IP Vikram Bajaj

  July 4, 2021

The anomaly of the situation was that avoidance was adjudicated, but the promoter was so hell-bent on not losing the control that he shut the business by simply cutting the power to the servers.

(Mr. Bajaj is a Delhi-based IP)


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

I have done the company secretary course, the chartered accountant course, and I am also a law graduate. All through my career I’ve been working in the distressed space. I started from the legal side by working with Dhir & Dhir and we did the restructuring schemes, through SICA, and eventually, they also acquired an ARC license. I then moved on to ARCIL in 2006. From 2006 to 2009, I was working in ARCIL so I went from the legal side to the financial restructuring, trading of non-performing loans and resolutions. So I would typically take a mandate for, say, restructuring of our creditors or arranging of distressed finance for the settlement or disposal of an undertaking, or to raise funds. Somebody would approach and I would tell them what was a possible solution, what could be disposed and, and then of course, arrange for the pieces in the end. In the meanwhile if there were certain legal proceedings initiated by the bank, I would handle those as well. This was on the borrower side. Similarly, we had mandates from banks and ARCs and other financial institutions for resolution of their NPAs. Then there is a big secondary market for the non-performing loans of banks. We did a lot of diligence for ARCs and we did asset pricing for them which told them at what price they should bid, what is the fair value, what is a fair amount that can be recovered out of that so that assessment, etc.


I’m practising on my own since May 2019. My entire area of practice has been distressed space only, be it legal, financial, real estate or financial assets, but all-around distress.


Did you also qualify as an IP in 2019?

You would know that when IBC started, there were two categories of licences – the first you could get if you had 15 years of experience, the other was available only if you had 10 years of experience and appeared for the Limited Insolvency Examination. I didn’t have 15 years of experience then, so I couldn’t enrol. But the Limited Insolvency Exam started from January 2017 in Delhi. And I took and cleared the exam on the very first date. My registration number is three. Even that is only because I’m on the lower rung alphabetically, else my application would have been first.


And may I ask how many assignments have you done so far.

In terms of the number of corporate debtors, I would now be dealing with the 10th or 11th assignment. For my very first assignment, we had five units, out of which three were running. In the very basic definition that the IP will take over management and control, it was difficult to pinpoint what extent will amount to control. Because you are a person coming in from the outside, or you are new to the industry or new to the specific organization, and you have to maintain it as a going concern, you can’t let the company stop. So whatever steps you have taken, whether they will be construed as adequate control in terms of legal fiction, that was the question. I think the evolution of jurisprudence, which was critical, is what has significantly changed in how we do CIRP these days.


There’s also more awareness now among everyone.

There is awareness among stakeholders so in some sense, you will not be as unwelcome, you receive a little less hostility or that hostility comes in the form of legal filings rather than physical aggression.


Speaking of hostilities, are there any assignments that particularly stand out in your mind as interesting or challenging?

Since I have been dealing in distressed assets all through my career, that hostility in its various manifestations – be it not giving out the information or not recognizing or vicious litigation or complaints – has been part and parcel of what I’ve been dealing with. Because I have dealt with a lot of NPAs that we purchased with CBI complaints filed against them, and we were sitting before the CBI explaining that we were just the traders of the NPA and had nothing to do with the propriety element of the transaction.


There was a transaction where the entire business was diverted during the CIRP period. It was a technology company and when we started the CIRP, we observed that there were only two legal employees on the premises. In fact, one of them was not even on the premises. These were the only two people shown on the rolls of the company, and there was no technical staff. In the records of the financial creditors, the business had already been shut for more than five years. It became an NPA in 2014/15. But as we started drilling deeper, we found that there was a technology business which was very much running through a website which was publicly visible. And there was more than 35-40 crores of revenue getting generated each year. There were many transactions that they had done to divert that business. The revenue was coming into another company and there was a complex web of transactions. We didn’t know how to convince the Adjudicating Authority that these were not independent transactions, that they had taken the business entirely out of the hands of the CD, and it was being run safely by another promoter group entity. The CD was not receiving anything, whereas all its licences, accreditations, and trademarks were being used for that. Thankfully, we could convince the AA, and the avoidance was adjudicated in our favour. The anomaly of the situation was that avoidance was adjudicated, but the promoter was so hell-bent on not losing the control that he shut the business by simply cutting the power to the servers.


What are your thoughts on how IBC has developed over the years and where it is now?

Certainly, there is a capacity constraint. A lot of jurisprudence has evolved at the apex court level and despite that, there is a lot of disparity in decision-making of the tribunals. They are ill-equipped in terms of the number of judges on the bench. The number of benches has been increased, but the same member is overseeing two benches, three benches. Matters are not getting disposed, therefor the financial creditors are losing faith in this mechanism, simply because of the time involved. That is a big roadblock. I would say there are cases I have handled where I got into the picture as an RP and the total time I had for achieving a resolution was maybe six or seven months. The plan was approved, but it’s been more than two and a half years since it was sent for approval by the AA. That puts a massive dampener on the faith that the investors have or that the creditors have. We receive calls each month saying our costs are going up, steel prices are shooting up, how can we do it in the same price? They even withdrew in one case, and we convened a COCs meeting and said that the NCLT has to take the decision, we can’t do much. So, if somebody backs out after investing two-three years, that whole period is lost for the system. And that is very fair on their part.  We take performance security so that we could second secure the applicant’s performance, but questions are being asked that what secures our performance.


Lastly, what would you say to the aspiring insolvency professionals?

As I mentioned, I had three different qualifications but for almost a decade or so, I could never say that I’m practising a particular profession. You guys have that advantage — whenever you enter, you will be entering a recognized profession. Distress as an area of work is one which gives you a feel of transactional business. With IBC you get to discover various industries. Across 10 cases, I worked in seven or eight different industries. I learned in a span of five years, which I don’t think even the best of entrepreneurs gets to do, and that too while being at the helm of affairs. You never get bored — you do transactional work, you see the legal side of it, and, of course, there is the rush of timelines. So a very interesting profession to be in.


If the NCLTs provide the required infrastructure and the investor community, the lender community and the banking community stay invested in the system as a credible way to resolve their NPAs, it could work. As long as there is going to be credit business, there is going to be risk. I think this is the area where you will find the maximum breadth for value addition. You can start at a distressed value which is bottomed out of the curve and take it to an enterprise value. The space for value addition is enormous.


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

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