Banks approach MCA to expedite nod for 40 resolved IBC cases

Leading banks have reached out to the Ministry of Corporate Affairs to fast-track 40 high-value insolvency cases that have been resolved and are awaiting approval from bankruptcy courts.

With prospects of almost zero recovery over the next few months, banks are worried that buyers may call off deals or reduce valuations significantly if the final approvals are delayed due to stalled economic activity.

The list sent to the ministry also includes the names of companies that have been admitted to the bankruptcy courts but hearings are yet to begin.

“We have sent a list of major bankruptcy cases to the MCA secretary. These include cases which have been filed and not taken up, also cases where resolution plans have been filed but we have not got the NCLT (National Company Law Tribunal) approval,” a banker said. “A lot of these cases will be taken up on an urgent basis by the NCLTs soon.”

“The issue is also whether any rescue funding needs to be given to some of these companies and what is to be done for companies in dire state. There are several challenges and the Covid-19 situation has only complicated things and several companies are on the edge,” said a resolution professional aware of the development.

Banks also want the ministry to issue guidelines on how to tackle challenges that these accounts are set to face. The Covid-19 pandemic has worsened the backlog of cases at bankruptcy tribunals across the country.

At the end of March, National Company Law Tribunals had admitted 3,774 companies to be tried under the bankruptcy law. Of them, 738 cases had exceeded the 270-day resolution timeline while another 494 cases were being heard for more than 180 days.

“Due to Covid-19, in some cases where the resolution plans are pending approval, even the resolution applicants are coming under stress or are not keen on proceeding further at the same level,” said Ashish Pyasi, associate partner at Dhir & Dhir Associates.

There is apprehension among stakeholders that applicants could withdraw from the process and at what level any new bidders will come forward, he said.

In an office memorandum issued by the registrar of the bankruptcy courts on Tuesday, all judicial members were asked to start attending office with immediate effect and hear cases through videoconferencing within NCLT premises across the country. The memo mandated 50% staff attendance on alternate days.

Last week, the finance minister announced a complete freeze on fresh insolvency cases for up to a year. Also, coronavirus-related debt will be excluded from the definition of default. The minimum threshold to initiate insolvency proceedings was raised to Rs 1 crore from Rs 1 lakh to benefit MSMEs.

Newsletter Subscription

Sign Up to enjoy top Finance Articles and Insights Delivered to your inbox.
  • Programic Asia Pvt Ltd may keep me informed with eMails about & finance newsletters. See our Privacy policy for more details