What is IBC?
IBC is one of the services offered by MCA to investors and stakeholders in order to protect them.
IBC was asserted in 2016 is the bankruptcy law of India. Further, it combined the existing legal configuration in order to fabricate a single law for insolvency and bankruptcy. Under this process, the resolution of bankrupt companies is much faster and smoother.
Addition of 12(A) in IBC:
Prior to the enforcement of 12(A) in IBC, it lacked the provision for withdrawal after submission under section (7), (9), (10). Even if the corporate debtor intends to settle the dispute by offering a one-time settlement offer, he was not allowed to withdraw the application. Due to this, the creditors had to lose a high portion of their amount of debt to be recovered under the insolvency resolution process.
Post the addition of 12(A), a significant increase has been seen in the withdrawal of applications at the initial stage. If 90% committee of creditors (CoC) approves the withdrawal of insolvency application by voting share, then IBC allows for withdrawal under section 12(A).
Post Addition of 12(A) in IBC:
Following the addition of 12 (A), 6500 pre-resolution cases have been settled and Rs. 3 lakh crores were generated from dead assets. In addition to this, around 500 cases have been settled through the court process. Another 100 cases are at the stage of 90% CoC approval. These cases are on the track of out of court settlements.
JSW Steel’s resolution plan for Bhushan Power and Steel:
Bhushan Power and Steel operates a 3.5 million ton steel plant in Odisha. The company had accumulated a debt of more than Rs. 47,000 crores. It was one of the firms in Reserve Bank of India’s “dirty dozen” list of NPA accounts. In the initial round of bidding, Bhushan Power and Steel received a bid of Rs. 11,000 crores from JSW Steel. JSW Steel subsequently revised its bid to Rs. 19,700 crores. The CoC of Bhushan Power and Steel approved JSW’s resolution plan for the distressed steel mill and issued a letter of intent to JSW Steel Ltd. JSW Steel will now infuse ₹350 crores in the Bhushan Power and Steel to revive.
Arcelor Mittal resolution plan for Essar Steel :
The debt-ridden firm had agreed upon the resolution plan of Rs 42,000 crore from the steel giant Arcelor Mittal. The plan came to a withheld when the operational creditor Standard Chartered moves to NCLAT. They demanded to have a larger share from the resolution share.
Post the enforcement of IBC the creditors have stood to gain 200% from the resolution of the liquidation value. The concept of value maximization has been of keen importance in the process.