IBC induces behavior change among corporate debtors

New Delhi: Over 27,500 applications for resolution process against corporate debtors have been withdrawn before their admission, with regulator IBBI emphasising that the credible threat of the insolvency law that ownership of debtors might change has changed the behaviour of debtors.

These Corporate Debtors (CDs) had an underlying default of Rs9.74 lakh crore. The Insolvency and Bankruptcy Code (IBC), introduced in December 2016, provides for a time-bound and market-linked resolution of stressed assets.

“The credible threat of the Code, that a CD may change hands, has changed the behaviour of debtors. Thousands of debtors are resolving distress in early stages of distress. They are resolving when default is imminent, on receipt of a notice for repayment, but before filing an application, after filing application, but before its admission, and even after admission of the application, and making best effort to avoid consequences of the resolution process,” the IBBI said in its latest newsletter.

The Insolvency and Bankruptcy Board of India (IBBI) is a key institution in implementing the IBC.