NEW DELHI :
Over 20,000 bankruptcy applications have been withdrawn as of February 2022, indicating how stakeholders of companies in financial distress work together in a non-adversarial manner, the government said on Tuesday in a monthly update of the corporate sector.
As of February, 20,071 applications for initiating bankruptcy resolution under the Insolvency and Bankruptcy Code involving an amount of ₹6.09 trillion have been withdrawn before admission in tribunals, secretary in the ministry of corporate affairs Rajesh Verma said in the monthly update. The IBC ecosystem got operationalised in 2016.
Such withdrawal of petitions have a direct beneficial impact on the books of the lenders as the corporate debtor’s loans remain standard assets while shareholders continue to be in control of running the business and operations continue without any disruption. Withdrawal of bankruptcy petition also implies an understanding among creditors and the business about the repayment obligations and its schedule.
“The Code (IBC) is emerging as a behavioural law, drawing various stakeholders of the entity in distress to work together, in a non-adversarial manner, towards the laid down objectives of the law,” Verma said in the monthly update.
At present, there is no standard framework to track outcomes of insolvency and bankruptcy regimes in various markets, other than the recently discontinued Ease of Doing Business Report of the World Bank. Therefore, it is crucial to study the impact of the insolvency framework created by IBC and investigate its strengths, weaknesses, opportunities and threats on a regular basis, Verma pointed out, while suggesting that experts could give suggestions on how to streamline the law further.
The government is currently working on amendments to the Code to make it more effective in terms of time taken to rescue companies and to offer a framework for cross-border insolvency resolution. The ministry has already conducted two rounds of public consultation in this regard.
