Just over five years after its enactment, the Insolvency and Bankruptcy Code (IBC), which provides a limited, market-linked time frame for the resolution of stressed assets, has passed the constitutional test.
In Sahoo’s words, with each Supreme Court ruling, the Code has developed deeper and stronger roots, and probably boasts the largest body of legal cases.
In terms of value, the code has rescued 70% of distressed assets through insolvency resolution plans and released the remaining 30% of those assets through liquidations.
Sahoo, who has been at the helm of the Bankruptcy and Insolvency Board of India (IBBI) since its inception in October 2016, said the code is changing the way society perceives business failures.
IBBI is a key institution in the implementation of the Code.
According to the IBBI chief, by salvaging viable businesses through the insolvency process, closing unviable ones through liquidation, and facilitating voluntary liquidations, he is freeing entrepreneurs from honest business failures.
“Companies, which may not withstand market pressures, would have to use the code to reorganize business or for a clean and dignified exit. ‘Not succeeding’ will soon be the new mantra for budding entrepreneurs in the country. No There are days far away when we will celebrate failure, “Sahoo told PTI in an email interview.
Since the provisions of the Bankruptcy Resolution Process (CIRP) came into force on December 1, 2016, a total of 4,376 CIRPs have been initiated until the end of March of this year.
Of the total, 2,653 have been closed, including 348 CIRPs that ended with the approval of resolution plans. Up to 617 CIRPs were closed on appeal or review or resolved, while 411 were withdrawn and 1,277 ended up in liquidation orders, according to IBBI’s latest quarterly bulletin.
Citing the findings, Sahoo said a huge unsatisfied appetite for freedom of exit “made the Code a reform by, for and by stakeholders, and the ban on undesirables to seize control of a stressed company ushered in a fair relationship between debtor and creditor.
Significant improvements in the insolvency resolution score made it easier to conduct business in India and the emergence of new markets for resolution plans, interim finances and liquidation assets, among others.
While noting that six amendments and dozens of subordinate laws have kept the code relevant with changing needs and addressed implementation difficulties, Sahoo said that most importantly, “the rule of law was institutionalized in an anarchic and stressful situation when the claims of all creditors together is incompatible with the company’s available assets. ”
All that said, there are also flaws but not many.
Aside from the few missing elements, such as cross-border and group insolvency to supplement corporate insolvency, Sahoo said that while work has begun, an institutional framework is sometimes lacking to prepare a cadre of appraisers.
“Compared to the previous regime that took almost five years to complete, the process under the code that produces a resolution plan takes an average of 400 days. However, if it does not reach the expected 180/270 days,” he said.
He also noted that economic legislation is typically a skeletal structure and “judicial pronouncements give it flesh and blood” and resolve gray areas.
“While granting the legislature the freedom to experiment, the supreme court proactively resolved jurisprudence, explained various conceptual issues, resolved contentious issues, and resolved gray areas, at an unprecedented rate, providing clarity on what is permissible and what is not. It is, “he emphasized.
The Code has also helped create a cadre of 3,500 insolvency professionals, three professional insolvency agencies, 80 professional insolvency entities, 4,000 registered appraisers, 16 registered appraiser organizations, and one information company.