''A MECHANISM THAT EXPECTS NPAs TO FIND THEIR OWN SOLUTIONS IS USELESS
Business Today|August 09, 2020
India Inc. and its lenders are in a legal crisis. Pre-empting a financial meltdown due to the Covid-19 lockdown, the Centre has suspended the Insolvency and Bankruptcy Code for a year. In parallel, the Reserve Bank of India has offered moratorium on loan repayments. In the absence of debt resolution mechanisms, the burden has shifted back on banks. Business Today’s Nevin John speaks to Shardul Shroff, Executive Chairman, Shardul Amarchand Mangaldas and Co, on the legal tangle and what this means for businesses and banks. Edited excerpts:
Nevin John
''A MECHANISM THAT EXPECTS NPAs TO FIND THEIR OWN SOLUTIONS IS USELESS

What are the legal implications of suspending IBC?

The implications of suspending the corporate insolvency resolution (CIR) process indicates lack of capacity of tribunals, inability to deal with lack of market demand for stressed assets in the CIR process, and ban on existing promoters remedying the default. It also indicates excessive litigation slowing down the resolution process. In the absence of a white knight or a third-party promoter stepping in to take over, the ban on existing promoters continuing with the company is deeply problematic. There is a moral dilemma. The expectation that lenders and promoters of companies, which are stressed assets / NPAs for banks, resolving matters without the imperative to find a solution in a time-bound solution, are difficult to handle. A mechanism which expects NPA companies/stressed assets will find their own solution with lenders is totally useless.

You represent various stakeholders. So what does it mean for lenders, defaulters, and government?

Lenders would be stressed since they cannot rely upon defaults in the interim (from March 25, 2020) by borrower companies to seek resolution of bankruptcy of such firms that are in insolvent circumstances. It would open the need for lenders standing outside, winding up and proceeding to enforce security, not as a mere asset sale or a piecemeal sale, but as a sale on a going concern basis with management rights, and which promote creation of adequate cash flows to repay lenders. The suspension of default interest and penal interest together with non-payment of regular interest and the right to recovery will lead to bank balance sheets shrinking and create the need to capitalise banks.

Bu hikaye Business Today dergisinin August 09, 2020 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

Bu hikaye Business Today dergisinin August 09, 2020 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

BUSINESS TODAY DERGISINDEN DAHA FAZLA HIKAYETümünü görüntüle
"Moving to cloud helped us grow❞
Business Today India

"Moving to cloud helped us grow❞

What was the problem you were grappling with?

time-read
1 min  |
November 24, 2024
She's Got Time
Business Today India

She's Got Time

MORE WOMEN ARE BECOMING WATCH CONNOISSEURS, SEEKING OUT BOTH JEWELLED AND TECHNICAL WATCHES FOR THEIR STYLE AND CRAFTSMANSHIP

time-read
3 dak  |
November 24, 2024
RISING STAR
Business Today India

RISING STAR

PARUL GULATI IS a name that's been steadily gaining prominence in the Indian entertainment industry after she appeared on season 2 of Shark Tank in 2023. She has become a multifaceted personality who effortlessly transitions between acting and entrepreneurship.

time-read
1 min  |
November 24, 2024
Building on a Legacy
Business Today India

Building on a Legacy

WHEN ZAHABIYA KHORAKIWALA stepped into her role as Managing Director of Wockhardt Hospitals over a decade ago, she confronted formidable challenges that have since turned into achievements.

time-read
1 min  |
November 24, 2024
LEADER IN INNOVATION
Business Today India

LEADER IN INNOVATION

AS FEDEX'S PRESIDENT (Middle East, Indian subcontinent and Africa), Kami Viswanathan has a lot on her plate.

time-read
1 min  |
November 24, 2024
WAITING IN THE WINGS
Business Today India

WAITING IN THE WINGS

Here are those who missed out as they have not yet completed a year in office; they'll be strong contenders in 2025

time-read
1 min  |
November 24, 2024
A DECENT PROPOSAL
Business Today India

A DECENT PROPOSAL

IN TODAY'S WORLD OF TRYING TO CREATE AN EQUITABLE SPACE, BOTH MEN AND WOMEN CONTRIBUTE TO THEIR HOUSEHOLDS. WOMEN ARE ENCOURAGED TO HAVE THEIR OWN SAVINGS POOL AND INVESTMENT ROUTINE. GIVEN THIS, HOW SHOULD FUTURE BRIDES APPROACH FINANCIAL PLANNING?

time-read
5 dak  |
November 24, 2024
Women and the STEM Bias
Business Today India

Women and the STEM Bias

EMPOWERING WOMEN IN STEM WILL NOT ONLY BENEFIT INDIVIDUALS, BUT ALSO STRENGTHEN THE ENTIRE INDUSTRY, DRIVING INNOVATION AND PROGRESS.

time-read
3 dak  |
November 24, 2024
ROCKET WOMEN
Business Today India

ROCKET WOMEN

WOMEN IN INDIA ARE NOT ONLY VENTURING INTO SPACE BUT ARE ALSO STARTING TO SPEARHEAD THE COUNTRY'S EFFORTS IN THE GLOBAL SPACE RACE.

time-read
6 dak  |
November 24, 2024
ONE STEP FORWARD
Business Today India

ONE STEP FORWARD

THE NUMBER OF WOMEN INDEPENDENT DIRECTORS IS GROWING STEADILY, BUT IT'S A LONG WAY FROM GENDER PARITY. MUCH MORE NEEDS TO BE DONE TO BREAK THE GLASS CEILING IN BOARDROOMS.

time-read
6 dak  |
November 24, 2024