OUT OF ORDER

THE INSOLVENCY AND BANKRUPTCY CODE SIMPLY ISN'T WORKING, DESPITE DOZENS OF AMENDMENTS AND GOOD INTENT. AN INSIDE LOOK AT ITS FLAWS, AND HOW TO MAKE IT WORK

- ANAND ADHIKARI

SOME SIX MONTHS ago, Hyderabad-based Ind-Barath Energy walked S out of the Insolvency and Bankruptcy Code (IBC) proceedings with a new buyer, JSW Energy, after nearly four years. Under the IBC's timelines, the process should have taken six months, or a maximum of a year if one factors in litigation. The outcome was equally disappointing, with banks recovering just ₹1,047 crore of the ₹5,500 crore of dues the thermal power producer had. Ind-Barath isn't an exception. More than half the default cases at the IBC have been languishing for more than nine months without any resolution. Besides, the financial creditors-mostly banks are usually able to recover only a small percentage of the admitted claims. For instance, in the case of Videocon Industries, the recovery was just around 5 percent. The average recovery value stands at 34 percent of the claims since this game-changing law came into force in 2016.

What ails the IBC? In its seventh year, the law is caught in a maze of litigation, new interpretations, amendments (as many as 84 to date), challenges from stakeholders, and new precedents set by the Supreme Court. (See graphic Hits & Misses). That's a far cry from the IBC's intent, which is to restructure and revive a defaulting company. According to Daizy Chawla, Managing Partner at S&A Law Offices, the IBC is being used as a recovery tool, not just by operational creditors or suppliers, but also financial creditors.