The Insolvency and Bankruptcy Code has legalized the loot of public money

It’s three years since the Parliament passed the Insolvency and Bankruptcy Code (IBC). It was called the biggest economic ‘reform’ of the NDA government. It boosted India’s rankings in the World Bank’s ease of doing business. It was claimed that it will help to solve the problem of NPAs faced by Indian banks and recover outstanding loans. The experience of the last 30 months, since the first case was filed under the new law, shows that the IBC has legalized the loot of public money with banks. The write-off of big amounts of NPAs by banks is now carried out under the order of a court.

When a defaulting company is not able to pay interest on time or repay loans or money due to suppliers, it can be taken to bankruptcy court. Once the application is accepted by the bankruptcy court, the management of the company is taken over by a resolution professional. The resolution professional invites bids for the sale of company. If a bid acceptable to lenders is received, the bankruptcy court orders the sale of the company to the successful bidder. If no acceptable bid is received within 180 days (plus a 90-day grace period), the court orders the liquidation of the company. Then the assets of the company are sold and the money received is shared among lenders.

A total of 1,858 cases of defaulting companies have been registered under the IBC by 31 March 2019. In case of 94 companies, acceptable bids were received and the ownership was transferred. However, acceptance of the bids through the court order required banks to write off huge amount of outstanding loans of these companies. While about Rs 75,000 crore were received through the sale of these companies, the write-off of Rs 100,000 crore was legalized under the IBC.

Another 378 companies, with outstanding dues of Rs 2,57,462 crore, were sent for liquidation by the court. The sale of assets of these companies is expected to recover only 7 percent of outstanding dues. That means another Rs 2,39,000 crore of outstanding amount will have to be written off.

Thus 3 years of the IBC will lead to court-ordered write-off of nearly Rs 3,40,000 crore by banks. The very first case decided by the IBC of Synergies-Dooray Automotive, an auto ancillary company, in Aug 2017, led to write-off of 94 percent of outstanding loans of the company. Lenders got only Rs 54 crore out of the total debt of Rs 972 crore.

In most cases of sale of companies through the IBC, the buyers have been able to buy valuable assets at very low prices. In 2017, the Reserve Bank of India referred 12 big NPAs, with outstanding amount of Rs 3.45 lakh crore, for resolution under the IBC. So far 5 cases have been decided – one for liquidation (Lanco Infrastructure with outstanding dues of over Rs 17,000 crore ) and another four for sale (Bhushan Steel - bought by Tata Steel for Rs 35,200 crore as against outstanding dues of Rs 56,000 crore; Electrosteel - bought by Vedanta for Rs 5320 crore as against outstanding dues of Rs 13,000 crore; Monnet Ispat - bought by JSW Steel for Rs 2,875 crore as against outstanding dues of Rs 11,000 crore ; Amtek Auto - bought by Liberty House for Rs 4,400 crore as against outstanding dues of Rs 12,000 crore). The loan write-off in case of these four companies varies from 35 to 70 percent of outstanding dues. The court decision in case of these five companies alone will mean banks writing off nearly Rs 60,000 crore of loans!

The three years of the operation of the IBC has clearly demonstrated that it is a tool to legalize write-off of big loans by banks and for purchase of valuable productive assets at very low prices by big Indian and foreign monopolies. The IBC has given legal sanctity to the big loot of the savings of workers and toilers deposited in banks.


Share Everywhere

Insolvency    Bankruptcy Code    Jun 16-30 2019    Political-Economy    Privatisation    Rights     2019   

पार्टी के दस्तावेज

8 Jan General Strike

Call of the Mazdoor Ekta Committee

The all India general strike has been called to resolutely oppose the course of enriching the capitalist minority by impoverishing the toiling majority. It has been called to assert the rights that belong to workers, peasants and other toiling people who create the wealth of India.

Hum Hain Iske Malik! Hindostan Humara!

Election manifesto of a CGPI supported candidate for Lok SabhaParties of the capitalist class claim that there is no alternative to the program of globalisation,liberalisation and privatisation. The truth is that there IS an alternative.The alternative is to reorient the economy to fulfil people’s needs instead of fulfilling capitalist greed. This is the program for the Navnirman of India.

(Click thumbnail to download PDF)

5th Congress DocumentThe Report to the Fifth Congress of the Communist Ghadar Party of India, presented by Comrade Lal Singh, General Secretary of the CGPI, on behalf of its Central Committee, was discussed and adopted by the Fifth Congress of the CGPI, held in November 2016. By decision of the Fifth Congress, this report has been edited for publication.

(Click thumbnail to download PDF)

Click to Download PDFThe first part of this pamphlet is an analysis of facts and phenomena to identify and expose the real aims behind the Note Ban. The second part is devoted to a critical appraisal of the government’s claims that it will reduce inequality, corruption and terrorism. The third part is what Communist Ghadar Party believes is the real solution to these problems and the immediate program of action towards that solution.

(Click thumbnail to download PDF)

These Elections are a FarceInterview with Comrade Lal Singh, General Secretary of Communist Ghadar Party of India by Comrade Chandra Bhan, Editor of Mazdoor Ekta Lehar

(Click thumbnail to download PDF)

Manifesto 2014Unite around the program to reconstitute the Indian Republic and reorient the economy to ensure prosperity and protection for all!

There is growing realisation among workers, peasants and other self-employed people that the program of liberalisation and privatisation only serves to enrich an exploiting minority at their expense. Mass resistance is growing to this anti-worker, anti-peasant and anti-national program.

(Click thumbnail to download PDF)