Union Finance Minister Arun Jaitley has written a facebook post titled ‘Two years of insolvency and Bankruptcy Code (IBC)’. In the blog juxtaposes in to policy failures of the Congress regime and the impact of the financial reforms initiated by the Modi govt.
Jaitley writes –The Congress left behind an anachronic system’s legacy for resolving commercial insolvency. The Companies Act had a provision of winding up a company if it is unable to pay its debt. The law proved to be an utter failure.
–During 2008-2014, Banks lent indiscriminately. This lead to a very high percentage of NPAs which was highlighted by the Asset Quality Reviews of the RBI. This led to a prompt action by the Government, appointing an Expert Committee, which in its Report in 2015 recommended the insolvency and Bankruptcy Code or IBC
–The IBC was the quickest Economic legislative change that I have seen being made by Parliament. The NCLT & the IBBI were immediately established, the regulations were framed & by the end of 2016 corporate insolvency cases were being received by the NCLT. An effective governance.
–The early harvest through the IBC process has been extremely satisfactory. It has changed the debtor – creditor relationship. The creditor no longer chases the debtor. In fact, it is otherwise
–The recoveries of monies parked in insolvent companies has taken place through three methods
–firstly, after the introduction of Section 29(A) such companies are paying up in anticipation of not crossing red line and being referred to NCLT.
–Secondly, once a petition of the creditor is filed before the NCLT many debtors have been paying at the pre-admission stage so that the declaration of insolvency does not take place. Thirdly, many major cases have already been resolved & many are on the way of resolution.
–The functioning of NCLT & the appellate Tribunal has led to a large number of cases being filed. The NCLT is over-crowded, its capacity is now being further enhanced. Further, the SC has pronounced several judgements expeditiously, laying down the Law on the IBC.
–So far 1322 cases have been admitted by NCLT. 4452 cases have been disposed at pre-admission stage and 66 have been resolved after adjudication. 260 cases have been ordered for liquidation. In 66 resolution cases, realization by creditors was around Rs. 80,000 crores
–Increase in conversion of NPAs into standard accounts and decline in new accounts falling in NPA category show a definite improvement in the lending and borrowing behaviour.