Bankruptcy code being misused by firms facing insolvency, govt tells apex court, Pg9

Key Highlights:

• The Central Government is reviewing potential misuse of the Insolvency and Bankruptcy Code (IBC) by companies facing insolvency.
• This statement was made to a three-judge bench of the Supreme Court.
• The case involves alleged bank frauds related to the Reliance Anil Dhirubhai Ambani Group (RADAG).
• A RADAG group company, with over Rs 47,000 crore in dues, was allegedly sold for Rs 455 crore.

Detailed Insights:

• The government's concern stems from instances where companies exploit the IBC to evade liabilities.
• Allegations suggest companies undervalue assets during insolvency, benefiting related parties.
• The petition seeks investigation into potential irregularities within the RADAG insolvency proceedings.
• The Supreme Court is examining the effectiveness of the IBC in preventing asset stripping and protecting creditors.

Key Concepts Involved:

• Insolvency and Bankruptcy Code (IBC): A law that consolidates and amends laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner.
• Asset Stripping: The practice of selling off a company's assets for personal gain, often leaving the company unable to pay its debts.
• Creditors: Entities to whom money is owed.