First test of India's new bankruptcy law offers cautionary tale

MUMBAI (Reuters) - In January, Innoventive Industries, a speciality steelmaker based in western India, was forced into the bankruptcy court by its lenders, testing for the first time new insolvency rules that aim to resolve India's $150 billion bad debt overhang. The company, which makes steel tubes and auto parts for customers including Ford, Volkswagen and Tata Motors, posted its third straight annual loss in 2016, prompting ICICI, one of its lead lenders, to trigger bankruptcy proceedings early this year. Nearly six months on the proceedings against Innoventive, seen as a test case for the first national bankruptcy law, are raising questions about the efficiency of the new regime that regulators are now compelling lenders to use to recover debts. Nifty Trading Tips

The new Insolvency and Bankruptcy Code aims to move cases of company failure into a single forum, replacing an archaic system of overlapping regulations under which banks, company promoters and other creditors could all initiate competing proceedings in different courts, tribunals and regions. That system left India's Debt Recovery Tribunals vastly overstretched, with court buildings strewn with ever-rising pillars of dusty files, gumming up the flow of credit in the economy and discouraging new investment. The World Bank estimated it took 4.3 years on average in India to resolve insolvency under the old laws, more than twice as long as in China. And average recoveries were just 25.7 cents on the dollar, one of the worst among similar sized economies. Future & Option Trading Tips