₹2.2 lakh crore worth of deals flagged, says IBBI

AT LEAST 71 TRANSACTIONS INVOLVING OVER ₹15,000 CRORE HAVE BEEN DISPOSED OF BY THE TRIBUNALS

NEW DELHI: Insolvency resolution professionals hired by lenders to administer bankrupt companies have flagged dubious transactions worth over ₹2.2 lakh crore by suspended managements, official data showed.

The Insolvency and Bankruptcy Board of India (IBBI), the bankruptcy regulator, said in a quarterly update that 777 applications have been filed by resolution professionals before tribunals seeking directions on such deals—called “avoidance transactions”. Of these, 71 transactions involving over ₹15,000 crore were disposed of by the tribunals, leading to the recovery of over ₹49 crore, IBBI said.

The bankruptcy code allows resolution professionals and liquidators to look back to see if their pre-bankruptcy transactions were in order and if not, seek tribunal orders to annul them. IBBI also said that in one case, 758 acres of 858 acres valued at ₹5,500 crore were given back to a company undergoing bankruptcy resolution. A resolution professional can request a tribunal to annul an undervalued transaction of the bankrupt firm dating back up to two years for related party transactions and up to a year in other cases.

The government is now in the process of amending the Insolvency and Bankruptcy Code to extend the oversight of resolution professionals to a longer period of pre-bankruptcy financial stress by the corporate defaulter. IBBI data shows that admission of bankruptcy cases in tribunals has steadily picked up in FY22 after the restriction on taking businesses to court for pandemic-related defaults was lifted in March 2021.

Data showed that 312 cases were admitted in tribunals for bankruptcy resolution in Q4FY22, close to twice the number admitted in the June quarter of FY22. In the June quarter, 165 cases were admitted, followed by 167 in September and 238 in December. However, the number of cases admitted is only the tip of the iceberg, given the long delays in admitting cases.

Two-fifth of all the cases admitted to tribunals belong to the manufacturing sector, 20% belong to real estate, 11% to construction and 10% to retail trade,

indicating that these are pain points in the economy.

Data also showed that operational creditors such as vendors initiate most bankruptcy cases where the payment defaults are small, while banks initiate proceedings in large defaults. Fourfifths of bankruptcy cases where the default is less than ₹1 crore are initiated by operational creditors, while an equal proportion of cases are initiated by financial creditors in cases where the payment default is over ₹10 crore.