Corporate India expects the Government to take “adequate measures” to resolve issues around ‘Group Insolvency’, runaway and pseudo bidders so as to further strengthen the Insolvency and Bankruptcy Code (IBC) process.

Ashok Haldia, former CA Institute Secretary and member Board of IIIPA, told BusinessLine that the Committee of Creditors should be mindful of deterrence effect of performance security requirement and use it effectively.

Further, adequate checks need to be applied on credibility, track record and capacity of bidders before approval of resolution plan by the CoC. In case of backout, the erring bidder should be blacklisted for future bids, Haldia said.

In the recent years, there have been instances of successful bidders not honouring their commitments on approved resolution plans and this has been a point of concern for policymakers.

Situation of runaway bidders was seen in resolution plans for Orchid Pharma, Ruchi Soya, Adhunik Metalik and Amtek Auto, industry sources said.

To ensure that corporate resolution plans, once approved, are not withdrawn on a whim, the IBBI had last month mandated resolution applicants to furnish performance security in corporate insolvency process.

Group insolvency

Haldia said that principle of collective interest and fairness in the resolution process require group insolvency approach where corporate veil is abused or group entities work for common economic goal that is maximisation of group value.

It may be recalled that the Insolvency and Bankruptcy Board of India (IBBI) had last month set up a 11-member working group under the Chairmanship of former SEBI Chief U K Sinha to go into the concept of ‘Group Insolvency’ and suggest a suitable framework.

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