Bankruptcy regulator MS Sahoo on Wednesday put the onus on the committee of creditors to create demand for distressed assets while admitting that there is a need to improve the ecosystem.
Speaking at the 5th SBI conclave, Sahoo, the chairman of Insolvency and Bankruptcy Board of India, likened the marketing of distressed assets to the sale process that precedes an IPO launch. “When someone is making an IPO he is going out to the market and sharing his dream with investors to that they come and buy those shares.”
This comment comes at a time when 100 companies have either been liquidated or are in the process of liquidation while the resolution plans of only 40 companies have been put in place.
” We do not see today that kind of commitment from the committee of creditors. I agree that we have to improve ecosystem. But you are selling a dream, it’s not distressed asset,” he said. He indicated that lenders have to inform potential investors about the potential of these assets. “I have not seen that happening. In market place someone has to create a dream. That is key to resolution,” he said.
At present, the decision to accept or reject a resolution plan is decided by the committee of creditors and the resolution professional cannot take any decision unless approved by the majority of creditors.
Insolvency lawyer Sumant Batra said that there is a need to put extra effort to reach out to the distressed asset investors rather than expecting them to come to the lender or the resolution professional because they have other markets to go to.
Arijit Basu, managing director of State Bank of India said Debts Recovery Tribunal (DRT) and Sarfaesi — which allows banks to sell pledged assets —were not adequate but IBC has changed the relationship between banks and the customers.
Source: Economic Times, July 5, 2018