Lok Sabha Question No. 701 (UNSTARRED), answered on 2022-02-07
Subject: Misuse of IBC
Ministry: CORPORATE AFFAIRS
Asked by: Dayanidhi Maran

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 701 ANSWERED ON MONDAY THE 7 TH  FEBRUARY, 2022 MAGHA 18, 1943 (SAKA)

## MISUSE OF IBC

## QUESTION

## 701. SHRI DAYANIDHI MARAN:

Will the Minister of CORPORATE AFFAIRS

be pleased to state:

- (a) whether the Ministry has taken cognisance of NCLTs taking note of disproportionate haircuts by lenders to companies using the Insolvency and Bankruptcy Code (IBC) to settle large debts and if so, the details thereof;
- (b) whether the Ministry has or is considering initiating investigations into borrowers misusing the IBC to obtain control of companies through family members or benamis and if so, the details thereof;
- (c)  whether  the  Ministry  has  or  is  considering  investigations  into consultancies  misusing  the  IBC  to  help  clients  obtain  control  of companies  &  properties  at  huge  loss  to  banks  and  if  so,  the  details thereof; and
- (d) whether the Ministry or agencies such as ED, CBI, CVC have received any complaints regarding violation of laws by defaulters or consultancies by misuse of IBC and if so, the details thereof?

## ANSWER

MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION; MINISTER OF STATE (INDEPENDENT  CHARGE)  OF  THE  MINISTRY  OF  PLANNING;  AND MINISTER OF STATE IN THE MINISTRY OF CORPORATE AFFAIRS

[RAO INDERJIT SINGH]

(a):    Realization  by  creditors  through  corporate  insolvency  resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (the Code/IBC)  is  market  driven  and  is  inter-alia  dependent  on  quality  of assets  at  the  time  of  its  resolution.  As  of  31 st   December,  2021,  457 companies have been resolved under the Code so far. The resolution plans  for  444  companies  for  which  data  is  available,  have  yielded realisable  value  of  Rs.  2.50  lakh  crore  for  financial  creditors  (FCs) against total admitted claims of Rs. 7.54 lakh crore. (b)  and  (c):  Section  29A  of  the  Code  enlists  certain  categories  of undesirable  persons  ineligible  to  submit  a  resolution  plan  during  the CIRP of a corporate debtor (CD). Regulation 36A(8) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 imposes a duty on Resolution Professional (RP) to conduct due diligence to satisfy that the prospective resolution applicant is not ineligible under section 29A of the Code. RP, on receipt of resolution plan, is required to place the resolution plan for approval of Committee of Creditors (CoC) which the CoC may approve considering its feasibility and viability as provided under section 30(4) of the Code. Thereafter, the Adjudicating Authority approves the resolution plan under section 31 after being satisfied that the  resolution  plan,  as  approved  by  CoC,  meets  the  requirements  of section  30(2) of the Code,  inter-alia, including that it  does  not contravene any of the provisions of the law for the time being in force. This ensures that any undesirable persons under section 29A are unable to take over the corporate debtor. Likewise, during liquidation proceedings of CD, the proviso to Section 35(1)(f) bars a liquidator from selling immovable and movable property to any person who is ineligible to be a resolution applicant.

(d):    The  Insolvency  and  Bankruptcy  Board  of  India  (Grievance  and Complaint Handling Procedure) Regulations, 2017 enable stakeholders to file a grievance or a complaint against service providers under the IBC. Besides this, Insolvency and Bankruptcy Board of India (IBBI) also receives complaints and grievances from Centralized Public Grievance Redress  and  Monitoring  System  (CPGRAM), Prime  Minister's  Office, Ministry  of  Corporate  Affairs  and  other  authorities.  Till  30 th   January, 2022, the IBBI had received 5782 such complaints and grievances, of which  5552  have  been  disposed  after  examination.  Further,  as  per information  available,  Directorate  of  Enforcement  has  received  one complaint against an RP of one CIRP, CBI has received one complaint regarding abuse of process in one CIRP matter and SFIO has received 8 (eight) complaints regarding violation of various provisions of the IBC.

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