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The role of Committee of Creditors (CoC) is crucial in deciding a resolution plan under the Insolvency and Bankruptcy Code (IBC), which provides for a market-linked framework for resolving stressed assets.
The discussions on the issue of the conduct of CoC in the context of the insolvency resolution process assumes significance amid recent instances of creditors taking steep haircuts on their exposure under resolution plans.
“We are working with IBA, RBI and Department of Financial Services on the very important issue of the conduct of CoC,” Corporate Affairs Secretary Rajesh Verma said.
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The Department of Financial Services comes under the finance ministry.
Verma also acknowledged that it has been upheld in judgements that commercial wisdom lies with CoC as the IBC provides for a competitive market driven process for value discovery of the debtor.
According to him, the IBBI has been working on increasing the capacity of CoC through various seminars and addressing the market issues.
The Insolvency and Bankruptcy Board of India (IBBI) and the National Company Law Tribunal (NCLT) are key constituents under the IBC framework.
Addressing a conference organised by industry body CII on five years of the IBC, Verma said erosion of the value of a debtor before it comes to CIRP (Corporate Insolvency Resolution Process) is a matter of concern and emphasised that “timing and asset preservation is of real essence”.
“The issues and challenges that often crop up are valuation, conduct of CoCs, insolvency professionals, delays happening in NCLT, post resolution implementation difficulties.
“… Still we see that creditors have been able to recover more than 180 per cent of the liquidation value of the corporate debtors that have been resolved. This is the outcome,” Verma said and cited that more than 30 per cent of the companies that have been resolved were not going concern.
Mentioning about efforts being made to make the insolvency law framework more effective and efficient, the corporate affairs secretary said the infrastructure of NCLT and NCLAT (National Company Law Appellate Tribunal) is being strengthened to address the delays in disposal of cases by filling up the vacant positions.
“Concerns of the market with respect to implementation of resolution plans due to claims by various government entities is also being addressed… advocacy efforts are being taken up to sensitise state government entities also,” he noted.
Further, Verma said there are constant interactions with academicians, policymakers, researcher and other stakeholders to make IBC more comprehensive and broad-based so that there is an enhanced ease of exit.
“We continue to work together to make this insolvency framework more effective and efficient. It will surely be one of the important chapters in the success story of India becoming a USD 5 trillion economy,” he added.