Chandra's settlement comes as IBC turns 10, with bank haircuts at five-year high, Pg11

Key Highlights:

• The National Company Law Tribunal (NCLT) approved a repayment plan for Zee Group founder Subhash Chandra.
• Chandra will pay Rs 6.5 crore against admitted claims of Rs 22006.57 crore, resulting in a 99.97% haircut.
• This represents one of the highest haircuts in the history of the Insolvency and Bankruptcy Code (IBC) regime.
• The IBC is marking its 10th anniversary, coinciding with bank haircuts reaching a five-year high.
• Banks are considering an appeal to the National Company Law Appellate Tribunal (NCLAT) regarding this order.

Detailed Insights:

• A "haircut" in the banking system refers to the percentage reduction in an asset's value to protect lenders from potential losses.
• The Insolvency and Bankruptcy Code (IBC) was enacted in 2016 to provide a comprehensive system for resolving financial stress in companies.
• Between financial years 2021-22 and 2025-26, 1077 cases were resolved under the IBC, with an average recovery of approximately 29%.
• The recovery against admitted claims in FY26 was 20%, which is the lowest recorded in the last five years.
• The government's stance is that the primary objective of the IBC is "resolution, not recovery," especially for long-stressed companies.
• Low realization can occur when a company's assets have significantly depleted due to non-performance over time.
• Claims often include Non-Performing Assets (NPA) and their accrued interest, which may not reflect the current market value of assets.
• Beyond financial recovery, the IBC is credited with fostering credit discipline and contributing to the reduction of banks' Gross Non-Performing Assets (GNPA).
• Banks have raised concerns about the valuation of stressed companies, suggesting that all assets should be properly valued.
• The IBC process mandates the appointment of at least two valuers to determine fair and liquidation values of assets.
• A key suggestion to mitigate excessive haircuts is to prioritize enterprise value over liquidation value during asset valuation.

Key Concepts Involved:

• Insolvency and Bankruptcy Code (IBC): A comprehensive law in India for resolving insolvency of corporate persons, partnership firms, and individuals.
• National Company Law Tribunal (NCLT): A quasi-judicial body in India that adjudicates matters related to companies, including insolvency proceedings.
• National Company Law Appellate Tribunal (NCLAT): An appellate authority that hears appeals against the orders passed by the NCLT.
• Haircut: The difference between the actual debt owed by a company and the amount recovered by creditors during insolvency proceedings.
• Non-Performing Assets (NPA): Loans or advances where the principal or interest payment is overdue for a period of 90 days or more.