2 years of IBC: Resolution for just 34 defaulters
Over 977 companies have been admitted under the Corporate Insolvency and Resolution Process (CIRP) since the implementation of the Insolvency and Bankruptcy Code (IBC) in 2016. During the April-June quarter 244 corporate defaulters were freshly admitted under the CIRP and around 716 corporate defaulters are still undergoing the process as of date.
About 91 of the IBC cases filed against corporate debtors were closed upon ‘appeal and review’ and only 34 cases have seen successful resolutions as of the end of June under the CIRP, according to data from the Insolvency Bankruptcy Board of India (IBBI).
During the January to March quarter, only 22 cases had yielded a resolution under the CIRP and between April and June resolutions for another 12 CIRPs were closed. These include companies such as Kalpataru Alloys, Electrosteel Steels, Bhushan Steel, Orissa Manganese and Minerals, Wig Associates amongst others.
While the total value of the claims against these companies, filed by lenders, stands at ~762.4 billion, the combined liquidation value was pegged at 23.4 per cent or ~180.8 billion. Financial creditors realised 56.25 per cent of their outstanding dues in comparison to their claims.
That is, on total outstanding loans worth ~762.4 billion the lenders realised ~428.9 billion in total.
One major issue in the implementation of the IBC and CIRP is that the strict prescribed time-lines for finding resolutions has not been adhered to, uniformly across cases. This, experts say, is the biggest hindrance in the effective implementation of the bankruptcy law.
The table above shows the compliance record of pending cases against corporate defaulters with respect to the 180 day and 270 day (extended) time-line as prescribed in the IBC rules and regulations. Around 186 companies have been undergoing CIRP for over 270 days, while 183 have asked for a 90 day extension on the standard 180-day deadline for bringing out a resolution plan with an appropriate buyer.
Of the 977 corporate defaulters taken to the National Company Law Tribunal(s) (NCLT) for IBC proceedings, 136 companies have been ordered for liquidation as of the end of June.
Experts are not surprised by the number of liquidation orders as the majority of the 136 companies sent for liquidation were corporate defaulters with cases pending for adjudication under the Board for Industrial and Financial Reconstruction (BIFR).
According to the IBBI newsletter, 110 companies were either in the BIFR, or were non-functional or both. One major reason why these companies ended up in liquidation is that the resolution value for 106 was lower than their liquidation value.
That is, selling off the company and its assets would be far more valuable for the lenders than finding a new buyer. Only 18 of these companies would receive a resolution value higher than their respective liquidation value.
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