UltraTech shows up two flaws in IBC: Mend, to maximise value of distressed asset

UltraTech shows up two flaws in IBC: Mend, to maximise value of distressed asset

That one of the bidders(नीलाम की बोली बोलने वाला ) for an asset(संपत्ति) being sold in the resolution(समाधान/प्रस्ताव) process under the Insolvency(शोधाक्षमता/दिवालियापन) and Bankruptcy(दिवाला) Code (IBC) is offering, outside the IBC framework, a price higher than what the IBC process has determined(निर्धारित) to be the highest bid shows up a shortcoming in the current IBC process. The process must change, to allow continuous competitive(प्रतियोगी/प्रतिस्पर्धात्मक) bidding by interested parties till only the highest bidder remains in the fray(मैदान में रहना/लड़ाई). Ironically(विडम्बना से/व्‍यंग्‍यात्‍मक ढंग से), the government uses precisely(निश्चित रूप से/ठीक-ठीक) such a competitive bidding process in the case of radio spectrum(विस्तार/रेंज), where jacking up the cost of spectrum is not in the public interest.

UltraTech lost the bid for Binani Cement to Dalmia Bharat by some .`200 crore in the IBC process. Since the process does not allow successive rounds of bidding, the creditors favoured the Dalmia bid, as offering them the highest bid and more than their secured outstanding loans. Thereafter, UltraTech has offered Binani promoters the money needed to pay off the loans on which Binani had defaulted, and a little more, to buy out the promoters’ stake(हिस्सेदारी/शेयर). Now Binani wants to take the company out of the insolvency process, paying off the loan and selling the company to UltraTech.This shows up yet another shortcoming in the IBC process. Once a company becomes bankrupt and is referred for resolution, it should cease to have any equity(औचित्य/निष्पक्षता) other than what the creditors acquire by converting their unpaid debt into 100% of the company’s equity. Instead(बजाय/की जगह), right now, the shares of bankrupt companies continue to trade on the stock market. This, too, must change. Once a company has been declared bankrupt, its resolution must take place through the IBC procedure. The procedure should amend(संशोधन/सुधरना) its bidding process, to achieve the public policy goal of maximising the value realised for resolution of assets. From the proceeds of the auction(नीलामी), what remains after paying off secured creditors, employee and statutory(वैधानिक/क़ानूनी) dues and unsecured creditors, should be paid to erstwhile shareholders pro-rata. Making these two changes to the IBC process is the right thing to do, not deal-making outside the IBC process.

Important Vocabulary

1.Bidders(नीलाम की बोली बोलने वाला )
Synonyms: applicant, aspirant, bidder, competitor, contender

Synonyms: bankruptcy, breakdown, deterioration, implosion, inadequacy
Antonyms: accomplishment, achievement, advantage, ascent, benefit

3.Ironically(विडम्बना से)
Synonyms: amusingly, jokingly, absurdly, facetiously, jocosely

4.Precisely(निश्चित रूप से/ठीक-ठीक)
Synonyms: absolutely, accurately, as well, correctly, literally
Antonyms: imprecisely, questionably, unsure

Synonyms: fairness, disinterestedness, fair-mindedness, honesty, integrity
Antonyms: dishonesty, bias, inequity, partiality, unfairness

Synonyms: pale, paling, picket, post, rod
Antonyms: whole

Synonyms: sell-off, bargain, jam

Synonyms: lawful, legal, judicial, rightful
Antonyms: illegal, illegitimate, illicit, unlawful

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