Bill placed to keep defaulters at bay

Special Correspondent, Telegraph India, December 29, 2017

The government on Thursday introduced a bill in the Lok Sabha to amend the Insolvency & Bankruptcy Code (IBC) to bar willful defaulters and promoters with dubious antecedents from bidding for stressed.
The bill, which was introduced by finance minister Arun Jaitley, brings greater clarity on who are eligible for the auction of stressed assets for resolution under IBC.
The bill gives defaulting promoters a chance to bid if they are able to clear their loans within a month. It has also permitted asset reconstruction companies, alternate investment funds and banks to participate in the bidding.
The Insolvency and Bankruptcy Code (Amendment) Bill 2017 replaces an ordinance brought last month to plug the legal loopholes.
According to the statement of objectives, the bill was being introduced as the original act did not bar anyone from participating in the bidding or resolution of a company being sold off because its promoters could not pay back the loans.
"Concerns have been raised that such persons who with their misconduct contributed to the defaults of companies or otherwise undesirable may misuse this situation. This may undermine the process as the unscrupulous person would be seen to be rewarded at the expense of creditors," the bill's objectives said.
The bill has brought in the words "or in concert with" to define connected parties who may be linked to the defaulting borrowers from bidding for the stressed assets.
It made it clear that the ineligible defaulters were those who had "failed to make the payments of all the overdue amounts with interest and charges relating to non-performing asset before the submission of the resolution plan".
It, however, does not count a person's or a firm's bad loans abroad as ineligibility for bidding for the stressed assets in India.
The issue of whether former promoters of failed firms should be barred from bidding to buy back their own companies arose after the Essar Group decided to bid for Essar Steel, a firm it had run unsuccessfully and for which it had submitted a major debt restructuring in the last decade. More recently, the Ruias had been unable to pay back Essar Steel's huge debt of over Rs 44,000 crore, resulting in their debt being declared as bad loan and the RBI ordering banks to recover money by using the government's new bankruptcy code.
While the promoters of Essar have not been declared "willful defaulters" by the RBI, both bankers and several firms bidding for the steel-maker felt that allowing Essar to bid could cause a moral hazard.
Sanjay Bhattacharya, former managing director of the State Bank of India, said, "A moral hazard would have been created if we allow failed promoters to bid and buy back their firm at a fraction of the real price while wiping out their entire debt... this would be like rewarding a promoter for failing his firm."
"The tone and tenor of the changes will make it obligatory for the committee of creditors to take a call on the viability of a proposal taking into account the track record of a bidder," said officials.
Link :

Comments

Post a Comment

Popular posts from this blog

India Joins Russia in Voting Against West-Backed Move to Expand Powers of OPCW

The Wire: June 28, 2018 New Delhi: India voted against a UK-backed move that will allow the global chemical weapons watchdog to apportion blame for illegal attacks, criticising the decision to grant “unchecked powers” to the head of the group which could be used for “partisan” purposes. On Wednesday, more than two-thirds of the member states of the Organisation for the Prohibition of Chemical Weapons (OPCW) voted to authorise the international body to identify the perpetrators and sponsors of a chemical weapons attack. It also specifically called on the OPCW’s technical secretariat to begin work on identifying the perpetrators behind the use of chemical weapons in Syria. The draft decision, sponsored by 30 countries, was adopted at the fourth special session of the conference of the states parties to the Chemical Weapons Convention at the Hague, with 82 in favour and 24 negative votes. While Europe, the United States and their allies voted ‘yes’, there was strong oppo...
Read more

As financial insecurity rises in urban India, so does investment in insurance

Image
Scroll.in March 13, 2020 Urban Indians are becoming less confident about their financial security. Up to 58% of them fret over financial independence post retirement, which is a 4% increase from last year. An equal share of urban Indians worry about meeting their daily medical expenses and sustaining their current lifestyle once they stop working. The findings are part of a survey published by Delhi-based Max Life Insurance in association with London-based consultancy Kantar. The firms surveyed 7,014 respondents in 25 cities, including six metros, nine tier-1 cities, and 10 tier-2 cities, between December 2019 and January 2020. Source: Max Life Insurance via Quartz The trends Source: Max Life Insurance via Quartz Source: Max Life Insurance via Quartz Source: Max Life Insurance via Quartz A significant share of urban Indians also say their families will have no financial support in the event of the breadwinner’s death. In such a scenario, around 57% believe the family sav...
Read more

ED tracks Swiss Bank A/Cs of Agusta scamster

The Poineer February 10,2019 Rakesh K Singh The Enforcement Directorate (ED) has tracked a dozen Swiss bank accounts in the name of Rajiv Saxena, who is key accused in the Rs 3,600 crore AgustaWestland VVIP chopper scam. The ED has also found out accounts held by  his family members and associates where the kickbacks in the now scrapped deal were allegedly parked. Two bank accounts are in the name of Rajiv Saxena’s  associates Pankaj Jain and Sumita Jain who are also the authorised signatories. The  third is in the name of another associate Ajit Singh Bubber, but Rajiv and his family members are authorised signatories. The remaining nine accounts are largely owned and operated by Rajiv, his family members and associates. Rajiv Saxena was deported by the UAE authorities on January 30 and the ED formally arrested him the next day and a court later granted his remand to the agency. He is currently undergoing custodial interrogation by the ED. The agency had in 2017...
Read more