In the seven months since the Insolvency
and Bankruptcy Code (IBC) became operational, the resolution process for 200 companies has started, said Insolvency
and Bankruptcy Board of India (IBBI) Chairman M S Sahoo
on Saturday. This includes the 12 large accounts that were referred to the National Company Law Tribunal (NCLT) by the Reserve Bank of India (RBI).
“A number of steel and power companies have moved the NCLT
to file for insolvency, so that they can restructure themselves. Only a few cases have been filed by financial creditors. Debtors and operational creditors have been the ones filling most of the cases,” said the regulator.
Sahoo added that appeals of the insolvency
cases in high courts and the Supreme Court
were helping clarify the new law. He was addressing an event, ‘Decoding the Insolvency
and Bankruptcy Code’, organised by the IBBI
and FICCI in the national capital on Saturday.
He said several insolvency
cases had gone to the courts or the National Company Law Appellate Tribunal (NCLAT). One of the earliest cases under the IBC
was ICICI Bank versus Innoventive Industries. The company, which had a debt of Rs 900 crore, had challenged in the Bombay High Court
the constitutional validity of the IBC
and the power to liquidate assets of debtor firms.
The court admitted the constitutional validity of the code and the case came back to the NCLT, Mumbai, where the insolvency
process has begun.
According to the IBC, if a company does not restructure within 180 days from the initiation of the insolvency
proceeding by lenders, its assets can be liquidated. The time given to it can be extended by 90 days.
judge A K Sikri, who also addressed the event, said while the IBC
was a wonderful document, its implementation was a challenge for the NCLT
and the IBBI.
The code provides for a market-determined and time-bound resolution of insolvency
proceedings, and became operational in December 2016.
Sikri also said the provision for cross-border insolvency
was yet to be implemented.
The rules for cross-border insolvency
under the IBC
have been notified but not finalised by the regulator. Once they are finalised, India will enter into agreements with countries where the United Nations model for insolvency
This would help the insolvency
process of companies, which have foreign assets like the 12 referred to by the RBI to the NCLT.
It would also help with the insolvency
process of companies such as PSL Limited, which have foreign lenders.