India’s jump from Rank 130 to Rank 100 in ease of doing business can be largely attributed to various legal reforms in the country, including the Insolvency and Bankruptcy Code, 2016 (IBC), which has been notified with a vision to resolve the rampant insolvency situation. IBC preliminarily provides for revival of insolvent corporate entities through a corporate insolvency resolution process (CIRP) in a time bound manner, failing which such entities undergo liquidation. As per the news sources, private equity players have raised stressed assets funds totalling over USD 4 billion in the past 3 years, sensing an opportunity in the increasing number of bad assets in the banking system.
Over the past two years, IBC has proved instrumental in addressing the corporate insolvency situation in the country, however, several crucial issues have emerged under IBC framework, including challenge to its constitutionality, questions on time bound process, ability and eligibility of bidders to bid for a corporate debtor, role of insolvency professionals, Reserve Bank of India’s mandate to mandatorily require banks to initiate CIRP against large debtors.
These are interesting times for the stressed assets space in the country, as the Government is moving various amendments in IBC, planning to launch an asset management company (AMC) to take over non-core assets and sell them through a bidding process, aims to give relief to stressed power sector companies. Similarly, the large banks and financial institutions are taking steps for faster resolution of stressed assets, by entering into intercreditor pacts, launching schemes.
