Objective of insolvency code is not realisation of bad loans – IBBI

The objective of IBC 2016 is reorganization and insolvency resolution and not realisation of bad loans- IBBI

In a letter written to “ The Week” the Insolvency and Bankruptcy Board of India (IBBI) has stated that the impression that Insolvency and Bankruptcy Code, 2016 (Code) is for realisation of bad loans is misleading and incorrect.

The letter was written with reference to the article titled “Modi report card: What has BJP govt done to help India’s bleeding banking sector?” by Mr. Soumik Dey, in the 4th April, 2019 edition of ‘The Week’.

The asid article, inter-alia, carried a statement as under:

“The Central Bank of India (CBI) has over Rs 150 billion worth of bad loans, stuck in the realisation process of the Insolvency and Bankruptcy Board of India, the insolvency regulator.”

According to the IBBI, The above statement gives two impressions, namely, (a) bad loans of the Central Bank of India are stuck up with the Insolvency and Bankruptcy Board of India (IBBI), the insolvency regulator, and (b) the Insolvency and Bankruptcy Code, 2016 (Code) is for realisation of bad loans. Both the impressions are misleading and incorrect as explained in this letter.

The IBBI stated that the IB Code segregates commercial aspects from judicial aspects of an insolvency proceeding and empowers and facilitates the stakeholders and the Adjudicating Authority to take decisions in their respective domain. The IBBI does not have any role in the proceeding. Therefore, the possibility of a proceeding or bad loan getting stuck up with the IBBI does not arise.

Quoting the decisions of the Supreme Court and NCLT , the IBBI has reiterated that rhe objective of the Code is reorganization and insolvency resolution and not realisation of bad loans.

The IBBI has requested “the Week” to publish the said letter  prominently to enable the readers to have a correct perspective.