IBC helped creditors recover Rs 80,000 crore to date, says Arun Jaitley

Enacting the Insolvency and Bankruptcy Code (IBC) has helped lenders get Rs 80,000 crore in 66 cases and another about Rs 70,000 crore is likely to be recovered in the remaining months of the current financial year, Finance Minister Arun Jaitley said on Thursday.

On his Facebook page, Jaitley said National Company Law Tribunal (NCLT) had started receiving corporate insolvency cases by the end of 2016 and so far, 1,322 cases have been admitted by it. A total of 4,452 cases have been disposed of at pre-admission stage and 66 have been resolved after adjudication. As many as 260 cases have been ordered for liquidation, he said in the post, titled two years of Insolvency and Bankruptcy Code (IBC).

“In 66 resolution cases, realisation by creditors was around Rs 80,000 crore... Some of the big 12 cases, such as Bhushan Power and Steel and Essar Steel India are in advanced stages of resolution and are likely to be resolved in this financial year, in which realisation is expected to be around Rs 70,000 crore,” Jaitley said.

He said the code, particularly after insertion of Section 29 (A), has forced promoters not to turn potential debtors, and pay their dues. The section debars promoters and related parties, who have more than one year of NPAs, to bid for companies. The defaulters know well that once they get into IBC they will surely be out of management because of Section 29(A), he said.

Also, once a petition of the creditor is filed before the NCLT many debtors have been paying at the pre-admission stage so that the declaration of insolvency does not take place.

Many major insolvency cases have already been resolved and many are on the way of resolving. Those which cannot be resolved move towards liquidation and the banks are receiving the liquidation value, he said.

“Those who drive the companies to insolvency, exit from management. The selection of new management has been an honest and transparent process. There has been no political or government interference in the cases,” he added.

According to the NCLT database, in 4,452 cases disposed at pre-admission stage, the amount apparently settled was around Rs 2.02 trillion, the minister added.

Jaitley said the increase in conversion of NPAs into standard accounts and decline in new accounts in NPA category show a definite improvement in the lending and borrowing behaviour. “The early harvest through the IBC process has been extremely satisfactory. It has changed the debtor-creditor relationship. The creditor no longer chases the debtor. In fact, it is otherwise,” the minister said.

Accusing the Congress of leaving behind a legacy of an “anachronic system” of resolving commercial insolvency, Jaitley said the NDA government acted swiftly to recover non-performing loans and legislated IBC.

Jaitley said the Congress government had enacted the Sick Industrial Companies Act during the 1980s for rehabilitation of sick companies. This applied to companies whose net worth had become negative.

“The law proved to be an utter failure,” he said.

Besides, the Debt Recovery Tribunal was created to enable banks to recover every due diligently, but these have not proved to be highly efficient mechanism for recovering debt, he added. “For non-corporate insolvencies the Provincial Insolvency Act was applicable. This was a rusted piece of legislation, ineffective and had faded away because of disuse,” Jaitley added.