Jet Airways’ nosedive took bankers by surprise somewhat and the scramble for a resolution plan began. But bankers dragged their feet on this and refused emergency funding on fears that they will come under the glare of investigative agencies later on.
The real benefit of the Insolvency and Bankruptcy Code (IBC) process is that it would have put a timeline on every step, from the appointment of a resolution professional to the framing of a resolution plan. “IBC compels creditors to negotiate rationally in the shadow of a deadline for liquidation," said Bhargavi Zaveri, senior researcher at think tank Indira Gandhi Institute of Development Research.
Besides, finding a bidder for Jet Airways—as lenders hope—is also something that can happen under the IBC framework. It’s incorrect to state that the process of finding bidders is best done outside of IBC.
The irony of it all is that Jet Airways is likely to find itself in insolvency proceedings now. The Economic Times reports that one of the operational creditors of the airline has threatened to drag it to bankruptcy courts.
Instead of getting emotional about Jet Airways’ nosedive, bankers could have invoked IBC and avoided the value erosion that they now stare at.