IBC resolves 891 CIRPs involving Rs 10 lakh crore loans defaults
The Insolvency and bankruptcy Code (IBC) has reached a milestone of sort as it resolved nearly 900 cases of corporate defaults worth Rs 10 lakh crore since its launch in 2016. This led to banks and financial institutions recovering Rs 3.2 lakh crore, or 32% of their claims. However, 2,376 companies couldn’t be revived and went into liquidation.
Under IBC, a resolution means a struggling company is acquired by another as a “going concern,” meaning it continues to operate. If no buyer is found during the resolution process, the company is liquidated and its assets are sold to repay creditors.
Although the 32% recovery might seem low compared to total claims, experts say the IBC has deterred many from defaulting in the first place. Thousands of cases were settled before reaching court due to the fear of consequences. According to the quarterly newsletter of the IBBI, as many as 27,500 CIRP applications involving defaults worth Rs 9.7 lakh crore were withdrawn even before the admission of the application.
IBC has rescued 3050 corporate debtors – 891 through resolutions, 1,124 through appeal, review or settlement and 1035 through withdrawals. The 891 CIRPs which yielded resolution took on an average 558 days for closure of the process while incurring 1.25% of liquidation value or 0.74% of resolution value. Similarly, 2,376 liquidation cases took an average 486 days for conclusion. The 830 liquidation cases which have closed by submission of final reports took an average 575 days for conclusion. In case of voluntary liquidation, 1,253 cases which saw closure by submission of final report, took on an average 409 days for closure.
Latest stats (December 2023 quarter):
- 79 companies resolved, recovering 26% of claims on Rs 16,517 crore of defaults.
- Liquidation value of these companies was Rs 3,330 crore, but resolution brought Rs 4,300 crore.
- Notable resolutions: Mittal Corp (acquired for Rs 350 crore), AMW Autocomponent (Rs 138 crore), Birla Tyres (Rs 347 crore).
Also See: Insolvency regulator gives nod to project-specific resolution of real estate CIRPs
