Occupational Hazard
Business Today|August 26, 2018

THE INSOLVENCY AND BANKRUPTCY CODE CAN LEAD TO HUGE JOB LOSSES IN THE SHORT TO MEDIUM TERM AS MANY COMPANIES, INCLUDING SOME BIG NAMES, FACE LIQUIDATION.

Dipak Mondal
Occupational Hazard

DECCAN CHRONICLE HOLDINGS, the Hyderabad-based newspaper publisher, is fighting for survival in the National Company Law Tribunal (NCLT). With debt of around ₹8,000 crore, the company has been dragged to the NCLT under the Insolvency and Bankruptcy Code (IBC) and is now waiting for a bidder to save it from liquidation. “We have to ensure that this company survives or else 40,000 jobs, direct and indirect, could be in jeopardy,” says a source closely associated with the resolution process. Srei Group’s Vision India Fund, the only bidder left, has agreed to pay ₹1,000 crore and acquire the company. A resolution would mean that Deccan Chronicle is acquired by another group or promoter as a going concern.

The Insolvency and Bankruptcy Code, seen as a path-breaking reform, now poses a moral dilemma. While it has hastened the resolution process of many long pending corporate loan default cases, it has also led to a substantial number of companies getting liquidated in the absence of any takers for their business. This has, in turn, led to thousands of jobs coming under threat.

Many experts and resolution professionals believe that the IBC, by freeing up lakhs of crores of money stuck in long-pending corporate default cases, would lead to cleaning up of the mess and revival of many industries in the long run, there is no denying that jobs are being lost in the short to medium term.

Liquidation: A Hanging Sword

Liquidation remains a big threat to companies going through insolvency proceedings. Of the 968 cases of corporate default admitted by the NCLT for resolution under the IBC, close to 40 have been resolved and 156 have gone into liquidation. While many liquidated companies may not have been functioning, there are several instances of operational companies, with employees on rolls, getting liquidated.

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