Bidders may face jail term if back out from insolvency process
By EDITORIAL TEAM INSOL INDIA Posted On : January 15, 2019
The government and the Insolvency & Bankruptcy Board of India (“IBBI”) are aiming at using provisions of the Insolvency & Bankruptcy Code, 2016 (“IBC”) against resolution applicants who have failed to honour their plan, for insolvency resolution of stressed companies, approved by NCLT. The government may invoke Section 74 of the IBC which provides for an imprisonment term which may extend upto 5 (five) years and/or imposition of fine upto Rs. 1 Crore for violation of the provisions of the IBC, against Liberty House and Adani Wilmsr who have withdrawn from their commitments to implement the plan for insolvency resolution of stressed assets.
Adani Wilmar was declared as the highest bidder in August to acquire Ruchi Soya after a long-drawn battle with Patanjali. Later, Adani Wilmar opted out of a deal to buy Ruchi Soya after the committee of creditors backed it, citing delays in closing the resolution process due to Patanjali moving the National Company Law Tribunal to challenge the decision of the lenders which caused deterioration of asset quality. Similarly, Liberty House had refused to honor its commitments from the resolution process of Adhunik Metals and Amtek Auto, citing various reasons. The government is keen to resolve glitches in the IBC implementation process and is seeking to fast-track cases to ensure that the maximum permissible time limit is adhered to. The ministry of corporate affairs has initiated talks with banks to find ways to decide cases at the earliest.