The pre-pack model of insolvency resolution introduced over two years ago to speed up the rescue of smaller firms has failed to take off, as bankers worry that the voluntary haircuts they opt for could lead to allegations of impropriety in the future. This, despite the fact that court approvals mandatory for all bankruptcy rescues, offer protection in case of an investigation.
Bankers have come under scrutiny in some recent cases, such as the one involving former State Bank of India chairman Pratip Chaudhuri, which has prompted them to be more cautious, legal experts added.
The Pre-packaged Insolvency Resolution Process (PPIRP) was introduced in April 2021 as an alternative mechanism for defaults by micro, medium and small enterprises (MSMEs) in 2021.
However, latest data from the Insolvency and Bankruptcy Board of India (IBBI) showed only four companies have taken the PPIRP route, including Shree Rajasthan Sintex, Sudal Industries, Enn Tee International and GCCL Infrastructure and Projects. The scheme was introduced to ensure faster resolution of cases when matters were dragging far beyond the 270-day threshold. At the time of its introduction, the average resolution time stood 540-560 days.
This story is from the October 03, 2023 edition of Mint Mumbai.
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This story is from the October 03, 2023 edition of Mint Mumbai.
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