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Banks let 124 companies undergo liquidation despite Resolution Plans-

Banks let 124 companies undergo liquidation despite Resolution Plans-

As per the reports, banks in India have made 124 companies go into liquidation despite resolution plans that promised higher recovery of money. At the end of March 2020, insolvency process for about 914 companies were closed. About 57% of the total insolvency cases which were closed ended by passing orders of liquidation by the tribunals, as compared with 14% that ended in resolution plans. The Insolvency & Bankruptcy Code contemplates value maximization and not price. The value improves if a business is continued and its assets are used in a more efficient manner.

Efficiency of a business improves if it is continued for a longer period and its assets are used more efficiently. This could be achieved by bringing a change in management structure, acquisition or disposal of assets, restructuring of the company or turning around the business. Since the starting of the IBC, over 396 manufacturing companies have been liquidated. More than 200 companies which were ordered to be sold separately were from real estate sector and construction companies, while another 117 companies were from retail and wholesale trading sector.

Banks will have to build more consensus amongst themselves to save companies and employment, considering the declining state of the Indian economy. Concreted approach by lenders can bring resolution of stressed assets of companies.


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