The Insolvency and Bankruptcy Code (IBC) is broke. It must be fixed, both to increase recovery and to redeploy the assets locked up in failed firms.
While 4,540 insolvency cases have been admitted for Corporate Insolvency Resolution Process (Cirp), significant recovery has materialised only in a handful of cases, such as Essar Steel and Bhushan Power and Steel. The average realisation has been 40%; that for the largest 100 cases, 36%. The Videocon resolution, in which creditors accepted a 95% haircut, has evoked a protest from the National Company Law Tribunal (NCLT), which has to approve Cirps.
Original Sin
In the absence of a market for corporate bonds, large projects in India are funded by banks. The project developer needs to convince …
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