Understanding India's bankruptcy laws needs more nuance. A company like Patanjali that takes loans on its own balance sheet to buy a Ruchi Soya, doesn't mean the banks are lending to Ruchi Soya.
Patanjali also has to pledge the Ruchi Soya shares it purchases, as part of that deal. Apart from those shares, there are corporate guarantees. If it doesn't service the loan, banks can sell the shares, if that's not enough, they should invoke the guarantee.
In general, any bankruptcy purchaser will want to fund the purchase partly by equity, partly by debt, and it's quite likely the same banks provide the debt; to them, it's actually a different borrower.
More importantly, remember that the underlying "resolved" company is now a better company for having written off the debt; it can turn profitable.
What banks SHOULD have done is to take a 5% stake in Ruchi Soya in shares. This is how banks did it in Monnet Ispat.
What banks SHOULD have done is to take a 5% stake in Ruchi Soya in shares. This is how banks did it in Monnet Ispat.
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