OUT OF ORDER
Business Today India|August 06, 2023
THE INSOLVENCY AND BANKRUPTCY CODE SIMPLY ISN'T WORKING, DESPITE DOZENS OF AMENDMENTS AND GOOD INTENT. AN INSIDE LOOK AT ITS FLAWS, AND HOW TO MAKE IT WORK
ANAND ADHIKARI
OUT OF ORDER

SOME SIX MONTHS ago, Hyderabad-based Ind-Barath Energy walked S out of the Insolvency and Bankruptcy Code (IBC) proceedings with a new buyer, JSW Energy, after nearly four years. Under the IBC's timelines, the process should have taken six months, or a maximum of a year if one factors in litigation. The outcome was equally disappointing, with banks recovering just ₹1,047 crore of the ₹5,500 crore of dues the thermal power producer had. Ind-Barath isn't an exception. More than half the default cases at the IBC have been languishing for more than nine months without any resolution. Besides, the financial creditors-mostly banks are usually able to recover only a small percentage of the admitted claims. For instance, in the case of Videocon Industries, the recovery was just around 5 percent. The average recovery value stands at 34 percent of the claims since this game-changing law came into force in 2016.

What ails the IBC? In its seventh year, the law is caught in a maze of litigation, new interpretations, amendments (as many as 84 to date), challenges from stakeholders, and new precedents set by the Supreme Court. (See graphic Hits & Misses). That's a far cry from the IBC's intent, which is to restructure and revive a defaulting company. According to Daizy Chawla, Managing Partner at S&A Law Offices, the IBC is being used as a recovery tool, not just by operational creditors or suppliers, but also financial creditors.

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