Financial creditors recover only 31% of admitted claims in over 500 resolved insolvency cases

The Insolvency and Bankruptcy Code, despite its many benefits, has not been able to live up to the expectations as far as recovery of creditors money is concerned.

Till 30 June 2022, financial creditors have been able to recover only 30.64% of their total admitted claims in cases where there have been resolutions. Against total claims of Rs 7.67 lakh crore, financial creditors could recover only Rs 2.35 lakh crore in as many as 517 cases that got resolved, according to the quarterly newsletter of the Insolvency and Bankruptcy Board of India (IBBI).

In the 43 cases that were reported be resolved in the April-June 2022 quarter, only 10% of the total admitted claims of Rs 10,697 crore were recovered by the financial creditors.

Since the provisions relating to CIRP came into force on 1 December 2016, a total of 5636 CIRPs have commenced by the end of June 2022. Of these, 3637 have been closed in which 1,934 cases ended in ‘revival’ of the corporate debtor. As many as 774 of these cases have been closed on appeal or review or settled; 643 cases have been withdrawn; and 517 cases have ended in approval of resolution plans.

As many as 1703 have ended in orders for liquidation. Of the cases which ended in liquidation, final reports have been submitted in 374 cases. There are 1329 ongoing liquidation processes as on on 30 June 2022. As many 221 liquidations were closed by dissolution, 18 by going concern sale and 8 by compromise/arrangement. About 76% of the CIRPs ending in liquidation (1283 out of 1697 for which data are available) were earlier with BIFR and/ or defunct, says the quarterly newsletter of the Insolvency and Bankruptcy Board of India (IBBI).

“The economic value in most of these CDs had almost completely eroded even before they were admitted into CIRP. These CDs had assets, on average, valued at less than 8% of the outstanding debt amount,” the IBBI report says.

Large cases (admitted claims of more than Rs 1,000 crore)

Of the 517 corporate debtors rescued under the Code, 91 had admitted claims of more than Rs 1,000 crore. Till March, 2022, 87 such CDs have yielded resolution plans with realisable value of Rs 2.17 lakh crore. During April – June 2022, 4 such CDs have yielded resolution plans. The realisable value of the assets available with these 91 CDs, when they entered the CIRP, was only Rs 1.18 lakh crore, though they owed Rs 6.97 lakh crore to the creditors.

Of 1703 CDs, ending up with orders for liquidation, 157 had admitted claims of more than Rs 1,000 crore. These CDs had an aggregate claim of Rs 6.69 lakh crore. However, they had assets, on the ground, valued only at Rs 0.39 lakh crore.

Cases resolved before admission

Despite the poor recovery, the insolvency regulator insists that the success of the IBC cannot be judged alone on the basis of recovery amount. It also flaunts the number of default cases that were resolved even before admission. The IBBI report says that till June 2022, as many as 22,411 applications for initiation of CIRPs of corporate debtor having underlying default of Rs 7,10,665.02 crore were resolved before their admission.

Individual Process

The provisions relating to insolvency resolution and bankruptcy relating to Personal Guarantors to corporate debtors came into force on 1 December 2019. So far, 1,235 applications have been filed as of 30 June 2022. Out of them, 114 applications have been filed by the debtors and 1,121 applications by the creditors under sections 94 and 95 of the Code, respectively. Among them 18 have been filed before different benches of DRT and 1217 have been filed before different benches of NCLT.

Of the 1,235 applications, 48 applications have been withdrawn/rejected/dismissed before the appointment of RP and RPs have been appointed in 488 cases. After the appointment of RP, 14 cases have been withdrawn/rejected/dismissed and 90 cases have been admitted.

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