Introduction

The concern of the chapter motion helped to resolve more than 9,650 cases involving claims of about Rs 3.7 lakh crore, with companies and their promoters paying fees earlier than the case was admitted to the National Company Law Tribunal (NCLT). As of December 2019, this debt had been settled as operational collectors, referring to vendors, or monetary collectors, such as banks, threatened to move forward, as stated by the Insolvency & Bankruptcy Board of India (IBBI).

With the Insolvency & Bankruptcy Code (IBC) prohibiting the proponents from rebidding their companies as soon as the case is admitted to the NCLT, the proprietors were more than desperate to settle cases in order to maintain control of the company. One of the many reasons of IBC ‘s implementation was to ensure quicker decision-making and faster recovery as banks grappled with a massive pile of risky debt.

Facts of the case

In May 2018, when TOI first reported on settlements, the number of cases settled earlier than admission was 2,100 with the amount of Rs 83,000 crore in question. In the case of monetary collectors, who additionally embrace household patrons in the case of residential real estate tasks, NCLT had admitted claims of more than Rs 3.8 lakh crore (rounded off) from monetary collectors, and the implementation amounted to Rs 1.8 lakh crore or around 46% of the amount claimed. As a result, the monetary collectors took a haircut of around 54% of the amount claimed, indicating the value of the erosion.

However, it was less than twice the liquidation value estimated at Rs 96,000 crore, IBBI ‘s knowledge confirmed.

Legal Standpoint

Insolvency consultants have argued that the value of implementation will increase as a number of the 221 cases that have been cleared under the insolvency decision to date have been admitted after years have elapsed. With the new legislation now in place, the method can be expected to gain momentum as the market matures. However, the pandemic, in all accounts, has dealt a blow, suppressing the demand for and valuation of burdened assets through the insolvency motion.

MSMES – Special dispensation to allow owners or promoters to initiate action and submit resolution plans, while remaining in the saddle

Fresh start process – Available only to those with annual income up to 60,000, assets under 20,000 and loans up to 35,000 and do not have a dwelling unit. The debtor files an application for “fresh start” for discharge of debt. Proposal to be decided quickly

Pre-packed to allow an arrangement for sale of all or a part of the business, assets are negotiated with a buyer before appointing an administrator. The administrator then clears the plan quickly Cross-border insolvency – Will deal with cases such as Jet Airways with assets or creditors in other countries

Group insolvency – Will help resolve cases similar to Videocon or IL&FS in future

Conclusion

The advantage for creditors is that cases are disposed of more quickly. The average time taken to resolve 221 companies was 415 days, including “excluded time” due to court litigation. Excluding “excluded time” it worked for 375 days, or a little more than a year, compared to more than four years in the pre-IBC era. In the case of liquidation, where 914 cases have been studied, the entire process is estimated to have taken 309 days.

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