The Centre may look into reviewing legal provisions that permit the withdrawal of legal proceedings in the Insolvency and Bankruptcy Code (IBC) for a nominal one-time settlement, Mint reported.
Citing two officials aware of the matter who gave the example of Siva Industries Holding Limited where IDBI Bank-led lenders accepted a one-time settlement by its former promoter C Sivasankaran offering just 6.5 percent of the total debt of Rs 4,863 crore following which a withdrawal application was filed before the National Company Law Tribunal (NCLT).
Moneycontrol could not independently verify the report.
NCLT has asked the creditors to explain the rationale behind taking a 93.5 per cent haircut and just Rs 5 crore in upfront cash.
A similar approach was followed by the lenders of debt-ridden firm Videocon Industries that approved the Rs 2,962.02 crore bid of Anil Agarwal's Twin Star Technologies. NCLT observed that creditors of Videocon Industries will be taking nearly 96 percent haircut on their loans and the bidder is "paying almost nothing".
RPG Enterprises Chairperson Harsh Goenka also rebuked the NCLT saying that it should be the next institution to be cleansed by the government to prevent "hard-earned public money being stolen" as companies' promoters stash away money on the side and get 80-90 percent haircut from bankers during the insolvency resolution process.
While tagging the Prime Minister's Office, Goenka tweeted, "Promoters stash away money on the side, take the company to the cleaners, get an 80-90% haircut from bankers/NCLT – that's the new game in town."
A 2018 amendment in the IBC allows the committee of creditors (CoC) to withdraw the insolvency application with the approval of a 90 percent majority. "It seems that this exit route is being misused in some cases. The matter is under examination and based on facts appropriate decisions will be taken," an official cited above told the publication.
[Inputs from PTI]
