In a transformative step for asset liquidation under the Insolvency and Bankruptcy Code (IBC), the Insolvency and Bankruptcy Board of India (IBBI) has partnered with the Indian Banks’ Association (IBA) to create a centralized electronic platform, eBKray, aimed at standardizing and improving the auction process for assets of companies undergoing liquidation. Managed by PSB Alliance Private Limited, a consortium of 12 public sector banks, eBKray has a proven track record, having facilitated auctions for bank-mortgaged assets under the SARFAESI Act for over five years.
Currently, liquidators conduct auctions through multiple platforms, with asset details typically disclosed only when auction notices are issued, creating information asymmetry and limiting buyers' time for due diligence. This new platform aims to mitigate such issues by continuously providing comprehensive asset information, including the asset’s status, geographical coordinates, photos, and videos, thereby allowing potential buyers more time to assess and bid accurately.
Key Features of the eBKray Platform
Effective November 1, 2024, IBBI mandates liquidators to list assets under their charge on the eBKray platform within seven days of submitting the asset memorandum to the Adjudicating Authority, applicable for liquidation processes starting on or after the circular's release. For ongoing cases, liquidators have the option to utilize eBKray for selling unsold assets. This platform is expected to provide a standardized, transparent approach to asset listing, significantly reducing information asymmetry, a common challenge in the current multi-platform auction system.
The eBKray platform includes a comprehensive module specifically developed to streamline the IBC liquidation process. It will host all information about a corporate debtor’s (CD’s) assets, including photographs, videos, and geographical coordinates, accessible to prospective buyers at any time. Unlike the current practice, where details are typically disclosed only at the auction notice stage, eBKray will ensure continuous public access to essential asset data, allowing potential buyers adequate time to evaluate asset worth.
Addressing Information Asymmetry and Improving Recovery
The move addresses a critical issue within the existing liquidation framework—information asymmetry. Typically, liquidators conduct asset sales through various auction platforms, revealing asset details only when the auction notice is published, leaving potential buyers with limited time to conduct due diligence. This practice has been linked to lower recovery rates, as hurried assessments often undervalue assets. A centralized listing platform like eBKray, offering ongoing access to asset information, is positioned as a robust solution, allowing prospective buyers to perform thorough evaluations, which can contribute to better price discovery and enhanced recovery for creditors.
Enhanced Transparency and Efficiency
The platform’s interface, enriched with advanced digital tools, is intended to increase transparency and bidder participation by making the entire inventory of liquidation assets available under one accessible platform. With required details such as the status of attachments or liens, geographical coordinates, and estimated auction dates, buyers can make more informed decisions. Additionally, the platform will streamline the operational aspects of liquidation, reducing redundancies and inefficiencies that have historically plagued the auction process.
Initial Deployment and Expected Impact
Initially, eBKray will be launched in pilot mode, with adjustments and enhancements to follow based on user feedback. The IBBI has provided access for Insolvency Professionals (IPs) handling liquidation to log into the platform using their IBBI credentials, while prospective buyers can access the platform at https://ebkray.in, with guidance and FAQs available on the IBBI website.
Experts anticipate that this unified auction platform will bolster the IBC framework by widening the market for prospective buyers, thereby improving recovery rates and reducing the need for substantial “haircuts” in asset sales. As Jyoti Prakash Gadia, Managing Director at Resurgent India, observes, “This reform will create a more competitive bidding environment, likely resulting in better price discovery and higher returns for creditors, while enhancing transparency and efficiency in the liquidation process."
In summary, eBKray represents a forward-looking initiative by IBBI and IBA, aiming to resolve long-standing issues in asset liquidation under the IBC, streamline the sale of distressed assets, and improve outcomes for both creditors and prospective buyers.
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