Mumbai, Dr M S Sahoo, Chairperson, Insolvency and Bankruptcy Board of India (IBBI) on Thursday said that the sole objective of the Insolvency and Bankruptcy Code (IBC) was the reorganisation of business.
Addressing the conference on Insolvency and Bankruptcy Code, 2016, here, he said, IBC had recast the rules of the game in the greater interest of the economy and has contributed to economic reforms.
''Performance of IBC code should be assessed in line with the objective of the code. IBC enables the market with the choices of resolution but should not be considered as a panacea for all the ills,'' he said.
''5 Years of Bankruptcy Code and Beyond” was organised by Confederation of Indian Industry (CII) along with the National Foundation for Corporate Governance (NFCG) and Insolvency and Bankruptcy Board of India (IBBI).
Dr Sahoo said, ''We require a framework for comprehensive and objective assessment of IBBI since vested interests may not allow indication of the success of the reforms. Outcome of the IBC will be better if stakeholders start the resolution process on early signals of stress and close it expeditiously. IBC requires systematic and holistic assessment, which will indicate the efficacy of the resolution process and highlight the gaps in the process.''
He said, ''Framework may include process evaluation by including the key evaluation aspects i.e., whether the process design was robust, conduct and competency of the Committee of Creditors, competency of the Insolvency Professional’s, quality disposal by NCLT etc.''
Dr Sahoo said, ''If we do not have a framework for scientific assessment, market will use the parameter of assessment which it finds convenient.''
Clearing the doubts on high numbers of companies entering liquidation, Dr Sahoo said majority of the companies that entered liquidation had an average asset six per cent when compared with its outstanding liabilities.
In value terms IBC had significantly contributed as companies accounting for 70 per cent of the stressed assets had been rescued, he said, adding corporate persons were also taking measures for resolutions, to avoid defaults reaching under CIRP.
Stating that liquidation was also good as it released the economic resources back to the economy, Dr Sahoo said figures of claims were inflated and realisations were lower.
''If claims and realisations are adjusted to their real level, haircut figures will be lesser,'' he said.
Dr Sahoo emphasised that it was the time to focus on framing an objective assessment framework for determining the strength and efficacy of the insolvency ecosystem, strength and efficacy of the underlying processes, strength of the market and impact on businesses.
Dr Sahoo said the right framework would provide the direction for course correction.