Disempowering the well-connected tycoons behind some of India’s powerful conglomerates remains challenging
religious tenet in India. It has also traditionally guided corporate life. Many of the country’s most powerful companies have looked dead and buried under a mountain of debt, only to be revived by biddable state-run banks willing to “extend and pretend ”. In the 1990s, after India liberalised its licence-choked economy, a government report warned that it was “impossible to liquidate and wind up an unviable firm”.
The Essar decision is the biggest knock yet to the nascent insolvency regime. The company has been stiffing creditors since 1999 and features on the’s list of a “dirty dozen” companies which accounted for a quarter of the banking system’s non-performing debt and were first in line for restructuring. The family of Essar’s founders, Shashi and Ravi Ruia, which holds a controlling stake, was expressly blocked from the bankruptcy auction last October.
The Essar case ends a winning streak for bankruptcy reformers. In May 2018 Tata Steel, a big steelmaker, acquired Bhushan Steel, another “dirty dozen” company. Creditors recovered 76% of their claims. Another five companies on the’s list were bought and a further two liquidated. The law is also credited with pressing Naresh Goyal, another tycoon, to step down as chairman of Jet Airways and relinquish control of his ailing carrier to lenders in March.
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