Insolvency Resolution Requires Innovation; Over Regulation Is Not A Solution: IBBI Chief

Amid instances of long delays in insolvency resolution process of various companies, IBBI chief Ravi Mital on Thursday said resolution requires innovation and "over regulation is not a solution."Around 650 resolutions of debt-ridden corporates have happened since the implementation of the Insolvency and Bankruptcy Code (IBC) in late 2016.

While acknowledging that the IBC has issues related to delays and haircuts, among other things, Mital said the Insolvency and Bankruptcy Board of India (IBBI) did an analysis which showed that the IBC is for resolutions but it is being evaluated on the basis of performance or haircuts. Resolution is a thing which requires innovations. Resolution professionals are the best to do such innovations with the help of the Committee of Creditors (CoC).

"We should encourage innovation and desist from over-regulation and writing everything in the Act," he said. Mital said the Chennai bench of the National Company Law Tribunal (NCLT) recently passed an order where it said a part of Hindustan Photo Films can go into resolution and another part can go into liquidation. "This is an innovation... I am not saying that it can be done in every case but that is an innovation that we should encourage," he added.

IBBI is the key institution under the IBC. He was speaking at the conference on 'Insolvency and Bankruptcy Code - Evolving Paradigms and Reforms' organised by industry body CII along with National Foundation for Corporate Governance (NFCG) and the IBBI in the national capital. In the last six-and-a-half years, Mital said the IBC has done about 650 resolutions, adding that the IBC has led to the settlement of cases even without resolution or without admission or with withdrawals.

The IBBI Chairperson said IIM Ahmedabad has been asked to conduct a study to find out whether these resolutions have led to a change in the economy, adding that the report is expected to come out in the next two months. "I have seen the preliminary figures that they have collected and I find that sales (of companies) have increased or turnover has increased manifold after the resolution, EBITDA, Profit after tax, market cap have increased manifold... these things have not been documented, these things are not in public domain.

"So, I hope that in next two months, once this report comes out, we will have a better understanding of what the IBC has achieved in terms of resolutions," Mital said.EBITDA refers to Earnings Before Interest, Taxes, Depreciation and Amortisation. According to him, there have also been several cases where the creditors have settled outside the resolution process, and that there is a perceptible change in the creditor-debtor relationship.

The success of the IBC may be evaluated based on the number of resolutions rather than the amount of realisation. "There are several post resolution success stories to showcase the achievement of the IBC over erstwhile legislations. IBBI has been continuously taking calibrated measures to navigate the law through its uncharted terrain with its agile, focused and definite efforts and timely actions...," he said.