New Delhi, Jan 3 (GCBusiness) The National Company Law Tribunal (NCLT) has helped in settlement of around Rs 2.02 lakh crore and disposed 4452 cases at pre-admission stage within two years only, Union Finance Minister Arun Jaitley said on Thursday.
The creditors have collected Rs 80,000 crore after the resolution of 66 cases by the Tribunal. The NCLT is also expecting to resolve 12 big cases such as Bhushan Power and Steel Ltd and Essar Steel India Ltd which are in advanced stages of resolution. The creditors would get Rs 70,000 crore more in this financial year after the resolution of these cases, Mr Jaitley wrote in his blog “Two Years of Insolvency and Bankruptcy Code (IBC)’ here.
He said so far 1322 cases have been admitted by NCLT. 4452 cases have been disposed at pre-admission stage and 66 have been resolved after adjudication. 260 cases have been ordered for liquidation.
“In 66 resolution cases, realisation by creditors was around Rs 80,000 crore. As per NCLT database, in 4452 cases disposed at pre-admission stage, the amount apparently settled was around Rs 2.02 lakh crore. Some of the big 12 cases such as Bhushan Power and Steel Ltd. and Essar Steel India Ltd are in advanced stages of resolution and are likely to be resolved in this financial year in which realisation is expected to be around Rs 70,000 crore.
“Increase in conversion of NPAs into standard accounts and decline in new accounts falling in NPA category show a definite improvement in the lending and borrowing behavior,” he added.
The Minister said between 2008 and 2014, banks lent indiscriminately. This leads to a very high percentage of NPAs which was highlighted by the Asset Quality Reviews of the RBI. The government constituted an expert committee, which submitted its report in 2015 recommending the IBC.
“The IBC was approved by both Houses of Parliament in May, 2016. This was the quickest economic legislative change that I have seen being made by Parliament. The NCLT was immediately constituted, the Insolvency Bankruptcy Board of India was established and the regulations were framed. By the end of 2016 corporate insolvency cases were being received by the NCLT,” he maintained.
Mr Jaitley said the early harvest through the IBC process has been extremely satisfactory. It has changed the debtor-creditor relationship. The creditor no longer chases the debtor. In fact, it is otherwise. Upon constitution of the NCLT and the implementation of IBC its functionality had revealed the need for improvements in the law. Two legislative interventions since then have taken place.
Mr Jaitley said, “The NCLT has become a trusted forum of high credibility. Those who drive the companies to insolvency, exit from management. The selection of new management has been an honest and transparent process. There has been no political or governmental interference in the cases.”
Blaming the Opposition party for growing of NPAs, he said, “The Congress left behind the legacy of an anachronic system of resolving commercial insolvency. The Companies Act had a provision of winding up a company if it is unable to pay its debt.
Additionally, the Congress government had enacted the Sick Industrial Companies Act (SICA) in 1980s for rehabilitation of sick companies. This applied to companies whose net worth has become negative. The law proved to be an utter failure. Law carried out rehabilitation, several sick companies got a protective iron curtain against creditors.”
Therefore, he added, the Debt Recovery Tribunal was created to enable banks to recover every dues diligently. But these have not proved to be highly efficient mechanism for recovering debt. For non-corporate insolvencies the Provincial Insolvency Act was applicable. This was a rusted piece of legislation, ineffective and had faded away because of disuse.