Billionaire banker Uday Kotak’s stressed asset investment unit is asking the country’s bankruptcy regulator to ensure that potential buyers of insolvent companies aren’t made to provide non-refundable deposits in exchange for financial information during the sale process.
A court-appointed insolvency professional asked bidders for Golden Jubilee Hotels Ltd., which operates a property that in November hosted Ivanka Trump, to pay an upfront deposit of Rs1 million ($15,000) while submitting an expression of interest, according to S. Sriniwasan, managing director of Kotak Investment Advisors. This practice wasn’t followed in other bankruptcy processes he has participated in.
“We found it a violation of the process defined under the Insolvency and Bankruptcy Code and have requested the board to make clear to all resolution professionals that this cannot be done arbitrarily,” he said.
Such instances, numerous court battles and recurring changes to the new code show that clarity is yet to emerge on India’s 18-month-old law, the cornerstone of its efforts to clean-up $210 billion of bad loans. Of the 12 largest defaulting companies referred to the nation’s insolvency courts last June, only two have been sold, with nine having missed the deadline for resolution mandated by law.
The bankruptcy board was receptive and is expected to come out with a public clarification on non-refundable deposits, Sriniwasan said. Golden Jubilee Hotels was pushed into insolvency proceedings earlier this year after it defaulted on repayments to creditors.