Dr. M. S. Sahoo, Chairperson, IBBI stated that Sole objective of the Insolvency and Bankruptcy Code is the reorganisation of business.  IBC has recast the rules of the game in the greater interest of the economy and has contributed to economic reforms. Performance of IBC code should be assessed in line with the objective of the code. IBC enables the market with the choices of resolution but should not be considered as panacea for all the ills. Dr Sahoo was addressing the Conference on Insolvency and Bankruptcy Code, 2016, “5 Years of Bankruptcy Code and Beyond” organised by Confederation of Indian Industry (CII) along with National Foundation for Corporate Governance (NFCG) and Insolvency and Bankruptcy Board of India (IBBI).

Dr Sahoo stated that we require a framework for comprehensive and objective assessment of IBBI since vested interests may not allow indication of the success of the reforms. Outcome of the IBC will be better if stakeholders start the resolution process on early signals of stress and close it expeditiously. IBC requires systematic and holistic assessment, which will indicate the efficacy of the resolution process and highlight the gaps in the process. Framework may include process evaluation by including the key evaluation aspects i.e., whether the process design was robust, conduct and competency of the Committee of Creditors, competency of the Insolvency Professional’s, quality disposal by NCLT etc. He stated that if we do not have a framework for scientific assessment, market will use the parameter of assessment convenient to it.

Clearing the doubts on high numbers of companies entering liquidation, Dr Sahoo stated that majority of the companies that entered liquidation had an average asset 6% when compared with its outstanding liabilities. In value terms IBC has significantly contributed as companies accounting for 70% of the stressed assets have been rescued.  He stated that Corporate persons are also taking measures for resolutions, to avoid defaults reaching under CIRP. Liquidation is also good as it releases the economic resources back to economy.  Dr Sahoo also stated his views on inflated levels of haircuts. He stated that figures of claims are inflated and realisations are lower. If claims and realisations are adjusted to their real level, haircut figures will be lesser. Dr Sahoo emphasised that it’s the time to focus on framing an objective assessment framework for determining the strength and efficacy of Insolvency ecosystem, strength and efficacy of the underlying processes, strength of the market and impact on businesses. Dr Sahoo stated that right framework will provide direction for course correction.  It is also the duty of all the market participant to effectively play their role by making the best use of the available options provided by IBC for faster resolution.

Delivering the welcome remark, Mr Shardul Shroff, Chairman, CII Task Force on Insolvency and Bankruptcy and Executive Chairman Shardul Amarchand Mangaldas & Co, stated that over the last five years, the Insolvency and Bankruptcy Code, 2016 (“IBC”) has undergone three phases of evolution, led by judicial developments and legislative activity. In the first phase, the IBC established itself as a constitutionally sound, single-point insolvency resolution mechanism for companies in India which professionalised the insolvency landscape. In the second phase, the IBC demonstrated its ability to maximise value from stressed assets, in a market-oriented manner. It enabled the sale of strategic stressed assets such as Essar Steel and rebalanced creditor-debtor relationships to result in significant pre-IBC settlements. We are in the third phase of evolution. In this phase the IBC has to adapted to be an all-weather legislation that responds even in a non-competitive scenario, in matters of vigorous bidding for corporate debtors and their undertakings in CIRP, constraints of a low growth COVID affected economy in a rapidly changing Indian and global world ,changing and amending IBC for prepacks, cross border insolvency covering holding companies and subsidiaries in group or conglomerate insolvencies and for group companies and for demonstrating how our legislation interacts seamlessly with other components of the legal framework, and makes the ease of doing business in India, even better.

Mr Vishesh C Chandiok, Co-Chair, CII Task Force on Insolvency and Bankruptcy and Chief Executive Officer Grant Thornton Bharat LLP, stated that while IBC has been through a tumultuous journey in the last five years, from being seen as a cure for financial woes to bearing the brunt of failed expectations, it has shown a remarkable recovery rate of almost 40% compared to earlier regimes. Progressive amendments such as the pre-packaged insolvency aim to rescue stressed MSMEs but there is also potential for the code to go beyond its current purview by boosting entrepreneurship and providing a clean slate and continuity of license to successful resolutions.

Dr Ashok Haldia, Chairman, Indian Institute of Insolvency Professionals of ICAI, stated that said that IBC over last 5 year has been a remarkable success in providing a framework and in building capacity for resolution of stressed assets. Its success has to be appreciated in relative terms with reference to pitiable situation prevailing before in terms of resolution or liquidation of number of cases, time taken and in percentage recovery of dues of creditors or for that matter in disciplining lending or borrowers behaviour. Low recovery of dues, as pointed out by its critiques is unfair as cases falling under IBC are at chronic stage of illness with poor prospects of restoration of their viability. IBC has recently provided direction to shift focus to pre-pack ,settlements and mediation as prior option for resolving stress. CIRP under IBC should be a last resort. Immediate measures are also needed by the Government, RBI and SEBI for creating a market for distress asset and appropriate mechanism and instruments for financing stressed assets.

Plenary Sessions on “Prepacked Insolvency Resolution – Milestone moment in the evolution of IBC”, “Cross Border and Group Insolvency” – Practitioner’s perspective, “Formalizing the Stressed Assets Market – Consolidated Platform for distressed assets”, are being organized during the two days conference. During these sessions, experts of IBC from Industry, law firms and IBBI will deliberate co-operation and dialogue between the ‘regulator’ and ‘industry’ as vital to promote a culture of IBC in India. Mr. Sudhaker Shukla, Whole Time Member, Insolvency and Bankruptcy Board of India (IBBI), Dr. (Ms.) Mukulita Vijayawargiya, Whole Time Member, Insolvency and Bankruptcy Board of India (IBBI), Dr. Navrang Saini, Whole Time Member, Insolvency and Bankruptcy Board of India (IBBI) and other Senior Officials of IBBI are also amongst the penalists during the ongoing two-day long Conference.

2 September 2021