Now, insolvency resolutions exceed liquidations

NEW DELHI: The Insolvency & Bankruptcy Code (IBC) has resulted in two cases being resolved under the new law for every one that goes into liquidation. This is a sharp contrast to 2017-18, when for every one resolution, five companies went into liquidation, latest data showed.

This improvement is partly because the legacy cases related to liquidation have come down and also due to better quality of assets when they are admitted for corporate insolvency resolution.

A number of initiatives are being taken to improve the outcomes of the Code (IBC). These include monitoring of cases pending for admission and ongoing CIRPs (corporate insolvency resolution processes). Further, the Insolvency & Bankruptcy Board of India (IBBI) revised its mechanisms for real-time sharing of information, regarding applications for the initiation of CIRP with the information utility (IU), IBBI said.

Besides, according to the latest numbers, nearly 25 times more cases are being settled even before they are admitted, as the promoters are keen to settle the dues, fearing losing control over their companies. Since the law was enacted, 30,310 cases with underlying default of Rs 13.8 lakh crore were settled pre-admission. Post-admission, IBC resolved 1,194 cases through resolution plans, 2,430 cases were closed through settlement, withdrawals and appeal, and 878 liquidations have closed, IBBI said.

So far, 8,308 cases have been admitted for resolution, with decision pending in case of 1,926 companies. Separate data released in a study showed that there is a marked improvement in borrower behaviour, resulting in fewer delays in repayment of loans availed from banks. In fact, the number of days for which a loan remained overdue has come down significantly between 2018 and 2024, the study said.

In recent years, there is also a marked improvement in the number of cases being disposed of as resolution plans have been approved. The big worry, however, is the time taken in completing the resolution process. The latest data pegs the time taken at 597 days - more than twice the extended deadline of 270 days provided under IBC. In fact, 78% of the cases that are pending have dragged on for over 270 days. Another 9% have been going on for 180-270 days. The law provides for deciding cases in NCLT within 180 days, with an extension of 90 days allowed, but extensions have now become the norm.

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