Attacking the Narendra Modi government over the low debt recovery under the Insolvency and Bankruptcy Code (IBC), the Congress on Friday asked whether it was a mechanism to rescue stressed firms or another tool for “organised loot”.
The party also asked if the IBC was aimed at helping cronies to create monopolies by transferring businesses at throwaway prices.
Addressing a press conference at the Congress headquarters here, party spokesperson Gourav Vallabh said the IBC of 2016 was billed as a game changer and one of the “big-ticket economic reforms” by the Modi government but the reality was that it had turned out to be far worse than its predecessor, the Sick Industrial Companies Act (SICA) of 1985, and its Board for Industrial and Financial Reconstruction (BIFR).
Mr. Vallabh said that at a time when people were struggling to make ends meet, the total recovery of debt under IBC was at only 17.6% of the “admitted claims,” resulting in a loss of 82.4% for financial creditors of their credits or loans.
Scrap sales
He claimed that 75% of the firms under the IBC end up in scrap sales. “As per the Insolvency and Bankruptcy Board of India (IBBI), total recovery of debt under IBC is at only 17.6% of ‘admitted claims’ by the end of FY 2023, inclusive of all previous recoveries. In other words, banks, mostly public banks, and other financial creditors have lost 82.4% of their credits or loans through the IBC by the end of FY23,” Mr. Vallabh noted.
He added that debt recovery under the previous mechanism, the SICA, was 25% and much better than the IBC.
Mr. Vallabh also alleged that the Adani Group had used the IBC to acquire stressed assets and consolidate its position in power and ports. “Adani has made three significant acquisitions — where the realisation for lenders has been more than ₹1,000 crore — through the corporate insolvency resolution process,” he alleged.
Karaikal port
He said that Adani Ports and Special Economic Zone Ltd (APSEZ) completed the acquisition of Karaikal Port Private Limited (KPPL) and as per the resolution plan, Adani Ports paid ₹1,583 crore for the Karaikal port while the admitted claims for KPPL were ₹2,997 crore.
In the case of Korba West Power plant acquisition, the Adani Group paid ₹1,100 crore to financial creditors, who had together admitted claims of ₹3,346 crore.
The Congress leader claimed that in the case of Essar Power, the approved resolution plan provides for payment of ₹2,500 crore as against the admitted claim of financial and operational creditors to the tune of ₹12,000 crore. “We have a very simple and straight question for Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman – Is IBC a mechanism to rescue and revive stressed firms or another tool for organised loot and helping cronies for creating monopolies by transferring businesses at throwaway prices,” asked Mr. Vallabh.
