IP Sanjeev Ahuja

  June 27, 2021

‘Out of the current four pillars, three are tyres of a truck – the IBBI, the IUs and the NCLTs. And the fourth is a Maruti 800 tyre called the RP.’

(Mr. Ahuja is a Delhi-based IP)


Can you tell us a little about yourself and your academic and professional background?

Okay, so in terms of background, both academic and professional, I sit here today I sit here with about 25 years plus experience. And the kind of hair fall I have had in the last five years, the credit should be given to IBC. It probably tells how easy or difficult being an IP would be. But anyway, almost two and a half decades of experience. And I used to be a part of the corporate world. I’m a chartered accountant and I hold a degree in cost accounting as well. That’s how I started my career. I was with Maruti, which was my first job. I used to work with the Treasury there, eventually moved on to Ernst & Young. Moved around to Dubai and Bombay. Then spent some time with Booz Allen Hamilton. It was then I had this inkling to work with promoters more, to see things from the inside out. And that’s where I joined the proper corporate world. Apollo International, DS Group and finally, Coastal Projects.

This was about 15 years of very diversified experience in companies across. Then I decided to rediscover, to look at a second innings. And that’s when I did law. About seven years back, I completed LLB from Delhi University. In hindsight, I can tell you it’s a great qualification to have chosen. Whether you want to practice law or not, it’s essential to do it to cultivate a perspective. So those three years were really well spent. I used to be the front bencher even in my second innings. By the time I completed the degree, I had a lot of interest in ADR, especially in mediation. I was not pleased or comfortable getting into litigation or going to a court and I said, if there is a mechanism to solve a dispute out of it, why not? Now, as luck would have it, just as I was getting more proactive and visible in ADR, I attended a three-hour program on IBC at Ph.D. Chambers. I’m on the Management Committee, and I used to frequent the chamber quite often. This was in the middle of 2016. And that was a turning point.

I realised IBC was something for people like me. The reason why I say so is if you have a corporate background, you’ve seen that world inside out. Then you can really relate as to what ails the company, right? You understand the kind of interdependence there exists between the departments. A chartered accountant can be good at reading balance sheets and doing taxes and audits. A company secretary would know, better than probably anyone else, about secretarial practices in the board meetings and the companies act. A lawyer knows his civil and criminal suits. Management graduates are more on the marketing and presentation side of things. However, once you are a part of a corporate, you can understand the interdependency, you know what exactly is relevant in how everything gets balanced. As you keep climbing the ladder, you are even better able to see the larger picture.

And that’s why, when for the first time I heard about the IBC, that there will be an animal called resolution professional who will be given the charge of a company, I knew it. I wanted to know more about it. We were told then that the bill was under consideration, and it was going to be notified. I was pretty eager to see how it would shape up and what exactly we were talking about. Back then, I was occupied with mediation and arbitration.

So on 1st December 2016 it got notified. The enrolment was open for the first month for those who met the initial criteria, but I wanted to avoid jumping in without doing my homework. So I spent January studying and going deeper into the law, then appeared for the LIE and cleared it. Frankly, taking it early was an advantage. It was a breeze for the reason that there were no precedents and just the Code, the acts and the regulations. But the real journey started after that.

At this point, I was working as a consultant to the Ministry of Commerce, among others. While handling PSU clients, I would suggest them to use the IBC. Of course, whether the IBC is used as a recovery tool or a resolution mechanism is still an ongoing debate. An operational creditor is keen to get his money back. A financial creditor is happy to consider restructuring if he is going to make his money back over a longer period. But nevertheless, I did suggest taking a look at the new law. That is how things were getting started, and eventually people knew we were present and active in this space.

So sometime in early March, I got a call from a senior banker who was sitting in a CoC and they wanted to replace the IRP. He knew I was eligible and asked me to take on the assignment. I told him I wanted more details, as I was a key part of some arbitration proceedings in a High Court. He said there was no time and they needed a yes or no. I was basically blindfolded and asked to jump in a well.

The issue was, at that time my consent was already given for two companies at the NCLT, Hyderabad. But I said yes. And shortly thereafter I was given a briefing about the company, which turned out to be a big infrastructure company. 2200 crores of turnover, 1800 crores of debt. That’s just how things work sometimes. By the time I got the order, I realised I was in for a serious thing. And that my other two consents needed to be withdrawn. Because if I were to really make sense of things in an operational company, then I could not be doing 10 projects together. It would have taken me time to understand the tricks of the trade and to create a good team. Then it was a struggle to even come out of the previous two where I had given my consent, because there was no concept of it then. Once you gave your consent, nobody knew how to withdraw it. But I wrote letters and mails and did it somehow. So that’s how my beginning was in IBC.


Was it a little overwhelming for you to take on an assignment of that magnitude in the first go?

It depends on how you would want to really describe it because it’s crucial for someone to have spent time in the corporate world. And that has always come as an edge to me. So I know that ‘ease of doing business’, as a phrase, is frankly not true in our country. I mean, it is really a Herculean task to do business. A promoter or an entrepreneur really has to go through a number of challenges, and it’s a real roller-coaster ride. That is why I could appreciate it when somebody told me what was happening in a company, what they were facing, and what are the hurdles.

Now in terms of whether I was capable of handling from day one – the law has evolved over the period, and it continues to do that. For people like me who started from day one, we have seen really a U-turn. Maybe not a U-turn, but a 180-degree turn. A new law, which requires so frequent an amendment, can be viewed in two ways. On the one hand, we can say the government really means business. The government is proactive. The government is agile, they figure out what the problem is on the ground. But I’ll give you a flipside as well. At times, it does not give out a good feeler in the market. It can mean you have no vision when you are bringing such an important piece of legislation, which is doing away with many previous legislations. Because it’s not the first time you are grappling with this scenario. Now, if you have to do it, and if you have to repeal so many laws, that means there needs to be a remarkable amount of planning and research so that you don’t commit mistakes or leave loopholes. If it requires too frequent amendments, that means somewhere we could not visualize that there are smart people who can figure out the loopholes. So it can be viewed both ways, right? For example, we first had 29A to keep the promoters out and then came along 12A came. Which is like 180 degrees turn because when we started, we were told these are proceedings in rem. Which means once a drill starts, you will necessarily need to go through the drill, and you come out of the other side of the tunnel. But now you have Regulation 30A, which says withdrawal can actually happen at any time. That means you get started and you withdraw. And if that be the case, don’t you think by default, people would use that as a recovery mechanism?


But the withdrawal still needs approval from 90% of the CoC.

No, no, the point is not that. I’m giving a comparison between a situation where these were supposed to be proceedings in rem. One of the ILFS group companies, which I handled, was a solvent company. Now the beauty is this — if you are talking about a solvent company, and you don’t have a 12A mechanism, it will have to go through the drill. But the problem does not stop here. For a solvent company, anyone can be eligible because they don’t need to contribute even a single rupee as the company has assets. One just needs to be a resolution applicant, showing their intent.

That being said, I can assure you IBC for sure has changed the game to a greater extent. Because another point which I will make regarding the benefit of IBC is it has really changed the relationships between the creditors and debtors. It has changed the entire mechanism of lending. Today people know that your documentation needs to be proper, you need to be on top of your limitation problems, you need to be on top of your disputes issues, you need to be on top of assured and not assured returns…


And now you also have to be on top of your personal guarantees.

Absolutely. The jury is still out whether we’ve been able to really make a difference in totality. These frequent amendments, these tweaks on one side, they are required. But they also show a lack of planning and preemption somewhere.


But on this point of frequent amendments, I want to ask you, do you not think maybe what happened was that the government started off with a very idealistic picture in mind? And when the law was actually applied, it realised it had to give in a little.

Okay, so there is a counter to that. When we expect the government to start with something of this importance, it is expected to have the wherewithal in terms of facts, data and the policymaking, unlike you and me. The government has the experience, the bureaucracy, the memory of the past mistakes. You cannot afford to start from scratch every time. You need to at least make a new mistake, not the same ones. That is one. The second thing is they started with the big 12 companies. The Dirty Dozen, which was almost about 20-25% of the NPAs. But frankly, if you want to start with a draconian legislation like this, and I’ll explain why I consider this draconian in a way. So if you want to start with something draconian like this, you want to start through a soft launch. And a soft launch does not happen with a big race. What we did here was through the RBI, we identified the top 12 accounts called the Dirty Dozen. And the writing is on the wall, all the changes initially happened primarily to deal with these accounts. The law actually got tweaked to handle a problem or an issue which a particular account was facing. Essar Steel has an issue and in comes 29A. Bhushan Power Steel has an issue and in comes 32A. Then we had 12A, which we spoke about, and then Jaypee led to the home-buyers becoming creditors. And Article 142 was being used by the Supreme Court not once, but twice! They restarted a CIRP twice. What happens to the timelines then, which was the USP?

Now I will come back to why I say it’s draconian. Look, there is a lot of learning and unlearning required when somebody wants to get into the IBC ecosystem. Any professional who comes in as a CS, a CA, a banker, a management graduate or a lawyer, they are great in their profession. But once you want to be an RP, you need to unlearn a lot. For my own assignments, I engage professionals, including other IPs. I also advise other IPs. I have seen a company secretary who is too good in the secretarial work, missing out on the bigger picture about how to look at the company in totality. How to look at a resolution applicant, how to interact with them. How to interact with a banker, how to manage a CoC, how to continue a CD as a going concern. I’ve interacted with a chartered accountant who is outstanding and can read a balance sheet better than me, who knows tax audit and assessments and everything. But he has a challenge when he interacts with a promoter, when he interacts with employees, when has to take a call with a customer, when he has to take a call about the COC meeting. He has difficulty while interacting with the NCLT, while talking about a particular arbitration or a legal case.

So, you see the difference. There is a lot of unlearning required once you are the de facto CEO or MD of a company, because a suspended Board does not mean that you actually become the MD. You work with the Board, you work with the CEO, you work with the KMPs and you take it further. You are in the driving seat, and they are under you in a way because you need to report to both the NCLT and to the CoC. It’s a complicated relationship. But the moot point here is that IBC is one such law which can lead to the death of a company. Would you agree? Yes, right. And liquidation is nothing but a dissolution of a corporate legal entity. A non-natural person, but it dies. Tell me any other law which you are aware of — the companies act, the income tax act, the contract act, the sale of goods act, the transfer of property act, in which a company would cease to exist? The basic premise is that the company is a perpetual entity, barring in exceptional circumstances. However, in IBC, if a CIRP is not handled properly, it will sound the death knell for the company. A failed resolution means a liquidation. Though in a case which I handled, even post liquidation we could sell the company as a going concern. It was back in service by January of ‘20. Today the company stands revived.


But do you not think that if the resolution has failed, then that means maybe the company’s time was up?

Theoretically, yes. But practically, never. I will give you two scenarios. We get to read figures like 48% of the companies are getting liquidated, but a lot of them are the erstwhile BIFR cases. A lot of them are ghost companies, zombie companies. And the balance of them are failed resolutions because of reasons like resolution applicants losing interest, RPs getting too bogged down by compliance and not really looking at the larger picture. Very common reasons. In my case, what happened by the time I was appointed as RP in that particular case was 180 days were over. Who do you blame? I’m not getting into the reasons why it happened. I come in on the 181st day and seek an extension. Now I get 90 days, 90 days is not good enough for an RP to understand what has happened. 90 days is not good enough to understand about the company, to do the marketing, to reach out to people and to try to sell to get something in return. But by the time I did all that, 90 days were over, so I had to necessarily go through liquidation. But the people I got in touch with, the kind of marketing we did, those people were now coming back. They said well, we find a reason, we see sense in what you say, maybe we can look at it. We had three bidders. One of the guys was from the same domain, and eventually, he picked up the company. We got much more than the liquidation value. That is fine, but the important point I’m trying to make is there are many practical difficulties on ground. So theoretically, yes, once a liquidation begins it means the death warrant. It means nothing can be done, strip the company off its assets, look for a maximum recovery and dissolve the company. The Code says the same, but the regulations have come up with the 32E which says you can sell the company as a going concern, even after liquidation. Then the NCLAT said Section 230 of the Companies Act can be applied. How can you pick up a section of a different statute and just parachute it back into IBC? If I read 230, it has a relevance to 229 as well as to 231. Because there is a sequence. Naturally, nothing has happened in 230 because people have no idea. It’s a non-starter. In NRE Coke they tried everything. Of course, it didn’t work out for a simple reason. These are the anomalies we should acknowledge. If one order says try 230, that becomes a precedent. Everyone wants to try 230. If 66% of creditors have never agreed to a resolution, how could 75% possibly agree under 230?

This is where I’ve also been saying that during CIRP, please reduce the requirements of compliance. If there’s a NPA, the promoters and the management have not adhered to the law, the company has not been compliant for three years, five years, or perhaps longer. Then why do we want to make the RP obligated to take care of all the possible laws? Section 30(2)(e) says ‘compliance of all laws’. Somebody give me a list first. Nobody can give me a list of the laws. Then what kind of compliance should I check? The other problem is less about that, more about the timeline. How should I not really be worried about the compliance when I have 180 days? I should focus my thinking on out-of-the-box solutions. Look at whether the company can survive.


Does the prevailing timeline then make sense?

These have been discussion points from day one. But that is one point I appreciate from the government, from the Regulator because I’ve been asking this. The point is, I was told ‘Mr. Ahuja if we’d have said 200 days, you would have asked why not 201?’ That’s why a certain number had to be given.

If you ask me, I’ve always been of the view that if it’s a going concern, give it one year. Because there is a business cycle. There are people who do business from January to March. There are people who move from October to December. Now for an RP to come in, understand the business, reach out to the market and do a lot of stuff, 180 days is slightly hard. I’m talking about a going concern — Essar Steel, Bhushan Power Steel. One size fits all is a wrong idea. If it’s a working company, even if it’s a small company, we need to give it time. Because that’s how you maximize the value. If it’s a zombie company, the CoC can take a call even in the first meeting to liquidate it. They’ve not been doing it. There have been cases where the RP finds no registered office, the promoters are absconding, and he can’t locate anything. But the CoC says we can’t do this. You’ve been given 180 days. He says there’s nothing to be done. They don’t hear that. So, it’s a clear differentiation and three possible categories. Going concern company, ideally one year, no extensions. Second is 180 days for a company for which something can probably be done. And if it’s a zombie company, then a cut-off after 30 days, that’s it.

The compliance should be reduced to 50% in a CIRP, but the moment there is a liquidation, it should be zero. RP’s focus should be maximization of value. He should not be bogged down by income tax returns, GST and audits and what not.

Then there are the four pillars of IBC. The missing, and the most important pillar is the CoC. They cannot tame them, they cannot regulate them, and they are the people who were the lenders. They are the people who are deciding the recovery or the resolution, and we are leaving them scot-free to do as they please. Not only that, but they don’t tell the RP why he is required or not. They can change the RP if they wish. Likewise, they never come back to committing the RP’s fees on time. The CoC is an important stakeholder, it should be the pillar. Out of the current four pillars, three are tyres of a truck – the IBBI, the IUs and the NCLTs. And the fourth is a Maruti 800 tyre called the RP. You can imagine what kind of smooth ride it will be. All those three are systems and organized institutions. There have not been any amendments because RPs are facing a challenge.

Moreover, IRP and RP, that relevance is lost. Initially, it was 30 days over the period between them. But in the back and forth among the three pillars, the number keeps creeping up. Today, Anuj Jain is still not an RP in Jaypee. He has been an IRP for four years now. He’s doing whatever he is supposed to do. I’m proposing there be an RP from day one. Overall, it’s been a mixed bag. Making any amendments only looking at a bigger case and losing out on what exactly is happening to the so many thousands of companies which are below the radar causes many practical problems.

For example, MSMEs. We say we raised the threshold from one lakh rupees to one crore rupees to save the MSMEs. But an MSME is not only a corporate debtor but more often, also an operational creditor. What happens is an operational creditor now suddenly cannot use Section 9 for up to 99 lakh rupees of debt. That is a huge amount for an MSME. We wanted to save MSME as the corporate debtor, but we are still keeping them exposed as an operational creditor. Today we have PPIRP. We’ve had so many roundtables and somewhere people are saying how would it get started? A CD has to initiate, but the CD needs to have a concurrence of 66% of the financial creditors which are unrelated. So even if the CD wants to appoint an RP it cannot, unless and until he is being given a green signal by the FCs. Under Section 10 of CIRP, a CD can go ahead and it can initiate the resolution but it cannot do that in PPIRP.

In the consultation period for the PPIRP, I repeatedly asked why do they want it to be completed in 90 days? CIRPs had 180 days and none ever saw the light of the day in that period. Why reduce it further? After much back and forth, eventually, they made it 120. But that 120 continues to be 90, because the 30 days are given only to the NCLT. It is the RP and the stakeholders who need time and not the NCLT. The simple point is, we need to think from the perspective of the people who have a problem. One step forward, two steps backward may not be a great idea, we need to be looking at a holistic solution.


You have wonderfully covered most of the ground, just two small questions to wrap things up. First, against the background of everything you’ve just talked about, coupled with the year-long suspension, do you think IBC is going to hold out in the coming years? Or is it going to go the same way as the previous legislations? Second, after your experience of the last five years, would you still recommend professionals to become an IP?

Let me take the second one first. As a mediator, I can say using mediation techniques can be very helpful in IBC. And I’ve been successful without even litigating. I’ve been interacting with the parties, with stakeholders, customers, vendors, the bureaucracy, you name it. I’m using mediation techniques and my philosophy, and it is helping. Today we have around 3500 IPs. When initially NPA numbers were being given, any kind of calculation was telling me we need at least 50,000 IPs in India, if you were to do anything about it. And let me tell you, not even 50% are working. So, there is a problem somewhere. There is an arithmetic, which we have done. 60 more people are getting added every two months. But half of them are not getting involved in the active work. Some people think initially, people made a lot of money. It’s a liquidator thing. But then they get to read some horror stories, somebody got kidnapped, somebody got a threat, somebody had to deal with bouncers, somebody didn’t get paid their fees, somebody had a disciplinary action. But that is the reality of life. The law will take some time, but the stakeholders are also more understanding now. The promoters thought initially they’d be able to manage it the way they’ve been able to manage everything all this while. In some cases, they’ve been successful, some places they’ve not. The short answer is yes, the potential is huge.

What will happen to IBC is the interconnected question. IBC version two is desperately required. Try and plug the loopholes. Because NPA is not something which is only a legacy. NPA is a regular phenomenon that will keep happening. You are not stopping banks from giving loans, right? You’re not stopping the development, you’re not stopping people doing scams for expansion, you still need equity and debt equity. We need holistic solutions and what we are doing currently is a patchwork. It is time we all understand that commercial law needs to be handled differently. There’s nothing in it about fairness and equity. We need to understand the sanctity of a contract. In enforcement of contracts, I think we are 150 in global rankings. And IBC is nothing but connected to contracts. Somebody has to understand this is not a procedural law. It’s a substantive law, we need to understand that.

Till the time the stakeholders don’t come together, it will have these issues. But I’m sure they will be ironed out. It’s a matter of time. Young guys are definitely welcome. They are calling it a profession of professionals. We have to be engaged with each other and take this forward.


(This interview was conducted by Adv. Parth Indalkar and has been edited and condensed for clarity.)

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