The governments move to extend the suspension of fresh insolvency proceedings till the end of this fiscal might appear to be bowing to the inevitable. However, two qualifications are in order. One, giving a troubled company more time to turn around makes sense if the intervening period holds out any possibility of a turnaround, and that depends on growth momentum in the economy.
Growth is not a matter of luck or seasonality, but of policy and policy-induced investment. If the government moves on a large stimulus, it would make sense to put off recognising that a company is in terminal difficulty and that its resources should swiftly be redeployed. If not, why delay? The second qualification is the bar on voluntary insolvency filing.
The…
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