Full IBC suspension to hurt lenders
According to lawyers, a complete suspension of IBC cases for defaults occuring during the six month period between March and September has left banks and investors in a lurch. This is because it leaves them with only recovery options which have proven to be futile in the past. Experts also opine that the ordinance could downgrade India’s image in the eyes of international investors who bet on legal frameworks for recoveries and hit fund raising through bond sale.
As per the industry wisdom, the move will particularly affect investors in market intruments like bonds, external commercial borrowings (ECBs) and trade credits which have recourse only to the delay prone ebt recovery tribunals (DRTs).
“A perpetual suspension of a creditor’s right to file insolvency resolution applications for defaults occurring during the 6 month period starting March 25 is excessive. It means that for any default during this peiod the doors of the IBC are closed. Unsecured creditors anyway don’t have recourse to SARFAESI which leaves them with only civil courts like DRT where the process is painfully time consuming,” explains Aashit Shah, partner, J Sagar Associates.