Insolvency law's success needs to be appreciated, say experts

The insolvency law has provided a framework for resolution of stressed assets, and its success needs to be appreciated in comparison with the situation that prevailed prior to its implementation

The insolvency law, which has undergone various phases of evolution, has provided a framework for resolution of stressed assets, and its success needs to be appreciated in comparison with the situation that prevailed prior to its implementation, experts said on Thursday.

The Insolvency and Bankruptcy Code (IBC) provides for a time-bound and market-linked resolution of stressed assets. It came into force in 2016.

Ashok Haldia, chairman of the Indian Institute of Insolvency Professionals of ICAI, said the Code's success has to be appreciated in relative terms with reference to the pitiable situation prevailing before in terms of resolution or liquidation of number of cases, time taken and in percentage recovery of dues of creditors.

"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," he said, adding that Corporate Insolvency Resolution Process (CIRP) should be the last resort.

Shardul Shroff, executive chairman of Shardul Amarchand Mangaldas & Co, said the Code has undergone three phases of evolution, led by judicial developments and legislative activity, according to a release issued by industry body CII.

They were speaking at a conference organised by the industry body along with National Foundation for Corporate Governance (NFCG) and Insolvency and Bankruptcy Board of India (IBBI).

Vishesh C Chandiok, chief executive officer, Grant Thornton Bharat LLP, said while the Code 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 per cent compared to earlier regimes.

Shroff is also the chairman of the CII Task Force on Insolvency and Bankruptcy while Chandiok is the vice chairman.