Former Law Secretary, Govt of India and now Chairman, Suncap Insolvency Professionals Pvt Ltd., is a Post Graduate, MA (Pol.Sci.) and LL.M. He is a gold medalist in International Law and has more than 45 years experience in the field of law. He retired as Law Secretary from the Ministery of Law & Justice, Govt of India where he worked for more than 25 years as an officer of Indian Legal Service. He is a recipient of awards from International Jurists Association for contribution in the field of law in government sector.
He held the position of Presiding Officer (Offg.) and Member, Securities Appellate Tribunal; Chairman, Adjudicating Authority, Prevention of Money Laundering Act; Judicial Member, Income-tax Appellate Tribunal; Arbitrator and Appellate Authority under Prevention of Money Laundering Act. His affiliations include as Member, Delhi High Court Bar Association; Life Member, Indian Institute of Public Administration; Life Member, Indian Law Institute; Life Member, International Centre for Alternate Dispute Resolution (ICADR).
What IBC means to businesses and lenders?
Insolvency & Bankruptcy Code (IBC) is an Act that consolidates and amends the laws relating to corporate reorganisation and insolvency resolution in a time bound, structured process for restructuring, reviving and liquidating business assets. It is entrepreneur friendly legal bankruptcy framework. For institutional lenders, it brings a paradigm shift from “debtors in possession” to “creditors in control.” It’s aimed to address the issue of non-performing assets by increasing the rate of recoveries and also help in protecting the interests of lenders. For the first time through the mechanism of committee of creditors, both secured and unsecured financial creditors are treated at par.
How do you expect this new act to impact businesses?
The insolvency resolutions will promote entrepreneurship and encourage foreign special situations funds. It will lead to credit availability and balance the interest of all stakeholders and at the same time help maximize the value of assets. It will bring vibrancy in the bond markets since IBC equalizes the rights of secured and unsecured creditors in case of winding up. India’s rating on World Bank’s ease-of-doing-business is expected to improve significantly from 130 out of 189 countries.
Who should seek use of this law?
Companies that have defaulted for reasons other than wilful default and are looking for a time bound resolution plan; that are otherwise viable looking for debt restructuring; and that are looking for strategic investor. Internationally, MDs are more aware and use Insolvency code proactively as they do not consider bankruptcy to be a bad name and look for timely solution. Debtors propose plan of reorganization to keep business alive and pay creditors. In India the companies need to be educated that this code is as beneficial for them as for the creditors.
How to make this procedure more efficient?
The legislation currently doesn’t deal with cross-border insolvency. It is under active cosideration of the government and notification will be issued in due course. More number of information utilities and more bandwidth in terms of adjudicating authority will increase the efficiency. The act is silent on issues of promoter’s personal guarantee since almost all bad loans currently have personal guarantee attached. I believe with the notification of part-III of the IBC dealing with personal bankruptcy, this issue will also be addressed.
Your advice?
This law is aimed at overall betterment of the business environment. I suggest my professional friends (Lawyers, CAs, CSs) to educate well their clients and suggest the Adjudicating Authority to believe in the fact that a running company is more fruitful to the national economy than a company which is being wound up.
