IBBI to commence individual insolvency process soon
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Talking on the sidelines of a conference on Financial Distress, Bankruptcy and Corporate Finance at the Indian Institute of Management, Ahmedabad (IIMA), Sahoo termed the insolvency process as sensitive and in the case of individual insolvency even more sensitive.
“We have categorised individual insolvency in three different categories — personal guarantors to corporate debtors, proprietary & partnership firms and rest of the individuals. We want to go in phased manner. The beginning of the individual insolvency process would be carried out with personal guarantors to corporate debtors very soon,” he said, adding that it would be difficult to give exact timeline for commencing the process.
Replying to a question on the number of cases pertaining to personal guarantors in the country, he said that bankruptcy law is voluntary as even corporate insolvency resolutions were not being identified from the sides of government, IBBI or NCLT. “It is up to debtors or creditors who comes and start the processes. Government, NCLT and IBBI are there to help the processes get momentum. It will be the same in the case of individual insolvency process too,” he added.
According to him, IBC code is just a couple of years old and hence there would be great challenge to build capacity among all stake holders —committee of creditors, NCLT, insolvency professional, resolution professional and others. Backing the IBC code, Sahoo said that in the old regime including that of BIFR, it used to take five to eight years to dispose of cases and used to cost nearly 9 to 10% of total claims with nearly 25% realisation to financial creditors (of their claims). “Under the new regime (IBC Code), cases are being disposed of in less than a year. Cost is not even one per cent. Most importantly realisation to financial creditors is around 43%,” he claimed.
The basic concept of IBC Code is, there shouldn’t be liquidation of a viable firm and more focus should be on revival of the company, he said. On man power front he said that currently there were 2,500 insolvency professionals and around 2,000 registered valuers working in the country. In July 2019, 30 new members joined NCLT.
During his keynote address Sahoo said that since the coming into force of the provisions of Corporate Insolvency Resolution Process (CIRP) with effect from December 1, 2016, as many as 2,162 corporate debtors (CDs) have been admitted into CIRP by June 2019 end. Of these, 174 have been closed on appeal or review or settled, 101 have been withdrawn, 475 have ended in liquidation and 120 ended in approval of resolution plans. Of the 2,162 CDs, 1080 operational creditors (OCs) which is nearly 50%, 868 financial creditors (FCs), nearly 40%, and 214 other CDs triggered resolution process. #casansaar (Source - Financia Express, FETeam)
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