Finance and Corporate Affairs Minister Arun Jaitley on Tuesday said the option of ‘marrying’ insolvency framework with possible settlement schemes could be looked at in the future for the resolution of stressed assets.
However, such an option could be explored only after the initial batches of bankruptcy cases are cleared at the National Company Law Tribunal.
“We have to see if revival is only through the Insolvency and Bankruptcy Code (IBC) or can we revive otherwise. (But) I think today may not be the right time to go in for this discussion because of the huge rush of companies coming to the insolvency process,” Jaitley said at an event. “But once this rush is off over the next couple of years, and then we think back and business comes back to usual, honest creditor-debtor relationship is restored on account of IBC, a situation may arise when we may then have to consider a need to marry the two processes together so they may well simultaneously exist,” he said. However, he added that various schemes in the past for settlements and restructuring did not yield the desired results.
This was perhaps one of the reasons why the Reserve Bank of India (RBI) earlier this year scrapped numerous loan restructuring programmes, including S4A and Corporate Debt Restructuring, to tackle defaulted loans, as the IBC emerged as an effective tool for time-bound resolution of stressed assets. Jaitley added that the next debate on the IBC would perhaps be about the role of operational creditors in the whole insolvency process. Once the big cases are resolved, this is an issue which will have to be adequately addressed, he said.
Recently, Corporate Affairs Secretary Injeti Srinivas said the government was exploring the feasibility of implementing the so-called ‘pre-packaged’ bankruptcy scheme, prevalent in countries like the US in India to aid the existing insolvency framework and cut costs and time of the resolution process. The planned scheme, if implemented, will just be a ‘pre-IBC window for the resolution of stressed assets, which will only complement the existing framework and not substitute it’. —FE