Small creditors and vendors, previously at the mercy of large debtors, are now using India’s new bankruptcy code as a pressure ploy to secure payment of dues that would earlier have been all but impossible to recover, Reuters reported on Friday. India overhauled bankruptcy laws last year with the main goal of helping banks tackle a $150-billion bad loan issue that is crimping growth in the economy. Less than a year on, insolvency professionals say that it is vendors and small suppliers, also referred to as operational creditors, who are using the new rules as leverage to recover dues much more effectively than banks owed far larger sums. “It is not necessarily a negative thing, but it was not the objective of the new code,” said Ashish Chhawchharia, a partner at Grant Thornton who works on insolvency cases. The new rules give any creditor owed 100,000 rupees ($1,560) the right to drag a multi-billion dollar company to court.
