Pointing out a case of one Alok Industries, a textile company, whose bidding was only about Rs 50 million while the company owns banks around Rs 296 million, Member of Parliament from Cuttack objected to the Bill to amend the Insolvency and Bankruptcy Code, 2016.
Bhartruhari Mahtab, MP of Biju Janata Dal from Cuttack, said, “I stand here to oppose the introduction of this amendment to Insolvency and Bankruptcy Code (Second Amendment) Bill. A month or so ago, Bhushan Steel was sold to Tata Steel and 65 per cent of the loan was recovered and 35 per cent was written off. Steel sector is booming now and nobody asks a question as to who is responsible for 35 per cent loss or haircut.”
He said this after Union Minister Piyush Goyal introduced Bill further to amend the Insolvency and Bankruptcy Code, 2016.
Mahtab said, “Alok Industries, a textile company whose bidding was only about Rs.50 million, of which lenders should get around Rs.47 million. Alok Industries owes banks around Rs.296 million. Can one
believe that a company worth Rs.296 million is being sold at Rs.50 million?”
He said, “The State Bank of India, Corporation Bank, UCO Bank, Bank of Maharashtra, LIC, Allahabad Bank, Union Bank, Dena Bank, Oriental Bank of Commerce and United Bank of India plus Axis Bank are the lenders, who have taken a massive haircut of almost 84 per cent.”
Addressing at the Lok Sabha, the MP debated that all this has happened because of the complicity of this Government. There was only one bidder, which was a strange consortium of Reliance Industries Ltd. and JM Financial Asset Reconstruction Company.
RIL has enough money of its own, while JM cannot run a textile mill. Why they have got together is a mystery. The foul bidder offered Rs.50 million of which the lenders would get out Rs.47 million, Mahtab said.
The Committee of Creditors (COC) in last April could not gather enough votes to act on the resolution plan and here the crux of the problem lies and that is the reason why an Ordinance came into force.
The proposal got 70 per cent of the votes when 75 per cent were needed. That is the prevalent law today. Now, the Government stepped in and an Ordinance amending the IBC lowered the minimum vote needed for passing a resolution plan to 66 per cent from 75 per cent,” said the Cuttack MP.
While going through this thick Bill, in Clause 25, Section 33, sub-section (ii) of the principal Act, after the words ‘decision of the Committee of Creditors’ the words ‘approved by not less than 66 per cent of voting share’ shall be inserted, stressed the MP.
He further said that the bad loan resolution is becoming deep rooted nexus between the bankers, auditors and promoters, which is undermining serious recovery.
“Alok Industries is a glaring example,” he added.
Reacting to this, Goyal said, “when the Insolvency and Bankruptcy Code was introduced, the country’s banking sector was going through a serious crisis. All of us are very much aware where the genesis of that crisis lies.”
He said, “When we took over this Government, the stress in the banking sector, including the stressed assets and the NPAs, was humongous…..Member is referring to are also loans which have been given during that period and then subsequently restructured and have continued to be evergreen because of which the banking system was in dire straits.”
Source: July 25, 2018, KNN