The storm that it has created in the past few quarters did make things a bit hazy. Most of the discussion so far has been focused on the threshold level dynamics, regarding admission, on whether a particular Corporate Insolvency Resolution Petition (CIRP) should be admitted in or not. The requirements are very different from its predecessor, the BIFR. As the dust takes its time to settle down, the narrative would slowly shift focus on the various finer provisions in the Code. The thick brush will give way to the finer tools, for the picture to emerge. In any new piece of legislation, there are the usual sticks in built to ensure compliance and penalize deviations. The Insolvency and Bankruptcy Code too has its share. This short paper attempts to have a closer look at some of these penal provisions that aim at controlling the behavior of the stakeholders, across the whole gamut, from the Resolution Professional, the Debtor, the Creditors and the Claimant Creditors. There are a few loose ends where probably the intent of the legislation is unclear and would need some attention in the near future.
On 23rd August 2018, the IBBI issued a 19 page order signed by the WT Director and also by the Chairman of IBBI. It was dedicated to ONE man, Mukesh Mohan, who had contravened provisions of sections 17, 18(f), 20, 23, 25(2)(h) and (j), 29A, 43, 45, 50, 66, 196 (1)(g), 206, 208 (2)(a) and (e) of the Insolvency Code. Not just that, he had also contravened regulation 7(2)(a)(h) and (i) of the IBBI IP Regulations. Furthermore, he was credited with contravention of clauses 1,2,3,5,9,10,11,12,13,14,15,16,17,19,24 and 25 of the Code of Conduct appended to IBBI IP Regulations. Lastly he was also found to have contravened Regulations 6(3), 13, 27(a) and 36 of the IBBI IRP for CP Regulations. While most of us are unaware or don’t care about the numerals mentioned above, but it is important to understand the breadth of the achievements of man and the detailed extent to which the Board goes about in military precision to clean up the dirt created by one of its own. The success of the most ambitious reform is so critically dependent on the fulcrum of the Institution of the Insolvency Professional that it needs to be constantly guarded and protected from the few bad apples within. Some of the statements/observations made in the 19 page report are subtle, while some are sharp, gives the nation an assurance that the men in charge mean business.
As such, the Insolvency Code is a piece of legislation, but in its application, it transcends the legal and tends to take socio-economic colors with huge strategic shades. Each case that is filed in the judicial forums, the way the creditors formulate their strategies, the debtors response, the judicial evaluation of each case, everything needs to be seen through laterally, from a strategic management perspective to understand how corporates get into trouble and thereafter need to crawl out of the hole. The story of Lanco is appears to be a never ending tale of twists, twists and some more twists, a story in which the petitioner (not Lanco) itself is on the verge of extinction. It is not uncommon for a CEO to sue his ex company; happens all the time, particularly in the US of A. However, even in the US of A, it is rare to see an ex-CEO filing corporate insolvency of the company where he had built up over a decade. The CIRP petition IB/9/HDB/2017 filed u/s 9 of the Code was decided on 21st Feb 2017 by the Hyderabad NCLT bench. It sought to put Lanco InfraTech Limited into Insolvency in accordance with the provisions of IBC 2016, appoint Interim Resolution Professional, award costs etc.. The petition was filed by KKV Naga Prasad who had worked for various group companies of Lanco InfraTech Ltd, from Jan 2003 till Jan 2014, in various roles, the last being CEO.
The mere fact that closure is a real possibility forces managements to get serious with debt monies. The Corporate Finance strategist is set to review her views on the leveraging strategies, as debt may cease to be the soft and easy option. Every corporate who has ended in the Insolvency Process, has gone through cycles of exuberance and despondence, as either it has paid the price of its own mistakes or was a victim of economic cycles. Each legal case is a management case study for the stakeholders and in particular the Insolvency Professional to guide when she is in the trenches attempting to pull out a battered corporate out of insolvency. It has learning for every individual on either side of a corporate debt. And the Beginning of the Journey could not have been any less controversial than what Synergy was. Presenting the complete story of the resolution that could have derailed the most critical reform post Man Mohan Singh.
This series of articles on THE CODE, looks at the elephant from the different perspectives, to understand how the economy is changing at a deep structural level, beyond the inferno of NPAs raging all around us.
On 26th Feb 2016, Alok Industries communicated to the Stock Exchange, informing them about the Extra Ordinary General Meeting of the Company to be held on 14th March. Among other things the special agenda had items that affected its creditors.
How does one make a perfect Insolvency Process? Can it be perfect or do we make do with a less than perfect process. Is the less than perfect process still good enough to deliver results, or does the need for Imperfection create known additional new imperfections in the process.
On 31st August 2017, the NCLT Hyderabad bench gave a landmark judgment in the CIRP application (#127/10/HDB/2017) filed u/s 10 of the Code, by #Anrak Aluminum Ltd, when it rejected the application on the grounds of;
In this article, fifth in the series, we look at the new profession which is an institution in the making, as it institutionalizes the legacy of the Turn Around Artist, the Insolvency Professional. To put it in two words, how to become an Insolvency Professional, Tough Luck.
In this article we look at the new profession which is an institution in the making, as it institutionalizes the legacy of the Turn Around Artist, the Insolvency Professional.
