IBC resolutions exceed new time limit

The government’s revised deadline is 330 days for the process

The average time taken for completion of 156 corporate insolvencies that have yielded agreed-on debt resolution plans is more than the government’s revised deadline of 330 days for the process.

According to Insolvency and Bankruptcy Board of India data, there were 156 such corporate insolvency resolution processes (CIRPS) till last month which had resulted in resolution. The average time taken, including the period formally excluded by the adjudicating authority (AA), was

374 days; if not so adjusted, 347 days.

Either way, more than the revised deadline.

Earlier, the outside time limit for resolution was 270 days. In many cases, that was breached, largely due to litigation by different stakeholders. In July, the government had amendments made to the Insolvency and Bankruptcy Code (IBC) that included revising this time limit to 330 days. The amendments, though passed by Parliament, are facing a legal challenge in the Supreme Court from the operational creditors to insolvent Essar Steel.

At end-september, 535 of the 1,497 ongoing CIRPS had exceeded the 270 - day timeline; 324 had exceeded 180 days but were within 270 days. The total number of admitted cases was 2,542.

“The increasing number of cases being admitted challenges the NCLT (National Company Law Tribunal, where all IBC cases arrive) infrastructure to close cases in a timely manner. CIRPS that are ongoing have reached an all-time high, with close to 1,500 as at the end of September,” said Abhishek Dafria, vice-president at ratings agency ICRA. While the average time taken is 374 days, there are cases from the Reserve Bank of India's first list of non-performing asset accounts., which it ordered lender-banks to send to the NCLT, that have been dragging on for more than two years. Essar Steel was admitted on August 2, 2017 and Bhushan Power on July 26, 2017.

Sumit Binani, an Insolvency Professional, notes timely resolution was a basic objective of the Code.

“The timeline was revised as it was not being maintained. The amended maximum resolution time limit of 330 days which includes t he litigation period would ensure that the two important pillars of the Code i.e., the resolution professional and the adjudicating authority take timely steps to complete t he process,” he said.

The average time taken, including the period formally excluded by the adjudicating authority, was 374 days; if not so adjusted, 347 days. Either way, more than the revised deadline. Earlier, the outside time limit for resolution was 270 days