The Committee of Creditors (CoC) is not being proactive enough in dealing with the cases, Insolvency and Bankruptcy Board of India (IBBI) chairman M.S. Sahoo said on Friday.
Mr. Sahoo, who is the head of the regulatory body of the Insolvency and Bankruptcy Code 2016 (IBC), was of the view that the best of the code was not used.
Speaking at a FICCI conference, Mr. Sahoo said, “It is the role of the CoC to tell a business what all the possibilities are, so that the resolution plan can address all the issues. Somehow, we are not making optimal use of the law. We are of the logic that we should maximise the value because the code said so, but the code says that it is of maximisation of value of assets for the corporate debtor. Not for a stakeholder or a set of stakeholders.”
CoC comprises both financial and operational creditors. “While resolution tries to keep the company alive, recovery kills,” he said and emphasised CoC’s need to focus on the former.
Further highlighting the CoC’s responsibility, he said, “Today, CoC is in the position of a custodian or a trustee. So, it has a higher responsibility to look after the interest of all stakeholders. The objective is that we work in unison to resolve insolvency through a process that is not adversarial.”
Speaking on the 75% creditor approval required for plans to be passed, FICCI president Rashesh Shah said, “We saw a lot more cases go into liquidation just because 27-28% of the creditors did not agree with the plan. The unintended consequence was that a lot of good plans were getting rejected because small creditors could hold up the whole process. We think the threshold of rejection of a plan should be brought as low as possible. It should be about 51%.”