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IBC in stress: Survival depends on commitment to its core principles
M S Sahoo Ashish Makhija
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The Indian Parliament in 2016 enacted the Insolvency and Bankruptcy Code (IBC) to address the country's persistent challenges of financial stress and managing bad debts, with the overarching objective of driving economic growth. In its initial years, the IBC benefited from rare institutional alignment. The legislature amended the code six times in the first five years to address implementation challenges and respond to the evolving economic environment. With alacrity, the executive issued the rules and regulations, established the Insolvency and Bankruptcy Board of India (IBBI) and National Company Law Tribunal (NCLT), accredited insolvency professionals, and built the supporting ecosystem. The
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Mint
3 hours ago
- Mint
IBC amendments to allow partial asset sales, second shot at revival
New Delhi: Apart from speeding up the disposal of distressed companies as going concerns, the proposed amendments to the Insolvency and Bankruptcy Code (IBC) tabled in Lok Sabha on Tuesday also makes it easier for splitting up such firms so that lenders could consider sale of individual assets when they are unable to find takers for the whole business, two persons informed about the government's deliberations on insolvency reforms said. The proposed amendments will also prevent orders for liquidation of a distressed company just because the 330-day window available for debt resolution under IBC has expired. This is meant to avoid situations like the Bhushan Power & Steel Ltd., the resolution plan for which was annulled by the Supreme Court in its now-recalled 2 May order. The apex court had then said that approving the corporate turnaround plan after the 330-day window was 'a grave error of law', setting aside JSW Steel's ₹ 19,700 crore resolution plan for Bhushan Power and ordering its liquidation. The proposed amendments specifically allow insolvency tribunals to grant a 120-day fresh opportunity to consider a new resolution plan before finally sending the company to liquidation, explained one of the two persons cited earlier, both of whom spoke on the condition of anonymity. 'The second attempt will benefit from the wealth of experience from the first effort,' said this person. Queries emailed on Thursday to the ministry of corporate affairs and the Insolvency and Bankruptcy Board of India (IBBI) seeking comments for the story remained unanswered till press time. To be sure, stakeholders can request tribunals to grant extra time even under the current system, but formally writing into the Code that there is a second official chance available for reviving a distressed company will boslter the view that IBC's main goal is to rescue a struggling business, instead of just shutting it down, experts said. A second chance at insolvency resolution within a maximum period of 120 days even when grounds of liquidation are met after the 330-day period is sought to be allowed by inserting a new sub-section 1A in Section 33 of IBC, which deals with liquidation proceedings. For such second chance, 66% of creditors have to consent. 'In certain circumstances, the amendment empowers the adjudicating authority to allow the recommencement of the corporate insolvency resolution (CIR) proceedings despite prior expiry of the CIR process period,' explained Anoop Rawat, national practice head (insolvency and restructuring) at law firm Shardul Amarchand Mangaldas & Co. Experts are also of the view that the flexibility to dispose of individual assets will be useful in the resolution of businesses with operations in multiple sectors. 'Explicitly incorporating in the Code that a resolution plan can include sale of one or more assets of the corporate debtor recognises the need for this flexibility and to avoid legal challenges. In May this year, IBBI had introduced this provision through regulations. But specifying this in the Code itself gives greater comfort to stakeholders in opting for this,' said Rawat.
Mint
11 hours ago
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IBC amendments plug a major gap in the insolvency process
MUMBAI , NEW DELHI : The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, tabled in the Lok Sabha on 12 August, closes a key exit route, making it harder for companies to quit insolvency proceedings for an early out-of-court settlement. The amendment makes the Committee of Creditors' (CoC) approval mandatory for an applicant to withdraw from bankruptcy proceedings under Section 12A of the IBC. A CoC—a group of financial creditors—is set up by the interim resolution professional (IRP) after the corporate insolvency resolution process (CIRP) is initiated. As of now, companies can withdraw the CIRP application even before the CoC is formed by securing approval from 90% of the creditors. However, the proposed Clause 8 in Section 12A permits only the IRP to seek withdrawal—and only within a narrow window after the CoC is formed but before the first call for resolution plans. Early or late withdrawals would be barred, and the National Company Law Tribunal (NCLT) must rule within 30 days. 'The ban on withdrawals before CoC formation and after the first plan invitation will likely discourage early, informal settlements that were sometimes reached between the debtor and a few creditors,"said Mohit Adatiya, director at NPV Insolvency Professionals Pvt. Ltd. 'It will push stakeholders to resolve disputes within the formal CoC framework, reducing scope for back-channel deals but potentially prolonging timelines," he added. The popular loophole To be sure, many firms in high-profile bankruptcy cases have attempted to exit at an early stage—before the CoC is formed—by offering quick settlements to lenders. One prominent example is the edtech major Buyu's. In 2024, edtech major Byju's sought to quit the legal proceedings after settling dues with its lead operational creditor Board of Control for Cricket in India (BCCI). The Supreme Court, however, stayed the bid, noting that the CoC had already been formed. The case is still being heard before multiple forums. On Wednesday, in SKIL Infrastructure Ltd's matter, the NCLT rejected the IRP's request to withdraw from the insolvency was admitted into insolvency in February 2024 after its financial creditor, Amluckie Investment Co. Ltd, filed for bankruptcy in February 2020. Other creditors blocked attempts to settle outside the formal process, underscoring the practical challenges of reaching consensus. Similarly, in March 2025, the NCLT rejected Syska LED Lights' bid to withdraw from insolvency proceedings initiated by operational creditor Sunstar Industries. Even after a settlement, financial creditors, including IDFC First Bank and State Bank of India, opposed the withdrawal. A mixed bag Though experts fear the proposal will give dissenting creditors more leverage, they also believe it will prevent the filing of frivolous applications under Section 12A. 'Even a small minority holding more than 10% of the voting share can now effectively veto settlements, as seen in high-profile matters like the one involving Byju's. This could lead to prolonged proceedings unless a broader consensus is built early," Adatiya pointed out. The amendment will facilitate discussion between all financial creditors at a very early stage prior to admission, considering that 90% CoC approval will anyway be required for post-admission withdrawal, added Siddharth Srivasta, partner, Khaitan and Co. Experts also said the ban on withdrawals before the formation of the CoC and after the first invitation for resolution plans will fundamentally change settlement behaviour. Srivasta said the change would also 'inculcate discipline in the CoC members and will reduce any complacent behaviour to consider settling at an advanced stage". He said this will nudge debt-laden companies' promoters to submit and finalize proposals before the first request for resolution plans rather than at a fairly advanced stage, wherein the corporate debtor's assets have already depleted, and there would be no option of withdrawal. According to law firms, while the amendment could be challenging, another area of concern is the criteria for the 90% voting threshold from the CoC, which is often difficult to achieve. 'The amendment is expected to bring a behavioural shift in cases where there is potential for early settlement and creditor exit. It will also help curb frivolous litigation, where proposals are submitted merely to derail the resolution plan process," said Surbhi Pareek, partner, Cyril Amarchand Mangaldas. Besides, now companies will have to undergo the CIRP right from the beginning. 'Many cases will have no alternative but to undergo the entire process. This may prolong cases and add costs, but will also ensure a comprehensive and transparent process, reducing the risk of collusive or side deals. Parties aiming for settlement must now design far more inclusive and robust proposals to win broad-based approval," said Alay Razvi, managing partner, Accord Juris. Lawyers also noted that the amendment changes who will be in charge of filing a withdrawal application. Earlier, such applications were generally filed by an operational or a financial creditor. Now, the IRP must file the application. 'As the IRP acts on the instructions of the CoC, the CoC will deliberate on whether such an application should be filed at all, rather than deciding whether to approve an application that has already been submitted," said Durgesh Khanapurkar, partner at Desai & Diwanji.
News18
12 hours ago
- News18
S&P Global upgrades ratings of 10 financial institutions
Agency: New Delhi, Aug 15 (PTI) S&P Global Ratings on Friday upgraded ratings of top 10 financial institutions, including SBI, HDFC Bank and Tata Capital, a day after the US-based agency raised India's sovereign credit rating. 'India's financial institutions will continue to ride the country's good economic growth momentum. These entities will benefit from their domestic focus and structural improvements in the system such as in the recovery of bad loans," S&P said. S&P has raised long-term issuer credit ratings on seven Indian banks — State Bank of India, ICICI Bank, HDFC Bank, Axis Bank Ltd, Kotak Mahindra Bank, Union Bank of India, and Indian Bank — and three finance companies — Bajaj Finance, Tata Capital, and L&T Finance. 'We expect India's banks to maintain adequate asset quality, good profitability, and enhanced capitalization over the next 12-24 months. This is despite some pockets of stress," S&P said, adding, credit risk in the system has reduced. S&P had on Thursday upgraded India's credit rating to 'BBB', after a gap of over 18 years, as it expects India's sound economic fundamentals to underpin growth momentum over the next 2-3 years. It also said monetary policy settings have become increasingly conducive to managing inflationary expectations. The ratings on many Indian financial institutions are capped by our sovereign rating on India. This is due to the direct and indirect influence that the sovereign has on financial institutions operating in the country, S&P said. It also said that the insolvency and bankruptcy code (IBC) has improved the payment culture and rule of law in India. The code, introduced in 2016, has tilted the balance in favour of the creditors. It has also promoted a credit culture that encourages restructuring of going-concern entities. On Thursday, S&P Global Ratings had also raised credit ratings on Oil and Natural Gas Corp. Ltd. (ONGC), Power Grid Corp. of India Ltd., NTPC Ltd., and Tata Power Co. Ltd. to 'BBB' from 'BBB-'. The outlooks are stable. S&P Global Ratings also raised its long-term issuer credit ratings on the Export-Import Bank of India (India Exim) and Indian Railway Finance Corp. (IRFC) to 'BBB' from 'BBB-'. PTI JD HVA view comments First Published: August 15, 2025, 08:30 IST Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
