India Reexamines Its Landmark Bankruptcy Reforms

India is planning new measures to clarify a landmark corporate bankruptcy law that was meant to bring the nation's largest corporate borrowers to heel, amid complaints it has become a “mockery of justice,” Nikkei Asia reported. The law giving more power to creditors was one of the Modi government’s signature reforms, but five years after it went into effect, banks are still taking big losses in bankruptcies, and the debt-resolution process has been plagued by delays and legal uncertainty. Now, with a wave of defaults that need to be resolved after India’s COVID crisis, there are fears that judges could become even more overwhelmed. “The IBC (Insolvency and Bankruptcy COde of 2016) has more or less collapsed,” said Nishit Dhruva, managing partner of law firm MDP & Partners, which advises banks on bankruptcy matters. “Due to several factors, such as a lack of judges and litigation by former owners, it appears that the entire IBC process has now become a mockery of justice and needs to be streamlined before it becomes a complete failure like the insolvency regime that was in effect prior to the IBC.” The new code was designed to tip the scales in banks’ favor by allowing them to sack the board of a defaulting company and appoint an independent monitor to oversee a speedy auction of the company to the highest bidder to maximize recoveries. Read more.