Don't send us to insolvency court, companies tell SBI

For two years after Insolvency and Bankruptcy Code (IBC) came into effect, the founders of the insolvent companies were keen to avoid the law by plugging loopholes and filing cases against bidders in the last moment to buy time.

With the Supreme Court upholding the constitutional validity of the insolvency law and the Government of India directing lenders to resolve insolvency cases at earliest, the founders of the stressed companies are at the backfoot.
 
For two years after Insolvency and Bankruptcy Code (IBC) came into effect, the founders of the insolvent companies were keen to avoid the law by plugging loopholes and filing cases against bidders in the last moment to buy time.
 
However, after the Supreme Court's verdict on the IBC, the founders have realised they risk loosing companies once banks approach National Company Law Appellate Tribunal (NCLAT). The apex court, last Friday, barred founders of companies that are loan defaulters from buying back stressed assets.
 
The founders have now begun approaching banks requesting the latter not to file cases in NCLAT.  
 
“The first thing they say when they come to us is ‘Madam please don’t send us to NCLT,’' Anshula Kant, managing director, State Bank of India (SBI) was quoted as saying, referring to the National Company Law Tribunal, which oversees bankruptcy cases. If the founder is “genuine we don’t want him to lose the company", she said.
 
Recent bankruptcy proceedings have taken away prominent companies from their owners and therefore, the latest Supreme Court verdict is a wake up call for India’s business community.
 
According to media reports, the crackdown on bankrupt companies has helped reduce the bad-debt ratio at India’s banks to 10.8 per cent in September from 11.5 per cent six month earlier. For SBI, it stands at a one-year low of 9.95 per cent.
 
Source: Bloomberg, media reports

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