Insolvency ordinance may see 100-150 cases reopen

The ordinance to make several companies as well as some promoters ineligible to bid for ailing companies may result into reopening of 100-150 cases with insolvency professionals beginning to dispatch letters to bidders to disclose if they are facing action in various forums. "Insolvency professionals are asking bidders to declare that they do not violate any of the provisions that have been inserted. So far, they only had to check if the resolution process was in order or not but now they have to also verify if bidders are eligible on all counts," a lawyer working on several cases told TOI.

Sources said the biggest impact will be on companies where the resolution plan has been finalised and is awaiting a go ahead from the National Company Law Tribunal (NCLT). "In these cases you will have to do the eligibility check, which means that the process will get extended and in some cases may be delayed," a source said.

The Insolvency & Bankruptcy Board of India (IBBI) too has written to the insolvency professionals seeking a host of details on bidders — ranging from subsidiaries and associates of the ailing company, related party transactions, details of forensic audit, apart from details of criminal cases against directors, history of BIFR and loan restructuring under some of the RBI schemes. Besides, it wants to know if the management has been cooperatiing during the insolvency process or not.

Since the Insolvency & Bankruptcy Code was enacted last year, over 300 cases have been filed with the NCLT with many of them coming from the lenders, while other creditors have also taken the route to recover dues. Once a plea is admitted, NCLT appoints an insolvency professional who takes charge of the company. The law provides for a time-bound resolution within 180 days, which can be extended by another 90 days, and companies where there is not enough interest are sent for liquidation. A break-up of cases in various stages is not readily available but sources said many of them are nearing or past the half-way mark.

But finalising bids is a time-consuming process that starts from issuance of an information memorandum, seeking interest from potential bidders, non-disclosure agreements with them, giving access to data, before calling the bids and then finalising the winner. Between all this the insolvency professional seeks clearances from the committee of creditors, which oversees the running of the company. #casansaar (Source - Times of India)