BackIBC ordinance: IRPs seek extension of deadline to resolve insolvency cases
IRPs will approach Insolvency and Bankruptcy Board of India (IBBI) for leeway in the amended Insolvency and Bankruptcy Code (IBC) for genuine insolvency cases
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Mumbai: Resolution professionals are seeking an extension to the 270-day deadline to resolve insolvency cases after the IBC ordinance tightened eligibility criteria for bidders of large NPA accounts.
The request for extension comes at a time when many cases have received single bids from its promoters and are at the threshold of the deadline, according to four people familiar with the matter.
At least 353 cases were undergoing resolution under the Insolvency and Bankruptcy Code (IBC) as the end of September, according to Insolvency and Bankruptcy Board of India (IBBI) data.
“The resolution professionals are planning to approach the IBBI for leeway in the Insolvency and Bankruptcy Code (IBC) for genuine cases where the company is viable and there are strong reasons why the committee of creditors couldn’t zero in on a resolution plan," said one of the people cited earlier.
On 23 November, President Ram Nath Kovind promulgated the IBC ordinance that bars not only wilful defaulters, but also several other categories such as guarantors to the debtor, those with loans classified as non-performing assets (NPAs) for at least a year, those convicted for any offence with a prison term of more than two years, directors in companies that are disqualified, entities barred by the capital markets regulator, those who have been found to have struck fraudulent transactions with the firm, and connected entities.
On 7 November, the IBBI amended its regulations to ensure that while clearing a turnaround plan, lenders take into account the background, credit worthiness and credibility of the party, including promoters, as part of their due diligence.
Lenders, lawyers and resolution professionals are preparing for fresh bidding in the case of companies where no other applicant apart from promoters have submitted the plan.
One case in point is Kolkata-based Gujarat NRE Coke Ltd which had a total debt of Rs3,468 crore at the end of March 2017. The nine-month period to submit a resolution plan for the company expires in January 2018.
Lenders led by State bank of India are currently exploring resolution options including sale to Asset Reconstruction Companies (ARCs) under the National Company Law Tribunal (NCLT), said a senior banker aware of the matter. A 7 September Mint report had said that JM Financial ARC is looking to buy all the outstanding loans to Gujarat NRE Coke.
“One month is too short a time to restart the bid process. As per law, the company will face liquidation once 270 days is over," said Sumit Binani, the resolution professional managing Gujarat NRE Coke.
According to the bankruptcy code, the resolution process should be completed within 180 days which can be extended by another 90 days with the approval of the NCLT. The move to extend the deadline beyond 270 days will require an amendment to the law, said the third person cited earlier.
A ministry official who spoke to Mint on condition of anonymity said that the government was aware of these issues.
“We are considering a way in which viable companies do not go into liquidation and also the code also does not get diluted," he said. “In IBC, timely resolution is the strongest pillar," he added.
“The law is clear that a resolution has to be finalized in 270 days. In a case where there is a need for extension, then the efficacy of the 270 days may need to be looked at. It needs to be clear that enough efforts were made to arrive at a resolution and there was no attempt to delay the resolution," said Vikram Babbar, Partner, Fraud Investigation & Dispute Services, EY.
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