New Delhi, Mar 12 () The insolvency and bankruptcy lawhas resulted in recovery of just 10 per cent of defaultedloans in case of companies other than the seven big onesreferred for resolution, senior Congress leader Jairam Rameshsaid in Rajya Sabha on Thursday.
Speaking on a bill to further amend the Insolvency andBankruptcy Code to give protection to new owners of a loandefaulter company against prosecution for misdeeds ofprevious owners, Ramesh said of the 970 cases referred to IBC,780 have been liquidated, indicating a mortality rate of 80per cent.
The first objective of the IBC was to save companies butwith a mortality rate of 80 per cent it is not life saving, hesaid.
Ramesh said against admitted claims of Rs 3.51 lakhcrore, Rs 1.50 lakh crore has been recovered by way ofauctioning defaulting firms to new buyers.
The recovery was 43 per cent, implying that banks took ahair cut of 57 per cent on their loans, he said.
If the big seven firms -- Electrosteel, Bhushan Steel,Monnet Ispat, Essar Steel, Alok Industries, Bhushan Power &Steel and Jyoti Structures are excluded then the totalrecovery is 10 per cent, he said, "This means banks took haircut of 90 per cent."
"That is matter of great concern," he said.
Ramesh also sought revisiting provision in the amendedIBC that gives power to resolution professional to order otherfirms such as small and micro enterprises to continuesupplying goods and services to the defaulter firm.
Under the law, a resolution professional oversees theinsolvency process.
This raises the risk of default for MSME firms, he saidseeking revisiting of the provision in the bill on supplyingto defaulter firm.
"You should not sacrifice interest of MSME sector," hesaid.
He went on to advocate a special regime for MSMEs byamending the 2006 MSME Act by allowing them to list accountsreceivable above Rs 1 crore so they can invoke IBC to recoverdue amounts.
MSMEs face cash flow issues mostly due to delayedpayments, he said.
Earlier, introducing the Insolvency and Bankruptcy Code(Amendment) Bill 2020, Finance Minister Nirmala Sitharamansaid insolvency and bankruptcy code (IBC) was brought in 2016as desired results were not coming from prevalent laws toresolve defaults.
Since 2016, several amendments to IBC have been broughtto keep pace with developments in the outside world and orderspassed by courts and tribunals on their interpretation of thelaw, she said.
She said the bill was brought in the previous Wintersession of Parliament but couldn't be passed and so anordinance was promulgated. The present bill is to convert theordinance into a law.
Mahesh Poddar (BJP) said the amendment to the IBC willprotect current management from past mistakes of previousowners. ANZDV DV