Bankruptcy Code & Once the Vilified Promoter-Averse Approach

Abstract

The report of the Bankruptcy Law Reforms Committee Volume I: Rationale and Design dated November 2015 stated that the IBC was construed to resolve the twin problems in Indian business environment firstly: “the recovery rates obtained in India are among the lowest in the world. When default takes place, broadly speaking, lenders seem to recover 20% of the value of debt, on an NPV basis” secondly “When creditors know that they have weak rights resulting in a low recovery rate, they are averse to lend. Hence, lending in India is concentrated in a few large companies that have a low probability of failure. Further, secured credit dominates, as creditors rights are partially present only in this case. Lenders have an emphasis on secured credit.”