work on this front has already begun and the company is using the $50 million ECLGS (Emergency Credit Line Guarantee Scheme) funds and our own cash,” he added.

Singh said that the airline has a great relationship with all its partners.

“Our lessors have supported us through the thick and thin and continue to do so and we are grateful for their support and confidence,” he said.

SpiceJet last week announced plans to revive 25 grounded aircraft saying the action will help it capitalise and make the most of the upcoming peak travel season.

With Wadia group-owned Go First filing declaring bankruptcy and grounded Jet Airways yet to take off, financial woes of some airlines have come under spotlight.

Earlier this month, cash-starved Go First cancelled all its flights citing operational reasons and moved to National Company Law Tribunal (NCLT) seeking resolution under bankruptcy law.

The NCLT has admitted the airline’s voluntary plea to initiate insolvency resolution process. Airline industry sources said that Go First is preparing to resume operations with limited flights.

Agitated Go First passengers left stranded by last-minute cancellations amid company’s woes

Avinash Ram — Wed, 03 May 2023 15:36:30 +0000

Go First Airlines stated on Tuesday that all of its scheduled flights from May 3 to May 5 will be cancelled, and that all customers will get a full refund.

Passengers who purchased tickets with the airlines were left stranded when Go First Airlines stopped flights due to insolvency.

“I left Meerut around 3 am, but after reaching here I got to know that my flight has been cancelled…no one is ready to say anything clearly..” stated a passenger, Harender Singh.

Go First Airlines’ official media account posted on Twitter, “Due to operational difficulties, Go First flights for May 3, 4, and 5, 2023, have been cancelled. We sincerely sorry to all of our devoted clients. You can count on us to return shortly with additional details. Soon, a complete refund will be processed using the original payment method.

“I had to book another flight after getting the message. I spent Rs 15,000 again…” said a passenger, Praveen Kumar.

The Government of India has been aiding Go First Airlines in every way possible, but it is the airline’s responsibility to organize alternate transport for customers so that they do not experience difficulty, according to Union Civil Aviation Minister Jyotiraditya Scindia.

Minister Jyotiraditya Scindia said, “Go First has been faced with critical supply chain issues with regard to their engines. The GOI has been assisting the airline in every possible manner. The issue has also been taken up with the stakeholders involved.”

Go First Airlines said on Tuesday that operations will remain cancelled as a result of the US-based jet engine manufacturer’s failure to provide engines.

Go First is experiencing financial difficulties as a result of the US-based Pratt and Whitney (P&W) jet engine manufacturer’s refusal to deliver engines, which necessitated the grounding of more than 50 aircraft.

Go First suspends flight operations, files for insolvency amid financial crisis

News Desk — Tue, 02 May 2023 12:41:54 +0000

The Indian airline business Go First has decided to cancel all of its flights on the 3rd and 4th of May. The Wadia Group, which owns the failing airline, is reticent to invest further in the company’s operations.

According to the chief executive officer of the airline, Kaushik Khona, who was describing the issue to PTI, the airline has been forced to apply for voluntary insolvency resolution procedures due to the suspension of operations. These processes will take place before the National Company Law Tribunal in Delhi.

“It is an unfortunate decision… but it had to be done to protect the interests of the company,” said Khona. “Go First is facing a financial crunch due to the non-supply of engines by Pratt & Whitney, which has forced the company to ground 28 planes.” “It is an unfortunate decision… but it had to be done to protect the interests of the company.”

The airline now has over 3,000 workers and has already told the government that they would be presenting a full report to the Director General of Civil Aviation. However, according to the CEO, the airline will not begin flying operations until after the insolvency application has been accepted.

In a statement that was released on Tuesday afternoon, Go First said that it ‘had to take this decision owing to the ever-increasing number of malfunctioning engines’ that were provided by the American firm Pratt & Whitney. According to the airline, these malfunctions were responsible for the grounding of 25 aircraft as of May 1; this is over half of their whole fleet.

Aps Wealth Ventures approaches NCLT to initiate Voluntary insolvency

United News of India (UNI) — Fri, 21 Apr 2023 10:47:56 +0000

Pune, Apr 21: A Stock Broking firm, Aps Wealth Ventures LLP, has approached the National Company Law Tribunal (NCLT) to initiate Voluntary Insolvency after suffering a massive loss in the recent Share Market crash.

Avinash Arjun Rathod, a partner of the firm, forwarded all pertinent information for litigation proceedings to his Counsel Advocate Aashutosh Srivastava.

To protect Mr. Rathod’s legal rights, Advocate Srivastava has already initiated the Voluntary Insolvency Procedure before the NCLT, said Adv Srivastava here on Friday.

It has been alleged by some of the investors that the firm has duped its investors to the tune of 700 Crore rupees who were lured by the promise of doubling their returns in just 20 months.

Rathod through his firm APS Wealth Ventures assisted numerous people in making stock market investments for many years, and he used to fulfill the Contractual Obligation to his investors for a long period but due to the Covid-19 outbreak, the stock market has experienced low and sometimes negative returns since 2020. Despite Rathod’s efforts towards investors, the Stock Market conditions had an unanticipated impact on the firm, where Rathod has a track record of making payments on time and protecting investors.

Adv. Srivastava said, “Rathod has no criminal records or antecedents that demonstrate his negligence and culpability in the eyes of the law and we have moved to NCLT for initiating insolvency proceedings in order to protect my client’s legal interest and the interest of the investors.

What is the IBC, 2016? Here’s how it address the problem of failing businesses in India

News Desk — Tue, 04 Apr 2023 10:21:17 +0000

The Insolvency and Bankruptcy Code, more commonly referred to as the IBC, is a set of regulations that were developed by the centre to address the problem of failing businesses. You might be wondering, what companies are insolvent companies? Well, this is a business that is unable to repay its debts.

IBC was first implemented in that year by the central government via an act of parliament. It puts down norms and procedures for organizations which are insolvent when earlier it was a lengthy process and wasn’t economically feasible.

Its goals are to protect the interests of individual retail investors and to streamline the business operations process to make it more efficient. The IBC is broken up into 11 Schedules and 255 individual sections.

In the beginning, the purpose of the code was to combat the sickness of bad loans that had wreaked havoc on the banking sector.

The debtor-creditor dynamic has undergone a dramatic transformation as a result of the IBC procedure. Under the umbrella of the IBC, a total of 421 cases with a total realizable value of 2.55 lakh crore were successfully resolved.

Companies are given a total of 180 days to complete the insolvency process which complies and adheres with the IBC, 2016. The deadline may be pushed back, but only if the creditors do not raise any concerns.

Nirmala Sitharaman, the Minister of Finance, stated on Saturday that the government will not be hesitant to make changes to the current IBC of 2016 to make it more robust. This statement was made in response to the growing criticism that the government has received regarding a sluggish resolution process and decreasing recovery for creditors.

The Finance Minister (FM) stated, “There has always been a bit of animosity outside about the benches not being filled sooner with both judicial and technical members.” The FM was speaking about the delays that have occurred in the appointment of tribunal benches. If only these members were appointed promptly and the cycle was maintained in a well-oiled mechanism. Then, the goal of holding the NCLAT itself would be served better. The administration has given this issue a great deal of attention, and as a result, a significant number of appointments have been hastily completed recently.

In addition to this, she said, “That has been repeatedly proven that the suggestion comes from the judiciary and we have taken it up from the government’s side frequently, and without any hesitation, we go to Parliament and have more and more amendments which only fine-tune the Act.” This was said in reference to the fact that the previous statement had been proven true on multiple occasions.

This statement was made at a time when the parliament may be presented with an additional set of amendments. For example, the corporate ministry has proposed expanding the scope of the pre-packaged insolvency scheme, which is presently only available to micro, small, and medium enterprises (MSMEs).

Insolvency and Bankruptcy Bill enables an efficient insolvency resolution framework for MSMEs: Nirmala Sithraman

Vandana Nampoothiri — Wed, 04 Aug 2021 09:38:01 +0000

Union Finance Minister Nirmala Sithraman on Wednesday said that Insolvency and Bankruptcy Code (Amendment) Bill, 2021 enables “an efficient alternative insolvency resolution framework for MSMEs.”

In a series of tweets, Sithraman explained the benefits and salient features of the Insolvency bill.

“Salient features of the Bill include pre-pack for MSMEs which blends elements & virtues of both formal and informal insolvency proceedings,” she said in the tweet.

“Other features of the Insolvency and Bankruptcy Code (Amendment) Bill, 2021 include guidance and oversight of the resolution professional – Finality of the process, with judicial approval. A process that offers flexibility – Quicker, cost-effective, and value-maximizing outcomes for all stakeholders, ” she added.

According to the tweets, the entire process will only take 120 days. There will be a minimum threshold default of Rs. 10 lakh for the initiation of the pre-pack insolvency resolution process.

The initiation will start only with the consent of 66% of unrelated financial creditors and the special majority of shareholders.

The Insolvency and Bankruptcy Code (Amendment) Bill, 2021 was passed by Rajya Sabha on August 3. The bill provides for a pre-packaged insolvency resolution mechanism for micro, small and medium enterprises (MSMEs).

After moving the bill for consideration, Finance Minister Nirmala Sitharaman said “this bill has been brought keeping in mind the situation in which MSMEs require a lot of help post the pandemic..we are increasing the threshold and coming up with a pre-pack.”