Quickest way to get defaulters to pay up? The threat of insolvency
Creditors have withdrawn 26,518 insolvency cases involving defaults of as much as ₹9.33 lakh crore before their applications were admitted by the adjudicating authority since the Insolvency and Bankruptcy Code (IBC) came into force.
The data compiled by the Insolvency and Bankruptcy Board of India (IBBI) is from late 2016, when the IBC was adopted, to August 2023.
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Offering CollegeCourseWebsiteIndian School of BusinessISB Leadership in AIVisitIndian School of BusinessISB Venture Capital and Private Equity ProgramVisitNorthwestern UniversityKellogg Marketing Leadership Development ProgramVisitThis suggests creditors have either recovered money from debtors or forced them to settle dues just by posing the IBC threat, experts said. Defaulting promoters run the risk of losing control of companies once insolvency cases are admitted by the National Company Law Tribunal (NCLT).
'Behavioural change seen in debtors'
In absolute terms, the default amount involved in the withdrawn cases was almost three times the Rs 3.16 lakh crore realised through the resolution of a total of 808 insolvent firms under the IBC until September 2023.
The recovery from these 808 rescued firms constituted 31.85% of the creditors' claims that were endorsed by the NCLT.
Importantly, the cumulative default amount relating to withdrawn cases climbed by more than a half over the past one-and-a-half years or so from Rs 6.09 lakh crore until March 2022, pointing to the increased invocation of the IBC, according to the IBBI data. The default amount was Rs 5.33 lakh crore up to March 2021. So while the dues were cleared or promised to be cleared outside the IBC resolution framework, it was
