With just three weeks to go for the Union Budget, all eyes are on Finance Minister Arun Jaitley to see if he would bring legislative changes to improve the implementation of the Insolvency and Bankruptcy Code (IBC). BusinessLine spoke with Reshmi Khurana, Managing Director and Head of South Asia in Kroll's investigations and disputes practice. Excerpts:

What is your overall assessment of the IBC implementation in India so far?

I don't think it (IBC process) has been used as a tool for real turnaround of companies. It has so far been used as a tool for financial engineering and not really for preserving value.

So, how much would you give in a scale of 1-10 for the IBC framework?

I would give 4. Mainly for the fact that a law was passed...we now have a framework through which companies can be turned around in an expeditious manner. What will take it from 4 to 7 is if we have a system that will prevent what is happening now in terms of it becoming a “free pass” for promoters.

So, where is the concern?

The concern is the absence of accountability. The NCLT mandate and capacity needs to be strengthened to drive accountability. There is no indication of the current system trying to address promoters’ malfeasance. It appears that IBC is being used to legitimise the large haircuts of banks, which they were hesitant to take in the absence of legal stamp of approval (which IBC provides).

Can you please elaborate?

IBC should create efficient market-based system for resolution of distressed assets. This cannot happen unless we create accountability in the system. Otherwise you merely end up as a system of laundering of bad debts of banks. You cannot find long- term solutions unless you set a precedent of accountability.

So, are you questioning the quantum of haircuts that banks are taking?

I am not questioning haircuts, which I understand is a function of valuation, mathematics and market. All that I am saying is the system will be better if one looks at deriving accountability. IBC/NCLT will not succeed unless we are able to create framework of accountability.

Promoters — wilful defaulters — have been barred from bidding for the stressed assets of their companies. Is that not enough?

Is this enough punishment for a promoter who has siphoned off taxpayer funds and run the company into the ground. Today, for any promoter malfeasance involving siphoning of public taxpayers funds of thousands of crores, the worse thing that can happen to him (promoter) is he will lose the company. But he has already siphoned off huge sums and can happily live ever after for three generations! Should not IBC framework address this aspect and see who was responsible for the mess and what deterrence is there in the system on such happenings in the future. NCLT should not just become a forum of cleansing. To give you an analogy, it should not turn out that you go in for ‘Ganga Snaan’ and emerge out thinking that you stand purified and can now go about committing further sins.

Who do you think has benefited from the IBC process? Is it bankers, promoters, the banking system or consultants?

You are asking me a question as to who has benefited. My question to you is who till date has been held accountable for this mess (NPA).

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