The auction of assets liquidated under the Insolvency and Bankruptcy Code (IBC) must be done through a centralised online platform, according to the Insolvency and Bankruptcy Board of India (IBBI).
This will maximise the liquidated value of stressed assets under the insolvency law and enhance creditors’ recovery.
The auction will take place on the eBKray platform, owned and managed by PSB Alliance Private Limited, a consortium of 12 public sector banks.
The PSU banks use the platform to conduct auctions under the SAREFAESI Act.
PSBA has now developed a module within the eBKray platform to facilitate the listing and auction of assets under IBC.
“By enhancing transparency and efficiency through advanced technology, eBKray aims to increase bidder participation, streamline operations, and maximise returns for creditors while improving outcomes for bidders,” the IBBI said in a circular.
The IBBI has directed insolvency professionals to list details of all unsold assets on the eBKray platform from November 1.
For liquidation processes commencing on or after October 29, 2024, assets must be listed within seven days of the asset memorandum submission to the adjudicating authority.
The platform will be deployed on a pilot mode. A full-fledged roll out will happen later after making improvements based on usage experience.
Liquidators at present sell assets through various platforms, with details often disclosed only at the time of the auction notice. This information asymmetry can lead to lower recovery rates as potential buyers have limited time to assess the asset value.
The centralised platform will provide detailed information, including photographs, videos and geographical co-ordinates.
Experts said this was a significant step towards improving the efficiency of the insolvency resolution process in India.
Haircut validity
As regards the realisation of creditors vis-à-vis admitted claims, the Economic Survey 2022-23 noted that in a public auction-based resolution model such as the IBC, the extent of the haircut represents the discount the market demands for acquiring the stressed entity as a going concern.
Since significant value destruction may have already happened in these assets, a comparison of realised value with admitted claims may not be a reasonable indicator of the effectiveness of the resolution process.
Further, the rate of recovery is contingent on several factors, including the overall macroeconomic environment and the extent of erosion in the intrinsic value of the defaulting entity.
