Saturday, June 6, 2020
Home Economy and Finance Modi’s IBC is making defaulters pay back Rs 1.1 lakh crore and Congress is...

Modi’s IBC is making defaulters pay back Rs 1.1 lakh crore and Congress is bound to be unhappy

Also Read

Abhishek Banerjeehttps://dynastycrooks.wordpress.com/
Abhishek Banerjee is a math lover who may or not be an Assistant Professor at IISc Bangalore. He is the author of Operation Johar - A Love Story, a novel on the pain of left wing terror in Jharkhand, available on Amazon here.  

Recently, on several platforms, Prime Minister Modi has finally been taking on the Congress over the issue of “phone banking” during the UPA years. Those were the days when the “naamdars” would call up the banks on behalf of big business and get them to hand out lakh crore loans like candy. Keep in mind that most of these happened to be Public Sector Banks, which means that the people of India would be on the hook when these loans went into default.

Now, we were already aware of the sinister deals that would be finalized in secret phone calls during the UPA era. Remember the famous tapes involving a lobbyist, a celebrity journalist, a big business house and a Cabinet Ministry that later became the focal point of a now legendary scam?

But the true extent of the rot was revealed by PM Modi when he stated that while our banks had collectively lent Rs 34 lakh crore just between 2008 and 2014. This is near twice the entire amount of Rs 18 lakh crore that the banks had lent in all the years from 1947 to 2008.

When the NDA government was sworn into office in May 2014, a full disclosure of the UPA’s loan disaster would have led to unprecedented panic, further sinking the economy. But now the ship has been steadied, with India cementing its position as the fastest growing (major) economy in the world. In 2013, they would speak of India as being a “fragile five” economy. At the end of 2018, the world prepares to welcome India into the top five economies in the world by GDP. The journey of India from “fragile five” to “top five” is nearly complete.

The focus of Modi government was therefore to stop the bleeding, to see to it that loan conditions were strictly followed and to bring back whatever could be brought back. When the Insolvency and Bankruptcy Code Bill was passed in 2016, it received little fanfare. Quietly, the Modi government had enacted a sweeping reform. And now we have this:

Untitled.png

And this:

Untitled.png

So what was the Insolvency and Bankruptcy Code? In simple terms, it created a speedy time-bound mechanism where a creditor can appeal if a company is not paying back its loans. Again, the key words here are *speedy* and *time bound*. The exact time limits vary depending on the size of the company, but in most cases, the matter must be resolved within 180 days. If the company refuses to pay up, the owners of the company will lose control, their assets will be seized and sold in order to pay back their loans.

In other words, the code puts an end to the days when a big business could take out all the loans it wanted and then turn into a wilful defaulter, bullying its creditors, refusing to pay back the money. They have 180 days to pay or else they will lose their company.

And pay they did. To the tune of Rs 1.1 lakh crore. In many instances, the creditors withdraw the case after filing, very often because the company pays up.

Untitled.png

Modi’s IBC code is not just a boon for the banks. One must also understand how it helps small businesses. Very often, a big company will owe money not just to banks, but to a number “operational creditors.” Frequently, these are smaller companies like suppliers and contractors etc who cannot keep running their day to day operations without their dues being cleared by big corporations. While these small suppliers and contractors face bullying from big defaulters just as much as banks, the problems of these small businesses are rarely reported in the media.

Indeed, this is why the maximum number of cases under this new law has been brought by operational creditors and not banks. Remember that these small businesses are where the real job growth comes from. The easier life is for budding entrepreneurs, the more entrepreneurship we will have. And today’s small businesses might grow tomorrow into big businesses that employ thousands of people.

Finally, the IBC code also short-circuits a number of scams that big companies have come up with over the years to beat the system. Let me explain with an example. Suppose that a big company wants to purchase a piece of expensive factory equipment that costs, say Rs 100 crore.

Let me show you a simple “scam” by which you can own the Rs 100 crore equipment for just Rs 10 crore.

Step 1: Get a “naamdar” to call a big bank and lend you Rs 100 crore to buy the equipment.

Step 2: Forget the loan, let it go bad.

Step 3: Let the equipment be seized by the banks, who will now try to recover their money by selling it.

Step 4: But an expensive piece of factory equipment is not a toy that just anyone would want it. Often, at the auction, there is just *one* bidder, the same company whose equipment was seized. The same company now bids just Rs 10 crore.

Step 5: The desperate banks have no option but to sell the seized equipment back to the same company for the rock bottom price of Rs 10 crore.

Step 6: Scam complete. The Rs 100 crore loan has disappeared. The company now fully owns the Rs 100 crore equipment by paying just Rs 10 crore.

Where did the other 90 crores come from? If the bank was a public sector bank (most common scenario), those 90 crores came from *your* pocket.

Outraged?

You should be.

So, here is what Modi’s IBC Code did about it. Look what happened here:

Untitled.png

The wilful defaulters, their parent company and even related persons are barred from buying back the assets at rock bottom prices. Sorry, Essar.

This is the story of how the Modi government went out on a limb and took on the most powerful and most entrenched elements in the system to save public money. Our money. A story that is rarely told.

In recent weeks, we have seen one naamdar and his numerous minions in the ecosystem making all sorts of allegations against the man who calls himself the “chowkidaar” of India’s money. Perhaps you will now have a better sense of why these nonsensical allegations are being made and who might gain from getting the chowkidaar out of office. Here is something that I recently came across on Facebook.

Untitled.png

Please try to remember that.

  Support Us  

Whether NDTV or 'The Wire', they never have to worry about funds. In name of saving democracy, they get money from various sources. We need your support to fight them. Please contribute whatever you can afford

Abhishek Banerjeehttps://dynastycrooks.wordpress.com/
Abhishek Banerjee is a math lover who may or not be an Assistant Professor at IISc Bangalore. He is the author of Operation Johar - A Love Story, a novel on the pain of left wing terror in Jharkhand, available on Amazon here.  

Trending now

Congress mouthpiece says ‘Muslims have sat quiet and subdued’: Here is how they are wrong and how their dog-whistling might not work

National Herald published an article that said that the first year of Modi Sarkar 2.0 has been the 'worst possible year' for Muslims in the country.

Is Safoora Zargar being unfairly kept in jail while she is pregnant? Here is what the law says

Safoora Zargar was denied bail and liberals on social media have been calling the order 'remorseless' and 'shameful'.

Media furthers a dangerous narrative, wrongly portrays scuffle between cops and a thug in Rajasthan as ‘India’s George Floyd moment’

There is a stark difference between the George Floyd murder and what happened in Jodhpur when police tried to control a thug who assaulted them

Justice for Bramsh Baloch: An Echo Of Revolution

The current incident of Bramsh Baloch has not only exposed the relation of Pakistani state with the burglars, killers, death squad members, but it also unveiled the hidden dirty faces of Parliamentarians

From December 2019 to Delhi riots 2020: Here is how Islamist mobs tampered with CCTV cameras to avoid detection as they went on rampage

During the Delhi anti-Hindu riots, Islamists broke CCTV cameras. Police also confirmed no CCTV footage was recovered fro Tahir Hussain's house

Muslim mob torched properties of Hindus till 24th Feb night, burnt Dilbar Negi alive: Fresh charge sheet against 12 in Delhi riots

According to the charge sheet, a Muslim mob came from Brijpuri Pulia side in northeast Delhi and unleashed violence, targeting properties of Hindus. The mob continued damaging Hindu shops and burnt them till late night on February 24.

Recently Popular

Times of India journalist Samina Shaikh tries to shame Hindus over the killing of pregnant elephant in Kerala

In Hinduism, Lord Ganesha has the head of an elephant and elephants are also considered holy.

Woman ‘protestor’ poops on an overturned police car in middle of riots in America. Watch the video (or maybe not)

A woman was seen defecating on a damaged police car in USA, an act video recorded and photographed by onlookers

GoAir fires trainee officer Asif Khan after screenshots of his Hinduphobic comment went viral on social media

GoAir has terminated the employment of one Asif Khan after his anti-Hindu offensive comments on social media went viral.

“Your mother was Hindu, how can we trust you?” Read shocking revelations by the niece of Nawazuddin Siddiqui

Nawazuddin Siddiqui and his family refused to believe the niece's allegations stating that they cannot trust the daughter of a Hindu.

One suspect arrested in Kerala pregnant elephant death case, autopsy report reveals she could not eat for two weeks after cracker explosion in mouth

The forest department in Kerala has arrested one suspect in the case of death of a pregnant wild elephant in Kerala

After trying to rope in 2nd, 3rd-year MBBS students to manage Coronavirus patients, Maharashtra govt to punish medical interns if they get coronavirus

Medical interns in Maharashtra will be liable to repeat the internship for the quarantine period if they are infected with Coronavirus

Second Pinjra Tod activist Devangana Kalita booked under UAPA in the Delhi riots case

Pinjra Tod activist and JNU student Devangana Kalita booked under UAPA for Delhi riots, she is under judicial custody after her arrest

Hackers take down website of Maneka Gandhi’s NGO after she blamed people of Malappuram district for the death of pregnant elephant

The hackers put a message on the web page saying that Maneka Gandhi used the matter of elephant's death for dirty politics.

Former Indian cricketer Yuvraj Singh apologizes for casteist remark against Yuzvendra Chahal

Yuvraj Singh took to Twitter and expressed regret for the comment which was made during a conversation with Rohit Sharma.

Darbhanga, Bihar: Massive explosion in one Nazir’s house, locals suspect bombs and not firecrackers responsible for blast

Local residents in Darbhanga claimed that the explosion took place at Nazir's house while making bombs and not due to fire crackers.

Markaz management deliberately disregarded police instructions to send back its members, central govt tells SC

Markaz management did not inform about the Tablighi Jamaat gathering to authorities, centre tells SC in affidavit

Meerut police find that more than 13000 phones of Chinese manufacturer Vivo operating on single IMEI number, case registered against the company

When one Meerut Police officer gave his phone to cyber cell for checking, they found that more than 13000 phones have same IMEI number

Central audit team finds JNU officials guilty of committing fraud worth Rs 57 lakhs in the financial year 2017-2018

The DGCAE has recommended that criminal cases be lodged against the JNU officials for availing LTCs using fake bills.

Facebook user narrates the harrowing tale of his struggle to get tested for Coronavirus in Arvind Kejriwal’s Delhi

Delhi man narrates how he was told by multiple hospitals and laboratories that Delhi govt has stopped Coronavirus testing for 2-3 days

Udaipur: Tribal youth Mukesh stabbed to death over a minor fishing dispute, Zafar, Saeed, Firoz and others arrested after 1000 villagers agitate

As the mob started swelling Udaipur police, fearing communal tension, went on high alert. Internet was snapped for 24 hours

Delhi riots case: Delhi police investigating the assets of accused Faisal Farooq and his links with Nizamuddin Markaz

Delhi riot accused Faisal Farooq was in contact with the people involved with the PFI and Hazrat Nizamuddin Markaz

Connect with us

229,696FansLike
363,542FollowersFollow
246,000SubscribersSubscribe