New Delhi, 28th August 2021:
The committee of creditors should not look at only maximizing their recovery or only going in for compulsory liquidation of the company to recover their dues during the company resolution process, but to ensure that the company becomes operational again stated Madan Balachandra Gosavi, Hon'ble Member (Judicial), National Company Law Tribunal (NCLT) at the National E-Summit: Insolvency & Bankruptcy Code & Valuation- "A Comprehensive Relook to Revamp of IBC" organized by the Associated Chamber of Commerce and Industry (ASSOCHAM).
Speaking at the event, Shri Gosavi informed that the job of the independent resolution professional, indeed, needs to be appreciated. "A company may be sick due to the mismanagement of the promoters or due to any other reason. The independent resolution professional's job is to ensure that the company again stands back on its feet and become operational and also to ensure that there is a proper buyer to the same assuring maximization of value for the lenders. This is not a simple job. It's like ensuring that you nurse your own sick child back on its own feet," he said.
Citing several examples, Shri Gosavi explained that there are instances where the independent resolution professionals have faced murderous attacks which have resulted in hospitalization for several months. "The professionals have again gone back to their jobs to resolve the pending issue. There have been cases where the ex- management too, has tried to get them intimidated in false criminal cases. I believe that it is a thankless job that the resolution professional is doing," he said.
In his special address, Santosh Kumar Shukla, Executive Director, Insolvency and Bankruptcy Board of India (IBBI) while lauding the role of Insolvency professionals, stated that it is a joint effort of all the stake holders and not only the Insolvency Professionals for revival of companies under financial stress.
"While we need to give full credit to the role and the responsibility of the insolvency professionals, while working out a resolution package, the other stakeholders like the committee of creditors and even the ex-management has an important role to play. The focus should be to maximize the value of the business and not just to recover the dues or liquidate the company," He said.
The performance of the insolvency professional depends on the cooperation and the joint efforts of all the people involved. "The insolvency professional also need to be diligent and look for information from public sources. He should not depend only on the information from the ex- management. This would save a lot of productive time in finding the resolution to the pending issue," he added.
The occasion also saw the release of the knowledge book – ‘Reinforcing the Code' which was jointly launched by ASSOCHAM and CRISIL Ratings Ltd.
Speaking on the role of resolution professional, Nitesh Jain, Director, CRISIL Ratings Ltd stated that adherence to the timelines for coming out with a resolution still poses a challenge with the average timeline exceeding 330 days across categories. "Out of the 1723 outstanding cases, 79 percent has been pending for more than 270 days," He said.
Mr. Anil Goel, Founder of AAA Insolvency Professionals LLP, who was moderating the session, said that delay in admittance of application to CIRP causes lot of damage to the assets and businesses of the Corporate Debtor as defaulting promoters divert, transfer or manipulate the liquid and current assets of the Corporate Debtor and company is mostly left with no liquid assets and businesses when admitted to CIRP. The time between filing of the application and admittance of case by NCLT should be restricted to 30 days by any means or there should be some provision of Interim appointment of IRP within 30 days of the filing of the application to save the business and assets of the Corporate Debtor.
He also proposed that there can be separate benches for hearing the new applications and most urgent status may be granted to new applications for initiating CIRP.
Mr Goel also said that IBBI wrote an urgent letter to Delhi Police Commissioner for the protection of Insolvency Professional when a woman claimant filed a false complaint of outraging the modesty of the woman against two partners of AAA Insolvency Sahil Narula, Partner, RNC Valuecon LLP stated that while there is a need to relook or revamp the Insolvency and Bankruptcy Code, it does not mean that it has failed in its objective.
"The IBC was set up with all the other possible recovery mechanisms like the BIFR or the SARFASI act failed and this was set up as a means of clean legislation procedure, " he said.
Jyoti A. Singh, Founder, AJA Legal and Associates gave a couple of suggestions for bringing in efficiency in the system. "The first thing that is needed is to revamp the website of the NCLT. At the moment, it is very difficult to locate any case or if the same company is pending in more than one benches," She said.
Ms Singh also explained that at the moment due to the pandemic, people are used to online sessions, so a hybrid model needs to be introduced as well where there is a mix of physical and online sessions to bring faster resolution of the process. "We also believe that the electronic filing should continue to bring in better efficiency where tools like Artificial Intelligence can be used," She added.
Dr. Sanjeev Gemawat, Executive Director-Legal, Dalmia Bharat Group stated that while a code of conduct should be there for the resolution professional, it should not be too harsh as to discourage a lot of good professionals from coming to this profession .
"We are still at the initial phase as only five years have passed since the passing of the Insolvency and Bankruptcy code. We have a long way to go so while we need to have a code of conduct to look in the conduct of the Insolvency professional, it should not be too harsh," He said.
Anju Agarwal, Partner, ASC Group spoke on the practical delays on the part of National Company Law Tribunal (NCLT) which impacts the resolution process. "There are delays to the tune of 2-3 years from the time a resolution plan is submitted till the date of its approval and implementation. This results in a lot of buyers exiting the resolution process and the company goes into liquidation," She explained.
Ms Agarwal stated that there are several reasons for the delay in admitting the applications. "The NCLT is operating at just 40 to 50 percent of the capacity. The valuation of the business gets reduced for every single day of delay in admitting the application," She said.
Pooja Mahajan, Managing Partner, Chandhiok & Mahajan, Advocates and Solicitors suggested the setting up of different benches for different kind of cases. "We can have a different bench for MSMEs and also cases pertaining to company law board can be put in different benches all together," She informed.
Ms Mahajan explained that while a 14 day timeline was set when the IBC was launched. "However practically it is not possible. It went all the way to the Supreme Court and it was held by Hon'ble Supreme Court that legislators cannot force judiciary to act within a certain timeline. The solution now is to not set timelines but to increase the capacity of the NCLT. At present each judge is sitting in 2 to 3 benches every single day," She pointed out.
Sundaresh Bhat, Partner, BDO India suggested the digitization of the entire resolution process to reduce the timeline and faster implementation of the resolution with a centralization of the monitoring process. "The process would be free from delays and free from manipulation, if it is digitalized. All the claims can be uploaded and the process flow can be accessed by the regulator. Even the valuation report can be uploaded with most details and protection so that it is visible to authorised persons only. This would reduce the time taken and increase the efficiency," he explained.
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