How did the threat of IBC make debtors pay Rs 1 lakh crore! MS Sahoo, President, IBBI explains

The Chairman of the Insolvency and Bankruptcy Council of India (IBBI), MS Sahoo

While the Indian Insolvency and Bankruptcy Council (IBBI) is two years old, its chairman, MS Sahoo, is looking into the effectiveness of the new insolvency law to avoid a stacking bad debt the law is enforced soon enough. In an interview with Banikinkar Pattanayak, FE, the threat of IBC forces debtors to pay, while operational creditors have recovered more than 1 lakh of crore even before their insolvency applications are accepted by the NCLTs. excerpts:

How do you see IBBI's performance over the past two years?
IBBI is one of the four pillars of the institutional infrastructure needed to implement the IBC. It is a single regulator: it regulates and develops a profession, institutions and best practices, as well as various processes under the IBC. It has put in place a regulatory framework for a corporate insolvency resolution process, an expedited resolution procedure, a liquidation of corporations, a voluntary liquidation, insolvency professionals, insolvency, public information services. (UI), inspection and investigation, and redress of grievances. It has facilitated ecosystem development including 2,037 IPs, 81 IPEs, three APIs, one UI, 8 Registered Reviewer Organizations (RVOs) and 70 registered experts to date. Debtors and creditors undertake business processes. About 1,100 companies, some with very large non-performing asset accounts, have been admitted to IBPGR. About 250 of them completed the process by filing a resolution or liquidation. About 250 companies have started a voluntary liquidation.

As the IBC system is becoming increasingly the preferred tool for creditors to recover default contributions, does the eco-system have adequate capacity to handle a large number of cases?
Banks have many options to recover their loans. IBC is one of them. Stakeholders are not obliged to use the IBC for resolution. They should only use it when they can not find an effective solution outside the IPC. In fact, given the inevitable consequences of a resolution process, namely that the company can distance itself from existing promoters, debtors are exploring other resolution options. Nevertheless, IBBI and other elements of the ecosystem have a duty to make CIB a preferred choice for stakeholders.

The IBC's incentive and deterrence system would require behavioral changes from all stakeholders, thus minimizing the incidence of failure, failure and poor performance incidents. I firmly believe, in the long run, that the best use of IBC is not to use it at all.

Although the IBC states that the insolvency resolution process must last for a maximum of 270 days, out of the 12 major default cases recommended by the RBI a year ago, the resolution did not take place only in four cases. Some of these cases are currently being reviewed by NCLAT or even by the Supreme Court.

India is probably the only country to have put a timetable in the process. He tries to respect the chronology. When you launch something new, many controversial questions arise. In the early days of the implementation of a new law, the settlement of business takes a little more time. Once these problems are resolved and the law is settled, the process accelerates and becomes quite mechanical after a while. We have taken this step in terms of admission to IBPGR. We have not yet taken this step in approving the resolution plan. Moreover, it is not that every CIRP is delayed. The IBRP, which resulted in a resolution, took an average of 230 days to file resolution plans with the contracting authority for approval. Please compare this with the antecedents of the days preceding IBC.

Once the first round of business closed, what is the future of recovery by this law?
For me, the IBC is a proactive and behavioral law. It has already led to a paradigm shift in the behavior of debtors and creditors. Although it is not for recovery, its very existence encourages recovery inside and outside the IBC. After seeing the result of several CIRP, where very large companies such as Bhushan Steel have changed hands, debtors are sparing no effort to repay their dues in time. They repay their contributions as soon as the default occurs or receive a notice from an operating creditor before filing an IBPIB application, before they are admitted to IBPGR and even before 90 days after the start of IBPGR. As a result, the incidence of defaults would decrease.

How much recovery has been achieved under the influence of the IPC even if the law has not been applied?
There is no reliable data on recovery before applications are submitted to the contracting authority. After an application has been filed to trigger the CIRP, it may be withdrawn before admission. Most of these requests are withdrawn on payment of the default amount. According to the available information, the creditors have recovered more than 1 lakh crore by this route. Recovery occurs even after admission to IBPGR. Some cases have been settled with the approval of the Supreme Court. The data shows that the banking sector is recovering well thanks to resolutions outside the CIB.

Now that the IBC is relatively relatively simple, what more can you do?
Wherever we find a way to strengthen the insolvency ecosystem, we deal with it immediately. The Insolvency Law Committee is currently studying a legislative framework for international insolvency. It is proposed to begin the resolution of the insolvency of personal guarantors with companies. IBBI is considering a 27-month graduates insolvency program to train world-class insolvency professionals.

(For a full interview, log on to www.financialexpress.com)