InvestorQ : In your view, should the government accept the discounted proposal given by Videocon or should they reject it?
Neelam Naik made post

In your view, should the government accept the discounted proposal given by Videocon or should they reject it?

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Anu Biswas answered.
9 months ago
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Purely from recent experience, the NCLT may not be for such an arrangement. But it is high time that India draws a line between regular bankruptcy due to market conditions and a lousy bankruptcy due to money laundering and siphoning of funds. In the first case, the NCLT can give a chance to the promoter to recoup control of the company.

The approach will have to be slightly different in this case. Promoters of companies like IL&FS, DHFL and Kingfisher, where there are allegations of round tripping of funds, cannot be given control back. However, in the post-COVID scenario, government must give another chance to genuine business promoters to make a fresh start.

In many cases, the NCLT case may either not find buyers or it may just drag on endlessly. There is no point in holding on to such cases and on a selective basis, these companies can be given back to the promoters at a discount. However, it must be done with checks and balances in place.

For starters, promoter should still be held accountable for frauds that get identified even subsequently. Additionally, banks that took a haircut must have equity and management participation in these companies. Also, such companies must be subject to enhanced scrutiny for some more years.

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