Mumbai: State Bank of India’s chairman Rajnish Kumar on Thursday said Section 29 (A) of the Insolvency and Bankruptcy Code (IBC) is being ‘stretched too far’ and there is need for more clarity on the issue.
Section 29 (A) of the IBC deals with related-party provisioning and aims to prevent defaulting promoters from taking back their companies. “The intent of (Section 29 (A)) was very clear and simple and has been very well documented in the Parliamentary proceedings also, but again, this section, in my view, is being stretched too far and there is a need that more clarity is brought along,” Kumar said at an event organised by Columbia Business School.
Citing an example, he said if two brothers have parted 25 years ago and if one of their businesses is in trouble, barring the other brother from bidding for any asset is currently accepted. “But, to say that the other brother running a business successfully cannot bid for any asset, I think is carrying the interpretation too far. These are two independent businesses,” Kumar said.
“If one company is in default, you can stop the related party or brother or family member, if they are in the same enterprise, but, not being allowed them to bid for any other enterprise and debarring them cannot be logical,” he added. Kumar expects more clarity on the section going ahead. He criticised the practice of allowing late bidders to bid for an asset facing insolvency process.
“They were sleeping all throughout the process which has gone for nine months and then suddenly there is a wake-up call for somebody to say that Rs 15,000 crore is the highest bid,and please take Rs 16,000 crore,” he said. Kumar warned that such practice can prove to be counter productive. When asked about the cash strapped Jet Airways, he said lenders are working on a quick resolution of the airlines.
Earlier in the day, PTI reported that Jet Airways chairman Naresh Goyal has told the SBI that he was ready to invest up to Rs 700 crore in the airline on the condition that his stake does not fall below 25 per cent.
Later speaking at a India Business Leader Award, organised by CNBC TV18, Kumar said, “We are trying to ensure that it (Jet Airways) keeps on flying. I have no hesitation in admitting that Jet Airways keeps on flying.”