Mint Explainer: Why bankruptcy reforms should be the new govt’s top priority
Mint looks at the cause of delays and what the new administration can do to improve outcomes for lenders and debtors. The IBBI data show that 947 resolution plans were approved till the end of March, resulting in 32% realisation against the admitted claims.
A total of 7,567 cases were admitted till 31 March since the Code was notified on 28 May, 2016. Of these, 2,224 cases were either withdrawn or closed on appeal/review/settled.
Liquidation orders were passed for 2,476 cases, and another 1,920 are going through the corporate insolvency resolution process (CIRP). The IBBI January-March 2024 newsletter states that creditors had realised ₹3.36 trillion under the resolution plans against total claims of ₹10.46 trillion, which was higher than the fair value of ₹3.20 trillion and ₹2.08 trillion of liquidation value.
In a note in the newsletter, IBBI chairperson Ravi Mittal wrote: “The resolution process, on an average, is taking 679 days to conclude as against the standard timeline of 330 days." Also read | The slow burn of bankruptcy filings may be about to end Mittal added that the data of the resolved cases indicated a direct correlation between the length of the resolution process and the recovery rate–cases resolved within shorter timeframes tend to yield higher recovery rates, while the longer resolution periods coincide with diminished recovery rates. Thus, for cases resolved within 330 days, the recovery was 49.2% of the creditors’ claims compared to just 26.1% for cases that took 600 days or more.
But just about 15% of the cases were resolved within 330 days. While the IBC was envisaged as a time-bound process with timelines prescribed for important activities, there has been considerable delay at every stage from
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