Bidders going on appeal must deposit up to 1% of loan amount, banks tell insolvency board

The banks' suggestion is meant to put a curb on those wanting to derail a rival’s acquisition plans, by going on appeal after the National Company Law Tribunal (NCLT) declared the rival as the successful bidder for a stressed asset.

Several companies have been on the bidding spree for stressed assets, which has resulted in delays in the resolution. and that has not gone well with banks. This has not gone well with banks. According to a Businessline report, they have requested the Insolvency and Bankruptcy Board of India (IBBI) to introduce deterrent provisions in IBC rules.
 
The banks have suggested insolvency board that bidders should deposit 0.5-1 per cent of the loan owed by a company undergoing resolution with the National Company Law Appellate Tribunal (NCLAT).
 
The bidders should deposit this amount each time they go on appeal. 
 
“If the requirement of putting money on the table is incorporated in the IBC rules, it will deter repeated appeals by some bidders and promoters of stressed companies who are bent on delaying or derailing the resolution process,” a Bank of India (BoI) official was quoted as saying.
 
“If the appeal is successful, the deposit will get adjusted towards the settlement of dues of the company being acquired. Otherwise, it will get forfeited. Such a provision will deter the tendency to appeal at the drop of a hat.”
 
The banks' suggestion is meant to put a curb on those wanting to derail a rival’s acquisition plans, by going on appeal after the National Company Law Tribunal (NCLT) declared the rival as the successful bidder for a stressed asset. 
 
There have also been cases of promoters of stressed companies opting for an appeal after the NCLT’s announcement of the successful bidder.
 
Source: Businessline

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