The Insolvency and Bankruptcy Code (IBC), 2016 & The Insolvency and Bankruptcy Code (Amendment) Bill, 2017 Darshini Kansara (Research Analyst)

This presentation is a summary based on the study given in the Economic Survey 2017-18 (January 29, 2018) and we, at CARE Ratings Limited, have only presented the same here. The purpose of this presentation is only to understand the Insolvency and Bankruptcy Code, 2016 and the Insolvency and Bankruptcy Code (Amendment) Bill, 2017 and the current status of the proceedings against the 12 defaulting companies.

Overview The Insolvency and Bankruptcy Code, 2016 (IBC) was passed in May 2016 There has been a significant amount of progress since then – the entire mechanism for the Corporate Insolvency Resolution Process (CIRP) has been put in place A number of rules and regulations have been notified to create the institutions and professionals necessary for the process to work A large number of cases have entered the insolvency process, and a few have even exited the process Over 1,300 Insolvency Professionals are registered (under three Insolvency Professional Agencies) Over 525 cases of corporate insolvency have been admitted across all the National Company Law Tribunal (NCLT) benches* Note: * - The details are from the orders uploaded on the NCLT website on or before 6 January, 2018 for petitions dated till 31 December 2017. This data is tentative, and might change as new orders are updated

Status of cases admitted for Corporate Insolvency Resolution Process (CIRP) Sr No Status of CIRP   Number of Corporates 1 CIRP in progress 442 of which* < 30 days 33 30-150 days 225 150-180 days 67 >180 days 117 2 Resolution plans approved 10 3 Liquidation order passed 30 4 Closed by appeal/review 36 Total CIRP petitions admitted: 525 Source: IBBI Note: *: For a few corporates, orders are still awaited, hence the totals might not be exact

Sector-wise Analysis of Admitted Cases under IBC, 2016 (Top-5 sectors) Sr No Sector Total Underlying Default (Rs Crore) Number of Corporates CIRP In Progress Resolution Plan Approved Liquidation Order Passed Closed By Appeal/ Review Total 1 Steel 57,001 39 2 3 45 Retail 12,719 12 -   - Capital Goods - Non-Electrical Equipment 4,785 14 - 17 4 Textiles 4,679 29 33 5 Trading 4,560 30 Total (Top 5 sectors) 83,744 124 146 6 Others 45,065 327 18 379 128,810 451 10 34 525 Source: IBBI Note: The details are from the orders uploaded on the NCLT website on or before January 6, 2018 for petitions dated till December 31, 2017. This data is tentative and might change as new orders are uploaded. Top 5 sectors account for 65% share in the total underlying default amount

Companies That Underwent Resolution Under IBC Name of Corporate Debtor Insolvency Commencement Date Total Claims Of FCs* Liquidation Value* Resolution Amount - FCs* % Recovery For FCs % Realisation To Liquidation Value Synergies Doorey Automotive Ltd. 23-Jan-17 972.2 8.2 54.7 6% 669% Shree Metalik Ltd 30-Jan-17 1,287.20 283 607.3 47% 215% Kamineni Steel & Power India Pvt. Ltd.# 10-Feb-17 1,508.90 761 600 40% 79% Chhaparia Industries Pvt. Ltd. 24-Feb-17 49.8 17.2 20.6 41% 120% Jekpl Private Ltd. 17-Mar-17 599 222.1 162 27% 73% Hotel Gaudavan Pvt. Ltd. 31-Mar-17 76.7 36.1 44.2 58% 122% Prowess International Pvt. Ltd. 20-Apr-17 3.4 N.A 100% N.A.

Companies That Underwent Resolution Under IBC Contd. Name of Corporate Debtor Insolvency Commencement Date Total Claims Of FCs* Liquidation Value* Resolution Amount - FCs* % Recovery For FCs % Realisation To Liquidation Value West Bengal Essential Commodities Supply Corp. Ltd. 29-May-17 359.2 N.A. 185.8 52% Shirdi Industries Ltd 18-May-17 673.9 103.1 175 26% 170% Nandan Hotels Ltd. 17-Aug-17 1.4 Source: IBBI Notes: *: Amounts are in Crores. FC : Financial Creditors, OC : Operational Creditors, CD : Corporate Debtors #: This resolution order was stayed by NCLAT

A major factor behind the effectiveness of the new Code has been the adjudication by the Judiciary The court prescribed strict time limits for various procedures under it In spite of the large inflow of cases to NCLT benches across India, these benches have been able to admit or reject applications for CIRP admissions with few delays In addition, appellate courts, including the NCLAT, High Courts and the Supreme Court have also disposed appeals quickly and decisively. In this process, a rich case-law has evolved, reducing future legal uncertainty On June 13, 2017, the Reserve Bank of India (RBI) identified 12 large loan defaulters where the Insolvency and Bankruptcy Code (IBC) was initiated. The status of the proceedings against these 12 defaulters, as of November 2017, is shown in the table in the following slides:

First 12 defaulters as notified by RBI Sr No Company# Sector Claims Admitted (Rs Crores) 180 Day Period Ends On Current Status of CIRP 1 Alok Industries Ltd. Textiles 29,912 14-01-2018 Applied for extension of 90 days 2 Amtek Auto Ltd. Auto component 12,586 20-01-2018 3 ABG Shipyard Ltd. Ship building 18,539 28-01-2018 CoC approved extension of 90 days 4 Bhushan Steel Ltd. Steel 55,989 22-01-2018 In process 5 Bhushan Power and Steel Ltd. Steel & Power Generation 48,524 Extension up to 22 April, 2018 6 Electrosteel Steels Ltd 13,302 16-01-2018 Extension up to 17 April, 2018 Source: IBBI Note: # Era Infra Engineering Ltd. has not yet been admitted to CIRP, CoC – Committee of Creditors

First 12 defaulters as notified by RBI Contd. Sr No Company# Sector Claims Admitted (Rs Crores) 180 Day Period Ends On Current Status of CIRP 7 Essar Steel Ltd Steel 50,778 29-01-2018 Applied for extension of 90 days 8 Jyoti Structures Ltd. Power Transmission 8,078 31-12-2018 Extension up to 31st Mar, 2018 9 Jaypee Infratech Ltd. Infrastructure Development 13,322 4-2-2018 10 Lanco Infratech Ltd. Power Generation 51,505 3-2-2018 11 Monnet Ispat and Energy Ltd. 10,412 13-01-2018 Total 312,947

Insolvency and Bankruptcy Code (Amendment) Bill, 2017 The Insolvency and Bankruptcy Code (Amendment) Bill, 2017, was passed by the Lok Sabha on December 2017, and by the Rajya Sabha on January 2, 2018 It replaces the IBC (Amendment) Bill, 2017, which was promulgated on November 23, 2017 In the CIRP the Committee of Creditors (CoC) invites resolution plans from resolution applicants, and may select one of these plans The Code originally does not specify any restrictions on who these resolution applicants might be However, the Bill has declared that some persons are ineligible to submit resolution plans: an undischarged insolvent; a “wilful defaulter”; a borrower whose account has been identified as a non-performing asset for over a year and who has not repaid the amount before submitting a plan; a person convicted of an offence punishable with two or more years of imprisonment;

Insolvency and Bankruptcy Code (Amendment) Bill, 2017 a person disqualified as a director under the Companies Act, 2013; a person prohibited from trading in securities; a person who is the promoter or in the management of a company which has indulged in undervalued, preferential, or fraudulent transactions; a person who has given guarantee on a liability of the defaulting company undergoing resolution or liquidation, and has not honored the guarantee; a person who is subject to any of the above disabilities in any jurisdiction outside India; or a person who has a connected person disqualified in any manner above The thrust of the Bill is to prevent a range of undesirable persons from bidding for the debtor. The Bill may prevent promoters from bidding for their own firms The Bill, thus, seeks to achieve a balanced approach, enabling the CoC to avoid imprudent transactions, while preserving its freedom to choose the best resolution plan from amongst all the applicants.

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