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When Binani Cement moved the Supreme Court seeking to exit the resolution(प्रस्ताव/समाधान) process under the Insolvency(दिवालियापन) and Bankruptcy Code (IBC) overseen by the National Company Law Tribunal (NCLT), the court made it clear that the law does not permit(अनुमति) forum shopping: once the company has entered the NCLT process, it must complete that process. This, in our view, is entirely(संपूर्णतया) in agreement with the spirit of the IBC. However, the procedure that has been followed for resolution under the IBC stands exposed as being flawed(त्रुटिपूर्ण). The procedure wasincapable(असमर्थ/अयोग्य) of discovering the highest valuation for the asset being auctioned(नीलाम करना). A value higher than the highest discovered under the IBC process was offered for the distressed company outside the IBC process, to enforce which Binani approached the Supreme Court. The way ahead is clear. The IBC process must be amended(संशोधन करना/सुधरना) to realise the public policy goal in resolving a bad asset: secure the highest value for the asset being resolved, so that the creditors of the bankrupt company realise their dues, and if there is anything left after paying off all secured and unsecured creditors, the shareholders, too, get back some part of their capital.
Realising the highest value for the asset(संपत्ति) is crucial(महत्वपूर्ण/निर्णायक) to minimise the bank-recapitalisation(पुनर्पूंजीकरण) burden(भार) on the exchequer(सरकारी खजाना/राजकोष) and the taxpayer as well as toincentivise(प्रोत्साहित) optimum(सर्वोत्तम/अनुकूलतम) use of the asset by the buyer who invests to acquire the asset. The way to realise the public policy goal in resolving bad assets is to dump all scorecards in evaluating(मूल्यांकन करना/आंकना) bids and be guided solely by the price being paid. And the price discovery should be through continuous bidding(बोली लगाना) until all save one bidder drops out, as is done in spectrum auctions.The IBC is a crucial instrument in ridding the economy of crony capitalism. It is a new law and some procedural(प्रक्रियात्मक) improvements will be found necessary during its implementation. The NCLT should adopt such improvements, not be bound by a rule whose flaws have been demonstrated. It should not set an unhappy precedent.
Important Vocabulary
1.Burden(भार)
Synonyms:anxiety, concern, difficulty, duty, hardship
Antonyms: advantage, aid, assistance, benefit, blessing
2.Amended(संशोधन करना/सुधरना)
Synonyms: alter, enhance, lift, modify, rectify
Antonyms: lower, worsen, break, decrease, depress
3.Entirely(संपूर्णतया)
Synonyms: absolutely, alone, altogether, exclusively, fully
Antonyms:inadequately, incompletely, partially, partly
4.Optimum(सर्वोत्तम/अनुकूलतम)
Synonyms: -carat, A1, ace, capital, choice
Antonyms: least, poorest, worst
5.Evaluating(मूल्यांकन करना/आंकना)
Synonyms: appraise, assess, calculate, check, check out
Antonyms: neglect
