AI May Play crucial Role in Identifying Distress Signals Before Insolvency: Justice Sanjiv Khanna at Launch of IBC Commentary

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Artificial Intelligence Law Insider

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Published on: 31 August 2023 at 11:30 IST

During a recent event marking the release of the book “Defaulter’s Paradise Lost: Demystifying the Insolvency and Bankruptcy Code,” authored by corporate litigator and disputes resolution lawyer Anant Merathia, Supreme Court judge Justice Sanjiv Khanna discussed the potential of using Artificial Intelligence (AI) to assess distress signals of entities before they default on debts or enter insolvency.

Justice Khanna highlighted that AI could have a significant role in examining and finely assessing distress signals that indicate potential insolvency concerns. He also emphasized the need for the development of a pre-default debt recovery mechanism and debt restructuring options on a larger scale.

He further mentioned the idea of creating special funds to address the bad debt issue, noting the Securities and Exchange Board of India’s (SEBI) establishment of an Alternative Investment Fund (AIF) called the Special Situation Funds for investing in distressed asset markets.

Justice Khanna’s suggestions were made during his keynote address at the event, where he also expressed the importance of a conservative approach to regulating personal guarantors, advocating for a shift towards personal guarantees that align with market economy risks.

The event was attended by notable legal figures including retired Justice Ashok Bhushan, Chairperson of the National Company Law Appellate Tribunal, and retired Justice Ramalingam Sudhakar, President of the National Company Law Tribunal.

Justice Bhushan praised Merathia’s book for its comprehensive commentary on the Insolvency and Bankruptcy Code (IBC), its impact on the economy, and practical implementation challenges.

Justice Sudhakar highlighted the positive impact of the IBC on bad debt management and shared statistics indicating successful application outcomes under different sections of the IBC.

The book’s author, Anant Merathia, explained that the book aimed to provide a reference guide for stakeholders affected by the IBC, including professionals and impacted parties.

The launch event also featured a panel discussion with senior lawyers discussing their experiences and challenges in IBC cases.

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