In the first big win of the new Insolvency and Bankruptcy Code (IBC) introduced by the Modi government, bankrupt Bhushan Steel has been successfully sold to Tata Steel in a deal worth over Rs 36,000 crore.
Bamnipal Steel Ltd (BNPL), a wholly owned subsidiary of Tata Steel has acquired a controlling stake of 72.65 per cent in Bhushan Steel Limited (BSL), as reported by Economic Times.
"BNPL has successfully completed the acquisition of controlling stake of 72.65 per cent in BSL in accordance with the approved resolution plan under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency and Bankruptcy Code 2016 (IBC) which has been managed by Vijaykumar V lyer, Partner, Deloitte Touche Tohmatsu India LLP, in his capacity as the resolution professional," a statement released by Tata Steel read.
The move is being hailed as the first big win for the the IBC, which is touted to be a game changer in the manner in which insolvency and bankruptcy proceedings are handled in the country.
One major problem facing Indian industry, businesses and banking was the absence of an efficient insolvency process. Previous attempts by governments either met dead ends or led to further worsening of the situation. That, in turn, led to NPAs of banks increasing, which in turn worsened the availability of credit for all. The Insolvency and Bankruptcy Code is arguably the most important step taken by the NDA regime to get the economy out of this quagmire.
Some of the unique features of the code are that, for one, the time limit for insolvency resolution is 180 days. As this PRS note informs, ‘if insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors’.
Also, the insolvency proceedings are to be carried out by licensed insolvency professionals.
If the IBC proceeds in the same manner forward, Indian banks can legitimately hope to operate without fear of crony capitalists.
Also Read: IBC’s A Winner: Modi’s Gambit Squeezes Cronies, Reducing Bankers’ Haircuts
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