First Insolvency Case under New Indian Bankruptcy Code Goes Forward

Aug. 18, 2017

India’s National Company Law Tribunal (NCLT) has approved the country’s first insolvency resolution order under the new Insolvency and Bankruptcy Code, 2016.

The plan for Synergies-Dooray Automotive Ltd., a company that manufactures alloy wheels, submitted its application to the NCLT January 23, according to a report in Money Control. The firm’s resolution plan was submitted within the code’s 180-day deadline.

The bankruptcy law passed Indian Parliament in May 2016 and went into effect in December, replacing the nest of rules and regulations formerly in place to tackle bad loans and nonperforming assets in the Indian economy. The total claim against Dooray from financial creditors, including three asset reconstruction companies, is roughly $15.2 million, according to a report in Livemint.com.

“There were three resolution plans out of which one was selected,” said Mamta Binani, the insolvency resolution professional for Synergies-Dooray and past president of Institute of Company Secretaries of India (ICSI), in the Livemint article. “The other two plans had good money in them, but the companies infusing capital were from a trading background. We went with the plan which had some manufacturing background to keep the company as a going concern. Putting in money is not the end of it. The selected plan also takes care of dues of operational creditors and the government, which is generally not the case when the liquidation value is zero. We are increasingly seeing that committee of creditors are conscious of the dues of operational creditors, as these are mostly small and medium enterprises, and if their dues do not get paid, then the companies can go under and overall hurt the economy.”

– Nicholas Stern, managing editor

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